On February 23rd, Philip Morris International (PMI) acknowledged in an interview with the Financial Times that it would rather keep its business in Russia than sell it according to the Kremlin's strict terms.
Jacek Olczak, CEO of PMI stated, "Whether I leave or not is completely irrelevant when I say so, as I attempted it last year and the reality is that I am unable to decide on the matter.
Olczak emphasized the difficulties that companies seeking to divest their Russian assets are currently facing, as well as the potential costs of abandoning the Russian market. For tobacco companies such as PMI, Russia is a profitable market.
I cannot lose patience and leave. This is their (shareholders) money, not my money, and I am managing it for them," said Olczak. "If I had a buyer who could execute a transaction, yes, we would do it - but it doesn't exist and there is no hope that it will appear... so I prefer to continue to stay in Russia.
It is known that the Russian market is the seventh largest market for PMI, with the tobacco company's products accounting for 27% of the market share in Russia.
As of December 31, 2022, PMI's total assets in Russia amount to approximately $2.5 billion (excluding intra-group balances). Of this amount, about $600 million is held in cash and cash equivalents primarily denominated in Russian rubles.
Photo credit: Reuters.
Due to high smoking rates and consumer willingness to switch to e-cigarettes and heated tobacco products, Russia has always been a huge market for big tobacco companies. Together with Ukraine, it accounted for 8% of PMI's $31.7 billion revenue last year.
In addition to Marlboro, the company also sells cigarette brands including L&M and Chesterfield, owns the smokeless tobacco product IQOS, and recently acquired Swedish Match, a manufacturer of nasal snuff and nicotine pouches, for over 15 billion US dollars.
I know some people who believe we have made a decision not to leave, but we have not made any decision yet because we cannot implement it," said Olczak.
Philip Morris International (PMI) has included Russia and Ukraine back into its future revenue forecasts this month, which implies that selling the business is no longer a remote possibility. However, the company has put new investments in these countries on hold and reduced its business operations there.
Olczak stated that if PMI does indeed sell its Russian assets, he would likely demand a buyback clause to have the opportunity to re-enter the market after the war ends. However, he noted that this objective has not slowed down the process.
It is understood that, among the four major tobacco companies, only the Imperial brand sold their Russian business to a local partner, resulting in an annual profit loss of $463 million.
Meanwhile, Japan Tobacco Inc. has no plans to leave, while British American Tobacco (BAT) is constantly striving to push for cross-border sales, despite announcing earlier this month that it is in talks to sell its Russian business.
Reference/sources:
The owner of the cigarette brands Parliament and L&M reported difficulties in leaving Russia.
Philip Morris, a tobacco company, has confessed that it may never be able to sell its Russian division.
Disclaimer
This article is provided solely for professional research, industry discussion, and informational purposes. Any references to brands, companies, products, technologies, or policies are made for factual reporting and analytical purposes only, and do not constitute endorsement, recommendation, promotion, or advertising by 2Firsts.
Nicotine-containing products, including but not limited to cigarettes, e-cigarettes, heated tobacco products, and nicotine pouches, carry significant health risks. Readers are responsible for complying with all applicable laws and regulations in their respective jurisdictions, including age restrictions and access limitations.
The information contained in this article should not be regarded as investment, legal, medical, regulatory, or commercial advice. While 2Firsts strives to ensure the accuracy and reliability of its content, it does not assume liability for any direct or indirect loss arising from errors, omissions, inaccuracies, or reliance on the information contained herein.
This article is not intended for individuals below the legal age for accessing tobacco or nicotine-related information in their jurisdiction.
Copyright Notice
This article is either original content produced by 2Firsts or content reproduced, translated, summarized, or adapted from third-party sources with attribution where applicable. The intellectual property rights of the original content remain with 2Firsts or the respective original rights holders.
No individual or organization may copy, reproduce, distribute, republish, modify, translate, or otherwise use this content without prior authorization. Any unauthorized use may result in legal action.
For copyright-related inquiries, corrections, or removal requests, please contact: info@2firsts.com.
AI-Assisted Translation and Editing Notice
Portions of this article may have been translated, edited, or reviewed with the assistance of artificial intelligence tools to improve efficiency and readability. Due to the limitations of AI-assisted translation and editing, discrepancies, omissions, or inaccuracies may exist when compared with the original source.
Where applicable, readers are advised to refer to the original source for the most complete and accurate information. If you identify any errors or believe that any content infringes upon your rights, please contact us at info@2firsts.com, and we will review and address the matter promptly.
