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Tag: Russia

  • J.P. Morgan: War Could Thwart PMI’s Smoke-Free Ambitions

    J.P. Morgan: War Could Thwart PMI’s Smoke-Free Ambitions

    Photo: Sergey

    The war in Ukraine could seriously impact sales of Philip Morris International, reports MarketWatch. Earlier this week, J.P. Morgan downgraded the multinational’s shares to “neutral” from “overweight,” citing the company’s exposure to Russia and Ukraine.

    PMI derives about 8 percent of group sales from Russia and Ukraine combined, according to the investment bank. The two countries account for about 23 percent of PMI’s heated-tobacco unit (HTU) volume. Heated-tobacco products are key to PMI’s next-generation growth strategy as they are reportedly less harmful than cigarettes.

    PMI entered the Ukrainian market in 1994. In 2021, Ukraine accounted for around 2 percent of PMI’s total cigarette and HTU shipment volume and under 2 percent of PMI’s total net revenues. The company has one factory and approximately 1,300 employees in the country.

    Russia accounted for almost 10 percent of PMI’s total cigarette and HTU shipment volume and around 6 percent of PMI’s total net revenues in 2021. PMI opened its first representative office in Russia in 1992 and has more than 3,200 employees in the country.

    PMI’s cigarette shipments to Russia in 2021 fell to 52.5 billion units from 55.6 billion units in 2021, and the percentage of total cigarette shipments fell to 8.4 percent from 8.8 percent, according to a company filing with the U.S. Securities and Exchange Commission.

    For HTUs, Russian shipments rose to 16.3 billion units from 13.6 billion units while the percentage of total HTU shipments slipped to 17.2 percent from 17.9 percent.

    Meanwhile, PMI’s HTU market share in Russia improved to 7.4 percent from 6.3 percent while the company’s overall HTU market share increased to 3.5 percent from 3 percent.

    On March 9, PMI announced the suspension of its planned investments in Russia, including all new product launches and commercial, innovation and manufacturing investments. PMI has also activated plans to scale down its manufacturing operations in Russia amid ongoing supply chain disruptions and the evolving regulatory environment.

  • Firms Scale Back in Russia and Ukraine

    Firms Scale Back in Russia and Ukraine

    Photo: BAT

    The leading tobacco companies are adjusting their strategies in Russia and Ukraine following the war between those countries.

    Philip Morris International announced the suspension of its planned investments in the Russian Federation, including all new product launches and commercial, innovation and manufacturing investment. PMI has also activated plans to scale down its manufacturing operations amid ongoing supply chain disruptions and the evolving regulatory environment.

    “We have watched with shock the war in Ukraine and condemn the violence in the strongest possible terms. We stand in solidarity with the innocent men, women and children who are suffering,” said PMI CEO Jacek Olczak in a statement. “We join the many voices calling for an immediate end to the war and the restoration of peace.”

    Olczak said PMI had helped evacuate more than 800 people from the most impacted areas; provided critical aid to employees who remain in Ukraine; and provided those who have left the country with logistical, medical, financial and other practical support in neighboring countries. PMI is continuing to pay salaries to all its Ukrainian employees during this period, the company said.

    Ukraine accounted for around 2 percent of PMI’s total cigarette and heated-tobacco unit shipment volume and under 2 percent of PMI’s total net revenues in 2021. The company has one factory and approximately 1,300 employees in the country.

    In 2021, Russia accounted for almost 10 percent of PMI’s total cigarette and heated-tobacco unit shipment volume and around 6 percent of PMI’s total net revenues. The company employs more than 3,200 people in the country.

    BAT, which employs more than 1,000 people in Ukraine and around 2,500 people in Russia, said it had suspended all business and manufacturing operations in Ukraine and suspended all planned capital investment into Russia.

    “In Ukraine, we have suspended all business and manufacturing operations and are providing all the support and assistance we can to our colleagues, including relocation and temporary accommodation. Our businesses bordering Ukraine are providing assistance to the humanitarian relief effort,” the company wrote on its website.

    “In Russia, we have a full establishment of our people right across the country, including substantial local manufacturing. Our business in Russia continues to operate. As a key principle, we have a duty of care to all our employees at this extremely complicated and uncertain time for them and their families.”

    Japan Tobacco International, which has four factories and nearly 4,000 employees in Russia, announced the suspension of all new investments and marketing activities as well as the planned launch of its Ploom X heated-tobacco product in Russia, citing the unprecedented challenges of operating in Russia at this time. “Unless the operating environment and geopolitical situation improve significantly, JTI cannot exclude the possibility of a suspension of its manufacturing operations in the country,” the company wrote in a press statement.

    Imperial Brands also suspended all operations in Russia, halting production at its factory in Volgograd and ceasing all sales and marketing activity.

    “We have already suspended our operations in Ukraine in order to prioritize the safety and well-being of our 600 employees in that country,” the company wrote in a statement.

    Russia and Ukraine are relatively small markets for Imperial Brands, representing around 2 percent of net revenues and 0.5 percent of adjusted operating profit in 2021.

  • Multinationals Continue to Monitor Situation in Ukraine

    Multinationals Continue to Monitor Situation in Ukraine

    Photo: JTI

    Multinational tobacco manufacturers have not stopped their operations in Russia but have done so in Ukraine.

    In the wake of Russia’s invasion of Ukraine and the stance taken by companies such as Apple and Stora Enso in halting sales in Russia, Tobacco Reporter asked the multinationals whether they had stopped sales of their products in Russia or when, if ever, they intended to do so. They were further asked why they had not stopped sales, given that this was the case. 

    “Our priority is our employees, and we are taking the necessary measures to ensure their safety,” said a spokesperson for Japan Tobacco International. “Our operations in Russia are fully functional and we have contingency plans in place to ensure business continuity if the situation were to change. As a responsible international company, we are fully committed to complying with all applicable national and international sanctions.

    “We are closely monitoring the situation and cannot comment any further.”

    Meanwhile, a spokesperson for Imperial Brands said: “We are monitoring the situation in both Ukraine and Russia very closely. Our prime concern remains for the welfare of our people in Ukraine, where we have suspended our operations for safety reasons. We will continue to update our plans as necessary.”

    And a spokesperson for British American Tobacco said: “We are deeply concerned about the conflict in Ukraine. The safety and wellbeing of our people in Ukraine and across the region is our first priority.

    “We have suspended all business and manufacturing operations in Ukraine and are providing all the assistance we can to our colleagues, including relocation and temporary accommodation.

     “In Russia, our wholly owned subsidiary has been in operation for more than 30 years. BAT always complies with relevant regulation and legislation wherever we operate, and we are aligned with all international sanctions.’

    “We continue to closely monitor the situation as it evolves.”

    Philip Morris International had not responded by the deadline. 

  • Stora Enso Suspends Operations in Russia

    Stora Enso Suspends Operations in Russia

    Photo: Stora Enso

    Stora Enso will stop all production and sales in Russia until further notice due to the ongoing invasion in Ukraine. Stora Enso has three corrugated packaging plants and two wood products sawmills in Russia, employing around 1,100 people. The company will also stop all export and import to and from Russia. A mitigation plan has been activated to secure availability of input materials from other sources.
     
    “The war in Ukraine is unacceptable, and we are fully behind all sanctions. We will now focus all our attention on supporting our customers and the well-being of our employees,” said Annica Bresky, president and CEO of Stora Enso, in a statement.
     
    Stora Enso’s sales in Russia are approximately 3 percent of total group revenues. The impact on Stora Enso’s sales and earnings before interest and taxes is not material.