BATI forecasts higher cigarette sales

The Jakarta Post, Jakarta

After posting a decline in sales in 2004, PT British American Tobacco Indonesia (BATI) expects to bounce back and enjoy higher cigarette sales this year, in line with projected improvements in the country's tobacco market.

"I believe the tobacco market in Indonesia will continue to grow throughout 2005. This year's first quarter results indicate the increase will be somewhere between 5 percent and 10 percent," said Ian Morton, the president director of BATI.

Quoting a report from market research company ACNielsen, Morton said cigarette sales in Indonesia increased 16 percent to 142.37 billion sticks in 2004 from 122.74 billion sticks in 2003.

He did not provide specific projections for the company's sales in 2005, but acknowledged that its sales in the first quarter declined by 7 percent from the same period in 2004 due to losses in tsunami-devastated Aceh and the circulation of smuggled cigarettes in the market.

According to a report from BATI, the company's sales declined in volume by 22 percent from 7.5 billion sticks in 2002 to 5.93 billion sticks in 2003, and by 9 percent to 5.37 billion sticks in 2004.

In value, the company's sales declined by 3 percent to Rp 573 billion (US$59.89 million) in 2004 from Rp 591 billion in 2003.

BATI produces cigarettes under the Dunhill, Lucky Strike, Ardath, Commfil and Kansas brands. It has a 30 percent share of the country's non-clove cigarette market, or a 2.5 percent share of the country's total tobacco market. In Aceh, it used to control 17 percent of the tobacco market before the Dec. 26 tsunami.

Morton said due to the decrease in sales and the allocation of Rp 43 billion in a one-off restructuring expenditure resulting from the closure of a factory in Malang, East Java, the company suffered a financial loss of Rp 18 billion in 2004, compared to a net profit of Rp 49 billion in 2003.

On the acquisition of PT HM Sampoerna by Phillip Morris Indonesia, Morton said it would not change BATI's business strategy in any way.

"I don't see any problem looking forward for BATI. Surely it will be interesting to see how they manage this huge resource. The impact on the market will only be known after the acquisition is completed," he said.

Morton said BATI had no plans to begin producing kretek (clove) cigarettes.