Sunday, November 26 2006
The world's two biggest cigar companies both released good earnings reports, for the nine months that ended September 30th, in the last few weeks. Altadis, S.A., the world leader, saw its cigar sales volume drop significantly, but the company made more money than ever. Cigar sales totaled 2.46 billion units, down 5.6% from the same period in 2005, but the economic results were sensational.
Sales reached 660 million Euro, or about $849 million U.S, up 2.1% over what was a record-setting year in 2005. Costs were down by 3.4%, so the profit margin was a sensational 212 million Euro (about $273 million U.S.), up to a remarkable 32.1%! That's a gain of almost four points from last year.
Sales in the U.S. market were up 4% for the first nine months of the year, despite a modest third quarter and what Altadis called "increasing competition." The best-performing sectors were premium cigars and machine-made cigars with natural-leaf wrappers (example: Dutch Masters). Altadis also reported nine-month sales figures for J-R Cigars (including its retail, telephone-Internet and wholesale divisions) of 39 million Euro (or $50.15 million U.S.); the company can purchase the remaining 50% of J-R in 2008 if it chooses.
Of course, Altadis owns half of Habanos S.A., the distribution arm of the Cuban cigar industry, and sales increased by almost 14% to 104 million Euro ($133.7 million U.S.) compared to 2005.
Second-ranked Swedish Match had a tough third quarter, but cigars were a bright spot. The company's sales of snuff, chewing tobacco, pipe tobacco and matches/lighters were all off, but cigars stormed ahead with a three-percent gain over 2005. For the nine months that ended in September, cigars were up 4% over 2005 even as the company showed a 4% loss in total sales volume over last year.
Not only were cigar sales up to $127.5 million U.S., but the operating income in the third quarter was up 19% over 2005 to $31.7 million! Sales for the first nine months of the year were up by 4% to $360 million, and income for the first nine months of the year zoomed ahead by 34% to $82.4 million. (By comparison, Swedish Match's sales total is about 42.4% of Altadis's for the same period in 2006.)
Profit margins on cigars reached an impressive 24.9% in the third quarter and 22.9% for the first three-quarters of the year. The interim financial report credited the strong showing not simply to increased sales, but also to "lowered overhead costs following the integration of General Cigar." Most of the General Cigar staff moved from New York to Richmond, Virginia in May of this year.
Cigar enthusiasts were subdued at Christie's semi-annual auction of fine wines and rare cigars in London in mid-November. Of the 246 cigar lots up for bids, only 168 actually sold and many sold for less than the pre-sale estimates.
The biggest prize was a special cabinet selection of 100 Romeo y Julieta Casa Reales (7 inches by 47 ring) from the 1970s. The item was made for the famed London cigar merchant Robert Lewis and was expected to bring the highest prize in the sale. It eventually was sold for £8,000 or $15,280, plus the buyer's premium. Second best was a special-issue humidor from 1996 of Partagas Salomones - 6 3/4 inch by 52 ring perfectos - identified as no. 96 of 100 made. It contained 50 cigars in good condition and drew a final bid of £3,600 or about $6,876.
And what would a Christie's auction be without some Havana-made Davidoffs? There were three lots available. A full box of the prized Dom Perignons (7 x 47) from 1988 was available and drew strong interest at £2,000 or $3,820 - that's $152.80 a cigar! A cabinet of 25 Davidoff Chateau Lafite (4 1/2 x 40) from the 1980s sold for £1,100 or $2,101 ($84.04 each), while a lot of three Dom Perignons from 1988 earned £250 or $477.50 ($159.17 each) and a lot of two Davidoff 80 Aniversarios (9 1/4 x 47) - each packed in a wooden tube - sold for £320 or $611.20 ($305.60 each!).
Keith Park's Prometheus International is now shipping its unique "Traveler Lighter" which breaks into three pieces for easy travel on airplanes. Put together, it's an elegant single-flame torch lighter that can be easily operated with one hand. But the top and bottom of the lighter can be separated, allowing the butane gas tank in the middle to be removed and carried separately in checked baggage. Prometheus, Otterbox and Colibri all make vapor-tight carrying cases so that the entire lighter or the tank only can be carried in a case without fear of confiscation by the U.S. Transportation Safety Administration.
- Rich Perelman in Los Angeles
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Reprinted by permission. "Heard in the Humidor" is a publication of Perelman, Pioneer & Company. Copyright 2006; All rights reserved.
