Business

RI’s cigarette sales
boost HMSP’s market share

Jakarta-listed cigarette maker PT HM Sampoerna (HMSP) enjoyed a higher market share last year on the back of growing domestic consumption, its parent company Philip Morris International Inc. (PMI) said.

In an announcement of its 2012 reports, PMI said that its market share increased by 2.8 percent to 35.6 percent year on year, particularly on the back of growing sales of premium segment cigarette brand Sampoerna A and middle segment brand U Mild.

“In Indonesia, the total cigarette market was up by 8.2 percent to 302.5 billion units in 2012, driven by growth in the premium and mid-price segments, and up by 9.4 percent in the fourth quarter to 79.2 billion units,” PMI said in the statement.

Out of the total figures, according to the PMI statement, Sampoerna A held a 13.8 percent market share in 2012, increasing by 1.1 points year on year. U Mild was up by 1.2 points to 3.3 percent, Marlboro by 0.3 points to 4.8 percent while Dji Sam Soe was flat at 7.8 percent.

Those are brands distributed by HMSP, which is 97.95 percent owned by PT Philip Morris Indonesia, the local unit of PMI. The public holds the remaining 2.05 percent stake in HMSP, whose market capitalization reached Rp 289.3 trillion (US$29.92 billion) as of Friday, the second highest among other listed companies on the bourse.

PMI also cited that its shipments to Indonesia grew by 17.5 percent last year, helping the company offset declining shipments to several other countries, including Japan and South Korea.

HMSP has not released its 2012 full year report.

In a recent email statement, HMSP said that its performance reflected the growth in the country’s cigarette market, particularly in the premium and mid-price segments.

“Sampoerna’s big investments in Indonesia over the past years support our current growth and set the basis for our future growth. These include investments in manufacturing, in the brand portfolio, and in developing the talent and future leadership of Sampoerna,” HMSP said an email to The Jakarta Post.

HMSP cited that since 2006, its manufacturing footprint had increased from 35 to 46 facilities, including those directly owned and operated by third party partner Mitra Produksi Sigaret. One of its significant expansions during the period was the inauguration of a production facility for machine-made kretek (clove cigarettes) in Karawang, West Java in 2008 with an investment of more than US$250 million. In July last year, HMSP also launched two hand-rolled kretek factories in East Java.

The company declined to comment on its future expansion plans.

HMSP shares closed at Rp 66,000 apiece on Friday, increasing by 2 percent from Rp 64,700 a day earlier.

The secretary general of the Indonesian Cigarette Producers Association (Gappri), Hasan Aoni Aziz, said that the country’s cigarette market would increase only by around 5 percent in terms of units this year.

“However, in terms of the industry, more companies will go bankrupt over the government’s regulations on pictorial warnings, cigarette tax increases and production capacity restrictions,” Hasan said.

He cited that there were around 4,700 cigarette factories in Indonesia in 2007. The number shrunk to around 600 factories last year.

Last December, the government issued a new tobacco control regulation. Under the regulation, cigarette makers would be given a 18-month grace period before having to comply to the regulation in which 40 percent of its packaging must comprise warnings on the dangers of smoking.

Meanwhile, cigarette tax will also be increased at around 7 percent this year.

“The government seems to ‘copy and paste’ foreign regulations, which have forbidden aromatic cigarettes and additives to cigarettes. Those will affect the heritage of kretek cigarettes, which have always contained additives,” Hasan said.

Commenting on HMSP, which also produces kretek cigarettes, Hasan said that kretek did not significantly contribute to PMI’s total business and would not affect the company.

Several large kretek cigarette companies have claimed that anti-smoking campaigns in Indonesia were influenced by “foreign” interests that champion non-kretek cigarettes over kretek.

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