JT volumes down but market share regains ground

Japan Tobacco Inc’s domestic volume cigarette sales during the nine months to the end of December, at 80.8 billion, were down by 24.3 per cent on those of the nine months to the end of December 2010, which themselves were down by 9.0 per cent on sales during the nine months to the end of December 2009.

Mild Seven

Japan Tobacco's Mild Seven cigarette brand

Most of the decline was due to an unprecedented tax-led price increase at the start of October 2010 and the effects of the earthquake and tsunami that struck Japan in March 2011.

However, according to a results announcement, JT’s domestic tobacco business is recovering from the effects of the earthquake. The company’s market share reached 59.1 per cent by the end of December as it strove to meet its own target of 60 per cent by March. At the end of March 2011, JT’s market share stood at 64.1 per cent.

As part of its strategy for regaining share, JT has been launching new and newly-designed products to a portfolio that was reduced following the earthquake.

A number of product, packaging and sales initiatives had been launched in the middle of January, the company said, including seven redesigned Pianissimo products and two super slim-sized ‘Mild Seven Style Plus’ cigarettes.

‘The Peace’, a premium product using the best selection of ingredients, blending, processing, flavors and packaging was being launched this month, while ‘Mild Seven Impact Menthol Box’, with menthol thread filters was due to be launched next month.

Adjusted net sales for the domestic tobacco business decreased by 4.2 per cent to ¥444.8 billion, while EBITDA increased by 14.6 per cent to ¥212.3 billion and operating income increased by 19.4 per cent to ¥180.8 billion.

Reporting JT’s consolidated results for the nine months to the end of December, president and CEO, Hiroshi Kimura, said that the company was revising upwards its full-year forecast given the stronger performance of the Japanese domestic and international tobacco businesses.

Tobacco company‘s shipment volumes for the nine months to the end of September 2011, at 319.6 billion, were unchanged from those of the nine months to the end of September 2010. Growth momentum in the Middle East, Italy, Romania and Taiwan was said to have been offset by lower shipments in Ukraine and Spain. In Russia, global flagship brand (GFB) volumes continued to increase, compensating for a volume decline in the company’s ‘low-end’ local brands.

GFB volumes overall were up by 4.1 per cent to 192.7 billion, driven by sales in Russia, the Middle East, Italy and Turkey.

Core net sales were up by 1.6 per cent to ¥682.3 billion, EBITDA was up by 5.6 per cent to ¥254.0 billion, and operating income was up by 9.2 per cent to ¥156.2 billion.

In dollar terms, core net sales and EBITDA increased by 12.8 per cent and 17.3 per cent respectively, driven by strong pricing, GFB shipment volume and favorable currency exchange rates.

Meanwhile, JTI reported separately its full-year and final quarter results for 2011.

Shipments for January-December 2011, at 425.7 billion were down by 0.6 per cent, while GFB volumes increased by 2.6 per cent to 256.5 billion.

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