Bloomberg News

Japan Tobacco Profit Jumps 83% on Revival From Earthquake

July 30, 2012

Japan Tobacco Inc. (2914), Asia’s largest listed cigarette maker by market value, reported first-quarter profit rose 83 percent as it recovered some of the market share lost after last year’s earthquake.

Net income rose to 84.5 billion yen ($1.1 billion ) from 46.1 billion yen a year earlier, the company said in a statement today.

The seller of Mild Seven cigarettes is expanding overseas and has launched new products as it faces a shrinking domestic market. Its share in the domestic tobacco business recovered to about 59 percent as of June, according to the company. Japan Tobacco’s market share had dropped to 55 percent in the year ended March 2012 from 64 percent a year earlier after the March 11, 2011, earthquake hurt sales.

“The domestic tobacco business has come out of the effect of last year’s earthquake with steady market share recovery following a number of sales and marketing initiatives,” President Mitsuomi Koizumi said in today’s statement.

Sales rose 17 percent to 512 billion yen from 437 billion yen a year earlier. The company left its forecast for the fiscal year ended March 31 unchanged at 318 billion yen.

The company in May agreed to pay 475 million euros, or $597 million at the time, for Belgium-based Gryson NV to expand in Europe’s roll-your-own cigarette market. Sales volumes are declining in Japan’s cigarette industry amid tax increases and increased health consciousness.

A law passed last year allowed the Japanese government, the cigarette maker’s biggest shareholder, to sell one-third of its entire holding to help pay for earthquake rebuilding. The government owns 50 percent of Japan Tobacco, according to data compiled by Bloomberg.

Japan Tobacco is considering buying back as much as 250 billion yen of its shares if the government sells its shares, the company has said.

Japan Tobacco shares closed up 1.3 percent to 2,445 yen ahead of the earnings announcement. The stock is up 35 percent for the year compared with a 0.43 percent gain for the broader Topix index.

To contact the reporter on this story: Yuki Yamaguchi in Tokyo at yyamaguchi10@bloomberg.net

To contact the editor responsible for this story: Anjali Cordeiro at acordeiro2@bloomberg.net


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