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Japan Tobacco Inc. (JTI), Asia’s largest listed cigarette maker, raised its full-year forecast by less than most analysts expected as a stronger yen eroded the value of overseas sales and price increases undermined domestic demand for cigarettes.
Net income will probably be ¥409 billion (US$4 billion) for 2016, the company said in a statement Monday. That compares with the ¥419 billion average of 17 analyst estimates compiled by Bloomberg. The cigarette maker forecast annual profit at ¥399 billion in May, when it also set a sales target of ¥2.2 trillion. It lowered the sales outlook to ¥2.12 trillion on Monday.
JTI, which has raised revenue from outside the country to about 60% of the total last year, compared with about 48% in 2011, said exchange rate fluctuations would probably pare adjusted operating profit by ¥111 billion this year. Still, the cigarette maker is “seeking further geographical expansion outside Japan,” Japan Tobacco executive deputy president Hideki Miyazaki said.
A shrinking population and rising concern about the health risks of smoking in Japan are sapping demand, prompting the company to pursue expansion in faster growing markets. Japan Tobacco agreed to pay $510 million for a 40% stake in Ethiopia’s National Tobacco Enterprise last month, after completing a deal in January to buy the international rights to Reynolds American Inc.’s Natural American Spirit brand.
Demand is “strong” in Europe, the Middle East, Africa, and Asia, Miyazaki said. The company left its annual dividend forecast at ¥128 per share for this year.