Cigarette companies hit by chilly winds from Russia

Companies that sell cigarettes, food, alcohol, and beauty products to Russians are increasingly feeling the effects of the country’s economic downturn, according to a story by Joe Miller for BBC Online.

Miller said that Philip Morris, which accounted for almost a quarter of all the cigarettes sold in Russia, had seen its shares decimated in the past month.

But Bonnie Herzog, managing director of beverage, tobacco and convenience store research at Wells Fargo Securities, said that she believed the recent pullback in the stock had been overdone.

Herzog said that PM’s valuation was attractive based on its dividend yield.

PM was in solid shape to fund dividend increases and share buy-backs despite greater foreign exchange headwinds.

Meanwhile, a Reuters report on Wednesday said that Japan Tobacco Inc shares had tumbled.

‘Japan Tobacco, which is highly exposed to crisis-hit Russia, dived 7.8 percent on heavy volume and contributed a hefty negative 10 points to the Nikkei,’ the Reuters report said. ‘It was the fourth most traded stock by turnover.’

Goldman Sachs was quoted as saying that Russia contributed 20-25 percent of JT’s operating profits and that a one percent rouble depreciation reduced its profit by almost ¥3 billion.

The rouble had fallen 20 percent since the start of the week and more than 50 percent this year, Reuters said.