Philip Morris Cuts Earnings Forecast Amid Currency Headwinds

Philip Morris International Inc., the world’s largest publicly traded tobacco company, lowered its annual earnings projection amid unfavorable currency shifts and price discounting at the budget-end of the market in Australia.

Diluted per-share profit will be $4.87 to $4.97, the New York-based maker of Marlboro cigarettes said today in a statement. That compares with a forecast of $5.09 to $5.19 made by the company on May 7. Philip Morris also said it will take a $495 million charge for ending production in the Netherlands.

The company faces “significant currency headwinds, an improving, but weak macroeconomic environment in the European Union and known challenges in Asia,” Chief Executive Officer Andre Calantzopoulos told investors today at a presentation in Lausanne. If price discounting in Australia persists, the company could be at the lower end of its 2014 guidance for diluted, adjusted earnings-per-share growth of 6 percent to 8 percent, on a currency-neutral basis.

Philip Morris fell in German trading. The stock traded at the equivalent of $87.29 as of 10 a.m. in Frankfurt, down 1.8 percent on yesterday’s New York closing price of $88.89.

As the development of electronic cigarettes and reduced-risk products accelerates, the tobacco industry is at “the early stages of a transformational process,” the CEO said. Philip Morris today forecast that one of its reduced-risk products will contribute about $700 million to profit once the company reaches a target of selling 30 billion units. It also announced the purchase of Nicocigs Ltd., a U.K. maker of e-cigarettes.

Dutch Closure

“I”m not panicking yet, it looks like near-term issues,’’ said Philip Gorham, a senior analyst at Morningstar Inc. in Amsterdam.

The cigarette maker, which gets all of its revenue outside of the U.S., said it will cease production in the Netherlands by Sept. 1 after reaching agreement with unions on the closure of its Bergen op Zoom factory.

Most of the $495 million charge will be incurred in the second quarter, the company said. About $356 million is related to job cuts and $139 million is for asset impairment.

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