Philip Morris Czech Republic: A Smoking Yield

Philip Morris C.R. (OTC:PHPMF), also known as PM Czech Republic is a subsidiary of Philip Morris International (NYSE: PM). The latter owns 77.6% of the former's outstanding shares, which are held through its Netherlands-based subsidiary Philip Morris Holland. The remaining shares are held by the public and trade on the Prague stock market under the TABAK ticker. There is one major attraction in this company and that is its cheap valuation and high pay-out, while its major detraction is its lack of autonomy. Given that its operations are indirectly controlled by PM, the company has limited possibilities for expansion into other territories for instance. Besides being the largest tobacco company in the Czech Republic with a 46.4% market share, the company also owns 99% of Philip Morris Slovakia which has cigarette market share of 53.1% in said country. Currently, the company operates one manufacturing facility in Kutna Hora, Czech Republic, where all its products are manufactured. As a third business line the company also manufactures tobacco products for other Philip Morris subsidiaries outside its core territories. These export sales now constitute the majority of its sales volumes, but come at low margins.While the company's sales in the Czech Republic and Slovakia are highly dependent on the cigarette markets of those countries, which have seen long-term declining consumer demand for cigarettes, these sales are very high margin and offer potential for upward pricing going... Read more