New Tobacco Giant May Lay Off Workers

Source from:  ABS-CBN Broadcasting Corporation 03/01/2010

Homegrown cigarette maker Fortune Tobacco Corp. will now share nearly all its operations with the Philippine unit of Philip Morris International under a new company in which both firms have equal stakes, executives said in a press briefing yesterday. The merged firm dubbed PMFTC, Inc. will absorb operations of the two firms which are geared towards the domestic market, as well as Fortune Tobacco's export business, the officials said. Both firms will maintain separate operations in the meantime but are studying the possibility of sharing factories and slashing redundant jobs, Philip Morris Philippines Manufacturing, Inc. managing director Chris J. Nelson said. "This is not a merger where one company disappears and another remains," Mr. Nelson said. Philip Morris' export business here will remain with its local unit while Fortune Tobacco will retain its contract manufacturing obligations to Japan Tobacco International, said Mr. Nelson, who now stands as PMFTC's first president. Fortune Tobacco's Lucio C. Tan is PMFTC chairman. Brands sold under the new unit will reportedly corner a combined 90% of the local market. "While Philip Morris currently competes mainly in the premium price segment, Fortune Tobacco's strength is in the value and medium price segments. Thus, PMFTC will have representation in all segments of the Philippine market," Mr. Nelson said. The "synergy," said Fortune Tobacco executive vice-president Harry C. Tan, will benefit from his company's expertise in distribution and Philip Morris' international manufacturing experience. Fortune Tobacco's tax issues which have already been resolved will not be carried over onto the new unit, Mr. Tan added. Mr. Nelson declined to state how long the two firms' operations will remain separate, saying only it was "too early to tell" how long the transition period will be. Manufacturing of cigarette brands will still be segregated within the firms' Batangas and Marikina factories, "but that doesn't preclude how it will be in the future," Mr. Nelson said. "[And] we are still in the process of evaluating…redundancies," Mr. Nelson said, noting however that they considered both sets of employees as "key assets." Philip Morris Philippines reported P32.8 billion in revenues and P2.1 billion in profits for 2008, higher by 8% and 15%, respectively. Fortune Tobacco, meanwhile, hiked revenues by 12% to P33.2 billion and profits by 46% to P457 million. Philip Morris held ground-breaking ceremonies last month for a new 20,000-square-meter warehouse at the Subic Technopark, which will consolidate storage operations scattered across the region. Enditem