Thu, Apr 03, 2014 - Page 15 News List

Phillip Morris blames plant closure on rules

JOB LOSSES:The end of its Australian manufacturing operations means 180 jobs will be terminated, with the production to be moved to facilities in South Korea


The Philip Morris International Inc logo is displayed outside the company’s plant in the suburb of Moorabbin in Melbourne, Australia, yesterday. Philip Morris plans to close its Australian cigarette plant and shift production to South Korea.

Photo: Bloomberg

Tobacco giant Philip Morris yesterday announced the closure of its only Australian manufacturing plant with the loss of 180 jobs, blaming regulations for limiting its export opportunities.

The firm, which makes the Marlboro brand, said its cigarette factory at Moorabbin in Victoria would close by the end of the year after six decades of operation.

The closure is the latest blow to the Australian manufacturing sector after the country’s car manufacturers — Ford, Toyota and General Motors Holden — all announced their plants will close with an estimated 50,000 job losses in the sector.

Philip Morris Limited’s (PML) Australasian managing director John Gledhill said production would be moved to South Korea.

He played down the impact of world-first plain packaging laws which were introduced in Australia in December 2012, but said an Australian government move two years earlier to reduce the fire risk posed by Australian-made cigarettes had affected their popularity in export markets.

“Despite the introduction of plain packaging and the continued growth in illicit trade, PML’s volumes were stable in 2013,” Gledhill said in a statement.

“However, with any significant export opportunity restricted by Australian government regulations, our Moorabbin factory is significantly under-utilized, operating at less than half of its currently installed capacity,” he said.

The announcement of the closure came on the same day that BP Australia said its Bulwar Island refinery in Brisbane will shut down in the middle of next year, costing 380 jobs.

Meanwhile, mining giant BHP Billiton is considering spinning-off its aluminum, bauxite and nickel assets into a single entity that would be worth about A$20 billion (US$18.5 billion), reports said yesterday.

The Anglo-Australian resources company wants to demerge “non-core” assets that are not providing adequate returns, as part of a streamlining process that will focus its portfolio on top-tier assets, the Australian Financial Review said.

It said BHP, which this year announced an 83 percent rise in interim net profit to US$8.1 billion, would keep the lucrative operations that are central to its “four pillars” strategy — iron ore, coal, petroleum and copper.

And the Australian newspaper said the resources giant was considering demerging all its non-core assets, rather than selling them off individually.

It said the strategy had been successful for BHP in the past, when it spun off its steel assets into OneSteel and BlueScope in 2000 and 2001.

BHP responded to the speculation by saying it was actively studying the next phase of simplifying its portfolio, “but will only pursue options that maximize value for BHP Billiton shareholders.”

“We believe that a portfolio focused on our major iron ore, copper, coal and petroleum assets would retain the benefits of diversification, generate stronger growth in free cash flow and a superior return on investment,” it said.

“By increasing our focus on these four pillars, with potash as a potential fifth, we will be able to more quickly improve the productivity and performance of our largest businesses,” it added.

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