Philip Morris to Quit Australian Cigarette Manufacturing

Source from:  The West Australian‎ & Bloomberg  04/02/2014

Tobacco company Philip Morris says it will cease manufacturing cigarettes in Melbourne by the end of the year.

The international tobacco giant has been making cigarettes at its Moorabbin plant for nearly 60 years, but will now shift production for the local market to South Korea after government regulations on low fire-risk cigarettes crimped exports.

The closure of the Moorabbin plant in southeast Melbourne will lead to about 180 job losses, about a quarter of its workforce in the nation, although Philip Morris (PML) says it will still employ about 550 people in its Australian corporate operations, which will remain headquartered in Melbourne.

Philip Morris said the decision was due to a gradual decline in the local market over the past decade and Australian Government regulations introduced in 2010 that required locally made cigarettes to conform to standards that reduced fire risks.

Government regulations

"Despite the introduction of plain packaging and the continued growth in illicit trade, PML's volumes were stable in 2013," John Gledhill, Philip Morris's managing director for Australia, New Zealand and Pacific islands, said in the statement.

"However, with any significant export opportunity restricted by Australian Government regulations, our Moorabbin factory is significantly underutilised, operating at less than half of its currently installed capacity."

"Forecast export opportunities have not been realized due to Australian government reduced-fire risk requirements" on cigarettes that "do not match consumers' preferences in other markets," the company said. The statement didn't say what impact plain-packaging had on the plant and Allison Davis, a spokeswoman for the Melbourne-based unit, didn't immediately respond to e-mail and phone messages seeking comment.

"This is an extremely difficult decision, and devastating news for all of our employees," Gledhill said, blaming "factors beyond our control."

Philip Morris says it will provide "extensive support" to affected employees, including redeployment opportunities where feasible, counselling, career transition support and financial advice.

Over the past decade Australia has introduced bans on smoking in workplaces and raised tobacco taxes by about two- thirds, according to the Cancer Council Victoria, a health charity. Smoking rates have fallen at the same time, to 20 percent of men and 16 percent of women in 2011-12, from 27 percent of men and 21 percent of women in 2001, according to government data.　Enditem