REG-Philip Morris International Inc. Philip Morris International Inc. (PMI) Reports 2016 Results; Provides 2017 Earnings Per Share Fo
02/02/2017 12:06
- Part 2: For the preceding part double click ID:nBw7kRJXqa
the table below
and detailed on Schedule 11. Adjusted operating companies income, excluding
unfavorable currency, increased by 44.5%. Adjusted operating companies income
margin, excluding currency, increased by 13.0 points to 54.0%, reflecting the
factors mentioned above, as detailed on Schedule 11.
EEMA OCI Fourth-Quarter Full-Year
(in millions) Excl. Excl.
2016 2015 Change Curr. 2016 2015 Change Curr.
OCI $ 627 $ 704 (10.9 )% 44.5 % $ 3,016 $ 3,425 (11.9 )% 12.6 %
Asset impairment & exit costs — — — —
Adjusted OCI $ 627 $ 704 (10.9 )% 44.5 % $ 3,016 $ 3,425 (11.9 )% 12.6 %
Adjusted OCI Margin* 34.9 % 41.0 % (6.1 ) 13.0 43.1 % 46.5 % (3.4 ) 4.2
*Margins are calculated as adjusted OCI, divided by net revenues, excluding
excise taxes.
EEMA PMI Shipment Commentaries
2016 Full-Year
PMI's cigarette shipment volume decreased by 2.9% to 271.4 billion units,
mainly due to North Africa, primarily Algeria, and Russia, partially offset by
Saudi Arabia and Ukraine. PMI's cigarette shipment volume of Marlboro
decreased by 8.5% to 73.8 billion units, principally due to Algeria and Egypt,
partly offset by Saudi Arabia. PMI's cigarette shipment volume of Parliament
increased by 1.0% to 33.9 billion units, driven by Saudi Arabia, Turkey and
Ukraine, partly offset by Russia. PMI's cigarette shipment volume of L&M
increased by 1.9% to 52.2 billion units, driven notably by Algeria, Kazakhstan
and Ukraine, partly offset by Russia and Turkey.
2016 Fourth-Quarter
PMI's cigarette shipment volume decreased by 2.2% to 67.8 billion units,
mainly due to North Africa, primarily Algeria and Egypt, and Turkey, partly
offset by Russia and Saudi Arabia. PMI's cigarette shipment volume of Marlboro
decreased by 7.5% to 18.8 billion units, principally due to Algeria, partly
offset by Saudi Arabia. PMI's cigarette shipment volume of Parliament
decreased by 0.5% to 8.4 billion units, mainly due to Turkey, partly offset by
Russia. PMI's cigarette shipment volume of L&M decreased by 2.4% to 12.7
billion units, mainly due to Egypt and Turkey, partly offset by Kazakhstan,
Saudi Arabia and Ukraine.
EEMA Key Market Commentaries
In North Africa, estimated industry size, PMI cigarette shipment volume and
market share performance are shown in the table below.
North Africa Key Market Data Fourth-Quarter Full-Year
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 33.6 37.4 (10.3 )% 139.0 138.5 0.4 %
PMI Shipments (million units) 8,141 10,174 (20.0 )% 34,035 38,111 (10.7 )%
PMI Cigarette Market Share
Marlboro 9.3 % 12.4 % (3.1 ) 8.5 % 13.7 % (5.2 )
L&M 12.2 % 13.0 % (0.8 ) 12.5 % 11.9 % 0.6
Others 2.5 % 2.4 % 0.1 2.7 % 2.3 % 0.4
Total 24.0 % 27.8 % (3.8 ) 23.7 % 27.9 % (4.2 )
For the full year, the estimated total cigarette market increased by 0.4%,
driven by Egypt, Morocco and Tunisia, partly offset by Algeria. The decrease
in PMI's cigarette shipment volume reflected lower market share, mainly due to
Marlboro in Algeria, principally resulting from the impact of excise
tax-driven price increases, as well as lower-than-anticipated acceptance of
Architecture 2.0 for Marlboro Round Taste.
In the quarter, the estimated total cigarette market decreased by 10.3%, or by
3.1% excluding the net impact of estimated trade inventory movements, due
primarily to Algeria and Egypt, partly offset by Tunisia. The decrease in
PMI's cigarette shipment volume reflected a lower total market, and lower
market share reflecting the same factors as for the full year.
In Russia, estimated industry size, PMI cigarette shipment volume and market
share performance, as measured by Nielsen, are shown in the table below.
Russia Key Market Data Fourth-Quarter Full-Year
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 71.7 74.2 (3.4 )% 280.7 294.1 (4.6 )%
PMI Shipments (million units) 20,543 18,596 10.5 % 79,651 84,422 (5.7 )%
PMI Cigarette Market Share
Marlboro 1.3 % 1.4 % (0.1 ) 1.4 % 1.4 % —
Parliament 3.7 % 3.9 % (0.2 ) 3.8 % 3.9 % (0.1 )
Bond Street 8.9 % 8.7 % 0.2 8.4 % 8.4 % —
Others 13.3 % 14.5 % (1.2 ) 13.6 % 14.7 % (1.1 )
Total 27.2 % 28.5 % (1.3 ) 27.2 % 28.4 % (1.2 )
For the full year, the estimated total cigarette market decreased by 4.6%,
mainly due to the impact of excise tax-driven price increases. The decrease in
PMI's cigarette shipment volume, down by 8.3% excluding the impact of
estimated distributor inventory movements, mainly reflected the lower total
market, and lower cigarette market share primarily due to a decline in
"Others" of mid-price L&M and Chesterfield and super-low Optima, resulting
from the timing of retail price increases compared to competition.
In the quarter, the estimated total cigarette market decreased by 3.4%,
reflecting the same dynamic as for the full year. The increase in PMI's
cigarette shipment volume reflected a favorable comparison with the fourth
quarter of 2015, which was unfavorably impacted by estimated distributor
inventory movements related to supply chain optimization. Excluding these
inventory movements, PMI's cigarette volume decreased by 4.7%, reflecting the
lower total market, and lower cigarette market share due to the same dynamics
as for the full year.
In Turkey, estimated industry size, PMI cigarette shipment volume and market
share performance, as measured by Nielsen, are shown in the table below.
Turkey Key Market Data Fourth-Quarter Full-Year
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 26.0 28.2 (8.0 )% 105.5 103.2 2.2 %
PMI Shipments (million units) 12,074 13,581 (11.1 )% 49,624 49,014 1.2 %
PMI Cigarette Market Share
Marlboro 10.3 % 9.9 % 0.4 10.2 % 9.5 % 0.7
Parliament 11.8 % 11.6 % 0.2 11.7 % 11.6 % 0.1
Lark 7.0 % 7.9 % (0.9 ) 7.4 % 7.6 % (0.2 )
Others 15.3 % 14.8 % 0.5 15.0 % 15.1 % (0.1 )
Total 44.4 % 44.2 % 0.2 44.3 % 43.8 % 0.5
For the full year, the estimated total cigarette market increased by 2.2%,
primarily reflecting a lower prevalence of illicit trade. The increase in
PMI's cigarette shipment volume was mainly driven by the higher total market.
PMI's higher market share, led by Marlboro, primarily reflecting the growth of
its slimmer Touch variant, and Chesterfield, partly offset by L&M in
"Others."
In the quarter, the estimated total cigarette market decreased by 8.0%, or by
4.7% excluding the net impact of estimated trade inventory movements,
principally due to the impact of price increases. The decrease also reflected
a difficult comparison with the fourth quarter of 2015, which increased by
7.8% driven by a lower prevalence of illicit trade and the favorable impact of
estimated immigration. The decrease in PMI's shipments mainly reflected the
lower total market. The increase in PMI's market share, as measured by
Nielsen, reflected the same dynamics as for the full year.
In Ukraine, estimated industry size, PMI cigarette shipment volume and market
share performance, as measured by Nielsen, are shown in the table below.
Ukraine Key Market Data Fourth-Quarter Full-Year
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 17.0 18.2 (6.4 )% 72.7 70.6 2.9 %
PMI Shipments (million units) 4,791 4,813 (0.5 )% 22,014 19,195 14.7 %
PMI Cigarette Market Share
Marlboro 3.2 % 3.4 % (0.2 ) 3.2 % 3.8 % (0.6 )
Parliament 3.2 % 2.8 % 0.4 3.0 % 2.9 % 0.1
Bond Street 9.3 % 8.8 % 0.5 10.1 % 8.3 % 1.8
Others 12.9 % 13.6 % (0.7 ) 13.6 % 15.0 % (1.4 )
Total 28.6 % 28.6 % — 29.9 % 30.0 % (0.1 )
For the full year, the estimated total cigarette market increased by 2.9%,
mainly driven by a lower prevalence of illicit trade. The increase in PMI's
cigarette shipment volume reflected the higher total cigarette market. The
decrease in PMI's market share was primarily due to Marlboro, reflecting the
impact of widened price gaps, and mid-price Chesterfield and super-low
President in "Others," mainly resulting from competitive price pressure in the
low price segment, partly offset by Bond Street and L&M in "Others."
In the quarter, the estimated total cigarette market decreased by 6.4%,
principally driven by the impact of price increases in 2016. The decrease in
PMI's cigarette shipment volume mainly reflected a lower total market and a
flat market share.
ASIA REGION
2016 Full-Year
Net revenues, excluding excise taxes, of $8.7 billion increased by 5.8%.
Excluding unfavorable currency of $8 million, net revenues, excluding excise
taxes, increased by 5.9%, reflecting a favorable pricing variance of $335
million, driven principally by Australia, Indonesia and the Philippines. The
favorable pricing variance was supported by favorable volume/mix of $151
million, mainly driven by HeatSticks volume in Japan and a favorable cigarette
volume comparison in Korea, partly offset by unfavorable volume/mix in
Australia, Indonesia and Thailand, reflecting a lower estimated total market
and cigarette market share.
Net revenues, excluding excise taxes, included $666 million related to the
sale of RRPs, as detailed in the attached Schedule 18, mainly driven by Japan.
Operating companies income of $3.2 billion increased by 10.7%. Excluding
favorable currency of $52 million, operating companies income increased by
8.9%, mainly driven by: a favorable pricing variance and a favorable cost
comparison, notably related to cigarette business building and optimization
initiatives in Indonesia. The increase was partly offset by: unfavorable
volume/mix of $106 million, predominantly in Australia and Indonesia, partly
offset by favorable HeatSticks volume in Japan, and increased support behind
Reduced-Risk Products.
Adjusted operating companies income and margin are shown in the table below
and detailed in Schedule 14. Adjusted operating companies income, excluding
favorable currency, increased by 8.9%. Adjusted operating companies income
margin, excluding currency, increased by 1.0 point to 36.2%, reflecting the
above-mentioned factors, as detailed on Schedule 14.
2016 Fourth-Quarter
Net revenues, excluding excise taxes, of $2.4 billion increased by 27.4%.
Excluding favorable currency of $118 million, net revenues, excluding excise
taxes, increased by 21.2%, reflecting a favorable pricing variance of $178
million, driven principally by Australia, Indonesia and the Philippines. The
favorable pricing variance was supported by favorable volume/mix of $229
million, predominantly driven by favorable HeatSticks volume in Japan, partly
offset by unfavorable volume/mix in Indonesia and unfavorable volume in
Australia, the Philippines and Thailand, reflecting a lower estimated total
market and cigarette market share.
Net revenues, excluding excise taxes, included $312 million related to the
sale of RRPs, mainly driven by Japan, as detailed in the attached Schedule 18.
Operating companies income of $908 million increased by 95.3%. Excluding
favorable currency of $63 million, operating companies income increased by
81.7%, mainly driven by: a favorable pricing variance; favorable volume/mix of
$132 million driven by HeatSticks volume in Japan; and a favorable cost
comparison, notably related to significant investments behind cigarette brand
building initiatives in Indonesia and Japan; partly offset by increased costs
behind Reduced-Risk Products in Japan.
Adjusted operating companies income and margin are shown in the table below
and detailed on Schedule 11. Adjusted operating companies income, excluding
favorable currency, increased by 81.7%. Adjusted operating companies income
margin, excluding favorable currency, increased by 12.1 points to 36.3%,
reflecting the factors mentioned above, as detailed on Schedule 11.
Asia OCI Fourth-Quarter Full-Year
(in millions) Excl. Excl.
2016 2015 Change Curr. 2016 2015 Change Curr.
OCI $ 908 $ 465 95.3 % 81.7 % $ 3,196 $ 2,886 10.7 % 8.9 %
Asset impairment & exit costs — — — —
Adjusted OCI $ 908 $ 465 95.3 % 81.7 % $ 3,196 $ 2,886 10.7 % 8.9 %
Adjusted OCI Margin* 37.2 % 24.2 % 13.0 12.1 36.8 % 35.2 % 1.6 1.0
*Margins are calculated as adjusted OCI, divided by net revenues, excluding
excise taxes.
Asia PMI Shipment Commentaries
2016 Full-Year
PMI's cigarette shipment volume decreased by 7.6% to 260.0 billion units,
mainly due to: Indonesia; Pakistan, reflecting a lower total estimated
cigarette market resulting from excise tax-driven price increases and the
growth of illicit trade; the Philippines; and Thailand, primarily reflecting
the impact of excise tax-driven price increases in the first quarter of 2016,
as well as lower market share; and in-switching to HeatSticks; partly offset
by Korea, reflecting a normalization of the total estimated cigarette market
following the disruptive excise tax increase in January 2015.
Cigarette shipment volume of Marlboro increased by 4.0% to 76.5 billion units,
mainly driven by Korea and the Philippines, partly offset by Vietnam, as well
as in-switching to HeatSticks. Cigarette shipment volume of Parliament
increased by 7.5% to 10.1 billion units, driven by Korea. Cigarette shipment
volume of Lark decreased by 3.8% to 17.6 billion units, principally due to
Japan.
2016 Fourth-Quarter
PMI's cigarette shipment volume decreased by 6.4% to 63.8 billion units,
mainly due to: Indonesia; the Philippines; and Thailand, primarily reflecting
the same dynamics as for the full year; partly offset by Japan, reflecting a
favorable comparison related to distributor inventory movements.
Cigarette shipment volume of Marlboro increased by 4.8% to 19.2 billion units,
predominantly driven by Japan and the Philippines, partly offset by Indonesia
and Vietnam, as well as in-switching to HeatSticks. Cigarette shipment volume
of Parliament increased by 2.7% to 2.6 billion units, driven mainly by Korea,
partly offset by Japan. Cigarette shipment volume of Lark increased by 11.5%
to 4.2 billion units, driven by Japan.
Asia Key Market Commentaries
In Indonesia, estimated industry size, PMI cigarette shipment volume, market
share and segmentation performance are shown in the tables below.
Indonesia Key Market Data Fourth-Quarter Full-Year
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 80.5 83.1 (3.1 )% 315.6 320.0 (1.4 )%
PMI Shipments (million units) 26,732 27,945 (4.3 )% 105,524 109,840 (3.9 )%
PMI Cigarette Market Share
Sampoerna A 14.0 % 14.3 % (0.3 ) 14.0 % 14.6 % (0.6 )
Dji Sam Soe 6.4 % 6.8 % (0.4 ) 6.5 % 6.9 % (0.4 )
U Mild 3.9 % 4.5 % (0.6 ) 4.2 % 4.7 % (0.5 )
Others 8.9 % 8.0 % 0.9 8.7 % 8.1 % 0.6
Total 33.2 % 33.6 % (0.4 ) 33.4 % 34.3 % (0.9 )
Indonesia Segmentation Data Fourth-Quarter Full-Year
Change Change
2016 2015 p.p. 2016 2015 p.p.
Segment % of Total Market
Hand-Rolled Kretek (SKT) 18.2 % 19.1 % (0.9 ) 18.2 % 19.1 % (0.9 )
Machine-Made Kretek (SKM) 76.2 % 74.8 % 1.4 75.8 % 74.7 % 1.1
Whites (SPM) 5.6 % 6.1 % (0.5 ) 6.0 % 6.2 % (0.2 )
Total 100.0 % 100.0 % — 100.0 % 100.0 % —
PMI % Share of Segment
Hand-Rolled Kretek (SKT) 37.8 % 38.9 % (1.1 ) 37.3 % 37.7 % (0.4 )
Machine-Made Kretek (SKM) 29.0 % 28.5 % 0.5 28.9 % 29.7 % (0.8 )
Whites (SPM) 76.3 % 80.6 % (4.3 ) 79.5 % 80.3 % (0.8 )
For the full year, the estimated total cigarette market decreased by 1.4%,
mainly reflecting a soft economic environment and the impact of excise
tax-driven price increases. The decrease in PMI's cigarette shipments was
mainly due to lower market share, reflecting the soft performance of PMI's SKM
portfolio, due to competitors' discounted product offerings, and PMI's SKT
portfolio, broadly in line with industry trends, as well as a lower estimated
total market.
In the quarter, the estimated total cigarette market decreased by 3.1%,
reflecting the same dynamics as for the full year. The decrease in PMI's
cigarette shipments was mainly due to a lower estimated total market, as well
as lower market share mainly reflecting the soft performance of PMI's SKT
portfolio, broadly in line with industry trends.
In Japan, estimated industry size, PMI cigarette shipment volume and market
share performance are shown in the table below.
Japan Key Market Data Fourth-Quarter Full-Year
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 43.1 46.5 (7.4 )% 173.8 182.3 (4.6 )%
PMI Shipments (million units) 10,631 9,496 12.0 % 43,915 45,690 (3.9 )%
PMI Cigarette Market Share
Marlboro 10.7 % 11.0 % (0.3 ) 10.9 % 11.3 % (0.4 )
Parliament 2.4 % 2.3 % 0.1 2.4 % 2.3 % 0.1
Lark 9.8 % 9.9 % (0.1 ) 9.9 % 9.9 % —
Others 1.6 % 1.7 % (0.1 ) 1.7 % 1.8 % (0.1 )
Total 24.5 % 24.9 % (0.4 ) 24.9 % 25.3 % (0.4 )
For the full year, the estimated total cigarette market decreased by 4.6%,
reflecting the continued underlying cigarette consumption decline, the growth
of Reduced-Risk Products, and the impact of the April price increases of
certain brands of PMI's key competitor. Excluding the net impact of
distributor inventory movements, PMI's cigarette shipment volume decreased by
6.5%. The decline was mainly due to a lower total cigarette market, as well as
lower cigarette market share, reflecting the impact of competitors' retail
pricing, competitors' differentiated menthol taste product offerings and
in-switching to Marlboro HeatSticks.
The estimated national market share of Marlboro HeatSticks was 2.9%, bringing
PMI's total combined national market share to 27.1%, up by 1.7 points.
In the quarter, the estimated total cigarette market decreased by 7.4%, mainly
reflecting the same dynamics as for the full year. Excluding the net impact of
distributor inventory movements, PMI's cigarette shipment volume decreased by
10.8%, mainly reflecting the lower cigarette market, as well as lower
cigarette market share, reflecting the same dynamics as for the full year.
The estimated national market share of Marlboro HeatSticks was 4.9%, bringing
PMI's total combined national market share to 28.3%, up by 3.1 points.
In Korea, estimated industry size, PMI cigarette shipment volume and market
share performance are shown in the table below.
Korea Key Market Data Fourth-Quarter Full-Year
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 18.0 17.9 0.5 % 73.6 67.3 9.4 %
PMI Shipments (million units) 3,937 3,848 2.3 % 15,490 14,201 9.1 %
PMI Cigarette Market Share
Marlboro 10.0 % 9.7 % 0.3 9.6 % 9.6 % —
Parliament 9.0 % 8.7 % 0.3 8.5 % 8.4 % 0.1
Virginia S. 2.3 % 2.6 % (0.3 ) 2.4 % 2.6 % (0.2 )
Others 0.4 % 0.5 % (0.1 ) 0.5 % 0.6 % (0.1 )
Total 21.7 % 21.5 % 0.2 21.0 % 21.2 % (0.2 )
For the full year, excluding a favorable comparison with the prior year driven
by estimated trade inventory movements, the estimated total cigarette market
increased by 4.3%, reflecting the normalization of the market following the
disruptive excise tax increase of 120% in January 2015. The growth in PMI's
cigarette shipment volume primarily reflected the higher estimated total
market.
In the quarter, the estimated total cigarette market increased by 0.5%.
Excluding the net impact of estimated trade inventory movements, the total
cigarette market decreased by 2.3%. The increase in PMI's cigarette shipment
volume partly reflected higher market share.
In the Philippines, estimated industry size, PMI cigarette shipment volume and
market share performance are shown in the table below.
Philippines Key Market Data Fourth-Quarter Full-Year
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 19.2 22.1 (13.2 )% 79.3 90.2 (12.0 )%
PMI Shipments (million units) 13,053 16,415 (20.5 )% 56,611 66,236 (14.5 )%
PMI Cigarette Market Share
Marlboro 29.9 % 23.9 % 6.0 28.4 % 20.0 % 8.4
Fortune 20.5 % 28.1 % (7.6 ) 23.4 % 29.2 % (5.8 )
Jackpot 6.8 % 10.6 % (3.8 ) 7.9 % 12.4 % (4.5 )
Others 11.0 % 11.8 % (0.8 ) 11.6 % 11.8 % (0.2 )
Total 68.2 % 74.4 % (6.2 ) 71.3 % 73.4 % (2.1 )
For the full year, the estimated total cigarette market decreased by 12.0%,
mainly due to the impact of excise tax-driven price increases. The decline in
PMI's cigarette shipment volume reflected the lower total market, as well as
the impact of these price increases on market share, particularly on its low
and super-low price brands, Fortune and Jackpot, partly offset by an increase
in market share of Marlboro, benefiting from its narrowed price gap with
lower-priced brands as a result of the price increases.
In the quarter, the estimated total cigarette market decreased by 13.2%,
mainly due to the impact of excise-tax-driven price increases, including those
on PMI's full brand portfolio at the end of October. The decline in PMI's
cigarette shipment volume and market share reflected the same dynamics as for
the full year.
LATIN AMERICA & CANADA REGION
2016 Full-Year
Net revenues, excluding excise taxes, of $2.8 billion decreased by 10.0%.
Excluding unfavorable currency of $525 million, net revenues, excluding excise
taxes, increased by 6.6%, driven by a favorable pricing variance of $312
million, principally in Argentina and Canada, partly offset by unfavorable
volume/mix of $104 million, mainly due to unfavorable volume in Argentina,
reflecting the impact of excise tax-driven price increases, partly offset by
favorable volume in Mexico.
Operating companies income of $938 million decreased by 13.5%. Excluding
unfavorable currency of $282 million, operating companies income increased by
12.4%, primarily driven by a favorable pricing variance, partially offset by
unfavorable volume/mix of $85 million, mainly due to Argentina, partly offset
by Mexico, and higher costs, mainly inflation-driven in Argentina.
Adjusted operating companies income and margin are shown in the table below
and detailed in Schedule 14. Adjusted operating companies income, excluding
unfavorable currency, increased by 12.4%. Adjusted operating companies income
margin, excluding currency, increased by 1.9 points to 36.2%, principally
driven by the factors mentioned above, as detailed on Schedule 14.
2016 Fourth-Quarter
Net revenues, excluding excise taxes, of $785 million decreased by 4.5%.
Excluding unfavorable currency of $98 million, net revenues, excluding excise
taxes, increased by 7.4%, driven by a favorable pricing variance of $87
million, principally in Argentina and Canada, partly offset by unfavorable
volume/mix of $26 million, mainly due to the same dynamics as for the full
year.
Operating companies income of $261 million increased by 10.6%. Excluding
unfavorable currency of $62 million, operating companies income increased by
36.9%, primarily driven by a favorable pricing variance, partly offset by
unfavorable volume/mix of $19 million, mainly due to Argentina, partly offset
by Mexico.
Adjusted operating companies income and margin are shown in the table below
and detailed on Schedule 11. Adjusted operating companies income, excluding
unfavorable currency, increased by 36.9%. Adjusted operating companies income
margin, excluding currency, increased by 7.9 points to 36.6%, principally
driven by the factors mentioned above, as detailed on Schedule 11.
Latin America & Canada OCI Fourth-Quarter Full-Year
(in millions) Excl. Excl.
2016 2015 Change Curr. 2016 2015 Change Curr.
OCI $ 261 $ 236 10.6 % 36.9 % $ 938 $ 1,085 (13.5 )% 12.4 %
Asset impairment & exit costs — — — —
Adjusted OCI $ 261 $ 236 10.6 % 36.9 % $ 938 $ 1,085 (13.5 )% 12.4 %
Adjusted OCI Margin* 33.2 % 28.7 % 4.5 7.9 33.0 % 34.3 % (1.3 ) 1.9
*Margins are calculated as adjusted OCI, divided by net revenues, excluding
excise taxes.
Latin America & Canada PMI Shipment Commentaries
2016 Full-Year
PMI's cigarette shipment volume decreased by 4.3% to 87.9 billion units,
mainly due to Argentina, partly offset by Mexico. While cigarette shipment
volume of Marlboro decreased by 1.8% to 35.2 billion units, its market share
increased by 0.6 points to an estimated 15.8%, primarily driven by Brazil, up
by 0.6 points to 10.3%, Colombia, up by 0.3 points to 9.3%, and Mexico, up by
1.3 points to 48.9%, partly offset by Argentina, down by 1.9 points to 22.4%.
Cigarette shipment volume of Philip Morris decreased by 15.3% to 16.5 billion
units, mainly due to Argentina.
2016 Fourth-Quarter
PMI's cigarette shipment volume decreased by 5.2% to 23.8 billion units,
mainly due to Argentina, partly offset by Mexico. While cigarette shipment
volume of Marlboro decreased by 3.4% to 9.6 billion units, its market share
increased by 0.7 points to an estimated 16.4%, primarily driven by Brazil, up
by 0.7 points to 10.3% and Colombia, up by 0.4 points to 9.4%, and Mexico, up
by 2.6 points to 52.2%, partly offset by Argentina, down by 3.9 points to
20.8%. Cigarette shipment volume of Philip Morris decreased by 26.5% to 3.9
billion units, mainly due to Argentina.
Latin America & Canada Key Market Commentaries
In Argentina, estimated industry size, PMI cigarette shipment volume and
market share performance are shown in the table below.
Argentina Key Market Data Fourth-Quarter Full-Year
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 9.4 11.0 (14.6 )% 36.1 40.8 (11.6 )%
PMI Shipments (million units) 7,123 8,676 (17.9 )% 27,512 31,910 (13.8 )%
PMI Cigarette Market Share
Marlboro 20.8 % 24.7 % (3.9 ) 22.4 % 24.3 % (1.9 )
Parliament 1.7 % 2.1 % (0.4 ) 1.9 % 2.1 % (0.2 )
Philip Morris 37.3 % 45.1 % (7.8 ) 41.6 % 44.7 % (3.1 )
Others 15.7 % 6.7 % 9.0 10.4 % 7.1 % 3.3
Total 75.5 % 78.6 % (3.1 ) 76.3 % 78.2 % (1.9 )
For the full year, the decline of the estimated total cigarette market of
11.6% mainly reflected a soft economic environment and the impact of the May
2016 excise tax increase that drove a more than 50% increase in average
industry retail prices. The decrease in PMI's cigarette shipment volume was
principally due to the lower total market. PMI's lower cigarette market share
primarily reflected growth in competitors' super-low priced products
benefiting from down-trading, partly offset by low-price Chesterfield in
"Others." The capsule segment was up by 1.0 point to 17.4% of the total
market; PMI's share of the segment increased by 0.4 points to 73.9%.
In the quarter, the decline of the total cigarette market of 14.6%, the
decrease in PMI's cigarette shipment volume and lower cigarette market share
reflected the same dynamics as for the full year. Although the capsule segment
was down by 0.1 point to 17.2% of the total market, PMI's share of the segment
increased by 0.9 points to 75.2%.
In Canada, estimated industry size, PMI cigarette shipment volume and market
share performance are shown in the table below.
Canada Key Market Data Fourth-Quarter Full-Year
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 6.8 6.9 (1.8 )% 26.3 26.7 (1.6 )%
PMI Shipments (million units) 2,584 2,502 3.3 % 10,049 9,926 1.2 %
PMI Cigarette Market Share
Belmont 3.8 % 3.4 % 0.4 3.7 % 3.3 % 0.4
Canadian Classics 10.3 % 9.8 % 0.5 10.2 % 10.3 % (0.1 )
Next 11.6 % 10.6 % 1.0 11.3 % 10.6 % 0.7
Others 13.1 % 12.3 % 0.8 13.2 % 13.1 % 0.1
Total 38.8 % 36.1 % 2.7 38.4 % 37.3 % 1.1
For the full year, the estimated total cigarette market decreased by 1.6%. The
increase in PMI's cigarette shipment volume was principally driven by higher
cigarette market share, favorably impacted by estimated trade inventory
movements, partly offset by a lower total market.
In the quarter, the estimated total cigarette market decreased by 3.6%
excluding the net impact of estimated trade inventory movements. The increase
in PMI's cigarette shipment volume reflected higher cigarette market share,
favorably impacted by estimated inventory movements.
In Mexico, estimated industry size, PMI cigarette shipment volume and market
share performance are shown in the table below.
Mexico Key Market Data Fourth-Quarter Full-Year
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 9.7 9.1 6.8 % 36.2 33.9 6.7 %
PMI Shipments (million units) 7,066 6,380 10.8 % 25,080 23,246 7.9 %
PMI Cigarette Market Share
Marlboro 52.2 % 49.6 % 2.6 48.9 % 47.6 % 1.3
Delicados 9.5 % 10.3 % (0.8 ) 9.7 % 10.6 % (0.9 )
Benson & Hedges 5.0 % 4.5 % 0.5 4.7 % 4.5 % 0.2
Others 6.0 % 5.7 % 0.3 6.0 % 5.8 % 0.2
Total 72.7 % 70.1 % 2.6 69.3 % 68.5 % 0.8
For the full year, the estimated total cigarette market increased by 6.7%, or
by 1.9% excluding the net impact of estimated trade inventory movements,
primarily reflecting improved market conditions and a lower prevalence of
illicit trade. The increase in PMI's cigarette shipment volume reflected the
higher total market. PMI's cigarette market share, benefiting from the impact
of estimated inventory movements, was up by 0.8 points, with growth of
Marlboro and Benson & Hedges, reflecting the impact of new product
launches, partly offset by low-price Delicados. PMI's share of the premium
segment, representing 56.8% of the total market, increased by 1.1 points to
93.5%.
In the quarter, the estimated total cigarette market increased by 6.8%.
Excluding the net impact of estimated trade inventory movements, the estimated
total cigarette market decreased by 2.5%. The increase in PMI's cigarette
shipment volume mainly reflected the higher total cigarette market. PMI's
cigarette market share, benefiting from the impact of estimated trade
inventory movements mentioned above, was up by 2.6 points, reflecting the same
dynamics as for the full year. PMI's share of the premium segment,
representing 59.5% of the total market, was up by 2.1 points to 94.9%.
About Philip Morris International Inc. (“PMI”)
PMI is the world’s leading international tobacco company, with six of the
world's top 15 international brands and products sold in more than 180
markets. In addition to the manufacture and sale of cigarettes, including
Marlboro, the number one global cigarette brand, and other tobacco products,
PMI is engaged in the development and commercialization of Reduced-Risk
Products (“RRPs”). RRPs is the term PMI uses to refer to products that
present, are likely to present, or have the potential to present less risk of
harm to smokers who switch to these products versus continued smoking. Through
multidisciplinary capabilities in product development, state-of-the-art
facilities, and industry-leading scientific substantiation, PMI aims to
provide an RRP portfolio that meets a broad spectrum of adult smoker
preferences and rigorous regulatory requirements. For more information, see
www.pmi.com
(http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.pmi.com&esheet=51503904&newsitemid=20170202005523&lan=en-US&anchor=www.pmi.com&index=3&md5=6e60f01d8198fbac28508a767bd71d9a)
and www.pmiscience.com
(http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.pmiscience.com&esheet=51503904&newsitemid=20170202005523&lan=en-US&anchor=www.pmiscience.com&index=4&md5=f230543d1bc8f7ebd430b35c357d35c6)
.
Forward-Looking and Cautionary Statements
This press release contains projections of future results and other
forward-looking statements. Achievement of future results is subject to risks,
uncertainties and inaccurate assumptions. In the event that risks or
uncertainties materialize, or underlying assumptions prove inaccurate, actual
results could vary materially from those contained in such forward-looking
statements. Pursuant to the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995, PMI is identifying important factors
that, individually or in the aggregate, could cause actual results and
outcomes to differ materially from those contained in any forward-looking
statements made by PMI.
PMI's business risks include: significant increases in cigarette-related
taxes; the imposition of discriminatory excise tax structures; fluctuations in
customer inventory levels due to increases in product taxes and prices;
increasing marketing and regulatory restrictions, often with the goal of
reducing or preventing the use of tobacco products; health concerns relating
to the use of tobacco products and exposure to environmental tobacco smoke;
litigation related to tobacco use; intense competition; the effects of global
and individual country economic, regulatory and political developments;
changes in adult smoker behavior; lost revenues as a result of counterfeiting,
contraband and cross-border purchases; governmental investigations;
unfavorable currency exchange rates and currency devaluations; adverse changes
in applicable corporate tax laws; adverse changes in the cost and quality of
tobacco and other agricultural products and raw materials; and the integrity
of its information systems. PMI's future profitability may also be adversely
affected should it be unsuccessful in its attempts to produce and
commercialize Reduced-Risk Products; if it is unable to successfully introduce
new products, promote brand equity, enter new markets or improve its margins
through increased prices and productivity gains; if it is unable to expand its
brand portfolio internally or through acquisitions and the development of
strategic business relationships; or if it is unable to attract and retain the
best global talent.
PMI is further subject to other risks detailed from time to time in its
publicly filed documents, including the Form 10-Q for the quarter ended
September 30, 2016. PMI cautions that the foregoing list of important factors
is not a complete discussion of all potential risks and uncertainties. PMI
does not undertake to update any forward-looking statement that it may make
from time to time, except in the normal course of its public disclosure
obligations.
Schedule 1
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Condensed Statements of Earnings
For the Quarters Ended December 31,
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