Japan Tobacco International profits to fall this year..

April 30, 2009 - Japan Tobacco Inc., the world’s third-largest publicly traded cigarette maker, forecast profit will fall 19 percent this year as fewer people smoke in its home market and currency movements hurt its international earnings.

The maker of Camel and Mild Seven cigarettes is losing sales in Japan as the smoking rate falls and authorities introduce tighter tobacco controls (decline in total demand due to various factors including an ageing society, increased health consciousness and stricter smoking regulations). Earnings from surging overseas cigarette sales, helped by the 2007 takeover of U.K.- based Gallaher Group Plc, are being blunted by the strengthening of the yen against other currencies.

The company’s Japanese tobacco sales fell 4.8 percent to 3.2 trillion yen, including tax, last year. The percentage of Japanese men who smoke has fallen by half over the past 40 years to about 40 percent.

Overseas tobacco revenue rose 18 percent to 3.12 trillion yen in the year to December on higher sales of Winston and Camel cigarettes in counties including Russia, Italy and Spain.

Growth in overseas sales was blunted by gains in the yen, which gained 23 percent last year, the best performer among the 16 major currencies tracked by Bloomberg.

Note: The image has the words 10 years of success. JTI (international business of Japan Tobacco) was formed in 1999 when Japan Tobacco Inc. purchased, for USD 8 billion, the international tobacco operations of the US multinational R.J.Reynolds. In 2007, Gallaher, a FTSE (Financial Times Stock Exchange) 100 business, was acquired by Japan Tobacco for GBP 9.4 billion. At the time, this was the largest foreign acquisition by a Japanese company.

Reference: Japan Tobacco Profit to Fall on Smoking Decline, Currency Moves by Fergus Maguire, Bloomberg.com, 4/30/2009; JT Posts Record Net Sales and EBITDA for the Fiscal Year that Ended March 2009, Japan Tobacco Inc., April 30, 2009.