Philip Morris Cuts 2014 Earnings Outlook, Buys E-cigarette Firm Nicocigs

(RTTNews) - Philip Morris International Inc. (PM) on Thursday lowered its reported earnings outlook for fiscal 2014, citing restructuring costs in the Netherlands and significant currency headwinds. The cigarette maker is hosting its investor day today in Switzerland.

The maker of Marlboro and L&M brand cigarettes also said it has acquired Nicocigs Limited, a U.K.-based e-vapor company whose principal brand is Nicolites. Financial terms of the deal were not disclosed.

In early April, Philip Morris' affiliate, Philip Morris Holland B.V., initiated talks with employee representatives on a proposal to discontinue cigarette production at its factory located in Bergen op Zoom, the Netherlands.

As it has reached a deal with the trade unions and their members on a social plan, PMH now plans to cease cigarette production by September 1, 2014. The company expects to incur a pre-tax charge of about $495 million or $0.24 per share, the majority of which is expected to be recorded in the second quarter of 2014.

The company will also incur a charge of $0.01 per share recorded as asset impairment and exit costs in the first quarter of 2014 relating to its decision to cease cigarette production in Australia by the end of 2014.

Accordingly, Philip Morris now forecasts fiscal 2014 reported earnings in a range of $4.87 to $4.97 per share, down from the prior range of $5.09 to $5.19 per share. In the prior year, the company reported earnings per share of $5.26.

On an adjusted basis, the company continues to forecast fiscal 2014 earnings per share to increase in a range of 6 to 8 percent from adjusted earnings of $5.40 per share in 2013.

On average, fifteen analysts polled by Thomson Reuters expect the company to report earnings of $5.25 per share for the year. Analysts' estimates typically exclude special items.

Philip Morris also noted that its forecast includes a productivity and cost savings target of $300 million and a share repurchase target of $4 billion.

André Calantzopoulos, Chief Executive Officer of Philip Morris International, said, "We continue to face significant currency headwinds, an improving but weak macro-economic environment in the EU and known challenges in Asia, partly offset by a robust performance in a number of markets and the contribution of our business development initiatives."

Calantzopoulos added, "Furthermore, we have recently witnessed significant price discounting at the low end of the market in Australia which, were it to persist, could lead us to be at the lower end of our 2014 guidance for full-year currency-neutral adjusted diluted EPS growth of 6%-8%."

Philip Morris said that the transaction to acquire Nicocigs is not subject to regulatory approval and is not material to its 2014 consolidated financial position, results of operations or cash flow.

Philip Morris noted that the acquisition is complementary to its previously announced agreement for the license and distribution of Altria Group, Inc.'s (MO) e-vapor products. In addition, the deal will provide PMI with immediate access as well as a significant presence in the growing e-vapor category in the U.K. market.

Nicocigs was founded in 2008 and is headquartered in Birmingham, U.K. The company employs a field force of about 40 sales representatives and distributes to more than 20,000 points of sale within the UK.

Nicocigs' 2014 April year-to-date retail share, as measured by Nielsen, was 27.3 percent. The U.K.'s e-vapor category has an estimated retail value of about $350 million.

Philip Morris said its senior management will offer its perspective on the company's business outlook and long-term growth strategies at the two-day investor meeting starting today at its Operations Center in Lausanne, Switzerland.

PM is trading at $86.58, down $2.31 or 2.60 percent on a volume of 3.15 million shares.