Philip Morris Int’l 4Q profit down 5 pct on lower cigarette sales, unfavourable exchange rates

RICHMOND, Va.—Philip Morris International Inc. said Thursday its fourth-quarter profit dropped 5 per cent as cigarette sales fell in most of its markets despite commanding higher prices.

The seller of Marlboro and other cigarette brands overseas also was hurt by foreign exchange rates for the U.S. dollar, but it adjusted results were in line with Wall Street expectations.

Smokers face tax increases, bans, health concerns and social stigma worldwide, but the effect of those 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 earned $1.99 billion, or $1.24 per share, in the period ended Dec. 31, down from $2.1 billion, or $1.25 per share, the year before.

On an adjusted basis, it earned $1.37 per share, beating Wall Street estimates by a penny, according to FactSet.

Excluding excise taxes, revenue fell about 1 per cent to $7.8 billion, matching analysts’ prediction.

It shares rose $1.67, or about 2 per cent, to $78.57 in morning trading.

Cigarette shipments fell about 4 per cent to 223.2 billion cigarettes. Total Marlboro volumes fell nearly 1 per cent to 74.8 billion cigarettes.

Economic woes in the European Union and increased excise taxes drove shipments down about 5 per cent during the quarter. Shipments fell 1.2 per cent in the company’s region that encompasses Eastern Europe, the Middle East and Africa. Shipments grew 4 per cent in Latin America and Canada.

In Asia, one of its largest growth areas, the company said that cigarette volume fell more than 9 per cent with gains in Indonesia offset by declines in Japan, Korea and the Philippines. Shipments in the Philippines fell 26 per cent during the quarter, hurt by a large tax increase last year and a surge in non-taxed cigarettes.

Because it does all its business overseas, the company also has to navigate changes in currency values. A stronger dollar cuts into revenue generated overseas when it’s translated back into dollars.

For the full year, the company said its profit fell 2.5 per cent to $8.58 billion on revenue of $31.2 billion, excluding excise taxes.

Philip Morris International Inc., based in New York and Switzerland, is the world’s second-biggest cigarette seller behind state-controlled China National Tobacco Corp.

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