Philip Morris CR intends to increase the retail prices of all its cigarette brands by CZK 4 per pack as of January 2004, the local MFDnes daily reports. This is less than expected. The price increase reflects the recently approved excise-tax hike on cigarettes, which is unavoidable as it is required by the EU (the Czech Republic is to join the EU in May 2004).
The current retail price of the leading domestic cigarette brand, Petra (a PM CR brand), is CZK 40. PM CR intends to increase it to CZK 44, while we expected almost CZK 46 per pack. While the lower increase will affect demand for cigarettes less than expected next year (and especially for the premium brands), it will cut into PM CR's margins more seriously. As both impacts will somewhat offset each other, the lower price increase will change our projections only marginally. We consider the news as largely neutral.