Philip Morris International Reports 3Q Profit Growth
Tobacco giant Philip Morris International declared last week that its third-quarter net profits rose almost 31 percent since the company managed to sell more cigarettes, especially in Asian region and increased prices. The maker of Marlboro and other top-selling cigarette brands outside of USA as well increased the lower end of the full-year income forecast by nearly 5 cents. The company currently expects earning of $4.75 to $4.80. Industry analysts had forecasted profits of $4.75 for 2011.
The tobacconist’s performance in July-September topped expert forecasts, and shares grew $2.16, or 3.3%, to reach at $68.19 last week. Philip Morris International reported earnings of $2.38 billion, or $1.35 per share, going up from $1.82 billion, or 99 cents per share, previous year. Adjusting for excise taxes, earnings went up almost 26 percent equaling $8.4 billion. Philip Morris International reported the number of cigarettes it sold went up 4.5 percent to 239.5 billion sticks. Total shipments of Marlboro grew 4 percent reaching 78.9 billion cigarettes.
Shipments to Asian region grew almost 13 percent, and revenue soared by 53 percent in the region. Hermann Waldemer, PMI Chief Financial Officer declared during investors conference that the Asian tobacco market is the “growth engine” for the company. Growth in this region is helping to offset sinking smoking rates in Western Europe, Canada and Latin America. PMI acquired Philippines-based tobacco company Fortune Tobacco Co.last winter, boosting the Asian business. Japan’s devastating earthquake and tsunami has as well contributed to the company’s Asian sales growth. Supply disruptions caused by the disasters at Japan Tobacco Inc., the third-largest tobacco company in the world, has helped PMI boost market share in the country. Shipments added 47 percent during the 3Q. Mr. Waldemer noted that PMI managed to retain its Japanese market share at 30% during September and till mid October, even after Japan Tobacco’s brands returned to the market. Before the disasters, Philip Morris International’s market share in Japan was nearly 26 percent.
Shipments as well added nearly 5 percent in the Middle East, Eastern Europe and Africa, but went down by almost 3.5 percent in the European Union market and fell by nearly 1 percent in Canada and the Latin America region due to reduced consumption in Mexico.
Philip Morris International declared its market share grew or was stable in most key regions. Adult smokers have to deal tax increases, smoking bans, health consequences and social stigma across the world, yet the impact on cigarette demand overall is less significant outside the USA. Philip Morris International managed to offset volume drop in Western Europe and other major markets by increasing prices and reducing costs. The company mentioned it intends to exceed its planned $250 million in expense cuts for 2011.
The weaker U.S. dollar contributed to earnings rise too. PMI sells all of its tobacco products on the international market. Converting earnings generated in stronger foreign currencies into the dollar provided additional profit. Philip Morris International, headquartered in New York and Lausanne, Switzerland, is the leading private cigarette maker in the world. The company sun off from Altria, parent company of Philip Morris USA in 2008.