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Bergen op Zoom, Netherlands -- Today the Board of Philip Morris Holland B.V. (PMH) commenced consultations with employee representatives on a proposal to end cigarette production at its factory located in Bergen op Zoom. Depending on the outcome of the consultation process, and pending approval of the PMH Supervisory Board, the proposal could affect approximately 1,230 out of the current 1,371 employees at PMH.

"Today’s very difficult announcement has been subject to deep reflections and thorough evaluation of all available options. We have long been a member of the Bergen op Zoom community, and are aware of the impact that our contemplated decision would have on our employees and their families, as well as on the local community. Our focus is and will be on supporting our people through this difficult phase. We will immediately engage in a dialogue with our employees and their representatives to develop a social plan that will support those potentially impacted by this proposal. We are totally committed to a collaborative and constructive process," said Petr Karla, General Manager of the Bergen op Zoom facility.

Over the past four years total tax-paid industry volume in the European Union declined sharply as a result of persistent macroeconomic weakness, consumer downtrading to cheaper alternative products such as fine cut, societal trends and the growing prevalence of illicit trade. In this context PMI experienced cigarette sales volume decline of approximately 20%. Furthermore, exports from EU factories also decreased during the period. Even if legal cigarette industry volume rates of decline in the EU moderate to historical levels, volume recovery is highly unlikely.

"The severe decline in the tax-paid EU cigarette market has led to today’s regretful announcement in Bergen op Zoom. While the decline is partially driven by societal and economic factors, PMI has consistently expressed its concern over the negative impact of excessive fiscal and regulatory policies, which create a prolific environment for the criminal organizations involved in the illegal cigarette trade. Unfortunately, new regulations affecting the industry such as the recently agreed EU Tobacco Products Directive do nothing to address this growing problem," said Drago Azinovic, President European Union at PMI. "We want to acknowledge our employees in Bergen op Zoom whose loyalty and long-standing service to the company deserve our respect and support in these difficult circumstances." Philip Morris Holland B.V. Marconilaan 20, 4622 RD, P.O. Box 205, 4600 AE Bergen op Zoom, The Netherlands Trade Register 20123097

Under the terms of the proposal, PMH would stop the production of cigarettes in Bergen op Zoom, while the Expanded Tobacco Plants and the Flavor Processing Center would continue to operate. The proposal is subject to consultation with the PMH Works Council and approval by the PMH Supervisory Board. Consultation with the European Works Council is also required. PMH will work with the Trade Unions in the development of a social plan to provide support to all potentially impacted employees. The consultation will start immediately. Subject to the final outcome of the consultations and fulfillment of certain other conditions, PMH would expect to implement the contemplated decision by October 2014.

During the consultation period, the company will not be providing information on the financial implications of this proposal