Philip Morris Earnings Climb on Higher Cigarette Prices
Price increases have helped Philip Morris, the maker of Marlboro cigarettes, make up for falling shipments as the slumping European economy and tax increases sap demand. Photographer: Gillianne Tedder/Bloomberg
Philip Morris International Inc., the world’s largest publicly traded tobacco company, posted a 28 percent gain in second-quarter profit after raising cigarette prices in countries such as Australia and Mexico.
Net income advanced to $1.98 billion, or $1.07 a share, the New York-based company said today in a statement. Excluding some items, earnings were $1, compared with the 97-cent average of estimates compiled by Bloomberg. The company also raised its full-year profit forecast.
The price increases have helped Philip Morris, the maker of Marlboro cigarettes, make up for falling shipments in the European Union, where struggling economies in Greece and Spain and higher taxes sapped demand. Revenue rose 14 percent to $17.4 billion, with favorable foreign exchange rates adding $419 million. All Philip Morris’s sales come from outside the U.S.
“Higher prices more than offset the negative effect of volume,” Thomas Russo, a partner at Gardner Russo & Gardner in Lancaster, Pennsylvania, said today by telephone. He manages more than $3 billion, including Philip Morris shares.
The company projected 2010 profit of $3.75 to $3.85 a share, helped by currency adjustments. That compares with last month’s forecast of $3.70 to $3.80.
Philip Morris rose 95 cents to $50.84 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have gained 5.5 percent this year, compared with a 1.9 percent drop in the Standard & Poor’s 500 Index.
Total Shipments
Philip Morris shipments totaled 241 billion cigarettes, an increase of 0.3 percent excluding acquisitions. Shipments sank 6.2 percent in the European Union while climbing 35 percent in Asia as distributors in Japan boosted inventories before a planned October tax increase.
“Our broad geographic footprint continues to serve us well, enabling us to deal with weakness arising in markets where economic recovery remains subdued,” Chief Executive Officer Louis Camilleri said today in the statement.
Pricing added $341 million to Philip Morris’s sales last quarter. A year earlier, profit in the period was $1.55 billion, or 79 cents a share.
Philip Morris has operated an independent publicly traded company since 2008 following its spinoff by Richmond, Virgina- based Altria Group Inc.
Separately, Reynolds American Inc., the second-largest U.S. tobacco company, also raised its full-year profit forecast. Excluding some items, earnings will be at least $4.90 a share, compared with a previous minimum of $4.80, the cigarette maker said. Reynolds’s brands include Camel and Pall Mall cigarettes, as well as Grizzly snuff. Analysts on average project $4.94.
To contact the reporter on this story: Chris Burritt in Greensboro, North Carolina, at cburritt@bloomberg.net.
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