RICHMOND, Va. – Philip Morris International’s first-quarter profit dropped nearly 12 per cent as cigarette sales fell in the overseas markets that it serves and it was hurt by foreign exchange rates for the U.S. dollar.
While adjusted earnings topped Wall Street expectations, shares fell almost 3 per cent in early trading.
The seller of Marlboro and other cigarette brands outside the United States earned $1.88 billion, or $1.18 per share, in the January-March quarter, down from $2.13 billion, or $1.28 per share, a year ago.
On an adjusted basis, it earned $1.19 per share, beating Wall Street estimates by 3 cents, according to FactSet.
Excluding excise taxes, revenue fell nearly 9 per cent to $6.9 billion. Analysts expected revenue of $7.01 billion.
Cigarette shipments fell more than 4 per cent to 196 billion cigarettes. Total Marlboro volumes fell about 4 per cent to 65.9 billion cigarettes.
Shipments fell more than 7 per cent in the company’s region that encompasses Eastern Europe, the Middle East and Africa, due to increased excise taxes in Russia and the prevalence of illicit trade in the region. Shipments also fell nearly 5 per cent in Latin America and Canada, nearly 3 per cent in the European Union and 2.5 per cent in Asia.
Still, the company said its retail market share increased in a number of key regions, including Argentina, Canada, France, Germany, Poland, Russia, Spain and the United Kingdom.
Smokers face tax increases, bans, health concerns and social stigma worldwide, but the effect of those on cigarette demand generally is less stark outside the United States. Philip Morris International has compensated for volume declines by raising prices and cutting costs. The company said higher prices represented a benefit of $406 million to its sales and profit during the quarter.
Because it does all its business overseas, the company also has to navigate changes in currency values. A stronger dollar cuts into revenue generated overseas when it’s translated back into dollars.
Its shares fell $2.33 to $82.46 in morning trading.
Philip Morris International Inc., based in New York and Switzerland, is the world’s second-biggest cigarette seller behind state-controlled China National Tobacco Corp.
Richmond, Va.-based Altria Group Inc., the owner of Philip Morris USA, spun off Philip Morris International as a separate company in 2008. Altria is the largest U.S. cigarette seller.
Michael Felberbaum can be reached at http://www.twitter.com/MLFelberbaum.