The agreement settles an 18-year-old lawsuit about the marketing of the manufacturers and their various affiliates and acquisitions going back to the 1950s. In 2006, U.S. District Judge Gladys Kessler ruled the manufacturers had concealed the dangers of smoking for decades. The U.S. Justice Department filed a civil case in 1999 under the federal Racketeer Influenced and Corrupt Organizations law, or RICO. In April, a federal appeals court reaffirmed that the manufacturers are required to include corrective warning statements. However, the U.S. Court of Appeals for the District of Columbia Circuit also ruled that the statements cannot include the phrase that Kessler required: “Here is the truth.” The court’s order requires that the companies publish five statements related to cigarette smoking across several communication channels, including on their websites and on cigarette packs for at least a year. The statement will cover these categories: Lack of significant health benefit from smoking “low tar,” “light,” “ultra light,” “mild” and “natural’ cigarettes.
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The performance of the American Dream bonds took Dreyfus, which doesn’t own any, by surprise. Not so, tobacco debt, whose cash flows can be modeled assuming varying degrees of cigarette consumption declines, Barton said. Under a 1998 national settlement, the major tobacco companies agreed to make annual payments to the states in perpetuity to resolve their liability for health-care costs attributed to smoking. Some states and cities borrowed against the payments, which are based on cigarette shipments. Altria Group Inc. , estimated that domestic cigarette industry shipment volume decreased by about 3.5 percent in the first half of 2017. Moody’s Investors Service projects 80 percent of the securities won’t make scheduled payments based on historical declines of 3 percent to 4 percent in U.S. smoking. A U.S. Food and Drug Administration proposal in July to cut the amount of nicotine in cigarettes to non-addictive levels cut tobacco bond returns 0.4 percentage point in the third-quarter, a potential buying opportunity, Barton said. Tobacco companies are expected to vigorously oppose the proposal.
Since there has been evidence of a local source of tendu leaves as well as seizures of smuggled tendu leaves, these are “additional components” that need to be included in the calculation, she said. Some smokers of Capstan cigarettes, the company’s lowest-priced brand, have cut back on the number of sticks they buy after the price increases and also purchase beedis, said K.K. Badra, 58. She runs a kiosk that sells soft drinks, packaged snacks and other food items apart from tobacco products in Maligawatta, a Colombo suburb. Ceylon Tobacco is looking to contain the impact from higher levies. It has shut some of its leaf depots and reduced factory shifts to curb costs. To sustain profitability it’s working on “smart cost management, streamlining processes, identifying consumer segments and addressing their needs,” said Ridley. The company is also widening its portfolio. It started selling its popular Gold Leaf brand in a smaller packet of 12 sticks apart from the 20-stick packet, introduced a new product Gold Leaf Red and is unveiling John Player Navy Cut, which will be sold for 40 rupees a stick. Still, those efforts may not completely offset the impact from the higher levies. Both revenue and net income will grow at a slower pace this year, according to Chayanika Ranasinghe, an analyst at CT CLSA Securities Ltd., in Colombo.