Philip Morris International profit falls 2 percent

RICHMOND, Va. Cigarette maker Philip Morris International Inc. said Thursday that its first-quarter profit fell nearly 2 percent on a decline in the number of cigarettes sold.

The company, based in New York and Switzerland, lowered its full-year earnings guidance because of changes in foreign exchange rates, which also hurt its quarterly results.

Philip Morris International sells Marlboro and other cigarette brands outside of the U.S., so its results reflect smoking trends abroad. It's the world's second-biggest cigarette seller behind state-controlled China National Tobacco Corp.

Profit came to $2.13 billion, or $1.28 per share, in the quarter ended March 31, down from $2.16 billion, or $1.25 per share, a year ago. Stripping out one-time items, profit was $1.29 per share, missing analysts' estimate of $1.34 per share.

Excluding excise taxes, revenue increased nearly 2 percent to $7.6 billion. Analysts polled by FactSet expected $7.5 billion. Volumes dropped while cigarette prices rose.

Costs to make and sell cigarettes rose 2 percent to $2.45 billion.

Cigarette shipments fell 6.5 percent, to 205 billion cigarettes, hurt by economic woes in the European Union and a recent tax increase in the Philippines. Shipments grew 1.4 percent in the company's region that encompasses Eastern Europe, the Middle East and Africa, but fell about 10 percent in both Asia and the European Union. Shipments also fell 7.5 percent in Latin America and Canada.

Shipments had grown 5 percent the year before.

Its shares fell $2.61, or 2.8 percent, to $91.43, in morning trading Thursday.

In Asia, one of its largest growth areas, the company said that cigarette volume grew nearly 3 percent if it didn't include the Philippines. There were gains in Japan and Indonesia.

The company benefited from increases in Japan following the March 2011 earthquake and tsunami. The events offered the company a sales opportunity because supply disruptions led Japan Tobacco Inc., the world's No. 3 tobacco maker, to stop shipping cigarettes within Japan. It also bought Philippines company Fortune Tobacco Co. in February 2010, bolstering its Asian business.

Marlboro shipments fell nearly 5 percent in the quarter, to 68.7 billion cigarettes. L&M and Parliament brands posted gains.

Smokers face tax increases, bans, health concerns and social stigma worldwide, but the effect of those on cigarette demand generally is less stark outside the United States. Philip Morris International has compensated for volume declines by raising prices and cutting costs.

Because it does all its business overseas, Philip Morris International also has to navigate changes in currency values. A stronger dollar cuts into revenue generated overseas when it's translated back into dollars.

The company cut its profit guidance for the year because of recent changes in foreign exchange rates. It now expects $5.55 to $5.65 per share, excluding one-time items, rather than profit of between $5.68 and $5.78 per share. Analysts expect $5.72 per share.

During the quarter, Philip Morris International spent $1.5 billion to buy back 16.7 million shares of stock under a three-year share repurchase program totaling $18 billion that began in August.

Altria Group Inc. in Richmond, Va., the owner of Philip Morris USA, spun off Philip Morris International as a separate company in 2008. Altria is the largest U.S. cigarette seller.