Altria Shifts U.S. Production to Europe

Source from:  tobaccoreporter.com International, Tuesday, June 26, 2007 06/28/2007

Altria Group will be moving its U.S.-based cigarette production for non-U.S. markets to Philip Morris International facilities in Europe. Philip Morris USA will close its cigarette factory in Cabarrus, North Carolina, and consolidate manufacturing for the U.S. market at its Richmond, Virginia, manufacturing center. Altria expects its restructuring program to generate pretax cost savings beginning in 2008, with total estimated annual cost savings of approximately $335 million by 2011, of which $179 million will be realized by PMI and $156 million by PM USA. Cumulative total expenses through 2011 are estimated at approximately $670 million, all of which will be at PM USA. Financial analysts saw the move as a prelude to Altria's long-anticipated split of its U.S. and international businesses. "If the market were looking for a definitive signal that Altria intends to spin off international tobacco, today's announced plant closures at PM USA and realignment to PMI in Europe all but give away the ending," said Marc Greenberg of Deutsche Bank. Bonnie Herzog of Citigroup said the spin-off could occur before the end of 2007. PMI is expected to shift sourcing of approximately 57 billion cigarettes from Cabarrus to PMI facilities in Europe by the third quarter of 2008. PM USA will close it Cabarrus manufacturing facility by the end of 2010. The Cabarrus plant currently employs approximately 2,500 people. "PM USA recognizes the profound impact the closing of the Cabarrus cigarette manufacturing facility has on employees and their families," said Mike Szymanczyk, chairman and CEO at PM USA. "As the company works to reduce manufacturing overcapacity, it will address the adverse impact on employees by relocating as many as possible to jobs in Richmond and offering separation benefits to those it cannot relocate." Altria stressed both PM USA and PMI would continue to purchase U.S. leaf tobacco for future production. Enditem