REG-Philip Morris International Inc. Philip Morris International Inc. (PMI) Reports 2016 Second-Quarter Results; Revises 2016 Full-Ye
19/07/2016 12:05
- Part 2: For the preceding part double click ID:nBw60Zzbra
10.1 % 9.3 % 0.8 10.0 % 9.1 % 0.9
Parliament 11.6 % 11.6 % — 11.6 % 11.5 % 0.1
Lark 7.6 % 7.4 % 0.2 7.7 % 7.3 % 0.4
Others 14.9 % 15.0 % (0.1) 14.7 % 15.4 % (0.7)
Total 44.2 % 43.3 % 0.9 44.0 % 43.3 % 0.7
In the quarter, the estimated total cigarette market increased by 5.6%, partly
reflecting a favorable comparison with estimated retail trade inventory
movements in the second quarter of 2015, as well as the estimated favorable
impact of immigration. The increase in PMI's cigarette shipment volume was
mainly driven by a higher total market and market share, led by Marlboro,
primarily reflecting the growth of its Touch variant.
Year-to-date, the estimated total cigarette market increased by 8.4%,
reflecting a lower prevalence of illicit trade, as well as the estimated
favorable impact of immigration. The increase in PMI's cigarette shipment
volume was mainly driven by the same factors as those for the quarter.
In Ukraine, estimated industry size, PMI cigarette shipment volume and May
quarter-to-date and year-to-date market share performance, as measured by
Nielsen, are shown in the table below.
Ukraine Key Market Data Second-Quarter Six Months Year-to-Date
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 19.4 18.9 2.6% 36.7 33.6 9.1%
PMI Shipments (million units) 5,951 5,070 17.4% 11,599 9,678 19.8%
PMI Cigarette Market Share
Marlboro 3.2 % 4.0 % (0.8) 3.2 % 4.4 % (1.2)
Parliament 3.0 % 2.9 % 0.1 2.8 % 3.0 % (0.2)
Bond Street 10.6 % 8.1 % 2.5 10.4 % 8.0 % 2.4
Others 14.4 % 15.9 % (1.5) 14.1 % 16.3 % (2.2)
Total 31.2 % 30.9 % 0.3 30.5 % 31.7 % (1.2)
In the quarter, the estimated total market increased by 2.6%. Excluding the
net impact of estimated trade inventory movements, the total market increased
by 6.0%, principally driven by a lower estimated prevalence of illicit trade.
The increase in PMI's cigarette shipment volume mainly reflected the increase
in PMI's market share, driven by low price Bond Street, and L&M in "Others,"
partly offset by 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.
Year-to-date, the estimated total market increased by 9.1%, or by 7.6%
excluding the net impact of estimated trade inventory movements, 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.
ASIA REGION
2016 Second-Quarter
Net revenues, excluding excise taxes, of $2.1 billion decreased by 0.6%.
Excluding unfavorable currency of $35 million, net revenues, excluding excise
taxes, increased by 1.1%, mainly reflecting favorable pricing of $53 million,
despite unfavorable comparisons related to the promotional support of PMI's
Reduced-Risk Products in Japan in the second quarter of 2016 and the gain in
Korea in second quarter of 2015. The favorable pricing was largely offset by
unfavorable volume/mix of $30 million, principally in: Australia, mainly
reflecting lower share and continued down-trading; and Pakistan, reflecting a
lower total estimated market and share; partly offset by Indonesia.
Operating companies income of $749 million decreased by 6.0%. Excluding
unfavorable currency of $5 million, operating companies income decreased by
5.4%, mainly due to: unfavorable volume/mix of $115 million, predominantly in
Japan, primarily reflecting an unfavorable comparison with the second quarter
of 2015 related to distributor inventory movements; and higher costs
associated with the commercialization of PMI's Reduced-Risk Products. The
unfavorable volume/mix was partly offset by favorable pricing and lower
manufacturing costs.
Adjusted operating companies income and margin are shown in the table below
and detailed on Schedule 11. Adjusted operating companies income, excluding
unfavorable currency, decreased by 5.4%. Adjusted operating companies income
margin, excluding unfavorable currency, decreased by 2.4 points to 34.8%,
reflecting the factors mentioned above, as detailed on Schedule 11.
Asia OCI Second-Quarter Six Months Year-to-Date
(in millions) Excl. Excl.
2016 2015 Change Curr. 2016 2015 Change Curr.
OCI $ 749 $ 797 (6.0)% (5.4)% $ 1,527 $ 1,731 (11.8)% (7.9)%
Asset impairment & exit costs — — — —
Adjusted OCI $ 749 $ 797 (6.0)% (5.4)% $ 1,527 $ 1,731 (11.8)% (7.9)%
Adjusted OCI Margin* 35.1 % 37.2 % (2.1) (2.4) 37.2 % 40.3 % (3.1) (3.1)
*Margins are calculated as adjusted OCI, divided by net revenues, excluding
excise taxes.
2016 Second-Quarter and Six Months Year-to-Date
In the quarter, PMI's cigarette shipment volume decreased by 7.9% to 69.3
billion units, mainly due to: Japan, reflecting a lower total estimated
market, as well as the unfavorable impact of distributor inventory movements
compared to 2015; Pakistan, reflecting a lower total estimated market
resulting from the June and December 2015 excise tax-driven price increases,
lower market share and the growth of illicit trade; the Philippines,
reflecting a lower total estimated market resulting from excise-tax driven
price increases; partly offset by Indonesia, driven by a higher total
estimated market, reflecting favorable estimated retail trade inventory
movements in the quarter.
Cigarette shipment volume of Marlboro increased by 2.8% to 19.4 billion units,
predominantly driven by Indonesia and the Philippines, partly offset by Japan.
Cigarette shipment volume of Parliament increased by 5.6% to 2.6 billion
units, driven by Korea. Cigarette shipment volume of Lark decreased by 14.6%
to 4.8 billion units, due to Japan.
Year-to-date, PMI's cigarette shipment volume decreased by 7.5% to 134.5
billion units, mainly due to Indonesia, Japan, Pakistan and the Philippines,
partly offset by Korea, reflecting a normalization of the total estimated
market following the disruptive excise tax increase in January 2015.
Cigarette shipment volume of Marlboro increased by 3.9% to 38.3 billion units,
mainly driven by Korea and the Philippines, partly offset by Japan. Cigarette
shipment volume of Parliament increased by 15.5% to 5.0 billion units,
primarily driven by Korea. Cigarette shipment volume of Lark decreased by
10.6% to 9.1 billion units, principally due to 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 Second-Quarter Six Months Year-to-Date
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 83.6 78.6 6.4% 157.4 156.9 0.3%
PMI Shipments (million units) 28,566 27,659 3.3% 53,708 55,343 (3.0)%
PMI Cigarette Market Share
Sampoerna A 14.2 % 15.0 % (0.8) 14.4 % 15.0 % (0.6)
Dji Sam Soe 6.6 % 7.0 % (0.4) 6.7 % 7.0 % (0.3)
U Mild 4.4 % 4.9 % (0.5) 4.4 % 5.0 % (0.6)
Others 9.0 % 8.3 % 0.7 8.6 % 8.3 % 0.3
Total 34.2 % 35.2 % (1.0) 34.1 % 35.3 % (1.2)
Indonesia Segmentation Data Second-Quarter Six Months Year-to-Date
Change Change
2016 2015 p.p. 2016 2015 p.p.
Segment % of Total Market
Hand-Rolled Kretek (SKT) 17.9 % 18.7 % (0.8) 18.1 % 19.0 % (0.9)
Machine-Made Kretek (SKM) 75.7 % 75.1 % 0.6 75.7 % 74.8 % 0.9
Whites (SPM) 6.4 % 6.2 % 0.2 6.2 % 6.2 % —
Total 100.0 % 100.0 % — 100.0 % 100.0 % —
PMI % Share of Segment
Hand-Rolled Kretek (SKT) 38.2 % 38.1 % 0.1 39.0 % 37.9 % 1.1
Machine-Made Kretek (SKM) 29.2 % 30.7 % (1.5) 29.1 % 30.8 % (1.7)
Whites (SPM) 81.1 % 81.0 % 0.1 81.3 % 81.1 % 0.2
In the quarter, the estimated total cigarette market increased by 6.4%, mainly
driven by favorable estimated retail trade inventory movements associated with
the timing of Ramadan, as well as a favorable comparison with the second
quarter of 2015 in which the estimated total cigarette market decreased by
4.5%. Excluding the impact of these inventory movements, the estimated total
cigarette market increased by 0.3%. The increase in PMI's cigarette shipments
was partly offset by lower market share, mainly reflecting the soft
performance of PMI's SKM portfolio due to competitors' discounted product
offerings.
Year-to-date, the estimated total cigarette market increased by 0.3%.
Excluding the impact of estimated net inventory movements, the estimated total
cigarette market decreased by 2.8%, mainly reflecting a soft economic
environment. The decrease in PMI's cigarette shipments reflected lower market
share resulting from the same factors as those described for the quarter.
In Japan, estimated industry size, PMI cigarette shipment volume and market
share performance are shown in the table below.
Japan Key Market Data Second-Quarter Six Months Year-to-Date
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 42.7 46.0 (7.1 )% 86.2 88.5 (2.6 )%
PMI Shipments (million units) 11,042 13,552 (18.5 )% 22,593 25,398 (11.0 )%
PMI Cigarette Market Share
Marlboro 11.1 % 11.3 % (0.2 ) 10.9 % 11.4 % (0.5 )
Parliament 2.5 % 2.3 % 0.2 2.4 % 2.3 % 0.1
Lark 10.5 % 10.0 % 0.5 9.9 % 10.0 % (0.1 )
Others 1.7 % 1.8 % (0.1 ) 1.7 % 1.8 % (0.1 )
Total 25.8 % 25.4 % 0.4 24.9 % 25.5 % (0.6 )
In the quarter, the estimated total cigarette market decreased by 7.1%, mainly
reflecting the reversal of estimated retail trade inventory movements and
adult smoker purchases of certain brands of PMI's key competitor in the first
quarter of 2016 ahead of their April price increase. Excluding these
unfavorable inventory movements, the estimated total cigarette market
decreased by 4.2%, reflecting the continued moderation of cigarette
consumption, as well as the growth of Reduced-Risk Products. The decrease of
PMI's cigarette shipment volume in the quarter mainly reflected the lower
total cigarette market as well as the unfavorable impact of distributor
inventory movements compared to 2015. Excluding the impact of these estimated
inventory movements, PMI's cigarette shipments decreased by 4.6%, reflecting,
on the same basis, lower cigarette market share, down by 0.3 points to 25.1%,
mainly due to the impact of competitive retail pricing, as well as
competitors' differentiated menthol taste product offerings, partly offset by
the successful launch of new products Parliament Crystal Blast and Lark Smart
Plus.
The estimated national market share of Marlboro HeatSticks was 2.2%, bringing
PMI's total combined national market share to 27.5%, up by 2.1 points.
Year-to-date, the estimated total cigarette market decreased by 2.6%.
Excluding the net impact of distributor inventory movements, PMI's cigarette
shipment volume decreased by 4.7%. The decline was mainly due to a lower total
cigarette market and lower cigarette market share, mainly due to the impact of
competitive retail pricing, as well as competitors' differentiated menthol
taste product offerings.
The estimated national market share of Marlboro HeatSticks was 1.5%, bringing
PMI's total combined national market share to 26.0%, up by 0.5 points.
In Korea, estimated industry size, PMI cigarette shipment volume and market
share performance are shown in the table below.
Korea Key Market Data Second-Quarter Six Months Year-to-Date
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 18.8 17.5 7.0% 35.8 29.6 20.9%
PMI Shipments (million units) 3,902 3,732 4.5% 7,445 6,190 20.3%
PMI Cigarette Market Share
Marlboro 9.4 % 9.5 % (0.1) 9.4 % 9.5 % (0.1)
Parliament 7.6 % 7.3 % 0.3 7.6 % 7.1 % 0.5
Virginia S. 3.2 % 3.9 % (0.7) 3.3 % 3.9 % (0.6)
Others 0.6 % 0.7 % (0.1) 0.6 % 0.7 % (0.1)
Total 20.8 % 21.4 % (0.6) 20.9 % 21.2 % (0.3)
In the quarter, the estimated total cigarette market increased by 7.0%, mainly
reflecting a normalization of the market following the disruptive excise tax
increase of 120% in January 2015. The increase in PMI's cigarette shipment
volume mainly reflected these same dynamics. The decline of PMI's market share
primarily reflected the impact of new brand launches by PMI's principal
competitor.
Year-to-date, the growth of the estimated total cigarette market was mainly
driven by a favorable comparison with the first six months of 2015 that were
negatively impacted by the disruptive excise tax increase, as well as the net
impact of estimated inventory movements. Excluding the impact of these
estimated inventory movements, the total cigarette market increased by 9.7%.
The growth in PMI's cigarette shipment volume reflected the higher estimated
total market, partly offset by a decline of market share, reflecting the same
factors as those for the quarter.
In the Philippines, estimated industry size, PMI cigarette shipment volume and
market share performance are shown in the table below.
Philippines Key Market Data Second-Quarter Six Months Year-to-Date
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 20.1 22.8 (11.9)% 39.8 44.9 (11.4)%
PMI Shipments (million units) 14,807 16,725 (11.5)% 29,281 32,629 (10.3)%
PMI Cigarette Market Share
Marlboro 28.1 % 18.7 % 9.4 27.8 % 18.7 % 9.1
Fortune 24.9 % 29.8 % (4.9) 25.0 % 28.8 % (3.8)
Jackpot 8.5 % 12.7 % (4.2) 8.8 % 13.4 % (4.6)
Others 12.1 % 12.0 % 0.1 12.1 % 11.8 % 0.3
Total 73.6 % 73.2 % 0.4 73.7 % 72.7 % 1.0
In the quarter, the estimated total cigarette market decreased by 11.9%,
mainly due to the impact of price increases, notably in the fourth quarter of
2015 ahead of the January 2016 excise tax increase. The decline in PMI's
cigarette shipment volume reflected the impact of these price increases,
particularly on its low and super-low price brands, Fortune and Jackpot,
partly offset by an increase in market share, driven by Marlboro, benefiting
from its narrowed price gap with lower-priced brands as a result of the excise
tax increase.
Year-to-date, the estimated total cigarette market decreased by 11.4%,
reflecting the same factors as those described for the quarter. The decline in
PMI's cigarette shipment volume, and the increase in market share, reflected
the same dynamics as those for the quarter.
LATIN AMERICA & CANADA REGION
2016 Second-Quarter
Net revenues, excluding excise taxes, of $697 million decreased by 13.6%.
Excluding unfavorable currency of $136 million, net revenues, excluding excise
taxes, increased by 3.2%, driven by favorable pricing of $74 million,
principally in Argentina and Canada, partly offset by unfavorable volume/mix
of $48 million, mainly due to Argentina, reflecting the impact of excise
tax-driven price increases.
Operating companies income of $224 million decreased by 31.1%. Excluding
unfavorable currency of $78 million, operating companies income decreased by
7.1%, principally due to unfavorable volume/mix of $39 million, mainly due to
Argentina, and higher costs, mainly inflationary-driven in Argentina. The
unfavorable volume/mix and higher costs were partly offset by favorable
pricing.
Adjusted operating companies income and margin are shown in the table below
and detailed on Schedule 11. Adjusted operating companies income, excluding
unfavorable currency decreased by 7.1%. Adjusted operating companies income
margin, excluding unfavorable currency, decreased by 4.0 points to 36.3%,
principally driven by the factors mentioned above, as detailed on Schedule 11.
Latin America & Canada OCI Second-Quarter Six Months Year-to-Date
(in millions) Excl. Excl.
2016 2015 Change Curr. 2016 2015 Change Curr.
OCI $ 224 $ 325 (31.1)% (7.1 )% $ 453 $ 555 (18.4)% 11.7 %
Asset impairment & exit costs — — — —
Adjusted OCI $ 224 $ 325 (31.1)% (7.1 )% $ 453 $ 555 (18.4)% 11.7 %
Adjusted OCI Margin* 32.1 % 40.3 % (8.2) (4.0 ) 33.6 % 36.2 % (2.6) 1.0
*Margins are calculated as adjusted OCI, divided by net revenues, excluding
excise taxes.
2016 Second-Quarter and Six Months Year-to-Date
In the quarter, PMI's cigarette shipment volume decreased by 5.9% to 21.3
billion units, predominantly due to Argentina. Although cigarette shipment
volume of Marlboro decreased by 5.1% to 8.3 billion units, its market share
increased by 0.4 points to an estimated 15.3%, primarily driven by Brazil, up
by 0.6 points to 10.0%, Colombia, up by 0.2 points to 9.3%, and Mexico, up by
0.3 points to 47.8%, partly offset by Argentina, down by 1.4 points to 22.7%.
Cigarette shipment volume of Philip Morris decreased by 10.2% to 4.1 billion
units, mainly due to Argentina.
Year-to-date, PMI's cigarette shipment volume decreased by 1.9% to 43.0
billion units, mainly due to Argentina, partly offset by Mexico. Cigarette
shipment volume of Marlboro increased by 1.5% to 17.2 billion units and its
market share increased by 0.8 points to an estimated 15.6%, primarily driven
by Brazil, up by 0.5 points to 10.0%, Colombia, up by 0.2 points to 9.2%, and
Mexico, up by 1.7 points to 48.2%, partly offset by Argentina, down by 1.0
point to 23.4%. Cigarette shipment volume of Philip Morris decreased by 7.0%
to 8.8 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 Second-Quarter Six Months Year-to-Date
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 8.4 9.6 (12.5)% 18.1 19.9 (8.7)%
PMI Shipments (million units) 6,445 7,463 (13.6)% 13,971 15,586 (10.4)%
PMI Cigarette Market Share
Marlboro 22.7 % 24.1 % (1.4) 23.4 % 24.4 % (1.0)
Parliament 1.9 % 2.1 % (0.2) 2.0 % 2.1 % (0.1)
Philip Morris 44.8 % 44.5 % 0.3 44.7 % 44.6 % 0.1
Others 7.4 % 7.1 % 0.3 6.9 % 7.3 % (0.4)
Total 76.8 % 77.8 % (1.0) 77.0 % 78.4 % (1.4)
In the quarter, the estimated total cigarette market decreased by 12.5%,
mainly due to 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 primarily
reflected the lower total market. PMI's lower cigarette market share primarily
reflected growth in competitors' super-low priced products. The capsule
segment was up by 1.9 points to 17.9% of the total market; PMI's share of the
segment increased by 0.6 points to 73.7%.
Year-to-date, the decline of the estimated total cigarette market, PMI's
cigarette shipment volume and market share reflected the same dynamics as
those for the quarter. The capsule segment was up by 2.0 points to 17.9% of
the total market; PMI's share of the segment increased by 1.0 point to 73.7%.
In Canada, estimated industry size, PMI cigarette shipment volume and market
share performance are shown in the table below.
Canada Key Market Data Second-Quarter Six Months Year-to-Date
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 6.8 7.3 (6.4)% 12.4 12.8 (3.0)%
PMI Shipments (million units) 2,607 2,647 (1.5)% 4,790 4,700 1.9%
PMI Cigarette Market Share
Belmont 3.6 % 3.2 % 0.4 3.6 % 3.1 % 0.5
Canadian Classics 10.0 % 10.2 % (0.2) 10.3 % 10.3 % —
Next 11.1 % 10.3 % 0.8 11.3 % 10.4 % 0.9
Others 13.3 % 12.7 % 0.6 13.3 % 13.0 % 0.3
Total 38.0 % 36.4 % 1.6 38.5 % 36.8 % 1.7
In the quarter, the estimated total cigarette market decreased by 6.4%, or by
2.9% excluding the impact of estimated competitors' trade inventory movements
in 2015. The decrease in PMI's cigarette shipment volume reflected the lower
estimated total market, partly offset by higher cigarette market share,
largely reflecting the inventory movements, the strong performance of premium
Belmont, low-price Next and super-low price Philip Morris in "Others," which
benefited from down-trading.
Year-to-date, the estimated total cigarette market decreased by 3.0%.
Excluding the impact of estimated competitors' trade inventory movements, the
total market increased by 1.8%, mainly driven by improved consumer spending.
The increase in PMI's cigarette shipment volume was principally due to higher
market share, reflecting the same dynamics as those for the quarter.
In Mexico, estimated industry size, PMI cigarette shipment volume and market
share performance are shown in the table below.
Mexico Key Market Data Second-Quarter Six Months Year-to-Date
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 8.7 8.6 1.2% 17.4 16.1 7.7%
PMI Shipments (million units) 5,976 5,891 1.4% 11,958 10,887 9.8%
PMI Cigarette Market Share
Marlboro 47.8 % 47.5 % 0.3 48.2 % 46.5 % 1.7
Delicados 9.8 % 10.7 % (0.9) 10.0 % 10.8 % (0.8)
Benson & Hedges 5.0 % 4.6 % 0.4 4.6 % 4.6 % —
Others 6.1 % 5.7 % 0.4 6.0 % 5.6 % 0.4
Total 68.7 % 68.5 % 0.2 68.8 % 67.5 % 1.3
In the quarter, the estimated total cigarette market increased by 1.2%, or by
5.1% 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 cigarette market. PMI's cigarette market share benefited from the
estimated trade inventory movements mentioned above, with increases driven by
Marlboro and premium Benson & Hedges, reflecting the impact of new product
launches, partly offset by low-price Delicados. PMI's share of the premium
segment, representing 56.5% of the total market, was up by 1.3 points to
93.3%,
Year-to-date, the estimated total cigarette market increased by 7.7%, or by
4.2% 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 was mainly
driven by the higher total market. The increase in PMI's cigarette market
share, benefiting from the inventory movements, largely reflected the same
factors as those for the quarter. PMI's share of the premium segment,
representing 56.8% of the total market, increased by 1.7 points to 93.0%.
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 with the
potential to reduce individual risk and population harm in comparison to
smoking cigarettes. 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 and www.pmiscience.com.
Forward-Looking and Cautionary Statements
This press release contains projections of future results and other
forward-looking statements. Achievement of projected 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 products that have the potential to reduce individual risk and
population harm; 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 March
31, 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 June 30,
($ in millions, except per share data)
(Unaudited)
2016 2015 % Change
Net Revenues $ 19,041 $ 18,763 1.5%
Cost of sales 2,364 2,378 (0.6)%
Excise Taxes on products (1) 12,392 11,904 4.1%
Gross profit 4,285 4,481 (4.4)%
Marketing, administration and research costs 1,513 1,568
Asset impairment and exit costs — —
Amortization of intangibles 19 21
Operating Income (2) 2,753 2,892 (4.8)%
Interest expense, net 223 259
Earnings before income taxes 2,530 2,633 (3.9)%
Provision for income taxes 716 743 (3.6)%
Equity (income)/loss in unconsolidated subsidiaries, net (28 ) (26 )
Net Earnings 1,842 1,916 (3.9)%
Net Earnings attributable to noncontrolling interests 54 29
Net Earnings attributable to PMI $ 1,788 $ 1,887 (5.2)%
Per share data (3):
Basic Earnings Per Share $ 1.15 $ 1.21 (5.0)%
Diluted Earnings Per Share $ 1.15 $ 1.21 (5.0)%
(1) The segment detail of Excise Taxes on products sold for the quarters ended June 30, 2016 and 2015 is shown on Schedule 2.
(2) PMI's management evaluates segment performance and allocates resources based on operating companies income, which PMI defines as operating income, excluding general corporate expenses and amortization of intangibles, plus equity (income)/loss in unconsolidated subsidiaries, net. The reconciliation from operating income to operating companies income is as follows:
2016 2015 % Change
Operating Income $ 2,753 $ 2,892 (4.8)%
Excluding:
- Amortization of intangibles 19 21
- General corporate expenses (included in marketing, 37 41
administration and research costs above)
Plus: Equity (income)/loss in unconsolidated subsidiaries, net (28 ) (26 )
Operating Companies Income $ 2,837 $ 2,980 (4.8)%
(3) Net Earnings and weighted-average shares used in the basic and diluted
earnings per share computations for the quarters ended June 30, 2016 and 2015
are shown on Schedule 4, Footnote 1.
Schedule 2
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Selected Financial Data by Business Segment
For the Quarters Ended June 30,
($ in millions)
(Unaudited)
Net Revenues excluding Excise Taxes
European EEMA Asia Latin Total
Union America &
Canada
2016 Net Revenues (1) $ 7,134 $ 4,531 $ 5,212 $ 2,164 $ 19,041
Excise Taxes on products (4,979 ) (2,867 ) (3,079 ) (1,467 ) (12,392 )
Net Revenues excluding Excise Taxes 2,155 1,664 2,133 697 6,649
2015 Net Revenues $ 6,676 $ 4,654 $ 5,039 $ 2,394 $ 18,763
Excise Taxes on products (4,616 ) (2,807 ) (2,894 ) (1,587 ) (11,904 )
Net Revenues excluding Excise Taxes 2,060 1,847 2,145 807 6,859
Variance Currency 39 (171 ) (35 ) (136 ) (303 )
Acquisitions — — — — —
Operations 56 (12 ) 23 26 93
Variance Total 95 (183 ) (12 ) (110 ) (210 )
Variance Total (%) 4.6 % (9.9 )% (0.6 )% (13.6 )% (3.1 )%
Variance excluding Currency 56 (12 ) 23 26 93
Variance excluding Currency (%) 2.7 % (0.6 )% 1.1 % 3.2 % 1.4 %
Variance excluding Currency & Acquisitions 56 (12 ) 23 26 93
Variance excluding Currency & Acquisitions (%) 2.7 % (0.6 )% 1.1 % 3.2 % 1.4 %
(1) 2016 Currency increased / (decreased) Net Revenues as follows:
European Union $ 97
EEMA (525 )
Asia (150 )
Latin America & Canada (598 )
$ (1,176 )
Schedule 3
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Selected Financial Data by Business Segment
For the Quarters Ended June 30,
($ in millions)
(Unaudited)
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