PE'3TRICTED
TOBACCO Divisicri ECARD OF .-'.IANAGEMENT
Wednesdav 2?t", June 1~?77
Present: ;-".r. ?. Sheehy (Chairman)
:;r. C.H. Stewart Lockhart
.'-Ir. C.G.
.1 r. D.S. Dunbar
,':r. =.P. Garra%..eay
Dr. 3.J. Green
:ir. R.St.C. Walmisley
;*r. ?.L. Wright
In attendance: E.G. Pearson (secretary)
Nr. P.W. Henchley
Also attended: ":r. E.A.A. Eruell (E.59)
H.L. S"elton (E.60)
D.W. (E.58)
E.57 Smckina & Health
Considera-ion -as o_fven to t-.e following
papers:-
Basic a5sumpti-cns
Stratecies and constraints
Ques-ticns and answers
Industry posizion paper
Changes were agreed t-2 the first two papers.
Dr. Green will draft alternative answers to two
questions
in the third paper for fur--."er consideration.
The industry position paper has already been
circulated with the suggestion tha-1 companies
should
ta'-Ie it within their irdustry ass_~ciations.with
a
vii;~_-! to its adoption as a t, ?,:,rking paper
from which
strategies and action plans can be developed
relevant
to.'local situations. Territ.Drial Directors will
repcrt
in one year as to ho,.-i many industry
associations have
been persuaded to adopt it as the-,-- own position
paper.
(Mr. Sheehy (Dr. Green
Mr. Stewart Lockhart Mr. Haddon)
Mr. Sluett
Mr. Goddard
Mr. Wright)
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E.58 Ccnsolidated Preview Fiqures
Consideration was aiven to the n-)te 10.6.77 and
the
schedules showing the latest previe%.; summaries
compared
with the three year forecast presented in
Fei~ruary.
The overall picture of the profit after tax, on a
management accounts basis, sh~~.s a dr,:.,o of 8.1
per cent
fcr 1976/77 compared ~4ith the February forecast,
but it
is still up 4.4 per cent cn the 1975/76 figure.
The
1977/78 fiaure falls short of the Fe'-,urary
forecast ty
4.6 per cent (although subsidiary ccr-panies
almost catch up
up with the forecast) but, coming up from the
lower
1976/77 base, will be more difficult :D achieve.
The principal reasons for the dr:: 'r in PAT in
1976/77
compared with the Februar7 forecast a:,e:-
1. El.-IT: lower sales partly ofiset by reduced
brand
expenses due to postponed launch of Kool Naturals.
2. G-imbels/Saks: Margins belo-.-.- expectations.
3. Vita: a strike nec&ssitated '--.uying in
stocks.
4. F-inland: t.--t-31 imarket down cn health
pressures
and a slight drop in market share.
5. Scuth Africa: over-optirnistf-c sales forecasts
in original plan.
6. Niaeria: Reduced total-markez, increased
competition, low factory pr--ductivity and cost
increases without a permitted price increase.
7. Kenya: delayed price increase not reflected in
increased volume.
8. !alaysia: delayed price increase.
9. Canada: government anti-inflation regulations.
10. H--rten: reduced turn-over ant increased
costs.
These falls are partly offset by increased sales
and
profits in indonesia and Pakistan.
As recards future figures:-
1. Voorgate will be shown as a separate heading.
2. B&'.%* International Operations and Germany
export
operations will be shown as separate items.
(N, r .Garraway) Price)
E.59 Brazil
Nlr. Bruell reported t1hat cont4nui-ig inflation,
at
atcut the sa:ne rate as last year's 4-~ cer cent,
is affectinc
gcvernment credibility and the Pres~4 ent may not
last his
full term in office. CD
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The cigarette market growth is forecast at 9.71.
this year and company volume growth should `e over
10%.
Current market share is 84,1%. Action is being
taken to
reduce tar and nicotine deliveries of existing
ma-in brands.
Leaf purchases are now expected to be less than
planned. Forecasts have been consistently
over-estimated.
A project team has been set up to investigate
future leaf
grn-.-:1ng areas and methods.
Delivery dates cn Mk9s for Uberlandia were late
but
mac~~_ines are now being received.
Aracruz is still expected to start up in may 1978.
Financing is still not completed but should be
achieved.
Peg Pag staffing has been reduced and the cc-pany
is
no-:.; profitable.
Suvalan is eliminatina bottle-necks and increasina
capacity and should break even in 2-3 years.
Samisa, the fish project, will be sold off a: a
loss.
Overall results are on budget for the first half
of '1977.
There are staff.-na problems, especially in
finance
and corporate services, but these will be
cvercome.
Consideration is being given to a ne-..!
compan-'.. lai-i
requirement for an Administration Council of which
only
one third of the mer.'--ers may be Souza Cruz
Board members.
E.60 USA - ELT
Mr. Shelton recorted that the 1977 F/C crop
shculd be adequate in quantity but only average in
quality. Support prices are up an average of 7.8%,
weichted on the better qualities. Average prices
are
expected to be up approximately 12% but less than
that
for better qualities. Forecast price increases fcr
the
following two years are 8% and 6%.
ELT reauirements are up 32% already and may i:e
more.
Pr-ductivity is being improved and higher
throughputs will
keep unit costs down. Nearly all surplus
propert:es have
no%..- been sold. Trading profits forecast f.,:,r
the ".ext three
years are progressive.
E.61 Chairman's Reoort
I
Mr.
Sheehy reported on the fol!_,~winc develop-ents
since the last meeting.-
Lorillard - purchase of the intern-ationall
cigarette business and its
future administration.
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Australia purchase of a meat prccessing
business, proposed BAT
representation on Anat' - Ecard
and arranaements for f--:ure
consultation.
Jamaica merger with Carreras.
E 2 Fina-ze Director's Reccrt
:!r. Garraway reported on:-
'orillard borrowing arrangements.
-Postponed Eurobond 'Issue.
7 inance/Accountinc staff plans.
=-',W LIF-.-' .
-':A,rco C::-)solidati-.,. Department.
::ash fl~:-.-j to ~_~ATIF.
E.E3 Afr-*,::a - Leaf
repcrted on a trip.
:n Ghana high inflation, shortage of foreicr.
exci~anqe
and fDod shortages poin: to a political change.
7 here has been no ccvernment response to app'l
_fc-a: ions
to "- allov.!ed to trace on equal terms with
co7npet_2"__;cn and
Pioreer cann:~t now trade profitably.
--he dcrestic leaf crop is below estimates art is
expe=--ed to zet worse. Ghana Tobacco Company is
_:.-:::~-petent
and =-:Dneer's mana,:;inc agency has been
terminatet. ":,D r e
leaf Lmpcrts than planned will be necessary,
provfted
fore-:zr) exchange is available, and this will
yie!-_~ increased
COM,-SSiOn in. UK.
Pionee-r's blendinc capability is good and
pf:_".~czs
are satisfactDry.
-n Niaeria, Northern air-cured crop failure -esns
NTC have to import mcre. The F/C crop is ac:_J
expa7zion is slow.
=lendin-. capability is good.
7 he size and quality of the developing F/C cr:p
in
Kenva is gocd and self-sufficiency should Ge
Witt,.-_,n five vears.
51 endinc capa~_,ility is weak and action is
be_`nz taken.
U.S-,.. ;~Ohl
He- i~ohl intends t--, exercise the s:-iares
aaree-ent, re:uir:.r.:; S&I t:~ purchase the
rera-;r,;-'-.--
per Cent.
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BATCo document for Province of British Columbia 28
October 1999