Philip Morris profits down 8 percent in second quarter 2013

philip morris

Oh, happy day. Philip Morris (Altria), the No. 1 private cigarette manufacturer in the world, saw its profits drop a dramatic 8 percent in the second quarter of 2013, mostly due to lagging sales. Philip Morris shares dropped 2.5 percent as a result.

Here’s what is interesting. We all know the sales of cigarettes is down, so at first blush, this doesn’t seem to be a big surprise.

What IS a big surprise? The biggest reason for the drop in profits is the drop in sales of Philip Morris brands (mostly Marlboro) overseas.

One thing a lot of people may not realize is that while cigarette sales have been obviously dropping the U.S., the tobacco industry has weathered the storm just fine, mostly by expanding its overseas markets in burgeoning smoking regions such as India,  the Philippines and Africa. Philip Morris is blaming a sluggish economy overseas:

According to USAToday:

The cigarette maker reported earnings of $2.12 billion, or $1.30 per share, in the quarter ended June 30, down from $2.32 billion, or $1.36 per share, a year ago.

Excluding excise taxes, revenue fell 2.5% to $7.9 billion despite higher prices. Costs to make and sell cigarettes rose more than 1% to $2.7 billion.

Cigarette shipments fell about 4% to 228.9 billion cigarettes as it saw volume declines in all of its regions. Total Marlboro volumes fell nearly 6% to 72.4 billion cigarettes.

Philip Morris International said economic woes in the European Union and increased excise taxes drove shipments down nearly 6% during the quarter. Shipments fell 3.6% in the company’s region that encompasses Eastern Europe, the Middle East and Africa. Shipments also fell 2.4% in Latin America and Canada.

In Asia, one of its largest growth areas, the company said that cigarette volume fell 3.5%, hurt by a recent tax increase in the Philippines, which saw a 16.5% decline in shipments.

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.

Anytime the tobacco industry is hurting that is great news. Perhaps its a bad economy, but maybe smoking bans, higher taxes and lower smoker rates in other countries is having an effect, as well. Of course, Philip Morris would never admit THAT.

Good news everyone … teen smoking reported at lowest point ever

professor farnsworth

This is such good news, I’m actually having difficulty believing it at face value. (Too good to be true syndrome…).

According to a federal study (called the Federal Interagency Forum on Child and Family Statistics), the rate of teen smoking has dropped dramatically from 18 percent in the 1990s to 5 percent in 2012. That’s how many high school sophomores smoked a cigarette daily in the past 30 days.

Wow, 5 percent. That teen smoking rate was stubbornly stuck at 15 to 25 percent for 10 years, long after Joe Camel was forced into retirement … mostly because the tobacco industry was still finding subtle ways to market cigarettes to kids, and mostly because Hollywood stubbornly continued to show smoking in a “cool” light.

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Numbers have also dropped for high school seniors and 8th graders.

“According to the report, 2 percent of 8th-graders, and 9 percent of high school seniors said they smoked daily in 2012. Compare that data to the survey’s peak smoking years in the mid-1990s, when those numbers were 10 percent for 8th graders, 18 percent for high school sophomores and 25 percent for high school seniors.”

This has really been my No. 1 priority personally over the last 10 years I’ve been into this issue … somehow finding a way to get fewer kids to start up smoking. Just telling them it’s bad for them doesn’t do it.

Not sure why those numbers are so dramatic, but I would give some credit to cigarette taxes and the cost of cigarettes going way up in the last 20 years. $6 for a pack in most places, compared to about $3 a pack 20 years ago. I also think less smoking in movies plays a role (no pun intended.).

The other good news, and a bit more scientific (this first study was based on surveys among kids, which has its merits), is that fewer kids are being exposed to secondhand smoke.

LA Times:

The percentage of nonsmoking kids ages 4 to 11 whose blood had a detectable level of cotinine, a breakdown product of nicotine, fell from 53% to 42% from 2007-08 to 2009-10.”

That’s the result of fewer people smoking overall and more smoking bans.

Keanu Reeves does not approve of you smoking!

From the new movie “Generation Um”

Hah, I actually saw something like this about 10 years ago, in which a drunk chick threw a massive temper tantrum for being told a bar was a non-smoking establishment and she stomped out of the bar, after vandalising her table.

Reeves was also in “Constantine,” a few years back, probably the most blatantly anti-tobacco movie I’ve ever seen.

 

Oops, “Smokers’ glitch” means smokers won’t pay more for “Obamacare” coverage — for the moment

smoking coverage photoHah, OK, this is actually kind of funny. An example of government bureaucracy at its best.

Under the Affordable Care Act, smokers were looking at paying up to 50 percent more than non-smokers through government insurance plans sold to small companies or individuals.

BUT, the ACA also allows insurers to charge three times more to older workers than what they charge to younger workers. That limit is set in stone — 3X more than the lowest premium is the most an insurer can charge. So, the problem is for an older person who smokes, the formula should be 4.5X more than the minimum premium amount … but that conflicts with the 3X maximum.

So, in short, the Obama administration had to scrap the whole smokers’ surcharge for the time being until they can figure out a new formula to fix this. What I’m buffudled by is … no one thought of this or noticed it until now….? Really? They didn’t think of it when they wrote the bill to begin with?

So, possibly for another year, smokers getting insurance through ACA programs won’t see higher premiums than non-smokers, but in the long run, they will.