Growth of illegal tobacco market leads to underutilization of lines at Philip Morris' new factory

Further growth of the illegal segment of the tobacco market may force Philip Morris Ukraine to revise its investment plans in the country, the company said in a release citing its Chief Financial Officer Serhiy Kalnoochenko.

He emphasized that the contraction of the legal market directly affects capacity utilization. At present, at the new factory in Lviv region, some of the five installed production lines remain underloaded.

"The expansion of shadow trade significantly reduces the volume of budget revenues. Under wartime conditions and amid shortages of electricity and heating, these are funds that could have been directed toward supporting the state and citizens," Kalnoochenko said.

He added that the potential for budget revenue generation remains significantly higher, but a major restraining factor is the growth of the illegal segment, which negatively affects fair competition.

Despite the challenging conditions and a missile strike on the company’s Kharkiv facility in January 2026, Philip Morris continues to meet its obligations to the state budget, partners, and consumers. In 2025, the company paid UAH 58.5 billion in taxes, which is 12% (or UAH 6.3 billion) more than in 2024. The bulk of payments consisted of excise tax, nearly UAH 44 billion, as well as VAT UAH 13.4 billion.

"The increase in tax payments in 2025 was driven by higher excise tax rates on tobacco products, as well as the transfer of cigarette production from a partner’s factory to the company’s own facility in Lviv region," Kalnoochenko said.

The company also implemented humanitarian projects totaling UAH 431 million, cooperating with rehabilitation funds Superhumans, U+System, UNBROKEN, and others.

As reported, in 2024 Philip Morris Ukraine opened a new factory in Lviv region, investing $30 million in its launch. Operations at the company’s Kharkiv factory have remained suspended since February 24, 2022.

Philip Morris Ukraine (PMU) has operated on the Ukrainian market since 1994. On January 30, 2026, the company reported a Russian missile strike that damaged part of its Kharkiv factory.

According to data from the YouControl resource, in the first nine months of 2025, revenue of PJSC Philip Morris Ukraine decreased by 13.3%, to UAH 14.23 billion.