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NEW YORK - Big tobacco companies should be able to raise prices and keep profits growing despite weakening sales, a Citi Investment Research analyst said Tuesday.

Adam Spielman said Philip Morris International Inc. could post 12 percent annual profit growth over the next few years, and Altria Group Inc. could grow at a 9 to 10 percent clip. That's as good as a lot of other big consumer product makers, he said, but the stocks are trading at a discount because of concerns about litigation and declining sales.

But the companies can keep increasing their profits as long as prices rise faster than sales fall, he wrote. Spielman said a pack of Marlboros costs $11 in the U.K., and prices are still going up to keep pace with wages.

"This implies U.S. prices have plenty of room to increase," he wrote. Costs are also coming down, he added.

Spielman expects the sector to outperform, and he started coverage of PMI and Altria with "Buy" ratings. He placed a "Hold" rating on shares of Reynolds American Inc., and said PMI and British American Tobacco PLC are his top picks.

He said fewer lawsuits are being filed against tobacco companies, so their legal risk has declined. 

Havana, The introduction of new disease-resistant tobacco varieties and more extensive areas under irrigation areas are some of the measures Cuba is currently applying to increase tobacco production.
According to authorities linked to production and research, tobacco outputs have considerably increased in the last few years, while better results are expected from a raise in payments to tobacco and cigarettes producers.
Raul Relova, head of TabaCuba Supervision and Control, said the country will step up irrigation from the safest sources, which will result in a 30 percent or more increase of the agricultural output.
TabaCuba will also rise up to 50 percent the price to be pay to tobacco and cigarettes producers.