Reflecting
Currency-Neutral Growth of Approximately 8% to 9% vs. 2017 Adjusted
Diluted EPS of $4.72
Regulatory News:
2018 Third-Quarter
- Reported and adjusted diluted earnings
per share of $1.44, up by $0.17 or 13.4% versus $1.27 in 2017
- Excluding unfavorable currency of
$0.09, adjusted diluted earnings per share up by $0.26 or 20.5%
versus $1.27 in 2017 as detailed in the attached Schedule 2
- Cigarette and heated tobacco unit
shipment volume of 203.7 billion, down by 2.1%, or up by 1.1%
excluding the net impact of total estimated distributor inventory
movements, reflecting:
- Cigarette shipment volume of 195.1
billion units, down by 3.4 billion units or 1.7%
- Heated tobacco unit shipment volume of
8.7 billion units, down by 1.1 billion units or 11.0%
- Net revenues of $7.5 billion, up by
0.4%
- Excluding unfavorable currency of $213
million, net revenues up by 3.3% as detailed in the attached
Schedule 3
- Operating income of $3.2 billion, up by
2.2%
- Excluding unfavorable currency of $167
million, operating income up by 7.6% as detailed in the attached
Schedule 5
- Adjusted operating income, reflecting
the items detailed in the attached Schedule 6, of $3.2 billion, up
by 2.2%
- Excluding unfavorable currency of $167
million, adjusted operating income up by 7.6% as detailed in the
attached Schedule 6
2018 Nine Months Year-to-Date
- Reported diluted earnings per share of
$3.85, up by $0.42 or 12.2% versus $3.43 in 2017
- Adjusted diluted earnings per share of
$3.85, up by $0.46 or 13.6% versus $3.39 in 2017
- Excluding unfavorable currency of
$0.02, adjusted diluted earnings per share up by $0.48 or 14.2%
versus $3.39 in 2017 as detailed in the attached Schedule 2
- Cigarette and heated tobacco unit
shipment volume of 579.3 billion, down by 1.2%, or up by 0.3%
excluding the net impact of total estimated distributor inventory
movements, reflecting:
- Cigarette shipment volume of 550.1
billion units, down by 15.5 billion units or 2.7%
- Heated tobacco unit shipment volume of
29.2 billion units, up by 8.7 billion units or 42.4%
- Net revenues of $22.1 billion, up by
8.2%
- Excluding favorable currency of $351
million, net revenues up by 6.5% as detailed in the attached
Schedule 4
- Operating income of $8.7 billion, up by
5.3%
- Excluding unfavorable currency of $4
million, operating income up by 5.3% as detailed in the attached
Schedule 5
- Adjusted operating income, reflecting
the items detailed in the attached Schedule 6, of $8.7 billion, up
by 5.3%
- Excluding unfavorable currency of $4
million, adjusted operating income up by 5.3% as detailed in the
attached Schedule 6
2018 Full-Year Forecast
PMI reaffirms its 2018 full-year reported diluted earnings per
share forecast to be in a range of $4.97 to $5.02, at prevailing
exchange rates, representing a projected increase of approximately
28% to 29% versus reported diluted earnings per share of $3.88 in
2017.
- Excluding an unfavorable currency
impact, at prevailing exchange rates, of approximately $0.12, the
forecast range represents a projected increase of approximately 8%
to 9% versus adjusted diluted earnings per share of $4.72 in 2017
as detailed in the attached Schedule 2.
2018 Full-Year Forecast Overview & Assumptions
As previously communicated, this forecast assumes:
- A total cigarette and heated tobacco
unit shipment volume decline for PMI of approximately 2% versus an
estimated total international industry volume decline, excluding
China and the U.S., of approximately 2.5%;
- Significant growth of PMI's in-market
heated tobacco unit sales volume, driven by all launch markets,
notably the EU Region, Japan, Korea and Russia, reaching 44 to 45
billion units in 2018;
- Heated tobacco unit shipments of 41 to
42 billion units in 2018, including an anticipated full-year
distributor inventory reduction -- concentrated in the third
quarter of 2018 -- of approximately three billion units, reflecting
approximately four billion unit reduction in Japan partly offset by
approximately one billion unit increase in other markets; and
- Currency-neutral net revenue growth of
approximately 3%, which also includes the move to highly
inflationary accounting in Argentina resulting in the treatment of
the U.S. dollar as the functional currency of the company’s
Argentinian affiliates, effective July 1, 2018.
As previously communicated, this forecast further assumes:
- An estimated strong combustible product
pricing variance of approximately 7%;
- Net incremental investment behind RRPs
of approximately $600 million for the full year;
- Operating cash flow of approximately $9
billion, subject to year-end working capital requirements;
- Capital expenditures of approximately
$1.5 billion;
- An effective tax rate of approximately
24%; and
- No share repurchases.
This forecast excludes the impact of any future acquisitions,
unanticipated asset impairment and exit cost charges, future
changes in currency exchange rates, further developments related to
the Tax Cuts and Jobs Act, and any unusual events. Factors
described in the Forward-Looking and Cautionary Statements section
of this release represent continuing risks to these
projections.
2018 THIRD-QUARTER CONSOLIDATED
RESULTS
Philip Morris International Inc. (NYSE: PM) today announced its
2018 third-quarter results.
"Our third-quarter results demonstrate that our underlying
business performance is in good shape. Excluding distributor
inventory movements, our total shipment volume was up in the
quarter and year-to-date, reflecting the continued growth of our
heat-not-burn products as well as the solid performance of our
combustible products. Our total market share was up by 0.5 and 0.6
points in the quarter and year-to-date, respectively. In addition,
supported by our leading brand portfolio, pricing was strong. As a
result, we continue to forecast currency-neutral EPS growth for the
full year of 8-9%," said André Calantzopoulos, Chief Executive
Officer.
"We remain focused on our smoke-free transformation and are very
encouraged by the continued progress of our smoke-free products and
initiatives, especially across the EU and Russia. As previously
announced, this quarter existing IQOS device and consumable
inventories were rightsized in Japan ahead of the upcoming global
launch of our new IQOS 3 and IQOS 3 Multi devices. Importantly, our
worldwide in-market sales of heated tobacco units this year remain
set to almost double and we continue to anticipate shipments of
approximately 41-42 billion units."
"Overall, as we stated recently at our Investor Day, our
business is showing great momentum. As we enter this year’s final
quarter, I am confident that the strategies and initiatives we have
put in place set the stage for an even better business performance
in 2019."
Conference Call
A conference call, hosted by Martin King, Chief Financial
Officer, will be webcast at 9:00 a.m., Eastern Time, on October 18,
2018. Access is at www.pmi.com/2018Q3earnings. The audio webcast may
also be accessed on iOS or Android devices by downloading PMI’s
free Investor Relations Mobile Application at www.pmi.com/irapp.
Impact of U.S. Tax Reform
PMI's 2018 full-year diluted earnings per share forecast assumes
a full-year effective tax rate of approximately 24%, reflecting the
current analysis, interpretation and clarifications of the scope
and impact of the Tax Cuts and Jobs Act (the “Act”).
The Act has significant complexity, and PMI's final full-year
effective tax rate may differ from this assumption, due to, among
other things, additional guidance that may be issued by the U.S.
Treasury Department and the Internal Revenue Service, related
interpretations and clarifications of tax law, and earnings mix by
taxing jurisdiction.
U.S. GAAP Treatment of Argentina as a Highly Inflationary
Economy
Following the categorization of Argentina by the International
Practices Task Force of the Center for Audit Quality as a country
with a three-year cumulative inflation rate greater than 100%, the
country is considered highly inflationary in accordance with U.S.
GAAP. Consequently, PMI began to account for the operations of its
Argentinian affiliates as highly inflationary, and to treat the
U.S. dollar as the functional currency of the affiliates, effective
July 1, 2018.
Dividends
During the quarter, PMI declared a regular quarterly dividend of
$1.14, representing an annualized rate of $4.56 per common share.
Since its spin-off in March 2008, PMI has increased its regular
quarterly dividend by 147.8% from the initial annualized rate of
$1.84 per common share, or a compound annual growth rate of
9.5%.
Investor Day
During the quarter, PMI's senior management reviewed the
company’s business outlook and long-term growth strategies at its
investor meeting at the Operations Center in Lausanne, Switzerland.
A copy of the presentation slides, transcript, glossary of key
terms and definitions, as well as reconciliations of non-GAAP
measures to the most directly comparable GAAP measures, have been
made available at www.pmi.com/2018InvestorDay. The archive of the
audio webcast will be available until Friday, October 26, 2018, and
may also be accessed on iOS or Android devices by downloading PMI’s
free Investor Relations Mobile Application at www.pmi.com/irapp.
PMI's Latest Nonclinical Results: A Step Further Toward
Confirming Risk-Reduction
On August 20, 2018, PMI submitted to the U.S. FDA the results of
its 18-month chronic toxicity and carcinogenicity animal study that
compared the exposure to IQOS aerosol with cigarette smoke. This
study adds to the extensive body of evidence already presented to
the agency in support of PMI’s pending application for
authorization of IQOS as a modified risk tobacco product.
The A/J mouse is a suitable model to study lung cancer and
Chronic Obstructive Pulmonary Disease (COPD), two of the most
common smoking-related diseases, because it is highly susceptible
to lung tumors and emphysema. This 18-month inhalation study
included female mice exposed to either fresh air, cigarette smoke
(3R4F reference cigarette), or IQOS aerosol at low, medium or high
exposure levels. In addition, the study included male mice exposed
to either fresh air or the high exposure level of IQOS aerosol. The
study assessed chronic toxicity and carcinogenicity of IQOS aerosol
compared to cigarette smoke in alignment with OECD Guidelines. The
study also included lung inflammation and COPD endpoints.
Lifelong exposure to IQOS aerosol, even at an exposure level
twice that of cigarette smoke, resulted in only mild systemic
toxicity and did not cause an increase in lung inflammation,
emphysema or lung tumorigenicity compared to air exposure. In
contrast, cigarette smoke exposure resulted in moderate to severe
chronic toxicity, lung inflammation, emphysema and an increase in
lung tumorigenicity as compared to fresh air.
This animal study provides direct evidence connecting the
reduction in exposure to the harmful chemicals in cigarette smoke
to a reduction in smoking-related diseases. In the absence of
long-term epidemiological data for IQOS on smoking-related diseases
such as lung cancer and COPD, these results provide further context
and strengthen the evidence that IQOS presents less risk of harm
and has the potential to reduce the risk of smoking-related
disease. The results have been presented at scientific conferences
and the full results will be submitted for publication in a
peer-reviewed journal.
"This is a ground-breaking study," said Miroslaw Zielinski,
PMI's President Science and Innovation. "It is the first-ever in
vivo lung cancer study that provides scientific evidence of the
potential impact of a smoke-free product on lung cancer. The study
results further strengthen the body of scientific evidence that
IQOS presents less risk of harm and has the potential to reduce the
risk of smoking-related disease."
SHIPMENT VOLUME
PMI Shipment Volume by Region
Third-Quarter Nine Months Year-to-Date
(million units) 2018 2017
Change 2018 2017 Change
Cigarettes European Union 48,223
49,114 (1.8)% 135,878 141,412 (3.9)% Eastern Europe 29,801 31,749
(6.1)% 80,294 88,426 (9.2)% Middle East & Africa 37,406 37,088
0.9% 100,831 101,399 (0.6)% South & Southeast Asia 45,840
44,731 2.5% 130,846 124,655 5.0% East Asia & Australia 14,186
15,331 (7.5)% 43,391 48,364 (10.3)% Latin America & Canada
19,612 20,452 (4.1)% 58,829
61,301 (4.0)%
Total PMI 195,068
198,465 (1.7)% 550,069 565,557
(2.7)% Heated Tobacco Units European Union
1,730 464 +100% 3,853 1,040 +100% Eastern Europe 1,152 180 +100%
2,667 351 +100% Middle East & Africa 1,152 247 +100% 2,832 410
+100% South & Southeast Asia — — —% — — —% East Asia &
Australia 4,575 8,826 (48.2)% 19,755 18,697 5.7% Latin America
& Canada 43 8 +100% 98
12 +100%
Total PMI 8,652
9,725 (11.0)% 29,205 20,510
42.4% Cigarettes and Heated Tobacco Units
European Union 49,953 49,578 0.8% 139,731 142,452 (1.9)% Eastern
Europe 30,953 31,929 (3.1)% 82,961 88,777 (6.6)% Middle East &
Africa 38,558 37,335 3.3% 103,663 101,809 1.8% South &
Southeast Asia 45,840 44,731 2.5% 130,846 124,655 5.0% East Asia
& Australia 18,761 24,157 (22.3)% 63,146 67,061 (5.8)% Latin
America & Canada 19,655 20,460
(3.9)% 58,927 61,313 (3.9)%
Total
PMI 203,720 208,190 (2.1)% 579,274
586,067 (1.2)%
Third-Quarter
PMI's total shipment volume decreased by 2.1%, principally due
to:
- Eastern Europe, reflecting lower
cigarette shipment volume, principally in Russia, Kazakhstan and
Ukraine, partly offset by higher heated tobacco unit shipment
volume, notably in Russia;
- East Asia & Australia, reflecting:
lower cigarette shipment volume, notably in Japan and Korea; lower
heated tobacco unit shipment volume in Japan due to net unfavorable
estimated distributor inventory movements described in the East
Asia & Australia Region section; partly offset by higher
cigarette shipment volume in Taiwan, as well as higher heated
tobacco unit shipment volume in Korea; and
- Latin America & Canada, reflecting
lower cigarette shipment volume, principally in Argentina, Brazil,
Canada and Colombia, partly offset by Mexico;
partly offset by
- the EU, reflecting higher heated
tobacco unit shipment volume, as well as higher cigarette shipment
volume in Germany and Poland, partly offset by lower cigarette
shipment volume, principally in France and Italy;
- Middle East & Africa, reflecting
higher cigarette shipment volume, principally in the GCC, notably
Saudi Arabia, and Turkey, as well as higher heated tobacco unit
shipment volume, primarily in PMI Duty Free; and
- South & South East Asia, reflecting
higher cigarette shipment volume, principally in Indonesia and
Thailand, partly offset by Pakistan.
Excluding the net unfavorable impact of total estimated
distributor inventory movements of approximately 6.7 billion units,
essentially reflecting unfavorable heated tobacco unit inventory
movements of approximately 6.9 billion units, mainly due to Japan,
partly offset by favorable cigarette inventory movements of
approximately 0.2 billion units, PMI's total shipment volume
increased by 1.1%.
Nine Months Year-to-Date
Year-to-date, PMI's total shipment volume decreased by 1.2%,
principally due to:
- the EU, primarily reflecting lower
cigarette shipment volume in France, Germany and Italy, partly
offset by higher heated tobacco unit shipment volume across the
Region;
- Eastern Europe, reflecting lower
cigarette shipment volume, principally in Russia and Ukraine,
partly offset by higher heated tobacco unit shipment volume, mainly
in Russia and Ukraine;
- East Asia & Australia, reflecting:
lower cigarette shipment volume, principally in Japan and Korea;
lower heated tobacco unit shipment volume in Japan due to net
unfavorable estimated distributor inventory movements described in
the East Asia & Australia Region section; partly offset by
higher heated tobacco unit shipment volume in Korea; and
- Latin America & Canada, reflecting
lower cigarette shipment volume, notably in Argentina, Canada,
Colombia and Mexico;
partly offset by
- Middle East & Africa, reflecting
higher cigarette shipment volume in Turkey, as well as higher
heated tobacco unit shipment volume, mainly in PMI Duty Free,
partly offset by lower cigarette shipment volume in the GCC,
notably Saudi Arabia and the UAE; and
- South & Southeast Asia, reflecting
higher cigarette shipment volume, principally in Pakistan, the
Philippines and Thailand.
Excluding the net unfavorable impact of total estimated
distributor inventory movements of approximately 8.6 billion units,
reflecting unfavorable heated tobacco unit inventory movements of
approximately 9.5 billion units, partly offset by favorable
cigarette inventory movements of approximately 0.9 billion units,
both driven mainly by Japan, PMI's total shipment volume increased
by 0.3%.
PMI shipment volume by brand is shown in the table below.
PMI Shipment Volume by Brand
Third-Quarter Nine Months Year-to-Date
(million units) 2018 2017
Change 2018 2017 Change
Cigarettes Marlboro 69,121
68,886 0.3% 195,987 200,115 (2.1)% L&M 24,329 23,809 2.2%
66,751 69,091 (3.4)% Chesterfield 15,821 15,116 4.7% 44,622 40,311
10.7% Philip Morris 13,505 12,838 5.2% 36,687 36,133 1.5% Sampoerna
A 10,333 10,482 (1.4)% 29,131 31,012 (6.1)% Parliament 11,588
11,354 2.1% 31,041 31,723 (2.1)% Bond Street 8,595 9,912 (13.3)%
23,960 28,675 (16.4)% Dji Sam Soe 7,578 6,425 17.9% 21,151 15,692
34.8% Lark 6,058 6,403 (5.4)% 17,604 18,627 (5.5)% Fortune 4,052
3,451 17.4% 11,791 9,761 20.8% Others 24,088 29,789
(19.1)% 71,344 84,417
(15.5)%
Total Cigarettes 195,068 198,465
(1.7)% 550,069 565,557 (2.7)% Heated
Tobacco Units 8,652 9,725 (11.0)%
29,205 20,510 42.4%
Total PMI
203,720 208,190 (2.1)% 579,274
586,067 (1.2)% Note: Sampoerna A includes Sampoerna;
Philip Morris includes Philip Morris/Dubliss; and Lark includes
Lark Harmony.
Third-Quarter
PMI's cigarette shipment volume of the following brands
decreased:
- Sampoerna A in Indonesia, partly
reflecting the impact of its retail price increasing past its round
pack price point in the fourth quarter of 2017;
- Bond Street, mainly due to Kazakhstan,
Russia and Ukraine;
- Lark, mainly due to Japan; and
- "Others," mainly due to: mid-price
brands, notably Sampoerna U in Indonesia, partly reflecting the
impact of above-inflation retail price increases; the successful
portfolio consolidation of local, low price brands into
international trademarks, notably in Colombia, Mexico and Russia;
and low price Jackpot in the Philippines, reflecting uptrading as a
result of narrowed price gaps.
PMI's cigarette shipment volume of the following brands
increased:
- Marlboro, mainly driven by Algeria, the
GCC, notably Saudi Arabia, Indonesia, Mexico, the Philippines and
Turkey, partly offset by Argentina, Italy, Japan, Korea and PMI
Duty Free;
- L&M, mainly driven by the GCC,
notably Saudi Arabia, Poland and Thailand, partly offset by North
Africa, notably Egypt, Russia and Turkey;
- Chesterfield, mainly driven by
Colombia, Mexico and Turkey, partly offset by Russia;
- Philip Morris, mainly driven by Russia,
partly offset by Argentina and the Philippines;
- Parliament, mainly driven by Japan and
Turkey, partly offset by Korea and Russia;
- Dji Sam Soe in Indonesia, notably
reflecting the continued strong performance of its Magnum Mild 16s
variant; and
- Fortune in the Philippines, reflecting
the favorable impact of its narrowed retail price gap to
competitors' products.
The decrease in PMI's heated tobacco unit shipment volume was
due to Japan, reflecting the previously disclosed expectation of a
full-year net distributor inventory reduction of approximately
three billion units (an estimated four billion unit reduction in
Japan and one billion unit increase in other markets) with the
reduction in Japan concentrated in the third quarter of 2018.
Nine Months Year-to-Date
PMI's cigarette shipment volume of the following brands
decreased:
- Marlboro, mainly due to France, the
GCC, notably Saudi Arabia and the UAE, Italy, Japan and Korea,
partly offset by Indonesia, North Africa and Turkey;
- L&M, mainly due to the GCC, notably
Saudi Arabia, North Africa, notably Egypt, Russia, Turkey and
Ukraine, partly offset by Kazakhstan, Serbia and Thailand;
- Sampoerna A in Indonesia, partly
reflecting the impact of its retail price increasing past its round
pack price point in the fourth quarter of 2017;
- Parliament, mainly due to Korea and
Russia, partly offset by Turkey;
- Bond Street, mainly due to Russia and
Ukraine;
- Lark, mainly due to Japan, partly
offset by Turkey; and
- "Others," mainly due to: mid-price
brands, notably Sampoerna U in Indonesia, partly reflecting the
impact of above-inflation retail price increases; the successful
portfolio consolidation of local, low price brands into
international trademarks, notably in Brazil, Colombia, Mexico and
Russia; low price Jackpot in the Philippines, reflecting uptrading
as a result of narrowed price gaps; partly offset by low-price
Morven in Pakistan.
PMI's cigarette shipment volume of the following brands
increased:
- Chesterfield, mainly driven by
Argentina, Brazil, Colombia, the GCC, notably Saudi Arabia, Mexico
and Turkey, partly offset by Portugal, Russia and Taiwan;
- Philip Morris, mainly driven by Russia,
partly offset by Argentina, Italy and the Philippines;
- Dji Sam Soe in Indonesia, notably
reflecting the continued strong performance of its Magnum Mild 16s
variant launched in the second quarter of 2017; and
- Fortune in the Philippines, reflecting
the favorable impact of its narrowed retail price gap to
competitors' products.
The increase in PMI's heated tobacco unit shipment volume was
driven by all IQOS Regions, reflecting growth in: the EU, notably
Italy; EE, notably Russia and Ukraine; ME&A, notably PMI Duty
Free; and EA&A, notably Korea, partly offset by Japan, due to
net unfavorable estimated distributor inventory movements described
in the East Asia & Australia Region section below.
FINANCIAL SUMMARY
Third-Quarter
Financial Summary -Quarters Ended September 30,
ChangeFav./(Unfav.)
VarianceFav./(Unfav.) 2018 2017
Total Excl.Curr. Total
Cur-rency Price
Vol/Mix Cost/Other (in
millions) Net
Revenues $ 7,504 $ 7,473 0.4% 3.3%
31 (213) 483 (310) 71 Cost of
Sales (2,618) (2,735) 4.3% 3.1%
117 32 — 118 (33)
Marketing, Administration
andResearch Costs
(1,710) (1,629) (5.0)% (5.8)%
(81) 14 — — (95) Amortization
of Intangibles (20) (21) 4.8%
4.8% 1 — —
— 1 Operating Income $ 3,156
$ 3,088 2.2% 7.6% 68 (167)
483 (192) (56) Asset Impairment & Exit
Costs — — —% —% — — — — —
Adjusted Operating Income $ 3,156 $ 3,088
2.2% 7.6% 68 (167) 483
(192) (56)
Adjusted Operating
IncomeMargin
42.1% 41.3% 0.8pp 1.8pp
“Cost/Other” also includes the
currency-neutral net revenue variance, unrelated to volume/mix and
price components, attributable to fees forcertain distribution
rights billed to customers in certain markets in the ME&A
Region. This immaterial presentational change, made in
conjunctionwith the new revenue recognition standard, is
prospective only.
Net revenues, excluding unfavorable currency, increased by 3.3%,
primarily reflecting a favorable pricing variance, driven by all
Regions, and a favorable "cost/other" variance, as described above,
partly offset by unfavorable volume/mix due mainly to EA&A,
principally Japan, partly offset by the EU.
Operating income, excluding unfavorable currency, increased by
7.6%, reflecting: a favorable pricing variance and the favorable
margin impact of lower IQOS device sales, partly offset by
unfavorable volume/mix due mainly to EA&A, principally Japan,
partly offset by the EU. The favorable pricing variance was also
partly offset by higher costs, notably higher manufacturing and
marketing, administration and research costs, primarily related to
increased investment behind reduced-risk products across all
Regions, predominantly the EU.
Adjusted operating income margin, excluding currency, increased
by 1.8 points to 43.1%, reflecting the factors mentioned above, as
detailed in the attached Schedule 7.
Nine Months Year-to-Date
Financial Summary -Nine Months Ended September 30,
ChangeFav./(Unfav.)
VarianceFav./(Unfav.) 2018 2017
Total Excl.Curr. Total
Cur-rency Price
Vol/Mix Cost/Other (in
millions) Net
Revenues $ 22,126 $ 20,454 8.2%
6.5% 1,672 351 1,165 (6)
162 Cost of Sales (7,977) (7,431)
(7.3)% (4.6)% (546) (205) —
(340) (1)
Marketing, Administration
andResearch Costs
(5,411) (4,717) (14.7)% (11.5)%
(694) (150) — — (544)
Amortization of Intangibles (63) (65)
3.1% 3.1% 2 —
— — 2 Operating Income
$ 8,675 $ 8,241 5.3% 5.3% 434
(4) 1,165 (346) (381) Asset Impairment
& Exit Costs — — —% —% — — —
— —
Adjusted Operating Income $ 8,675 $
8,241 5.3% 5.3% 434 (4)
1,165 (346) (381)
Adjusted Operating
IncomeMargin
39.2% 40.3% (1.1)pp (0.4)pp
“Cost/Other” also includes the
currency-neutral net revenue variance, unrelated to volume/mix and
price components, attributable to fees forcertain distribution
rights billed to customers in certain markets in the ME&A
Region. This immaterial presentational change, made in
conjunctionwith the new revenue recognition standard, is
prospective only.
Net revenues, excluding favorable currency, increased by 6.5%,
primarily reflecting a favorable pricing variance, driven by EU,
EE, S&SA, EA&A and LA&C, and a favorable "cost/other"
variance as described above. Despite an unfavorable volume variance
in Japan and Saudi Arabia, volume/mix was essentially flat, notably
reflecting a favorable volume variance driven by heated tobacco
units.
Operating income, excluding unfavorable currency, increased by
5.3%, reflecting: a favorable pricing variance; partly offset by
unfavorable volume/mix, due mainly to lower mix in Indonesia, lower
volume in Japan, lower volume/mix in Russia and lower volume in
Saudi Arabia, partly offset by higher volume in Korea. The
favorable pricing variance was also partly offset by higher
marketing, administration and research costs, primarily related to
increased investment behind reduced-risk products, predominantly in
the EU and EA&A.
Adjusted operating income margin, excluding currency, decreased
by 0.4 points to 39.9%, reflecting the factors mentioned above, as
detailed in the attached Schedule 7.
NET REVENUES BY PRODUCT CATEGORY
PMI Net Revenues Third-Quarter
Nine Months Year-to-Date (in millions)
Excl. Excl. 2018
2017 Change Curr.
2018 2017 Change
Curr. Combustible Products European Union $ 2,225 $
2,139 4.0% 2.7% $ 6,381 $ 5,909 8.0% (0.6)% Eastern Europe 705 696
1.2% 7.2% 1,926 1,900 1.4% 2.5% Middle East & Africa 1,019
1,045 (2.5)% 6.8% 2,813 2,970 (5.3)% (2.4)% South & Southeast
Asia 1,197 1,129 6.0% 13.2% 3,434 3,206 7.1% 11.2% East Asia &
Australia 789 760 3.8% 4.4% 2,348 2,363 (0.6)% (2.4)% Latin America
& Canada 748 755 (1.0)% 2.3% 2,254
2,108 6.9% 9.8%
Total PMI $ 6,681 $
6,526 2.4% 5.8% $ 19,156 $ 18,457
3.8% 2.4% RRPs European Union $ 242 $
65 +100% +100% $ 577 $ 145 +100% +100% Eastern Europe 73 9 +100%
+100% 179 19 +100% +100% Middle East & Africa 124 31 +100%
+100% 313 45 +100% +100% South & Southeast Asia — — —% —% — —
—% —% East Asia & Australia 377 841 (55.1)% (56.4)% 1,887 1,786
5.7% 2.4% Latin America & Canada 5 1 +100%
+100% 14 2 +100% +100%
Total PMI $
823 $ 947 (13.2)% (14.2)% $ 2,970
$ 1,997 48.7% 43.6% Combustible
Products and RRPs European Union $ 2,467 $ 2,204 11.9% 10.6% $
6,958 $ 6,054 14.9% 5.8% Eastern Europe 778 705 10.4% 16.9% 2,105
1,918 9.7% 11.1% Middle East & Africa 1,143 1,078 6.0% 15.0%
3,126 3,017 3.6% 6.4% South & Southeast Asia 1,197 1,129 6.0%
13.2% 3,434 3,206 7.1% 11.2% East Asia & Australia 1,166 1,601
(27.2)% (27.5)% 4,235 4,149 2.1% (0.3)% Latin America & Canada
753 756 (0.4)% 2.9% 2,268 2,110
7.5% 10.4%
Total PMI $ 7,504 $ 7,473
0.4% 3.3% $ 22,126 $ 20,454 8.2%
6.5% Note: Sum of product categories or Regions might not
foot to total PMI due to rounding.
EUROPEAN UNION REGION
Third-Quarter
Financial Summary -Quarters Ended September 30,
ChangeFav./(Unfav.)
VarianceFav./(Unfav.) 2018 2017
Total Excl.Curr. Total
Cur-rency Price
Vol/Mix Cost/Other (in
millions) Net
Revenues $ 2,467 $ 2,204 11.9%
10.6% 263 30 77 156 —
Operating Income $ 1,179 $ 1,025
15.0% 13.2% 154 19 77 110
(52) Asset Impairment & Exit Costs — — —%
—% — — — — —
Adjusted Operating
Income $ 1,179 $ 1,025 15.0% 13.2%
154 19 77 110 (52)
Adjusted Operating
IncomeMargin
47.8% 46.5% 1.3pp 1.1pp
Net revenues, excluding favorable currency, increased by 10.6%,
reflecting: a favorable pricing variance, driven principally by
Germany and Italy, partly offset by France; and favorable
volume/mix, primarily reflecting favorable volume across the
Region, driven by heated tobacco unit volume, partly offset by
France.
Operating income, excluding favorable currency, increased by
13.2%, mainly reflecting: a favorable pricing variance; and
favorable volume/mix across the Region; partially offset by higher
manufacturing costs and marketing, administration and research
costs, primarily related to investments behind reduced-risk
products.
Adjusted operating income margin, excluding currency, increased
by 1.1 points to 47.6%, reflecting the factors mentioned above, as
detailed on Schedule 7.
Nine Months Year-to-Date
Financial Summary -Nine Months Ended September 30,
ChangeFav./(Unfav.)
VarianceFav./(Unfav.) 2018 2017
Total Excl.Curr. Total
Cur-rency Price
Vol/Mix Cost/Other (in
millions) Net
Revenues $ 6,958 $ 6,054 14.9% 5.8%
904 553 194 157 —
Operating Income $ 3,096 $ 2,717 13.9%
3.0% 379 298 194 62 (175)
Asset Impairment & Exit Costs — — —% —% —
— — — —
Adjusted Operating Income $
3,096 $ 2,717 13.9% 3.0% 379
298 194 62 (175)
Adjusted Operating
IncomeMargin
44.5% 44.9% (0.4)pp (1.2)pp
Net revenues, excluding favorable currency, increased by 5.8%,
reflecting a favorable pricing variance, driven principally by
Germany and Italy, partly offset by France, and favorable
volume/mix, notably Bulgaria, the Czech Republic, Italy and Poland,
driven by heated tobacco unit volume, partly offset by unfavorable
volume in France.
Operating income, excluding favorable currency, increased by
3.0%, mainly due to: a favorable pricing variance; favorable
volume/mix, notably in Bulgaria, the Czech Republic and Poland,
driven by heated tobacco unit volume, partly offset by France and
Germany; partly offset by higher manufacturing costs and marketing,
administration and research costs, primarily related to investments
behind reduced-risk products.
Adjusted operating income margin, excluding currency, decreased
by 1.2 points to 43.7%, reflecting the factors mentioned above, as
detailed on Schedule 7.
Total Market, PMI Shipment & Market Share
Commentaries
European Union Key Data Third-Quarter
Nine Months Year-to-Date Change
Change 2018 2017
% / pp 2018 2017 % / pp
Total Market (billion units) 131.3 131.7 (0.3)% 365.3 372.7
(2.0)%
PMI Shipment Volume (million units) Cigarettes
48,223 49,114 (1.8)% 135,878 141,412 (3.9)% Heated Tobacco Units
1,730 464 +100.0% 3,853 1,040 +100.0%
Total EU 49,953 49,578 0.8%
139,731 142,452 (1.9)% PMI Market
Share Marlboro 18.5% 18.7% (0.2) 18.4% 18.7% (0.3) L&M 7.0%
6.8% 0.2 6.9% 6.9% — Chesterfield 5.9% 6.1% (0.2) 5.9% 6.0% (0.1)
Philip Morris 2.9% 3.0% (0.1) 3.0% 3.1% (0.1) HEETS 1.2% 0.3% 0.9
1.0% 0.2% 0.8 Others 3.0% 3.2% (0.2) 3.2% 3.2%
—
Total EU 38.5% 38.1% 0.4
38.4% 38.1% 0.3
Third-Quarter
The estimated total market in the EU decreased by 0.3% to 131.3
billion units, or by 1.0% excluding the net impact of favorable
estimated trade inventory movements, mainly due to:
- France, down by 8.6%, primarily
reflecting the impact of significant excise-tax driven price
increases in November 2017 and March 2018, and an increase in the
prevalence of illicit trade; and
- Italy, down by 2.4%, primarily
reflecting the impact of retail price increases in March 2018;
partly offset by
- Poland, up by 6.5%, partly reflecting a
favorable comparison with the third quarter of 2017 which decreased
by 2.9%.
PMI's total shipment volume increased by 0.8% to 50.0 billion
units, notably driven by:
- Germany, up by 2.8%, primarily driven
by higher market share, notably of Marlboro, and higher heated
tobacco unit shipment volume; and
- Poland, up by 7.4%, primarily
reflecting the higher total market;
partly offset by
- France, down by 6.7%, primarily due to
a lower total market, partly offset by higher market share
primarily driven by Marlboro, benefiting from its narrowed price
gap with competitors' alternatives following its positioning to the
round price of €8.00/pack as of March 2018, and the positive
momentum of Philip Morris initiated with its price repositioning in
November 2017 and extended with its XXL line variant in March 2018;
and
- Italy, down by 3.8%, reflecting the
lower total market and lower cigarette market share, partly offset
by higher heated tobacco unit shipment volume.
PMI's total market share increased by 0.4 points to 38.5%, with
gains notably in Belgium, Bulgaria, Croatia, France, Germany,
Greece, Hungary, the Netherlands, Poland, Portugal, the Slovak
Republic and Sweden, partly offset by declines in the Czech
Republic, Denmark, Italy, Romania, Spain, Switzerland and the
United Kingdom.
Nine Months Year-to-Date
The estimated total market in the EU decreased by 2.0% to 365.3
billion units, notably due to:
- France, down by 10.1%, reflecting the
same factors as in the quarter;
- Germany, down by 2.6%, primarily
reflecting the impact of price increases in 2017 and in March
2018;
- Italy, down by 2.1%, reflecting the
same factor as in the quarter; and
- the United Kingdom, down by 5.7%,
primarily reflecting the impact of price increases.
partly offset by
- Poland, up by 2.7%, primarily
reflecting a decrease in the prevalence of illicit trade.
PMI's total shipment volume decreased by 1.9% to 139.7 billion
units, or by 1.4% excluding the net impact of unfavorable estimated
distributor inventory movements, notably due to:
- France, down by 6.7%, primarily
reflecting the same factors as in the quarter;
- Germany, down by 2.2%, primarily due to
the lower total market, partly offset by higher market share;
and
- Italy, down by 4.1%, or by 2.6%
excluding unfavorable estimated distributor inventory movements
associated with the timing of price increases in March 2018, partly
offset by higher heated tobacco unit shipment volume.
PMI's total market share increased by 0.3 points to 38.4%, with
gains notably in Belgium, Bulgaria, Croatia, Denmark, France,
Germany, Greece, Hungary, the Netherlands, Portugal, Romania, the
Slovak Republic, partly offset by declines in Austria, the Czech
Republic, Italy, Poland, Spain, Sweden, Switzerland and the United
Kingdom.
EASTERN EUROPE REGION
Third-Quarter
Financial Summary -Quarters Ended September 30,
ChangeFav./(Unfav.)
VarianceFav./(Unfav.) 2018 2017
Total Excl.Curr. Total
Cur-rency Price
Vol/Mix Cost/Other (in
millions) Net
Revenues $ 778 $ 705 10.4% 16.9%
73 (46) 91 28 —
Operating Income $ 270 $ 244 10.7%
33.6% 26 (56) 91 (10) 1
Asset Impairment & Exit Costs — — —% —% —
— — — —
Adjusted Operating Income $
270 $ 244 10.7% 33.6% 26
(56) 91 (10) 1
Adjusted Operating
IncomeMargin
34.7% 34.6% 0.1pp 5.0pp
Net revenues, excluding unfavorable currency, increased by
16.9%, reflecting a favorable pricing variance, mainly driven by
Russia and Ukraine, and favorable volume/mix, primarily due to
Russia and Ukraine driven by heated tobacco units.
Operating income, excluding unfavorable currency, increased by
33.6%, mainly reflecting a favorable pricing variance, partly
offset by unfavorable volume/mix, predominantly due to unfavorable
mix in Russia.
Adjusted operating income margin, excluding currency, increased
by 5.0 points to 39.6%, reflecting the factors mentioned above, as
detailed on Schedule 7.
Nine Months Year-to-Date
Financial Summary -Nine Months Ended September 30,
ChangeFav./(Unfav.)
VarianceFav./(Unfav.) 2018 2017
Total Excl.Curr. Total
Cur-rency Price
Vol/Mix Cost/Other (in
millions) Net
Revenues $ 2,105 $ 1,918 9.7% 11.1%
187 (26) 243 (30) —
Operating Income $ 682 $ 627 8.8%
19.8% 55 (69) 243 (98)
(21) Asset Impairment & Exit Costs — — —%
—% — — — — —
Adjusted Operating
Income $ 682 $ 627 8.8% 19.8%
55 (69) 243 (98) (21)
Adjusted Operating
IncomeMargin
32.4% 32.7% (0.3)pp 2.5pp
Net revenues, excluding unfavorable currency, increased by
11.1%, reflecting a favorable pricing variance, mainly driven by
Russia and Ukraine, partly offset by unfavorable volume/mix,
primarily due to Russia.
Operating income, excluding unfavorable currency, increased by
19.8%, mainly reflecting: a favorable pricing variance and lower
manufacturing costs; partly offset by unfavorable volume/mix,
predominantly due to Russia, and higher marketing, administration
and research costs notably reflecting increased investments behind
reduced-risk products in Russia.
Adjusted operating income margin, excluding currency, increased
by 2.5 points to 35.2%, reflecting the factors mentioned above, as
detailed on Schedule 7.
Total Market, PMI Shipment & Market Share
Commentaries
PMI Shipment Volume
Third-Quarter Nine Months Year-to-Date
(million units) 2018 2017
Change 2018 2017 Change
Cigarettes 29,801 31,749 (6.1)% 80,294 88,426
(9.2)% Heated Tobacco Units 1,152 180 +100.0%
2,667 351 +100.0%
Total Eastern Europe
30,953 31,929 (3.1)% 82,961
88,777 (6.6)%
Third-Quarter
The estimated total market in Eastern Europe decreased, notably
due to:
- Russia, down by 7.8%, primarily
reflecting the timing and impact of excise tax-driven retail price
increases, as well as an increase in the prevalence of illicit
trade; and
- Ukraine, down by 9.4%, primarily
reflecting the timing and impact of excise-tax driven retail price
increases and an increase in the prevalence of illicit trade.
PMI's total shipment volume decreased by 3.1% to 31.0 billion
units, or by 5.1% excluding the net favorable impact of estimated
distributor inventory movements, notably in:
- Russia, down by 3.0%, or by 5.3%
excluding the net favorable impact of estimated distributor
inventory movements, mainly due to the lower total market; lower
cigarette market share, as measured by Nielsen, largely due to
mid-price L&M , and low price Bond Street and Next, reflecting
the impact of down-trading to competitive products, partly offset
by Philip Morris; partially offset by higher heated tobacco unit
shipment volume;
- Kazakhstan, down by 9.2%, mainly due to
the lower total market, partly offset by higher market share;
and
- Ukraine, down by 3.7%, mainly due to
the lower total market, partly offset by higher heated tobacco unit
shipment volume.
Nine Months Year-to-Date
The estimated total market in Eastern Europe decreased, notably
due to:
- Russia, down by 8.6%, mainly reflecting
the same factors as in the quarter; and
- Ukraine, down by 8.2%, mainly
reflecting the same factors as in the quarter.
PMI's total shipment volume decreased by 6.6% to 83.0 billion
units, notably in:
- Russia, down by 8.8%, mainly due to the
same factors as in the quarter; and
- Ukraine, down by 8.3%, mainly due to
the same factors as in the quarter.
MIDDLE EAST & AFRICA REGION
Third-Quarter
Financial Summary -Quarters Ended September 30,
ChangeFav./(Unfav.)
VarianceFav./(Unfav.) 2018 2017
Total Excl.Curr. Total
Cur-rency Price
Vol/Mix Cost/Other (in
millions) Net
Revenues $ 1,143 $ 1,078 6.0% 15.0%
65 (97) 19 72 71
Operating Income $ 491 $ 495 (0.8)%
18.8% (4) (97) 19 59 15
Asset Impairment & Exit Costs — — —% —% —
— — — —
Adjusted Operating Income $
491 $ 495 (0.8)% 18.8% (4)
(97) 19 59 15
Adjusted Operating
IncomeMargin
43.0% 45.9% (2.9)pp 1.5pp
“Cost/Other” also includes the
currency-neutral net revenue variance, unrelated to volume/mix and
price components, attributable to fees forcertain distribution
rights billed to customers in certain markets in the ME&A
Region. This immaterial presentational change, made in
conjunctionwith the new revenue recognition standard, is
prospective only.
Net revenues, excluding unfavorable currency, increased by
15.0%, reflecting: a favorable pricing variance, mainly driven by
Egypt and Turkey; favorable volume/mix, principally driven by
favorable volume in the GCC, notably Saudi Arabia, as well as PMI
Duty Free and Turkey, partly offset by Egypt; and a favorable
"cost/other" variance, as described above.
Operating income, excluding unfavorable currency, increased by
18.8%, mainly reflecting a favorable pricing variance; favorable
volume/mix, principally driven by favorable volume in the GCC,
notably Saudi Arabia, as well as PMI Duty Free and Turkey; and
lower marketing, administration and research costs primarily
related to the favorable "cost/other" variance.
Adjusted operating income margin, excluding currency, increased
by 1.5 points to 47.4%, reflecting the factors mentioned above, as
detailed on Schedule 7.
Nine Months Year-to-Date
Financial Summary -Nine Months Ended September 30,
ChangeFav./(Unfav.)
VarianceFav./(Unfav.) 2018 2017
Total Excl.Curr. Total
Cur-rency Price
Vol/Mix Cost/Other (in
millions) Net
Revenues $ 3,126 $ 3,017 3.6% 6.4%
109 (83) (32) 62 162
Operating Income $ 1,268 $ 1,463
(13.3)% (3.6)% (195) (143) (32)
9 (29) Asset Impairment & Exit Costs — —
—% —% — — — — —
Adjusted
Operating Income $ 1,268 $ 1,463 (13.3)%
(3.6)% (195) (143) (32) 9
(29)
Adjusted Operating
IncomeMargin
40.6% 48.5% (7.9)pp (4.5)pp
“Cost/Other” also includes the
currency-neutral net revenue variance, unrelated to volume/mix and
price components, attributable to fees forcertain distribution
rights billed to customers in certain markets in the ME&A
Region. This immaterial presentational change, made in
conjunctionwith the new revenue recognition standard, is
prospective only.
Net revenues, excluding unfavorable currency, increased by 6.4%,
reflecting: a favorable "cost/other" variance, as described above;
favorable volume/mix, primarily driven by favorable volume in PMI
Duty Free and Turkey, partly offset by the GCC, notably Saudi
Arabia; partly offset by an unfavorable pricing variance, due
mainly to Saudi Arabia, partly offset by Egypt.
Operating income, excluding unfavorable currency, decreased by
3.6%, mainly reflecting: an unfavorable pricing variance, and
higher manufacturing costs, partly due to PMI Duty Free relating to
reduced-risk products. The unfavorable pricing and higher
manufacturing costs were partly offset by favorable volume/mix,
primarily driven by favorable volume in PMI Duty Free and Turkey,
partly offset by Saudi Arabia.
Adjusted operating income margin, excluding currency, decreased
by 4.5 points to 44.0%, reflecting the factors mentioned above, as
detailed on Schedule 7.
Total Market, PMI Shipment & Market Share
Commentaries
PMI Shipment Volume Third-Quarter
Nine Months Year-to-Date (million units)
2018 2017 Change 2018
2017 Change Cigarettes 37,406
37,088 0.9% 100,831 101,399 (0.6)% Heated
Tobacco Units 1,152 247 +100.0% 2,832 410
+100.0%
Total Middle East & Africa 38,558
37,335 3.3% 103,663 101,809 1.8%
Third-Quarter
The estimated total market in the Middle East & Africa
increased, notably driven by:
- Turkey, up by 11.3%, notably reflecting
a reduction in the prevalence of illicit trade;
partly offset by
- North Africa, down by 4.4%, mainly due
to Egypt reflecting the impact of retail price increases in
November 2017 and July 2018.
PMI's total shipment volume increased by 3.3% to 38.6 billion
units, notably in:
- the GCC, notably: Saudi Arabia, up by
18.5%, reflecting higher market share;
- Turkey, up by 12.3%, reflecting a
higher total market; and
- PMI Duty Free, up by 4.4%, reflecting
higher heated tobacco unit shipment volume;
partly offset by
- Egypt, down by 16.6%, reflecting a
lower total market and lower market share.
Nine Months Year-to-Date
The estimated total market in the Middle East & Africa
increased, notably due to:
- Turkey, up by 13.1%, primarily
reflecting the same factor as in the quarter;
partly offset by
- North Africa, notably: Algeria, down by
5.2%, or by 1.4% excluding the unfavorable impact of trade
inventory movements; and
- Saudi Arabia and the UAE, down by 24.5%
and 30.4%, respectively, primarily reflecting the impact of price
increases and the introduction of the new excise tax in 2017, and
VAT in January 2018.
PMI's total shipment volume increased by 1.8% to 103.7 billion
units, notably in:
- Turkey, up by 13.2%, reflecting a
higher total market; and
- PMI Duty Free, up by 15.0%, mainly
reflecting higher heated tobacco shipment volume;
partly offset by
- the GCC, notably: Saudi Arabia, down by
42.8%, and the UAE, down by 64.2%, reflecting the lower total
market and market share due to the impact of excise tax and
VAT-driven price increases.
SOUTH & SOUTHEAST ASIA REGION
Third-Quarter
Financial Summary -Quarters Ended September 30,
ChangeFav./(Unfav.)
VarianceFav./(Unfav.) 2018 2017
Total Excl.Curr. Total
Cur-rency Price
Vol/Mix Cost/Other (in
millions) Net
Revenues $ 1,197 $ 1,129 6.0% 13.2%
68 (81) 150 (1) —
Operating Income $ 455 $ 411 10.7%
21.2% 44 (43) 150 (18)
(45) Asset Impairment & Exit Costs — — —%
—% — — — — —
Adjusted Operating
Income $ 455 $ 411 10.7% 21.2%
44 (43) 150 (18) (45)
Adjusted Operating
IncomeMargin
38.0% 36.4% 1.6pp 2.6pp
Net revenues, excluding unfavorable currency, increased by
13.2%, reflecting: a favorable pricing variance, driven principally
by Indonesia and the Philippines, partly offset by Thailand.
Essentially flat volume/mix largely reflected unfavorable mix in
Indonesia and Thailand offset by favorable volume in Thailand.
Operating income, excluding unfavorable currency, increased by
21.2%, mainly reflecting: a favorable pricing variance; partly
offset by unfavorable volume/mix, mainly due to Indonesia, partly
offset by Thailand, and higher manufacturing costs and marketing,
administration and research costs, partly due to Indonesia and
Thailand.
Adjusted operating income margin, excluding currency, increased
by 2.6 points to 39.0%, reflecting the factors mentioned above, as
detailed on Schedule 7.
Nine Months Year-to-Date
Financial Summary -Nine Months Ended September 30,
ChangeFav./(Unfav.)
VarianceFav./(Unfav.) 2018 2017
Total Excl.Curr. Total
Cur-rency Price
Vol/Mix Cost/Other (in
millions) Net
Revenues $ 3,434 $ 3,206 7.1% 11.2%
228 (130) 401 (43) —
Operating Income $ 1,324 $ 1,100 20.4%
27.1% 224 (74) 401 (90)
(13) Asset Impairment & Exit Costs — — —%
—% — — — — —
Adjusted Operating
Income $ 1,324 $ 1,100 20.4% 27.1%
224 (74) 401 (90) (13)
Adjusted Operating
IncomeMargin
38.6% 34.3% 4.3pp 4.9pp
Net revenues, excluding unfavorable currency, increased by
11.2%, reflecting: a favorable pricing variance, driven principally
by Indonesia and the Philippines, partly offset by Thailand; partly
offset by unfavorable volume/mix, mainly due to unfavorable mix in
Indonesia and Thailand, partly offset by favorable volume in
Pakistan and Thailand.
Operating income, excluding unfavorable currency, increased by
27.1%, mainly driven by a favorable pricing variance, partly offset
by unfavorable volume/mix, mainly due to Indonesia, partly offset
by Pakistan and Thailand.
Adjusted operating income margin, excluding currency, increased
by 4.9 points to 39.2%, reflecting the factors mentioned above, as
detailed on Schedule 7.
Total Market, PMI Shipment & Market Share
Commentaries
PMI Shipment Volume Third-Quarter
Nine Months Year-to-Date (million units)
2018 2017 Change 2018
2017 Change Cigarettes 45,840
44,731 2.5% 130,846 124,655 5.0% Heated
Tobacco Units — — —% — — —%
Total
South & Southeast Asia 45,840 44,731
2.5% 130,846 124,655 5.0%
Third-Quarter
The estimated total market in South & Southeast Asia
increased, notably driven by:
- Indonesia, up by 1.4%, reflecting
slightly improved macro-economics; and
- Pakistan, up by 6.1% or approximately
0.8 billion units, reflecting an increase in the duty-paid market
driven by a lower prevalence of illicit trade, as well as the
timing impact of estimated trade inventory movements related to
excise tax changes in 2017 and 2018. Excluding the net impact of
favorable estimated trade inventory movements, the total market was
up by 5.6%;
partly offset by
- the Philippines, down by 1.4%,
reflecting the impact of excise tax-driven retail price increases;
and
- Thailand, down by 9.0%, primarily
reflecting the impact of excise tax-driven price increases.
PMI's total shipment volume increased by 2.5% to 45.8 billion
units, mainly driven by:
- Indonesia, up by 1.2%, mainly
reflecting the higher total market; and
- Thailand, up by 85.7%, mainly
reflecting higher market share driven by the price repositioning of
the L&M 7.1 variant in the third quarter of 2017 and its
subsequent distribution expansion during 2018;
partly offset by
- Pakistan, down by 11.2%, mainly
reflecting lower market share, disproportionately impacted by the
estimated trade inventory movements mentioned above, partly offset
by a higher total market.
Nine Months Year-to-Date
The estimated total market in South & Southeast Asia
increased, notably driven by:
- Pakistan, up by 43.8% or approximately
13.4 billion units, notably reflecting an increase in the duty-paid
market driven by a reduction in the prevalence of illicit trade
resulting from excise tax reform in May 2017. Excluding the net
impact of favorable estimated trade inventory movements, as
mentioned above, the total market was up by 23.2%;
partly offset by
- Indonesia, down by 0.5%, primarily
reflecting soft consumer spending in the first half of 2018 and
above inflation excise tax-driven retail price increases;
- the Philippines, down by 3.0%,
primarily reflecting the same factor as in the quarter; and
- Thailand, down by 9.8%, primarily
reflecting the same factor as in the quarter.
PMI's total shipment volume increased by 5.0% to 130.8 billion
units, notably driven by:
- Pakistan, up by 43.4%, reflecting the
higher total market;
- the Philippines, up by 1.1%, mainly
reflecting higher market share, partly offset by a lower total
market; and
- Thailand, up by 64.2%, mainly
reflecting the same factors as in the quarter.
EAST ASIA & AUSTRALIA REGION
Third-Quarter
Financial Summary -Quarters Ended September 30,
ChangeFav./(Unfav.)
VarianceFav./(Unfav.) 2018 2017
Total Excl.Curr. Total
Cur-rency Price
Vol/Mix Cost/Other (in
millions) Net
Revenues $ 1,166 $ 1,601 (27.2)%
(27.5)% (435) 6 86 (527)
— Operating Income $ 426 $ 648
(34.3)% (33.3)% (222) (6) 86
(307) 5 Asset Impairment & Exit Costs — —
—% —% — — — — —
Adjusted
Operating Income $ 426 $ 648 (34.3)%
(33.3)% (222) (6) 86 (307)
5
Adjusted Operating
IncomeMargin
36.5% 40.5% (4.0)pp (3.3)pp
Net revenues, excluding favorable currency, decreased by 27.5%,
reflecting: an unfavorable volume/mix, primarily due to heated
tobacco unit volume in Japan resulting from the adjustment of
estimated distributor inventories described below, partly offset by
favorable heated tobacco unit volume in Korea. The unfavorable
volume/mix was partly offset by a favorable pricing variance.
Operating income, excluding unfavorable currency, decreased by
33.3%, mainly reflecting: unfavorable volume/mix, primarily due to
heated tobacco unit volume in Japan resulting from the adjustment
of estimated distributor inventories described below, partly offset
by favorable heated tobacco unit volume in Korea; and higher
marketing, administration and research costs, notably in Japan. The
unfavorable volume/mix and higher marketing, administration and
research costs were partly offset by a favorable pricing variance
and favorable manufacturing costs related to Japan.
Adjusted operating income margin, excluding currency, decreased
by 3.3 points to 37.2%, reflecting the factors mentioned above, as
detailed on Schedule 7.
Nine Months Year-to-Date
Financial Summary -Nine Months Ended September 30,
ChangeFav./(Unfav.)
VarianceFav./(Unfav.) 2018 2017
Total Excl.Curr. Total
Cur-rency Price
Vol/Mix Cost/Other (in
millions) Net
Revenues $ 4,235 $ 4,149 2.1%
(0.3)% 86 99 65 (78) —
Operating Income $ 1,439 $ 1,630
(11.7)% (12.0)% (191) 5 65
(162) (99) Asset Impairment & Exit Costs —
— —% —% — — — — —
Adjusted
Operating Income $ 1,439 $ 1,630 (11.7)%
(12.0)% (191) 5 65 (162)
(99)
Adjusted Operating
IncomeMargin
34.0% 39.3% (5.3)pp (4.6)pp
Net revenues, excluding favorable currency, decreased by 0.3%,
reflecting an unfavorable volume/mix, due to unfavorable volume in
Australia and Japan, partly offset by favorable heated tobacco unit
volume and IQOS device sales in Korea. The unfavorable volume/mix
was partly offset by a favorable pricing variance.
Operating income, excluding favorable currency, decreased by
12.0%, mainly reflecting: unfavorable volume/mix, mainly due to
unfavorable volume in Australia and Japan, partly offset by
favorable heated tobacco unit volume and IQOS device sales in
Korea; and higher marketing, administration and research costs,
primarily related to investments behind reduced-risk products;
partly offset by a favorable pricing variance, as well as favorable
manufacturing costs related to Japan.
Adjusted operating income margin, excluding currency, decreased
by 4.6 points to 34.7%, reflecting the factors mentioned above, as
detailed on Schedule 7.
Total Market, PMI Shipment & Market Share
Commentaries
PMI Shipment Volume Third-Quarter
Nine Months Year-to-Date (million units)
2018 2017 Change 2018
2017 Change Cigarettes 14,186
15,331 (7.5)% 43,391 48,364 (10.3)% Heated
Tobacco Units 4,575 8,826 (48.2)% 19,755
18,697 5.7%
Total East Asia & Australia
18,761 24,157 (22.3)% 63,146
67,061 (5.8)%
Third-Quarter
The estimated total market in East Asia & Australia
increased, notably driven by:
- Japan, up by 10.1%, primarily
reflecting the favorable impact of estimated trade and consumer
inventory movements ahead of the October 1, 2018 excise tax-driven
retail price increases. Excluding these inventory movements, the
estimated total market decreased by 2.1%; and
- Taiwan, up by +100%, primarily
reflecting a favorable comparison with the third quarter of 2017
that was impacted by the reversal of estimated trade inventory
movements following the excise tax-driven retail price increases in
June 2017. Excluding these inventory movements, the total estimated
market decreased by 11.6%, primarily reflecting the impact of the
retail price increases;
partly offset by
- Korea, down by 5.8%, primarily
reflecting an unfavorable comparison with the third quarter of 2017
that benefited from estimated trade inventory movements ahead of
public holidays in the fourth quarter of 2017. Excluding these
inventory movements, the estimated total market decreased by
2.4%.
PMI's total shipment volume decreased by 22.3% to 18.8 billion
units, reflecting lower cigarette shipment volume, notably in Japan
and Korea, and lower heated tobacco unit shipment volume in Japan,
partly offset by higher cigarette shipment volume in Taiwan, as
well as higher heated tobacco unit shipment volume in Korea.
Excluding the net unfavorable impact of an estimated 7.4 billion
units of total distributor inventory movements, primarily related
to heated tobacco units in Japan, PMI's total shipment volume
increased by 9.1%.
PMI's total shipment volume in Japan was down by 35.4%.
Excluding the impact of estimated distributor inventory movements,
PMI's total shipment volume in Japan was up by 11.0%, reflecting an
increase of heated tobacco unit shipment volume of 42.5%, partly
offset by a decline of cigarette shipment volume of 6.7%.
The net unfavorable estimated distributor inventory movements in
Japan primarily reflected the impact of higher heated tobacco unit
inventory movements in the third quarter of 2017 of approximately
3.1 billion units and lower heated tobacco unit inventory movements
in the third quarter of 2018 of approximately 4.3 billion
units.
Nine Months Year-to-Date
The estimated total market in East Asia & Australia
decreased, notably due to:
- Australia, down by 6.2%, primarily
reflecting the impact of excise tax-driven retail price increases
in 2017 and the first quarter of 2018;
- Korea, down by 3.3%, or by 2.3%
excluding the impact of the estimated trade inventory movements
mentioned above; and
- Taiwan, down by 23.3%, or by 16.7%
excluding the impact of the estimated trade inventory movements
mentioned above, primarily reflecting the impact of excise
tax-driven retail price increases in June 2017;
partly offset by
- Japan, up by 2.1%, or down by 2.1%
excluding the impact of the estimated trade and consumer inventory
movements mentioned above.
PMI's total shipment volume decreased by 5.8% to 63.1 billion
units, reflecting lower cigarette shipment volume, principally in
Japan and Korea, and lower heated tobacco unit shipment volume in
Japan, partly offset by higher heated tobacco unit shipment volume
in Korea.
Excluding the net unfavorable impact of an estimated 9.2 billion
units of total distributor inventory movements, primarily in Japan,
reflecting net unfavorable heated tobacco unit inventory movements
of approximately 10.3 billion units, partly offset by net favorable
cigarette inventory movements of approximately 1.1 billion units,
PMI's total shipment volume increased by 8.4%.
PMI's total shipment volume in Japan was down by 11.9%.
Excluding the impact of estimated distributor inventory movements,
PMI's total shipment volume in Japan was up by 9.6%, reflecting an
increase of heated tobacco unit shipment volume of 63.1%, partly
offset by a decline of cigarette shipment volume of 14.0%.
The net unfavorable estimated distributor inventory movements in
Japan of approximately 9.3 billion units, primarily reflecting
higher heated tobacco unit inventory movements year-to-date 2017 of
approximately 5.7 billion units, lower cigarette inventory
movements year-to-date 2017 of approximately 1.0 billion units, and
lower heated tobacco unit inventory movements year-to-date 2018 of
approximately 4.6 billion units.
LATIN AMERICA & CANADA REGION
Third-Quarter
Financial Summary -Quarters Ended September 30,
ChangeFav./(Unfav.)
VarianceFav./(Unfav.) 2018 2017
Total Excl.Curr. Total
Cur-rency Price
Vol/Mix Cost/Other (in
millions) Net
Revenues $ 753 $ 756 (0.4)% 2.9%
(3) (25) 60 (38) —
Operating Income $ 335 $ 265 26.4%
20.4% 70 16 60 (26) 20
Asset Impairment & Exit Costs — — —% —% —
— — — —
Adjusted Operating Income $
335 $ 265 26.4% 20.4% 70 16
60 (26) 20
Adjusted Operating
IncomeMargin
44.5% 35.1% 9.4pp 5.9pp
Net revenues, excluding unfavorable currency, increased by 2.9%,
reflecting: a favorable pricing variance, notably in Canada and
Mexico, partly offset by Argentina, partially reflecting the
adoption of highly inflationary accounting; partly offset by
unfavorable volume/mix, mainly due to unfavorable volume in
Argentina and Canada, partly offset by favorable volume in Mexico
reflecting a favorable comparison with the third quarter of
2017.
Operating income, excluding favorable currency, increased by
20.4%, reflecting: a favorable pricing variance; and favorable
costs, mainly reflecting lower manufacturing costs in Argentina,
partially reflecting the adoption of highly inflationary
accounting, and Mexico; partly offset by unfavorable volume/mix,
mainly in Argentina and Canada, partly offset by Mexico.
Adjusted operating income margin, excluding currency, increased
by 5.9 points to 41.0%, principally driven by the factors mentioned
above, as detailed on Schedule 7.
Nine Months Year-to-Date
Financial Summary -Nine Months Ended September 30,
ChangeFav./(Unfav.)
VarianceFav./(Unfav.) 2018 2017
Total Excl.Curr. Total
Cur-rency Price
Vol/Mix Cost/Other (in
millions) Net
Revenues $ 2,268 $ 2,110 7.5% 10.4%
158 (62) 294 (74) —
Operating Income $ 866 $ 704 23.0%
26.0% 162 (21) 294 (67)
(44) Asset Impairment & Exit Costs — — —%
—% — — — — —
Adjusted Operating
Income $ 866 $ 704 23.0% 26.0%
162 (21) 294 (67) (44)
Adjusted Operating
IncomeMargin
38.2% 33.4% 4.8pp 4.7pp
Net revenues, excluding unfavorable currency, increased by
10.4%, reflecting a favorable pricing variance across the Region,
notably in Argentina, Canada and Mexico, partly offset by
unfavorable volume/mix, mainly due to unfavorable volume in
Argentina and Canada.
Operating income, excluding unfavorable currency, increased by
26.0%, largely reflecting a favorable pricing variance, partly
offset by: unfavorable volume/mix, mainly in Argentina and Canada,
as well as higher manufacturing and marketing, administration and
research costs, primarily related to increased investment behind
reduced-risk products in the Region, coupled with an unfavorable
comparison to 2017 related to the sale of assets, primarily in the
Dominican Republic.
Adjusted operating income margin, excluding currency, increased
by 4.7 points to 38.1%, principally driven by the factors mentioned
above, as detailed on Schedule 7.
Total Market, PMI Shipment & Market Share
Commentaries
PMI Shipment Volume Third-Quarter
Nine Months Year-to-Date (million units)
2018 2017 Change 2018
2017 Change Cigarettes 19,612
20,452 (4.1)% 58,829 61,301 (4.0)% Heated
Tobacco Units 43 8 +100.0% 98 12
+100.0%
Total Latin America & Canada 19,655
20,460 (3.9)% 58,927 61,313
(3.9)%
Third-Quarter
The estimated total market in Latin America & Canada
decreased, notably due to:
- Argentina, down by 8.5%, primarily
reflecting the impact of retail price increases in 2017 and 2018;
and
- Brazil, down by 12.5%, primarily
reflecting the impact of retail price increases in 2017 and August
2018;
partly offset by
- Mexico, up by 7.3%, or down by 0.6%
excluding estimated trade inventory movements related to the timing
of price increases in June 2018 compared to July of the prior
year.
PMI's total shipment volume decreased by 3.9% to 19.7 billion
units, mainly due to:
- Argentina, down by 9.2%, reflecting the
lower total market;
- Brazil, down by 7.0%, reflecting the
lower total market, partly offset by higher market share;
- Canada, down by 6.7%, reflecting the
lower total market; and
- Colombia, down by 15.9%, reflecting the
lower total market;
partly offset by
- Mexico, up by 15.0%, reflecting the
favorable impact of the estimated trade inventory movements
described above.
Nine Months Year-to-Date
The estimated total market in Latin America & Canada
decreased, notably due to:
- Argentina, down by 3.9% , primarily
reflecting the same factor as in the quarter;
- Brazil, down by 9.7%, primarily
reflecting the same factor as in the quarter; and
- Colombia, down by 10.9%, primarily
reflecting the impact of excise tax-driven retail price
increases.
PMI's total shipment volume decreased by 3.9% to 58.9 billion
units, notably due to:
- Argentina, down by 5.1%, reflecting the
lower total market and lower market share;
- Canada, down by 2.9%, reflecting the
lower total market, partly offset by higher market share; and
- Colombia, down by 7.7%, reflecting the
lower total market.
Philip Morris International: Building a Smoke-Free
Future
Philip Morris International (PMI) is leading a transformation in
the tobacco industry to create a smoke-free future and ultimately
replace cigarettes to the benefit of adults who would otherwise
continue to smoke, society, the company and its shareholders. PMI
is a leading international tobacco company engaged in the
manufacture and sale of cigarettes, smoke-free products and
associated electronic devices and accessories, and other
nicotine-containing products in markets outside the U.S. PMI is
building a future on a new category of smoke-free products that,
while not risk-free, are a much better choice than continuing to
smoke. Through multidisciplinary capabilities in product
development, state-of-the-art facilities and scientific
substantiation, PMI aims to ensure that its smoke-free products
meet adult consumer preferences and rigorous regulatory
requirements. PMI's smoke-free IQOS product portfolio includes
heated tobacco and nicotine-containing vapor products. As of
September 30, 2018, PMI estimates that approximately 5.9 million
adult smokers around the world have already stopped smoking and
switched to PMI’s heated tobacco product, which is currently
available for sale in 43 markets in key cities or nationwide under
the IQOS brand. For more information, please visit www.pmi.com and www.pmiscience.com.
Forward-Looking and Cautionary Statements
This press release contains projections of future results and
other forward-looking statements. Achievement of future results is
subject to risks, uncertainties and inaccurate assumptions. In the
event that risks or uncertainties materialize, or underlying
assumptions prove inaccurate, actual results could vary materially
from those contained in such forward-looking statements. Pursuant
to the “safe harbor” provisions of the Private Securities
Litigation Reform Act of 1995, PMI is identifying important factors
that, individually or in the aggregate, could cause actual results
and outcomes to differ materially from those contained in any
forward-looking statements made by PMI.
PMI's business risks include: 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 and effectiveness of its data
privacy policies. 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. Future results are also subject to
the lower predictability of our reduced-risk product category's
performance.
PMI is further subject to other risks detailed from time to time
in its publicly filed documents, including the Form 10-Q for the
quarter ended June 30, 2018. 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.
Key Terms, Definitions and Explanatory Notes
General
- "PMI" refers to Philip Morris
International Inc. and its subsidiaries. Trademarks and service
marks that are the registered property of, or licensed by, the
subsidiaries of PMI, are italicized.
- Comparisons are made to the same
prior-year period unless otherwise stated.
- Unless otherwise stated, references to
total industry, total market, PMI shipment volume and PMI market
share performance reflect cigarettes and heated tobacco units.
- Key market data regarding total market
size, PMI shipments and market share can be found in Appendixes 1
and 2 provided with this press release.
- References to total international
market, defined as worldwide cigarette and heated tobacco unit
volume excluding the United States, total industry, total market
and market shares are PMI estimates for tax-paid products based on
the latest available data from a number of internal and external
sources and may, in defined instances, exclude the People's
Republic of China and/or PMI's duty free business.
- "OTP" is defined as "other tobacco
products," primarily roll-your-own and make-your-own cigarettes,
pipe tobacco, cigars and cigarillos, and does not include
reduced-risk products.
- "Combustible products" is the term PMI
uses to refer to cigarettes and OTP, combined.
- In-market sales, or "IMS," is defined
as sales to the retail channel, depending on the market and
distribution model.
- "Total shipment volume" is defined as
the combined total of cigarette shipment volume and heated tobacco
unit shipment volume.
- Effective January 1, 2018, PMI began
managing its business in six reporting segments as follows: the
European Union Region (EU); the Eastern Europe Region (EE); the
Middle East & Africa Region (ME&A), which includes PMI Duty
Free; the South & Southeast Asia Region (S&SA); the East
Asia & Australia Region (EA&A); and the Latin
America & Canada Region (LA&C).
- "North Africa" is defined as Algeria,
Egypt, Libya, Morocco and Tunisia.
- "The GCC" (Gulf Cooperation Council) is
defined as Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the
United Arab Emirates (UAE).
- [NEW] From time to time, PMI’s
shipment volumes are subject to the impact of distributor inventory
movements, and estimated total industry/market volumes are subject
to the impact of inventory movements in various trade channels that
include estimated trade inventory movements of PMI’s competitors
arising from market-specific factors that significantly distort
reported volume disclosures. Such factors may include changes to
the manufacturing supply chain, shipment methods, consumer demand,
timing of excise tax increases or other influences that may affect
the timing of sales to customers. In such instances, in addition to
reviewing PMI shipment volumes and certain estimated total
industry/market volumes on a reported basis, management reviews
these measures on an adjusted basis that excludes the impact of
distributor and/or estimated trade inventory movements. Management
also believes that disclosing PMI shipment volumes and estimated
total industry/market volumes in such circumstances on a basis that
excludes the impact of distributor and/or estimated trade inventory
movements improves the comparability of performance and trends for
these measures over different reporting periods.
- [NEW] "OECD" is defined as
Organisation for Economic Co-operation and Development.
Financial
- Net revenues related to combustible
products refer to the operating revenues generated from the sale of
these products, including shipping and handling charges billed to
customers, net of sales and promotion incentives, and excise taxes.
PMI recognizes revenue when control is transferred to the customer,
typically either upon shipment or delivery of goods.
- Net revenues related to RRPs represent
the sale of heated tobacco units, IQOS devices and related
accessories, and other nicotine-containing products, primarily
e-vapor products, including shipping and handling charges billed to
customers, net of sales and promotion incentives, and excise taxes.
PMI recognizes revenue when control is transferred to the customer,
typically either upon shipment or delivery of goods.
- PMI has adopted Accounting Standard
Update ASU 2014-09 "Revenue from Contracts with Customers" as of
January 1, 2018 on a retrospective basis. PMI made an accounting
policy election to exclude excise taxes collected from customers
from the measurement of the transaction price, thereby presenting
revenues, net of excise taxes in all periods. The underlying
principles of the new standard, relating to the measurement of
revenue and the timing of recognition, are closely aligned with
PMI's current business model and practices.
- PMI adopted Accounting Standard Update
ASU 2017-07 "Compensation - Retirement Benefits" as of January 1,
2018 on a retrospective basis. Previously, total pension and other
employee benefit costs were included in operating income. Beginning
January 1, 2018, only the service cost component is required to be
shown in operating income, while all other cost components are
presented in a new line item “pension and other employee benefit
costs" below operating income.
- Prior to 2018, management evaluated
business segment performance, and allocated resources, based on
operating companies income, or OCI. Effective January 1, 2018,
management began evaluating business segment performance, and
allocating resources, based on operating income, or OI.
- "Cost of sales" consists principally
of: tobacco leaf, non-tobacco raw materials, labor and
manufacturing costs; shipping and handling costs; and the cost of
IQOS devices produced by third-party electronics manufacturing
service providers. Estimated costs associated with IQOS warranty
programs are generally provided for in cost of sales in the period
the related revenues are recognized.
- "Marketing, administration and research
costs" include the costs of marketing and selling our products,
other costs generally not related to the manufacture of our
products (including general corporate expenses), and costs incurred
to develop new products. The most significant components of our
marketing, administration and research costs are marketing and
sales expenses and general and administrative expenses.
- "Cost/Other" in the Financial Summary
table of total PMI and the six reporting segments of this release
reflects the currency-neutral variances of: cost of sales
(excluding the volume/mix cost component); marketing,
administration and research costs; asset impairment and exit costs;
and amortization of intangibles.
- "Adjusted Operating Income Margin" is
calculated as adjusted operating income, divided by net
revenues.
- "Adjusted EBITDA" is defined as
earnings before interest, taxes, depreciation, amortization and
equity (income)/loss in unconsolidated subsidiaries, excluding
asset impairment and exit costs, and unusual items.
- "Net debt" is defined as total debt,
less cash and cash equivalents.
- Management reviews net revenues, OI, OI
margins, operating cash flow and earnings per share, or "EPS," on
an adjusted basis, which may exclude the impact of currency and
other items such as acquisitions, asset impairment and exit costs,
tax items and other special items.
- Management reviews these measures
because they exclude changes in currency exchange rates and other
factors that may distort underlying business trends, thereby
improving the comparability of PMI’s business performance between
reporting periods. Furthermore, PMI uses several of these measures
in its management compensation program to promote internal fairness
and a disciplined assessment of performance against company
targets. PMI discloses these measures to enable investors to view
the business through the eyes of management.
- Non-GAAP measures used in this release
should neither be considered in isolation nor as a substitute for
the financial measures prepared in accordance with U.S. GAAP. For a
reconciliation of non-GAAP measures to the most directly comparable
GAAP measures, see the relevant schedules provided with this press
release.
Reduced-Risk Products
- "Reduced-risk products," or "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. PMI
has a range of RRPs in various stages of development, scientific
assessment and commercialization. Because PMI's RRPs do not burn
tobacco, they produce an aerosol that contains far lower quantities
of harmful and potentially harmful constituents than found in
cigarette smoke.
- The IQOS heat-not-burn device is a
precisely controlled heating device into which a specially designed
and proprietary tobacco unit is inserted and heated to generate an
aerosol.
- "Heated tobacco units," or "HTUs," is
the term PMI uses to refer to heated tobacco consumables, which
include the company's HEETS, HEETS Marlboro and HEETS FROM
MARLBORO, defined collectively as HEETS, as well as Marlboro
HeatSticks and Parliament HeatSticks.
Appendix 1 PHILIP MORRIS
INTERNATIONAL INC. and Subsidiaries
Key Market Data
Quarters Ended September 30, Market
Total Market,bio units PMI Shipments, bio
units PMI Market Share, % (1) Total
Cigarette HTU Total HTU 2018
2017
%Change
2018 2017
%Change
2018 2017
%Change
2018 2017
%Change
2018 2017
ppChange
2018 2017
ppChange
European Union
France 10.7
11.7 (8.6) 4.6 5.0 (6.7) 4.6 4.9
(6.6) — — — 45.7 43.4 2.3 0.1 —
0.1
Germany 20.5 20.4 0.5 7.3
7.1 2.8 7.2 7.0 1.8 0.1 — — 35.5
34.7 0.8 0.5 0.2 0.3
Italy 18.3
18.7 (2.4) 9.3 9.7 (3.8) 8.8 9.5
(8.0) 0.5 0.1 +100.0 51.9 52.4
(0.5) 2.0 0.7 1.3
Poland 11.9 11.2
6.5 5.2 4.8 7.4 5.1 4.8 5.8 0.1
— — 43.4 43.0 0.4 0.9 0.2
0.7
Spain 12.5 12.4 0.9 3.9 3.8
1.6 3.8 3.8 0.3 0.1 — — 32.4
33.0 (0.6) 0.4 0.1 0.3
Eastern
Europe
Russia(2) 64.6 70.0
(7.8) 18.4 18.9 (3.0) 17.6 18.9
(6.5) 0.7 0.1 +100.0 26.9 27.3 (0.4) —
— —
Middle East & Africa
Saudi Arabia 5.3 5.3 (0.4) 2.5
2.1 18.5 2.5 2.1 18.5 — — — 41.7
35.6 6.1 — — —
Turkey(2)
33.4 30.0 11.3 15.9 14.1 12.3 15.9
14.1 12.3 — — — 43.2 43.4
(0.2) — — —
South & Southeast Asia
Indonesia 80.3 79.2 1.4 26.5
26.2 1.2 26.5 26.2 1.2 — —
— 33.0 33.1 (0.1) — — —
Philippines 18.3 18.6 (1.4) 12.7 12.7
0.4 12.7 12.7 0.4 — — — 69.5
68.3 1.2 — — —
East Asia
& Australia
Australia 3.4 3.4
1.7 1.0 1.1 (8.7) 1.0 1.1 (8.7)
— — — 29.1 32.5 (3.4) — —
—
Japan 48.5 44.0 10.1 10.7 16.5
(35.4) 7.5 8.2 (8.6) 3.2 8.3 (61.8)
33.5 33.2 0.3 15.5 11.9 3.6
Korea 18.7 19.9 (5.8) 4.6 4.2
8.2 3.2 3.7 (14.7) 1.4 0.5 +100.0 24.2
21.1 3.1 7.4 2.5 4.9
Latin
America & Canada
Argentina 8.1 8.9
(8.5) 6.1 6.7 (9.2) 6.1 6.7
(9.2) — — — 74.7 75.1 (0.4) — —
—
Canada 6.2 6.5 (4.8) 2.4 2.6
(6.7) 2.4 2.6 (6.8) — — — 38.7
39.5 (0.8) 0.1 — 0.1
Mexico 8.5
8.0 7.3 5.9 5.1 15.0 5.9 5.1
15.0 — — — 69.1 64.5 4.6 —
— — (1) Market share estimates are calculated
using IMS data unless otherwise stated (2) PMI Cigarette Market
Share August QTD as measured by Nielsen Note: % change for Total
Market and PMI shipments is computed based on millions of units
Appendix 2 PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Key Market Data
Nine Months Ended September 30, Market Total
Market,bio units PMI Shipments, bio units PMI
Market Share, % (1) Total Cigarette
HTU Total HTU 2018 2017
%Change
2018 2017
%Change
2018 2017
%Change
2018 2017
%Change
2018 2017
ppChange
2018 2017
ppChange
European Union
France 31.1
34.6 (10.1) 14.0 15.1 (6.7) 14.0 15.0
(6.7) — — — 45.3 43.3 2.0 0.1
— 0.1
Germany 56.1 57.6 (2.6)
20.5 21.0 (2.2) 20.3 20.9 (3.1) 0.3
0.1 +100.0 36.6 36.5 0.1 0.5 0.1
0.4
Italy 52.0 53.1 (2.1) 26.6
27.7 (4.1) 25.5 27.3 (6.8) 1.1 0.4
+100.0 51.8 52.1 (0.3) 1.8 0.6
1.2
Poland 33.1 32.3 2.7 13.8 13.7
0.6 13.6 13.7 (0.7) 0.2 — — 41.6
42.4 (0.8) 0.7 0.1 0.6
Spain
34.1 34.2 (0.2) 11.1 11.1 (0.7) 10.9
11.1 (1.4) 0.1 0.1 +100.0 32.1
32.4 (0.3) 0.4 0.1 0.3
Eastern
Europe
Russia(2) 176.8 193.5
(8.6) 48.7 53.4 (8.8) 47.1 53.2
(11.5) 1.6 0.2 +100.0 26.6 27.2 (0.6) —
— —
Middle East & Africa
Saudi Arabia 15.2 20.1 (24.5) 5.3
9.2 (42.8) 5.3 9.2 (42.8) — —
— 41.1 48.2 (7.1) — — —
Turkey(2) 87.9 77.7 13.1 40.9
36.1 13.2 40.9 36.1 13.2 — — —
43.1 43.2 (0.1) — — —
South
& Southeast Asia
Indonesia 224.8
225.9 (0.5) 74.5 74.4 0.1 74.5 74.4
0.1 — — — 33.1 33.0 0.1 —
— —
Philippines 52.6 54.2 (3.0) 36.7
36.3 1.1 36.7 36.3 1.1 — —
— 69.8 66.9 2.9 — — —
East Asia & Australia
Australia 9.6
10.3 (6.2) 2.8 3.1 (9.2) 2.8 3.1
(9.2) — — — 29.3 30.2 (0.9) —
— —
Japan 130.7 128.0 2.1 39.9
45.3 (11.9) 24.2 27.2 (11.1) 15.8
18.2 (13.1) 34.1 31.8 2.3 15.6
9.7 5.9
Korea 52.4 54.2 (3.3) 13.1
11.0 19.7 9.1 10.4 (12.3) 4.0
0.5 +100.0 24.9 20.2 4.7 7.6 1.0
6.6
Latin America & Canada
Argentina 25.9 27.0 (3.9) 19.1 20.1
(5.1) 19.1 20.1 (5.1) — — — 73.9
74.7 (0.8) — — —
Canada 17.2
18.0 (4.6) 6.6 6.8 (2.9) 6.6 6.8
(3.1) — — — 38.4 37.3 1.1 0.1
— 0.1
Mexico 25.4 25.6 (0.7)
16.9 17.1 (1.2) 16.9 17.1 (1.2) —
— — 66.4 66.8 (0.4) — — —
(1) Market share estimates are calculated using IMS data
unless otherwise stated (2) PMI Cigarette Market Share August YTD
as measured by Nielsen Note: % change for Total Market and PMI
shipments is computed based on millions of units
Schedule 1 PHILIP MORRIS INTERNATIONAL INC. and
Subsidiaries Diluted Earnings Per Share (EPS) ($ in
millions, except per share data) / (Unaudited)
Quarters Ended Diluted EPS Nine Months Ended
September 30, September 30, $
1.44 2018 Diluted Earnings Per Share (1) $
3.85 $ 1.27 2017 Diluted Earnings Per Share
(1) $ 3.43 $ 0.17 Change $ 0.42 13.4 % % Change
12.2 %
Reconciliation:
$ 1.27 2017 Diluted Earnings Per Share (1)
$ 3.43 — 2017 Asset impairment and exit costs — —
2017 Tax items (0.04 ) — 2018 Asset impairment and exit costs — —
2018 Tax items — (0.09 ) Currency (0.02 ) 0.04 Interest 0.07 0.11
Change in tax rate 0.24 0.11 Operations (2)
0.17
$ 1.44 2018 Diluted Earnings
Per Share (1) $ 3.85 (1) Basic and
diluted EPS were calculated using the following (in millions):
Quarters Ended Nine Months Ended September
30, September 30, 2018 2017 2018
2017 $ 2,247 $ 1,970 Net Earnings attributable to PMI $
6,001 $ 5,341 5 4 Less distributed and undistributed
earnings attributableto share-based payment awards 13 12 $
2,242 $ 1,966 Net Earnings for basic and diluted EPS $ 5,988 $
5,329 1,555 1,553 Weighted-average shares for basic EPS
1,555 1,552 — 1 Plus Contingently Issuable
Performance Stock Units — 1 1,555 1,554
Weighted-average shares for diluted EPS 1,555 1,553
(2) Includes the impact of shares outstanding and share-based
payments
Schedule 2 PHILIP MORRIS
INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP
Measures
Reconciliation of Reported Diluted EPS to Reported
Diluted EPS, excluding Currency, and Reconciliation of
Reported Diluted EPS to Adjusted Diluted EPS, excluding
Currency (Unaudited)
Quarters Ended September 30,
Nine Months Ended September 30, 2018
2017 % Change 2018
2017 % Change $ 1.44 $ 1.27
13.4% Reported Diluted EPS $ 3.85 $
3.43 12.2% (0.09) Currency
(0.02)
$ 1.53 $
1.27 20.5% Reported Diluted EPS, excluding
Currency $ 3.87 $ 3.43
12.8% Quarters Ended September 30,
Nine Months Ended September 30, Year Ended
2018 2017 % Change
2018 2017 % Change 2017
$ 1.44 $ 1.27 13.4% Reported Diluted
EPS $ 3.85 $ 3.43 12.2% $ 3.88 — —
Asset impairment and exit costs — — — — — Tax
items — (0.04) 0.84
$ 1.44 $
1.27 13.4% Adjusted Diluted EPS $ 3.85
$ 3.39 13.6% $ 4.72 (0.09)
Currency (0.02)
$ 1.53 $ 1.27 20.5% Adjusted
Diluted EPS, excluding Currency $ 3.87
$ 3.39 14.2%
Schedule 3
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of
Non-GAAP Measures
Net Revenues by Product Category and
Adjustments of Net Revenues for the Impact of Currency and
Acquisitions ($ in millions) / (Unaudited)
NetRevenues
Currency
NetRevenues
excludingCurrency
Acquisitions
NetRevenuesexcludingCurrency
&Acquisitions
Quarters EndedSeptember
30,
NetRevenues
Total
ExcludingCurrency
ExcludingCurrency
&Acquisitions
2018 Combustible Products 2017 %
Change $ 2,225 $ 27 $ 2,198 $ — $ 2,198 European Union $ 2,139
4.0% 2.7% 2.7% 705 (42) 746 — 746 Eastern Europe 696 1.2% 7.2% 7.2%
1,019 (97) 1,116 — 1,116 Middle East & Africa 1,045 (2.5)% 6.8%
6.8% 1,197 (81) 1,278 — 1,278 South & Southeast Asia 1,129 6.0%
13.2% 13.2% 789 (5) 793 — 793 East Asia & Australia 760 3.8%
4.4% 4.4% 748 (25) 773 — 773 Latin
America & Canada 755 (1.0)% 2.3% 2.3%
$
6,681 $ (223) $ 6,904 $
— $ 6,904 Total Combustible $ 6,526
2.4% 5.8% 5.8%
2018 Reduced-Risk Products 2017 %
Change $ 242 $ 3 $ 239 $ — $ 239 European Union $ 65 +100%
+100% +100% 73 (4) 78 — 78 Eastern Europe 9 +100% +100% +100% 124 —
124 — 124 Middle East & Africa 31 +100% +100% +100% — — — — —
South & Southeast Asia — —% —% —% 377 11 367 — 367 East Asia
& Australia 841 (55.1)% (56.4)% (56.4)% 5 — 5
— 5 Latin America & Canada 1 +100% +100%
+100%
$ 823 $ 10 $ 813
$ — $ 813 Total RRPs $
947 (13.2)% (14.2)% (14.2)%
2018 PMI 2017 % Change $ 2,467 $
30 $ 2,437 $ — $ 2,437 European Union $ 2,204 11.9% 10.6% 10.6% 778
(46) 824 — 824 Eastern Europe 705 10.4% 16.9% 16.9% 1,143 (97)
1,240 — 1,240 Middle East & Africa 1,078 6.0% 15.0% 15.0% 1,197
(81) 1,278 — 1,278 South & Southeast Asia 1,129 6.0% 13.2%
13.2% 1,166 6 1,160 — 1,160 East Asia & Australia 1,601 (27.2)%
(27.5)% (27.5)% 753 (25) 778 — 778
Latin America & Canada 756 (0.4)% 2.9% 2.9%
$
7,504 $ (213) $ 7,717 $
— $ 7,717 Total PMI $ 7,473
0.4% 3.3% 3.3% Note: Sum of
product categories or Regions might not foot to total PMI due to
roundings. “-“ indicates amounts between -$0.5 million and +$0.5
million.
Schedule 4 PHILIP MORRIS INTERNATIONAL
INC. and Subsidiaries Reconciliation of Non-GAAP Measures
Net
Revenues by Product Category and Adjustments of Net Revenues for
the Impact of Currency and Acquisitions ($ in millions) /
(Unaudited)
NetRevenues Currency
NetRevenues
excludingCurrency
Acquisitions
NetRevenuesexcludingCurrency
&Acquisitions
Nine Months EndedSeptember
30,
NetRevenues
Total
ExcludingCurrency
ExcludingCurrency
&Acquisitions
2018 Combustible Products 2017 %
Change $ 6,381 $ 510 $ 5,871 $ — $ 5,871 European Union $ 5,909
8.0% (0.6)% (0.6)% 1,926 (22) 1,948 — 1,948 Eastern Europe 1,900
1.4% 2.5% 2.5% 2,813 (88) 2,900 — 2,900 Middle East & Africa
2,970 (5.3)% (2.4)% (2.4)% 3,434 (130) 3,564 — 3,564 South &
Southeast Asia 3,206 7.1% 11.2% 11.2% 2,348 41 2,306 — 2,306 East
Asia & Australia 2,363 (0.6)% (2.4)% (2.4)% 2,254 (62)
2,316 — 2,316 Latin America & Canada 2,108
6.9% 9.8% 9.8%
$ 19,156 $ 250
$ 18,906 $ — $ 18,906
Total Combustible $ 18,457 3.8%
2.4% 2.4% 2018 Reduced-Risk
Products 2017 % Change $ 577 $ 43 $ 534 $ — $ 534
European Union $ 145 +100% +100% +100% 179 (4) 183 — 183 Eastern
Europe 19 +100% +100% +100% 313 5 309 — 309 Middle East &
Africa 45 +100% +100% +100% — — — — — South & Southeast Asia —
—% —% —% 1,887 58 1,830 — 1,830 East Asia & Australia 1,786
5.7% 2.4% 2.4% 14 — 14 — 14 Latin
America & Canada 2 +100% +100% +100%
$
2,970 $ 101 $ 2,869 $
— $ 2,869 Total RRPs $ 1,997
48.7% 43.6% 43.6%
2018 PMI 2017 % Change $ 6,958 $ 553 $
6,405 $ — $ 6,405 European Union $ 6,054 14.9% 5.8% 5.8% 2,105 (26)
2,131 — 2,131 Eastern Europe 1,918 9.7% 11.1% 11.1% 3,126 (83)
3,209 — 3,209 Middle East & Africa 3,017 3.6% 6.4% 6.4% 3,434
(130) 3,564 — 3,564 South & Southeast Asia 3,206 7.1% 11.2%
11.2% 4,235 99 4,136 — 4,136 East Asia & Australia 4,149 2.1%
(0.3)% (0.3)% 2,268 (62) 2,330 — 2,330
Latin America & Canada 2,110 7.5% 10.4% 10.4%
$ 22,126 $ 351 $ 21,775
$ — $ 21,775 Total PMI $ 20,454
8.2% 6.5% 6.5% Note: Sum of
product categories or Regions might not foot to total PMI due to
roundings. “-“ indicates amounts between -$0.5 million and +$0.5
million.
Schedule 5 PHILIP MORRIS INTERNATIONAL
INC. and Subsidiaries Reconciliation of Non-GAAP Measures
Adjustments of Operating Income for the Impact of Currency and
Acquisitions ($ in millions) / (Unaudited)
OperatingIncome
Currency
OperatingIncomeexcludingCurrency
Acquisitions
OperatingIncomeexcludingCurrency
&Acquisitions
OperatingIncome
Total
ExcludingCurrency
ExcludingCurrency
&Acquisitions
2018 Quarters EndedSeptember 30,
2017 % Change $ 1,179 $ 19 $ 1,160 $ — $ 1,160
European Union $ 1,025 15.0% 13.2% 13.2% 270 (56) 326 — 326 Eastern
Europe 244 10.7% 33.6% 33.6% 491 (97) 588 — 588 Middle East &
Africa 495 (0.8)% 18.8% 18.8% 455 (43) 498 — 498 South &
Southeast Asia 411 10.7% 21.2% 21.2% 426 (6) 432 — 432 East Asia
& Australia 648 (34.3)% (33.3)% (33.3)% 335 16
319 — 319 Latin America & Canada 265 26.4%
20.4% 20.4%
$ 3,156 $ (167) $
3,323 $ — $ 3,323 Total PMI
$ 3,088 2.2% 7.6% 7.6%
2018 Nine Months EndedSeptember 30,
2017 % Change $ 3,096 $ 298 $ 2,798 $ — $ 2,798
European Union $ 2,717 13.9% 3.0% 3.0% 682 (69) 751 — 751 Eastern
Europe 627 8.8% 19.8% 19.8% 1,268 (143) 1,411 — 1,411 Middle East
& Africa 1,463 (13.3)% (3.6)% (3.6)% 1,324 (74) 1,398 — 1,398
South & Southeast Asia 1,100 20.4% 27.1% 27.1% 1,439 5 1,434 —
1,434 East Asia & Australia 1,630 (11.7)% (12.0)% (12.0)% 866
(21) 887 — 887 Latin America &
Canada 704 23.0% 26.0% 26.0%
$ 8,675
$ (4) $ 8,679 $ — $
8,679 Total PMI $ 8,241 5.3%
5.3% 5.3%
Schedule 6 PHILIP MORRIS INTERNATIONAL INC. and
Subsidiaries Reconciliation of Non-GAAP Measures
Reconciliation
of Operating Income to Adjusted Operating Income, excluding
Currency and Acquisitions ($ in millions) / (Unaudited)
OperatingIncome
AssetImpairment&
ExitCosts
AdjustedOperatingIncome
Currency
AdjustedOperatingIncomeexcludingCurrency
Acqui-sitions
AdjustedOperatingIncomeexcludingCurrency&
Acqui-sitions
OperatingIncome
AssetImpairment&
ExitCosts
AdjustedOperatingIncome
Total
ExcludingCurrency
ExcludingCurrency&
Acqui-sitions
2018
Quarters EndedSeptember
30,
2017 % Change $ 1,179 $ — $ 1,179 $ 19 $ 1,160 $ — $
1,160 European Union $ 1,025 $ — $ 1,025 15.0% 13.2% 13.2% 270 —
270 (56) 326 — 326 Eastern Europe 244 — 244 10.7% 33.6% 33.6% 491 —
491 (97) 588 — 588 Middle East & Africa 495 — 495 (0.8)% 18.8%
18.8% 455 — 455 (43) 498 — 498 South & Southeast Asia 411 — 411
10.7% 21.2% 21.2% 426 — 426 (6) 432 — 432 East Asia & Australia
648 — 648 (34.3)% (33.3)% (33.3)% 335 — 335 16 319 — 319 Latin
America & Canada 265 — 265 26.4% 20.4% 20.4%
$ 3,156
$ — $ 3,156 $ (167) $ 3,323 $ —
$ 3,323 Total PMI $ 3,088 $ — $
3,088 2.2% 7.6% 7.6% 2018
Nine Months EndedSeptember
30,
2017 % Change $ 3,096 $ — $ 3,096 $ 298 $ 2,798 $ — $
2,798 European Union $ 2,717 $ — $ 2,717 13.9% 3.0% 3.0% 682 — 682
(69) 751 — 751 Eastern Europe 627 — 627 8.8% 19.8% 19.8% 1,268 —
1,268 (143) 1,411 — 1,411 Middle East & Africa 1,463 — 1,463
(13.3)% (3.6)% (3.6)% 1,324 — 1,324 (74) 1,398 — 1,398 South &
Southeast Asia 1,100 — 1,100 20.4% 27.1% 27.1% 1,439 — 1,439 5
1,434 — 1,434 East Asia & Australia 1,630 — 1,630 (11.7)%
(12.0)% (12.0)% 866 — 866 (21) 887 — 887 Latin America & Canada
704 — 704 23.0% 26.0% 26.0%
$ 8,675 $ — $
8,675 $ (4) $ 8,679 $ — $ 8,679
Total PMI $ 8,241 $ — $ 8,241
5.3% 5.3% 5.3%
Schedule 7 PHILIP MORRIS
INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP
Measures
Reconciliation of Adjusted Operating Income Margin,
excluding Currency and Acquisitions ($ in millions) /
(Unaudited)
AdjustedOperatingIncome(1)
NetRevenues
AdjustedOperatingIncomeMargin
AdjustedOperatingIncomeexcludingCurrency
(1)
NetRevenuesexcludingCurrency(2)
AdjustedOperatingIncomeMarginexcludingCurrency
AdjustedOperatingIncomeexcludingCurrency&
Acqui-sitions (1)
NetRevenuesexcludingCurrency&
Acqui-sitions (2)
AdjustedOperatingIncomeMarginexcludingCurrency&
Acqui-sitions
AdjustedOperatingIncome (1)
NetRevenues
AdjustedOperatingIncomeMargin
AdjustedOperatingIncomeMargin
AdjustedOperatingIncomeMarginexcludingCurrency
AdjustedOperatingIncomeMarginexcludingCurrency&
Acqui-sitions
2018
Quarters EndedSeptember
30,
2017 % Points Change $ 1,179 $ 2,467 47.8% $ 1,160 $
2,437 47.6% $ 1,160 $ 2,437 47.6% European Union $ 1,025 $ 2,204
46.5% 1.3 1.1 1.1 270 778 34.7% 326 824 39.6% 326 824 39.6% Eastern
Europe 244 705 34.6% 0.1 5.0 5.0 491 1,143 43.0% 588 1,240 47.4%
588 1,240 47.4% Middle East & Africa 495 1,078 45.9% (2.9) 1.5
1.5 455 1,197 38.0% 498 1,278 39.0% 498 1,278 39.0% South &
Southeast Asia 411 1,129 36.4% 1.6 2.6 2.6 426 1,166 36.5% 432
1,160 37.2% 432 1,160 37.2% East Asia & Australia 648 1,601
40.5% (4.0) (3.3) (3.3) 335 753 44.5% 319 778
41.0% 319 778 41.0% Latin America & Canada
265 756 35.1% 9.4 5.9 5.9
$
3,156 $ 7,504 42.1% $ 3,323
$ 7,717 43.1% $ 3,323
$ 7,717 43.1% Total PMI $ 3,088
$ 7,473 41.3% 0.8
1.8 1.8 2018
Nine Months EndedSeptember
30,
2017 % Points Change $ 3,096 $ 6,958 44.5% $ 2,798 $
6,405 43.7% $ 2,798 $ 6,405 43.7%
European Union
$ 2,717 $ 6,054 44.9% (0.4) (1.2) (1.2) 682 2,105 32.4% 751 2,131
35.2% 751 2,131 35.2% Eastern Europe 627 1,918 32.7% (0.3) 2.5 2.5
1,268 3,126 40.6% 1,411 3,209 44.0% 1,411 3,209 44.0% Middle East
& Africa 1,463 3,017 48.5% (7.9) (4.5) (4.5) 1,324 3,434 38.6%
1,398 3,564 39.2% 1,398 3,564 39.2% South & Southeast Asia
1,100 3,206 34.3% 4.3 4.9 4.9 1,439 4,235 34.0% 1,434 4,136 34.7%
1,434 4,136 34.7% East Asia & Australia 1,630 4,149 39.3% (5.3)
(4.6) (4.6) 866 2,268 38.2% 887 2,330
38.1% 887 2,330 38.1% Latin America & Canada 704
2,110 33.4% 4.8 4.7 4.7
$ 8,675
$ 22,126 39.2% $ 8,679
$ 21,775 39.9% $ 8,679
$ 21,775 39.9% Total PMI
$ 8,241 $ 20,454 40.3%
(1.1) (0.4) (0.4) (1) For
the calculation of Adjusted Operating Income and Adjusted Operating
Income excluding currency and acquisitions refer to Schedule 6 (2)
For the calculation of Net Revenues excluding currency and
acquisitions refer to Schedules 3 and 4
Schedule 8 PHILIP MORRIS INTERNATIONAL
INC. and Subsidiaries
Condensed Statements of Earnings ($ in
millions, except per share data) / (Unaudited)
Quarters Ended September 30, Nine Months Ended September
30, 2018 2017
ChangeFav./(Unfav.) 2018 2017
ChangeFav./(Unfav.) $ 20,439 $ 20,638 (1.0)%
Revenues including Excise Taxes $ 59,965 $ 56,513 6.1% 12,935
13,165 1.7% Excise Taxes on products 37,839
36,059 (4.9)%
7,504 7,473 0.4% Net
Revenues 22,126 20,454 8.2% 2,618
2,735 4.3% Cost of sales 7,977 7,431 (7.3)%
4,886 4,738 3.1% Gross profit
14,149 13,023 8.6% 1,710 1,629 (5.0)%
Marketing, administration and research costs 5,411 4,717 (14.7)% —
— Asset impairment and exit costs — — 20 21
Amortization of intangibles 63 65
3,156
3,088 2.2% Operating Income 8,675
8,241 5.3% 145 223 35.0% Interest expense, net 540
655 17.6% 7 20 65.0% Pension and other employee
benefit costs 19 56 66.1% 3,004 2,845 5.6% Earnings
before income taxes 8,116 7,530 7.8% 691 812 14.9% Provision for
income taxes 1,894 2,042 7.2% (28) (12) Equity
investments and securities (income)/loss, net (61) (57)
2,341 2,045 14.5% Net Earnings 6,283 5,545 13.3% 94
75 Net Earnings attributable to noncontrolling
interests 282 204
$ 2,247 $
1,970 14.1% Net Earnings attributable to
PMI $ 6,001 $ 5,341 12.4%
Per share data (1): $ 1.44 $ 1.27
13.4% Basic Earnings Per Share $ 3.85 $
3.43 12.2% $ 1.44 $ 1.27 13.4%
Diluted Earnings Per Share $ 3.85 $ 3.43
12.2%
(1) Net Earnings and weighted-average
shares used in the basic and diluted Earnings Per Share
computations for the quarters and for the nine months ended
September 30, 2018 and 2017 areshown on Schedule 1, Footnote 1.
Schedule 9 PHILIP MORRIS
INTERNATIONAL INC. and Subsidiaries
Condensed Balance Sheets
($ in millions, except ratios) / (Unaudited)
September
30, December 31, 2018 2017 Assets
Cash and cash equivalents $ 5,880 $ 8,447 All other current assets
12,658 13,147 Property, plant and equipment, net 7,138 7,271
Goodwill 7,271 7,666 Other intangible assets, net 2,317 2,432
Investments in unconsolidated subsidiaries and equity securities
1,361 1,074 Other assets 2,755 2,931
Total
assets $ 39,380 $
42,968 Liabilities and Stockholders' (Deficit)
Equity Short-term borrowings $ 545 $ 499 Current portion of
long-term debt 3,042 2,506 All other current liabilities 12,012
12,957 Long-term debt 28,179 31,334 Deferred income taxes 809 799
Other long-term liabilities 4,735 5,103
Total
liabilities 49,322 53,198 Total PMI stockholders'
deficit (11,720) (12,086) Noncontrolling interests 1,778
1,856
Total stockholders' (deficit) equity
(9,942) (10,230) Total liabilities and
stockholders' (deficit) equity $ 39,380
$ 42,968
Schedule 10 PHILIP MORRIS
INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP
Measures
Calculation of Total Debt to Adjusted EBITDA and Net
Debt to Adjusted EBITDA Ratios ($ in millions, except ratios) /
(Unaudited)
Year Ended September 30, 2018
Year EndedDecember
31,2017
October ~December
January ~September
12 months 2017 2018 rolling
Net Earnings
$ 796 $ 6,283 $ 7,079
$ 6,341 Equity (income)/loss in unconsolidated
subsidiaries, net (2) (55) (57) (59) Provision for income taxes
2,265 1,894 4,159 4,307 Interest expense, net 259 540 799 914
Depreciation and amortization 243 734 977 875 Asset impairment and
exit costs — — — —
Adjusted EBITDA $ 3,561 $ 9,396
$ 12,957 $ 12,378 September
30, December 31, 2018 2017 Short-term
borrowings $ 545 $ 499 Current portion of long-term debt 3,042
2,506 Long-term debt 28,179 31,334
Total Debt
$ 31,766 $ 34,339 Cash and cash
equivalents 5,880 8,447
Net Debt $
25,886 $ 25,892 Ratios: Total
Debt to Adjusted EBITDA 2.45 2.77 Net Debt to
Adjusted EBITDA 2.00 2.09
Schedule 11 PHILIP MORRIS
INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP
Measures
Reconciliation of Operating Cash Flow to Operating Cash
Flow, excluding Currency ($ in millions) / (Unaudited)
Quarters Ended September 30, Nine Months Ended September
30, 2018 2017 % Change
2018 2017 % Change $
1,683 $ 1,920 (12.3)% Net cash provided by
operating activities (1) $ 7,056 $ 5,991
17.8% (217) Currency 138
$ 1,900 $ 1,920
(1.0)% Net cash provided by operating
activities,excluding currency $ 6,918 $
5,991 15.5% (1) Operating cash flow
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Philip Morris International Inc.Investor Relations:New York: +1
(917) 663 2233Lausanne: +41 (0)58 242
4666InvestorRelations@pmi.comorMedia:Lausanne: +41 (0)58 242
4500Iro.Antoniadou@pmi.com
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