Dollars 1.4bn sacrificed by Philip Morris

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PHILIP MORRIS, the US food, tobacco and brewing conglomerate, emerged humbled but not crippled from last year's Marlboro price wars, forgoing dollars 1.4bn in profit but gaining valuable market share.

The company's surprise decision to cut the price of the world's best- selling cigarettes last April helped cut operating earnings by 15 per cent during 1993, to dollars 3.56bn ( pounds 2.39bn) from dollars 4.93bn in 1992, despite slightly higher revenues of dollars 60.9bn.

Tobacco, which accounted for 47 per cent of its 1992 profit, represented only 30 per cent of its earnings last year.

American shipments of Marlboros fell more than 12 per cent year-on-year to 108.5 billion cigarettes, but by the end of the year the brand had increased its market share four points to 26 per cent of US sales. The industry as a whole saw shipments decline 9 per cent during the year.

Price cutting and increased marketing expenditure 'enabled the company to regain market share in the premium category', it said, and should lift profits in the long term.

Philip Morris's fourth-quarter results contained charges that reduced net earnings by almost dollars 1bn, including a dollars 741m pre-tax charge to cover restructuring costs. After the charges it was left with a profit of dollars 339m, or 38 cents a share, compared with dollars 1.2bn or dollars 1.34 a share during the same period in 1992.

The three-year restructuring programme will begin to yield savings this year and eventually total dollars 600m a year, the company said.

Without the charges Philip Morris would actually have posted slightly higher profits thanks to strong performances at its other divisions, Kraft, General Foods and Miller Brewing. Excluding its US tobacco division, operating profit rose 13 per cent with income from foods up 10.5 per cent at home and 4.1 per cent overseas.

Profits at Miller rose 37 per cent, in part because of its acquisition of the US product and distribution operations of Canada's Molson Breweries.