JTI Romania invests EUR 25 million in expanding local production capacity

Cigarette manufacturer Japan Tobacco International (JTI) Romania has expanded the production capacity of its factory in Bucharest and has created some 125 new jobs following a EUR 25 million investment. The expansion project was begun last year.

JTI Romania presently exports about 65 percent of the cigarettes it manufacturers locally to some 45 countries but their number is constantly growing, said Gilda Lazar, communication director with the company. The main export markets are Austria, the Czech Republic and Holland.

Talking about the results reported in 2011 by the Japanese manufacturer inRomania, Lazar said last year was a much better year than the previous one. “2010 was disastrous for the entire industry. It was the year when cigarette smuggling had its say and legal sales dropped by about 30 percent. Most players did not report profit. But 2011 was better and we reported growth,” said Lazar. She added that so far cigarette smuggling has remained stable over the past year at about 15 percent of the total market.

In the first semester of 2012 JTI’s local sales have remained on a positive trend but future developments depend very much on legal and fiscal stability and predictability, she explained. “There are positive signs from the Ministry of Finance which I understand has not approved the proposal of the Ministry of Health to double the vice tax which would have increased the total excise tax,” said Lazar explaining that 80 percent of the final price of a package of cigarettes represents VAT and the excise tax.

Even so, the price is expected to go up as each year the excise tax must increase by EUR 3 until 2018 when it must reach EUR 90/ 1,000 cigarettes. The exchange rate depreciation too will impact the final price as it is used in calculating the excise tax (a level is establishes each October for the following year) and the producer imports most of the raw materials it requires. Overall, Lazar thinks the time when a package of cigarettes will reach the RON 20 level (from a present average of RON 12.5) is not very far.

JTI has been present inRomaniasince 1993. Its total investment so far on the local market amounts to more than EUR 100 million according to the company. Other players on the local cigarette market are British American Tobacco and Philip Morris.

Simona Bazavan