REG-Philip Morris International Inc. Philip Morris International Inc. (PMI) Reports 2016 Third-Quarter Results; Reaffirms 2016 Full-Y
18/10/2016 12:05
- Part 2: For the preceding part double click ID:nBw9t8jD5a
mainly reflected the lower total market, and lower
cigarette market share due to the same factors as those for the quarter,
partly offset by super-low Next/Dubliss.
In Turkey, estimated industry size, PMI cigarette shipment volume and August
quarter-to-date and year-to-date market share performance, as measured by
Nielsen, are shown in the table below.
Turkey Key Market Data Third-Quarter Nine Months Year-to-Date
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 29.3 29.3 0.1% 79.4 75.0 6.0%
PMI Shipments (million units) 14,041 14,150 (0.8)% 37,550 35,433 6.0%
PMI Cigarette Market Share
Marlboro 10.4 % 9.8 % 0.6 10.2 % 9.3 % 0.9
Parliament 11.7 % 11.9 % (0.2) 11.6 % 11.7 % (0.1)
Lark 7.3 % 7.7 % (0.4) 7.5 % 7.5 % —
Others 15.1 % 14.7 % 0.4 14.9 % 15.0 % (0.1)
Total 44.5 % 44.1 % 0.4 44.2 % 43.5 % 0.7
In the quarter, the estimated total cigarette market was essentially flat,
mainly reflecting a lower prevalence of illicit trade. The increase in PMI's
market share was led by Marlboro, primarily reflecting the growth of its
slimmer Touch variant, and Chesterfield, partly offset by L&M in "Others."
Year-to-date, the estimated total cigarette market increased by 6.0%,
primarily reflecting a lower prevalence of illicit trade. The increase in
PMI's cigarette shipment volume was mainly driven by the higher total market
and higher market share, reflecting the same dynamics as for the quarter.
In Ukraine, estimated industry size, PMI cigarette shipment volume and August
quarter-to-date and year-to-date market share performance, as measured by
Nielsen, are shown in the table below.
Ukraine Key Market Data Third-Quarter Nine Months Year-to-Date
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 18.9 18.8 0.8% 55.6 52.4 6.1%
PMI Shipments (million units) 5,624 4,704 19.6% 17,222 14,382 19.7%
PMI Cigarette Market Share
Marlboro 3.2 % 3.5 % (0.3) 3.2 % 4.1 % (0.9)
Parliament 3.1 % 2.8 % 0.3 2.9 % 2.9 % —
Bond Street 10.3 % 8.4 % 1.9 10.4 % 8.1 % 2.3
Others 13.5 % 14.7 % (1.2) 14.0 % 15.7 % (1.7)
Total 30.1 % 29.4 % 0.7 30.5 % 30.8 % (0.3)
In the quarter, the estimated total cigarette market increased by 0.8%.
Excluding the net impact of estimated trade inventory movements in 2015, the
total market decreased by 1.6%, principally driven by the impact of price
increases in 2016. 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 cigarette market increased by 6.1%, 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.
ASIA REGION
2016 Third-Quarter
Net revenues, excluding excise taxes, of $2.1 billion increased by 7.7%.
Excluding favorable currency of $59 million, net revenues, excluding excise
taxes, increased by 4.7%, mainly reflecting a favorable pricing variance of
$95 million, driven principally by Australia, Indonesia and the Philippines.
The favorable pricing variance was marginally offset by unfavorable volume/mix
of $2 million, mainly due to unfavorable volume in Australia, Indonesia and
the Philippines, primarily reflecting the lower total markets, largely offset
by favorable HeatSticks volume in Japan, and favorable mix in the Philippines.
Operating companies income of $761 million increased by 10.3%. Excluding
favorable currency of $57 million, operating companies income increased by
2.0%, mainly driven by: a favorable pricing variance, partly offset by
unfavorable volume/mix of $35 million, predominantly Australia and Indonesia,
partly offset by favorable HeatSticks volume in Japan, and higher costs,
primarily related to the commercialization of Reduced-Risk Products.
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 2.0%. Adjusted operating companies income
margin, excluding favorable currency, decreased by 0.9 points to 33.9%,
reflecting the factors mentioned above, as detailed on Schedule 11.
Asia OCI Third-Quarter Nine Months Year-to-Date
(in millions) Excl. Excl.
2016 2015 Change Curr. 2016 2015 Change Curr.
OCI $ 761 $ 690 10.3 % 2.0 % $ 2,288 $ 2,421 (5.5 )% (5.0 )%
Asset impairment & exit costs — — — —
Adjusted OCI $ 761 $ 690 10.3 % 2.0 % $ 2,288 $ 2,421 (5.5 )% (5.0 )%
Adjusted OCI Margin* 35.6 % 34.8 % 0.8 (0.9 ) 36.7 % 38.5 % (1.8 ) (2.4 )
*Margins are calculated as adjusted OCI, divided by net revenues, excluding
excise taxes.
2016 Third-Quarter and Nine Months Year-to-Date
In the quarter, PMI's cigarette shipment volume decreased by 9.0% to 61.7
billion units, mainly due to: Indonesia, reflecting the reversal of estimated
trade inventory movements in the second quarter of 2016 related to the timing
of Ramadan; Pakistan, reflecting a lower total estimated cigarette market
resulting from excise tax-driven price increases and the growth of illicit
trade; the Philippines, reflecting a lower total estimated cigarette market
resulting from excise-tax driven price increases; and Thailand, primarily
reflecting the impact of excise tax-driven price increases in the first
quarter of 2016, as well as lower market share.
Cigarette shipment volume of Marlboro increased by 3.4% to 19.0 billion units,
predominantly driven by the Philippines, partly offset by Indonesia and
Vietnam. Cigarette shipment volume of Parliament decreased by 1.3% to 2.5
billion units, due mainly to Japan, partly offset by Korea. Cigarette shipment
volume of Lark decreased by 1.0% to 4.3 billion units, due to Japan.
Year-to-date, PMI's cigarette shipment volume decreased by 8.0% to 196.2
billion units, mainly due to: Indonesia, reflecting a lower total estimated
cigarette market, resulting from the impact of excise-tax driven price
increases, and lower market share, reflecting the soft performance of PMI's
machine-made kretek portfolio due to competitors' discounted product
offerings; Japan, mainly reflecting the continued underlying cigarette
consumption decline and the growth of the Reduced-Risk Products category;
Pakistan, the Philippines and Thailand, reflecting the same dynamics as for
the quarter; 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 3.8% to 57.3 billion units,
mainly driven by Korea and the Philippines, partly offset by Japan and
Vietnam. Cigarette shipment volume of Parliament increased by 9.3% to 7.5
billion units, driven by Korea. Cigarette shipment volume of Lark decreased by
7.7% to 13.4 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 Third-Quarter Nine Months Year-to-Date
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 72.3 75.5 (4.3)% 229.7 232.5 (1.2)%
PMI Shipments (million units) 25,084 26,552 (5.5)% 78,792 81,895 (3.8)%
PMI Cigarette Market Share
Sampoerna A 14.4 % 14.9 % (0.5) 14.4 % 15.0 % (0.6)
Dji Sam Soe 6.6 % 7.2 % (0.6) 6.6 % 7.1 % (0.5)
U Mild 4.3 % 4.7 % (0.4) 4.3 % 4.9 % (0.6)
Others 9.4 % 8.3 % 1.1 9.0 % 8.2 % 0.8
Total 34.7 % 35.1 % (0.4) 34.3 % 35.2 % (0.9)
Indonesia Segmentation Data Third-Quarter Nine Months Year-to-Date
Change Change
2016 2015 p.p. 2016 2015 p.p.
Segment % of Total Market
Hand-Rolled Kretek (SKT) 17.2 % 18.4 % (1.2) 17.8 % 18.8 % (1.0)
Machine-Made Kretek (SKM) 76.7 % 75.2 % 1.5 76.0 % 74.9 % 1.1
Whites (SPM) 6.1 % 6.4 % (0.3) 6.2 % 6.3 % (0.1)
Total 100.0 % 100.0 % — 100.0 % 100.0 % —
PMI % Share of Segment
Hand-Rolled Kretek (SKT) 38.6 % 40.3 % (1.7) 38.9 % 38.7 % 0.2
Machine-Made Kretek (SKM) 30.2 % 30.0 % 0.2 29.4 % 30.5 % (1.1)
Whites (SPM) 79.7 % 80.7 % (1.0) 80.7 % 80.9 % (0.2)
In the quarter, the estimated total cigarette market decreased by 4.3%,
reflecting the reversal of estimated trade inventory movements in the second
quarter of 2016 related to the timing of Ramadan. Excluding the impact of
these inventory movements, the estimated total cigarette market increased by
1.9%. The decrease in PMI's cigarette shipments was mainly due to a lower
total market, and lower market share mainly reflecting the soft performance of
PMI's SKT portfolio, in line with industry trends.
Year-to-date, the estimated total cigarette market decreased by 1.2%, 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 a
lower total market, and lower market share, mainly reflecting the soft
performance of: PMI's SKM portfolio, due to competitors' discounted product
offerings; and PMI's SKT portfolio, 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 Third-Quarter Nine Months Year-to-Date
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 44.5 47.2 (5.8)% 130.8 135.8 (3.7)%
PMI Shipments (million units) 10,691 10,796 (1.0)% 33,284 36,194 (8.0)%
PMI Cigarette Market Share
Marlboro 11.1 % 11.3 % (0.2) 11.0 % 11.4 % (0.4)
Parliament 2.4 % 2.3 % 0.1 2.4 % 2.3 % 0.1
Lark 10.0 % 10.0 % — 9.9 % 10.0 % (0.1)
Others 1.7 % 1.7 % — 1.7 % 1.7 % —
Total 25.2 % 25.3 % (0.1) 25.0 % 25.4 % (0.4)
In the quarter, the estimated total cigarette market decreased by 5.8%, mainly
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
6.8%, mainly reflecting the lower cigarette market. The decline of PMI's
cigarette market share partly reflected the cannibalization by Marlboro
HeatSticks.
The estimated national market share of Marlboro HeatSticks was 3.5%, bringing
PMI's total combined national market share to 27.9%, up by 2.5 points.
Year-to-date, the estimated total cigarette market decreased by 3.7%,
reflecting the same dynamics as for the quarter. Excluding the net impact of
distributor inventory movements, PMI's cigarette shipment volume decreased by
5.1%. The decline was mainly due to a lower total cigarette market and lower
cigarette market share, reflecting the impact of competitors' retail pricing,
competitors' differentiated menthol taste product offerings and
cannibalization by Marlboro HeatSticks.
The estimated national market share of Marlboro HeatSticks was 2.2%, bringing
PMI's total combined national market share to 26.7%, up by 1.2 points.
In Korea, estimated industry size, PMI cigarette shipment volume and market
share performance are shown in the table below.
Korea Key Market Data Third-Quarter Nine Months Year-to-Date
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 19.8 19.8 0.2% 55.6 49.4 12.6%
PMI Shipments (million units) 4,109 4,163 (1.3)% 11,553 10,352 11.6%
PMI Cigarette Market Share
Marlboro 9.7 % 9.6 % 0.1 9.5 % 9.6 % (0.1)
Parliament 7.5 % 7.0 % 0.5 7.6 % 7.1 % 0.5
Virginia S. 3.1 % 3.7 % (0.6) 3.2 % 3.8 % (0.6)
Others 0.5 % 0.7 % (0.2) 0.5 % 0.6 % (0.1)
Total 20.8 % 21.0 % (0.2) 20.8 % 21.1 % (0.3)
In the quarter, the estimated total cigarette market increased by 0.2%.
Excluding the net impact of estimated trade inventory movements, the total
market increased by 1.2%, reflecting the normalization of the market following
the disruptive excise tax increase of 120% in January 2015. The decline in
PMI's cigarette shipment volume was due to lower market share, reflecting the
impact of new brand launches by PMI's principal competitor. The decline in
market share of Virginia S. reflected the continued morphing of Virginia Super
Slims into Parliament Super Slims that began in January 2016.
Year-to-date, the growth of the estimated total cigarette market reflected the
normalization of the market following the disruptive excise tax increase of
120% in January 2015. 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 dynamic as 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 Third-Quarter Nine Months Year-to-Date
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 20.2 23.3 (13.2)% 60.1 68.2 (11.8)%
PMI Shipments (million units) 14,277 17,192 (17.0)% 43,558 49,821 (12.6)%
PMI Cigarette Market Share
Marlboro 28.5 % 18.8 % 9.7 27.9 % 18.7 % 9.2
Fortune 23.4 % 30.9 % (7.5) 24.3 % 29.5 % (5.2)
Jackpot 7.5 % 12.2 % (4.7) 8.3 % 13.0 % (4.7)
Others 11.3 % 12.0 % (0.7) 11.9 % 11.9 % —
Total 70.7 % 73.9 % (3.2) 72.4 % 73.1 % (0.7)
In the quarter, the estimated total cigarette market decreased by 13.2%,
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 of 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 11.8%,
reflecting the same factors as those described for the quarter. The decline in
PMI's cigarette shipment volume and market share reflected the same dynamics
as for the quarter.
LATIN AMERICA & CANADA REGION
2016 Third-Quarter
Net revenues, excluding excise taxes, of $710 million decreased by 11.7%.
Excluding unfavorable currency of $108 million, net revenues, excluding excise
taxes, increased by 1.7%, driven by a favorable pricing variance of $72
million, principally in Argentina and Canada, partly offset by unfavorable
volume/mix of $58 million, mainly due to unfavorable volume in Argentina,
Brazil and Ecuador reflecting the impact of excise tax-driven price increases
in 2016.
Operating companies income of $224 million decreased by 23.8%. Excluding
unfavorable currency of $53 million, operating companies income decreased by
5.8%, principally due to unfavorable volume/mix of $50 million, mainly due to
Argentina, Brazil and Ecuador, and higher costs, mainly inflation-driven in
Argentina. The unfavorable volume/mix and higher costs were partly offset by a
favorable pricing variance.
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 5.8%. Adjusted operating companies income
margin, excluding unfavorable currency, decreased by 2.7 points to 33.9%,
principally driven by the factors mentioned above, as detailed on Schedule 11.
Latin America & Canada OCI Third-Quarter Nine Months Year-to-Date
(in millions) Excl. Excl.
2016 2015 Change Curr. 2016 2015 Change Curr.
OCI $ 224 $ 294 (23.8 )% (5.8 )% $ 677 $ 849 (20.3 )% 5.7 %
Asset impairment & exit costs — — — —
Adjusted OCI $ 224 $ 294 (23.8 )% (5.8 )% $ 677 $ 849 (20.3 )% 5.7 %
Adjusted OCI Margin* 31.5 % 36.6 % (5.1 ) (2.7 ) 32.9 % 36.3 % (3.4 ) (0.2 )
*Margins are calculated as adjusted OCI, divided by net revenues, excluding
excise taxes.
2016 Third-Quarter and Nine Months Year-to-Date
In the quarter, PMI's cigarette shipment volume decreased by 8.0% to 21.2
billion units, predominantly due to Argentina, Brazil and Ecuador, all
reflecting the impact of tax-driven price increases in 2016. While cigarette
shipment volume of Marlboro decreased by 6.2% to 8.3 billion units, its market
share increased by 0.1 point to an estimated 15.4%, primarily driven by
Brazil, up by 0.1 point to 9.8% and Colombia, up by 0.2 points to 9.3%, partly
offset by Argentina, down by 1.7 points to 22.1%, and Mexico, down by 0.4
points to 48.5%. Cigarette shipment volume of Philip Morris decreased by 19.4%
to 3.8 billion units, mainly due to Argentina, partly offset by Canada.
Year-to-date, PMI's cigarette shipment volume decreased by 4.0% to 64.1
billion units, mainly due to Argentina, Brazil and Ecuador, reflecting the
same dynamics as for the quarter, partly offset by Mexico, reflecting a higher
total market. While cigarette shipment volume of Marlboro decreased by 1.2% to
25.6 billion units, its market share increased by 0.6 points to an estimated
15.5%, primarily driven by Brazil, up by 0.4 points to 10.0%, Colombia, up by
0.2 points to 9.2%, and Mexico, up by 1.0 point to 48.3%, partly offset by
Argentina, down by 1.2 points to 23.0%. Cigarette shipment volume of Philip
Morris decreased by 11.1% to 12.6 billion units, mainly due to Argentina,
partly offset by Canada.
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 Third-Quarter Nine Months Year-to-Date
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 8.5 9.9 (14.1)% 26.7 29.8 (10.5)%
PMI Shipments (million units) 6,418 7,648 (16.1)% 20,389 23,234 (12.2)%
PMI Cigarette Market Share
Marlboro 22.1 % 23.8 % (1.7) 23.0 % 24.2 % (1.2)
Parliament 1.9 % 2.1 % (0.2) 1.9 % 2.1 % (0.2)
Philip Morris 39.9 % 44.5 % (4.6) 43.2 % 44.6 % (1.4)
Others 11.6 % 6.8 % 4.8 8.4 % 7.1 % 1.3
Total 75.5 % 77.2 % (1.7) 76.5 % 78.0 % (1.5)
In the quarter, the estimated total cigarette market decreased by 14.1%,
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 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 0.4 points to 16.9% of the total market; PMI's share of the
segment decreased by 1.4 points to 72.5%.
Year-to-date, the decline of the estimated total cigarette market, PMI's
cigarette shipment volume and market share reflected the same dynamics as for
the quarter. The capsule segment was up by 1.5 points to 17.6% of the total
market; PMI's share of the segment increased by 0.3 points to 73.4%.
In Canada, estimated industry size, PMI cigarette shipment volume and market
share performance are shown in the table below.
Canada Key Market Data Third-Quarter Nine Months Year-to-Date
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 6.9 7.0 (1.4)% 19.4 19.7 (1.5)%
PMI Shipments (million units) 2,675 2,725 (1.8)% 7,466 7,424 0.6%
PMI Cigarette Market Share
Belmont 3.9 % 3.6 % 0.3 3.7 % 3.3 % 0.4
Canadian Classics 10.2 % 10.8 % (0.6) 10.2 % 10.5 % (0.3)
Next 11.5 % 11.1 % 0.4 11.3 % 10.7 % 0.6
Others 13.4 % 13.7 % (0.3) 13.1 % 13.2 % (0.1)
Total 39.0 % 39.2 % (0.2) 38.3 % 37.7 % 0.6
In the quarter, the estimated total cigarette market decreased by 1.4%, or by
2.0% excluding the net impact of estimated competitors' trade inventory
movements. The decrease in PMI's cigarette shipment volume was mainly due to:
the lower estimated total market; and lower cigarette market share,
unfavorably impacted by the inventory movements, due to Canadian Classics, and
Accord and Number 7 in "Others," partly offset by the strong performance of
premium Belmont, low-price Next, and super-low price Philip Morris in "Others"
that benefited from down-trading.
Year-to-date, the estimated total cigarette market decreased by 1.5%.
Excluding the impact of estimated competitors' trade inventory movements, the
total market increased by 0.5%, mainly driven by improved consumer spending.
The increase in PMI's cigarette shipment volume was principally due to higher
market share, largely reflecting the strong performance of premium Belmont,
low-price Next, and super-low price Philip Morris in "Others" that benefited
from down-trading.
In Mexico, estimated industry size, PMI cigarette shipment volume and market
share performance are shown in the table below.
Mexico Key Market Data Third-Quarter Nine Months Year-to-Date
Change Change
2016 2015 % / p.p. 2016 2015 % / p.p.
Total Cigarette Market (billion units) 8.8 8.5 3.4% 26.2 24.6 6.2%
PMI Shipments (million units) 6,055 5,980 1.3% 18,013 16,866 6.8%
PMI Cigarette Market Share
Marlboro 48.5 % 48.9 % (0.4) 48.3 % 47.3 % 1.0
Delicados 9.6 % 10.8 % (1.2) 9.9 % 10.8 % (0.9)
Benson & Hedges 4.8 % 4.6 % 0.2 4.7 % 4.6 % 0.1
Others 5.9 % 5.9 % — 5.9 % 5.7 % 0.2
Total 68.8 % 70.2 % (1.4) 68.8 % 68.4 % 0.4
In the quarter, the estimated total cigarette market increased by 3.4%, or by
0.8% 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, unfavorably
distorted by the impact of estimated trade inventory movements mentioned
above, was down by 1.4 points, mainly due to low-price Delicados. PMI's share
of the premium segment, representing 56.6% of the total market, was up by 0.4
points to 93.2%.
Year-to-date, the estimated total cigarette market increased by 6.2%, or by
3.0% excluding the net impact of estimated trade inventory movements,
reflecting the same factors as for the quarter. The increase in PMI's
cigarette shipment volume reflected the higher total market. PMI's cigarette
market share, favorably distorted by the impact of estimated inventory
movements, was up by 0.4 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 56.5% of the total
market, increased by 1.1 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 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 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 June
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 September 30,
($ in millions, except per share data)
(Unaudited)
2016 2015 % Change
Net Revenues $ 19,935 $ 19,422 2.6%
Cost of sales 2,432 2,383 2.1%
Excise Taxes on products (1) 12,953 12,495 3.7%
Gross profit 4,550 4,544 0.1%
Marketing, administration and research costs 1,554 1,566
Asset impairment and exit costs — —
Amortization of intangibles 19 19
Operating Income (2) 2,977 2,959 0.6%
Interest expense, net 220 247
Earnings before income taxes 2,757 2,712 1.7%
Provision for income taxes 764 748 2.1%
Equity (income)/loss in unconsolidated subsidiaries, net (35 ) (20 )
Net Earnings 2,028 1,984 2.2%
Net Earnings attributable to noncontrolling interests 90 42
Net Earnings attributable to PMI $ 1,938 $ 1,942 (0.2)%
Per share data (3):
Basic Earnings Per Share $ 1.25 $ 1.25 —%
Diluted Earnings Per Share $ 1.25 $ 1.25 —%
(1) The segment detail of Excise Taxes on products sold for the quarters ended September 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 $ 2,977 $ 2,959 0.6%
Excluding:
- Amortization of intangibles 19 19
- General corporate expenses (included in marketing, administration 36 33
and research costs above)
Plus: Equity (income)/loss in unconsolidated subsidiaries, net (35 ) (20 )
Operating Companies Income $ 3,067 $ 3,031 1.2%
(3) Net Earnings and weighted-average shares used in the basic and diluted
earnings per share computations for the quarters ended September 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 September 30,
($ in millions)
(Unaudited)
Net Revenues excluding Excise Taxes
European EEMA Asia Latin Total
Union America &
Canada
2016 Net Revenues (1) $ 7,387 $ 5,122 $ 5,113 $ 2,313 $ 19,935
Excise Taxes on products (5,187 ) (3,186 ) (2,977 ) (1,603 ) (12,953 )
Net Revenues excluding Excise Taxes 2,200 1,936 2,136 710 6,982
2015 Net Revenues $ 7,018 $ 5,107 $ 4,880 $ 2,417 $ 19,422
Excise Taxes on products (4,895 ) (3,091 ) (2,896 ) (1,613 ) (12,495 )
Net Revenues excluding Excise Taxes 2,123 2,016 1,984 804 6,927
Variance Currency (6 ) (141 ) 59 (108 ) (196 )
Acquisitions — — — — —
Operations 83 61 93 14 251
Variance Total 77 (80 ) 152 (94 ) 55
Variance Total (%) 3.6 % (4.0 )% 7.7 % (11.7 )% 0.8 %
Variance excluding Currency 83 61 93 14 251
Variance excluding Currency (%) 3.9 % 3.0 % 4.7 % 1.7 % 3.6 %
Variance excluding Currency & Acquisitions 83 61 93 14 251
Variance excluding Currency & Acquisitions (%) 3.9 % 3.0 % 4.7 % 1.7 % 3.6 %
(1) 2016 Currency increased / (decreased) Net Revenues as follows:
European Union $ (59 )
EEMA (441 )
Asia 51
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