PM USA's a 'Declining-Volume Business'

Source from:  tr.itsmyiq.com Jul 19, 2007 07/20/2007

Philip Morris USA's second quarter 2007 cigarette shipments, at 45.6 billion, were down by 3.3 per cent or 1.6 billion on those of the second quarter 2006. Marlboro shipments were down by 2.3 per cent to 37.7 billion, but the brand's market share increased by 0.4 percentage points to 41.0 per cent. Overall, PM USA's market share, at 50.5 per cent, was unchanged. PM USA said that it estimated that the total cigarette volume in the US had declined by 4-5 per cent during the first half of this year, but still believed that the full-year decline would be 3-4 per cent. The 3.3 per cent decline in volumes was almost twice the rate that had been expected by Judy Hong, a Goldman Sachs Group analyst quoted by Chris Burritt for Bloomberg News. Burritt quoted also Matthew Kaufler, a portfolio manager at Clover Capital Management, as saying that PM USA was a declining-volume business, while internationally tobacco was a growth business. However, PM USA reported that its second-quarter revenues net of excise taxes increased by 1.5 per cent to $3.9 billion from those of the second quarter 2006. Income from operating companies decreased by 22.8 per cent to $1.0 billion, with the decline largely a result of a $318 million pre-tax charge for asset impairment and exit costs related to the closure of its Cabarrus cigarette manufacturing facility, lower volumes and increased resolution expenses, partially offset by lower wholesale promotional allowance rates and lower expenses for marketing, administrative and research costs. Adjusted for the $318 million in asset impairment and exit costs, PM USA's operating companies income would have increased by 1.6 per cent to $1.3 billion. PM USA's parent company, the Altria Group, yesterday announced second quarter 2007 revenues net of excise taxes and currency increased by 2.9 per cent to $9.5 billion from those of the second quarter of 2006. Operating income increased 0.6 per cent to $3.2 billion and earnings from continuing operations increased 4.9 per cent to $2.2 billion. "Altria had a solid quarter," said Louis C. Camilleri, chairman and chief executive officer. "The underlying fundamentals in our tobacco businesses remained strong, with operating companies income well ahead of the prior-year period when adjusted for the impact of asset impairment and exit costs. In our US tobacco business, Marlboro achieved a record retail share of 41.0%. In our international tobacco business, operating companies income adjusted for asset impairment and exit costs grew 7.2 per cent, and Philip Morris International (PMI) continued to introduce innovative products including Marlboro Filter Plus in Korea, Ukraine and Russia, L&M Essence in a number of key markets and Marlboro kretek in Indonesia in early July." Philip Morris International, meanwhile, reported second quarter cigarette shipments increased by 3.3 per cent or 7.1 billion to 221.0 billion, due largely to acquisition volume from Lakson Tobacco in Pakistan. Gains in Argentina, Egypt, Indonesia, Korea, the Philippines and Ukraine, as well as the favorable timing of shipments in certain markets, were offset by shipment declines in Russia, Germany and the Czech Republic, as well as Japan, where comparisons to the second quarter of 2006 were distorted by heavy trade purchases in anticipation of the July 2006 excise tax increase. Excluding the impact of acquisitions, PMI's cigarette shipment volumes were down by 0.5 per cent. PMI said that its market shares in the second quarter had advanced in many countries, including Argentina, Australia, Austria, Belgium, the Czech Republic, Egypt, France, Italy, Korea, Mexico, the Netherlands, Russia, Serbia, the Philippines, Portugal and Ukraine. But total Marlboro cigarette shipments of 81.1 billion units were down by 0.5 per cent. Lower Marlboro volumes in Germany, Japan and Turkey were partially offset by gains in Argentina, Korea, Poland, Romania and Russia. Marlboro's market shares were said to have been increased in many markets, including Argentina, Brazil, the Czech Republic, Egypt, France, Hungary, Indonesia, Kazakhstan, Korea, Kuwait, Mexico, the Netherlands, Poland, Russia, Saudi Arabia, Serbia and Ukraine. PMI reported that its revenues net of excise taxes and currency during the second quarter of 2007 were increased by 4.0 per cent to $5.6 billion on those of the second quarter of 2006. Income from operating companies grew by 4.7 per cent to $2.2 billion. Enditem