By Timothy S. Donahue

Top Takeaways:

• Sharp first-half decline expected: CTI (HK) expects revenue to fall 25% to 30% and profit to decline 10% to 15% in the first half of 2026.
• Leaf imports hit by trade conditions: The company cited lower tobacco leaf imports from the United States and other region.
• Duty-free shipments delayed: Process changes in China’s domestic duty-free market pushed back cigarette shipments.

China Tobacco International (HK) Co. Ltd. has warned investors that first-half revenue could decline by as much as 30%, as lower tobacco-leaf imports and delayed cigarette shipments weigh on results.

In a June 18 profit warning, the Hong Kong-listed company said it expects revenue for the six months ending June 30, 2026, to decline by about 25% to 30% year-over-year, while profit attributable to shareholders is expected to decrease by about 10% to 15%.

The company said the forecast is based on a preliminary assessment of unaudited management accounts for the first five months of the year and remains subject to final review. “The expected decrease in the Group’s revenue and profit attributable to equity holders of the Company for the Period is mainly due to the following reasons,” the company said.

The first factor concerns its tobacco leaf import business. The company specifically cited “international trade relations and shipping schedules” as factors behind lower tobacco leaf imports. “Regarding the import of tobacco leaf products, the quantity of tobacco leaves imported from the United States and other regions decreased compared to the same period last year due to factors such as international trade relations and shipping schedules,” the company said.

The decline reduced both revenue and gross profit for the segment, which remains the largest contributor to China Tobacco International’s business. According to the company’s 2025 annual report, tobacco leaf imports generated HK$9.54 billion in revenue last year, representing approximately 65% of total revenue.

The second factor cited by management was a slowdown in cigarette exports. “Regarding the export of cigarettes, the shipment of cigarettes to the domestic duty-free market was delayed due to the phased adjustment of the business process in the domestic duty-free market,” the company said.

The delayed shipments reduced revenue in the cigarette export segment during the reporting period. The warning comes after a year of growth for the company. In 2025, China Tobacco International reported revenue of HK$14.58 billion, up 11.5% year over year, while profit attributable to shareholders rose 14.8% to HK$980 million.

Management emphasized that the company remains optimistic about its long-term outlook despite the anticipated first-half decline.

“From 2021 to 2025, the Group’s corporate governance has been continuously improved, the gross profit margin of its export business has been continuously increased, business quality has been continuously optimized, new areas of tobacco leaf sales have been expanded, new platforms for cigar exports have been built, and duty-free cigarettes have focused on the main channels,” the company said.

China Tobacco International also highlighted agreements with duty-free operators, including Zhuhai Duty Free International and Shenzhen Duty Free (Hong Kong), as part of efforts to strengthen its domestic duty-free cigarette business and improve long-term profitability.

The results underscore the extent to which the company remains dependent on traditional tobacco operations. Based on its 2025 revenue mix, tobacco leaf imports, tobacco leaf exports, and Brazilian operations accounted for roughly 88% of group revenue, while cigarette exports contributed about 11%. New tobacco product exports represented less than 1% of total revenue.

The company’s disclosure also offers a glimpse into the broader pressures facing China’s international tobacco business. While the company cited shipment schedules as a factor, management specifically cited international trade relations as contributing to lower tobacco-leaf imports from the United States and other sourcing regions.

China Tobacco International said its full interim results are expected to be released on or before Aug. 31.