Philip Morris says Canadian unit RBH granted creditor protection
(Reuters) – Philip Morris International Inc on Friday said its Canadian unit, Rothmans, Benson & Hedges Inc (RBH), was granted creditor protection, following a tobacco class action ruling in Quebec this month.
The company said it would deconsolidate RBH from its financial statements, and it cut its full-year 2019 diluted earnings per share forecast to at least $4.90 at prevailing exchange rates, from at least $5.28 in the forecast it made on March 4, shortly after the ruling in Quebec.
The Court of Appeal of Quebec upheld the bulk of a 2015 decision that awarded about C$15 billion ($11.19 billion) to smokers in the Canadian province, a blow to several big tobacco companies, including RBH.
Some observers criticized the creditor protection calling it an attempt to avoid making payments.
“The company’s strategy is to obtain a sweetheart settlement of all tobacco lawsuits in Canada, and then to carry on business as normal”, said Rob Cunningham, senior policy analyst from the Canadian Cancer Society.
“The company is highly profitable and is not anywhere close to bankruptcy.”
On an adjusted basis, the current forecast for full-year 2019 represents earnings per share growth of at least 8 percent over last year, the Marlboro cigarette maker said.
The deconsolidation, which will not have an impact on the company’s current annualized dividend rate, will result in an estimated one-time non-cash charge of about $0.10 per share, it said.
The operating cash flow for full-year 2019 is now estimated to be about $9.5 billion, down from “at least $10 billion” in the forecast it made on Feb. 7.
The creditor protection process, granted by the Ontario Superior Court of Justice, will allow RBH to carry on its business in the ordinary course, Philip Morris added.
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