Japan Tobacco Inc. said yesterday it would close three domestic cigarette factories due to a declining smoking rate as it announced net profit nearly halved in the last financial year.
Net profit in the year to March fell 48.3 percent to 123.4 billion yen (1.3 billion dollars) from 238.7 billion yen, with operating profit falling 15.5 percent to 363.81 billion yen, the former government monopoly said.
Sales hit a record of 6.83 trillion yen, up 6.6 percent from the previous year, thanks to higher tobacco sales volume overseas and contribution from Britain's Gallaher, which JT bought in 2007 for 19 billion dollars.
Japan Tobacco said it would close plants in Morioka, Yonago and Odawara in the coming two years as the domestic market has been shrinking due to an ageing society, rising health consciousness and stricter regulations.
With sales volume declining, "the company expects intensified competition in the Japanese market," Japan Tobacco said.
More than 400 staff at the three factories will be transferred to other domestic plants or offered early retirement, an official said. Final details are subject to consultation with the employee labour union.
The company said amortisation related to the acquision of Gallaher and Japanese foodstuff maker Katokichi squeezed profits.
Lower income from fixed assets sales as well as restructuring costs for Katokichi reduced net profit, the company said.
For the current year to March 2010, Japan Tobacco expects net profit to slide further to 100 billion yen due to lower domestic sales, the stronger yen and restructuring costs at its tobacco business.
Operating profit is estimated to plunge to 244 billion yen as sales are projected to drop to six trillion yen.