Japan Tobacco Inc. may buy back shares to help narrow a gap in earnings-per-share growth with rivals including Philip Morris International Inc. and British American Tobacco PLC.
“We are chasing Philip Morris and British American,” Executive Deputy President Masakazu Shimizu said Feb. 8 in an interview.
He said this will be achieved by increasing EPS growth and dividends, as well as through raising cash flows and EBITDA — earnings before interest, taxes, depreciation and amortization.
The company has said it will buy back shares when the government starts selling some of its 50 percent stake in the former tobacco monopoly. Any repurchases will help prevent dilution of share value if the government decides to cut its holding, Shimizu said. Japan may reduce its stake to 33 percent to raise cash to pay for recovery projects after the March 11 earthquake.
“The first priority is investing in the business, which will be the engine for future growth,” Shimizu said. “This will lead to profits for all parties concerned, including shareholders.”
The world’s second-biggest listed cigarette maker plans to increase shareholder dividends while boosting profitability as part of its new midterm strategy. This comes after paying down its debt from the takeover of Gallaher Group Ltd. in 2007.
The maker of Mild Seven and Camel cigarettes has come under pressure to return more cash to shareholders, including the Children’s Investment Fund Management (UK) LLP. The U.K.-based investor has said it is seeking a ¥20,000 per share dividend, compared with the ¥9,000 the company plans for the year ending March 31.
The cigarette maker’s stock rose 1.9 percent to ¥414,000 at the close of trading in Tokyo on Feb. 8. The shares have advanced 14 percent this year, more than double the 6.6 percent gain for the Nikkei 225 stock index.