Philip Morris Ukraine is considering the possibility of starting to export cigarettes from Ukraine, in particular to geographically close countries, said the company’s CEO Maxim Barabash during a roundtable discussion on “Current issues of Ukraine’s economic recovery and the role of state and business structures in this process” at the company’s new production facility in Lviv region.
“There is no potential for growth in cigarette production in Ukraine because it is a fairly stable market. As before the war, the potential lies in exports. We will look at which countries this can be done in,” he said.
Barabash recalled that before the full-scale aggression of the Russian Federation, the factory in Kharkiv produced 20 billion cigarettes, half of which were for export, including to Japan.
“Most likely, due to the war, it will be difficult to resume exports to Japan; it will take more time, but this does not mean that we are not looking at other countries. We can start exporting to geographically close countries first,” said the CEO.
As reported, with the start of the full-scale invasion, Philip Morris was forced to shut down its factory in Kharkiv and invested $30 million in opening a new production facility in May 2024 in the Lviv region, which has five production lines with a capacity of 10 billion cigarettes per year and reached its planned capacity this year.
The company also invested an additional UAH 60 million in the construction of its own shelter on the factory premises for 170 employees and local residents.
According to YouControl, Philip Morris Ukraine increased its revenue by 86.7% to UAH 21.62 billion in 2024, while its net loss decreased by 30.1% to UAH 1.20 billion.
PJSC “Philip Morris Ukraine” welcomes the actions of the Ukrainian authorities to restore the economy, improve the investment climate and business conditions, however, the company said that over the past few months it has been facing numerous unfounded claims from the authorities.
“Due to the stoppage of production in Ukraine, we refocused on imports and immediately faced more than a week of downtime of our products at customs due to bureaucratic procedures for calculating VAT on tobacco products. Then the work of our warehouses was paralyzed by actual inspections of the STS with baseless accusations. And any delay in the sale of our products means lost sales and, accordingly, unpaid excise tax, the volume of which can reach UAH 100 million daily,” said Maxim Barabash, CEO of the company, in a blitz interview with Interfax-Ukraine.
He noted that such delays are especially strange in the context of a full-scale invasion of the Russian Federation, when the country needs money due to a huge state budget deficit.
According to the company’s general director, representatives of the Economic Security Bureau (BEB) came to the Philip Morris warehouse in Kyiv on June 24 to conduct a search – an urgent investigative action that lasted several days, including during air raids.
“In our opinion, there were no legal grounds for a search of the BEB representatives. As a result, a batch of foreign-labeled cigarettes was temporarily seized. This product was produced before the war for the Japanese market and, due to obvious circumstances, cannot be exported. The product is legal stored in warehouses,” Barabash explained.
The head emphasized that such a situation interferes with the normal operation of the business and leads to a shortfall of millions of hryvnias in taxes by the state, and the company incurs significant time costs “for explaining obvious things.”
Another issue that the company is now solving is the disappearance of a large batch of cigarettes from the customs warehouse at one of the airports in Ukraine, which Philip Morris planned to export to Japan. Now the company finds out under what circumstances and where they disappeared, and does not exclude that the stolen cigarettes could already be on sale in the shadow market.
“In order for investors to be interested in participating in the recovery programs announced in Lugano, the authorities must take concrete steps so that businesses do not have to deal with such actions of government officials that we constantly face,” Barabash stated.
Philip Morris International, which includes PJSC “Philip Morris Ukraine”, is one of the world’s largest manufacturers of tobacco products.
The company has been operating in Ukraine for more than 20 years, owns a factory in the Kharkiv region. About 1.3 thousand people worked at the company’s enterprises before the Russian invasion. Before the war, the factory was an export hub for more than 20 countries, in particular such large markets as Japan and Egypt.
PJSC “Philip Morris Ukraine” in 2020 increased its net profit by 5% compared to 2019 – up to UAH 2.73 billion, assets increased by 18% over the year – up to UAH 11.51 billion, and retained earnings – by 55, 5%, up to UAH 7.79 billion.
The full flash interview with Maxim Barabash will be published on the main page of the website of the Interfax-Ukraine agency www.interfax.com.ua
