China National Tobacco Corp, a state firm that’s by far the biggest cigarette maker in the world, plans to list its international unit on the Hong Kong stock exchange.
The unit, China Tobacco International Inc, is primarily responsible for procuring overseas tobacco leaf from countries like Brazil and Canada for the cigarette giant, which churns out four of every 10 sticks made in the world.
While the international unit accounts for a tiny portion of China Tobacco’s overall business, which has a bigger market share than the top five global tobacco companies combined, the listing represents a rare opening up of the state monopoly.
China is the largest tobacco-consuming and -manufacturing country in the world. Last year, lawmakers in China’s National People’s Congress called for higher taxes on cigarettes to deter smoking among the young.
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The international business to be floated recorded revenue of HK$5.1 billion (US$651 million) for the nine months ended in September, a 21 percent drop from the same period last year, according to pre-listing documents issued Wednesday. It had a gross profit margin of 5.8 percent, down from 6.5 percent a year earlier.
The unit derives revenue primarily from a fixed markup of 6 percent it applies to the overseas tobacco leaf supply when selling to domestic cigarette manufacturers. It also has full control of cigarette exports – sold primarily in duty-free locations overseas to Chinese tourists – and domestic-grown tobacco leaf from provinces including Yunnan and Sichuan. In May, it started a business exporting Chinese-made heat-not-burn tobacco devices, the document said.
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In 2016, the industry contributed profit and tax of 1.1 trillion yuan (US$160 billion), according to China Tobacco’s website.
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