Clear The Air News Tobacco Blog Rotating Header Image

April 6th, 2012:

Stop tobacco industrY interferENCE

Download PDF : wntd_2012_poster_lr

Tobacco stocks could damage your wealth

No smoking sign © Thinkstock

Smoking bans are becoming more widespread

What are the 20 best stocks listed in the UK? It’s the kind of thing you want to know before this year’s deadline for choosing your individual savings account (Isa) holdings, isn’t it? It’s good news, then, that Société Générale’s Andrew Lapthorne has made a stab at figuring out the answer, by compiling a list of the most consistent shares over the past 20 years.

These he counts as the stocks that you could have bought in any month since 1993 and been certain to make a positive absolute return, had you held them for five years. To find them, he took all the stocks with a long enough trading history – 329 qualified – and ranked them every month on a five-year total return basis. All those with any negative returns were removed.

A mere 20 remained. Of these, the top ten were: Domino’s Pizza, Centamin Egypt, BHP Billiton, Genus, Imperial Tobacco, Synergy Health, Dechra Pharmaceuticals, SABMiller, BG Group and Ultra Electronics Holdings.

That these companies have done so well in the past 20 years is no guarantee they will do anything useful at all in the next five, admits Lapthorne. But the fact that “they have delivered consistent share price performance over such a long period must indicate some form of competitive advantage”.

That makes sense – and a good few of the companies will surely make their holders nice returns.

Domino’s is an excellent example of a well-managed company that has tapped into rising consumer demand for convenience food – as is Greggs, which comes in at number 19 on the list.

Genus is a market leader and good pharmaceutical companies should be finding themselves in a demographic sweet spot.

But one bothers me. It is Imperial Tobacco.

Tobacco companies have had an extraordinary amount of bad publicity over the past 50-odd years. They’ve been in and out of court; they’ve paid out enormous settlements; the countries in which they operate have spent billions trying to prevent citizens from buying their products; and they’ve been severely limited in terms of how they can market, advertise and manage their brands.

Yet their shares have continued to be top performers. Look at how their businesses operate and you can glimpse the reason why. Big tobacco companies have very strong brands. There is never any new competition. After all, who’s going to put up the money to enter such a vilified and low-growth sector when they aren’t even allowed to promote their products?

Incoming Lorillard CEO Kessler made US$13M in ’11

6 April 2012

AP Tobacco Writer

Lorillard Inc. CEO Murray Kessler received a pay package valued at $13 million in his first full year on the job with the nation’s third-biggest tobacco company, according to an Associated Press analysis of a regulatory filing.

The pay package came in a year when the maker of Newport, Kent, True and Maverick cigarettes saw its profit rise nearly 8 percent to $1.11 billion and its revenue excluding excise taxes increased about 10 percent to $4.45 billion. Shipments rose nearly 7 percent to more than 40 billion cigarettes, compared with an estimated industry decline of 3.5 percent.

The compensation deal was disclosed in an annual proxy filing with the Securities and Exchange Commission filed Thursday.

Kessler, who joined the company in September 2010, received a salary of $1.2 million and a $3.5 million performance-based bonus in fiscal 2011. The value of his stock options and stock awards totaled $8.3 million.

The 52-year-old, who also serves as board chairman, received $3.7 million for 2010.

Lorillard also announced that it will hold its annual meeting May 17 in its headquarters city of Greensboro, N.C., where shareholders will elect two directors to its board. Lorillard, the oldest continuously operating U.S. tobacco company, spun off from Loews Corp. in 2008.

The Associated Press formula calculates an executive’s total compensation during the last fiscal year by adding salary, bonuses, perks, above-market interest the company pays on deferred compensation and the estimated value of stock and stock options awarded during the year. The AP formula does not count changes in the present value of pension benefits. That makes the AP total slightly different in most cases from the total reported by companies to the Securities and Exchange Commission.

The value that a company assigned to an executive’s stock and option awards for 2010 was the present value of what the company expected the awards to be worth to the executive over time. Companies use one of several formulas to calculate that value. However, the number is just an estimate, and what an executive ultimately receives will depend on the performance of the company’s stock in the years after the awards are granted. Most stock compensation programs require an executive to wait a specified amount of time to receive shares or exercise options.

Michael Felberbaum can be reached at

© 2012 Kansas City Star and wire service sources. All Rights Reserved.

Government files High Court tobacco defence

General Nicola Roxon is ready for a fight over plain tobacco packaging laws. Source: The Courier-Mail

THE federal government has formally rejected big tobacco’s High Court claims that the commonwealth is actually acquiring the companies’ brands through its new cigarette plain packaging laws.

The government lodged its detailed submissions to the High Court today in response to the legal action launched by four big tobacco companies.

In November last year, the government passed landmark laws forcing all cigarettes to be sold in drab olive-brown packs by December 2012.

British American Tobacco, Phillip Morris, Imperial Tobacco Australia and Japan Tobacco International are now challenging the legislation in the High Court.

They believe the laws breach the Australian Constitution because they seek to acquire property – in the form of brand names – without providing compensation.

But the government insists it is restricting the use of brand names and logos, not taking them over.