(Yicai Global) Jan. 3 -- The international unit of China National Tobacco, the world's largest cigarette maker, intends to float its shares for the first time in Hong Kong, which speaks for an opening up of the state monopoly amid increasing health concerns caused by a large domestic population of smokers.
China Tobacco International will use the proceeds from its upcoming initial public offering to acquire products from overseas, as well as well-known tobacco brands, according to its prospectus that the Hong Kong Stock Exchange published on Dec. 31. The unit of the Beijing-based firm will also expand its sales channels in Southeast Asia.
With its 306 million smokers, China is the global epicenter of the cigarette industry, according to data from consultancy Frost & Sullivan. CNTC planned to sell 47.5 million cases of cigarettes, or 6.1 billion individual smokes last year, which is 122,000 cases more from a year ago, the company said in a meeting held early last year.
China Tobacco International, mostly engaged in procuring tobacco leaves from places like Brazil and Canada and selling them to its parent, made up only a fraction of CNTC's revenues. However, the unit depends on the monopoly for its profits, the prospectus warned. The international arm made HKD7.8 billion (USD996 million) in revenues in 2017, with a net profit of HKD348 million (USD44.4 million), its earnings report shows.
Growth may be harder to reach for global cigarette makers in the future, as regulations have tightened amid health concerns. Last year, China's National People's Congress, the supreme organ of state power, discussed raising taxes on the cancer-causing substance to protect its youth. Moreover, some 20 Chinese cities have banned smoking in public places.
Global demand for tobacco imports has also fallen to USD11.5 billion in 2017 from USD13.6 billion in 2013. The number of smokers around the world has decreased from 1.14 billion in 2000 to 1.1 billion as of last June, according to the World Health Organization.
Global actions to control the tobacco industry could have a negative impact on China Tobacco International's performance, according to the prospectus.
Editor: Emmi Laine