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China Tobacco heads abroad as mainland stubs out smoking

World's top cigarette producer to strengthen war chest with Hong Kong IPO

China National Tobacco commands a 43% share of the global cigarette market, according to Euromonitor.
China National Tobacco commands a 43% share of the global cigarette market, according to Euromonitor.   © Reuters

HONG KONG -- The international arm of state-owned China National Tobacco, the world's largest cigarette maker, aims to fund a push into Southeast Asia and beyond through a stock market listing as smoking restrictions cloud prospects at home.

China Tobacco International plans to use proceeds from its roughly $100 million initial public offering in Hong Kong to fund fresh investments and acquisitions. It also intends to diversify revenue streams by entering into exports of smokeless heated-tobacco products.

The Hong Kong-based subsidiary filed last month for the IPO, which will be watched as a litmus test of investors' appetite for tobacco stocks as global cigarette demand is forecast to shrink amid rising health concerns.

Its draft prospectus reported a profit of 222 million Hong Kong dollars ($28.33 million) for the nine months ended last September, down from the year-earlier figure of HK$287 million. Revenue came in at HK$5.1 billion for the nine-month period, down from HK$6.41 billion.

China's national tobacco monopoly commands a 43% share of the global cigarette market, according to U.K. research company Euromonitor, thanks to its home market of 300 million smokers.

But broadening restrictions on smoking in public have dimmed the outlook for Chinese sales growth. Even in Southeast Asia, one country after another is adopting new anti-smoking regulations and taxes.

China Tobacco International works chiefly in importing tobacco leaf from sources like Brazil, the U.S. and Argentina and selling the group's cigarettes through overseas duty-free vendors.

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