Japan Tobacco Profit to Fall on Smoking Decline, Currency Moves
Japan Tobacco Inc., the world’s third-largest publicly traded cigarette maker, forecast profit will fall 19 percent this year as fewer people smoke in its home market and currency movements hurt its international earnings.
Net income is forecast to be 100 billion yen ($1 billion) in the 12 months ending March 2010 from 123.4 billion yen last year, the company said in a statement to Tokyo’s stock exchange today. That compares with the 163 billion yen median estimate of 13 analysts surveyed by Bloomberg.
The maker of Camel and Mild Seven cigarettes is losing sales in Japan as the smoking rate falls and authorities introduce tighter tobacco controls. Earnings from surging overseas cigarette sales, helped by the 2007 takeover of U.K.- based Gallaher Group Plc, are being blunted by the strengthening of the yen against other currencies.
“The tobacco market in Japan has been experiencing a decline in total demand due to various factors including an ageing society, increased health consciousness and stricter smoking regulations,” the company said in a statement today. “The company expects intensified competition in the Japanese market.”
Japan Tobacco said today it would close two factories this fiscal year and a third by March 2011 as demand wanes.
The company’s Japanese tobacco sales fell 4.8 percent to 3.2 trillion yen, including tax, last year. The percentage of Japanese men who smoke has fallen by half over the past 40 years to about 40 percent.
Overseas Sales
Overseas tobacco revenue rose 18 percent to 3.12 trillion yen in the year to December on higher sales of Winston and Camel cigarettes in counties including Russia, Italy and Spain.
Growth in overseas sales was blunted by gains in the yen, which gained 23 percent last year, the best performer among the 16 major currencies tracked by Bloomberg.
Japan’s health ministry last month said it’s considering new smoking bans after public broadcaster NHK reported restrictions would be increased at hospitals, schools and government offices.
Japan Tobacco has said it supports designated smoking areas in hospitals and schools where possible, rather than outright smoking bans.
In December, the government abandoned a plan to raise tobacco taxes after opposition from some lawmakers and a campaign by Japan Tobacco, which argued it would destroy the nation’s tobacco industry.
Japan Tobacco, which is 50 percent government-owned, is the biggest traded cigarette maker after Altria Group Inc. and British American Tobacco Plc.
Source: Bloomberg
