A "complex and atypical year" - Philip Morris employees in Bergen op Zoom, the Netherlands, striking against plans to close their plant.
Koen van Weel/AFP—Getty
By Geoffrey Smith
June 26, 2014

Philip Morris International Inc (PM) cut its profit forecast for this year, citing “significant currency headwinds”, weak sales in the E.U., competition from discounting and charges related to ceasing operations in Australia and the Netherlands.

The maker of Marlboro cigarettes said it now expects diluted per-share earnings to be roughly 2.3% lower than it had forecast less than two months at between $4.87-$4.97. In 2013, they had been $5.26.

At an investor day in Lausanne, Switzerland, chief executive Andre Calantzopoulos said 2014 would be “complex and truly atypical”.

The cigarette industry is struggling with a long-term decline in consumption in developed markets such as the U.S. and E.U. on health concerns, and Philip Morris forecast another 1%-2% decline in total cigarette industry sales next year, and a drop of between 5%-6% in the E.U..  It expects its own sales volumes to drop 1% next year.

Against that background, it’s closing its factory in Bergen op Zoom in the Netherlands, with the loss of 1,230 jobs, but employees have held a series of strikes since January to protest the closure, complicating the process.

As its traditional business declines, PMI took another small step towards securing its future Thursday by buying Nicocigs, one of the U.K.’s biggest makers of e-cigarettes, with a 27.3% share of a local market valued at $350 million this year.  That follows similar moves by competitors Japan Tobacco Inc. (JAPAF) and British American Tobacco (BTI) in recent months.

E-cigarettes, which release nicotine without generating smoke, have grown in popularity as western countries have imposed increasingly wide bans on smoking in public spaces. Sales volumes are expected to grow by an average of over 30% a year through 2018, according to research firm TechNavio.

PMI didn’t give any details regarding the value of the six year-old company, saying it wouldn’t have a material impact on this year’s earnings.


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