Russia & Turkey: Lighting Up

Source from:  ft.com 07/20/2012

When Russians and Turks spend, they also spend on cigarettes. This year's surge in Russian and Turkish consumer activity has given a welcome boost to Philip Morris International, the US tobacco group. As the company warned last month, the financial benefits would have been even greater had it not been for the recent turmoil in emerging market currencies. "Currency headwinds" held the company back, turning a 3.4 per cent gain in operating income before currency adjustments into a 2.7 per cent decline. Expect more such announcements from multinationals active in emerging markets. Reporting its second quarter results, PMI disclosed an 8.7 per cent increase in cigarette sales in Russia, led by a 12.5 per cent rise in premium brands including Parliament and Marlboro. Turkey was up by even more, 8.9 per cent. Overall, eastern Europe, the Middle East and Africa (EEMEA) was the top-performing region, with a 5.1 per cent increase in shipments, compared with a 1.2 per cent decline at group level. In financial terms, the EEMEA region’s lead over the rest of the world in the three months to the end of June was just as noticeable. Net revenues rose 6.9 per cent to $1.15bn, compared to a 1.8 per cent decline to $8.12bn, and operating incomes were up 13.5 per cent at $948m, versus a 2.7 per cent decline (after currency adjustments) at $3.68bn. Net revenues, excluding excise taxes, were down 1.8 per cent at $8.1bn, or up 2.9 per cent excluding currency and acquisitions. CEO Louis C. Camilleri said in a statement: Our broad geographic footprint, world-class brand portfolio and a strong pricing environment remain the cornerstone of our continuing ability to capitalize on growth opportunities around the world, whilst enabling us to weather uncertainty in those markets where economic conditions are still currently weak. In other words, emerging markets are good for us. Enditem