Big Tobacco Business still solid

Published on October 29th, 2009 13:28
big tobacco

The weak economy and higher prices are inhaling out cigarette wish around the world, especially in the U.S., where a federal tax hike, smoking bans, health concerns and social stigma have cut cigarettes demand at least 10 percent. However the tobacco company profits remain still solid. For example two of the world’s biggest cigarette makers reported that they arose from the third quarter in better shape than analysts expected and raised their 2009 profit values.

Both Philip Morris International, which makes Marlboro and other top brands for sale abroad, and Reynolds American Inc., the second-biggest cigarette seller in the U.S., with brands such as Camel and Pall Mall, raised prices even as clients bought fewer cigarettes. And Reynolds also plans to introduce smokeless alternatives for future business growth.

Philip Morris International has offices in Lausanne, Switzerland, and New York said that it earned $1.79 billion during the quarter. It is the world’s second-biggest cigarette maker after the state-controlled China National Tobacco Corp. It was developed in 2008 from Richmond, Va.-based Altria Group Inc., owner of the largest U.S. tobacco company, Philip Morris USA.

Scientists started to investigate the U.S. industry’s third quarter for the first clear sense of cigarette volumes after a 62-cent-per-pack federal tax increase took effect. They observed that cigarette sales fell during the first half of the year. They found that Reynolds American recorded 72 percent higher profit than in last year’s third quarter, when restructuring costs and the falling value of its trademarks extinguished its earnings. Based in Winston-Salem, N.C., it earned $362 million for the period that ended Sept. 30, up from $211 million a year earlier.

The company said that tax increases and the weak economy cut the amount of cigarettes it shipped by 11 percent, and it charged the decline industry wide at 12.6 percent. Reynolds explained that its smokeless tobacco unit, Conwood Co., sold 11.7 percent moister snuff products by volume during the quarter. Susan M. Ivey, Reynolds CEO said that she hopes that U.S. cigarette demand to fall 8 percent to 9 percent per year and easing back to annual drops of 3 percent to 4 percent over the next few years.

Cigarette sale declines are less harsh in the rest of the world, that’s why it continues to raise. For example Philip Morris International shipped 219.3 billion cigarettes in the quarter, 2.9 percent less than a year earlier, as declines in Europe and the Middle East were offset by a rising volume in Latin America and Canada from its purchase of Rothmans Inc. during the third quarter last year.

Scientists concluded that when the dollar is strong, companies that sell goods abroad and change that revenue from foreign currencies, they take a hit in the dollar value of those sales.

By Joanna Johnson, Staff Writer Copyright © 2010 TobaccoPub. All rights reserved.

Related tags: smoking habit | cigarette | smoking ban | tobacco company | smoker | smokeless alternative | cigarette seller

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