JTI targets 4% increase in tobacco sales this year

TOKYO, Japan – Japan Tobacco Inc. (JTI) is targeting to increase its tobacco sales by four percent this year on the back of the recent acquisitions made by the company in different markets, including Mighty Corp. in the Philippines.

In its annual report for 2017, JTI said it wants to expand its shipment volume by four percent this year from the 398.5 billion units recorded in 2017 despite challenges such as decreased demand and increases in tobacco excise taxes in different parts of the world.

“In 2018, we target robust total volume growth of approximately four percent as we benefit from the volume contribution from our acquisitions in Asia, and more recently in Ethiopia,” the company said.

In September last year, JTI acquired the assets of Bulacan-based cigarette manufacturer Mighty Corp., after the latter was embroiled in a controversy for allegedly using counterfeit tax stamps.

“This deal consolidated our business foundation through expanded distribution and a strengthened brand portfolio, enabling JTI to reach a 29 percent share in one of the largest tobacco markets worldwide,” JTI said.

Other acquisitions made by the company last year include PT. Karyadibya Mahardhika and its distributor, PT. Surya Mustika Nusantara in Indonesia.

JTI also signed last December a share purchase agreement with the Ethiopian government for 30 percent of the total shares in National Tobacco Enterprise Share Co., bringing its total share ownership to over 70 percent.

Aside from its acquisitions, JTI sales growth will also be driven by the cigarette manufacturer’s shift in strategy. For this year, JTI said it would narrow its global flagship brands from nine to four, namely, Winston, Camel, LD and Mevius.

The company said its projected positive volume performance for the year, together with improved pricing gains and increased contribution from its reduced-risk products, would enable JTI to grow its core revenue and adjusted operating profit by 8.1 percent and 14.7 percent, respectively.

“To ensure long-term competitiveness and sustainable growth, we will continue to focus out investment strategy on GFB portfolio, emerging markets, and reduced-risk products,” JTI said.

However, JTI admitted that total industry volume would become more challenging this year. The company cited tax policies, such as increases in excise taxes as one of the industry’s challenges.

In the Philippines alone, the Tax Reform for Acceleration and Inclusion (TRAIN) Law adjusted upwards the excise tax rate on tobacco.

In 2017, JTI reported a core revenue of $10.5 billion, slightly above the $10.49 billion recorded the previous year. Adjusted operating profit also grew 1.4 percent to $3.14 billion.