When American investors think of tobacco greatness, Altria
With British American reporting results on a nine-month basis, we're somewhat comparing apples and oranges, especially since the company didn't report profit or revenue numbers. But British American's volume results were still roughly in line with those of Philip Morris: a 2% increase in overall volume growth (including acquisitions), but a 3% decline excluding acquisitions. Compare that with Philip Morris International's overall volume drop of 2.9% (a 4% decline without acquisitions) in last week's earnings release.
While Philip Morris experienced a 4.3% volume drop for flagship brand Marlboro, British American saw 4% overall volume gains for its four "Global Drive Brands," including:
- 9% growth for Pall Mall
- 5% growth for Lucky Strike
- 6% growth for Dunhill
So British American appears to be weathering the economic storm well enough.
More impressively, British American stated that the company delivered revenue growth with and without currency considerations (although it didn't specify whether this was organic or due to acquisitions). In comparison, Philip Morris International reported a 5.3% revenue decline on the quarter, and a 1.4% decrease in operating income, while revenue would have grown 6.9% without adverse currency fluctuation.
As global excise taxes on tobacco products continue to rise, the cigarette producers have their work cut out for them in protecting profits in spite of declining volume. Smaller producers such as Vector Group
Domestically, Altria hasn't fared much better, with declining sales and volume owing in part to rising excise taxes, while Reynolds American
While the tobacco market isn't growing in the U.S. now, consumers here aren't completely scared off by increased excise taxes. Similarly, global tax increases are just beginning to unfold. And while those taxes are not likely to kill the industry, global consumers are increasingly turning to gray- or black-market smokes as a result of increased excise taxes, leaving growth prospects for premium products like Marlboro in some jeopardy.
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