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Japan Tobacco Profit Rises on New Products, Quake Recovery

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Oct. 31 (Bloomberg) -- Japan Tobacco Inc., Asia’s largest cigarette maker by market value, reported an 18 percent rise in first-half profit, aided by new domestic products and a recovery from last year’s earthquake.

Net income rose to 168.8 billion yen ($2.1 billion) for the six months ended September, from 143.6 billion yen a year earlier, according to a statement to the Tokyo Stock Exchange yesterday. The company maintained its profit forecast of 318 billion yen for the full year to March 2013.

The Tokyo-based cigarette maker has introduced new products such as “Pianissimo Precia Dia’s Menthol” as it faces a shrinking domestic market. Japan Tobacco’s market share increased to 60 percent during the six-month period from 51 percent a year earlier as sales recovered from the March 2011 earthquake, it said yesterday.

Japan Tobacco shares fell 1.5 percent to 2,206 yen at the close in Tokyo trading. The stock climbed 22 percent for the year, compared with a 1.9 percent gain for the broader Topix index. The company cut its full-year sales forecast by 1.4 percent to 2.1 trillion yen, according to the statement.

Domestic tobacco sales rose 14 percent to 350.7 billion yen during the first half, while international sales increased 3 percent to 490.2 billion yen, the company said yesterday.

Europe Slowdown

Sales volume in south and west Europe fell 4.8 percent in the three months to September, as markets in Italy and Spain continued to shrink on slowing economies, the cigarette seller said in a statement yesterday.

“We should watch for the sales volume in Europe in terms of the current European economic situation,” said Junichi Kanamori, analyst at Mitsubishi UFJ Morgan Stanley Securities Co.

Japan Tobacco in August said it will change the name of Japan’s best-selling “Mild Seven” cigarettes to “Mevius.” It would be the first time the company changed the name since it started selling the product in 1977.

A law passed last year allowed the Japanese government, the cigarette maker’s biggest shareholder, to sell one-third of its entire holding to help pay for earthquake rebuilding. The government owns 50 percent of Japan Tobacco, according to data compiled by Bloomberg.

Japan Tobacco is considering buying back as much as 250 billion yen of its shares if the government sells its shares this fiscal year, the company has said.

To contact the reporter on this story: Yuki Yamaguchi in Tokyo at yyamaguchi10@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

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