Smokers Face High Prices on Cigarettes

SmokerToday cigarette smokers in many countries in the world face high prices on cigarettes due to tax increases imposed by governments as a measure to fight smoking. In these conditions tobacco companies experience difficult times due to shrinking sales revenue.

Market analysts consider that this state of affairs came from the recent weakness of Emerging Markets (EM) Foreign Exchange ( FX) rates.  International tobacco companies depend greatly on emerging markets as they do provide the biggest part of tobacco company revenue. Thus rating agencies lowered 2014 Financial Year Earnings Per Share across tobacco industry.

FX weakness in major tobacco markets of Brazil, Indonesia, Australia, Russia, Canada, South Africa this year is likely to put additional pressure on the earnings growth of such leading tobacco companies as British American Tobacco (BAT), Philip Morris International (PMI) and Imperial Tobacco (IMT).

Philip Morris International is the world’s largest manufacturer and seller of cigarettes and other tobacco products. It owns such brands as Marlboro, Parliament, L&M and Chesterfield.

Among causes of EM weakness are implementation of the US bond-buying programme, the recovery in developed market (DM) economies and weakening trends in the Chinese economy.

Nigerian Tribune investigations showed that the price of cigarettes had not increased in Lagos.

The volume of cigarettes sold worldwide has reduced, and namely about this the investors are worried. Cigarette prices go up and this leads to reduction on cigarettes demand, which results in sales decrease. Thus tobacco share prices have dropped by 10% over the past year. This is the result of regulatory concerns, reduced earnings estimates, and sector rotation out of defensives.

Today numerous smoking bans are being introduced in many countries because people are worried about the negative effects of tobacco smoke. This affects cigarettes sales and tobacco companies work over alternatives to cigarettes.

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