Philip Morris International (
), the world's leading international tobacco company outside the
U.S. and China, will announce its Q2 2011 earnings on 21st July.
PMI's product portfolio boast of eight of the world's top 15
brands, including Marlboro, the number one cigarette brand
worldwide. Until a spin-off in 2008, Philip Morris
International was an operating company of the
). Philip Morris International competes with British American
), Japan Tobacco (PNK:JAPAF.PK) and Imperial Tobacco Group plc (
) in its various geographical segments. Below we look at some some
key trends to watch for in its earnings report.
We have a
$69.50 price estimate for Philip Morris
, which is just slightly ahead of the market price.
Pricing Focuses on Profitability
With a favorable geographical footprint and a strong product
portfolio, Philip Morris International expects an average 3-5%
organic growth in its annual revenues, net of excise taxes. Amid
declining volume of cigarette sales in several key markets
worldwide and rising excise taxation, PMI will continue to
focus on its profitability. Accordingly, the profit margins will
primarily be driven by higher pricing. PMI also recently
concluded the 2008-10 cost savings program and expects to save $1.5
billion in costs annually going forward. This may significantly
improve its bottom line.
Emerging Markets Driving Cigarette Sales Volume
PMI's cigarette sales volume will be mainly driven by growing
Asian and Latin American markets of Indonesia, Philippines,
Argentina and Brazil. Indonesia and South Korea are expected to
offer PMI organic sales growth. Sales in the Philippines will
continue to rise after the 2010 merger with Fortune Tobacco
Post-merger PMI-FTC together control up to 90% of the expanding
Philippine tobacco market with a greater presence on the low and
mid-priced segments. Also looking forward, market share retention
in the important Japanese market in the aftermath of the March 2011
earthquake and tsunami will be important.
Philip Morris International and British American Tobacco
witnessed significant market share growth post March at the cost of
Japan Tobacco which saw temporary supply disruptions.
However, sales volumes are expected to be offset by declining
sales volume in Europe due to decreasing market volume, notably in
Greece, Poland and Spain. Sales will also continue to be hit by the
disruptive 2010 excise tax increase in Mexico as well as trends
consumers trading down to lower priced cigarettes in Pakistan and
See our complete analysis of Philip Morris