Japan Tobacco Aims to Boost EPS as It Chases Philip Morris
February 10, 2012, 12:59 AM ESTBy Cheng Herng Shinn and Shunichi Ozasa
(Updates with share price in seventh paragraph.)
Feb. 9 (Bloomberg) -- Japan Tobacco Inc. may buy back shares to help narrow a gap in earnings-per-share growth with rivals including Philip Morris International Inc. and British American Tobacco Plc.
“We are chasing Philip Morris and British American,” Executive Deputy President Masakazu Shimizu said yesterday in an interview. This will be achieved by increasing EPS growth and dividends as well as through raising cash flows and Ebitda, or earnings before interest, taxes, depreciation and amortization, margin, he said.
The company has said it will buy back shares when the government starts selling from its 50 percent stake in the former tobacco monopoly. Any repurchases will help prevent dilution of share value if the government decides to cut its holding, Shimizu said. Japan may reduce its stake to 33 percent to raise cash to pay for recovery projects after the March 11 earthquake.
“The first priority is investing in the business which will be the engine for future growth,” Shimizu said. “This will lead to profits for all parties concerned, including shareholders.”
The world’s second-biggest listed cigarette maker plans to increase shareholder dividend while boosting profitability as part of its new mid-term strategy. This comes after paying down its debt from the takeover of Gallaher Group Ltd. in 2007.
The maker of Mild Seven and Camel cigarettes has come under pressure to return more cash to shareholders including Children’s Investment Fund Management UK LLP. The U.K.-based investor has said it is seeking a 20,000 yen-a-share dividend, compared with the 9,000 yen the company plans for the year ending March 31.
The cigarette maker rose 3.5 percent to 428,500 yen in Tokyo as of 12:36 p.m. local time. The shares have advanced 18 percent this year, tripling the 6.1 percent gain for the Nikkei 225 Stock Average.
Japan Tobacco earnings per share rose 4.8 percent over the past year, lower than the 19.4 percent median for the global tobacco industry, according to data compiled by Bloomberg.
--With assistance from Anjali Cordeiro in Hong Kong. Editors: Suresh Seshadri, Dave McCombs
To contact the reporter on this story: Cheng Herng Shinn in Tokyo at hcheng52@bloomberg.net
To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net
