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British American Tobacco has recently reached all time share price highs

cigarettes — Wed, 10 Mar 2010 14:21:04 +0000

Tobacco giant British American Tobacco (LSE, BATS) for one has recently reached all time share price highs and looking at recent results it is not difficult to see why. In a recession dominated year in which top line growth was a very rare commodity, the company managed to boost revenues by 17%, ramp up pre tax profits by almost 11% and increase its dividend payout by 19%.

BAT’s top line came in at £14.2 billion with various factors underpinning the result. Favourable exchange rate movements played a part, as did continued good pricing momentum, and the additional volume brought from 2008 acquisitions of Skandinavisk Tobakskompagni (Denmark) and Tekel (Turkey) and the purchase of Indonesia’s Bentoel Internasional Investama Tbk in June last year.

Whilst management can not control currency moves, they are responsible for the improvement in other areas. Stripping out the currency effects, revenue surged ahead by 10% – no mean feat given the year that 2009 was.

It was not all plain sailing however and group organic sales volumes did fall – by 3% – showing that tobacco is ‘recession resilient’ rather than recession proof. Management though successfully rolled out an 8% increase in prices to make sure cash generation remained robust… a useful tactic; particularly effective when your product is highly addictive.

When assessing the BAT’s credentials it is impossible to avoid comparisons with fellow heavyweight Philip Morris International. Morris, which owns Marlboro the supposed preferred brand of the still smoking US President Barrack Obama, posted organic sales growth for 2009 of 0.4%, favourable performance when compared to BAT.

The company also announced a US$12 billion share buyback plan which will no doubt please investors whilst BAT has placed its own buyback plan on the backburner. Before BAT investors begin looking over at their Philip Morris counterparts with envy, we do not see this as a negative. Management at BAT are simply wishing to keep their powder dry in light of further acquisitions whilst maintaining balance sheet strength.

For investors focused on UK listed entities, it is also useful to compare BATS with Imperial Tobacco. BAT trades on the higher forward price earnings ratio (13.2 Vs 11.4) and in our opinion it is not difficult to see why investors are prepared to pay more for BAT’s earnings. Although we are far from bearish on Imperial Tobacco, BAT’s has the edge on balance sheet strength. Gearing levels are lower, whilst interest cover and cash levels are higher. BAT shares also offer a better yield – 5.05% Vs 4.12%.

Another factor which attracts investors to BAT is geographic exposure. Over 80% of Imperial revenues are derived from Europe which presently can hardly be described as a hotbed of economic optimism. BAT on the other hand has significant exposure to Latin America, Asia Pacific and Africa and the Middle East which are all significant growth areas.

Planned greening law threatens to uproot tobacco growers

cigarettes — Tue, 02 Mar 2010 09:25:56 +0000

Use of wood to cure tobacco is causing an environmental crisis in tobacco growing areas of Migori, Kuria, Uriri and Rongo districts even as a new law pushes afforestation programmes to farmers.

Under the Forestry Act set to come in force in May, farmers are required to put a tenth of their farms under trees but the requirement may not be enforceable as farm sizes become increasingly smaller due to subdivision.

Speaking in Kisumu during the Nyanza provincial land preparation field day, agriculture minister William Ruto said tree nurseries would be established in all divisions to enable farmers support environmental conservation programmes.

“The guidelines will boost sustainable farming that is environmental friendly,” Mr Ruto said. Tobacco growers use firewood to cure tobacco in the barns, a move that has led to massive deforestation in the region.

Although the buying companies that include Alliance One, BAT Kenya and Mastermind Tobacco occasionally supply tree seedlings to the over 15,000 contracted growers to replenish the cut trees, the efforts end up in vain because the seedlings are not tended to maturity.

Some local leaders have even called on farmers from Southern Nyanza, who earned Sh1 billion from tobacco last year, to stop growing the crop altogether and migrate to crops that are less destructive to the environment.

“Start growing other well paying cash crops that do not interfere with environmental conservation,” roads assistant minister Wilfred Machage told farmers, adding that years of tobacco farming had contributed to food insecurity by reducing the productivity of land.

Farmers, however, have backed the afforestation efforts saying many areas had been reduced to deserts by human activities.

KU, K-State halting sales of cigarettes on campus

cigarettes — Tue, 09 Feb 2010 13:54:16 +0000

Jayhawks and Wildcats will share something new — a refusal to sell smokes.
The University of Kansas announced Friday that starting July 1 it would join the five other schools governed by the Board of Regents in banning sales of cigarettes and other tobacco products on campus.
At Kansas State University, the student union governing board voted a week ago to end tobacco sales as soon as its current inventory runs out.
Tobacco sales generate about $27,000 a year on the Lawrence campus and about half of that in Manhattan.

In financial need? Please kick the cigarette habit.

cigarettes — Fri, 05 Feb 2010 15:03:30 +0000

I am a member of the local council of the Knights of Columbus and a parishioner of Precious Blood Catholic Church. I read with much interest the article in Sunday’s Exponent about the dire straits of the local Department of Social Services, regarding the large increase of local folks needing help.

One part of the program that both the church and the K of C are very involved in is help we provide to the local food closet, with money, food, manpower, etc. Many other churches and organizations also provide help. We know this is just one phase of the large demand on DSS, but it is also a large one.

In the article, I also read with much dismay that the DSS waiting room “smelled like stale cigarette smoke.” How do many of those people needing help from the community have enough money to buy packs of cigarettes?

I don’t think it is fair for so many to ask for help from others, but they won’t attempt to help themselves by sacrificing an expensive bad habit with money that could be used for necessities to provide for the family. The community should not be required to provide help to those who won’t attempt to help themselves and weather the storm.

You would be surprised how many families are caught in this trap of addiction.

Joseph F. Kratochvil
Culpeper

Dozens arrested in undercover smokes operations

cigarettes — Tue, 02 Feb 2010 08:23:50 +0000

Undercover agents have funneled more than 250 million cigarettes onto America’s streets in the past three years through black market sales targeting smugglers, an Associated Press review has found.
Authorities say the flood of government-provided smokes _ a pack and a half for every man, woman and child in New York City, the smugglers’ main destination _ leads them to organized crime rings and can even cut off financing for terrorists. The undercover operations by the Bureau of Alcohol, Tobacco, Firearms and Explosives have yielded about five dozen federal arrests, albeit none on terror charges.
Many of those cigarettes undoubtedly wind up in the mouths of minors, since black market vendors have no reason to turn away teenage purchasers.
Despite that, government auditors and anti-tobacco groups want the ATF to do even more.
“Smuggling reduces prices, so it increases use, especially among kids, who are more price-sensitive” in their purchases, said Eric Lindblom, director of policy research for the Campaign for Tobacco-Free Kids.
The Department of Justice, the ATF’s parent agency, estimates that federal, state and local governments lose out on $5 billion annually in tax revenue from cigarettes sold through illegitimate channels.
In the biggest and most recent prosecution, federal authorities charged 14 people in November with paying more than $8 million in cash, supplemented by guns and drugs, for 77 million cigarettes over the course of a year. Two are accused of paying an undercover agent posing as a hitman to kill a couple over missing cigarettes.
In September, the Justice Department’s inspector general found that tobacco diversion cases account for just 1 percent of ATF’s caseload and 2 percent of its budget. In large swaths of the country, ATF has not conducted any investigations of cigarette smuggling for at least five years, the audit determined.
A notable exception, the AP found, was the Eastern District of Virginia, which includes Richmond, northern Virginia and the Interstate 95 corridor. The area is a hotbed for the crime because while 42 states and the District of Columbia have collectively passed more than 80 tax hikes on cigarettes since 2002, Virginia and North Carolina, the heart of tobacco country, still tax tobacco at only pennies per pack.
“The profit margin on this is ridiculous,” said Ashan Benedict, resident agent in charge of the bureau’s office in Falls Church, Virginia. “It’s not that hard to find a customer who wants to save $40 a carton.”
All told, the AP found undercover sales of more than 250 million cigarettes in the last few years. The AP review did not include state charges _ authorities said that the vast majority of cases brought in state courts involve relatively small quantities of cigarettes.
While 250 million is a large number, it pales to the 469 million cigarettes produced every day by Philip Morris USA at its two plants in Virginia and North Carolina last year.
The Virginia agents say they focus on cigarette smuggling in large part because the investigations often turn up other crimes. The ATF’s Richmond office went so far as to set up its own store in King George, Virginia, called KG Wholesale, which advertised in Arabic-language newspapers and elsewhere. The store was set up with audio and video surveillance to record the transactions, all of which were illegal undercover sales.
By the time ATF pulled the plug on KG Wholesale in 2008, 27 people had been arrested and roughly 60 million contraband cigarettes had been sold.
The planners of the storefront sting were aware that cigarette smuggling has been a source of terrorist funding in the past _ in 2002 a federal jury in North Carolina convicted two Lebanese citizens of diverting millions of dollars in cigarette smuggling proceeds to the radical Islamic group Hezbollah _ and were anxious to disrupt other similar money trails.
Agent Ken Mosley is confident that investigations like the KG case disrupt terror financing, but he acknowledged evidence was insufficient to bring terrorism charges.
“There is no doubt in my mind that we have arrested people involved in terrorism,” Mosley said.
The focus on Arabic-speaking smugglers in the KG Wholesale investigation _ the store did not run ads in other foreign-language papers _ smacks of profiling, said Ibrahim Hooper, a spokesman for the Council on American-Islamic Relations, a Muslim civil rights group.
“Obviously it would be a concern if they targeted only Muslims and/or Arab-Americans,” Hooper said.
While there have been terrorists who have made money through cigarette smuggling, it’s far more common to find smugglers linked to organized crime, said John W. Colledge III, a Nevada-based consultant who once ran large-scale cigarette smuggling investigations for the U.S. Customs Service.
“Unfortunately, terrorism has become a sort of a buzzword,” he said. “That’s what gets you funding.”
Smuggled cigarettes end up in legitimate retail establishments as well as on street corners, where they’re often sold for $5 a pack _ several dollars below retail. The cheap cigarettes are especially alluring to minors, experts say, since black market sellers are less likely to card.
A tractor-trailer filled with untaxed or low-tax cigarettes can hold a potential profit of $1 million if they’re trucked to New York City, where each pack faces $2.75 in state taxes plus a $1.50 levy from the city itself. A single vanload can turn a $115,000 profit.
By their nature, the undercover investigations require agents to act convincingly as criminals. Benedict and Fairfax County Police Lt. David Smith had the Korean smugglers convinced they were Italian mobsters. In the KG case, Mosley said agents would get angry or cagey if their customers asked where all the cigarettes were coming from.
“We’d tell them, ‘It’s none of your business,’” Mosley said.
In fact, the cigarettes come from the same places the legitimate ones do: Big Tobacco. Under an ATF program, tobacco corporations supply cigarettes for stings (undercover operations) and are repaid with the proceeds from the sales.

Tobacco company will pay to settle suit over advertising

cigarettes — Thu, 28 Jan 2010 10:55:14 +0000

R.J. Reynolds Tobacco Co. has agreed to end its Camel Farm marketing campaign and pay $150,000 to settle a lawsuit by Maryland, which had accused the tobacco giant of using cartoons and brand-name trinkets in advertising to target young consumers, the Maryland attorney general’s office announced Wednesday. Maryland’s regulator contended that the marketing campaign violated the 1998 Tobacco Master Settlement Agreement that states reached with major tobacco companies when it used cartoons and brand-name giveaways to promote cigarettes. Maryland was one of nine states that sued Reynolds in late 2007, and the first to settle. As part of that settlement, Reynolds also agreed not to distribute any marketing materials created for the campaign, the state regulator said.

Tax won’t end teen tanning bed use

cigarettes — Mon, 25 Jan 2010 14:25:40 +0000

Melanoma is the fastest growing cancer in the U.S., as well as the leading cause of cancer deaths in women ages 25-29. The World Health Organization has declared the UV light used in tanning beds to be just as carcinogenic as asbestos and cigarettes. Exposure to UV radiation, especially at a young age, is a well-known cause of melanoma.
As a 20 year-old melanoma patient, I am painfully aware of the seriousness consequences of tanning. As a teen I used tanning beds, naïve to the consequences of UV exposure, like many of my friends. If young women are hearing the facts, they aren’t listening.
UV exposure should be handled the way handle cigarettes – illegal to sell to minors. Instead, the federal health care bill has proposed a 10 percent tax on indoor tanning services. If the bill passes, tanning won’t be made illegal for minors because the U.S. government is unlikely to halt a new revenue stream it has created.
Let’s get real – a 10 percent tax won’t stop minors from tanning. This tax is only going to benefit the government.

Proposed Taxes Upset Local Convenience Store Owners

cigarettes — Fri, 22 Jan 2010 08:55:34 +0000

The state of New York is facing a 7.4 billion dollar deficit and Governor Paterson wants to close that gap by taxing sugary beverages and cigarettes.
So FOX 40 hit the streets of Binghamton to find out what this will mean for convenience stores and their customers.
If Governor Paterson gets his way, every time someone buys a pack of cigarettes or a sugary beverage from a convenience store it will cost them more.About a dollar more for cigarettes, and 16% more for a bottle of soda.
Taxes some residents say are unfair.
“$51.40 just pure tax on one carton of cigarettes, that’s insane,” said the owner of Cordisco’s, John Cordisco.
“They are always harping on cigarettes and soda, but what’s wrong with beer, beer kills just as much as cigarettes do to,” said Whitney Point Resident, Rosann Larue.
In his budget address Tuesday, Paterson said the taxes would save lives and billions in health care costs, but these long-time smokers don’t agree.
“I’ve been smoking for 30 years and I keep paying more every time it goes up, so I don’t see it as much of a deterrent,” said Binghamton Resident, Todd Forkey.
“It might slow down me smoking, but people will still pay,” said Binghamton Resident, Marcus Melvin.
The taxes would also affect convenience stores.The owner of Court Street Fuel Stop says cigarettes make up 40% of his total sales, and another tax would turn customers away.
“I’m going to lose more business on this if the price goes up, then business is going to go down for sure,” said Mike Gill, The Owner of Court Street Fuel Stop. The owner of Cordico’s says he’ll have to raise prices just to compensate.
“All the other prices in the stores go up to account for the loss in sales, because that’s $1.08 your not spending in the store anymore,” said Cordisco.
Cordisco also says the taxes would prompt local customers to cross the border to buy their goods at a cheaper price.
“There’s a term called diminishing retuns, that you end up with less than when you started, the boot legging will be even worse,” said Cordisco.
For now, Paterson’s tax proposals are just that–proposals, convenience store customers and business owners will have to wait and see what the legislature decides.

Research Report on China Cigarette Industry, 2009—-Aarkstore Enterprise

cigarettes — Wed, 20 Jan 2010 08:25:45 +0000

The number of Chinese smokers is over 0.35 billion, more than the total population of America. The sharp growth of China’s Cigarette Industry makes up the most important part of national economy.
In 2008, the total domestic cigarette sales volumes were 2180.5 billion, increasing by 2.6% of 2124.35 in 2007. The market scale of Chinese cigarettes passes 100 billion US Dollars in 2008.
In 2008, brands in process of Chinese cigarette industry were one hundred and fifty-five, decreasing by 20 in 2007. Cigarette types in process were eight hundred and seventy-one, decreasing by five in 2007. The average yield of single brand in process was 14.25 billion, increasing by 2.1 billion of the same period in 2007 and increased 17.3%.
In 2008, national top 20 brands cigarette sales reached to 939.2, increasing by 14.85% of 817.75 billion of the same period of last year. The proportion in total sales volumes was 43.1%. The accumulative sales revenues of top 20 brand cigarette were 411.09 billion Yuan (58.7 billon US Dollars), accounting for more than 50% of the total sales revenues.

Family flees blaze caused by cigarette

cigarettes — Tue, 12 Jan 2010 11:19:44 +0000

A FAMILY had a lucky escape when a discarded cigarette caused a blaze which destroyed a bedroom.
Grandmother Jacqueline Mayer had emptied an ashtray into a bin and left her room to take her morning shower when the fire started.
When the 55-year-old smelled smoke minutes later, she returned to the bedroom to find the blaze had already taken hold.
Her husband John fetched water to try to extinguish the flames, but it was too late.
Mrs Mayer said: “I was only gone about four minutes. When I opened the bedroom door the flames were already going up the wall. I had a curtain covering the wardrobe and that had gone up. It was awful.”It was unbelievable how fast it spread – if we’d gone out somewhere we would’ve lost the whole house.”
Mrs Mayer’s 12-year-old granddaughter, Kimberley Mayer, and son Anthony’s partner, Kelly Hughes, were downstairs when the fire broke out, at around 10.15am on Saturday.
Everyone was safely out of the Aspire Housing-owned property, in Gilbert Close in Kidsgrove, when firefighters arrived to tackle the blaze.
There were two smoke alarms fitted in the house, but only one was working.
Mrs Mayer’s bedroom was gutted, and smoke damage caused to the whole of the upstairs.
She said: “Every single item of clothing I had has gone. I’ve had to beg, borrow and steal so I’ve got something to wear. My bag was in there and the heat melted my purse.
“Aspire have been good and offered to put us up in a hotel, but we would rather stay here an get the place sorted out.
“We’re living downstairs and waiting for someone to come round and assess the damage.”
Mrs Mayer’s son Scott and his partner Michelle Lightfoot also live at the house. Scott, aged 31, said: “I was out at the time and came back to see the fire engine and firefighters in my mum’s bedroom. All sorts of things were going on in my mind. I was so relieved that everyone was OK.”
Mrs Mayer, who has lived in the house for 25 years, said she will dispose of her cigarettes more carefully from now on. She said: “This has certainly been a wake-up call. It’s scary how fast the fire got going, and I would tell other people to be careful. We’re just really lucky nobody was hurt.”
Staffordshire Fire and Rescue Service also warned smokers of the dangers of causing fires in their homes.
Station manager Mick Daniels said: “Tobacco is designed to stay lit, so cigarettes and cigars can easily start an accidental fire, especially if you are tired, not alert or have been drinking alcohol. We would urge smokers to either kick the habit altogether, smoke outside their property or ensure they always extinguish their cigarettes properly, especially last thing at night.
“Had this fire occurred during the hours of darkness then the outcome may well have been different.”