Vapor taking toll on smoke sales

Japan Tobacco Inc’s domestic cigarette volume sales during the three months to the end of March, at 23.0 billion, were 15.3 percent down on those of the three months to the end of March 2016, 27.2 billion.

JT reported today that the volume reduction was down mainly to the overall industry decline, which was partly caused by an increase in the vapor-product category.

‘Core revenue declined 10.4 percent [from ¥160.6 billion to ¥143.9 billion] due to the impact from the sales volume decline partially offset by the benefit from the retail price amendment of Mevius last year,’ the company reported.

‘Adjusted operating profit declined 13.0 percent [from ¥65.7 billion to ¥57.2 billion] due to lower core revenue and despite benefits from cost reduction initiatives.’

Meanwhile, Japan Tobacco International’s shipment volume during the three months to the end of March, at 91.7 billion, was down by 2.9 percent on that of the three months to the end of March 2016, 94.4 billion. At the same time GFB (global focus brands) volume fell by 0.5 percent from 66.4 billion to 66.0 billion.

JT said that JTI’s volume decline had been caused by industry-wide contractions in some markets, market share loss in the face of competitor-driven price discounting in the Commonwealth of Independent States, and unfavorable trade inventory adjustments when compared with the situation during the first quarter of last year.

‘GFB shipment volume was stable but grew excluding inventory adjustments, supported by strong performance in Iran and Taiwan,’ the company said.  ‘Year-on-year total and GFB market shares increased in several key markets.

In US dollars, JTI’s core revenue at constant currency was said to have been stable at US$2,469 million [in Yen it was down 3.1 percent from ¥284.7 billion to ¥276.0 billion] as price/mix gains in several key markets offset the volume decline impact.

‘Adjusted operating profit at constant currency grew 1.5 percent [in Yen it was down 7.6 percent from ¥99.5 billion to ¥92.0 billion] driven by price/mix gains and cost reduction benefits including contribution from the manufacturing footprint optimization; while investments in emerging markets and emerging products continued.

‘On a reported basis, core revenue and adjusted operating profit declined 1.6 percent and 6.1 percent, respectively, due to unfavorable currency movements.’

“We are making good progress towards achieving our full year profit target,” said Mitsuomi Koizumi, JT’s president and CEO in presenting the company’s consolidated results.

“This quarter was impacted by unfavorable comparisons due to one-off specific factors in the previous year, but our underlying business performance and financial results were in line with our expectations.

“The international tobacco business delivered steady profit growth at constant currency, in a challenging operating environment.

“At the same time, we reaffirmed our robust operating base in the Japanese domestic tobacco business as assumed.

“It is encouraging that the pharmaceutical and the processed food businesses continued to contribute to the Group.

“I’m confident that we can achieve our full year target while continuing to invest for future sustainable growth amid a continuously challenging business environment.”