The Czech Republic’s biggest tobacco company, employing around 1,000 at its main plant at Kutná Hora, upped its sales and profits for 2014. But its share on its Czech home market continued to slide under competition from cheap rivals and bootleg sales while it enjoyed greater success and a rising share of smokers in Slovakia.
Overall turnover climbed by 10 percent, 6.9 percent taking out the impact of currency changes, to 14 billion crowns with operating profit up 1.5 percent to 2.8 billion crowns.
The Kutná Hora based company had stronger exports and a bigger market share in Slovakia to thank for some of the improvement. There it is also benefitting from the relative weakness of the Czech crown against the euro. But sales in the Czech Republic are still under pressure.
The Czech market for cigarettes grew over 2014 by 1.6 percent in the Czech Republic and by a faster 1.8 percent in Slovakia. But the story for Philip Morris is the familiar in its home market: one of its key leading brands losing out to cheap competition. Surveys suggest the company had a 46.4 percent market share on the Czech market in 2014, down from 48.6 percent a year earlier.
The biggest loss of sales were in the low and mid-range market with the company gaining market share in premium cigarette sales. Local brands and Red & White were among the main losers but a local revamp of Marlboro and continued strong showings by L&M, Chesterfield, and Philip Morris.
In Slovakia, the market share held by Philip Morris ČR products advanced to 53.1 percent from 51.7 percent in 2013. Increases in market share were registered across the low, medium, and premium markets. The strongest showing was in the low cost cigarette market where the company says it is continuing to benefit from the launch in late 2012 of Philip Morris in that segment and by the transfer of Red & White smokers to it.
Export earnings jumped by 15.2 percent to 6.2 billion crowns. Shipments to other Philip Morris affiliates were higher with favourable currency conditions giving a boost worth 250 million crowns.
Looking ahead, Philip Morris ČR says it is difficult to predict any improvement in the drift to lower cost cigarettes and cheaper tobacco products in its main Czech and Slovak markets or any appreciable reduction in sales of illicit duty free sales. So curbs on costs and cost cutting will continue to be the main focus.
Further increases in excise tax are set to take place in the Czech Republic on January 1, 2016 but at least the government is trying to make the market more predictable by setting out ahead what excise changes are expected that year and in the following years of 2017 and 2018.
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