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Philip Morris Int'l profit falls nearly 8 percent



Philip Morris International Inc.'s CEO said Wednesday that the stronger dollar shrank the company's profit from selling Cigarettes in other currencies and it will drag down profit this year again.

When the dollar's value rises in relation to other currencies, profits from sales in those currencies is diminished as they are translated back into dollars. The company sells Marlboro, L&M and Parliament Cigarettes outside the U.S. Its stock fell $1.13, or 3 percent, to $37.19 in afternoon trading. "The (negative) impact of currency is much greater than we previously realized," Citigroup analyst Adam Spielman told investors. "The underlying business is performing exactly as we had expected, which in this economy is probably a mild positive. But in our view the much greater-than-expected currency sensitivity is a clear negative." Philip Morris International's profit in the quarter that ended Dec. 31 fell nearly 8 percent. It earned $1.45 billion, or 71 cents per share. That's down from $1.57 billion, or 74 cents per share, a year earlier but well above Wall Street estimates. Analysts polled by Thomson Reuters on average expected a profit of 62 cents per share. The cigarette maker said its fourth-quarter revenue rose 2 percent to $15.22 billion. Philip Morris International, with offices in New York and Lausanne, Switzerland, is the world's largest non-governmental cigarette seller, sMaller only than state-controlled China National Tobacco Corp. The company spun off from Altria Group Inc. in March 2008. Altria still owns Philip Morris USA, which sells Marlboros in the U.S. Philip Morris International predicted its 2009 profit will be between $2.85 and $3 per share, at current exchange rates, including an 80-cent hit per share caused by the dollar's strength. "The global economic crisis obviously results in uncertainty, particularly on the currency front, and at current exchange rates we face a steep hurdle," Chief Executive Louis Camilleri said in a statement. Camilleri said the bulk of the hit the company took from the strong dollar came in Russia, Turkey, Mexico and Ukraine. While currency comparisons hurt the company, Camilleri said that all signs were that it will continue to generate strong sales. "We have not witnessed any evidence of a shift in consumer behavior in emerging markets," he said on a conference call with investors. "No sign of consumer down-trading has yet been detected. This is obviously good news." The tobacco company has even raised prices. In recent months, the company has raised prices in countries around the world, including Russia, Ukraine, Indonesia, Italy, Mexico, Spain, the U.K. and others. For all of 2008, the company's net income rose 14 percent to $6.89 billion from $6.04 billion. It earned $3.32 per share. Revenue rose 15 percent to $63.64 billion in its first year as an independent company. Both Philip Morris companies are pursuing sales of smokeless tobacco products to replace the revenue they expect to lose as cigarette demand continues falling. Sales volume in the U.S. has been falling due to smoking bans, higher taxes and health concerns. Philip Morris International said Tuesday it had joined Swedish Match for a global partnership to make and sell smokeless products. Richmond, Va.-based Philip Morris USA closed on its $10.4 billion takeover of UST Inc. last month, giving it the market leader and brands such as Copenhagen and Skoal. Philip Morris International also said it has bought the rights to the Petteroes trademark, a fine-cut brand sold in Norway. During the third quarter, Philip Morris International completed its acquisition of Canadian cigarette maker Rothmans Inc. for $2 billion Canadian dollars.

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