PMCR held closed press conference yesterday where its CEO commented past development with prospects for year 2006. Total cigarette consumption in Czech Republic increased by 15% over past two years and reached about 24bn pieces; nonetheless PMCR’s market share has diminished by approx. 10 percentage points. Domestic consumption has not changed much and majority of mentioned increased is thanks to foreign tourist demand. Because of excise tax hikes and price increases, low-price segment has reached already 30% market share. PMCR expects foreign demand to rise forward, however domestic demand may start to decline depending on price development. Last excise tax hike in April ‘06 should materialize in approximately in 4-5 months.
We still see some pressure from increased competition on PMCR revenues in first half, however further tax hikes should be fully reflected in price and market should start to slowly stabilize later this year. PMCR has been also trying to limit pre-stocking ahead of an excise tax hike as producers with smaller market share are able to build larger stock with lower tax hurting PMCR’s market share.