Philip Morris reported a 13% drop in second-quarter profit as the tobacco giant posted weaker cigarette shipments, particularly in Asia.
Results from the international tobacco company, which derives all sales from markets outside of the United States, were also stung by impairment charges and a stronger U.S. dollar. Unfavorable currency movements trimmed earnings by 15 cents in the latest quarter.
And while the maker of Marlboro and L&M cigarettes posted a 2.7% drop in cigarette shipment volume, results for the period easily exceeded analysts’ expectations and Philip Morris affirmed its full-year targets.
“We achieved strong fundamental results in the second quarter, driven by a lower volume decline, strong pricing and robust market share,” Chief Executive André Calantzopoulos said in a statement.
Philip Morris and other tobacco companies have faced challenges as consumers in many markets smoke less, or move on to e-cigarettes and other new products. While tobacco producers remain wildly profitable, they must chase earnings growth by either buying back shares, raising prices on their products, or investing in new pockets of growth like the e-cigarette market.
Shipment volumes slid 6.1% in Asia, hurt by broad industry weakness in Japan. Shipments dropped 1% in Latin America and Canada, and fell 2.8% in Eastern Europe, the Middle East and Africa. The European Union was the only region to post shipment growth, up 2.4% in the latest period.
Overall, Philip Morris reported a profit of $1.85 billion, or $1.17 a share, down from $2.12 billion, or $1.30 a share, a year earlier. Excluding asset impairment charges and other items, adjusted profit in the latest quarter totaled $1.41 a share. Net revenue, excluding excise taxes, slid 1.5% to $7.8 billion.
Analysts surveyed by Bloomberg had projected an adjusted profit of $1.24 a share on $7.53 billion.