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Philip Morris' Profit Jumps on Higher Cigarette Prices

Thursday, 20 Oct 2011 09:29 AM

Cigarette maker Philip Morris International Inc. said Thursday that its third-quarter net income grew nearly 31 percent as it sold more cigarettes and commanded higher prices for its brands.

The seller of Marlboro and other cigarette brands overseas also lifted the lower end of its full-year earnings forecast.

The company said it earned $2.38 billion, or $1.35 per share, for the period ended Sept. 30. That's up from $1.82 billion, or 99 cents per share, a year ago. Adjusted for asset impairments and exit costs, the company said it earned $1.37 per share.

Excluding excise taxes, revenue grew about 26 percent to $8.4 billion.

Analysts polled by FactSet had expected earnings of $1.24 per share on revenue of $7.54 billion.

Philip Morris International said the number of cigarettes it shipped grew 4.5 percent to 239.5 billion cigarettes.

Especially important were large gains of nearly 13 percent in Asia, including Indonesia, Japan and Korea and Thailand, and the favorable impact of acquiring Fortune Tobacco Co. in the Philippines. Revenues in the Asia region increased 53 percent.

The March earthquake and tsunami in Japan also offered Philip Morris International a sales opportunity because supply disruptions led Japan Tobacco Inc., the world's No. 3 tobacco maker, to stop shipping cigarettes within Japan.

Philip Morris International was able to minimize supply disruptions because all of its cigarettes for sale in Japan are produced outside the country and shipments at ports were being unloaded normally. It sold brands like Marlboro to customers in Japan who normally bought other brands.

Shipments also grew about 5 percent in Eastern Europe, the Middle East and Africa, but fell 3.5 percent in the European Union and about 1 percent in Latin America and Canada.

Total Marlboro shipments rose 4 percent in the quarter to 78.9 billion cigarettes, due to growth in Asia, as well as Eastern Europe, the Middle East and Africa.

Philip Morris International said its market share increased or remained stable in many key areas.

It now expects profit of $4.75 to $4.80 per share for the year, from a previous forecast of between $4.70 and $4.80 per share. Analysts expected earnings of $4.75 for 2011.

Smokers face tax hikes, bans, health concerns and social stigma worldwide, but the effect 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.

The company's earnings also were helped slightly by foreign exchange rates for the U.S. dollar. Companies that sell goods internationally get a boost from a weaker dollar when they convert revenue in foreign currencies back into the dollar.

That effect is particularly strong for Philip Morris International, because it does all its business overseas.

The company also said it spent $1.4 billion to buy back 21.2 million shares of stock in the quarter as part of its three-year, $12 billion buyback program that began in May 2010.

Philip Morris International, with offices in New York and in Lausanne, Switzerland, is the world's second-biggest cigarette company after the state-controlled China National Tobacco Corp.

Altria Group Inc. in Richmond, Va., the owner of Philip Morris USA, spun off Philip Morris International in 2008. Altria is the largest U.S. cigarette seller.

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Cigarette maker Philip Morris International Inc. said Thursday that its third-quarter net income grew nearly 31 percent as it sold more cigarettes and commanded higher prices for its brands. The seller of Marlboro and other cigarette brands overseas also lifted the lower...
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2011-29-20
Thursday, 20 Oct 2011 09:29 AM
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