London council bans smokers from fostering

A controversial new policy to ban smokers from fostering children has been passed by a London council.

The ban, which was passed unanimously at a cabinet meeting of Redbridge Council, means that children in the east London borough will not be placed with foster carers who smoke after January 2010.

Councillors say the move is crucial in protecting children from the harmful effects of passive smoking, but concerns have been raised that the ban could reduce the number of loving foster homes available to vulnerable children.

Speaking after the meeting, the cabinet member for children, Tory councillor Michael Stark, said: "We know this is a difficult issue because some people will feel it is an intrusion on personal freedoms, but we also know that smoking increases the risk of serious illness in childhood.

"The bottom line is that we must put the welfare of young children in our care first."

The Fostering Network has expressed concerns that the policy could prevent good foster carers from coming forward.

A spokesman for the national charity said: "We certainly view this as a good move in terms of creating a smoke-free environment for a child, but we don't agree that a blanket ban on any smokers becoming foster carers is the right thing.

"If a person has the right qualities and skills to be a foster carer, they shouldn't be put off coming forward just because they have the odd cigarette at the end of the garden or on a night out. Fostering is about much more than just smoking."

The council said the new policy is a result of scientific evidence which showed that second-hand smoke is a cause of lung cancer and childhood respiratory disease. It said young children are particularly susceptible to the effects of second-hand smoke because their lungs and airways are small and their immune systems immature.

Smokers' rights group Forest reacted angrily to the policy. A spokesman said: "This is another attempt to stigmatise smokers and separate them from the rest of society."

Source: Channel 4 News 4th Novemver 2008
Link: http://tiny.cc/qCWb8

Keanu Reeves is desperate to escape smoking 'prison'

Hollywood star Keanu Reeves is desperately trying to kick the smoking habit he picked up on a movie set 14 years ago.
Reeves never touched a cigarette until he stepped onset to play a smoker in 1996 movie Feeling Minnesota, and he has been hooked since.
The 44-year-old says, "It was an outcome of having to smoke on a film. I got hooked making a film, Feeling Minnesota. I didn't start smoking until I was 30. Now I'm just in prison."
 

Source: Contactmusic.com 5th November 2008
Link: http://tiny.cc/fHaoE

Share view: Vintage year for British America Tobacco

Times may be hard, but third-quarter figures from British American Tobacco (BAT) suggest that hard-pressed consumers have few intentions yet of giving up on their cigarettes. Indeed, the performance prompted chief executive Paul Adams to remark that '2008 is shaping up to be a vintage year for BAT'. Whether consumers become keener to kick the habit as things get tougher remains to be seen, but Mr Adams sounds bullish. 'We're not seeing anything at the distributor or consumer level. We're not worried, but we recognise the risk.'

The world's second largest cigarette maker saw its operating profit increase 18 per cent to £2.714bn in the three months to the end of September. Exclude the effect of exchange rates and operating profit grew 10 per cent. The main driver of growth was from emerging markets in eastern Europe, Africa, the Middle East and Latin America, with revenues over the quarter climbing more than 25 per cent. Another key factor was the performance of BAT's premium products, with sales rising 7 per cent on brands including Dunhill and Kent - so it seems that customers are not yet trading down to cheaper brands as consumer conditions get tougher.

The figures were ahead of expectations by a couple of per cent, and profit growth (excluding exchange rate effects) was three percentage points ahead of that at Philip Morris. There is underlying volume growth and the Africa/Middle East and Latin American markets delivered more progress than expected. Above all, the company's outlook is very confident and BAT hasn't seen any effect from the economic turmoil. BAT is delivering underlying volume and profit growth, while there's enough resilience, as well as product and geographic diversity, to cover all eventualities.

Given the share price out-performance, a period of consolidation should be expected - leaving our buy rating as a long-term stance. BAT has consistently delivered solid and consistent earnings and dividend growth over virtually any time period. Boosted by currency translations, it should deliver near 13 per cent EPS growth and 15 per cent dividend growth between 2008 and 2010. In an uncertain economic environment, that growth should give investors considerable confidence. We are forecasting full-year profit before tax of £3.183bn, leading to an EPS of 125.6p.
  

Source: Investors Chronicle 4th November
Link: http://tiny.cc/85PW2

Now looks like the right time to quit tobacco companies

Turning to tobacco stocks during a downturn is a habit that investors find hard to break - and with good reason. This week’s third-quarter figures from British American Tobacco, the world’s second-biggest cigarette maker, demonstrated that the defensive traits for which its sector is sought remain firmly intact: the company grew faster than expected in the three months to September 30, with sales from emerging markets up by a quarter on the year and its higher-priced brands, such as Dunhill and Kent, continuing to sell well around the world. 

That resilience is reflected in BAT’s shares, down less than 8 per cent over the past 12 months, so that they have outperformed the FTSE all-share index over that period by 48 per cent.

It is not alone. In relative terms, the European tobacco sector is trading at its highest level since the early 1990s, as the chart below shows. On the basis of forward multiples, tobacco stocks sit at 11 times next year’s earnings, according to Nomura, a premium of nearly 40 per cent to the wider European stock market, at eight times.

The inevitable question for investors is how much longer that strength can be sustained. With emerging market economies - the source of recent profit growth - increasingly under strain, with cash-strapped governments seeking ways to supplement tax revenues and with public smoking bans spreading around the world, are tobacco shares set to run out of puff?

If tobacco companies are assessed on their dividend-paying potential alone, the answer must be no. Indeed, the recent government bailout of British banks - which has curbed their ability to return cash to ordinary shareholders - has only increased the relative attractions of tobacco. Whereas banks previously accounted for 22 per cent of all UK dividend income, that figure is now set to fall to just 11 per cent. That leaves BAT - which offers a secure prospective yield of 5.5 per cent - as one the FTSE 100’s biggest dividend payers. Even Imperial Tobacco, never traditionally regarded as a yield stock, now joins that roster, offering a prospective 4.7 per cent return.

The bigger concern must be that rising unemployment prompts a change in consumer behaviour, so that tobacco companies find it harder to pass on cost increases to recover rising raw material costs, customers in developed markets trade down to cheaper brands and the pace of those trading up to more expensive brands in emerging markets starts to slow. Nomura points that at the time of the last downturn, in 2002, Philip Morris, the maker of Marlboro, saw US volumes fall 7.5 per cent, double the drop of the wider tobacco market, reflecting its bias towards premium brands. That susceptibility helps to explain why BAT and Imperial have been busy targeting the “economy” end of the market through launches such as JPS Silver and Pall Mall.

The other sensitivity in developed markets must be a demographic one: 57 per cent of smokers in the UK are classified as skilled manual workers - carpenters, plumbers and the like - who are among those most likely to be feeling the pinch.

The outlook is no more encouraging in emerging markets, which account for the bulk of recent underlying profit growth at BAT and Imperial. It is reasonable to assume that recent financial market volatility will weigh on consumer confidence. Slowing GDP growth will show through in consumer spending and the rate at which the international majors are taking market shares from local producers will decline.

For those companies that derive most of their revenues in nonsterling currencies, there is also issue of devaluing emerging market currencies. Of the £457 million rise in nine-month operating profits reported by BAT this week, about half of that sum was driven by the appreciaton of the dollar against sterling. The worry for next year is that those foreign exchange benefits will be offset by a weakening of the South African rand and the Brazilian real, two big currencies for BAT. The broader comfort is that the effect of any faltering of profit growth at BAT and Imperial will be mitigated by extensive cost-saving programmes – either as a result of internal restructuring or, in the case of Imperial, the postmerger shake-up after the takeover of Altadis.

Both stocks may prove volatile in the short term – BAT because of this week’s distribution of shares to two to its biggest shareholders, Richemont and Remgro, whose own investors may choose to sell, and Imperial because of concerns over its £10 billion of net debt, part of which matures next year.

In the longer term, the risk is that tobacco’s allure of relatively predictable earnings and dividend will be replaced by the stock market’s pursuit of cheaper sectors that are explicitly geared to economic recovery. Either way, the inclination must be for those with profits to take them.

Source: The Times 1st November 2008
Link: http://tiny.cc/xKGDg