Japan Tobacco received the first FDA approval

The U.S. Food and Drug Administration approval on Monday of a new AIDS medicine is a first for the company Japan Tobacco Inc.2914. To +0.40%, who spent a quarter-century of research products with no product of his laboratory permit large U.S. market.

The FDA approved pill combination with AIDS that will be sold in the U.S. by Gilead Sciences, Inc. under the trade name Stribild, Jennifer Corbett reports Dooren.Produkt combines Gilead four different medications, one of which is a substance called elvitegravir. This was discovered by

Japan Tobacco and licensed to Gilead.

Separately Gilead seeks permission for elvitegravir as a standalone product.

According to the annual report of Gilead, issued in February 2012, it was $ 45 million in upfront and milestone payments in Japan Tobacco as Stribild progressing toward approval FDA, and will pay an undisclosed royalty rate on sales of products containing elvitegravir. Some analysts say,

Stribild sales could reach $ 3 billion a year by 2020.

Japan Tobacco is closer to FDA approval several times. He found the drug to enhance the body HDL, or “good” cholesterol, and licensed its Roche Holding AG. But after more than a decade of human trials in thousands of patients, Roche concluded earlier this year that the drug was not effective enough.

In the U.S. and Europe, pharmaceutical research, as a rule, in the province of specialized companies. Japan has given the world gout drug found textile manufacturer, cholesterol drug from fashion and diversified Electronics Company, and now, a cure for one of the major disasters in the world from the cigarette manufacturer. Specialists in drug say a few fields so unpredictable, and the list seems to offer enough evidence.

Japan Tobacco

The following companies may have unusual price changes in Japanese trading today. Stock symbols are in parentheses, and share prices are as of the latest close. The information in each item was released after markets shut unless stated otherwise.
Japan Tobacco Inc. (2914 JT): The cigarette maker’s domestic sales volume rose 40 percent in November from a year earlier, the company said in a release. The stock fell 0.1 percent to 365,000 yen.
JX Holdings Inc. (5020 JT): JX Nippon Oil & Gas Exploration Corp., a unit of JX Holdings, secured a $263 million loan for its liquefied natural gas project in Papua New Guinea, according to a statement from Japan Bank for International Cooperation. JX added 0.2 percent to 481 yen.
Kyushu Electric Power Co. (9508 JT): Radioactive water was found at the utility’s Genkai plant in Saga prefecture, Kyodo News said. The leak of 1.8 tons of cooling water containing radioactive material remained within a purification system at the plant and didn’t escape outside, according to Kyodo. Kyushu Electric failed to report the leak when it announced the pump problem at the plant in southern Japan, Kyodo said. The stock lost 0.3 percent to 1,067 yen.
Nippon Steel Corp. (5401 JT), Sumitomo Metal Industries Ltd. (5405 JT): Japanese regulators will approve a merger of the two steel producers, the Asahi newspaper said. The companies aim to complete the tie-up by October 2012, according to the report. Nippon Steel dropped 3 percent to 192 yen, while Sumitomo Metal Industries fell 2.8 percent to 138 yen.
Nissan Motor Co. (7201 JT): The automaker expects to double sales of its Leaf electric car to full capacity of 40,000 vehicles next year, the Financial Times reported, citing an interview with Andy Palmer, the automaker’s head of business strategy and corporate planning. The stock slipped 0.9 percent to 687 yen.
Olympus Corp. (7733 JT): The camera maker may file its earnings without having an auditor sign off on the statement so it can meet a Dec. 14 deadline, Jiji Press said. Auditing firms are unlikely to finish checking corrections to past and current reports by the filing date, Jiji said, which comes after the company admitted to trying to hide losses. Separately, the Asahi newspaper reported Olympus’s office may be searched by Tokyo prosecutors after the company submits securities reports on Dec. 14. Olympus rose 2.4 percent to 1,206 yen.
Panasonic Corp. (6752 JT): The electronics company plans to start selling smartphones in Europe in March, subsidiary Panasonic Mobile Communications Co. said. Panasonic aims to use Europe as a stepping stone to lift overseas sales of its mobile phones to 9 million units in the fiscal year ending March 2016. The stock lost 2.8 percent to 694 yen.
Ryohin Keikaku Co. (7453 JT): The owner of the Muji retail chain will probably report a 15 percent increase in operating profit for the nine months ended Nov. 30 from a year earlier, the Nikkei newspaper reported. The company’s profit rose to about 12 billion yen for the period because of robust sales in Japan and reduced marketing expenses, it said. The stock gained 1 percent to 3,615 yen.
Sojitz Corp. (2768 JT): The trading company forecast a loss of 12 billion yen for the year ending March 31, citing charges related to deferred tax assets, according to a filing with the Tokyo Stock Exchange. That compares with a previous projection of 16 billion in net income. The stock fell 1.6 percent to 127 yen.
Tohoku Electric Power Co. (9506 JT): The utility has restarted the Shin-Sendai No. 1 thermal unit, which was closed after the March 11 earthquake, Tohoku Electric said on its website. The stock slid 0.6 percent to 773 yen.
Tokyo Electric Power Co. (9501 JT): The utility aims to cut 2.65 trillion yen in costs over the next 10 years, it said in a statement distributed to reporters on Dec. 9. Separately, the owner of the crippled Fukushima Dai-Ichi nuclear power plant reiterated that no decision has been made on a reported nationalization of the utility or a capital injection. The utility is in talks with KDDI Corp. (9433 JT) to sell its 17 percent stake in Japan Cablenet Ltd. for about 10 billion yen, the Nikkei reported. The stock rose 1.2 percent to 247 yen.
Toyota Motor Corp. (7203 JT): The world’s biggest carmaker by market value cut its profit forecast 54 percent, saying Thailand’s floods hurt production. Net income will fall to 180 billion yen ($2.3 billion) in the 12 months ending March 31, the Toyota City-based carmaker said in a statement. The stock fell 0.4 percent to 2,636 yen.
–With assistance from Kanoko Matsuyama in Tokyo. Editors: Jim Powell, Jason Clenfield.
news.businessweek.com

Japan Tobacco Privatization a Threat


Far from the economic rationale in favor of full privatization of Japan Tobacco Inc., the world’s third-biggest cigarette maker, one group fears for its future: the country’s tobacco farmers.
About 400 farmers from across the nation gathered and then staged a demonstration Thursday, marching around Tokyo’s Nagatacho-district, the center of Japan’s government, to urge the case against selling off its 50% stake in the company, conceived as part of potential program of fund-raising to help the country cover the cost of restructuring after the March 11 disasters.
Japan Tobaccco, known universally as JT, itself has long expressed a desire to become a fully private company to better compete with its bigger global rivals — Philip Morris International Inc. and British American Tobacco PLC.
But farmers are strictly against the government and the ruling Democratic Party of Japan, which plan to transform JT eventually into a fully privatized entity within 10 years. They also showed strong opposition to plans for another round of tobacco tax hikes, adding another ¥2 per cigarette.
Current law requires the government to hold at least 5 million JT shares, or 50%, of the shares outstanding, and any share sale will require a law change, which in turn would be smoothed by cooperation from the Liberal Democratic Opposition party. The latter, though, has close ties with the tobacco lobby.
Tobacco farmers remain suspicious that any decline in the government’s stake in JT would be accompanied by the scrapping of the current tobacco sales framework here, under which the farmers have long been protected via an arrangement under which JT buys all tobacco leaf produced in Japan.
Any change in that poses a threat to future livelihoods, tobacco farmers say, because JT may buy larger amounts of cheaper tobacco leaf elsewhere.
“I have sons aged 19 and 17 but I can’t tell them to take over (my farm),” said Masakatsu Sakai, a farmer attending the gathering from Kumamoto prefecture in western Japan, the biggest tobacco producing prefecture in the country.
“If the government unloads its entire stake in JT, I have no doubt that JT would increasingly be driven in pursuit of profits, more than ever,” said Mr. Sakai, putting downward pressure on the price of tobacco leaf in Japan.
The potential change in JT’s shareholder structure comes amid increasingly uncertain times for Japan’s tobacco industry, with the number of smokers in the country having slid to a record low of about 21.7% of the population. Compared with a decade ago, the number of tobacco farmers in Japan has almost halved to 10,801 for this fiscal year.
The tempo of decline accelerated with lean harvests in recent years. A major tax hike — ¥3.5 hike per cigarette — implemented by the government in October last year led to a hike of close to 40% in the price of a pack of cigarettes.
Earlier this year tobacco farmers found about 40% of them have already decided to discontinue tobacco farming next year, according to JT and farmers.
“I’ve lost many fellow farmers…they decided to quit because of inability to make a living and no prospect for the future,” said Mr. Sakai.
One point of optimism for the farmers — privatization still has a very long way to go before becoming reality.
Prime Minister Yoshihiko Noda is already struggling to cope with what’s called in Japan a “twisted parliament.” While the DPJ controls the lower house of parliament, after a defeat in national elections last year, the ruling DPJ lost its majority in the upper house of parliament.
And that means the government could be dependent on the cooperation of the opposition parties like LDP to enact any law to change JT’s shareholding structure, cooperation that may be a long way off.
By Hiroyuki Kachi

Japan Tobacco can rise Cigarette Prices 75%

Japan Tobacco Inc. (2914), the world’s third-biggest publicly traded cigarette maker, climbed to the highest in almost three years on japan women smokingspeculation it can lift prices more than the tax increases proposed by the health minister.
Japan Tobacco rallied 6 percent to 370,000 yen, the highest intraday level since October 2008, as of 2:01 p.m. in Tokyo trading while the broader Topix index fell 1.8 percent.
Tobacco taxes in Japan should be raised until the average price of a pack of cigarettes is about 700 yen ($9.15), or 75 percent higher than the current level, to cut medical costs, Health MinisterYoko Komiyama said. Smoking in Japan was responsible for at least 4.3 trillion yen in medical costs and economic losses in 2005, according to the Institute for Health Economics and Policy.
“Tax increases will lead to Japan Tobacco’s profit growth,” said Mikihiko Yamato, a research partner at Japan Invest KK who recommends buying the stock. “If the price is over 500 yen, it will damage the sales of tobacco, but cigarette companies can still raise profit when their price increases reflect the higher costs.”
The ministry, which is participating in a tax panel session, will push for increasing tobacco levies by 100 yen annually for three years, Komiyama said in a Sept. 16 interview. Most panel members agreed with the idea last year, she said.
Underage Smoking
“At that level, we can expect people who want to quit smoking to stop, while maintaining the level of tax revenue,” said Komiyama, 63, who became minister on Sept. 2. “It’s also the best way to prevent underage smoking.”
Almost 10 percent of Japanese under 20 years old had smoked at least once, with 1.2 percent of them smoking every day, according to a study funded by the health ministry in 2007.
Efforts to raise duties have been complicated by government ownership of a controlling stake in Japan Tobacco and concerns that tax revenue may decline for a country facing the world’s largest public debt.
The tax panel, led by Finance Minister Jun Azumi, proposes reducing the government’s stake in Japan Tobacco to a third from about half, he said Sept. 16. The maker of Mild Seven and Camel cigarettes has gained 23 percent this year in Tokyo trading, giving it a market value of 3.7 trillion yen, or $48 billion.
Ruling Party’s Manifesto
“It is almost clear that the government will sell a certain amount of Japan Tobacco shares, which will make it easier for the company to do business,” Japan Invest KK’s Yamato said.
The average price of a pack of 20 cigarettes increased by 33 percent last October to 400 yen, or about $5.20. That compares with the average price of $10.80 in New York City, where taxes were raised in July 2010.
Japan Tobacco forecast an 11 percent increase in profit this fiscal year after raising prices in Russia and other overseas markets. Net income in the year ended March rose 4.7 percent to 145 billion yen, beating analysts’ estimates.
Cigarette sales volume fell after a tax increase in October pushed up prices, Japan Tobacco has said.
The proposal to increase taxes is in accordance with the manifesto of the ruling Democratic Party of Japan, Komiyama said. The manifesto calls for abolishing a law that the government own more than half of Japan Tobacco’s outstanding shares and says tobacco-related issues should be included in the “health agenda,” she said.
Children’s Fund
The cigarette maker said Sept. 6 it wants the government to sell its shares and use the funds to finance reconstruction after a March 11 earthquake and tsunami left more than 20,000 people dead or missing.
The Children’s Investment Fund Management UK LLP, the London hedge fund founded by Christopher Cooper-Hohn, has been lobbying for Japan Tobacco to buy back at least 17 percent of its stock and raise dividends.
Central and regional governments raise about 2 trillion yen in tax revenue each year from tobacco, according to the finance ministry.
One of every four adults in Japan smoked in 2009, according to Japan Tobacco. That’s down from one in three in 2000.
“You have to have political will to bring down smoking rates,” said Judith McKay, a Hong Kong-based senior adviser to the World Lung Foundation who has campaigned for stricter tobacco control. “Japan is the one exception.”
6 Million Deaths
In the U.S., one of every five adults smokes cigarettes, according to the U.S. Centers for Disease Control and Prevention. Smoking was estimated to be responsible for $193 billion in annual health-related economic losses in the U.S. between 2000 and 2004, according to the CDC.
Tobacco-related illnesses comprise one of the biggest public-health threats and kill almost 6 million people, including 600,000 non-smokers, a year, according to the World Health Organization. Almost 80 percent of the world’s 1 billion smokers live in low- and middle-income countries, the Geneva- based agency said on its website.
Japan’s health ministry also will submit legislation at the session requiring businesses to ban smoking or provide separate smoking sections, Komiyama said. The ministry probably will give exceptions to restaurants and hotels for a few years and subsidize the purchase of ventilation equipment, she said.
“It may be extreme to say this, but I’m not stopping people from shortening their lives themselves,” Komiyama said. “But I don’t want to let them cause trouble for others.”
Komiyama began advocating anti-smoking measures when she became a lawmaker in 1998 and found other legislators smoked in the parliament buildings and at meetings. She said she had been careful about protecting her throat when she worked as an anchorwoman for public broadcaster NHK for more than 20 years.
“I walked around with a sign that said ‘no smoking at my table’ to every meeting I attended,” Komiyama said. “Then many lawmakers who didn’t enjoy the smoke began sitting near me. That’s how this started.”
To contact the reporters on this story: Kanoko Matsuyama in Tokyo at kmatsuyama2@bloomberg.net; Shunichi Ozasa in Tokyo at sozasa@bloomberg.net
By Kanoko Matsuyama and Shunichi Ozasa

Japan Tobacco: Nicotine, Yes; Radioactivity, No

Japan’s smokers can breathe easy, more or less: whatever else is in their cigarettes, there’s no radiation, according to Japan japan cigarettesTobacco Inc.
The world’s third-largest tobacco company by sales volume said Tuesday that in order to “allay consumer concern” about the possibility of radiation contamination in cigarettes, it has been conducting tests since mid-August on the domestic cured leaf tobacco harvest to seek out traces of radioactive material in the wake of the country’s worst-ever nuclear incident at Fukushima Daiichi.
It ran tests on samples from all 35 municipalities where this year’s harvest was grown, prior to purchasing the leaves, and the company, known here as JT, said none of the results exceeded its own standard of 500 Bq/kilogram for radioactive cesium-133 and cesium-137 and 2,000 Bq/kg of radioactive iodine. JT adopted the same benchmark as the level set by the Food Sanitation Law for vegetables in the absence of comparable provisions established for leaf tobacco.
The samples originated from Ibaraki, Tochigi, Chiba and Shizuoka prefectures, some of which are among locations where the government banned shipments of certain food items after elevated levels of radioactive materials were detected. Above-normal levels of radioactive iodine-131 were found in spinach grown in Ibaraki and Tochigi prefectures as well as in the leafy garland chrysanthemum from Chiba prefecture. Most recently, the government temporarily restricted shipments of cows from Tochigi prefecture and other regions neighboring the unsteady Fukushima Daiichi nuclear power plant when radioactive cesium was detected in the livestock in July.
Trace amounts of combined radioactive cesium-134 and 137 were detected in 27 of the 35 samples, JT said. The highest amount measured 217 Bq/kg in a sample from Kashima, Ibaraki prefecture. Levels of radioactive Iodine-131 weren’t high enough to be detected in any of the samples.
For added customer reassurance, JT says it has several more safety checks in place before the cigarettes reach customers’ mouths. The company plans to re-examine the tobacco at three more junctures – testing it before it is processed, before use in finished products and one last monitoring check before shipments are sent off to the market.
Of course, one factor that may have had a positive influence on JT’s tests is that tobacco cultivated in Fukushima prefecture, home of the troubled nuclear plant, will not be available, unlike last year when Fukushima ranked 7th among the country’s tobacco growing prefectures.
By Yoree Koh

Japan Tobacco Urges Serbia to Align Excise Taxes With EU

Serbia and other nations in the Western Balkans should increase excise duties on cigarettes and other tobacco goods to bring them closer to European Union levels, said Cristian Cring, Adriatic representative for Japan Tobacco Inc. (2914)
Excise duties in Serbia now are 28 euros ($39 dollar) per 1,000 cigarettes, compared with EU taxes of 90 euros.
“That is the target which will be imposed for the countries of the region. That is a huge difference, even if Serbia becomes an EU member in 2020,” Cring said today at a conference in Becici, Montenegro. “We are not here to ask for an increase in taxes, but for an increase in predictable and stable way.”
The duty of 114 euros in Italy compares with 22.3 euros per 1,000 cigarettes in Albania, Cring said, adding that differences between EU and the Western Balkans meant that “a pack of Winston costs 1.25 euros in Serbia and 5.25 euros in Italy.”
An excise duty calendar would determine the pace of an increase in excise duties over a three- to five-year period, while securing stable budget revenue and a predictable business environment for the tobacco industry.
Excise duties on tobacco in Serbia generated 9.1 percent of its budget in 2010, 5.3 percent of the Romanian budget and 6.3 percent of the Bulgarian budget, Cring said.
Japan Tobacco, the world’s third-largest publicly traded cigarette maker, is the manufacturer of brands such as Camel and Winston.
To contact the reporter on this story: Gordana Filipovic in Belgrade at gfilipovic@bloomberg.net
To contact the editor responsible for this story: Elizabeth Konstantinova at ekonstantino@bloomberg.net

A Case for Reform at Japan Tobacco

The Children’s Investment Fund was humiliated when it brandished the sword of shareholder activism at Japan’s corporate shogunates in 2008. Now the London hedge fund is back with what appears to be an even more foolhardy campaign — to prod the Japanese finance minister to shake up Japan Tobacco. But this time around the embattled government may have enough to gain to push for corporate reform.
Japanese companies are laggards in the shareholder value revolution. The country’s biggest enterprises have long put job preservation and market share ahead of profits and stock price performance. Past arguments that this reflected a laudable long-term focus have been thoroughly gutted by two decades of deadweight stock prices.
All this was part of the reason the investment fund and other activists previously banged on the doors of Japan Inc.’s medieval boardrooms. But there’s change in the air in Tokyo, largely as a result of the March earthquake, the government’s botched handling of the disaster and a growing urgency over the country’s huge fiscal problems. This makes the Finance Ministry, which owns half of Japan Tobacco, a potentially malleable target.
And the investment fund has a sound case against Japan Tobacco’s management. Over the last three years, the company has lost a third of its value while two international rivals, British American Tobacco and Philip Morris, have gained 42 percent and 32 percent, respectively. That’s before factoring in dividends. On that front, the fund notes that Japan Tobacco’s payouts have amounted to a quarter of its earnings, significantly less than its rivals have handed back.
In the past, the fund’s appeal would have been easy for the bureaucrats of Kasumigaseki to dismiss. But the Finance Ministry is weaker today. The government is about to put forward a supplementary budget that will ask its citizens to tighten their belts further, including by swallowing higher value-added taxes.
Just narrowing Japan Tobacco’s performance gap with rivals would restore some $13 billion of wealth to the government’s treasury. More importantly, fostering a business culture in which shareholders — including the pension funds entrusted with the retirement years of Japan’s aging populace — are no longer treated as second-class citizens should help enrich both the government’s coffers and those of its citizens. Whether attributed to any efforts of the Children’s Investment Fund or not, it’s hard to see how the Finance Ministry could quibble with that.
Perelman’s Price
Shareholders in M&F Worldwide shouldn’t rush to take Ron O. Perelman’s latest deal. The billionaire wants to buy the 57 percent of the company he doesn’t own. His offer includes a premium, but the shares traded higher until recently. With M&F’s boss involved in running Mr. Perelman’s investments too, skepticism is warranted.
Printing checks for banks goes against the tide of technology. So even with the odd counterweight of its licorice extracts business, M&F might be expected to post declining sales. But its first-quarter results showed a sales drop of 5.2 percent from the previous year, far sharper than the 1.7 percent decline for 2010. Earnings shrank by even more. And M&F’s shares steadily slipped, losing 30 percent by June 10.
So if nothing else, Mr. Perelman’s swoop is opportunistic. His offer at a 41 percent premium brings his target’s valuation back only to near early May levels. That’s a multiple of barely 5.3 times the last 12 months’ Ebitda, less than the trading multiple of its peer, R. R. Donnelley & Sons.
But it muddies the water that Mr. Perelman effectively controls M&F already. Not only does his holding company MacAndrews & Forbes have three board seats, one occupied by Mr. Perelman, but Barry F. Schwartz, the other top executive at MacAndrews & Forbes, is also the target’s chief executive.
Even though Mr. Perelman wants a special committee of independent directors to evaluate his offer and then a vote of the other shareholders, investors might consider the Revlon example. Shareholders exchanged common shares of the cosmetics firm for a new class of preferred stock in the fall of 2009, gradually adding to Mr. Perelman’s stake. Just weeks later Revlon posted results that sent shares skyrocketing. Despite the involvement of independent directors, some investors cried foul.
With M&F’s shares flat-lining at the offer price, it looks as though shareholders are inclined to take the offer. They may feel they have little choice. But they should make sure they ask some skeptical questions before rolling over.
By ROB COX, WAYNE ARNOLD and LISA LEE

Japan Tobacco Staggers Back Following Quake

SENDAI, Japan—As shops slowly reopen along Japan’s tsunami-hit northeastern coast, many residents still aren’t finding one of the Japan markproducts they crave most: cigarettes.
The shortages represent the latest supply-chain breakdown in Japan—and a headache for Japan Tobacco Inc., which for decades has dominated Japan’s tobacco market.
The March 11 earthquake and tsunami knocked out two of Japan Tobacco’s six cigarette-making factories, damaged its distribution network and wrecked some of its suppliers’ facilities.
Japan Tobacco was forced to halt deliveries across the whole country for 12 days starting March 30. Although it said it expects to restart deliveries of seven top brands on Monday, the move cut supplies to millions of smokers, forcing even the company’s most loyal customers to try cigarettes from international rivals British American Tobacco PLC and Philip Morris International Inc.
Most of the Japanese company’s other 97 products won’t be available for weeks, if not months. The company said it aims to restart deliveries of up to 25 products over the coming month and return to normal supply volume capacity by the end of June.
Japan Tobacco’s ability to restore full capacity quickly could determine whether it can hold on to its 65% share of the $40 billion Japanese cigarette market, analysts and people in the industry said. “This could change the market and put the imported brands on top” for the first time, said Yasuhide Kitagawa, whose family runs Sendai’s Panda drug store, which specializes in foreign brands and markets BAT brands heavily. “We want that to happen.”
Taizo Demura, an analyst at Morgan Stanley MUFG Research Japan, estimated that Japan Tobacco would lose one to six percentage points in market share. “Some consumers will change,” he said. “They will try Kent, Lark, Virginia Slims or cigarette-store.biz/online/marlboro as a trial and if they think it is better than JT, then they will stay.”
In addition to losing two of its factories, a Japan Tobacco distribution center in Sendai was damaged. The company also has had problems getting such supplies as the cardboard for cartons, the fluff in cigarette filters and the plastic film used to wrap packages, said Hideyuki Yamamoto, general manager of media and investor relations for Japan Tobacco. Among the first seven brands of which Japan Tobacco will resume distribution this week: Seven Stars, Mild Seven and Caster.
The struggle to deliver cigarettes is the latest bit of bad news for the industry in Japan. Like many countries, it has been ratcheting up taxes and restrictions, and the percentage of Japanese people who smoke slid to 25% in 2009 from 33% in 2000, according to Japan Tobacco.
While delivery of foreign brands in Japan’s northeast also was interrupted by damage to distribution centers, output was unaffected because those companies’ cigarettes are made outside the country. Foreign companies aren’t allowed to make cigarettes in Japan. Even though the foreign companies largely have resolved their distribution problems, domestic and foreign brands alike have been hoarded by smokers worried over consistent supplies.
Smokers in Sendai exchanged tips on which stores still had supplies. Some smokers had friends and relatives courier cartons from other parts of Japan. Men took drags on the long, thin cigarettes that are marketed to women. One shop had a five-page list of orders.
Loft tobacco shop, which was the last supplier in its neighborhood, had only international cigarettes. “JT Sold Out,” said a hand-written sign on its window. “I will smoke whatever they have,” said Aika Ono as she stood in the long line in front of the store.
BAT and Philip Morris said they don’t intend to take advantage of Japan Tobacco’s situation. But they are increasing shipments to the country to meet customer demand. BAT has doubled its inventory to about four billion cigarettes. It has even airlifted cigarettes and routed supplies through Kobe to avoid bottlenecks in Tokyo.
Still, some analysts and investors projected that Japan Tobacco will offer its full portfolio within months. And some customers may feel it is their duty to switch to one of the few available Japan Tobacco brands rather than to foreign labels.
“While it is not as patriotic a mood as the ‘Buy America’ sentiment in the wake of 9/11, there could be a Buy Japan’ movement among smokers after the 3/11 earthquake,” said Chris Redl, chief investment adviser of Siena Capital, a Japan-dedicated hedge fund.
By Eric Bellman: eric.bellman@wsj.com

Tax Increase Hits Japan Tobacco Profit

TOKYO—Japan Tobacco Inc. said Monday its net profit in the October to December period slipped 8.3% from a year earlier, as Japan Tobaccodomestic cigarette sales fell sharply after a last-minute rush to buy tobacco ahead of an Oct. 1 price increase, while the yen’s strength also hurt its overseas business.
The world’s third-largest tobacco company by sales volume after Philip Morris International Inc. and British American Tobacco PLC generated a net profit of 37.5 billion yen ($456.2 million) in October-December period, compared with a 40.9 billion yen profit in the same period a year earlier.
The company, commonly known as JT, said its revenue dropped 16% to 1.349 trillion yen from 1.598 trillion yen in the previous year, while its operating profit fell 26% to 65.6 billion yen from 88.8 billion yen.
JT’s domestic tobacco sales in the quarter were nearly half their level in the year-earlier period, as higher tobacco prices—about 40% on average more per pack—weighed on demand. But JT had already anticipated weakness in post-tax-increase sales, estimating that its domestic sales of tobacco by volume would fall by at least 25% over the 12 months through Sept. 30.
Still, the decline in domestic demand has not been as severe as JT had previously estimated. The company revised up its domestic sales volume forecast for the current fiscal year through March to 133.5 billion cigarettes from its prior projection of 125.5 billion.
Due mainly to better-than-expected domestic sales the company raised its net profit outlook for the fiscal year through March to 136 billion yen from 115 billion yen. It also lifted its operating profit forecast to 308 billion yen from 281 billion yen and its revenue outlook to 6.12 trillion yen from 5.91 trillion yen.
Like many Japanese companies, JT is advancing into emerging markets, seeking to mitigate the effects of a weak economy and a shrinking domestic customer base. The company also announced last week that it plans to push to improve its disclosure methods through the use of new global accounting standards as it increasingly focuses on overseas markets.
JT’s acquisition in 2007 of U.K.’s Gallaher Group PLC helped extend its global reach especially in Europe and the Commonwealth of Independent States region, including Russia.
More than half of JT’s revenue now comes from overseas business activities in more than 120 countries.
Separately on Monday, JT said that it will spend up to 20 billion yen to buy back up to 65,000 of its own shares between Feb. 9 and March 23. The maximum number of the shares it plans to buy back would amount to 0.68% of the company’s total outstanding shares.
JT’s earnings are based on Japanese accounting standards.
By Hiroyuki Kachi: hiroyuki.kachi@wsj.com

Japan Tobacco Says Demand Is Recovering in Russia, Ukraine and Neighbors

Japan Tobacco Inc., the world’s third-largest publicly traded cigarette maker, said demand is recovering in Russia, Ukraine and neighboring countries, as the region emerges from the global recession.
Sales by volume of Japan Tobacco’s Winston, LD and other brands in the region rose 0.6 percent in the two months ended Aug. 31 after falling 9.7 percent in the first quarter and 7.3 percent in the second, the company said in a presentation to investors yesterday.
Japan Tobacco counts on Russia and other markets in eastern Europe to spur earnings as it expects domestic sales to fall 16 percent this fiscal year because of a planned tax increase on Oct. 1. The region accounts for almost half of Japan Tobacco’s overseas cigarette sales by volume, according to the company.
There have been “initial signs of recovery observed, with the return of the historic trend of higher consumption during the summer,” the Tokyo-based company said in its presentation in St. Petersburg.
Russia’s economy may expand 4.3 percent in 2010, compared with a record 7.9 percent contraction in 2009, VTB Capital, a Moscow-based investment bank, said Sept. 13.
Japan Tobacco rose 0.1 percent to 280,700 yen at the 3 p.m. close of trading on the Tokyo Stock Exchange. The stock has fallen 10 percent this year, compared with a 9.4 percent decline in the Nikkei 225 Stock Average.
The cigarette maker bought RJR Nabisco Inc.’s international businesses, including the Camel and Winston brands, in 1999 and the U.K.’s Gallaher Group in 2007.
The company’s profit in the first quarter declined 47 percent after domestic sales fell 7.9 percent and a stronger yen eroded the value of overseas earnings. The Japanese government plans to raise taxes by 70 yen (84 cents) per pack of 20 cigarettes from next month.