Philip Morris Int'l 3Q profit up 5 per cent as higher prices offset lower cigarette sales
Oct 17, 2013 / 2:06 pm
RICHMOND, Va. - Philip Morris International Inc. said Thursday that its third-quarter profit rose 5 per cent as higher prices helped offset the decline in the number of cigarettes it sold.
The seller of Marlboro and other cigarette brands overseas earned $2.34 billion, or $1.44 per share, in the quarter ended Sept. 30, up from $2.23 billion, or $1.32 per share, a year ago.
Excluding excise taxes, revenue was essentially flat at $7.93 billion.
Analysts polled by FactSet had expected $1.44 per share on revenue of $7.94 billion. Its shares rose 94 cents, or about 1 per cent, to $87.03 in morning trading on Thursday.
Cigarette shipments fell about 6 per cent to 223.1 billion cigarettes as it saw volumes fall in all of its regions. The company sold 2.5 per cent fewer Marlboro cigarettes, 75.2 billion.
In a conference call with investors, Chief Financial Officer Jacek Olczak said the company continues to see "persistently difficult microeconomic conditions."
Philip Morris International said economic woes in the European Union and increased excise taxes drove shipments down 5 per cent during the quarter. Shipments fell 5.5 per cent in the company's region that encompasses Eastern Europe, the Middle East and Africa. Shipments also fell slightly in Latin America and Canada.
In Asia, one of its largest growth areas, the company said that cigarette volume fell nearly 8 per cent, hurt by a recent tax increase in the Philippines, which saw a nearly 21 per cent decline in shipments.
The company benefited from increases in Japan following the March 2011 earthquake and tsunami. The events offered the company a sales opportunity because supply disruptions led Japan Tobacco Inc., the world's No. 3 tobacco maker, to stop shipping cigarettes within Japan. It also bought Philippines company Fortune Tobacco Co. in February 2010, bolstering its Asian business.
Smokers face tax increases, bans, health concerns and social stigma worldwide, but the effect of those on cigarette demand generally is less stark outside the United States. Philip Morris International has compensated for volume declines by raising prices and cutting costs.
Because it does all its business overseas, the company also has to navigate changes in currency values. A stronger dollar cuts into revenue generated overseas when it's translated back into dollars.
Philip Morris International also said Thursday it has completed its previously announced agreement to buy the remaining 20 per cent stake in its Mexican subsidiary from business magnate Carlos Slim's Grupo Carso holding company. Marlboro was the leading brand in Mexico in 2012 with 53.6 per cent share of the market.
The company also cut its profit guidance for the year to a range of between $5.35 and $5.40 per share, versus $5.17 per share in 2012. The forecast includes a one-year $300 million cost-saving target and planned share buybacks of $6 billion for 2013. It spent $1.46 billion to buy back 16.7 million shares in the quarter.
Philip Morris International Inc., based in New York and Switzerland, is the world's second-biggest cigarette seller behind state-controlled China National Tobacco Corp.
Altria Group Inc. in Richmond, Va., the owner of Philip Morris USA, spun off Philip Morris International as a separate company in 2008. Altria is the largest U.S. cigarette seller.
Michael Felberbaum can be reached at http://www.twitter.com/MLFelberbaum .
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