Philip Morris International Decreases its Revenue Estimates
The largest tobacco company Philip Morris International decreased its revenue estimates for the whole year already for the second time in this year in order to demonstrate the strengthening US dollar, while cautioning about the dropping cigarette sales in the European Countries.
The 10% drop to between $5.15 and $5.25 a share followed a 6 cents fall in April thin year. The cigarette manufacturer currently forecasts exchange rates to deduct approximately 25 cents a share from estimates for 2012, in comparison with a 20 cent benefit registered last year.
Philip Morris representative and Chief Executive Louis Camilleri, declared at a conference led in Switzerland, that the maker of such popular brands as Marlboro and L&M outside U.S. are currently facing a slack 2Q performance in the European Countries, demonstrating a great quarterly fail in sales across the cigarette industry in southern Europe, mostly in such countries as Italy and Spain.
European sales generated about 25% to Philip Morris’s whole shipments last year. Mr. Camilleri stated he hopes that this year the company will achieve its objective of 1% lift in volume except any purchases and divestments. He also added that Philip Morris expects that the volume increase will proceed to be strong in Eastern Europe, Africa, Asia and Middle East. For instances the sales in Asia have helped the cigarette manufacturer to increase profits in recent quarters.
Philip Morris deals with severe comparison in Asia in the present quarter, as the previous year showed an additional 10% revenue from Japan. In 2011, Marlboro maker announced a 25% boost in sales in Japan as its competitor Japan Tobacco faced significant production shortage after the disaster of March 2011.
As sales decrease in emerging markets, Mr. Camilleri declared that pricing will be essential to keep the profits growth. Philip Morris has realized price increases in many markets in order to help boost profitability. Firm excise duty levels have also helped the company.
“According to our estimates, this year our company has not faced any increases that we would consider too excessive,” stated Mr. Camilleri, while warning about a possible tax growth in Philippines and some other markets. Last week, Philip Morris announced about a new buyback plan amounting $18 billion, the latest action to allow more cash to shareholders. Dividend yields, share buy back and tough cash flows all have prompted investors to tobacco stocks of late.