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MarketScreener Homepage  >  Equities  >  Tokyo Stock Exchange  >  Japan Tobacco Inc.    2914   JP3726800000

JAPAN TOBACCO INC.

(2914)
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Big Tobacco gets a pandemic pick-me-up

11/19/2020 | 10:54am EST
FILE PHOTO: Protest against the use of protective masks during the coronavirus disease (COVID-19) pandemic, in Madrid

(Reuters) - Danielle Eddy, a smoker for 20 years, quit at the start of 2019. When the coronavirus pandemic hit, the 42-year-old spirits industry consultant lit up again.

"When I get on a call, I walk with the phone, and I smoke cigarettes. That's what I do," she said in a phone interview from Columbus, Ohio.

She's not the only one. Thousands of miles away in Brussels, photographer Olivier Truyman says that pre-COVID, he was smoking less than three-quarters of a pack a day. Nowadays, he says, he paces in his apartment "like a panther in a cage." And he's lighting up more than a pack a day.

In homes across the world, people like Eddy and Truyman are giving Big Tobacco a boost during the pandemic, despite public health advice that smoking increases the risk of severe illness from COVID-19. A combination of anxiety, boredom, stress, and the unexpected freedoms of social isolation are among reasons they give.

In recent weeks, tobacco companies Philip Morris International Inc, Japan Tobacco Inc (JT), Imperial Brands Plc and Altria Group Inc all raised their sales or profit targets, saying the industry had done better than expected, mostly in the United States and Europe. Imperial said staying home in the pandemic gave people more chances to smoke and more cash to spend.

Overall, tobacco sales, which have been declining for years, are still falling, many people are still trying to quit, and the picture is mixed globally. For example in Britain, a study published in October by researchers at University College London found that attempts by smokers to quit jumped in April. Sales have been hit in countries such as South Africa, where tobacco sales were banned for five months from late March as part of the response to COVID-19.

But in some COVID lockdowns, the decline slowed down.

For example, in the United States tobacco sales by volume fell 2% in the eight months to Oct. 24, according to Nielsen data. That's smaller than an average drop of just over 3% in the previous two years.

Slowing U.S. sales of e-cigarettes also have benefitted conventional smokes. E-cigs rose only 2% over the period versus about 70% on average in the previous two years. By February this year, nearly 3,000 people in the United States had been hospitalized or died with what's known as E-cigarette or Vaping use-associated Lung Injury (EVALI), according to the Centers for Disease Control and Prevention (CDC).

A U.S. government ban on most flavours of pre-filled nicotine cartridges used in e-cigarettes has made them less attractive tobacco substitutes for some people, according to Investec analyst Alicia Forry. But that's not the only reason she said tobacco volumes have picked up in the United States - cheaper gasoline is another, for instance.

It's people thinking "'my bill isn't usually this low, let's throw in an extra three packs of cigarettes, I know I'll get around to smoking them at some point,'" Forry said.

British American Tobacco Plc told Reuters its U.S. cigarette performance had been helped by government stimulus payments, which have boosted disposable incomes, as well as working from home and "pantry-loading" - stocking up on necessities.

Other factors tobacco firms cited include: reduced international travel, which has helped domestic sales in some countries, and tighter border controls, which reduced cigarette smuggling. Philip Morris said it saw demand pick up more as lockdowns eased and people smoked socially.

Alimentation Couche-Tard Inc, which owns convenience stores in North America and Europe, said in September it had seen strong demand for cigarettes and other tobacco products between April and July, with many smokers buying multipacks and cartons.

MORE PRESSING PROBLEMS

Truyman, the photographer in Brussels, works freelance for corporate clients and said his work dried up with lockdown. A general sense of anxiety around the world influences his cigarette consumption, says the 33-year-old.

He knows smoking impairs lung function, which the World Health Organization says makes it harder for the body to fight off coronaviruses. And smokers who catch COVID are more likely to develop severe illness than non-smokers, according to the CDC.

While tobacco smoke contains at least 4,000 chemicals of which 70 are known carcinogens, Truyman says any health problems that may come from smoking a few more Camels a day aren't top of mind right now. "I have more pressing things to deal with."

From the United States and Britain to Israel and South Africa, studies have shown the coronavirus pandemic has brought with it increased feelings of depression and anxiety and in some cases, more substance abuse and smoking.

In a May survey of pandemic-related stress among more than 900 smokers in the Netherlands, 19% of respondents said they smoked more, and 14% said they were smoking less. A survey of more than 5,000 smokers from April to May in Brazil found more than a third said they smoked more during the pandemic.

Tobacco has long been a central coping mechanism for people with mental illness or in stressful situations like war or prison.

"Many people with mental illness, ranging from mild depression to alcohol dependence, to serious illnesses such as schizophrenia, smoke more when they're stressed, and smoke more when they're getting more sick," says Laura Hirshbein, a psychiatrist and psychiatry professor at the University of Michigan.

ESSENTIAL ITEMS

The industry has lobbied to try to keep output going during the pandemic.

For instance in Russia, which according to the WHO has one of the largest adult smoking populations in Europe, the manufacture of tobacco products was temporarily suspended on March 30 after the government omitted cigarettes from a list of essential items.

The JT Group said Russia's Council for the Development of the Tobacco Industry, an industry association, had written to the government to try to prevent "negative consequences" of the suspension. Eduard Vorontsov, head of the group, told Reuters a lengthy suspension risked disrupting supplies of legally produced tobacco.

A representative of Deputy Prime Minister Victoria Abramchenko confirmed that she had recommended regional authorities add tobacco to their lists of essential items in early April.

In countries including France, Italy and Spain, tobacconists were deemed "essential" and stayed open in lockdown. In the United States and Britain, tobacco was on sale in stores that sell other necessities such as groceries.

And in the United States, people can also access coupons to buy cigarettes at a discount through apps on Android cell phones from firms including Altria and BAT - a promotional effort first reported by the Campaign for Tobacco-Free Kids, which last month called on Alphabet Inc's Google to prohibit such apps.

Asked about the coupons, Altria said its "responsible marketing practices" are consistent with previous years; BAT also said digital coupons were established before the pandemic. Google, which runs the Google Play store on Android phones, says it does not allow apps that sell tobacco or encourage use by minors and that it has reviewed the apps, which are rated Mature, and found no evidence of policy issues.

In the United States, the CDC says calls to the national 1-800-QUIT-NOW number jumped less sharply than they have in previous years after a regular media campaign.

Still, the impulse to smoke more may soon burn out. Imperial, which reported full-year results this week, says it expects tobacco's decline to resume in earnest next year. And Eddy, who is single, says she hopes to quit again soon.

"Once dating is available again, I'd like to be done," she said.

(With additional reporting by Alexander Marrow and Gleb Stolyarov in Moscow and Inti Landauro in Madrid; Edited by Vanessa O'Connell and Sara Ledwith)

By Martinne Geller and Siddharth Cavale


© Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
ALIMENTATION COUCHE-TARD INC. 0.42% 43 Delayed Quote.4.34%
ALPHABET INC. 1.30% 1787.02 Delayed Quote.33.42%
ALTRIA GROUP, INC. -0.02% 40.37 Delayed Quote.-19.09%
BRITISH AMERICAN TOBACCO PLC 0.15% 2677 Delayed Quote.-17.16%
DOW JONES AFRICA TITANS 50 INDEX -1.06% 501.92 Delayed Quote.-5.57%
DOW JONES SOUTH AFRICA(ZAR) -0.64% 1728.26 Delayed Quote.-4.21%
EURO / BRAZILIAN REAL (EUR/BRL) 0.54% 6.3746 Delayed Quote.40.72%
IMPERIAL BRANDS PLC -0.49% 1413 Delayed Quote.-24.40%
INVESTEC GROUP -5.65% 38.21 End-of-day quote.-53.94%
JAPAN TOBACCO INC. 0.14% 2181 End-of-day quote.-10.34%
PHILIP MORRIS INTERNATIONAL INC. -1.29% 75.9 Delayed Quote.-10.80%
S&P AFRICA 40 INDEX -0.87% 162.67 Delayed Quote.-5.02%
US DOLLAR / RUSSIAN ROUBLE (USD/RUB) 0.16% 75.975 Delayed Quote.22.05%
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Financials
Sales 2020 2 089 B 20 082 M 20 082 M
Net income 2020 300 B 2 880 M 2 880 M
Net Debt 2020 573 B 5 511 M 5 511 M
P/E ratio 2020 12,8x
Yield 2020 7,07%
Capitalization 3 870 B 37 112 M 37 203 M
EV / Sales 2020 2,13x
EV / Sales 2021 2,04x
Nbr of Employees 61 975
Free-Float 55,1%
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Mean consensus OUTPERFORM
Number of Analysts 15
Average target price 2 363,53 JPY
Last Close Price 2 181,00 JPY
Spread / Highest target 42,1%
Spread / Average Target 8,37%
Spread / Lowest Target -17,5%
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Managers
NameTitle
Masamichi Terabatake President, CEO & Representative Director
Yasutake Tango Chairman
Naohiro Minami CFO, Representative Director & Executive VP
Hiroyuki Miki Executive Officer, Head-Research & Development
Mutsuo Iwai Vice Chairman
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