Philip Morris cuts 2014 earnings forecast

Thursday 26 June 2014 14.41
2014  a 'complex and truly atypical' year for Philip Morris
2014 a 'complex and truly atypical' year for Philip Morris

Cigarette maker Philip Morris International cut its earnings forecast for 2014 and said it is proving to be a "complex and truly atypical" year for the company.

Philip Morris and its rivals like Imperial Tobacco Group and British American Tobacco are grappling with declining sales in a number of markets.

This is due to increasing government regulation and more health-aware consumers, as well as smuggling and an economic downturn. 

The maker of Marlboro cigarettes said it now expects to earn $4.87-$4.97 per share for 2014, lower than the $5.09-$5.19 per share it expected earlier and $5.26 it earned in 2013. 

"We continue to face significant currency headwinds, an improving but weak macro-economic environment in the European Union and known challenges in Asia," chief executive Andre Calantzopoulos said.

However, Philip Morris expects adjusted profit in 2014 to rise 6-8% from the $5.40 it reported last year. The company forecast a 2-3% fall in 2014 total cigarette industry volume, excluding China and US. 

Philip Morris also said it acquired Nicocigs Ltd, a UK-based e-cigarette maker to get access to the growing e-cigarette category in the UK market. 

Financial terms were not disclosed, but the company said the deal is not material to its 2014 results or cash flow. 

The company, which plans to launch a proprietary e-cigarette in 2016, said its reduced-risk products are expected to add to its bottom line within next three to four years. 

Philip Morris said last year it would enter the e-cigarette business in the second half of 2014 to tap fast-growing demand for a less harmful alternative to cigarettes. 

The company teamed up with Altria Group in 2013 to market electronic cigarettes and other "reduced risk" tobacco products. Less dangerous alternatives to cigarettes are a key focus for big tobacco firms as governments worldwide crack down and consumers cut back consumption.