REG-Philip Morris International Inc. Philip Morris International Inc. (PMI) Reports 2017 Third-Quarter Results; Revises 2017 Full-Yea
19/10/2017 12:00
- Part 2: For the preceding part double click ID:nBw4NKJMa
tax, partly offset by North Africa. The
unfavorable volume/mix was partly offset by a favorable pricing variance of
$65 million, despite low price realization in Russia, driven mainly by North
Africa, notably Egypt, and Ukraine, partly offset by Turkey.
Operating companies income of $765 million decreased by 20.5%. Excluding
unfavorable currency of $84 million, operating companies income decreased by
11.7%, principally due to: unfavorable volume/mix of $121 million,
predominantly in Russia and Saudi Arabia, partly offset by a favorable pricing
variance.
Adjusted operating companies income and margin are shown in the table below
and detailed on Schedule 12. Adjusted operating companies income, excluding
unfavorable currency, decreased by 11.7%. Adjusted operating companies income
margin, excluding unfavorable currency, decreased by 4.8 points to 44.9%,
reflecting the factors mentioned above, as detailed on Schedule 12.
EEMA OCI Third-Quarter Nine Months Year-to-Date
(in millions) Excl. Excl.
2017 2016 Change Curr. 2017 2016 Change Curr.
OCI $ 765 $ 962 (20.5 )% (11.7 )% $ 2,188 $ 2,389 (8.4 )% (0.8 )%
Asset impairment & exitcosts — — — —
Adjusted OCI $ 765 $ 962 (20.5 )% (11.7 )% $ 2,188 $ 2,389 (8.4 )% (0.8 )%
Adjusted OCI Margin* 42.9 % 49.7 % (6.8 ) (4.8 ) 44.3 % 45.9 % (1.6 ) (0.3 )
*Margins are calculated as adjusted OCI, divided by net revenues, excluding
excise taxes.
EEMA PMI Shipment Commentaries
EEMA PMI Shipment Volume by Brand Third-Quarter Nine Months Year-to-Date
(million units)
2017 2016 Change 2017 2016 Change
Cigarettes
Marlboro 18,655 20,082 (7.1 )% 51,808 55,005 (5.8 )%
L&M 12,639 13,486 (6.3 )% 35,919 39,511 (9.1 )%
Bond Street 9,473 11,159 (15.1 )% 27,449 31,310 (12.3 )%
Parliament 8,710 9,262 (6.0 )% 23,525 25,501 (7.8 )%
Philip Morris 5,501 344 +100.0% 13,813 824 +100.0%
Others 13,859 17,839 (22.3 )% 37,311 51,479 (27.5 )%
Total Cigarettes 68,837 72,172 (4.6 )% 189,825 203,630 (6.8 )%
Heated Tobacco Units 427 27 +100.0% 761 37 +100.0%
Total EEMA 69,264 72,199 (4.1 )% 190,586 203,667 (6.4 )%
2017 Third-Quarter and Nine Months Year-to-Date
In the quarter, PMI's total shipment volume decreased by 4.1% to 69.3 billion
units, mainly due to cigarette volume declines in: Russia, Saudi Arabia, where
PMI's cigarette shipment volume declined by 48.3% reflecting the impact of the
new excise tax implemented in June 2017, and Ukraine, partly offset by North
Africa, notably Egypt, and higher heated tobacco unit shipment volume. The
decrease in cigarette shipment volume of Marlboro was mainly due to Saudi
Arabia. The decrease in cigarette shipment volume of L&M was mainly due to
Russia, Saudi Arabia and Turkey, partly offset by Kazakhstan and North Africa,
notably Egypt. The decrease in cigarette shipment volume of Bond Street was
mainly due to Russia and Ukraine. The decrease in cigarette shipment volume of
Parliament was mainly due to Russia, partly offset by Kazakhstan and Turkey.
The increase in cigarette shipment volume of Philip Morris was driven by
Russia and Ukraine, reflecting successful portfolio consolidation of local,
low-price brands. The decrease in cigarette shipment volume of "Others" was
mainly due to low-price Next/Dubliss in Russia.
Year-to-date, PMI's total shipment volume decreased by 6.4% to 190.6 billion
units, mainly reflecting cigarette volume declines in Russia, Saudi Arabia,
Turkey and Ukraine, partly offset by North Africa, notably Algeria, and higher
heated tobacco unit shipment volume. 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 Russia,
Saudi Arabia and Turkey, 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, partly offset by Kazakhstan.
The increase in cigarette shipment volume of Philip Morris was driven by
Russia and Ukraine, reflecting the same dynamics as in the quarter. 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 Third-Quarter Nine Months Year-to-Date
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Cigarette Market (billion units) 37.6 36.9 1.7 % 104.7 105.4 (0.7 )%
PMI Cigarette Shipments (million units) 9,558 8,480 12.7 % 25,953 25,893 0.2 %
PMI Cigarette Market Share
Marlboro 10.4 % 10.2 % 0.2 9.3 % 8.2 % 1.1
L&M 13.1 % 11.6 % 1.5 12.1 % 12.5 % (0.4 )
Others 3.3 % 2.5 % 0.8 2.9 % 2.9 % —
Total 26.8 % 24.3 % 2.5 24.3 % 23.6 % 0.7
In the quarter, the estimated total cigarette market increased by 1.7%. The
increase in PMI's cigarette shipment volume mainly reflected higher cigarette
market share, notably of Marlboro and L&M in Algeria and Egypt.
Year-to-date, the estimated total cigarette market decreased by 0.7%, mainly
due to Algeria, partially offset by Egypt. The increase in PMI's cigarette
shipment volume, up by 2.2% excluding estimated distributor inventory
movements, was mainly driven by higher cigarette market share, notably of
Marlboro in Algeria, partly offset by L&M in Egypt.
In Russia, estimated industry size and PMI shipment volume, shown in the table
below, include cigarettes and PMI's heated tobacco units. August
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 Third-Quarter Nine Months Year-to-Date
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Market (billion units) 70.4 76.5 (7.9 )% 193.9 209.0 (7.2 )%
PMI Shipments (million units) 18,942 20,778 (8.8 )% 53,365 59,132 (9.8 )%
PMI Cigarette Market Share
Marlboro 1.6 % 1.3 % 0.3 1.4 % 1.4 % —
Parliament 3.6 % 3.8 % (0.2 ) 3.6 % 3.9 % (0.3 )
Bond Street 8.5 % 8.2 % 0.3 8.9 % 8.1 % 0.8
Philip Morris 5.1 % 0.1 % 5.0 3.6 % 0.1 % 3.5
Others 8.5 % 13.5 % (5.0 ) 9.7 % 13.7 % (4.0 )
Total 27.3 % 26.9 % 0.4 27.2 % 27.2 % —
In the quarter, the estimated total market decreased by 7.9%, reflecting the
impact of excise tax-driven price increases and an increase in the prevalence
of illicit trade. The decline of PMI's shipment volume was mainly due to the
lower total market. The increase in PMI's market share was mainly driven by
Philip Morris, reflecting successful portfolio consolidation of local,
low-price brands in "Others."
Year-to-date, the estimated total market decreased by 7.2%, reflecting the
same dynamics as in the quarter. PMI's market share was flat, largely
reflecting the same dynamics as in the quarter.
In Turkey, estimated cigarette industry size, PMI cigarette shipment volume
and August 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 Third-Quarter Nine Months Year-to-Date
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Cigarette Market (billion units) 29.9 29.3 2.1 % 77.6 79.5 (2.3 )%
PMI Cigarette Shipments (million units) 14,130 14,041 0.6 % 36,094 37,550 (3.9 )%
PMI Cigarette Market Share
Marlboro 10.3 % 10.4 % (0.1 ) 10.1 % 10.2 % (0.1 )
Parliament 11.6 % 11.7 % (0.1 ) 11.5 % 11.6 % (0.1 )
Lark 6.8 % 7.3 % (0.5 ) 6.9 % 7.5 % (0.6 )
Others 14.7 % 15.1 % (0.4 ) 14.7 % 14.9 % (0.2 )
Total 43.4 % 44.5 % (1.1 ) 43.2 % 44.2 % (1.0 )
In the quarter, the estimated total cigarette market increased by 2.1%.
Excluding the net impact of estimated trade inventory movements, the estimated
total cigarette market increased by 1.1%. The increase in PMI's cigarette
shipments was mainly due to the higher total market. The decline in PMI's
cigarette market share, as measured by Nielsen, was mainly due to low-price
Lark, reflecting competitive pressure from super-low price alternatives, and
L&M and Muratti in "Others."
Year-to-date, the estimated total cigarette market decreased by 2.3%, partly
reflecting a challenging comparison with the nine months year-to-date of 2016,
which increased by 6.0%, benefiting from a lower prevalence of illicit trade.
Excluding the net impact of estimated trade inventory movements associated
with the timing of anticipated price increases, the estimated total cigarette
market declined by 4.1%, mainly reflecting a higher prevalence of illicit
trade resulting from the impact of price increases. The decrease in PMI's
cigarette shipments was principally due to the lower total cigarette market
and lower cigarette market share, mainly due to the same dynamics as in the
quarter.
In Ukraine, estimated industry size and PMI shipment volume, shown in the
table below, include cigarettes and PMI's heated tobacco units. August
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 Third-Quarter Nine Months Year-to-Date
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Market (billion units) 17.9 19.1 (6.2 )% 50.7 56.0 (9.5 )%
PMI Shipments (million units) 5,116 5,626 (9.1 )% 14,521 17,226 (15.7 )%
PMI Cigarette Market Share
Marlboro 3.0 % 3.2 % (0.2 ) 3.1 % 3.2 % (0.1 )
Parliament 3.3 % 3.0 % 0.3 3.3 % 2.8 % 0.5
Bond Street 8.4 % 10.3 % (1.9 ) 8.9 % 10.4 % (1.5 )
Philip Morris 3.6 % — % 3.6 2.7 % — % 2.7
Others 9.4 % 13.1 % (3.7 ) 9.7 % 13.8 % (4.1 )
Total 27.7 % 29.6 % (1.9 ) 27.7 % 30.2 % (2.5 )
In the quarter, the estimated total market decreased by 6.2%, mainly due to
the impact of price increases and a challenging comparison with the third
quarter of 2016, which grew by 1.7%. The decrease in PMI's shipment volume was
primarily due to the lower total market, as well as lower cigarette market
share, notably of low-price Bond Street, partly offset by Parliament and
Philip Morris, following successful portfolio consolidation of a local,
low-price brand in "Others."
Year-to-date, the estimated total market decreased by 9.5%, mainly due to the
impact of price increases and a challenging comparison with the first nine
months of 2016, which grew by 6.9%. The decrease in PMI's shipment volume was
primarily due to the lower total market, as well as lower cigarette market
share, reflecting the same dynamics as in the quarter.
ASIA REGION
2017 Third-Quarter
Net revenues, excluding excise taxes, of $2.7 billion increased by 27.8%.
Excluding unfavorable currency of $68 million, net revenues, excluding excise
taxes, increased by 31.0%, reflecting: a favorable pricing variance of $122
million, driven principally by Australia, Indonesia and the Philippines; and a
favorable volume/mix of $540 million, predominantly driven by heated tobacco
unit volume in Japan and Korea, as well as cigarette volume in Pakistan,
partly offset by unfavorable volume due mainly to the lower total cigarette
market in Australia.
Operating companies income of $1.1 billion increased by 39.9%. Excluding
unfavorable currency of $55 million, operating companies income increased by
47.2%, mainly driven by a favorable pricing variance and favorable volume/mix
of $226 million, mainly in Japan, Korea and Pakistan, partly offset by
Australia.
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 47.2%. Adjusted operating companies income
margin, excluding unfavorable currency, increased by 4.4 points to 40.0%,
reflecting the factors mentioned above, as detailed on Schedule 12.
Asia OCI Third-Quarter Nine Months Year-to-Date
(in millions) Excl. Excl.
2017 2016 Change Curr. 2017 2016 Change Curr.
OCI $ 1,065 $ 761 39.9 % 47.2 % $ 2,753 $ 2,288 20.3 % 21.5 %
Asset impairment & exit costs — — — —
Adjusted OCI $ 1,065 $ 761 39.9 % 47.2 % $ 2,753 $ 2,288 20.3 % 21.5 %
Adjusted OCI Margin* 39.0 % 35.6 % 3.4 4.4 37.4 % 36.7 % 0.7 0.9
*Margins are calculated as adjusted OCI, divided by net revenues, excluding
excise taxes.
Asia PMI Shipment Commentaries
Asia PMI Shipment Volume by Brand Third-Quarter Nine Months Year-to-Date
(million units)
2017 2016 Change 2017 2016 Change
Cigarettes
Marlboro 18,227 18,967 (3.9 )% 54,255 57,277 (5.3 )%
Lark 3,539 4,274 (17.2 )% 11,396 13,421 (15.1 )%
Parliament 2,269 2,545 (10.8 )% 7,128 7,534 (5.4 )%
Others 36,027 35,907 0.3 % 100,240 117,982 (15.0 )%
Total Cigarettes 60,062 61,693 (2.6 )% 173,019 196,214 (11.8 )%
Heated Tobacco Units 8,826 2,006 +100.0% 18,697 3,558 +100.0%
Total Asia 68,888 63,699 8.1 % 191,716 199,772 (4.0 )%
2017 Third-Quarter and Nine Months Year-to-Date
In the quarter, PMI's total shipment volume increased by 8.1% to 68.9 billion
units, mainly driven by Indonesia, Pakistan, notably reflecting a lower price
gap with illicit product following a modification to the excise tax structure,
and higher heated tobacco unit volume, mainly in Japan and Korea. The increase
was partly offset by cigarette volume declines in Japan, primarily reflecting
out-switching to HeatSticks, and the Philippines. The decrease in cigarette
shipment volume of Marlboro was notably due to Japan and Korea, primarily
reflecting out-switching to PMI's heated tobacco units, partly offset by
Indonesia. The decrease in cigarette shipment volume of Lark was primarily due
to Japan. The decrease in cigarette shipment volume of Parliament was mainly
due to Japan, partly offset by Korea. The increase in cigarette shipment
volume of "Others" was mainly driven by Indonesia and low-price brands in
Pakistan.
In the quarter, PMI's total shipment volume benefited from the favorable
impact of estimated net combustible and heated tobacco unit inventory
movements, driven by approximately 2.1 billion units in Japan. The favorable
estimated net inventory movements in Japan, anticipated to continue in the
fourth quarter of 2017, primarily reflected the growing demand for HeatSticks
and a manufacturing capability sufficient to begin establishing normal levels
of distributor inventory of heated tobacco units for risk management purposes,
partly offset by a reduction of distributor inventory of combustible products.
Excluding the impact of total estimated net inventory movements, PMI's total
shipment volume increased by 4.7%.
Year-to-date, PMI's total shipment volume decreased by 4.0% to 191.7 billion
units, mainly due to lower cigarette shipment volume in Indonesia, Japan,
Pakistan and the Philippines, partly offset by higher heated tobacco unit
volume, mainly in Japan and Korea. The decrease in cigarette shipment volume
of Marlboro was mainly due to Japan, primarily reflecting out-switching to
HeatSticks, and Korea, partly offset by Indonesia and the Philippines. The
decrease in cigarette shipment volume of Lark was primarily due to 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 local, low-price brands in Pakistan and the
Philippines.
Year-to-date, PMI's total shipment volume benefited from the favorable impact
of estimated net combustible and heated tobacco unit inventory movements,
driven by approximately 3.5 billion units in Japan. Excluding the impact of
these estimated net inventory movements, PMI's total shipment volume decreased
by 5.6%.
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 Third-Quarter Nine Months Year-to-Date
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Cigarette Market (billion units) 79.2 74.4 6.5 % 225.9 235.1 (3.9 )%
PMI Cigarette Shipments (million units) 26,211 25,084 4.5 % 74,421 78,792 (5.5 )%
PMI Cigarette Market Share
Sampoerna A 13.2 % 14.0 % (0.8 ) 13.7 % 14.0 % (0.3 )
Dji Sam Soe 8.1 % 6.4 % 1.7 6.9 % 6.5 % 0.4
Sampoerna U 4.2 % 5.9 % (1.7 ) 4.6 % 5.2 % (0.6 )
Others 7.6 % 7.4 % 0.2 7.7 % 7.8 % (0.1 )
Total 33.1 % 33.7 % (0.6 ) 32.9 % 33.5 % (0.6 )
Indonesia Segmentation Data Third-Quarter Nine Months Year-to-Date
Change Change
2017 2016 p.p. 2017 2016 p.p.
Segment % of Total Market
Hand-Rolled Kretek (SKT) 17.4 % 17.6 % (0.2 ) 17.7 % 18.2 % (0.5 )
Machine-Made Kretek (SKM) 77.6 % 76.4 % 1.2 77.0 % 75.7 % 1.3
Whites (SPM) 5.0 % 6.0 % (1.0 ) 5.3 % 6.1 % (0.8 )
Total 100.0 % 100.0 % — 100.0 % 100.0 % —
PMI % Share of Segment
Hand-Rolled Kretek (SKT) 38.4 % 36.8 % 1.6 37.5 % 37.1 % 0.4
Machine-Made Kretek (SKM) 29.7 % 29.5 % 0.2 29.2 % 28.9 % 0.3
Whites (SPM) 67.3 % 79.3 % (12.0 ) 72.4 % 80.4 % (8.0 )
In the quarter, the estimated total cigarette market increased by 6.5%.
Excluding the favorable impact of net estimated trade inventory movements
mainly associated with the timing of Ramadan, the estimated total cigarette
market was flat, reflecting the impact of above-inflation tax-driven price
increases and the impact of higher utility prices on consumer spending. The
increase in PMI's cigarette shipments was primarily driven by the higher
estimated total cigarette market, partly offset by a lower cigarette market
share, mainly due to Sampoerna A and Sampoerna U, largely reflecting the
impact of price increases, partly offset by Dji Sam Soe, notably Magnum Mild,
and Marlboro Filter Black in "Others."
Year-to-date, the estimated total cigarette market decreased by 3.9%,
reflecting the same dynamics as in the quarter. The decrease in PMI's
shipments was mainly due to the lower total market and lower cigarette market
share, largely reflecting 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 Third-Quarter Nine Months Year-to-Date
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Market (billion units) 44.0 46.1 (4.6 )% 128.0 133.7 (4.3 )%
PMI Shipments (million units)
Cigarettes 8,196 10,691 (23.3 )% 27,171 33,284 (18.4 )%
Heated Tobacco Units 8,325 2,006 +100% 18,157 3,559 +100%
Total 16,521 12,697 30.1 % 45,328 36,843 23.0 %
PMI Market Share
Marlboro 9.5 % 10.7 % (1.2 ) 9.7 % 10.7 % (1.0 )
HeatSticks 11.9 % 3.5 % 8.4 9.7 % 2.2 % 7.5
Parliament 2.0 % 2.3 % (0.3 ) 2.1 % 2.4 % (0.3 )
Lark 8.5 % 9.7 % (1.2 ) 8.8 % 9.7 % (0.9 )
Others 1.3 % 1.6 % (0.3 ) 1.5 % 1.7 % (0.2 )
Total 33.2 % 27.9 % 5.3 31.8 % 26.7 % 5.1
In the quarter, the estimated total market decreased by 4.6%. The increase in
PMI's shipment volume, up by 13.7% excluding the impact of estimated net
distributor inventory movements of approximately 2.1 billion units, mainly
reflected higher share, driven by HeatSticks.
Year-to-date, the estimated total market decreased by 4.3%. PMI's shipment
volume increased by 13.5%, excluding the impact of estimated net distributor
inventory movements of approximately 3.5 billion units, mainly reflecting
higher share, driven by 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 Third-Quarter Nine Months Year-to-Date
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Market (billion units) 19.9 19.8 0.1 % 54.2 55.6 (2.5 )%
PMI Shipments (million units) 4,214 4,109 2.6 % 10,959 11,553 (5.1 )%
PMI Market Share
Marlboro 8.5 % 9.7 % (1.2 ) 8.8 % 9.5 % (0.7 )
Parliament 7.8 % 7.5 % 0.3 8.0 % 7.6 % 0.4
HEETS 2.5 % — % 2.5 1.0 % — % 1.0
Virginia S. 2.0 % 3.1 % (1.1 ) 2.0 % 3.2 % (1.2 )
Others 0.3 % 0.5 % (0.2 ) 0.4 % 0.5 % (0.1 )
Total 21.1 % 20.8 % 0.3 20.2 % 20.8 % (0.6 )
In the quarter, the estimated total market increased by 0.1%. The increase in
PMI's shipment volume mainly reflected higher market share, driven mainly by
the May 2017 launch of HEETS. The decline in market share of Virginia S.
reflected the successful consolidation of its super slims variants to
Parliament during the first nine months of 2016.
Year-to-date, the estimated total market decreased by 2.5%, primarily
reflecting a challenging comparison with the first nine months of 2016, which
increased by 12.6%. The decrease in PMI's shipment volume was due to the lower
total market, as well as lower market share, mainly reflecting the impact of
competitors' new cigarette brand launches, partly offset by HEETS.
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 Third-Quarter Nine Months Year-to-Date
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Cigarette Market (billion units) 18.6 20.2 (8.1 )% 54.3 60.2 (9.8 )%
PMI Cigarette Shipments (million units) 12,677 14,277 (11.2 )% 36,303 43,558 (16.7 )%
PMI Cigarette Market Share
Marlboro 31.9 % 28.4 % 3.5 32.0 % 27.9 % 4.1
Fortune 18.6 % 23.3 % (4.7 ) 18.0 % 24.3 % (6.3 )
Jackpot 6.5 % 7.5 % (1.0 ) 6.3 % 8.3 % (2.0 )
Others 11.1 % 11.3 % (0.2 ) 10.6 % 11.9 % (1.3 )
Total 68.1 % 70.5 % (2.4 ) 66.9 % 72.4 % (5.5 )
In the quarter, the estimated total cigarette market decreased by 8.1%, 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 Third-Quarter
Net revenues, excluding excise taxes, of $756 million increased by 6.5%.
Excluding unfavorable currency of $14 million, net revenues, excluding excise
taxes, increased by 8.5%, primarily reflecting a favorable pricing variance of
$85 million, driven principally by Argentina, Canada and Mexico, partly offset
by unfavorable volume/mix of $25 million, mainly due to Canada and Mexico.
Operating companies income of $264 million increased by 17.9%. Excluding
unfavorable currency of $8 million, operating companies income increased by
21.4%, primarily reflecting a favorable pricing variance, partly offset by
unfavorable volume/mix of $37 million, mainly due to Canada and 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 21.4%. Adjusted operating companies income
margin, excluding unfavorable currency, increased by 3.8 points to 35.3%,
principally driven by the factors mentioned above, as detailed on Schedule 12.
Latin America & Canada OCI Third-Quarter Nine Months Year-to-Date
(in millions) Excl. Excl.
2017 2016 Change Curr. 2017 2016 Change Curr.
OCI $ 264 $ 224 17.9 % 21.4 % $ 709 $ 677 4.7 % 13.6 %
Asset impairment & exit costs — — — —
Adjusted OCI $ 264 $ 224 17.9 % 21.4 % $ 709 $ 677 4.7 % 13.6 %
Adjusted OCI Margin* 34.9 % 31.5 % 3.4 3.8 33.6 % 32.9 % 0.7 2.6
*Margins are calculated as adjusted OCI, divided by net revenues, excluding
excise taxes.
Latin America & Canada PMI Shipment Commentaries
Latin America & Canada PMI ShipmentVolume by Brand Third-Quarter Nine Months Year-to-Date
(million units)
2017 2016 Change 2017 2016 Change
Cigarettes
Marlboro 7,758 8,345 (7.0 )% 24,282 25,561 (5.0 )%
Philip Morris 3,335 3,793 (12.1 )% 9,985 12,550 (20.4 )%
Chesterfield 2,537 667 +100.0% 6,536 1,061 +100.0%
Others 6,822 8,380 (18.6 )% 20,498 24,972 (17.9 )%
Total Cigarettes 20,452 21,185 (3.5 )% 61,301 64,144 (4.4 )%
Heated Tobacco Units 8 — — % 12 — — %
Total Latin America & Canada 20,460 21,185 (3.4 )% 61,313 64,144 (4.4 )%
2017 Third-Quarter and Nine Months Year-to-Date
In the quarter, PMI's total shipment volume decreased by 3.4% to 20.5 billion
units, mainly due to Mexico, partly offset by Argentina and Brazil. The
decrease in cigarette shipment volume of Marlboro was mainly due to Mexico.
The decrease in cigarette shipment volume of Philip Morris was mainly due to
Argentina. The increase in cigarette shipment volume of Chesterfield was
mainly driven by Argentina and Brazil. The decrease in cigarette shipment
volume of "Others" was mainly due to local brands in Argentina, Brazil,
reflecting successful brand portfolio consolidation, Colombia and Mexico.
Year-to-date, PMI's total shipment volume decreased by 4.4% to 61.3 billion
units, mainly due to cigarette volume declines in Brazil, Canada, Colombia and
Mexico. The decrease in cigarette shipment volume of Marlboro was mainly due
to Argentina, Brazil 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, Brazil, Colombia and
Venezuela. The decrease in cigarette shipment volume of "Others" was mainly
due to local brands in Argentina, Brazil, reflecting successful brand
portfolio consolidation, Canada, 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 Third-Quarter Nine Months Year-to-Date
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Cigarette Market (billion units) 8.9 8.5 4.9 % 27.0 26.7 1.2 %
PMI Cigarette Shipments (million units) 6,683 6,418 4.1 % 20,142 20,389 (1.2 )%
PMI Cigarette Market Share
Marlboro 20.2 % 22.1 % (1.9 ) 20.1 % 23.0 % (2.9 )
Chesterfield 16.0 % 6.7 % 9.3 15.4 % 3.5 % 11.9
Philip Morris 33.2 % 39.9 % (6.7 ) 33.4 % 43.2 % (9.8 )
Others 5.6 % 6.8 % (1.2 ) 5.8 % 6.8 % (1.0 )
Total 75.0 % 75.5 % (0.5 ) 74.7 % 76.5 % (1.8 )
In the quarter, the estimated total cigarette market increased by 4.9%,
primarily reflecting a favorable comparison to the third quarter of 2016,
which declined by 14.1%, mainly due to the impact of excise-tax driven price
increases. The increase in PMI's cigarette shipment volume mainly reflected
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 benefited from
successful brand portfolio consolidation of a low-price brand in "Others."
Year-to-date, the estimated total cigarette market increased by 1.2%,
primarily reflecting a favorable comparison to the nine months year-to-date
2016, which declined by 10.5%. 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 Third-Quarter Nine Months Year-to-Date
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Market (billion units) 6.4 6.9 (6.3 )% 18.0 19.5 (7.8 )%
PMI Shipments (million units) 2,554 2,675 (4.5 )% 6,782 7,466 (9.2 )%
PMI Market Share
Belmont 4.4 % 3.9 % 0.5 4.0 % 3.7 % 0.3
Canadian Classics 10.0 % 10.2 % (0.2 ) 9.5 % 10.2 % (0.7 )
Next 12.2 % 11.5 % 0.7 11.5 % 11.3 % 0.2
Others* 13.1 % 13.3 % (0.2 ) 12.4 % 13.1 % (0.7 )
Total 39.7 % 38.9 % 0.8 37.4 % 38.3 % (0.9 )
*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, partly offset by
higher market share that largely reflected the favorable impact of estimated
trade inventory movements.
Year-to-date, the estimated total market decreased by 7.8%, 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,
reflecting 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 Third-Quarter Nine Months Year-to-Date
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Cigarette Market (billion units) 8.0 8.8 (10.0 )% 25.6 26.4 (3.1 )%
PMI Cigarette Shipments (million units) 5,129 6,055 (15.3 )% 17,092 18,013 (5.1 )%
PMI Cigarette Market Share
Marlboro 46.7 % 48.3 % (1.6 ) 48.2 % 47.8 % 0.4
Delicados 7.9 % 9.6 % (1.7 ) 8.2 % 9.8 % (1.6 )
Benson & Hedges 4.5 % 4.8 % (0.3 ) 4.9 % 4.6 % 0.3
Others 5.4 % 5.8 % (0.4 ) 5.5 % 6.0 % (0.5 )
Total 64.5 % 68.5 % (4.0 ) 66.8 % 68.2 % (1.4 )
In the quarter, the estimated total cigarette market decreased by 10.0%.
Excluding the impact of estimated trade inventory movements, the estimated
total cigarette market decreased by 1.9%. The decrease in PMI's cigarette
shipment volume mainly reflected the lower total cigarette market. The
decrease of PMI's cigarette market share largely reflected the unfavorable
impact of the estimated trade inventory movements.
Year-to-date, the estimated total cigarette market decreased by 3.1%, or
increased by 0.5% excluding the impact of estimated inventory movements. The
decrease in PMI's cigarette shipment volume mainly reflected the lower total
cigarette market. The decrease 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 a 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
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