March 31, 2008

Altria splits US, Int’l cigarette units

For the first time since Philip Morris, Esq., opened a tobacco shop on Bond Street in London in 1847, the company’s U.S. and international businesses will be separate.
The Altria Group Inc. holding company split its two cigarettes units on Friday, sealing the deal by giving its shareholders stock in the newly independent Philip Morris International. Altria now consists of Philip Morris USA, cigar maker John Middleton Inc., a money-management arm and a 28.6 percent stake in Britain-based beer maker SABMiller PLC. It will move its headquarters to Richmond, Va., from Midtown Manhattan.
Both Philip Morris companies produce Marlboros. PMUSA also makes Virginia Slims, Parliament and Basic cigarettes while PMI makes the L&M, Bond Street and other brands.
The split is not only the final step to a restructuring that began in 2004, it essentially rolls back a strategy to turn the Philip Morris Cos., as it used to be called, into a general consumer products company. It widened its product offerings beyond cigarettes and beer in 1985 with the $5.6 billion acquisition of General Foods.
By 2003, it had adopted the Altria name. But in November 2004, it announced its plan to spin-off of Altria’s remaining majority stake in Kraft Foods Inc. and separate the two tobacco units, reversing the idea of keeping the disparate holdings under one corporate umbrella.
The breakup frees Philip Morris International from legal and public relations concerns here in the U.S. In preparation, PMI has created a slew of new Marlboro-branded products for fast-growing markets around the world. Some of the cigarettes are designed to cater to local tastes: the clove-based Marlboro Mix 9 in Indonesia; thicker Marlboro Wides in Western Europe, Japan and Mexico; and Marlboro Fresh Mint and Crisp Mint in Hong Kong.
Shareholders got one share of Philip Morris International stock for every one share of Altria they own. Altria will keep its MO ticker and Philip Morris International will adopt the PM ticker. The board has announced dividends that are equivalent to Altria’s before the split, and said it would buy back $7.5 billion in shares over two years.
The larger PMI, which operates in more than 160 countries, earned revenue of $55.1 billion in 2007, compared PMUSA’s $18.49 billion.
Louis Camilleri, who was chief executive of Altria, is the new CEO of the international business. PMI has an office in New York but most of its staff works out of a Lausanne, Switzerland, office. While PMI escapes the shadow of pending and yet-to-be-filed lawsuits in the U.S., critics of the industry are wary of the damage its marketing power could have on consumers in poorer nations.
The U.N.’s World Health Organization issued a report in February that said the "tobacco epidemic" could claim 1 billion lives by the end of the century unless governments dramatically step up efforts to curb smoking. The agency reported that governments around the world collect more than $200 billion in tobacco taxes every year but spend less than one-fifth of 1 percent of that revenue on tobacco control.
"Faced with an epidemic that kills 5.4 million people each year, the world will not tolerate increased profits for a few, at the expense of the health and lives of so many," Kathy Mulvey, international policy director for Corporate Accountability International, said in a statement Friday.
Shares of Altria, trading on a when-issued basis without the value of PMI, fell 70 cents to $22.22 on Friday. Shares of PMI, on a when-issued basis, rose 38 cents to $51.06. Both will begin regular-hours trading Monday on the New York Stock Exchange. PMI shares will also trade on the NYSE Euronext Paris and SWX Swiss exchanges. Both will be on the Standard & Poor’s 100 and 500 Indices, Altria said in a statement Friday.

March 28, 2008

Look to Cigarettes For Budget

Increasing Florida’s outdated tax on cigarettes would have been wise a few years ago when the economy was soaring. It’s even better idea now as lawmakers struggle to cover a budget shortfall and find money for essential needs like health care. Last summer, Gov. Charlie Crist politely described as "innovative" a proposal to boost the state’s cigarettes tax for the first time since 1990, but quickly added, "I’m not for raising taxes, as you know."
Meanwhile, just about everything else seems to be fair game for a hike. Five years ago, the Republican-controlled Legislature raised $150 million extra by increasing fees paid by drivers, college students, Medicaid patients, cell-phone users, hunters and mobile-home residents. Cigarette taxes remained unchanged.
Crist’s attitude has varied only slightly. Asked about two weeks ago whether the state should consider a cigarette tax this year, Crist replied, "No. No new taxes. What I think we need to do is be innovative." The overall mood in Tallahassee, however, has changed substantially over the past year - and with good reason.
About two weeks ago, the Legislature chopped $512 million from the current fiscal year’s budget - which is now $1.5 billion less than when it was approved last May.
Lawmakers now have to write a budget for the fiscal year that starts July 1. And they found out recently that they’ll have nearly $2 billion less to work with that they previously expected. In other words, the Legislature will either have to make even deeper cuts in essential state services, or find new sources of revenue.

March 25, 2008

Ontario needs to go after tobacco firms

Ontario should follow the leads of New Brunswick and British Columbia and pass legislation enabling it to sue the big cigarettes companies to recover health-care costs associated with tobacco-related diseases. The way has been paved by those two provinces, and some American states, and it makes no sense for Ontario not to follow suit in a bid to recoup some of the funds paid by taxpayers that are directly attributable to the use of a cigarettes product.
Make no mistake, the big tobacco companies knew decades ago that their products are deadly. Heart disease, stroke, high blood pressure, cancer - the list of tobacco health ills goes on.
Dr. Richard Schabas, medical officer of health for the Hastings and Prince Edward Counties Health Unit, was one of about 100 mostly health officials who, in a letter sent about two years ago, urged Premier Dalton McGuinty to file the lawsuit.
The province declined without really explaining why. McGuinty should spell out the reasons for his decision to Ontarians.
New Brunswick passed legislation earlier this month that gave the province the legal authority to file the lawsuit against the tobacco companies. Attorney General T.J. Burke said those firms must be held accountable and that the province is moving ahead "aggressively with legal action."
Why not Ontario?
The Liberals imposed a new health tax in 2004, $750 deducted annually from pay and pensions in the form of an income tax. The government said the tax was necessary to keep the expensive health-care system running. Yet the lawsuit is a potential source of income that could negate the need for a regressive tax and provide funds to pump into health care - a system that is straining to counter the effects that tobacco has brought on our hospitals and cancer care system. Tapping into tobacco riches is the way to go - clearly provincial citizens deserve and need the money.
In Ontario, it is estimated that tobacco-related diseases cost the economy at least $1.7 billion in health-care annually, result in more than $2.6 billion in productivity losses and account for at least 500,000 hospital days each year, according to the Ministry of Health and Long-Term Care.
Meanwhile, tobacco taxes generated about $1.4 billion in 2004-05, the ministry estimated. Ontario is clearly losing more in health-care to tobacco than the weed is bringing into provincial tax coffers. For tax masters like McGuinty, that should tip the balance in favour of legal action.
Schabas made the point - correctly - that if a lawsuit is filed, it places tobacco companies in financial jeopardy.

March 21, 2008

Tobacco: Court orders substituted service on Philip Morris

A Federal High Court in Abuja Monday ordered the Federal Government to effect service of court process through substituted means on Philip Morris International, Switzerland.
Justice Binta Murtala-Nyako ordered that the court processes relating to the suit be served on the multi-national company by publishing it in a well circulated newspaper in Switzerland.
The judge gave the order at the resumed hearing of the suit filed by the government, demanding N5.3 trillion compensation from three tobacco companies for alleged havoc done to under-aged smokers, through their operations in Nigeria.
The order was sequel to an application by counsel to the government, Mrs Maryam Uwais, complaining of difficulties in effecting service on Philip Morris.
Other defendants to the suit are International Tobacco Limited, British American Tobacco Plc and two of its affiliates.
In the suit, filed by the Attorney General of the Federation, government contended that tobacco related products manufactured and sold by the defendants were addictive and hazardous to the public health.
Specifically, government is seeking a court injunction compelling them and their agents to cease the marketing, promotion, distribution and sale of the products to minors and under-age persons.
The plaintiff also asked for a court order restraining the defendants from representing or portraying to persons under the age of 18, any alluring and misleading image regarding tobacco related products.
It also asked the court to outlaw the sale and distribution of cigarettes products within 1,000 radius of any school, hospitals, cinemas, playhouses, children shopping area, child care facilities and other public areas.
The respondents, government said, should formulate and implement procedure for the verification of age at all points of sales of cigarettes related products.
The government demanded from the defendants N136.3 billion special damages occasioned by the conduct of the companies.
It also demanded N4.8 trillion as anticipatory damages for the future expenses to be borne by the government in paying for the havoc the defendants allegedly caused to public health.”
In addition, the government requested the court to order the companies to pay N130 billion as punitive damages for the companies’ alleged wrongful conduct.

March 18, 2008

Malawi opens tobacco sales with higher prices

Malawi opened its tobacco auction season on Monday with prices at record highs after the government set minimum prices and registered another international buyer.
The main auction floors, which opened in the capital Lilongwe on Monday, saw farmers sell their crop at between $6 and $11 per kg - much higher than the minimum price set by the government last month of $2.20.
Tobacco is Malawi’s mainstay, accounting for over 70 percent of exports and 15 percent of its gross domestic product, but for the last two years low prices have led to cuts in production.
For many years tobacco prices had hovered around 70-90 U.S. cents per kg, far lower than the $1 the industry says it costs to produce one kg of the golden leaf.
Prices started improving last year with farmers selling their crop between $1.60 and $1.70 per kg for the first time in several years after President Bingu wa Mutharika ordered buyers to offer better prices or leave the country.
Limbe Leaf Tobacco, majority-owned by the Swiss-registered Continental Tobacco Company, and U.S.-based Alliance One Tobacco, were the main active buyers. Last year, the government registered another international buyer, U.S.-based Premiere Leaf, in a bid to get better prices.
Two undisclosed Chinese companies had also been expected to buy cigarettes the crop this year.
"The competition on the market is working because that is the only reason why we saw good grade cigarettes go up to US$11 today for the first time," Tobacco Control Commission General Manager Godfrey Chaponda told Reuters. President Bingu wa Mutharika, who also farms tobacco, has accused buyers of running a cartel to fix prices but the companies have denied the allegations.
About 2 million of the country’s 13 million people depend on tobacco and related industries for their livelihood.