QUOTE AND NEWS
Motley Fool  Aug 18  Comment 
With merger activity in the domestic market, is international tobacco the place to be?
SeekingAlpha  Aug 13  Comment 
By Michael VanLoon: State attorneys general target e-cigarettes, which Philip Morris hoped would transform the industry. E-cigarettes have been significantly advantaged by loopholes associated with "vapor" rather than "smoke" While...
SeekingAlpha  Aug 13  Comment 
ByAristofanis Papadatos: It is well known that stocks with aggressive distribution (dividend plus share repurchases) to their shareholders can lead to great profits. However, while there are various companies offering extreme distribution yields...
TheStreet.com  Aug 12  Comment 
NEW YORK (TheStreet) -- Shares of Philip Morris International are slightly lower at the market open as the world's biggest tobacco company is prepared to sue the British government should it implement a law requiring plain packaging of...
MarketWatch  Aug 11  Comment 
Shares of Philip Morris International are a good buy, because the stock has been beaten down enough, writes Michael Brush.
SeekingAlpha  Aug 5  Comment 
ByRupert Hargreaves: Altria (NYSE:MO) and its holding in SABMiller plc (ADR)(OTCPK:SBMRY) actually pre-dates Altria itself. As you might know, Altria owns Philip Morris USA, which was a subsidiary of Philip Morris International (NYSE:PM). Philip...
SeekingAlpha  Aug 4  Comment 
By Bill Maurer: It has been a couple of weeks since I updated investors on cigarette giant Philip Morris (NYSE:PM) after its Q2 earnings report. I did not think that the Q2 report really changed the scenario for Philip Morris, and I continued to...
SeekingAlpha  Jul 30  Comment 
By Team Money Research: We thought it would be interesting to see how Philip Morris (NYSE:PM) compares to a major international rival. Indeed, another member of the group of the biggest four tobacco firms in the world by sales, British American...
SeekingAlpha  Jul 24  Comment 
By Balanced Investing: Philip Morris' (NYSE:PM) share value has fallen a little more than 5% in one year. However, it has picked up an upward trail since the beginning of February. When the company cut its full-year earnings forecast last month, a...
SeekingAlpha  Jul 22  Comment 
By Drip Breakout: I recently spoke with a colleague about the future of the tobacco industry both at home and abroad. As many analysts and health advocates alike accurately point out, U.S. tobacco consumption is at an historic low. This trend, as...




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Philip Morris International (NYSE:PM) is an independently Owned and operated tobacco company that spun off from its former parent company the Altria Group (MO) on March 28th, 2008. Phillip Morris is the world’s largest producer of tobacco products, holding 15.7% of the global market excluding the United States.

While international sales continue to grow for Phillip Morris, domestic sales revenues have been in decline as Altria struggles to cope with higher state tobacco tariffs and the tobacco industry's negative image in the United States. The newly independent Philip Morris International will sell tobacco products in international markets while Altria will maintain its own domestic operations. In addition to selling Marlboro branded cigarettes, the world’s highest volume cigarette brand, PMI also has seven of the top ten brands by volume global such as L&M, Philip Morris, Bond Street, Chesterfield, Parliament, Lark, A Mild, and Morven Gold throughout Europe, South America, and Asia.[1]

Company Overview

Philip Morris International's tobacco products include traditional cigars and cigarettes as well as smokeless products such as snuff and chewing tobacco. Although Philip Morris International is headquarted in New York, NY, all of its operations are conducted internationally though its operation center located in Lausanne, Switzerland. [2]

Prior to its spinoff from Altria on March 31st, 2008, as the international segment for Altria, PMI has historically generated the highest proportionate sales revenue and operating income out of all of the segments in Altria’s portfolio.

The main logic behind the spinoff of PMI from Altria Group was to allow shareholders to profit more directly from tobacco revenue. As a result of the spinoff, every shareholder of Altria received, for every share of Altria held, a share in the new independently traded and unaffiliated Philip Morris International. Another factor in the companies' separation is discrepancy in demand for international vs. domestic tobacco sales.

Business Segments

In 2009, PM earned a total of $25.0 billion in total revenues. This was a tiny decline from its 2008 total revenues of $25.7 billion. As a result of the decline in revenues, PM's net income was adversely affected. Between 2008 and 2009, PM's net income declined from $6.9 billion in 2008 to a net income of $6.6 billion in 2009.[3]

Business Segments/Cigarette Brands

In addition to providing service to about 15.4% of the global tobacco market, PM also owns seven out of ten of the top selling international cigarette brands. PM comes into contact with two distinct customers when marketing its cigarettes – the value consumer and the discriminatory consumer. Value consumers are more concerned with the price of the tobacco products, whereas discriminatory consumers are concerned with where the tobacco was grown and the quality of the product they are purchasing.

PM, for the most part produces tobacco for the discriminatory consumer, but does maintain a portfolio of three value company brands (Bond Street, Red and White, and Next branded tobacco products) that operate globally. To meet the needs of its discriminatory customers, in addition to owning globally recognized branded cigarettes such as Marlboro, L&M, Philip Morris, and Chesterfield, PM owns local brands such as A Mild and Diji Sam in Indonesia, Diana in Italy, and Assos in Greece to take advantage of established brands as opposed to marketing new brands in some regions.[4]

Trends and Forces

The Altria - PM Split in 2008

Recently, tobacco companies operating from within the United States market have faced significant challenges. As a result, Altria saw value in a split the between its domestic and international segments. Under a single company model, when either the domestic or international segment has a downturn in sales revenue, the other segment would be under pressure to increase sales and decrease expense to offset this weakness on the other side of the business. the company revenue and expense on the balance sheet. This was the case prior to the spin off, and Altria itself inherited both the domestic and international risk. From the shareholder’s perspective, separated segments allows investors to allocate their capital according to which market they see as the most lucrative based on that market’s risk profile.

Not bad at all faells and gallas. Thanks.

Tar and Nicotine Testing Methods

A number of world public health organizations have brought to the attention of tobacco corporations an issue with the “ISO” method of testing (an industry tar and nicotine testing standard). Specifically, the impact of tar and nicotine levels in tobacco products,as determined by the ISO method, provides inaccurate guidance as to the actual effect on the human body. Since the ISO method does not provide a comprehensive analysis of different inhalation methods of smoking, the results of the ISO method are not a reflection of the true population of smokers. A developing method for testing known as the Health Canada calls for Altria to change over to this newer, more expensive form of testing to satisfy the standards set by public world health organizations. Switching to new testing methods would cause Philip Morris to incur significant expenses in purchasing equipment and performing the new tests.

Ingredient Disclosure Laws

In a large number of international marketplaces, PMI is required by local law and regulation to disclose the ingredients and related toxicological characteristics that are in its tobacco related products, for consumer health reasons. From a tobacco company’s perspective, some of the standards of disclosure impact sales in two ways. The first is, along with a greater transparency in information, people be more health conscious when deciding whether to buy tobacco products, reducing the volume of sales. Additionally, some companies including PMI argue that full disclosure of ingredients to the consumer aids counterfeiting, and that full disclosure of tobacco products gives away “trade secrets” and ultimately the competitive edge of the tobacco company.

Bans and Restrictions on Marketing and Advertisement

With respect to brand advertisement and marketing, many countries impose partial or total restrictions not only on the way in which they advertise, but also the groups they advertise to and the physical size of advertisements. In some case, countries even view the packaging and form of tobacco products itself as an advertisement or marketing tactic, requiring all tobacco products to be marketed using generic packaging and standard forms. Seeing as the way in which advertisment and marketing is conducted greatly infulences the amount of customers that are aware of and are attracted to buy tobacco products, these restrictions directly influence PMI’s ability to earn sales revenue.

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