RICHMOND, Va. (AP) — Cigarette maker Philip Morris International Inc.'s third-quarter net income fell more than 6 percent, despite higher prices, as the company sold fewer cigarettes.
The seller of Marlboro and other cigarette brands overseas said Thursday that changes in currency exchange rates hurt its profit in the July-September quarter. The company narrowed its earnings guidance for the year.
Philip Morris International said it earned $2.23 billion, or $1.32 per share, in the third quarter, down from $2.38 billion, or $1.35 per share, a year ago.
On an adjusted basis, the company said it earned $1.38 per share, missing Wall Street estimates by a penny.
Its shares fell $3.85, or 4.2 percent, to close at $88 Thursday.
When the U.S. dollar is rising against the world's other currencies, companies that sell goods internationally take a hit when converting revenue in foreign currencies back into the dollar. That effect is particularly strong for Philip Morris International, because it does all its business overseas.
Excluding excise taxes, revenue fell about 5 percent to $7.9 billion, despite higher prices. Analysts expected $8.21 billion, according to FactSet.
Philip Morris International said the number of cigarettes it shipped fell more than 1 percent to 236.5 billion cigarettes compared with a year ago when the company saw volumes jump more than 4 percent. The company is the world's second-biggest cigarette seller, trailing state-controlled China National Tobacco Corp.
Smokers face tax hikes, bans, health concerns and social stigma worldwide, but the effect on cigarette demand generally is less stark outside the United States. Philip Morris International has compensated for volume declines by raising prices and cutting costs.
Shipments grew 3 percent in the company's region that encompasses Eastern Europe, the Middle East and Africa, but fell about 8 percent in the European Union as the region is under pressure because of the continent's government debt crisis, which has caused smokers to switch to cheaper roll-your-own tobacco and counterfeit cigarettes.
"Economic conditions continue to be very difficult. Unemployment continues to rise," Jacek Olczak, the company's chief financial officer, said in a conference call with investors.
Still, Olczak expressed "confidence in the underlying strength of the business."
Shipments also fell nearly 5 percent in Latin America and Canada. And in Asia, one of its largest growth areas, shipments grew less than 1 percent during the quarter on a tough comparison with the year-ago period, when shipments shot up in Japan following the March 2011 earthquake and tsunami.
The events offered the company a sales opportunity because supply disruptions led Japan Tobacco Inc., the world's No. 3 tobacco maker, to stop shipping cigarettes within Japan.
Philip Morris International also bought Philippines company Fortune Tobacco Co. in February 2010, bolstering its Asian business.
Philip Morris International said total Marlboro shipments fell 2.3 percent in the quarter to 77.1 billion cigarettes. The company said its market share increased or remained stable in many key areas.
During the quarter, the company spent $1.5 billion to buy back 16.7 million shares of stock, completing a three-year, $12 billion buyback program that began in May 2010. A new, previously announced three-year share repurchase program of $18 billion began in August.
Looking forward, Philip Morris narrowed its full-year earnings forecast to between $5.12 and $5.18 per share. Previously the company forecast $5.10 to $5.20 per share.
Altria Group Inc. in Richmond, Va., the owner of Philip Morris USA, spun off Philip Morris International as a separate company in 2008. Altria is the largest U.S. cigarette seller.
Michael Felberbaum can be reached at http://www.twitter.com/MLFelberbaum.