PMFTC investing $50M in Mindanao over 5 years

Cigarette manufacturer PMFTC Inc. is investing more than $50 million or over P2.2 billion in growing Virginia tobacco leaves in Mindanao over the next five to six years.

“We have a lot of capital expenditures at the moment [that are] being used on several projects, particularly the one in Claveria (in Misamis Oriental). We are helping farmers down there now… we’re starting a whole new operation because it is quite a unique project that we got going on there—it’s the only second place in the world where we grow tobacco twice a year,” PMFTC president Paul Riley told reporters last week.

According to earlier reports, PMFTC in 2012 established its first Virginia tobacco experimental farm on a 10-hectare land in Barangay Ane-i, Claveria.

Riley noted that tobacco could be grown only once a year in the northern part of the country.

He said the $50-million investment would be used to build curing barns as well as provide seedling trays to farmers in the area.

“We’re not going away, so we have to invest in the future,” Riley said.

PMFTC continues to pour money into the country even as its parent firm, global tobacco giant Philip Morris International Inc., had lamented the “shameful state of affairs” of the cigarette market in the Philippines.

Last month, Philip Morris International said its Philippine operations were causing a “drain” on company profit.

“In the Philippines, we continue to face what can only be described as a shameful state of affairs. You will appreciate that it is virtually impossible to compete successfully when one’s principal competitor openly flaunts excise tax legislation. We estimate that this competitor continues to sell some 50 percent of its volume excise tax-free,” Philip Morris International chief executive André Calantzopoulos told investors during the 2014 Morgan Stanley Global Consumer and Retail Conference in New York last Nov. 19.

Calantzopoulos’ statement is posted on the company’s website.

He was referring to homegrown cigarette manufacturer Mighty Corp., which is being pinpointed by Philippine affiliate PMFTC as allegedly engaging in “systematic and endemic” fraud these past few years.

Once a virtual monopoly when Philip Morris merged its Philippine operations with Lucio Tan-led Fortune Tobacco Corp. in 2010, PMFTC’s market share slid to 70.9 percent in June this year from 76.7 percent in the same month last year.

PMFTC is behind global brands Marlboro, L&M and Philip Morris as well as homegrown Fortune, Champion and Hope.

The share of Wongchuking family-owned Mighty in domestic cigarette sales, meanwhile, climbed from 17.9 percent in June 2013 to 23.9 percent in June 2014 as its products remained relatively cheaper.

PMFTC has been alleging that Mighty is being able to keep its prices low as it does not pay the correct taxes and duties on raw materials.

“While our vigorous efforts to remedy this situation have yet to translate into concrete action by the authorities, we do see some light at the end of the tunnel. Congressional hearings, the advent of tax stamps next month and calls for a minimum price will undoubtedly pressure our competitor to act lawfully,” Calantzopoulos said.

Under the Bureau of Internal Revenue’s Revenue Regulations No. 9-2014, all packs of cigarettes to be produced in the country starting Dec. 1 must already be affixed with tax stamps, so that by Mar. 1 next year, only packs bearing the stamp must be sold in the market. As for imported cigarettes, all packs to be sold locally must have the said stamps by Apr. 1, 2014.

The revenue stamps to be affixed on cigarette packs are aimed at monitoring the collection of so-called “sin” taxes.

“In addition, the increase in excise taxes in January next year is skewed towards the lower price categories and brings us one step closer to the single specific tax tier system that is scheduled to be introduced in 2017,” Calantzopoulos added.