Philip Morris International, the world’s largest tobacco company by market share, blamed currency swings, the introduction of plain packaging in Australia and the rise of illicit tobacco in the Philippines for a drop in its projected earnings.
The Marlboro-maker, which makes and distributes the brand outside the US, cited a “complex and truly atypical year” for the fact that its adjusted earnings per share growth for 2014 will be at the lower end of its 6 to 8 per cent guidance.
Chief executive André Calantzopoulos blamed the introduction of plain packaging in Australia for some of the performance, with smokers buying cheaper cigarettes rather than PMI’s premium brands, such as Marlboro.
“With plain packaging, adult smokers do not quit more or smoke less,” said Mr Calantzopoulos. “They do, however, appear to down-trade much more readily to lower price, lower margin brands and illicit products.”
PMI has been at the forefront of the industry’s fight against plain packaging, launching a challenge against the law under Australia’s trade treaty with Hong Kong.
The chief executive added that PMI will “engage in a dialogue” with regulators in other countries that are set to introduce plain packaging, including the UK and Ireland.
But Mr Calantzopoulos warned that PMI will “pursue other alternatives to ensure protection of our intellectual property”. Rival tobacco groups, such as British American Tobacco, have already hinted at legal action if the UK follows Australia and introduces plain packaging.
Australia was not the only Asian market that PMI struggled in, with the Philippines also proving troublesome. In the Philippines, PMI said that it was damaged by the market being flooded with non-duty-paid cigarettes by domestic rivals.
“This continues to prevent us from being able to operate on a level playing field,” said Matteo Pellegrini, president of PMI’s Asian division.
PMI took its First Direct step into the e-cigarette business in the UK, by buying Nicocigs, which makes Nicolites. The tobacco group had previously agreed an
e-cigarette distribution deal with Altria Group, the US tobacco group from which PMI was spun out in 2008.
Bonnie Herzog, analyst at Wells Fargo, said: “We believe PMI’s solid execution will continue despite challenging conditions and we are encouraged by PMI’s investments in evapor as we believe it will be a game changer for the global tobacco industry.”
Elsewhere in the sector, Imperial Tobacco completed the pricing for the forthcoming float of Logista, its logistics business. The price range of €12.50 to €15.50 will give Logista a market capitalisation of up to €1.9bn.
Shares in PMI fell 2.6 per cent to $86.54 in New York trading.
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