Business news from Ukraine

Philip Morris officially opens new factory in Lviv region

On Wednesday, tobacco manufacturer Philip Morris International officially opened a new factory in Lviv region, in which it has invested $30 million.

“The first line is already in operation. The second line is almost completed and will start operating in June… In total, five lines will be installed, 10 billion cigarettes will be produced, which will fully meet the needs of the local market of Ukraine,” said Philip Morris Ukraine (PMU) CEO Maxim Barabash at the opening of the factory.

He emphasized that the focus of the production is to cover the market demand for cigarettes.

According to Barabash, there are no plans to expand production for export or manufacture other products.

According to PMU, 250 jobs will be created at the factory. By now, the company already employs about 100 people relocated from the Kharkiv factory, which was “mothballed” on February 24, 2024, the day of the Russian invasion, and another 150 people are planned to be relocated by the end of the year.

“My dream for the future after the victory is that we have two factories. One would produce cigarettes, and the other would be in Kharkiv, working on new products that would be relevant and relevant at the time when this comes true,” Barabash summarized.

According to him, this year Philip Morris celebrates 30 years of operation in Ukraine. During this time, the company has invested about $750 million in the Ukrainian economy and is one of the largest taxpayers.

Philip Morris was spun off from Altria in 2008 and is one of the world’s largest tobacco manufacturers. The company’s revenue for 2023 increased by 10.7% compared to 2022 to $35.2 billion, and for the first quarter of 2024 – by 9.7% to $8.79 billion. The report states that Ukraine accounts for approximately 2% of total sales in physical terms and 1% in monetary terms.

In 2022, PMI reduced shipments to the Ukrainian market by 30.1% to 11.07 billion cigarettes and tobacco sticks due to the war, but in 2023 it managed to increase shipments of finished products by 8.4%, including 14.9% in the fourth quarter. Last October, the company announced that it had recovered its share of the Ukrainian market to 24% after it fell to 14% from 28.5% in the first months after Russia’s invasion.

Prior to the launch of the new factory, PMU was forced to import products from eight PMI factories outside the country and a temporary partnership with another international manufacturer in Ukraine.

In addition to cigarettes, PMI develops and manufactures smokeless products, such as systems for electrically heating tobacco, POD systems containing nicotine, and nicotine products for oral administration. Sales of smokeless products accounted for 39% of PMI’s total net revenue in the first quarter of 2024.

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Philip Morris increased shipment of products in Ukraine by 8.4% in 2023

Tobacco concern Philip Morris International has increased shipments of finished products in Ukraine by 8.4% in 2023 compared to 2022, the company said in a press release.

“For 2023, our finished product shipments in Ukraine increased by 8.4%. This figure includes both imported and locally produced products. The increase in shipments occurred as part of our strategy to regain market share, which we temporarily lost due to the war and the forced shutdown of our factory in Kharkiv region,” the company’s press service quoted Philip Morris’ CFO in Ukraine Sergey Kalnoochenko as saying.

According to the published financial report of the company, in the fourth quarter of 2023 PMI increased total shipments of cigarettes and tobacco products for electric heating in Ukraine by 14.9% compared to the same period of 2022.

In total, total finished goods shipments in the company’s European region, which includes Ukraine, increased 2.6% to 53.6 billion cigarettes in the fourth quarter of 2023 compared to the fourth quarter of the prior year, primarily driven by markets in Poland (up 10.6%), Italy (up 4.0%) and Ukraine (up 14.9%), partially offset by lower shipments in France (down 13.7%) and Germany (down 6.2%).

In total, Philip Morris International’s 2023 revenue increased 10.7% to $35.2 billion compared to 2022.

According to the report, the total number of adult IQOS users globally at the end of 2023 was estimated at approximately 28.6 million, an increase of 3.7 million from December 2022.

Philip Morris International (PMI) is a leading international tobacco company that has been operating in the Ukrainian market since 1994. Over 30 years of work, the company has invested more than $700 mln in the Ukrainian economy.

Philip Morris in Ukraine has suspended the operation of its factory in Kharkiv region since February 24, 2022. Since the beginning of the full-scale war in Ukraine, the company has secured a steady supply of its products to Ukraine through imports from 8 PMI factories and a temporary partnership with another international manufacturer in Ukraine.

Philip Morris plans to launch a new factory in Lviv region in the second quarter of 2024 with an investment of $30 mln.

In 2023, the company paid more than UAH 30 bln of taxes to budgets of different levels in Ukraine.

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Ukrainian NACP adds Philip Morris and Japan Tobacco to list of international war sponsors

The National Agency for the Prevention of Corruption (NAPC) has added two tobacco market leaders Philip Morris International and Japan Tobacco International to the list of international sponsors of war because of their continued operations in Russia, the agency said.

“The NACP has added two tobacco market leaders Philip Morris International and Japan Tobacco International to the list of international sponsors of war,” the NACP said in a statement on its Telegram channel on Thursday.

According to the financial statements of Philip Morris’ Russian subsidiary, the company’s revenue in the first year of Russia’s full-scale invasion of Ukraine increased by 8% to RUB 140.3 billion, and net profit – to RUB 48.2 billion, which is 45% more than in 2021. “Having confidence in Russia’s economic potential, the company is implementing a large-scale long-term investment program,” the statement said.

“Japan Tobacco International (JTI) is the undisputed leader of the tobacco market in Russia (market share – 34.9%). The company itself has openly stated that the Russian market generated about USD 2 billion. USD in 2022 for the JT Group, or approximately 11% of its consolidated revenue for 2022,” the NACP cites data on the second company’s activities in Russia.

“JTI is the largest investor and leading taxpayer in the Russian tobacco industry. Over the past 20 years, JTI’s investments in the Russian economy have exceeded $4.6 billion. In 2020, the company’s tax payments accounted for 1.4% of the federal budget’s revenue,” the NACP said in a statement.

The NAPC emphasizes that despite the fact that “representatives of both companies have announced their plans to close their business in Russia, stop new investments and marketing activities in Russia, they still continue to manufacture and distribute products in Russia.”

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Philip Morris tobacco concern increased cigarette shipment in Ukraine by 50% in second quarter

Philip Morris International (PMI) tobacco concern in the second quarter of 2023 increased shipments of cigarettes and tobacco sticks in the Ukrainian market by 50.3% compared to the same period last year, while in the first quarter there was a decline of 26.7%, according to the quarterly report of PMI.

According to it, the market in Ukraine as a whole grew by 13.4% in the second quarter of this year, thus the company managed to increase its share in the Ukrainian market after a slump last year.

More detailed information on sales in Ukraine is not available in the document, but it is indicated that PMI in July began preparatory work on a new facility in Lviv region in western Ukraine, which will be invested $30 million and production is scheduled to start in the first quarter of 2024.

It is specified that the Kharkiv plant, which was shut down at the end of February 2022, remains in the same condition due to existing threats, while products are supplied to the Ukrainian market from production centers outside Ukraine, as well as through contract manufacturing.

In the first half of the year PMI additionally did not adjust the value of its long-term assets in Ukraine, unlike last year.

It is stated that as of June 30, 2023, total assets of PMI’s Ukrainian operations were approximately $497 million, compared to $485 million a quarter earlier. These assets included receivables, inventories, and fixed assets of $75 million ($69 million), $305 million ($324 million), and $29 million ($30 million), respectively.

In addition, Lviv Regional Military Administration reported a July 27 meeting between its chief, Maksym Kozitsky, and PMI’s vice president for Northeast Europe, Michal Mierzejewski, where future production was discussed.

“The company has received a license to produce tobacco products in Lvivshchyna for five years with the possibility of extending it in the future. I hope that the plant, having created jobs, will provide the residents of our region with work,” – said the head of Lviv OVA.

In turn, Mierzejewski confirmed plans to launch production in the first quarter of 2024 and create more than 250 jobs at the new factory.

“First of all, we will employ employees of our Kharkiv factory, but we will also hire local specialists, which will create new jobs for residents of the region who have experience or would like to get it to work in this field,” – said the vice-president of PMI.

As reported, Philip Morris International in 2022 reduced shipments in the Ukrainian market by 30.1% – to 11.07 billion cigarettes and tobacco sticks. In particular, sales of cigarettes decreased by 38.1% to 6.6 billion, tobacco sticks for tobacco heating systems – by 13.5% to 4.47 billion.


Philip Morris increased revenue by 14.5%

Tobacco concern Philip Morris International reduced net profit and increased revenue in the second quarter of 2023, with adjusted profit and revenue exceeding market expectations.

At the same time, the company’s annual forecast was worse than analysts had expected.

According to the group’s press release, net income per share for the April-June quarter was $1.01, compared with $1.43 per share for the same period a year earlier. Operating profit fell 16% to $2.6 billion.

Adjusted earnings rose to $1.60 from $1.48 per share, with analysts forecasting $1.50.

Philip Morris’ quarterly revenue rose 14.5% to $8.97 billion, with analysts surveyed by FactSet on average forecasting revenue of $8.67 billion.

The company’s shipments rose 3.3% last quarter, with cigarette sales down 0.4% and sales of tobacco heating device sticks soaring 26.6%.

The number of Iqos e-cigarette users totaled 27.2 million at the end of June, up 1.4 million during the quarter, of which 19.4 million switched from regular cigarettes to Iqos, it said.

Philip Morris expects to record adjusted earnings in the range of $6.13 to $6.22 per share in 2023, compared with analysts’ forecast of $6.24 per share. The company expects total global shipments, excluding China, to decline 0.5-1.5% this year.

Philip Morris shares were stable in pre-market trading Thursday. The company’s capitalization is down 2.4% YTD to $152.66 billion.

Philip Morris was spun off from Altria in 2008 and is among the world’s largest tobacco manufacturers. It produces cigarettes at 39 facilities around the world and sells them in more than 180 markets. Its brand portfolio includes Marlboro, L&M, Chesterfield, Parliament, Bond Street and other brands. PMI also produces Iqos tobacco heating systems and tobacco sticks.

Philip Morris invests over $30 mln in new factory in Ukraine

Philip Morris International (PMI) will invest more than $30 million to launch a new factory in the Lviv region, the company’s press service said Tuesday.
According to the report, preparatory work for the construction of the future factory will begin in July 2023. The company expects production to start in the first quarter of 2024. The new factory will employ more than 250 people, mostly in manufacturing. Employment will primarily be offered to employees of the Philip Morris plant in Kharkiv.
“By opening this new factory, we are once again demonstrating our support for Ukraine. This investment represents our dedication as a long-term economic partner of the country. The new production facility at the location proposed by UkraineInvest will create jobs, meet the demand of the Ukrainian market with quality products and support the Ukrainian economy in difficult times for the country,” said Maxim Barabash, CEO of Philip Morris Ukraine.
PMI European Region President Massimo Andolina expressed confidence that the new company will provide a reliable supply of products and employment opportunities for Ukrainians. “This investment is a powerful signal to other international investors – confidence in the Ukrainian economy, the Ukrainian people and the future of Ukraine,” he summarized.
“Philip Morris Ukraine” works in the Ukrainian market since 1994 and during this time has invested more than $700 million in the Ukrainian economy. In 2022, the company paid 25.3 billion UAH of taxes in Ukraine.
As reported in May, PMI said that at the present time considers it unsafe to resume production at its factory near Kharkiv (Dokuchaevskoe village, Kharkiv district, Kharkiv region), which was suspended in February 2022, and intends to run an alternative production in the country.
After the factory was suspended, PMI supplied products to Ukraine from the company’s eight plants abroad for some time. But then, in search of a solution that would allow the production of Ukrainian product in Ukraine, an agreement was signed to produce the company’s products at Imperial Tobacco’s facilities in Kiev, where they are now produced.
Since the start of a full-scale war in Ukraine, the company has ensured a steady supply of its products in Ukraine through imports from PMI’s 8 factories and a temporary partnership with another manufacturer in Ukraine.
According to PMI, the tobacco market in Ukraine in 2022 decreased by 30% and in the first quarter of 2023 by 26.7% due to the departure of some consumers from Ukraine, as well as the loss of some territories that are under occupation. In addition, the company noted the growth of the shadow tobacco market.
In March 2022, in response to Russia’s military invasion of Ukraine, PMI said it was suspending planned investments in Russia, including new product launches, investments in innovation, and commercial and manufacturing activities. In addition, the company has intensified plans to reduce production operations in Russia amid supply chain disruptions and changing regulations. PMI later announced that its board of directors and management were considering opportunities to exit its business in Russia.