BAT fumes over plain-packaging regulations

BRITISH American Tobacco (BAT) chairman Richard Burrows issued a stern warning against further efforts to bring in plain packaging for cigarettes and tobacco products, at the group’s annual general meeting on Wednesday.
Australia introduced plain-packaging regulations at the end of 2012, prompting speculation — so far unfounded — that other countries, including South Africa, could follow suit.
Plain-packaging regulations in Australia stipulate that cigarette brands are sold in identical packs featuring prominent and graphic images of smoking-linked ailments.
Speaking at the annual meeting held in London on Wednesday, Mr Burrows said BAT believed packaging regulations had gone too far with recent moves to bring in plain packaging. "Along with failing to respect our minimum guaranteed rights on trademark protection, we have seen no credible evidence that plain packaging will stop children from taking up smoking or encourage current smokers to quit," he said.
He stressed that where BAT disagreed with measures being proposed, the company would always try to offer practical alternatives for delivering regulatory aims and public health objectives.
Mr Burrows noted that Australia introduced plain packaging one year ago. "Since then the amount of tobacco shipped equated to an increase of 59-million cigarettes, the first increase in Australian tobacco volumes in over five years."
He said that an industry-commissioned KPMG report published last month found that the illegal tobacco market was now at its highest point yet and was equal to 13.9% of total consumption, costing the Australian government and taxpayers about $1.1bn a year.
"These facts clearly place a question mark over the policy."
Mr Burrows noted that five sovereign states were challenging Australia’s decision to introduce plain packaging via the World Trade Organisation. "Those countries are challenging it because they believe the legislation is a barrier to trade and restricts intellectual property."
BAT also released an interim management statement — covering the three months to end-March — on Wednesday. The quarterly statement showed revenue up 2% at constant rates of exchange, but declining 12% at current rates of exchange.
Cigarette volumes slipped 1% to 158-billion with a decrease of 1.1% for total tobacco volume.
The market seemed disappointed with the numbers, with BAT’s shares drifting down as much as 2.2% to an intraday low of R602.94 on the JSE on Wednesday. In a research note, investment house Renaissance Capital (RenCap) said the timing of price increases explained the temporary lag in BAT’s revenue. But RenCap believed revenue would improve during the financial year ahead.
BAT reported that Global Drive Brand cigarette volume — Dunhill, Kent, Lucky Strike and Pall Mall —-grew a sprightly 6.3%.
CEO Nicandro Durante maintained that BAT enjoyed a good underlying performance, underpinned by an improving trend in volume. "We have grown revenue at constant rates of exchange and our pricing remains on track."