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Philip Morris Earnings Preview

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.

 
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Posted by on April 15, 2014 in Tobacco Articles

 

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Cigarette companies settle dispute over payments to 17 states

Philip Morris USA said Tuesday that it and other tobacco companies have reached an agreement with 17 states to settle a long-running dispute over how much money the companies must pay under the 1998 national tobacco settlement.

Under the agreement announced late Tuesday, the states, including Virginia, each will receive their share of about $4 billion that was paid into a disputed payments account. In return, Philip Morris USA, R.J. Reynolds Tobacco Co. and Lorillard Inc. will receive credits against future payments to the states.

In 1998, Henrico County-based Philip Morris USA, the maker of Marlboro cigarettes, and other major cigarette companies agreed to pay $206 billion to 46 states, including Virginia, over 25 years to cover smoking-related health care costs. Virginia’s share was estimated at about $4 billion.

So far, the states have received about $85 billion, but a dispute arose over how much the payments should be adjusted as a result of the major cigarette companies losing market share to competitors that did not join the settlement. The dispute has been in arbitration.

Philip Morris USA, a subsidiary of Henrico-based Altria Group Inc., said it will authorize the release of about $190 million of the $458 million that it has paid into the disputed payments account to the states that are part of the deal announced Tuesday.

The company said it is prepared to continue arbitration with other states that were not part of the new agreement. The company said it would receive an estimated reduction in its settlement payment obligations of about $450 million, but that amount could change depending on a variety of factors.

The states participating in the settlement are Alabama, Arizona, Arkansas, California, Georgia, Kansas, Louisiana, Michigan, Nebraska, Nevada, New Hampshire, New Jersey, North Carolina, Tennessee, Virginia, West Virginia and Wyoming. In addition, the settlement includes Puerto Rico and the District of Columbia.

 
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Posted by on March 25, 2013 in Tobacco News

 

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How Philip Morris built Marlboro into a global brand for young adults

Philip Morris pursued standardised market research and strategic marketing plans in different regions throughout the world using research on young adults with three principle foci: lifestyle/ psychographic research, brand studies, and advertising/communication effectiveness.

Philip Morris
The American cigarette-maker Philip Morris

Philip Morris identified core similarities in the lifestyles and needs of young consumers worldwide, such as independence, hedonism, freedom, and comfort.

In the early 1990s Philip Morris adopted standardised global marketing efforts, creating a central advertising production bank and guidelines for brand images and promotions, but allowing regional managers to create regionally appropriate individual advertisements.

Prior studies describe the emergence of new markets for tobacco products and the exportation of successful marketing strategies from developed countries to the developing world. However, much of the research to date has been region specific, highlighting the marketing efforts and strategies in specific countries such as Sri Lanka, China, Hungary, Myanmar, or Indonesia.

While some international cigarette brands are concentrated in certain regions, others, such as Marlboro and Camel, are recognised all over the world, particularly among the young.

Values and lifestyles play a central role in the global marketing of tobacco to young adults. Worldwide counter marketing initiatives, coupled with strong, coherent global marketing policies such as the Framework Convention on Tobacco Control, are needed to break associations between young adult values and tobacco brands.

As globalisation promotes the homogenisation of values and lifestyles, tobacco control messages that resonate with young adults in one part of the world may appeal to young adults in other countries. Successful tobacco control messages that appeal to young people, such as industry denormalisation, may be expanded globally with appropriate tailoring to appeal to regional values.

 
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Posted by on February 14, 2012 in Tobacco News

 

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Philip Morris Increases Cigarette Prices By Nearly 7%

Starting February 10, Philip Morris International Korea will increase its cigarette prices by nearly 7-percent on average.

Burning Cigarette
A lighted up cigarette in an ashtray

Its flagship brands such as Marlboro, Parliament and Lark will be sold at 2,700 won roughly 2-dollars-and-40-cents a pack, up 200 won.

In April and May last year, British American Tobacco Korea, the No. 2 player in the local market, and Japan Tobacco International Korea relayed their price hikes on Dunhill, Kent, Mild Seven and other products by 200 won in general to cope with surging raw material and labor costs.

Korea’s tobacco giant, KT&G Corporation however, is set to freeze its cigarette prices for the time being, putting more emphasis on boosting productivity rather than temporary sales growth

 
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Posted by on February 10, 2012 in Tobacco News

 

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Goldman Sachs (GS) Analysts Downgrade Philip Morris (PM) Shares to “Neutral”

Philip Morris (NYSE: PM) was downgraded by Goldman Sachs (NYSE: GS) to a “neutral” rating in a research note issued on Tuesday.

Philip Morris

Philip Morris logo

Separately, analysts at Bank of America (NYSE: BAC) raised their price target on shares of Philip Morris to $85.00 in a research note to investors on Wednesday, January 11st. Analysts at Davenport downgraded shares of Philip Morris from a “buy” rating to a “neutral” rating in a research note to investors on Friday, January 6th. Also, analysts at Nomura (NYSE: NMR) downgraded shares of Philip Morris from a “buy” rating to a “neutral” rating in a research note to investors on Thursday, December 8th.

Philip Morris International Inc. (PMI) is engaged in the manufacture and sale of cigarettes and other tobacco products through its subsidiaries and affiliates. The Company’s products are sold in approximately 160 countries. PMI’s portfolio comprises both international and local brands. Its portfolio comprises both international and local brands, which include Marlboro, Merit, Parliament, Virginia Slims, L&M, Chesterfield, Bond Street, Lark, Muratti, Next, Philip Morris and Red & White. The Company divides its markets into four geographic regions: The European Union (EU); The Eastern Europe, Middle East and Africa (EEMA); The Asia Region, and The Latin America and Canada Region. As of December 31, 2009, PMI operated and owned 58 manufacturing facilities, operated two leased manufacturing facilities, one in Korea and one in Mexico, and maintained 30 contract manufacturing relationships with third parties. In September 2009, PMI acquired Swedish Match South Africa (Proprietary) Limited.

Philip Morris opened at 77.32 on Tuesday. Philip Morris has a 52-week low of $55.98 and a 52-week of $79.96. The stock has a 50-day moving average of $76.62 and a 200-day moving average of $70.40. The company has a market cap of $134.3 billion and a price-to-earnings ratio of 16.40.

 
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Posted by on January 19, 2012 in Tobacco Articles

 

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