Philip Morris hikes prices
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April 25, 2001: 4:46 p.m. ET
Cigarette maker raises wholesale prices on all brands beginning Thursday
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NEW YORK (CNNfn) - Tobacco company Philip Morris Cos. Inc. said Wednesday it was increasing prices for all its cigarette brands effective Thursday.
New York-based Philip Morris said the wholesale price would increase to $7 per thousand cigarettes, spokesman Tom Ryan told CNNfn Wednesday, adding that he could not discuss how that would affect retail prices.
"The prices are set at retail by the retailers," said Billy Abshaw, another Philip Morris spokesman. "It changes them (retail prices) of course, but it's not something we can necessarily make comments on."
Shares of Philip Morris (MO: Research, Estimates) moved up sharply Wednesday, ending up $2.75 at $50.70 ahead of the announcement. The company typically alerts its wholesalers to price increases, but does not announce them in press releases to the general public. The company declined to comment.
Credit Suisse First Boston's Bonnie Herzog expects most of the price increase will be used to offset upcoming higher payments related to the industry's landmark 1998 $206 billion Master Settlement Agreement with 46 U.S. states.
Abshaw refuted Herzog's statement saying the money from the price increase will go to a number of different areas within the company.
Herzog forecasts a $1.5 billion, or 7 cents per pack, increase in MSA payments in 2002. She also forecasts an increase in MSA payments of around $200 million in 2003 and a decrease in MSA payments of around $2 billion in 2004.
Herzog also said she expects New York-based Philip Morris to raise prices again later this year, as the federal excise tax is set to increase by 5 cents per pack in January 2002.
Philip Morris last introduced a 14-cent per pack wholesale price increase in December. The No. 2 U.S. tobacco company, R.J. Reynolds Tobacco Holdings Inc. (RJR: up $2.61 to $57.86, Research, Estimates) soon matched that increase. A 14-cent per pack wholesale increase would translate into about a 17-cent-per-pack increase for consumers, Herzog said at that time.
Herzog has a "buy" recommendation on Philip Morris.
- from staff and wire reports
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