Philip Morris Stays Neutral
Philip Morris International’s profit of $1.27 per share in the first quarter of fiscal 2012 raised from the year-ago profit of $1.06 per share. The good results were made due to auspicious pricing and volume mix along with strong performance in Asia, Middle East & Africa, Eastern Europe and the European region.
PMI recently informed about a new share reacquisition program of $18.0 billion. This new plan is planned to commence soon after the end of the current $12 billion share buyback program, which started in May 2010. The company has a target of repurchase shares worth $6.0 billion during 2012. It is paying its quarterly dividend statedly.
The company has strong cigarette brand portfolio. It consists of popular brand names like Marlboro, L&M, Bond Street and Parliament. Philip Morris is improving its brand portfolio by means of innovations that are found on improved consumer understanding.
The L&M cigarette brand is being restored by the development of smoother taste products and more alluring packaging designs. Moreover, the portfolio of premium and expensive brands (Parliament, Virginia Slims and Chesterfield) along with the cheap brands (Bond Street, Red & White, and Next) are being developed and replenished.
Besides, the tobacco company is listed in a wide range of markets that provide it with growth opportunity despite macro-economic headwinds. It has a large share in the emerging markets. Asia is still a growth engine for the company with strong growth in Indonesia, China, Philippines and Korea.
But, governments around the world are putting limitations on cigarette manufacturers to prevent the appearance of new tobacco consumers. The US Food and Drug Administration (FDA) has admitted a regulation that will oblige cigarette makers to place strict warning labels on cigarette packets to discourage customers from smoking.
Governmental measures that ban the use of tobacco products, together with the lessening social acceptance of smoking, will negatively influence on the company’s volume in many markets.
Besides, several retail dealers and importers have appeared who are engaged in fake versions of the company’s top-branded cigarettes. Miami is one of the top three zones counterfeit cigarettes. These cigarettes are not only fake, but also far more injurious to health than their real counterparts.
As per the lab data of “The Organized Crime and Corruption Reporting Project,” fake cigarettes from China likely to consist of 80% more nicotine and 130% more carbon monoxide, and impurities that are harmful for health. This kind of trafficking has a negative influence on the company’s reputation and earnings.
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