August 25, 2014 11:42 pm JST

Japan Tobacco seen skipping share buyback in fiscal 2014

TOKYO -- Japan Tobacco will likely refrain from repurchasing shares this fiscal year, since it is expected to meet its earnings-per-share growth target thanks to strong overseas sales compensating for a domestic slump.

     The company emphasizes earnings per share as a management indicator, and had maintained a growth target in the 6-9% range, excluding such factors as exchange rate fluctuations and restructuring costs. It has set a separate goal for this fiscal year, since it is shifting its book-closing date to December from March.

     "If we can't reach the target, we'll make share buybacks an option," President Mitsuomi Koizumi said previously.

     By reducing the number of shares in circulation, repurchasing shares can bolster earnings per share even if net profit remains unchanged. Many had predicted that JT would buy back stock this fiscal year due to the consumption tax hike holding down profit growth, but brisk foreign sales will likely allow it to meet its goal.

     Domestic sales of proprietary tobacco products between January and June edged down slightly on the year to 315.3 billion yen ($2.99 billion). But overseas sales, particularly in such markets as Russia where JT has a strong presence, climbed 4% due to price hikes. Adjusted operating profit, excluding such factors as exchange rates, grew 11% to 325.4 billion yen.

     The company is expected to book this fiscal year 54 billion yen in expenses related to boosting competitiveness, including a reserve for premiums on early retirement allowances related to domestic plant restructuring. Profits from real estate sales are seen falling by 47 billion yen.

     Earnings per share for this fiscal year will probably decline 16% to 203 yen, but when extraordinary factors are excluded, the figure will likely climb 6-9%.

     JT has thus far implemented four share buybacks, including in February of last year, when it purchased 86.8 million shares for 250 billion yen or so. About 9% of outstanding shares are held by the company as treasury stock. It plans to use these shares for such moves as acquisitions rather than retire them.