Philip Morris International said Tuesday that it expects the roughly $500 million charge to reduce the reported carrying value of its investment in RBH, with the remaining carrying value expected to fall below $100 million. The Stamford, Conn., tobacco company attributed the impairment to revised five-year financial projections from the Canadian affiliate reflecting “current industry dynamics,” according to a statement cited by the Wall Street Journal.
RBH and other major tobacco brands last year agreed to pay C$32.5 billion, equivalent to about US$23.5 billion, to settle all smoking-related lawsuits in Canada. The settlement, which was reported at the time, reshaped the financial outlook for the affiliate and contributed to the need for the write-down.
The charge comes as Philip Morris updates its earnings expectations for the full year. The company’s reported per-share earnings guidance range of $7.18 to $7.33 compares with an April forecast of $7.56 to $7.71. The adjusted-earnings forecast of $8.31 to $8.46 a share, which excludes the impairment and other items, also reflects currency headwinds. Analysts polled by FactSet are on average expecting full-year adjusted earnings of $8.40 a share, within the company’s new range.
The impairment charge is the latest sign of the financial fallout from large-scale tobacco litigation. The Canadian settlement last year represented one of the largest multi-company agreements to resolve smoking-related claims.