Philip Morris International is set to report its 2014 first quarter earnings on April 17. We expect the company’s deteriorating market share in the Philippines, where a sharp hike in indirect taxes implemented last year disrupted an otherwise flourishing tobacco industry, to negatively impact its results. We also expect Philip Morris’ weak performance in the European Union to continue, primarily because of the growing prevalence of illegal trading of cigarettes in the region. Furthermore, the company’s performance in the Eastern Europe, Middle East and Africa region is not expected to be great either because of the tightening of anti-tobacco regulations in Russia, one of the biggest tobacco markets in the region.
Philip Morris International is a leading international tobacco company with its products sold in more than 180 countries worldwide. Until its spin-off in March 2008, Philip Morris International was an operating company of Altria Group. Excluding the U.S. and China, the company holds more than 28% of the total international cigarette market, led by its cheap Marlboro.
We currently have a $80 price estimate for Philip Morris International, which is almost in line with its current market price.
Almost 47% of the total volume decline reported by Philip Morris International last year can be attributed to its operations in the Philippines. Following a sharp hike in indirect taxes in the country, the company raised the prices of its Marlboro and Fortune brands by around 60% and 70% respectively. However, a local competitor, Mighty Corp., held back its pricing in the lower price segment, which allowed it to gain significant market share during the year. From mid-single digits in 2012, Mighty’s market share zoomed to over 20% last year.