Japan Tobacco raises net forecast on currency gains and gains in market share for brands..

October 31, 2009 - Japan Tobacco Inc., the world’s third-largest publicly traded cigarette maker, raised its full-year profit forecast 8 percent on projected currency gains and increasing market share for brands including Camel and Winston.

Net income may be 108 billion yen ($1.2 billion) for the year ending March, compared with its previous estimate of 100 billion yen, the company said in a statement today. Annual sales may total 6.09 trillion yen, compared with its previous forecast of 6 trillion yen. “We are changing our forecast mainly because we have changed our exchange-rate assumptions,” Executive Deputy President Munetaka Takeda said in a briefing in Tokyo today.

The maker of Mild Seven cigarettes seeks to boost overseas sales as a declining smoking rate shrinks its home market. Sales volume of its eight “global flagship brands,” which include LD and Benson & Hedges, rose 1.8 percent in the first half, while total overseas sales volume fell 0.9 percent, the company said in its statement. Domestic sales volume dropped 5.2 percent. (Global Flagship Brands consist of eight brands: Winston, Camel, Mild Seven, Benson & Hedges, Silk Cut, LD, Sobranie and Glamour.)

“I’m concerned about a slowdown in overseas sales, even though tobacco demand has been seen as less affected by economic swings,” Tomonobu Tsunoyama, an analyst at Tokai Tokyo Research Center Co., said by telephone.

Japan Tobacco’s market share grew to 40.2 percent in Britain, 36.5 percent in Russia, 18.1 percent in Italy, 14.6 percent in France and 18.4 percent in Turkey, it said in a separate statement.

The cigarette maker predicted exchange rates of 0.73 euro, 0.65 British pound, 32.25 rubles and 93 yen to the dollar. The projected rates for the European currencies are an average of 11.6 percent higher compared with the initial forecast in April, while the yen’s is 2.2 percent higher, according to Bloomberg calculations.

Japan Tobacco International is one of the companies operating in Canada that may face at least C$200 billion ($192 billion) in claims from governments seeking compensation for treatment of smoking- related illnesses and lost taxes from smuggling. (Canada - tobacco companies may face C$200 billion in claims..)

Japan Tobacco, which is 50 percent government owned, is the biggest traded cigarette maker after Altria Group Inc. and British American Tobacco Plc.

Reference: Japan Tobacco Raises Net Forecast on Currency Gains (Update2) by Naoko Fujimura (nfujimura@bloomberg.net), Bloomberg.com, 10/29/2009.

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