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Philip Morris (PM) Takes Bold Steps to Cut Operations in Russia

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Philip Morris International Inc. (PM - Free Report) undertook solid steps to suspend its planned investments and reduce manufacturing operations in Russia. Earlier this month, Philip Morris informed that it had suspended its planned investments in the Russian Federation. This includes all new product launches along with investments related to innovation, commercial and manufacturing.

Per the latest release, the tobacco giant discontinued several cigarette products it offered in the market and is also scaling down its manufacturing activities in tandem with the same. PM suspended its marketing actions in Russia. Further, Philip Morris canceled all product launches, which were planned for 2022, in Russia. These include the launch of its flagship heated tobacco product, IQOS ILUMA, which was initially planned for March 2022.

Additionally, the company canceled its plans to produce more than 20 billion TEREA sticks (for IQOS ILUMA) in Russia along with the associated ongoing investment of $150 million. Apart from this, management is exploring ways to exit Russian operations in an orderly fashion due to a rising and rapidly altering regulatory and operating landscape. Russia formed more than 10% of the company’s total cigarette and heated tobacco shipment volumes and roughly 6% of its total net revenues. Philip Morris has more than 3,200 workers in Russia, where it opened its first representative office in 1992.
 

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In an earlier release, Philip Morris had announced the temporary suspension of its operations in Ukraine, including its factory in Kharkiv. Ukraine formed nearly 2% of the company’s total cigarette and heated tobacco unit shipment volumes in 2021 and less than 2% of its total net revenues. PM operates one factory and has more than 1,300 workers in Ukraine. Management also stated that it has contingency plans to restart the supply of products when conditions are safer.

Several consumer staples companies like The Coca-Cola Company (KO - Free Report) , McCormick & Company, Incorporated (MKC - Free Report) and Nu Skin Enterprises, Inc. (NUS - Free Report) are also suspending or scaling down their businesses in Russia due to the turmoil.

On Mar 14, 2022, McCormick announced the suspension of its operations in Russia. At the beginning of the conflict, McCormick stopped its advertising and promotional activity and other investments across Russia. MKC also paused its operations across Ukraine, keeping in mind the safety of employees and their families in the region.

On Mar 8, 2022, Coca-Cola announced that it suspended its business across Russia. Coca-Cola highlighted that it would continue to monitor and assess the situation. Per KO, “Our hearts are with the people who are enduring unconscionable effects from these tragic events in Ukraine.”

Given the challenging and volatile situation hampering Nu Skin’s business operations, management suspended its operations across Russia effective Mar 4, 2022. Nu Skin, which believes in empowering people to improve lives, is devastated to see the tragedy unfold in Ukraine.

Coming back to Philip Morris, we will have to wait and see how the abovementioned exit impacts the operations of this New York-based company. Shares of this Zacks Rank #3 (Hold) company have dipped 1% in the past three months against the industry’s rise of 5.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.