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PMI’s 2013 volume shipments holed by tax regime changes in the Philippines

| February 7, 2014

Philip Morris International’s shipment volumes during the 12 months to the end of December, at 880,169 million, were down by 5.1 percent on those of the 12 months to the end of December 2012.

Volumes were down in each of PMI’s region: by 7.7 percent in Asia; by 6.5 percent in the EU; by 2.4 percent in Eastern Europe, Middle East and Africa (EEMA); and by 1.4 percent in Latin America and Canada.

Overall, the decline in volumes was said to have been caused principally by a significant erosion of total industry tax-paid volume.

In Asia, PMI’s volumes were hit by the unfavorable impact of a January 2013 excise tax increase and a surge in the prevalence of domestic non-duty paid products in the Philippines, and lower shares in Japan and Pakistan, partly offset by the company’s performance in Indonesia.

Excluding the Philippines, overall, PMI’s cigarette shipment volume decreased by 2.7 percent.

In the EU, volumes fell because of the unfavorable impact of excise tax-driven price increases, the weak economic and employment environment, the share growth of the other tobacco products (OTP) category, and the prevalence of non-duty-paid products.

Volume declines in the EEMA were due to the impact of price increases in Russia and Ukraine, an increase in illicit trade in Russia, Turkey and Ukraine, and a weak economy in Russia.

Total shipments of Marlboro cigarettes of 291.1 billion were down by 3.5 percent, due primarily to declines in the EU, notably in France, Poland and Spain, partly offset by Italy; in the EEMA, mainly in Romania, Russia, Turkey and Ukraine, largely offset by countries of North Africa; in Asia, predominantly in Japan and the Philippines, partly offset by Indonesia; and in Latin America and Canada, mainly in Argentina and Brazil, partly offset by Colombia and Mexico.

Excluding the Philippines, Marlboro cigarette shipments were down by 1.3 percent overall.

Total L&M shipments of 95 billion were up by 1.4 percent, total Bond Street shipments of 44.9 billion were down by 4.2 percent, total Parliament shipments were up by 2.9 percent to 44.7 billion, total Philip Morris shipments decreased by 7.9 percent to 35 billion, total Chesterfield shipments of 34.4 billion were down by 3.2 percent, and total Lark shipments of 28.8 billion were decreased by 10.2 percent.

Total shipments of OTP, in cigarette equivalent units, grew by 4.9 percent, notably in the EU, mainly in Belgium, France, Hungary and Italy.

Total shipments of cigarettes and OTP in cigarette equivalents were down by 4.7 percent.

Meanwhile, during the fourth quarter of last year, PMI’s cigarette shipments, at 223,199 million, were down by 4.3 percent on those of the three months to the end of December 2012.

Asia region shipments were down by 9.4 percent to 74,821 million, EU shipments were down by 4.9 percent to 44,437 million, and EEMA shipments were down by 1.2 percent to 76,428 million.

Latin America and Canada shipments were up by 4 percent to 27,513 million.

In announcing the results, CEO André Calantzopoulos said PMI had confronted an extremely harsh operating environment in 2013.

“Within this context, we withstood the pressures well and delivered a solid financial performance,” he said.

“As foreseen, our fourth-quarter results were particularly strong, contributing to our full-year adjusted diluted earnings per share growth of 10 percent, excluding the impact of unfavorable currency.

“This performance reflects our continued robust pricing and excellent share momentum.”

“The challenges of last year, including significant currency headwinds, are likely to persist into 2014 and are reflected in our full-year forecast for reported diluted EPS, along with significant expenditures behind the development of reduced-risk products.

“Our overarching objective remains our steadfast commitment to generously reward our long-term shareholders.”

For the full year 2013, PMI reported diluted earnings per share up by 1.7 percent to $5.26 and adjusted diluted earnings per share up by 3.4 percent to $5.40.

Reported net revenues, excluding excise taxes, were down by 0.5 percent to $31.2 billion.

Reported operating companies’ income was down by 2.7 percent to $13.8 billion, and adjusted operating companies’ income was down by 1.1 percent to $14.1 billion.

Reported operating income was down by 2.5 percent to $13.5 billion.

Universal sees opportunities for growth

| February 7, 2014

Universal Corp’s net income for the third quarter to the end of December was $38.6 million or $1.36 per diluted share, up from $35.5 million or $1.25 per diluted share during the three months to the end of December 2012.

Segment operating income during the third quarter of fiscal 2014, at $74.6 million, was up by 18 per cent on that of the previous third quarter, on combined earnings improvement in every segment.

At the same time, consolidated revenues increased by 13 per cent to $767.8 million on higher overall volumes, mainly due to the current season’s larger African crops, partly offset by lower volumes in Brazil.

Meanwhile, net income for the nine months ended December 31 was $122.3 million or $4.31 per diluted share, compared with $106.6 million or $3.75 per diluted share for the same period of the previous fiscal year.

Segment operating income was $130.3 million for the nine-month period to the end of December, a decrease of $55.6 million from that of the nine months to the end of December 2012.

Revenues increased by two per cent to $1.9 billion for the first nine months of fiscal year 2014, on slightly lower volumes at higher prices.

George C. Freeman, III, chairman, president, and CEO said that one of Universal’s strengths was the ability to manage its business well in uncertain global markets.

“While it is still very preliminary, the current outlook for the 2014 crops, which will impact our fiscal year 2015 results, indicates increased production in some origins,” he said.

“At the same time, there are possible reductions in cigarette manufacturers’ needs due to lower cigarette sales in Europe and the United States. However, our uncommitted inventories remain at relatively low levels.

“Our focus remains on efficiently managing our business and positioning ourselves to meet the needs of our customers and suppliers while delivering consistent results to our shareholders.

“We believe that there are opportunities to grow our business by investing in projects that bring additional value and services to our customers.

“We continue to make good progress on the programs announced in October to expand our leaf production and processing capacity in Mozambique and to enhance production efficiency in several other origins…”

Dioxins undetectable in cigarette MSS

| February 7, 2014

New research from Essentra Scientific Services (ESS) has found that dioxins are not present at detectable levels in cigarette mainstream smoke.

The new research, carried out by Dr. William Guthery, analytical chemist at ESS, drew on an innovative gas chromatography-tandem mass spectrometry analysis to demonstrate that dioxins, which are cited by the US Food and Drug Administration as harmful and potentially harmful constituents, were not present at detectable levels in the American-blend and Virginia cigarettes tested.

ESS, which is part of the Filter Products division of Essentra plc, has now published its latest findings into the levels of chlorinated dioxins and furans found in mainstream cigarette smoke.

The full paper is available as a free download from:

Bhutan says tobacco ban must end

| February 6, 2014

Bhutan’s Upper House resolved that the country’s ban on the import of tobacco must end. In a majority resolution on February 3 the house said the ban on import and sale of tobacco products must end to control the black market, reports the Bhutan News Network.

Bhutan had gained fame for being the first country to completely ban on manufacturing, import and sale of any tobacco products. However, the government also received harsh criticism for sending a monk behind bar for years on charge of carrying tobacco products.

After public outcry over the harshness of the law, the first elected parliament of the country showed some leniency towards tobacco consumers. Many send to jail for selling tobacco were subsequently released on king’s order.

The country recently lifted its ban on the import of furniture and alcohol.

Now, the National Council comes with proposal that the tobacco import ban must end, though the resolution says the ban must continue on production of tobacco products within the country.

The resolution should pass through the National Assembly before it becomes the law.

No. 2 U.S. drugstore to stop selling smokes

| February 6, 2014

CVS Caremark Corp. said on Feb. 5 that it would stop selling tobacco products at its 7,600 stores by October of this year, becoming the first national drugstore chain in the United States to take cigarettes off the shelf. Public health experts called the decision by the No. 2 U.S. drugstore chain a precedent-setting step that could pressure other retailers to follow suit.

“Ending the sale of cigarettes and tobacco products at CVS/pharmacy is the right thing for us to do for our customers and our company to help people on their path to better health,” said Larry J. Merlo, president and CEO, CVS Caremark. “Put simply, the sale of tobacco products is inconsistent with our purpose.”

The company estimates that it will lose approximately $2 billion in revenues on an annual basis from the tobacco shopper.

“CVS Caremark is continually looking for ways to promote health and reduce the burden of disease,” said CVS Caremark Chief Medical Officer Troyen A. Brennan, M.D., M.P.H. “Stopping the sale of cigarettes and tobacco will make a significant difference in reducing the chronic illnesses associated with tobacco use.”

CVS said it will recover some lost sales by promoting stop-smoking aids, possibly including e-cigarettes.

“As a leader of the health care community focused on improving health outcomes, we are pledging to help millions of Americans quit smoking,” said Merlo. “In addition to removing cigarettes and tobacco products for sale, we will undertake a robust national smoking cessation program.”

Walgreen Co., the U.S.’s top-retailer, said Feb. 5 that it was not making the same move at this time. “We will continue to evaluate the choice of products our customers want,” Walgreens said in a statement. In May, a Walgreen executive was quoted as saying the company, which focuses its branding on health, was continuing to sell cigarettes to stay competitive with other drug store chains, convenience stores and grocery stores.


No fire in smoking impeachment plan

| February 6, 2014

A proposal that the Philippines’ President, Benigno S. Aquino III, should be impeached because of his tobacco smoking seems unlikely be realized, according to a story in the Manila Bulletin.

While the president had not quit smoking, he had followed the smoking ban in government offices and other public areas, presidential communications secretary, Herminio Coloma Jr, was quoted as saying.

Coloma made his remarks after a Civil Service Commission (CSC) official had warned that Aquino’s smoking in government premises could be grounds for impeachment.

CSC assistant commissioner, Ariel Ronquillo, reportedly claimed that the president had violated the smoking prohibition in government buildings.

But Coloma countered that the president had always been supportive of the MMDA’s (Metropolitan Manila Development Authority) efforts to reduce the hazards of smoking. “The president is following all of the laws of the land regarding this matter,” he said.

“The president has not violated any of these rules.”

Aquino has repeatedly rejected calls by concerned groups to lead by example and quit his smoking habit, saying that for him smoking is a way to relieve stress.

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