Japan Tobacco hopes price hikes will boost profit
Japan Tobacco Inc., the world's third-biggest tobacco company, said on Wednesday it hoped that planned price hikes would boost its 2006/07 profits above its April forecast.
JT, which has around a 66 percent share of the domestic market, will raise prices of its flagship Mild Seven and 12 other cigarette brands by 30 yen (26 U.S. cents) a pack -- 10 yen more than a tobacco tax hike effective the same date -- from July 1.
"We are hopeful to generate higher profits than we forecast at the earnings announcement," new JT chief executive Hiroshi Kimura, who was in charge of Geneva-based international operations for the last seven years, told Reuters in an interview.
"Any negative impact [of the price hikes] on sales volume will depend on our operational efforts," he said. "I hope this will help to lessen a profit fall."
JT, known also for its Camel, Winston, and Salem brands, posted 12 percent growth in operating profit for the year ended March 2006, led by strong sales in overseas markets. It forecast profit in the current business year falling by the same amount as the price hikes weigh on sales volume.
The termination in April 2005 of a three-decade contract with Philip Morris to produce and sell the global leader's Marlboro brand in Japan would also hurt profits.
Kimura said the company should be able to make any necessary changes to its earnings forecast when it reports half-year results.
By further strengthening its overseas operations amid a sluggish domestic market, he also said JT aims to close the gap in market share with global leaders Altria Group Inc's Philip Morris and British American Tobacco Plc by 1-2 percentage points in three years.
