PMI reports reduced cigarette volumes

Philip Morris International (PMI) has reported a net revenue of $6.1 billion, down 8.1 per cent, for the first quarter of 2016, with international cigarette shipment falling by 1.4 per cent to a volume of 196 billion units.

The company’s forecasts for 2016 show cigarette volumes (excluding the People’s Republic of China and the US) are expected to decline by around 2.0 to 2.5 per cent, in line with an estimated decline of 2.4 per cent in 2015.

PMI’s results show that the company’s Asian division has performed poorly in relation to the  Eastern Europe, Middle East and Africa (EEMA) region, the European Union, and Latin America and Canada, with cigarette shipment by volume declining 7 per cent in Asia during the first quarter of 2016 against gains in the other three markets.

Similarly net revenue fell 1.7 per cent in the Asia region but grew by 1.2 per cent in EEMA, 3.4 per cent in the European Union and 14.7 per cent in Latin America and Canada.

Despite relatively poor Asian performance, PMI noted that cigarette market share increased in a number of key markets including Australia.

Net revenues in the Asia region decreased by 1.7 per cent mainly due to unfavourable volume/mix, which, in Australia, reflected a lower total cigarette market and continued, albeit moderating, downtrading.

“In line with our expectations, our first quarter financial results reflected a tough comparison with the exceptionally strong first quarter last year,” Andre Calantzopoulos, Philip Morris CEO, said.

Tobacco tax hike “lazy, short-sighted”: AACS

Last week the Australasian Association of Convenience Stores (AACS) took aim at the Turnbull Government after it was reported the Coalition is planning to increase tobacco taxes in the Federal Budget, calling the government as “lazy, short-sighted and discriminatory as those which preceded it”.

According to AACS CEO, Jeff Rogut, increasing the tobacco excise will represent the clearest admission yet that raising the tax on legal tobacco has nothing to do with health and everything to do with revenue.

“It’s not just adults who choose to smoke, it’s Australians across the board who deserve better than this reactionary, unimaginative and uninspiring policy. Smokers are already excessively taxed in Australia, more than almost any other country in the world, and to target this group further to fill the budget gap is discrimination, plain and simple,” Mr Rogut said.

“Of course, there are always other consequences, such as the loss of business to retailers, especially small retailers, as the market for illicit tobacco surges ahead.

“Most disappointing of all is that the pretext that raising tobacco tax is in any way linked to health benefits has been dropped. It has never been about health and it’s interesting government no longer even bothers to peddle this line,” he said.

Mr Rogut said further increases to the cost of legal tobacco would be especially concerning given the huge rise in the illicit tobacco market driven by endless excise hikes and plain packaging.

Mr Rogut said it’s counterproductive to initiate an inquiry into the illicit market on one hand, then introduce further tax increases to legal tobacco – directly boosting the illicit market – on the other.

“We strongly urge common sense to prevail as the Government puts the finishing touches on next month’s budget. Raising tobacco excise is having a clear counterproductive effect, with the illicit market flourishing as a result of the existing regulatory framework,” Mr Rogut said.

“Not only does Government actually miss out on revenue as the illegal market grows, but criminals profit and minors have easier access to contraband products.

“All the while, adult consumers who choose to buy a legal product are singled out to pay even more. It’s not fair or smart, it’s discriminatory and dangerous,” he said.

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