REG-Philip Morris International Inc. Philip Morris International Inc. (PMI) Reports 2017 First-Quarter Results; Increases, for Favora
20/04/2017 12:02
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17,734 18,873 (6.0 )%
Lark 4,566 4,302 6.1 %
Parliament 2,326 2,410 (3.5 )%
Others 30,516 39,637 (23.0 )%
Total Cigarettes 55,142 65,222 (15.5 )%
Heated Tobacco Units 4,145 435 +100%
Total Asia 59,287 65,657 (9.7 )%
As shown in the table above, PMI's total shipment volume decreased by 9.7% to
59.3 billion units, mainly due to cigarette volume declines in: Indonesia;
Japan; Korea; Pakistan, reflecting the impact of excise tax-driven price
increases and an increase in the prevalence of illicit trade; and the
Philippines; partly offset by higher heated tobacco unit volume in Japan.
The decrease in cigarette shipment volume of Marlboro was mainly due to Japan,
primarily reflecting out-switching to Marlboro HeatSticks. The increase in
cigarette shipment volume of Lark was driven by Japan and Korea. The decrease
in cigarette shipment volume of Parliament was mainly due to Japan. The
decrease in cigarette shipment volume of "Others" was mainly due to local,
low-margin brands in Pakistan and the Philippines.
Asia Key Market Commentaries
In Indonesia, estimated cigarette industry size, PMI cigarette shipment
volume, cigarette market share and segmentation performance are shown in the
tables below.
Indonesia Key Market Data First-Quarter
Change
2017 2016 % / p.p.
Total Cigarette Market (billion units) 71.0 75.2 (5.5 )%
PMI Cigarette Shipments (million units) 23,399 25,142 (6.9 )%
PMI Cigarette Market Share
Sampoerna A 13.9 % 14.3 % (0.4 )
Dji Sam Soe 6.3 % 6.6 % (0.3 )
Sampoerna U 5.0 % 4.5 % 0.5
Others 7.8 % 8.1 % (0.3 )
Total 33.0 % 33.5 % (0.5 )
Indonesia Segmentation Data First-Quarter
Change
2017 2016 p.p.
Segment % of Total Market
Hand-Rolled Kretek (SKT) 18.2 % 18.8 % (0.6 )
Machine-Made Kretek (SKM) 76.3 % 75.2 % 1.1
Whites (SPM) 5.5 % 6.0 % (0.5 )
Total 100.0 % 100.0 % —
PMI % Share of Segment
Hand-Rolled Kretek (SKT) 38.0 % 38.1 % (0.1 )
Machine-Made Kretek (SKM) 28.6 % 28.5 % 0.1
Whites (SPM) 76.5 % 81.3 % (4.8 )
The estimated total cigarette market decreased by 5.5%, primarily reflecting
the impact of tax-driven price increases. The decrease in PMI's cigarette
shipments was mainly due to the lower estimated total market. The decline of
PMI's cigarette market share mainly reflected the decline of PMI's share of
the SPM segment and the soft performance of PMI's SKT portfolio, broadly in
line with industry trends.
In Japan, estimated industry size, PMI shipment volume and market share
performance, shown in the table below, include cigarettes and PMI's heated
tobacco units.
Japan Key Market Data First-Quarter
Change
2017 2016 % / p.p.
Total Market (billion units) 40.6 43.9 (7.4 )%
PMI Shipments (million units)
Cigarettes 10,701 11,551 (7.4 )%
Heated Tobacco Units 4,145 435 +100%
Total 14,846 11,986 23.9 %
PMI Market Share
Marlboro 10.0 % 10.6 % (0.6 )
Marlboro HeatSticks 7.1 % 0.8 % 6.3
Parliament 2.2 % 2.3 % (0.1 )
Lark 9.2 % 9.2 % —
Others 1.5 % 1.7 % (0.2 )
Total 30.0 % 24.6 % 5.4
The estimated total market decreased by 7.4%, or by 4.3% excluding the net
impact of estimated trade inventory movements mainly associated with PMI's
principal competitor's products in the first quarter of 2016 ahead of its
retail price increases. PMI's shipment volume increased by 11.6%, excluding
the net impact of distributor inventory movements primarily associated with
the timing of Marlboro HeatSticks in transit to Japan, mainly reflecting
higher share driven by Marlboro HeatSticks.
In Korea, estimated cigarette industry size, PMI cigarette shipment volume and
cigarette market share performance are shown in the table below.
Korea Key Market Data First-Quarter
Change
2017 2016 % / p.p.
Total Cigarette Market (billion units) 16.1 17.0 (5.2 )%
PMI Cigarette Shipments (million units) 3,049 3,543 (13.9 )%
PMI Cigarette Market Share
Marlboro 8.7 % 9.4 % (0.7 )
Parliament 8.0 % 7.5 % 0.5
Virginia S. 2.0 % 3.4 % (1.4 )
Others 0.4 % 0.6 % (0.2 )
Total 19.1 % 20.9 % (1.8 )
The estimated total cigarette market decreased by 5.2%, primarily reflecting a
challenging comparison with the first quarter of 2016 which increased by
40.9%. The decrease in PMI's cigarette shipment volume was due to the lower
total market, as well as lower cigarette market share, which was unfavorably
impacted by the estimated trade inventory movements.
In the Philippines, estimated cigarette industry size, PMI cigarette shipment
volume and cigarette market share performance are shown in the table below.
Philippines Key Market Data First-Quarter
Change
2017 2016 % / p.p.
Total Cigarette Market (billion units) 16.6 19.6 (15.6 )%
PMI Cigarette Shipments (million units) 10,955 14,474 (24.3 )%
PMI Cigarette Market Share
Marlboro 32.5 % 27.5 % 5.0
Fortune 17.4 % 25.0 % (7.6 )
Jackpot 5.9 % 9.0 % (3.1 )
Others 10.3 % 12.2 % (1.9 )
Total 66.1 % 73.7 % (7.6 )
The estimated total cigarette market decreased by 15.6%, mainly due to the
impact of excise tax-driven price increases, including those on PMI's full
brand portfolio in the fourth quarter of 2016, as well as a high prevalence of
illicit trade. The decline in PMI's cigarette shipment volume was due to the
lower total cigarette market, as well as lower cigarette market share,
particularly of PMI's low and super-low price brands as a result of the timing
of competitors' price increases, and widened price gaps to PMI's principal
competitor's discounted brands, partly offset by Marlboro, which benefited
from in-switching from lower-priced brands.
LATIN AMERICA & CANADA REGION
Net revenues, excluding excise taxes, of $606 million decreased by 6.8%.
Excluding unfavorable currency of $22 million, net revenues, excluding excise
taxes, decreased by 3.4%, primarily reflecting unfavorable volume/mix of $87
million, mainly due to Argentina, Canada and Mexico, partly offset by a
favorable pricing variance of $65 million, principally in Argentina, Canada
and Mexico.
Operating companies income of $177 million decreased by 22.7%. Excluding
unfavorable currency of $26 million, operating companies income decreased by
11.4%, primarily due to: unfavorable volume/mix of $75 million, mainly due to
Argentina, Canada and Mexico; and higher costs, mainly inflation-driven in
Argentina; partly offset by a favorable pricing variance.
Adjusted operating companies income and margin are shown in the table below
and detailed on Schedule 8. Adjusted operating companies income, excluding
unfavorable currency, decreased by 11.4%. Adjusted operating companies income
margin, excluding unfavorable currency, decreased by 2.9 points to 32.3%,
principally driven by the factors mentioned above, as detailed on Schedule 8.
Latin America & Canada OCI First-Quarter
(in millions) Excl.
2017 2016 Change Curr.
OCI $ 177 $ 229 (22.7 )% (11.4 )%
Asset impairment & exit costs — —
Adjusted OCI $ 177 $ 229 (22.7 )% (11.4 )%
Adjusted OCI Margin* 29.2 % 35.2 % (6.0 ) (2.9 )
*Margins are calculated as adjusted OCI, divided by net revenues, excluding
excise taxes.
Latin America & Canada PMI Shipment Commentaries
Latin America & Canada PMI Shipment Volume First-Quarter
(million units)
2017 2016 Change
Cigarettes 19,296 21,700 (11.1 )%
Heated Tobacco Units 1 — — %
Total Latin America & Canada 19,297 21,700 (11.1 )%
Latin America & Canada PMI Shipment Volume by Brand First-Quarter
(million units)
2017 2016 Change
Cigarettes
Marlboro 7,625 8,880 (14.1 )%
Philip Morris 3,440 4,631 (25.7 )%
Chesterfield 1,887 171 +100.0%
Others 6,344 8,018 (20.9 )%
Total Cigarettes 19,296 21,700 (11.1 )%
Heated Tobacco Units 1 — — %
Total Latin America & Canada 19,297 21,700 (11.1 )%
As shown in the table above, PMI's total shipment volume decreased by 11.1% to
19.3 billion units, mainly due to cigarette volume declines in Argentina,
Canada and Mexico.
The decrease in cigarette shipment volume of Marlboro was mainly due to
Argentina and Mexico. The decrease in cigarette shipment volume of Philip
Morris was mainly due to Argentina. The increase in cigarette shipment volume
of Chesterfield was driven by Argentina, Colombia and Venezuela. The decrease
in cigarette shipment volume of "Others" was mainly due to largely local,
lower-margin brands in Canada, Colombia and Mexico.
Latin America & Canada Key Market Commentaries
In Argentina, estimated cigarette industry size, PMI cigarette shipment volume
and cigarette market share performance are shown in the table below.
Argentina Key Market Data First-Quarter
Change
2017 2016 % / p.p.
Total Cigarette Market (billion units) 9.3 9.8 (4.3 )%
PMI Cigarette Shipments (million units) 6,948 7,526 (7.7 )%
PMI Cigarette Market Share
Marlboro 20.2 % 24.0 % (3.8 )
Chesterfield 14.5 % 1.6 % 12.9
Philip Morris 33.9 % 44.6 % (10.7 )
Others 5.9 % 7.0 % (1.1 )
Total 74.5 % 77.2 % (2.7 )
The estimated total cigarette market decreased by 4.3%, primarily reflecting
the impact of excise tax increases in May 2016, which drove a more than 50%
increase in average industry retail prices, as well as retail price increases
in the first quarter of 2017. The decrease in PMI's cigarette shipment volume
was mainly due to the lower total market, as well as lower cigarette market
share, impacted by down-trading of Marlboro and mid-price Philip Morris,
partly offset by low-price Chesterfield that also benefited from its
successful morphing from Next.
In Canada, estimated industry size, PMI shipment volume and market share
performance, shown in the table below, include cigarettes and PMI's heated
tobacco units.
Canada Key Market Data First-Quarter
Change
2017 2016 % / p.p.
Total Market (billion units) 4.9 5.6 (12.4 )%
PMI Shipments (million units) 1,776 2,184 (18.7 )%
PMI Market Share
Belmont 3.6 % 3.7 % (0.1 )
Canadian Classics 8.9 % 10.7 % (1.8 )
Next 10.9 % 11.6 % (0.7 )
Others* 11.5 % 13.2 % (1.7 )
Total 34.9 % 39.2 % (4.3 )
*Includes heated tobacco units.
The estimated total market decreased by 12.4%, mainly reflecting a difficult
comparison with the first quarter of 2016, which grew by 1.4%. Excluding the
impact of estimated trade inventory movements associated with retail price
increases in January 2017, the total market decreased by 8.8%. The decrease in
PMI's shipment volume was mainly due to the lower total market, as well as
lower cigarette market share, which largely reflected the unfavorable impact
of the estimated trade inventory movements.
In Mexico, estimated cigarette industry size, PMI cigarette shipment volume
and cigarette market share performance are shown in the table below.
Mexico Key Market Data First-Quarter
Change
2017 2016 % / p.p.
Total Cigarette Market (billion units) 7.9 8.9 (11.3 )%
PMI Cigarette Shipments (million units) 5,059 5,982 (15.4 )%
PMI Cigarette Market Share
Marlboro 46.0 % 47.5 % (1.5 )
Delicados 8.2 % 9.9 % (1.7 )
Benson & Hedges 4.9 % 4.2 % 0.7
Others 5.2 % 5.9 % (0.7 )
Total 64.3 % 67.5 % (3.2 )
The estimated total cigarette market decreased by 11.3%. Excluding the impact
of estimated trade inventory movements associated with industry retail price
increases in January 2017, the estimated total cigarette market increased by
1.8%. The decrease in PMI's cigarette shipment volume mainly reflected the
lower total cigarette market. The decline of PMI's cigarette market share
largely reflected the unfavorable impact of the estimated trade inventory
movements.
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://www.pmi.com) and www.pmiscience.com
(http://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: excise tax increases and discriminatory tax
structures; increasing marketing and regulatory restrictions that could reduce
our competitiveness, eliminate our ability to communicate with adult
consumers, or ban certain of our 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, natural
disasters and conflicts; 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,
and limitations on the ability to repatriate funds; 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-K for the year ended December
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 March 31,
($ in millions, except per share data)
(Unaudited)
2017 2016 % Change
Net Revenues $ 16,556 $ 16,788 (1.4)%
Cost of sales 2,177 2,096 3.9%
Excise Taxes on products (1) 10,492 10,705 (2.0)%
Gross profit 3,887 3,987 (2.5)%
Marketing, administration and research costs 1,469 1,496
Asset impairment and exit costs — —
Amortization of intangibles 22 18
Operating Income (2) 2,396 2,473 (3.1)%
Interest expense, net 219 247
Earnings before income taxes 2,177 2,226 (2.2)%
Provision for income taxes 541 630 (14.1)%
Equity (income)/loss in unconsolidated subsidiaries, net (22 ) (9 )
Net Earnings 1,658 1,605 3.3%
Net Earnings attributable to noncontrolling interests 68 75
Net Earnings attributable to PMI $ 1,590 $ 1,530 3.9%
Per share data (3):
Basic Earnings Per Share $ 1.02 $ 0.98 4.1%
Diluted Earnings Per Share $ 1.02 $ 0.98 4.1%
(1) The segment detail of Excise Taxes on products sold for the
quarters ended March 31, 2017 and 2016 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:
2017 2016 % Change
Operating Income $ 2,396 $ 2,473 (3.1)%
Excluding:
- Amortization of intangibles 22 18
- General corporate expenses (included in marketing, administration and 51 46
research costs above)
Plus: Equity (income)/loss in unconsolidated subsidiaries, net (22 ) (9 )
Operating Companies Income $ 2,491 $ 2,546 (2.2)%
(3) Net Earnings and weighted-average shares used in the basic and
diluted earnings per share computations for the quarters ended March
31, 2017 and 2016 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 March 31,
($ in millions)
(Unaudited)
Net Revenues excluding Excise Taxes
European Union EEMA Asia Latin America & Canada Total
2017 Net Revenues (1) $ 5,889 $ 3,695 $ 4,838 $ 2,134 $ 16,556
Excise Taxes on products (4,149 ) (2,218 ) (2,597 ) (1,528 ) (10,492 )
Net Revenues excluding Excise Taxes 1,740 1,477 2,241 606 6,064
2016 Net Revenues $ 6,143 $ 3,997 $ 4,689 $ 1,959 $ 16,788
Excise Taxes on products (4,280 ) (2,395 ) (2,721 ) (1,309 ) (10,705 )
Net Revenues excluding Excise Taxes 1,863 1,602 1,968 650 6,083
Variance Currency (55 ) (99 ) 56 (22 ) (120 )
Acquisitions — — — — —
Operations (68 ) (26 ) 217 (22 ) 101
Variance Total (123 ) (125 ) 273 (44 ) (19 )
Variance Total (%) (6.6 )% (7.8 )% 13.9 % (6.8 )% (0.3 )%
Variance excluding Currency (68 ) (26 ) 217 (22 ) 101
Variance excluding Currency (%) (3.7 )% (1.6 )% 11.0 % (3.4 )% 1.7 %
Variance excluding Currency & Acquisitions (68 ) (26 ) 217 (22 ) 101
Variance excluding Currency & Acquisitions (%) (3.7 )% (1.6 )% 11.0 % (3.4 )% 1.7 %
(1) 2017 Currency increased / (decreased) Net Revenues as follows:
European Union $ (203 )
EEMA (541 )
Asia 96
Latin America & Canada (138 )
$ (786 )
Schedule 3
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Selected Financial Data by Business Segment
For the Quarters Ended March 31,
($ in millions)
(Unaudited)
Operating Companies Income
European Union EEMA Asia Latin America & Canada Total
2017 $ 772 $ 690 $ 852 $ 177 $ 2,491
2016 906 633 778 229 2,546
% Change (14.8 )% 9.0 % 9.5 % (22.7 )% (2.2 )%
Reconciliation:
For the quarter ended March 31, 2016 $ 906 $ 633 $ 778 $ 229 $ 2,546
2016 Asset impairment and exit costs — — — — —
2017 Asset impairment and exit costs — — — — —
Acquired businesses — — — — —
Currency (28 ) (12 ) 54 (26 ) (12 )
Operations (106 ) 69 20 (26 ) (43 )
For the quarter ended March 31, 2017 $ 772 $ 690 $ 852 $ 177 $ 2,491
Schedule 4
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Diluted Earnings Per Share
For the Quarters Ended March 31,
($ in millions, except per share data)
(Unaudited)
Diluted
E.P.S.
2017 Diluted Earnings Per Share $ 1.02 ((1))
2016 Diluted Earnings Per Share $ 0.98 ((1))
Change $ 0.04
% Change 4.1 %
Reconciliation:
2016 Diluted Earnings Per Share $ 0.98 ((1))
Special Items:
2016 Asset impairment and exit costs —
2016 Tax items —
2017 Asset impairment and exit costs —
2017 Tax items 0.04
Currency —
Interest 0.02
Change in tax rate 0.01
Operations (0.03 ) ((2))
2017 Diluted Earnings Per Share $ 1.02 ((1))
(1) Basic and diluted EPS were calculated using the following (in
millions):
Q1 2017 Q1 2016
Net Earnings attributable to PMI $ 1,590 $ 1,530
Less distributed and undistributed earnings attributable
to share-based payment awards 3 5
Net Earnings for basic and diluted EPS $ 1,587 $ 1,525
Weighted-average shares for basic EPS 1,552 1,550
Plus Contingently Issuable Performance Stock Units (PSUs) 1 —
Weighted-average shares for diluted EPS 1,553 1,550
(2) Includes the impact of shares outstanding and share-based
payments
Schedule 5
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Condensed Balance Sheets
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