The company will take a charge of dollars 457m after tax to cover the cuts, which will involve the closure of up to 40 manufacturing plants. It will also make a dollars 495m accounting charge for its fourth quarter, related to retirement benefits.
The cuts come at the end of a year of big changes in the tobacco business, which generates more than 50 per cent of Philip Morris's profits. In April, the company announced cuts in its cigarette prices in order to stop a steady loss of market share to discount brands. This triggered the 'Marlboro Friday' tobacco stocks sell-off, as analysts cut full-year profit forecasts for Philip Morris by more than dollars 1bn. Large tax rises on cigarettes are also expected next year as part of President Bill Clinton's healthcare reforms.
The cost-cutting measures, announced after a board meeting - Rupert Murdoch is a non-executive - held in New York yesterday, mainly concern manufacturing operations in food and tobacco and are expected to save the company dollars 600m a year by 1997.
Excluding domestic tobacco, Philip Morris expects full-year operating profits to be up by around 13 per cent. Analysts are now forecasting full-year operating profits of around dollars 4.3bn.Reuse content