Big Tobacco Companies and their Profits
Speaking about American tobacco companies, the first companies which come to mind are Altria and Philip Morris International. But also a well known British tobacco company is British American Tobacco. Comparing American tobacco companies and British tobacco companies is like comparing apples and oranges, especially since the British company didn’t report profit or revenue numbers. But British American’s volume results were still harshly in line with those of Philip Morris: a 2% increase in overall volume growth (including purchases), but a 3% decline excluding acquisitions.
Compare that with Philip Morris International’s overall volume drop of 2.9% in last week’s earnings release. While Philip Morris experienced a 4.3% volume drop for Marlboro brand, British American saw 4% overall volume profits for its four “Global Drive Brands,” including: 9% growth for Pall Mall, 5% growth for Lucky Strike, 6% growth for Dunhill. These results showed that British American appears to be weathering the economic storm well enough.
More surprising is that British American established that the company delivered profits growth with and without currency regards. In comparison, Philip Morris International reported a 5.3% revenue decrease on the quarter, and a 1.4% decrease in operating income, while revenue would have grown 6.9% without adverse currency instability. But when the global excise taxes on tobacco products continue to rise, the cigarette producers have their work cut out for them in protecting benefits in spite of decreasing volume. In such cases only smaller cigarette producers such as Vector Group could be particularly at risk because many smokers decided to pay for a cigarette break program than for cigarettes.
Scientists showed that Altria hasn’t succeeded much better, with declining sales and volume due in part to rising excise taxes, while Reynolds American also reported an 11% volume fell. On the other hand, Lorillard served up a better-than-average 6.1% volume decrease even as it showed a 2.6% increase in operating income. British American Tobacco holds a 42% stake in Reynolds American. Although the tobacco market isn’t increasing in the U.S. now, cigarette consumers here aren’t absolute scared off by increased excise cigarette taxes, because they turn to gray- or black-market smokes.
