Wednesday April 25, 5:54 pm Eastern Time

Philip Morris raises cigarette prices

NEW YORK, April 25 (Reuters) - Tobacco giant Philip Morris Cos Inc. (NYSE:MO - news), said on Wednesday it was raising wholesale cigarette prices by 14 cents per pack for all its brands effective on Thursday.

A spokesman for the company told Reuters the wholesale price would increase by $7 per thousand cigarettes, or 14 cents per pack, but he could not immediately say how that would translate to retail prices which cost anywhere between $4 and $5 per pack of 20 depending on the state.

Credit Suisse First Boston's tobacco industry analyst Bonnie Herzog said she expected Philip Morris, which makes the leading Marlboro brand, to increase wholesale prices by about 5 percent, or 12 cents per pack.

``If Philip Morris doesn't increase prices this Friday, then we would expect the company to take a price increase towards the end of June,'' Herzog said in a research note issued late on Tuesday.

Philip Morris typically alerts its wholesalers to price increases, but does not announce them in press releases to the general public. A company spokesman, who told Reuters of the price hike, said Philip Morris does not comment on pricing.

Philip Morris shares rose $2.75, or 5.74 percent, to close at $50.70 Wednesday on the New York Stock Exchange. Rival R.J. Reynolds Tobacco Holdings Inc. (NYSE:RJR - news) was up $2.61, or 4.72 percent, to close at $57.86.

Herzog said most of the expected price increase will be used to offset upcoming higher payments related to the industry's landmark 1998 $206 billion Master Settlement Agreement with 46 U.S. states.

She forecasts a $1.5 billion, or 7 cents per pack, increase in MSA payments in 2002. She also forecasts an increase in MSA payments of around $200 million in 2003 and a decrease in MSA payments of around $2 billion in 2004.

Herzog also said she expects New York-based Philip Morris to raise prices again later this year, as the federal excise tax is set to increase by 5 cents per pack in January 2002.

Philip Morris last introduced a 14-cent per pack wholesale price increase in December. The No. 2 U.S. tobacco company, R.J. Reynolds, soon matched that increase. A 14-cent per pack wholesale increase would translate into about a 17-cent-per-pack increase for consumers, Herzog said at that time.

Herzog has a buy recommendation on Philip Morris.