IN BRIEF : American Tobacco Profits on Rise
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NEW YORK — Rising worldwide cigarette sales and aggressive pricing are boosting profits for the American tobacco industry despite declining domestic sales amid worries about the dangers of smoking.
Twenty-five years after the health hazards of smoking were first outlined in a U.S. government report, the business continues to boom.
Wall Street analysts say earnings of cigarette-makers should rise by between 10% and 20% this year, helped by higher prices and lower production costs.
Recent growth in tobacco company earnings has been fueled mostly by cigarette price increases and technological advances that have lowered production costs.
Tobacco analyst Roy Burry with Kidder Peabody said a dearth of competition among U.S. producers allows them to push through price hikes that more than offset declines in domestic sales. Excluding excise taxes, prices of Philip Morris’ cigarettes rose 15% in 1988, he said. Production costs, however, rose only a third of that amount.
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