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Tobacco Statistics – July/August 2020 – Nº2

Tobacco Statistics

 

Quarterly report

 

2020

May to August

 

Focus on Tobacco Manufacturers and Leaf Dealers

2nd Quarter Results
  • Net Revenues: US$ 6,651 million (+13.6%)
  • Operating Income: US$ 2,731 million (-14.3%)
  • Reduced Risk Products share of Total Revenue: 24% (+500bps)
  • Total Shipment Volume (million units): 170,067 (-14.5%)
  • Cigarette Shipment Volume (million units): 151,359 (-17.6%)
  • Heated Tobacco Shipment Volume (million units): 18,708 (+24.3%)

Philip Morris International


2nd Quarter Overview

PMI presents strong operational income (OI) margins in this quarter as well as in the first half of the year, mainly driven by the increasing mix of RRPs and the growing IQOS profitability despite the unprecedented circumstances of the pandemic. The company also shows a strong performance by its product IQOS, with an increase of 24% of the volume, when compared to the same quarter last year. The report estimates that 15.4 million people are using IQOS. Also, the authorization of the U.S. FDA to market IQOS as a Modified Risk Tobacco Product (MRTP), presents a historical milestone, since the product is the first electronic nicotine device to be authorized in this category. The product represents a better alternative for adults who continue smoking.
Even with the good results presented the uncertainty remains due to the volatility and risk of virus resurge and economic fallout even though PMI has undertaken a number of business continuity measures, manufacturing facilities globally are currently operational, based on sale trends there are adequate inventories of PMI finished goods and the company ample liquidity through cash on hand, the ongoing cash generation of its business, and its access to the commercial paper and debt markets.
2nd Quarter Results
  • Net Revenue: US$ 6,367 million (-3.8%)
  • Operating Income: US$ 2,796 million (+2.9%)
  • Net Revenue of Smokeable Products: US$ 5,603 million (-4.3%)
  • Smokeable Products Shipment Volume (million units): 25,371 (-8.7%)
  • Net Revenue of Oral Tobacco Products: US$ 660 million (+9.6%)
  • Oral Tobacco Products Shipment Volume: 213.8 million of cans and packs (+2.8%)

Altria


2nd Quarter Overview

The decrease on net revenue is primarily due to lower net revenue in the smokable products segments. In fact, the segment had a decrease of 4.3%, mainly driven by lower shipment volume, a decrease of 8.7% in cigarettes and 1.4% in cigars. This decrease was partially offset by the higher pricing and lower promotional investments. The oral tobacco products segment had a net revenue increase of 9.6% primarily driven by higher pricing and an increase of 2.8% in the domestic shipment volume.  In this quarter of 2020, Altria recorded net pre-tax charges of $50 million, directly related to costs for disruptions caused by or efforts to mitigate the impact of the COVID-19 pandemic. Helix submitted Premarket Tobacco Applications (PMTAs) to the FDA for all 35 on! SKUs. These PMTAs are now in scientific review. The company now expects to reach 50 million cans in annualized manufacturing capacity by the end of 2020 and continues to expect to remove capacity constraints in 2021.
Also, Altria revised its 2020 estimated full-year domestic cigarette industry adjusted decline rate to a range of 2 to 3.5% from the previous estimated rate of 4 to 6%. This decrease rate is based on better year-to-date industry performance and expectations for continued category resilience.
2nd Quarter Results
  • Revenue: (JPY 510.6 billion) US$ 4.834 billion (-7.7%)
  • Adjusted Operating Profit: (JPY 140.8 billion) US$ 1.333 billion (-5.5%)
  • Operating Profit: (JPY 123 billion) US$ 1.164 billion (-4.4%)
  • International Shipment Volume (billion units): 107.8 (-8.5%)
  • Japan Domestic-Tobacco Business (billion units): 17 (-12.6%)
  • Japan Reduced Risk Product (billion units): 0.9 (+350%)
  • Share of Japan Reduced Risk Product Market: 10%

Japan Tobacco International


2nd Quarter Overview

The company attributed the decline in Revenue to declines in the Japanese-domestic tobacco and processed food businesses, which were impacted by the restrictions on non-essential outings during the declaration of a state of emergency, and the pharmaceutical business. The robust impetus of the international tobacco business could not completely offset the negative impacts of both COVID-19 and foreign currencies. The effects of COVID-19 were most prevalent from April to June and is estimated to have had a negative impact of almost (JPY 35 billion) US$ 331 million, or over 3%.
The total shipment volume decreased by 8.5%, mainly due to an unfavorable year-on-year comparison in Bangladesh and Turkey; negative impact travel restrictions in selected duty free markets such as Spain; as well as a decline in industry volume in several markets, notably Russia, and negative inventory movements. The impact of COVID-19 on the volume of shipments was negative, in particular regarding the turnover and volume of the industry in several emerging markets. Excluding inventory movements, the total volume of shipments decreased by 7.6%. Quarterly market share gains continued in many geographies, including Austria, Canada, Czech Republic, France, Germany, Hungary, Iran, Italy, Kazakhstan, Malaysia, Poland, Romania, Spain, Taiwan and the United Kingdom.
Half-Year Results
  • Revenue: (£ 12,271 million) US$ 15.982 billion (+0.8%)
  • Profit from Operations: (£ 5,097 million) US$ 6.64 billion (+16.4%)
  • Operating Margin: 41.5% (+550 bps)
  • Cigarette Shipment Volume (billion units): 310.5 (-6.5%)
  • Heated Tobacco Shipment Volume (billion units): 4.2 (+9.1%)
  • Traditional Oral Volume (billion units): 4.3 (-0.3%)
  • Modern Oral Shipment Volume (million pounds): 717 (+74%)
  • Vapor Shipment Volume (million pods): 145 (+43%)
  • Other Tobacco Products (billion units): 9.9 (-1.8%)
  • Combustibles Share of Revenue: 88.4%
  • Non-Combustibles Share of Revenue: 9.8%
  • Vapor Revenue: (£265 million) US$ 345 million (40.8%)
  • Heated Tobacco Revenue: (£286 million) US$ 372 million (-8.7%)

British American Tobacco


Half-Year Overview

The total volume of cigarettes and heated tobacco products fell by 6.3% to 315 billion units with the volume of cigarettes falling by 6.5% and the volume of heated tobacco products rising by 9.1%. While the volume of cigarettes in the Developed Markets was largely unaffected, the volume in Emerging Markets was affected by plant closures and sales restrictions imposed by the government, including in South Africa, Mexico and Argentina, as well as the severity and duration of lockdowns in several other markets, particularly Asia Pacific Middle East (APME). Volume also declined in Indonesia (driven by local prices and taxes) and Pakistan (as illicit trade grew).
Reported revenue increased 0.8% to (£12,271 million) US$ 15.98 billion;  Reported profit from operations was up 16.4% to (£5,097 million) US$ 6.64 billion, with reported operating margin up 550 bps at 41.5%, as the prior period was impacted by the charge in respect of the Quebec class action in Canada; Net cash generated from operating activities increased 52% to (£3,484 million) US$ 4.5 billion largely driven by the deferral of total excise and corporate tax to the second-half of 2020 in the US. This more than offset a (£409 million) US$ 532 million increase in inventory due to COVID-19. Non-Combustibles consumer base increased to 11.6 million (up 1.1 million from December 2019, and 2.7 million from June 2019). New categories revenue grew 12.7% (at constant rates). BAT is growing in volume share in heated tobacco and value share in Vapor, with Modern oral adjusted revenue up 71% (at constant rates).
1st Quarter Results
  • Net Sales: US$ 274,9 million (DKK 1,791 million) (5%)
  • Gross Profit: US$ 125,75 million (DKK 819 million) (20%)
  • Net Profit: US$ 3,22 million (DKK 21 million) (-77%)
  • Free Cash Flow before acquisitions: US$ 18.75 million (DKK 122 million)

Scandinavian Tobacco


1st Quarter Overview

The first quarter of the Scandinavian Tobacco Group (STG) was affected by the COVID-19 pandemic. The impacts were related to factory shutdowns, the difficulties felt across the supply chain, and global retail and restocking materials.  The company will focus its commercial activities in 3 new divisions: Europe Branded, North America Online & Retail, North America Branded, and Rest-of-the-World. The three divisions represent 37%, 29% and 34% of the group net sales, respectively. STG will close three production sites (Moca, Duizel, and Eersel). The acquisition of Agio cigars has been responsible for the increase in sales, especially in Europe. Despite the economic crisis, the company has left unchanged its program to buy back up to (DKK 330 million) US$ 50.7 million worth of shares. STG reaffirmed its assumptions of a moderate decline in net sales growth.
1st Quarter Results
  • Sales and Operating Revenue: US$ 632.1 million (-5.89%)
  • Cost of Goods Sold: US$ 522.9 (-5.3%)
  • Operating Income: US$ 31.5 million (-48%)
  • Net Income: US$ 18 million (-46.4%)

Universal Leaf


1st Quarter Overview

Universal Leaf as a multinational company that operates in various markets highlighted the volatility in the exchange rate as one of the factors that affected the company’s operating income, namely, the Indonesian rupiah, the Brazilian real and the Mexican peso which was drivers of unfavorable currency movements. Shipment delays due to the COVID-19 pandemic and lower customer orders harmed financial results. The company estimates that flue-cured and burley production will decrease 7 and 10%, respectively. Still, flue-cured would be in an oversupply situation while burley tobacco would be in a balanced supply position. Universal Leaf emphasized that the first quarter is usually weaker than the rest of the year. Besides some factories having to endure temporary lockdowns, the company has not seen a material impact on the supply chain, seasonal planting, or harvesting requirement. The company has been investing in outside the tobacco sector. The acquisition of Fruit Smart is part of this diversification plan.  Also, the company has completed this year the 50th annual dividend increase.
Half Year Results
  • Total Tobacco Volume (billion units): 114.6 (-0.5%)
  • Tobacco net revenue: (£3,509 million) US$ 4,454 million (0%)
  • NGP net revenue: (£83 million) US$ 105 million (-43.2%)
  • Total Net revenue: (£3,592 million) US$ 4,559 million (-1.7%)
  • Total Adjusted Operating Profit: (£1,469 million) US$ 1,865 million (-9.3%)
  • Operating Profit: (£925 million) US$ 1,174 million (-19.6%)
  • Operating Margins: 19.5% (-90 bps)

Imperial Brands


Half Year Overview

The company provided results that had already been revised, still, the management announced its disappointment with the financial performance during the first half of the year. There were market share gains in the company’s top priority markets. Imperial Brands reduced its NGP investments due to the reduced returns on investment and overall weakness of the vapor category which resulted in lower NGP revenue. Continued pressure due to COVID-19 is expected as a result of the impact on duty-free and travel retail business, changes in consumption patterns (e.g. downtrading), and a reversal of some first-half inventory build. The company highlighted the relevance of the sale of the cigar business for € 1.2 billion (US$ 1.37 billion) as it will allow the group to simplify the business and reduce the debt weight. Imperial Brands has lowered its dividends by one-third to accelerate debt repayment.
1st Quarter Results
  • Group Sales: US$ 985 million (1,178.4 billion won) (-0.6%)
  • Group Operating Profit: US$ 263 million (315 billion won) (-9.5%)
  • Group Net Income: US$ 249.86 million (298.9 billion won) (+7.3%)
  • Sales: US$ 552.8 million (661.3 billion won) (+0.4%)
  • Domestic Sales Revenue: US$ 363.6 million (435 billion won) (-2.8%)
  • Domestic Combustible Cigarette Volume: 9.6 billion sticks (+5.5%)
  • Domestic Market Share: 64% (+0.9%)
  • Overseas Cigarette Volume: 7.3 billion sticks (-24%)
  • KT&G Operating Profit: US $ 208.9 million (249.9 billion won) (-1.1%)
  • KT&G Net Income: US $ 218 million (260.8 billion won) (+21.8%)

KT&G


1st Quarter Overview

The group reported a small decrease caused by the coronavirus pandemic and by the decline on the domestic Next Generation Products (NGP) market. As for KT&G, sales actually showed a small growth this quarter that was mainly driven by domestic combustible cigarettes and Suwon real estate sales. In fact, the domestic market volume of combustible cigarettes of KT&G grew 5.5%, corresponding to 9.6 billion stick sold. In this quarter the domestic market share of the Heat Not Burn (HNB) products also presented an increase mainly motivated by the introduction of wider stick product portfolio and by the release of the new P2 2.0 device. The reduction of operating profits was mainly triggered by the reduced duty-free sales, consequence of the COVID-19 outbreak. Net income had an increase of 21.7% driven by foreign currency gains of (24 billion won) US$ 20 million and a disposal of long-term deposit of (29 billion won) US$ 24.26 million.
2nd Quarter Results
  • Sales: US$ 403 million (4,133 million SEK) (+11%)
  • Operating Profit from product segments: US$ 166 million (1,704 million SEK)(+17%)
  • Company Main Segment by Revenue: Smokefree 65.2%
  • Smokefree Segment Revenue Growth: 19%
  • U.S. Smokefree Revenue Growth: 42%

Swedish Match


2nd Quarter Overview

The company has presented strong financial results in this second quarter of 2020 mainly led by the strong volume growth of ZYN nicotine pouches in the US, contributing to higher sales and operating profit. Despite the good results the company also faced challenges consequence of the new coronavirus pandemic, mainly due to trade hoarding, suspension of production or reduced production, border closures and travel restrictions. Higher costs with the implementation of pandemic planning protocols and the affected timing and execution of certain sales, marketing and launch activities for ZYN.
The growth in sales was mainly motivated by the growth in both the US and Scandinavia (Sweden, Norway and Denmark). In the U.S., the main contributor to the sales growth was the increased shipment volume of ZYN. In Scandinavia, sales grew mainly due to nicotine pouches and snus. Due to the travel restrictions imposed by COVID 19, volumes were exceptionally strong in Norway, but lower in Sweden. In other markets outside of Scandinavia and the US, sales declined. The operating profits also improved in both the Us and Scandinavia, as for the other markets there were notable declines.
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