REG-Philip Morris International Inc. Philip Morris International Inc. (PMI) Reports 2017 Second-Quarter Results; Revises 2017 Full-Ye
20/07/2017 12:07
- Part 2: For the preceding part double click ID:nBw7CWzW6a
market share, principally due to
Marlboro, reflecting the same dynamics as in the quarter, as well as a
challenging comparison with the first six months of 2016 in which the market
share of Marlboro grew by 1.4 points.
EASTERN EUROPE, MIDDLE EAST & AFRICA REGION (EEMA)
2017 Second-Quarter
Net revenues, excluding excise taxes, of $1.7 billion increased by 0.7%.
Excluding unfavorable currency of $62 million, net revenues, excluding excise
taxes, increased by 4.4%, principally reflecting a favorable pricing variance
of $127 million, driven mainly by North Africa, notably Egypt, Turkey and
Ukraine. The favorable pricing variance was partly offset by unfavorable
volume/mix of $54 million, mainly due to lower total markets in Russia, Saudi
Arabia, mainly resulting from the implementation of a new excise tax, and
Turkey, partly offset by North Africa.
Operating companies income of $733 million decreased by 7.7%. Excluding
unfavorable currency of $87 million, operating companies income increased by
3.3%, principally reflecting a favorable pricing variance, partly offset by
unfavorable volume/mix of $43 million, mainly in Russia, Saudi Arabia and
Turkey, partly offset by North Africa, and higher costs, primarily reflecting
a challenging cost comparison to the second quarter of 2016 in which costs
were favorable.
Adjusted operating companies income and margin are shown in the table below
and detailed on Schedule 12. Adjusted operating companies income, excluding
unfavorable currency, increased by 3.3%. Adjusted operating companies income
margin, excluding unfavorable currency, decreased by 0.5 points to 47.2%,
reflecting the factors mentioned above, as detailed on Schedule 12.
EEMA OCI Second-Quarter Six Months Year-to-Date
(in millions) Excl. Excl.
2017 2016 Change Curr. 2017 2016 Change Curr.
OCI $ 733 $ 794 (7.7 )% 3.3 % $ 1,423 $ 1,427 (0.3 )% 6.7 %
Asset impairment & exit costs — — — —
Adjusted OCI $ 733 $ 794 (7.7 )% 3.3 % $ 1,423 $ 1,427 (0.3 )% 6.7 %
Adjusted OCI Margin* 43.8 % 47.7 % (3.9 ) (0.5 ) 45.1 % 43.7 % 1.4 2.2
*Margins are calculated as adjusted OCI, divided by net revenues, excluding
excise taxes.
EEMA PMI Shipment Commentaries
EEMA PMI Shipment Volume Second-Quarter Six Months Year-to-Date
(million units)
2017 2016 Change 2017 2016 Change
Cigarettes 64,414 68,332 (5.7 )% 120,988 131,458 (8.0 )%
Heated Tobacco Units 229 8 +100.0% 334 10 +100.0%
Total EEMA 64,643 68,340 (5.4 )% 121,322 131,468 (7.7 )%
EEMA PMI Shipment Volume by Brand Second-Quarter Six Months Year-to-Date
(million units)
2017 2016 Change 2017 2016 Change
Cigarettes
Marlboro 17,037 17,391 (2.0 )% 33,153 34,923 (5.1 )%
L&M 11,791 13,160 (10.4 )% 23,280 26,025 (10.5 )%
Bond Street 9,844 10,901 (9.7 )% 17,976 20,151 (10.8 )%
Parliament 8,273 8,938 (7.4 )% 14,815 16,239 (8.8 )%
Others 17,469 17,942 (2.6 )% 31,764 34,120 (6.9 )%
Total Cigarettes 64,414 68,332 (5.7 )% 120,988 131,458 (8.0 )%
Heated Tobacco Units 229 8 +100.0% 334 10 +100.0%
Total EEMA 64,643 68,340 (5.4 )% 121,322 131,468 (7.7 )%
2017 Second-Quarter and Six Months Year-to-Date
In the quarter, PMI's total shipment volume decreased by 5.4% to 64.6 billion
units, mainly due to cigarette volume declines in: Russia; Saudi Arabia,
notably reflecting the implementation of a new excise tax in June 2017
resulting in a doubling of retail prices, from SAR 12 to SAR 24 per pack in
the case of Marlboro; Turkey and Ukraine, partly offset by North Africa. The
decrease in cigarette shipment volume of Marlboro was mainly due to Saudi
Arabia, partly offset by North Africa. The decrease in cigarette shipment
volume of L&M was mainly due to North Africa, Russia, Saudi Arabia and
Turkey, partly offset by Kazakhstan. The decrease in cigarette shipment volume
of Bond Street was mainly due to Kazakhstan and Ukraine. The decrease in
cigarette shipment volume of Parliament was mainly due to Russia, Saudi Arabia
and Turkey, partly offset by Kazakhstan. The decrease in cigarette shipment
volume of "Others" was mainly due to low-price Next/Dubliss in Russia, due to
the competitive environment, while largely local, lower-margin brands in
Russia and Ukraine were successfully morphed into Philip Morris.
Year-to-date, PMI's total shipment volume decreased by 7.7% to 121.3 billion
units, mainly reflecting cigarette volume declines in Russia, Saudi Arabia,
Turkey and Ukraine. The decrease in cigarette shipment volume of Marlboro was
mainly due to Saudi Arabia, partly offset by North Africa. The decrease in
cigarette shipment volume of L&M was mainly due to North Africa, Russia,
Turkey and Ukraine, partly offset by Kazakhstan. The decrease in cigarette
shipment volume of Bond Street was mainly due to Kazakhstan, Russia and
Ukraine. The decrease in cigarette shipment volume of Parliament was mainly
due to Russia, Saudi Arabia and Turkey. The decrease in cigarette shipment
volume of "Others" was mainly due to the same dynamics as in the quarter.
EEMA Key Market Commentaries
In North Africa, estimated cigarette industry size, PMI cigarette shipment
volume and cigarette market share performance are shown in the table below.
North Africa Key Market Data Second-Quarter Six Months Year-to-Date
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Cigarette Market (billion units) 34.2 34.2 0.1 % 67.8 68.5 (1.0 )%
PMI Cigarette Shipments (million units) 7,616 7,184 6.0 % 16,395 17,414 (5.8 )%
PMI Cigarette Market Share
Marlboro 8.9 % 6.9 % 2.0 8.5 % 7.1 % 1.4
L&M 11.1 % 11.9 % (0.8 ) 11.5 % 13.0 % (1.5 )
Others 2.6 % 3.1 % (0.5 ) 2.7 % 3.1 % (0.4 )
Total 22.6 % 21.9 % 0.7 22.7 % 23.2 % (0.5 )
In the quarter, the estimated total cigarette market was essentially flat. The
increase in PMI's cigarette shipment volume, up by 3.3% excluding estimated
distributor inventory movements, mainly reflected higher cigarette market
share, notably driven by the recovery of Marlboro in Algeria following product
changes to address the lower-than-anticipated acceptance of Architecture 2.0
in 2016, partly offset by L&M in Egypt as a result of widening price gaps
with competitors' brands.
Year-to-date, the estimated total cigarette market decreased by 1.0%, mainly
due to Algeria. The decrease in PMI's cigarette shipment volume, down by 3.1%
excluding estimated distributor inventory movements, was mainly due to the
lower total cigarette market, as well as lower cigarette market share, notably
of L&M in Egypt as a result of widening price gaps with competitors'
brands, partly offset by the recovery of Marlboro in Algeria, reflecting the
same dynamic as in the quarter.
In Russia, estimated industry size and PMI shipment volume, shown in the table
below, include cigarettes and PMI's heated tobacco units. May quarter-to-date
and year-to-date market share performance, as measured by Nielsen and shown in
the table below, reflects that of cigarettes.
Russia Key Market Data Second-Quarter Six Months Year-to-Date
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Market (billion units) 68.6 73.1 (6.2 )% 124.4 132.5 (6.1 )%
PMI Shipments (million units) 19,584 20,543 (4.7 )% 34,423 38,354 (10.2 )%
PMI Cigarette Market Share
Marlboro 1.4 % 1.4 % — 1.4 % 1.4 % —
Parliament 3.5 % 3.9 % (0.4 ) 3.6 % 3.9 % (0.3 )
Bond Street 8.9 % 8.0 % 0.9 9.1 % 8.2 % 0.9
Others 13.3 % 13.7 % (0.4 ) 13.1 % 13.9 % (0.8 )
Total 27.1 % 27.0 % 0.1 27.2 % 27.4 % (0.2 )
In the quarter, the estimated total market decreased by 6.2%, reflecting the
impact of excise tax-driven price increases. The decline of PMI's shipment
volume was mainly due to the lower total market. The slight increase in PMI's
market share was driven by Bond Street and the growth of recently-launched
Philip Morris in "Others," reflecting the successful morphing of super-low
price Optima and Apollo Soyuz, partly offset by Parliament, reflecting the
impact of price increases.
Year-to-date, the estimated total market decreased by 6.1%, reflecting the
same dynamic as in the quarter. Excluding the net impact of estimated
distributor inventory movements, mainly associated with 2016, PMI's shipment
volume decreased by 5.9%, in line with the lower total market. The decrease of
PMI's cigarette market share was mainly due to: Parliament, reflecting the
impact of price increases; Chesterfield, L&M and Next in "Others,"
primarily reflecting slower-than-anticipated retail price penetration of
competitors' brands, partly offset by Bond Street; and the growth of
recently-launched Philip Morris in "Others," reflecting the successful
morphing of super-low price Optima and Apollo Soyuz.
In Turkey, estimated cigarette industry size, PMI cigarette shipment volume
and May quarter-to-date and year-to-date cigarette market share performance,
as measured by Nielsen, are shown in the table below.
Turkey Key Market Data Second-Quarter Six Months Year-to-Date
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Cigarette Market (billion units) 26.0 27.8 (6.5 )% 48.0 50.2 (4.4 )%
PMI Cigarette Shipments (million units) 12,135 13,164 (7.8 )% 21,965 23,509 (6.6 )%
PMI Cigarette Market Share
Marlboro 10.1 % 10.1 % — 10.0 % 10.0 % —
Parliament 11.6 % 11.6 % — 11.4 % 11.6 % (0.2 )
Lark 7.0 % 7.6 % (0.6 ) 6.9 % 7.7 % (0.8 )
Others 14.7 % 14.9 % (0.2 ) 14.9 % 14.7 % 0.2
Total 43.4 % 44.2 % (0.8 ) 43.2 % 44.0 % (0.8 )
In the quarter, the estimated total cigarette market decreased by 6.5%, mainly
reflecting a higher prevalence of illicit trade. The decrease in PMI's
shipments was mainly due to the lower total cigarette market and lower
cigarette market share, mainly driven by low-price Lark reflecting competitive
pressure from super-low price alternatives.
Year-to-date, the estimated total cigarette market decreased by 4.4%.
Excluding the net impact of estimated trade inventory movements associated
with the timing of anticipated price increases, the estimated total cigarette
market declined by 6.8%, mainly reflecting a higher prevalence of illicit
trade resulting from the impact of price increases. The decrease in PMI's
shipments was mainly due to the lower total cigarette market and lower
cigarette market share, mainly reflecting the same dynamics as in the quarter.
In Ukraine, estimated industry size and PMI cigarette shipment volume, shown
in the table below, include cigarettes and PMI's heated tobacco units. May
quarter-to-date and year-to-date market share performance, as measured by
Nielsen and shown in the table below, reflects that of cigarettes.
Ukraine Key Market Data Second-Quarter Six Months Year-to-Date
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Market (billion units) 17.5 19.4 (9.3 )% 32.4 36.7 (11.6 )%
PMI Shipments (million units) 5,296 5,952 (11.0 )% 9,406 11,600 (18.9 )%
PMI Cigarette Market Share
Marlboro 3.2 % 3.1 % 0.1 3.1 % 3.2 % (0.1 )
Parliament 3.4 % 2.9 % 0.5 3.2 % 2.8 % 0.4
Bond Street 9.0 % 10.5 % (1.5 ) 9.0 % 10.4 % (1.4 )
Others 12.6 % 14.4 % (1.8 ) 12.3 % 13.9 % (1.6 )
Total 28.2 % 30.9 % (2.7 ) 27.6 % 30.3 % (2.7 )
In the quarter, the estimated total market decreased by 9.3%, mainly due to
the impact of price increases and a challenging comparison with the second
quarter of 2016, which grew by 2.7%. The decrease in PMI's shipment volume was
primarily due to the lower total market, as well as lower cigarette market
share, primarily of low-price Bond Street, and in "Others," Chesterfield,
largely reflecting the impact of price increases and President, following its
morphing into Philip Morris.
Year-to-date, the estimated total market decreased by 11.6%, mainly due to the
impact of price increases and a challenging comparison with the first six
months of 2016, which grew by 9.1%. The decrease in PMI's shipment volume was
primarily due to the lower total market, as well as lower cigarette market
share, primarily of low-price Bond Street, and in "Others," Chesterfield,
largely reflecting the impact of price increases and President, following its
morphing into Philip Morris, partly offset by L&M.
ASIA REGION
2017 Second-Quarter
Net revenues, excluding excise taxes, of $2.4 billion increased by 11.8%.
Excluding unfavorable currency of $21 million, net revenues, excluding excise
taxes, increased by 12.8%, reflecting a favorable pricing variance of $128
million, driven principally by Australia, Indonesia and the Philippines. The
favorable pricing variance was supported by favorable volume/mix of $144
million, predominantly driven by heated tobacco unit volume in Japan, partly
offset by unfavorable volume due mainly to lower total markets in Australia,
Indonesia, Pakistan and the Philippines.
Operating companies income of $836 million increased by 11.6%. Excluding
unfavorable currency of $25 million, operating companies income increased by
15.0%, mainly driven by a favorable pricing variance, partly offset by
unfavorable volume/mix of $19 million, mainly due to unfavorable volume/mix in
Indonesia and unfavorable volume in Australia, Pakistan and the Philippines,
partly offset by favorable volume in Japan, driven by heated tobacco units.
Adjusted operating companies income and margin are shown in the table below
and detailed on Schedule 12. Adjusted operating companies income, excluding
unfavorable currency, increased by 15.0%. Adjusted operating companies income
margin, excluding unfavorable currency, increased by 0.7 points to 35.8%,
reflecting the factors mentioned above, as detailed on Schedule 12.
Asia OCI Second-Quarter Six Months Year-to-Date
(in millions) Excl. Excl.
2017 2016 Change Curr. 2017 2016 Change Curr.
OCI $ 836 $ 749 11.6 % 15.0 % $ 1,688 $ 1,527 10.5 % 8.6 %
Asset impairment & exit costs — — — —
Adjusted OCI $ 836 $ 749 11.6 % 15.0 % $ 1,688 $ 1,527 10.5 % 8.6 %
Adjusted OCI Margin* 35.1 % 35.1 % — 0.7 36.5 % 37.2 % (0.7 ) (1.1 )
*Margins are calculated as adjusted OCI, divided by net revenues, excluding
excise taxes.
Asia PMI Shipment Commentaries
Asia PMI Shipment Volume Second-Quarter Six Months Year-to-Date
(million units)
2017 2016 Change 2017 2016 Change
Cigarettes 57,815 69,299 (16.6 )% 112,957 134,521 (16.0 )%
Heated Tobacco Units 5,726 1,118 +100.0% 9,871 1,553 +100.0%
Total Asia 63,541 70,417 (9.8 )% 122,828 136,074 (9.7 )%
Asia PMI Shipment Volume by Brand Second-Quarter Six Months Year-to-Date
(million units)
2017 2016 Change 2017 2016 Change
Cigarettes
Marlboro 18,294 19,437 (5.9 )% 36,028 38,310 (6.0 )%
Lark 3,291 4,845 (32.1 )% 7,857 9,147 (14.1 )%
Parliament 2,532 2,580 (1.8 )% 4,858 4,990 (2.6 )%
Others 33,698 42,437 (20.6 )% 64,214 82,074 (21.8 )%
Total Cigarettes 57,815 69,299 (16.6 )% 112,957 134,521 (16.0 )%
Heated Tobacco Units 5,726 1,118 +100.0% 9,871 1,553 +100.0%
Total Asia 63,541 70,417 (9.8 )% 122,828 136,074 (9.7 )%
2017 Second-Quarter and Six Months Year-to-Date
In the quarter, PMI's total shipment volume decreased by 9.8% to 63.5 billion
units, mainly due to cigarette volume declines in: Indonesia; Japan; 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, partly offset by the Philippines. The decrease in
cigarette shipment volume of Lark was driven by Japan. The decrease in
cigarette shipment volume of Parliament was mainly due to Japan, partly offset
by Korea. The decrease in cigarette shipment volume of "Others" was mainly due
to Indonesia and to local, low-margin brands in Pakistan and the Philippines.
Year-to-date, PMI's total shipment volume decreased by 9.7% to 122.8 billion
units, mainly due to the same dynamics as in the quarter. The decrease in
cigarette shipment volume of Marlboro was mainly due to Japan, primarily
reflecting out-switching to Marlboro HeatSticks, partly offset by the
Philippines. The decrease in cigarette shipment volume of Lark was driven by
Japan. The decrease in cigarette shipment volume of Parliament was mainly due
to Japan, partly offset by Korea. The decrease in cigarette shipment volume of
"Others" was mainly due to Indonesia and 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 Second-Quarter Six Months Year-to-Date
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Cigarette Market (billion units) 75.7 85.6 (11.6 )% 146.6 160.8 (8.8 )%
PMI Cigarette Shipments (million units) 24,811 28,566 (13.1 )% 48,210 53,708 (10.2 )%
PMI Cigarette Market Share
Sampoerna A 14.0 % 13.9 % 0.1 13.9 % 14.1 % (0.2 )
Dji Sam Soe 6.4 % 6.4 % — 6.3 % 6.5 % (0.2 )
Sampoerna U 4.7 % 5.2 % (0.5 ) 4.8 % 4.9 % (0.1 )
Others 7.7 % 7.9 % (0.2 ) 7.9 % 7.9 % —
Total 32.8 % 33.4 % (0.6 ) 32.9 % 33.4 % (0.5 )
Indonesia Segmentation Data Second-Quarter Six Months Year-to-Date
Change Change
2017 2016 p.p. 2017 2016 p.p.
Segment % of Total Market
Hand-Rolled Kretek (SKT) 17.4 % 18.3 % (0.9 ) 17.8 % 18.6 % (0.8 )
Machine-Made Kretek (SKM) 77.1 % 75.4 % 1.7 76.7 % 75.3 % 1.4
Whites (SPM) 5.5 % 6.3 % (0.8 ) 5.5 % 6.1 % (0.6 )
Total 100.0 % 100.0 % — 100.0 % 100.0 % —
PMI % Share of Segment
Hand-Rolled Kretek (SKT) 36.2 % 36.5 % (0.3 ) 37.1 % 37.3 % (0.2 )
Machine-Made Kretek (SKM) 29.1 % 28.7 % 0.4 28.9 % 28.6 % 0.3
Whites (SPM) 73.4 % 80.7 % (7.3 ) 75.0 % 81.0 % (6.0 )
In the quarter, the estimated total cigarette market decreased by 11.6%,
unfavorably impacted by net estimated trade inventory movements mainly
associated with the timing of Ramadan. The decline primarily reflected the
impact of above-inflation tax-driven price increases and the impact of higher
utility prices on consumer spending. The decrease in PMI's cigarette shipments
was mainly due to the lower estimated total cigarette 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.
Year-to-date, the estimated total cigarette market decreased by 8.8%,
unfavorably impacted by net estimated trade inventory movements mainly
associated with the timing of Ramadan, primarily reflecting the same dynamics
as in the quarter. The decrease in PMI's cigarette shipments and share
primarily reflected the same dynamics as in the quarter.
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 Second-Quarter Six Months Year-to-Date
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Market (billion units) 43.4 43.7 (0.8 )% 84.0 87.6 (4.1 )%
PMI Shipments (million units)
Cigarettes 8,274 11,042 (25.1 )% 18,975 22,593 (16.0 )%
Heated Tobacco Units 5,687 1,118 +100% 9,832 1,553 +100%
Total 13,961 12,160 14.8 % 28,807 24,146 19.3 %
PMI Market Share
Marlboro 9.6 % 10.9 % (1.3 ) 9.8 % 10.7 % (0.9 )
Marlboro HeatSticks 10.0 % 2.2 % 7.8 8.6 % 1.5 % 7.1
Parliament 2.1 % 2.4 % (0.3 ) 2.1 % 2.4 % (0.3 )
Lark 8.9 % 10.2 % (1.3 ) 9.0 % 9.7 % (0.7 )
Others 1.4 % 1.8 % (0.4 ) 1.5 % 1.7 % (0.2 )
Total 32.0 % 27.5 % 4.5 31.0 % 26.0 % 5.0
In the quarter, the estimated total market decreased by 0.8%, or by 3.2%
excluding the net impact of estimated trade inventory movements mainly
associated with PMI's principal competitor's products in the second quarter of
2016 after its retail price increases. The increase in PMI's shipment volume
mainly reflected higher share, driven by Marlboro HeatSticks.
Year-to-date, the estimated total market decreased by 4.1%, or by 3.8%
excluding the net impact of estimated trade inventory movements. PMI's
shipment volume increased by 13.4%, 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 industry size, PMI shipment volume and market share
performance, shown in the table below, include cigarettes and PMI's heated
tobacco units.
Korea Key Market Data Second-Quarter Six Months Year-to-Date
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Market (billion units) 18.2 18.8 (2.8 )% 34.4 35.8 (3.9 )%
PMI Shipments (million units) 3,696 3,902 (5.3 )% 6,745 7,445 (9.4 )%
PMI Market Share
Marlboro 9.1 % 9.4 % (0.3 ) 8.9 % 9.4 % (0.5 )
Parliament 8.4 % 7.6 % 0.8 8.2 % 7.6 % 0.6
Virginia S. 2.1 % 3.2 % (1.1 ) 2.0 % 3.3 % (1.3 )
Others* 0.7 % 0.6 % 0.1 0.6 % 0.6 % —
Total 20.3 % 20.8 % (0.5 ) 19.7 % 20.9 % (1.2 )
*Includes heated tobacco units.
In the quarter, the estimated total market decreased by 2.8%, primarily
reflecting a challenging comparison with the second quarter of 2016 which
increased by 7.0%. The decrease in PMI's shipment volume was due to the lower
total market, as well as 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 morphing of its super slims variants to Parliament
during the first nine months of 2016.
Year-to-date, the estimated total market decreased by 3.9%, primarily
reflecting a challenging comparison with the first six months of 2016, which
increased by 20.9%. The decrease in PMI's shipment volume was due to the lower
total market, as well as lower market share, mainly due to the same dynamics
as in the quarter.
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 Second-Quarter Six Months Year-to-Date
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Cigarette Market (billion units) 19.2 20.3 (5.7 )% 35.8 39.9 (10.4 )%
PMI Cigarette Shipments (million units) 12,671 14,807 (14.4 )% 23,626 29,281 (19.3 )%
PMI Cigarette Market Share
Marlboro 31.6 % 27.8 % 3.8 31.9 % 27.7 % 4.2
Fortune 17.9 % 24.7 % (6.8 ) 17.6 % 24.8 % (7.2 )
Jackpot 6.4 % 8.5 % (2.1 ) 6.2 % 8.7 % (2.5 )
Others 10.2 % 11.9 % (1.7 ) 10.3 % 12.1 % (1.8 )
Total 66.1 % 72.9 % (6.8 ) 66.0 % 73.3 % (7.3 )
In the quarter, the estimated total cigarette market decreased by 5.7%, 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. 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, which
initially widened the price gaps to PMI's principal competitor's discounted
brands, partly offset by Marlboro, which benefited from in-switching from
lower-priced brands.
Year-to-date, the decline of the estimated total cigarette market, PMI's
cigarette shipment volume and cigarette market share all reflected the same
dynamics as in the quarter.
LATIN AMERICA & CANADA REGION
2017 Second-Quarter
Net revenues, excluding excise taxes, of $748 million increased by 7.3%.
Excluding unfavorable currency of $20 million, net revenues, excluding excise
taxes, increased by 10.2%, primarily reflecting a favorable pricing variance
of $74 million, driven principally by Argentina, Canada and Mexico, partly
offset by unfavorable volume/mix of $3 million, mainly due to Brazil and
Canada, partly offset by Mexico.
Operating companies income of $268 million increased by 19.6%. Excluding
unfavorable currency of $26 million, operating companies income increased by
31.3%, primarily driven by a favorable pricing variance, partly offset by
unfavorable volume/mix of $4 million, mainly due to Brazil and Canada, partly
offset by Mexico.
Adjusted operating companies income and margin are shown in the table below
and detailed on Schedule 12. Adjusted operating companies income, excluding
unfavorable currency, increased by 31.3%. Adjusted operating companies income
margin, excluding unfavorable currency, increased by 6.2 points to 38.3%,
principally driven by the factors mentioned above, as detailed on Schedule 12.
Latin America & Canada OCI Second-Quarter Six Months Year-to-Date
(in millions) Excl. Excl.
2017 2016 Change Curr. 2017 2016 Change Curr.
OCI $ 268 $ 224 19.6 % 31.3 % $ 445 $ 453 (1.8 )% 9.7 %
Asset impairment & exit costs — — — —
Adjusted OCI $ 268 $ 224 19.6 % 31.3 % $ 445 $ 453 (1.8 )% 9.7 %
Adjusted OCI Margin* 35.8 % 32.1 % 3.7 6.2 32.9 % 33.6 % (0.7 ) 2.0
*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 Second-Quarter Six Months Year-to-Date
(million units)
2017 2016 Change 2017 2016 Change
Cigarettes 21,553 21,259 1.4 % 40,849 42,959 (4.9 )%
Heated Tobacco Units 3 — — % 4 — — %
Total Latin America & Canada 21,556 21,259 1.4 % 40,853 42,959 (4.9 )%
Latin America & Canada PMI Shipment Volume by Brand Second-Quarter Six Months Year-to-Date
(million units)
2017 2016 Change 2017 2016 Change
Cigarettes
Marlboro 8,899 8,336 6.7 % 16,523 17,216 (4.0 )%
Philip Morris 3,210 4,126 (22.2 )% 6,649 8,757 (24.1 )%
Chesterfield 2,111 223 +100.0% 3,998 394 +100.0%
Others 7,333 8,574 (14.5 )% 13,679 16,592 (17.6 )%
Total Cigarettes 21,553 21,259 1.4 % 40,849 42,959 (4.9 )%
Heated Tobacco Units 3 — — % 4 — — %
Total Latin America & Canada 21,556 21,259 1.4 % 40,853 42,959 (4.9 )%
2017 Second-Quarter and Six Months Year-to-Date
In the quarter, PMI's total shipment volume increased by 1.4% to 21.6 billion
units, driven by Mexico, partly offset by Brazil, Canada and Colombia. The
increase in cigarette shipment volume of Marlboro was mainly driven by Mexico,
partly offset by Argentina and Brazil. 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 principally local, lower-margin brands in Argentina, Brazil and
Colombia.
Year-to-date, PMI's total shipment volume decreased by 4.9% to 40.9 billion
units, mainly due to cigarette volume declines in Argentina, Brazil, Canada
and Colombia. The decrease in cigarette shipment volume of Marlboro was mainly
due to Argentina and Brazil, partly offset by 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 principally local, lower-margin brands in Argentina, Brazil,
Colombia and Venezuela.
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 Second-Quarter Six Months Year-to-Date
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Cigarette Market (billion units) 8.8 8.4 4.6 % 18.1 18.1 (0.4 )%
PMI Cigarette Shipments (million units) 6,511 6,445 1.0 % 13,459 13,971 (3.7 )%
PMI Cigarette Market Share
Marlboro 19.9 % 22.7 % (2.8 ) 20.1 % 23.4 % (3.3 )
Chesterfield 15.7 % 2.5 % 13.2 15.1 % 2.0 % 13.1
Philip Morris 32.8 % 44.8 % (12.0 ) 33.4 % 44.7 % (11.3 )
Others 5.8 % 6.8 % (1.0 ) 5.9 % 6.9 % (1.0 )
Total 74.2 % 76.8 % (2.6 ) 74.5 % 77.0 % (2.5 )
In the quarter, the estimated total cigarette market increased by 4.6%,
primarily reflecting a favorable comparison to the second quarter of 2016,
which declined by 12.5%, mainly due to the impact of excise tax-driven price
increases. The increase in PMI's cigarette shipment volume was mainly due to
the higher total market, partly offset by lower cigarette market share. The
lower cigarette market share principally reflected the growth of the ultra-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 also benefited
from its successful morphing from Next.
Year-to-date, the estimated total cigarette market decreased by 0.4%. The
decrease in PMI's cigarette shipment volume was mainly due to lower cigarette
market share, reflecting the same dynamics as in the quarter.
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 Second-Quarter Six Months Year-to-Date
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Market (billion units) 6.6 7.0 (6.3 )% 11.4 12.6 (9.3 )%
PMI Shipments (million units) 2,452 2,607 (5.9 )% 4,228 4,790 (11.7 )%
PMI Market Share
Belmont 3.9 % 3.5 % 0.4 3.8 % 3.6 % 0.2
Canadian Classics 9.5 % 9.7 % (0.2 ) 9.3 % 10.2 % (0.9 )
Next 11.5 % 10.8 % 0.7 11.3 % 11.2 % 0.1
Others* 12.4 % 13.0 % (0.6 ) 12.0 % 13.0 % (1.0 )
Total 37.3 % 37.0 % 0.3 36.4 % 38.0 % (1.6 )
*Includes heated tobacco units.
In the quarter, the estimated total market decreased by 6.3%, mainly
reflecting the impact of retail price increases. The decrease in PMI's
shipment volume was mainly due to the lower total market.
Year-to-date, the estimated total market decreased by 9.3%, or by 7.6%
excluding the net impact of estimated trade inventory movements, reflecting
the impact of price increases. The decrease in PMI's shipment volume was
mainly due to the lower total market, as well as lower cigarette market share
that largely reflected the unfavorable 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 Second-Quarter Six Months Year-to-Date
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Cigarette Market (billion units) 9.8 8.8 11.7 % 17.6 17.6 0.3 %
PMI Cigarette Shipments (million units) 6,903 5,976 15.5 % 11,963 11,958 — %
PMI Cigarette Market Share
Marlboro 51.2 % 47.4 % 3.8 48.9 % 47.6 % 1.3
Delicados 8.6 % 9.7 % (1.1 ) 8.4 % 9.9 % (1.5 )
Benson & Hedges 5.3 % 4.9 % 0.4 5.1 % 4.6 % 0.5
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