Japan Tobacco says acquisitions not on agenda

LONDON, June 12 (Reuters) The world's third-largest cigarette group Japan Tobacco Inc says tobacco acquisitions are not on its agenda, though its chief executive designate comes from its fast-growing international business.

JT, known for its Camel, Winston, Salem and Mild Seven brands, is expecting its international tobacco side to grow strongly over the next three years without the help of acquisitions, but it did buy a Serbian tobacco group only last month.

''Nothing is on our agenda in the acquisitions field, but we monitor the situation closely,'' said Seishi Baba, JT's vice president in its media and investor division, said on Monday.

JT, still 50 percent owned by the Japanese government, became a big international tobacco player in 1999 with the acquisition of the non-U.S. tobacco business of RJR Nabisco for .8 billion, and has been linked with a bid for Gallaher Group Plc, the UK maker of Benson&Hedges and Silk Cut, for a number of years.

''We watch the international market, and if an opportunity comes we would consider our options. But acquisitions are not necessary,'' she added in an interview with Reuters.

JT and the world's fifth-largest cigarette group Gallaher have always declined to comment on the bid talk.

JT's international operations account for around a quarter of its earnings before interest, tax, depreciation and amortisation (EBITDA), and it expects EBITDA from international tobacco to grow annually in the mid-teens in percentage terms over the next three years to end-March 2009.

Last year, its international cigarette volumes overtook its domestic Japanese cigarette volumes for the first time.

JT, third in the world after Altria Group Inc's Philip Morris and British American Tobacco Plc, has 11 core international markets including Italy, Spain and France in west Europe, Russia, Ukraine and Turkey and Iran further east, South Korea, Taiwan and Malaysia in Asia, and also Canada.

JT says its focus will be on these core 11 markets, looking to gain market share, encourage consumers to move towards more expensive brands and also improve productivity, while it looks to stabilise its domestic business in Japan after tax rises and the end of its Marlboro contract with Philip Morris.

JT has said Hiroshi Kimura, 52, a Geneva-based executive with its international division for the last seven years, will take over as CEO and President later this month.

Last month, JT said it would acquire a majority stake in Serbia's Duvanska Industrija Senta for 27.5 million euros.

REUTERS VJ ND2046