TOKYO -Japan Tobacco Inc. (2914) reported Wednesday that it swung into a net profit for the January-March quarter, thanks to increased sales of tobacco products in overseas markets, offsetting a sales drop at home.
The world’s third-largest tobacco company by sales volume after Philip Morris International Inc. and British American Tobacco PLC generated a group net profit of Y31.5 billion in the fiscal fourth quarter, compared with a year-earlier loss of Y8.0 billion.
The company, commonly known as JT, posted revenue of Y1.483 trillion, slightly down compared with Y1.486 trillion in the previous year. Group operating profit rose 29% to Y43.9 billion from Y34.1 billion.
In addition, JT booked a special profit of Y16.7 billion, reflecting smaller penalties that its U.K. tobacco units Gallaher Group Ltd. and Gallaher Ltd. will pay the U.K. Office of Fair Trading. The special profit mirrors the discrepancy between the provision already set aside for the penalties, and the actual payments.
Separately, the company said it will book Y13.8 billion special loss for the July-September quarter to reflect a payment made by Canadian unit JTI-Macdonald Corp. to settle a longstanding dispute over alleged cigarette smuggling.
JT has been in a legal dispute with the authorities in Canada, which in 2004 claimed JTI-Macdonald had profited from contraband trade in cigarettes, and that it didn’t pay tax on those profits from 1990 and 1998.
JT obtained the unit via the 1999 purchase of the international operations of RJR Nabisco.
For the full year ended March, JT posted a net profit of Y138.45 billion, up 12% from Y123.40 billion. Its full year revenue came to Y6.135 trillion, down 10% from Y6.832 trillion.
For this fiscal year ending March 31, 2010, the company expects a net profit of Y133 billion, down 3.9%. Revenue is pegged at Y5.980 trillion, down 2.5%.
Japan Tobacco compiles its earnings based on Japanese accounting standards.
The Japanese government will raise the tax on tobacco by Y3.5 per cigarette effective Oct. 1, or Y70 per pack-the first tax hike since July 2006, and a much steeper rise compared with past increases.
To absorb the looming tax hike, JT plans to raise the price of its popular Mild Seven brand by Y110 per pack of 20 cigarettes, bringing the price of tobacco to around Y410 per pack.
Nikkei, April 28, 2010