At the beginning of this week Philip Morris International Inc. the leading tobacco company, announced about its profit rise by 5%. Respresentatives of the company say that higher prices helped to equalize drop in the number of cigarettes it sold.
In the quarter that ended on September 30, the manufacturer of Marlboro cigarettes and many other cigarette brands reported an earn outside the USA $2.34 billion ($1.44 per share). In 2012 the same period it earned $2.23 billion ($1.32 per share).
Apart from excise taxes, revenue was basically smooth and is $7.93 billion. However, analysts expected $1.44 per share on revenue of $7.94 billion. Company’s shares increased by 94 cents (1%) and valued $87.03 in morning trading on Thursday. Shipments of cigarettes dropped by 6% to 223.1 billion cigarettes. This occured due to volumes drop in many countries of the world. Philip Morris sold 75.2 billion cigarettes that is 2.5% fewer than in 2012,
Chief Financial Officer Jacek Olczak said the tobacco company continues to face economic difficulties these days. Economic problems in the European Union and high taxes made shipments fell by 5% during the quarter. Thus shipments dropped 5.5% in the Middle East, Eastern Europe and Africa. At the same time, in Canada and Latin America shipments also fell but not as significantly.
Today Asia is company’s largest market and the report showed that on this market cigarette volume dropped by 8%. The market was affected by a recent tax increase in the Philippines, which saw almost 21% decline in shipments.
Due to earthquake and tsunami that occured in Japan in March 2011, the company benefited on this market because Japan Tobacco Inc., stopped shipping cigarettes within Japan. Philip Morris acquired Philippines company Fortune Tobacco Co. in February 2010, extending its Asian business.
Today tobacco business faces smoking bans, tax increase on cigarettes and social stigma worldwide, and this generally leads to drops in cigarettes demand. However, Philip Morris has compensated for volume drops by cutting costs and increasing prices on cigarettes. Because it does all its business outside the USA, the tobacco company also has to navigate changes in currency values.