REG-Philip Morris International Inc. Philip Morris International Inc. (PMI) Reports 2017 Results; Excluding Currency & Tax Items, Ful
08/02/2018 12:12
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Marlboro 19.7 % 20.8 % (1.1 ) 20.0 % 22.4 % (2.4 )
Chesterfield 17.2 % 11.3 % 5.9 15.9 % 5.5 % 10.4
Philip Morris 32.0 % 37.3 % (5.3 ) 33.0 % 41.6 % (8.6 )
Others 5.7 % 6.1 % (0.4 ) 5.8 % 6.8 % (1.0 )
Total 74.6 % 75.5 % (0.9 ) 74.7 % 76.3 % (1.6 )
For the full year, the estimated total cigarette market increased by 0.2%,
reflecting higher tax declarations by local manufacturers, as well as a
favorable comparison to the full year 2016, which declined by 11.6% mainly due
to the impact of tax-driven price increases. The decrease in PMI's cigarette
shipment volume was mainly due to lower cigarette market share, reflecting the
growth of the low price segment, where local manufacturers are exempt from
paying minimum excise tax, resulting in widened price gaps with premium
Marlboro and mid-price Philip Morris , partly offset by low-price Chesterfield
that benefited from successful brand portfolio consolidation of a low-price
brand in "Others."
In the quarter, the estimated total cigarette market decreased by 2.5%, mainly
due to the impact of excise-tax driven price increases. The decrease in PMI's
cigarette shipment volume was mainly due to the lower total market and lower
cigarette market share, largely reflecting the same dynamics as for the full
year.
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 Fourth-Quarter Full-Year
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Market (billion units) 6.6 6.8 (2.6 )% 24.6 26.3 (6.3 )%
PMI Shipments (million units) 2,477 2,584 (4.1 )% 9,259 10,049 (7.9 )%
PMI Market Share
Belmont 4.3 % 3.8 % 0.5 4.1 % 3.7 % 0.4
Canadian Classics 9.5 % 10.3 % (0.8 ) 9.5 % 10.2 % (0.7 )
Next 11.6 % 11.6 % — 11.5 % 11.3 % 0.2
Others* 12.0 % 13.1 % (1.1 ) 12.2 % 13.2 % (1.0 )
Total 37.4 % 38.8 % (1.4 ) 37.3 % 38.4 % (1.1 )
*Includes heated tobacco units.
For the full year, the estimated total market decreased by 6.3%, mainly due to
the impact of price increases. The decrease in PMI's shipment volume mainly
reflected the lower total market, as well as lower cigarette market share,
unfavorably impacted by estimated net trade inventory movements.
In the quarter, the estimated total market decreased by 2.6%, mainly
reflecting the same dynamics as for the full year. The decrease in PMI's
shipment volume and market share reflected the impact of 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 Fourth-Quarter Full-Year
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Cigarette Market (billion units) 10.2 9.7 4.5 % 35.8 36.2 (1.1 )%
PMI Cigarette Shipments (million units) 7,260 7,066 2.7 % 24,351 25,080 (2.9 )%
PMI Cigarette Market Share
Marlboro 52.4 % 52.1 % 0.3 49.4 % 49.0 % 0.4
Delicados 8.3 % 9.5 % (1.2 ) 8.3 % 9.7 % (1.4 )
Benson & Hedges 5.1 % 5.0 % 0.1 5.0 % 4.7 % 0.3
Others 5.5 % 5.9 % (0.4 ) 5.4 % 5.9 % (0.5 )
Total 71.3 % 72.5 % (1.2 ) 68.1 % 69.3 % (1.2 )
For the full year, the estimated total cigarette market decreased by 1.1%, or
increased by 1.2% excluding the net impact of estimated trade inventory
movements. The decrease in PMI's cigarette shipment volume mainly reflected
the lower total cigarette market, as well as lower cigarette market share. The
decrease of PMI's cigarette market share largely reflected the net impact of
the estimated trade inventory movements, as well as lower share of Delicados ,
impacted by competitive pressure in the low price segment.
In the quarter, the estimated total cigarette market increased by 4.5%, or by
3.1% excluding the net impact of estimated trade inventory movements. The
increase in PMI's cigarette shipment volume mainly reflected the higher total
cigarette market. The decrease of PMI's cigarette market share largely
reflected the same dynamics as for the full year.
Philip Morris International: Who We Are
We are a leading international tobacco company engaged in the manufacture and
sale of cigarettes and other nicotine-containing products in markets outside
the United States of America. We’re building our future on smoke-free
products that are a much better consumer choice than continuing to smoke
cigarettes. Through multidisciplinary capabilities in product development,
state-of-the-art facilities and scientific substantiation, we aim to ensure
that our smoke-free products meet adult consumer preferences and rigorous
regulatory requirements. Our vision is that these products ultimately replace
cigarettes to the benefit of adult smokers, society, our company and our
shareholders. 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 or if regulation or taxation do not
differentiate between such products and cigarettes; 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, 2017. 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,
($
in millions, except per share data)
(Unaudited)
2017 2016 % Change
Net Revenues $ 21,585 $ 19,189 12.5 %
Cost of sales 3,001 2,499 20.1 %
Excise Taxes on products (1) 13,291 12,218 8.8 %
Gross profit 5,293 4,472 18.4 %
Marketing, administration and research costs 1,952 1,842
Asset impairment and exit costs — —
Amortization of intangibles 23 18
Operating Income (2) 3,318 2,612 27.0 %
Interest expense, net 259 201
Earnings before income taxes 3,059 2,411 26.9 %
Provision for income taxes 2,265 658 100+%
Equity (income)/loss in unconsolidated subsidiaries, net (2 ) (22 )
Net Earnings 796 1,775 (55.2 )%
Net Earnings attributable to noncontrolling interests 102 64
Net Earnings attributable to PMI $ 694 $ 1,711 (59.4 )%
Per share data (3):
Basic Earnings Per Share $ 0.44 $ 1.10 (60.0 )%
Diluted Earnings Per Share $ 0.44 $ 1.10 (60.0 )%
(1) The segment detail of Excise Taxes on products sold for the quarters ended
December 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 $ 3,318 $ 2,612 27.0 %
Excluding:
- Amortization of intangibles 23 18
- General corporate expenses (included in marketing, administration and 38 42
research costs above)
Plus: Equity (income)/loss in unconsolidated subsidiaries, net (2 ) (22 )
Operating Companies Income $ 3,381 $ 2,694 25.5 %
(3) Net Earnings and weighted-average shares used in the basic and diluted
earnings per share computations for the quarters ended December 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
December 31,
($ in millions)
(Unaudited)
Net Revenues excluding Excise Taxes
European Union EEMA Asia Latin America & Canada Total
2017 Net Revenues (1) $ 7,424 $ 4,868 $ 6,584 $ 2,709 $ 21,585
Excise Taxes on products (5,160 ) (3,104 ) (3,149 ) (1,878 ) (13,291 )
Net Revenues excluding Excise Taxes 2,264 1,764 3,435 831 8,294
2016 Net Revenues $ 6,465 $ 4,636 $ 5,517 $ 2,571 $ 19,189
Excise Taxes on products (4,521 ) (2,838 ) (3,073 ) (1,786 ) (12,218 )
Net Revenues excluding Excise Taxes 1,944 1,798 2,444 785 6,971
Variance Currency 139 (23 ) (104 ) 2 14
Acquisitions — — — — —
Operations 181 (11 ) 1,095 44 1,309
Variance Total 320 (34 ) 991 46 1,323
Variance Total (%) 16.5 % (1.9 )% 40.5 % 5.9 % 19.0 %
Variance excluding Currency 181 (11 ) 1,095 44 1,309
Variance excluding Currency (%) 9.3 % (0.6 )% 44.8 % 5.6 % 18.8 %
Variance excluding Currency & Acquisitions 181 (11 ) 1,095 44 1,309
Variance excluding Currency & Acquisitions (%) 9.3 % (0.6 )% 44.8 % 5.6 % 18.8 %
(1) 2017 Currency increased / (decreased) Net Revenues as follows:
European Union $ 455
EEMA (293 )
Asia (141 )
Latin America & Canada (78 )
$ (57 )
Schedule 3
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Selected
Financial Data by Business Segment
For the Quarters Ended
December 31,
($ in millions)
(Unaudited)
Operating Companies Income
European Union EEMA Asia Latin America & Canada Total
2017 Operating Companies Income $ 992 $ 700 $ 1,396 $ 293 $ 3,381
2016 Operating Companies Income 898 627 908 261 2,694
Variance
2016 Asset impairment and exit costs — — — — —
2017 Asset impairment and exit costs — — — — —
Currency 39 264 (97 ) (10 ) 196
Acquisitions — — — — —
Operations 55 (191 ) 585 42 491
Variance Total 94 73 488 32 687
Variance Total (%) 10.5 % 11.6 % 53.7 % 12.3 % 25.5 %
Variance excluding Currency 55 (191 ) 585 42 491
Variance excluding Currency (%) 6.1 % (30.5 )% 64.4 % 16.1 % 18.2 %
Variance excluding Currency & Acquisitions 55 (191 ) 585 42 491
Variance excluding Currency & Acquisitions (%) 6.1 % (30.5 )% 64.4 % 16.1 % 18.2 %
Schedule 4
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Diluted
Earnings Per Share
For the Quarters Ended December 31,
($
in millions, except per share data)
(Unaudited)
Diluted
E.P.S.
2017 Diluted Earnings Per Share $ 0.44 ((1))
2016 Diluted Earnings Per Share $ 1.10 ((1))
Change $ (0.66 )
% Change (60.0 )%
Reconciliation:
2016 Diluted Earnings Per Share $ 1.10 ((1))
Special Items:
2016 Asset impairment and exit costs —
2016 Tax items —
2017 Asset impairment and exit costs —
2017 Tax items (0.88 )
Currency 0.01
Interest (0.02 )
Change in tax rate (0.04 )
Operations 0.27 ((2))
2017 Diluted Earnings Per Share $ 0.44 ((1))
(1) Basic and diluted EPS were calculated using the following (in
millions):
Q4 Q4
2017 2016
Net Earnings attributable to PMI $ 694 $ 1,711
Less distributed and undistributed earnings attributable
to share-based payment awards 4 5
Net Earnings for basic and diluted EPS $ 690 $ 1,706
Weighted-average shares for basic EPS 1,553 1,552
Plus Contingently Issuable Performance Stock Units (PSUs) 1 —
Weighted-average shares for diluted EPS 1,554 1,552
(2) Includes the impact of shares outstanding and share-based
payments
Schedule 5
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Condensed
Statements of Earnings
For the Years Ended December 31,
($
in millions, except per share data)
(Unaudited)
2017 2016 % Change
Net Revenues $ 78,098 $ 74,953 4.2 %
Cost of sales 10,432 9,391 11.1 %
Excise Taxes on products (1) 49,350 48,268 2.2 %
Gross profit 18,316 17,294 5.9 %
Marketing, administration and research costs 6,725 6,405
Asset impairment and exit costs — —
Amortization of intangibles 88 74
Operating Income (2) 11,503 10,815 6.4 %
Interest expense, net 914 891
Earnings before income taxes 10,589 9,924 6.7 %
Provision for income taxes 4,307 2,768 55.6 %
Equity (income)/loss in unconsolidated subsidiaries, net (59 ) (94 )
Net Earnings 6,341 7,250 (12.5 )%
Net Earnings attributable to noncontrolling interests 306 283
Net Earnings attributable to PMI $ 6,035 $ 6,967 (13.4 )%
Per share data (3):
Basic Earnings Per Share $ 3.88 $ 4.48 (13.4 )%
Diluted Earnings Per Share $ 3.88 $ 4.48 (13.4 )%
(1) The segment detail of Excise Taxes on products sold for the year ended
December 31, 2017 and 2016 is shown on Schedule 6.
(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 $ 11,503 $ 10,815 6.4 %
Excluding:
- Amortization of intangibles 88 74
- General corporate expenses (included in marketing, administration and 164 161
research costs above)
Plus: Equity (income)/loss in unconsolidated subsidiaries, net (59 ) (94 )
Operating Companies Income $ 11,814 $ 11,144 6.0 %
(3) Net Earnings and weighted-average shares used in the basic and diluted
Earnings Per Share computations for the year ended December 31, 2017 and 2016
are shown on Schedule 8, Footnote 1.
Schedule 6
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Selected
Financial Data by Business Segment
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