Reflecting
Currency-Neutral Growth of Approximately 8% to 11% vs. 2017
Adjusted Diluted EPS of $4.72
Regulatory News:
2018 First-Quarter
- Reported diluted earnings per share of
$1.00, down by $0.02 or 2.0% versus $1.02 in 2017
- Adjusted diluted earnings per share of
$1.00, up by $0.02 or 2.0% versus $0.98 in 2017
- Excluding favorable currency of $0.03,
adjusted diluted earnings per share down by $0.01 or 1.0% versus
$0.98 in 2017 as detailed in the attached Schedule 2
- Cigarette and heated tobacco unit
shipment volume of 173.8 billion, down by 2.3%, or by 1.1%
excluding the net impact of total estimated inventory movements,
reflecting:
- Cigarette shipment volume of 164.3
billion units, down by 9.3 billion units or 5.3%
- Heated tobacco unit shipment volume of
9.6 billion units, up by 5.1 billion units versus 2017
- Net revenues of $6.9 billion, up by
13.7%
- Excluding favorable currency of $327
million, net revenues up by 8.3% as detailed in the attached
Schedule 3
- Operating income of $2.4 billion, up by
0.4%
- Excluding favorable currency of $76
million, operating income down by 2.7% as detailed in the attached
Schedule 4
- Adjusted operating income, reflecting
the items detailed in the attached Schedule 5, of $2.4 billion, up
by 0.4%
- Excluding favorable currency of $76
million, adjusted operating income down by 2.7% as detailed in the
attached Schedule 5
2018 Full-Year Forecast
- PMI increases, primarily to reflect a
lower effective tax rate, its 2018 full-year reported diluted
earnings per share forecast to be in a range of $5.25 to $5.40, at
prevailing exchange rates, representing a projected increase of
approximately 35% to 39% versus reported diluted earnings per share
of $3.88 in 2017.
- Excluding a favorable currency impact,
at prevailing exchange rates, of approximately $0.16, the forecast
range represents a projected increase of approximately 8% to 11%
versus adjusted diluted earnings per share of $4.72 in 2017 as
detailed in the attached Schedule 2.
- This forecast assumes:
- Currency-neutral net revenue growth of
approximately 8.0%;
- Operating cash flow of over $9.0
billion;
- Capital expenditures of approximately
$1.7 billion;
- A full-year effective tax rate of
approximately 26%; 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 FIRST-QUARTER CONSOLIDATED
RESULTS
Philip Morris International Inc. (NYSE: PM) today announced its
2018 first-quarter results.
"We began the year with strong, currency-neutral net revenue
growth of more than 8% in the quarter, driven by higher volume for
heated tobacco units and IQOS devices coupled with higher pricing
from our combustible product portfolio," said André Calantzopoulos,
Chief Executive Officer.
"Our increased full-year EPS guidance reflects the benefit of a
lower effective tax rate and incorporates, at this early stage in
the year, some caution regarding: on-going volume challenges in the
GCC; the pricing environment in Russia; and
less-rapid-than-initially-projected growth in sales of devices to
consumers in Japan in the first quarter, as we are now reaching
more conservative adult smoker segments that may require, at least
at first, slightly more time for adoption. Even if this temporary
dynamic in Japan persists, we remain on track to double our
worldwide in-market sales of heated tobacco units compared to
2017."
"We are confident in our ability to deliver strong results this
year and remain steadfast in our commitment to generously reward
our shareholders."
Conference Call
A conference call, hosted by Martin King, Chief Financial
Officer, will be webcast at 9:00 a.m., Eastern Time, on April 19,
2018. Access is at www.pmi.com/2018Q1earnings. 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 26%. The reduction
in this rate compared to the full-year effective tax rate of 28%
communicated in February 2018 mainly reflects two factors:
- further analysis and interpretation of
the scope and impact of the Tax Cuts and Jobs Act (the “Act”),
primarily related to foreign tax credit limitations due to the
Act's Global Intangible Low Taxed Income provisions; and
- revised foreign income tax estimates
due to a change in the mix of our foreign earnings.
The Act has significant complexity, and our 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.
Dividends
During the quarter, PMI declared a regular quarterly dividend of
$1.07, representing an annualized rate of $4.28 per common
share.
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.
- [NEW] Key market data regarding
total market size, PMI shipments and market share can be found in
Appendix 1 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.
- "Total shipment volume" is defined as
the combined total of cigarette shipment volume and heated tobacco
unit shipment volume.
- [NEW] 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.
- [NEW] "The GCC" (Gulf
Cooperation Council) is defined as Bahrain, Kuwait, Oman, Qatar,
Saudi Arabia and the United Arab Emirates (UAE).
Financial
- [NEW] 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.
- [NEW] 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.
- [NEW] 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.
- [NEW] 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.
- [NEW] "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.
- [NEW] "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.
- [NEW] "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.
- [NEW] "Adjusted Operating Income
Margin" is calculated as adjusted operating income, divided by net
revenues.
- [NEW] "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.
- [NEW] 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.
- [NEW] IQOS 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.
- [NEW] 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.
SHIPMENT VOLUME
PMI Shipment Volume by Region
First-Quarter (million units) 2018
2017 Change Cigarettes
European Union 39,671 42,540 (6.7 )% Eastern Europe 22,039 24,596
(10.4 )% Middle East & Africa 29,248 31,978 (8.5 )% South &
Southeast Asia 40,218 37,899 6.1 % East Asia & Australia 14,091
17,243 (18.3 )% Latin America & Canada 19,013
19,296 (1.5 )%
Total PMI 164,280
173,552 (5.3 )% Heated Tobacco
Units European Union 928 184 +100% Eastern Europe 564 54 +100%
Middle East & Africa 709 51 +100% South & Southeast Asia —
— — % East Asia & Australia 7,342 4,145 77.1 % Latin America
& Canada 23 1 +100%
Total
PMI 9,566 4,435 +100% Cigarettes
and Heated Tobacco Units European Union 40,599 42,724 (5.0 )%
Eastern Europe 22,603 24,650 (8.3 )% Middle East & Africa
29,957 32,029 (6.5 )% South & Southeast Asia 40,218 37,899 6.1
% East Asia & Australia 21,433 21,388 0.2 % Latin America &
Canada 19,036 19,297 (1.4 )%
Total
PMI 173,846 177,987 (2.3 )%
PMI's total shipment volume decreased by 2.3%, principally due
to:
- the EU, reflecting lower cigarette
shipment volume mainly in France, Germany and Poland;
- Eastern Europe, reflecting lower
cigarette shipment volume mainly in Russia and Ukraine; and
- Middle East & Africa, reflecting
lower cigarette shipment volume mainly in the GCC, notably Saudi
Arabia, and North Africa, notably Algeria, partly offset by higher
cigarette shipment volume mainly in Turkey and PMI Duty Free;
partly offset by
- South & Southeast Asia, reflecting
higher cigarette shipment volume, driven mainly by Pakistan and
Thailand, partly offset by Indonesia; and
- East Asia & Australia, reflecting
higher heated tobacco unit shipment volume, driven by Japan and
Korea.
Excluding the net unfavorable impact of total estimated
distributor inventory movements of approximately 2.1 billion units,
driven mainly by Japan and Saudi Arabia, PMI's total shipment
volume decreased by 1.1%.
PMI shipment volume by brand is shown in the table below.
PMI Shipment Volume by Brand
First-Quarter (million units) 2018
2017 Change Cigarettes
Marlboro 57,973 62,399 (7.1 )% L&M 19,225 21,913 (12.3 )%
Chesterfield 13,875 11,544 20.2 % Philip Morris 10,659 10,608 0.5 %
Sampoerna A 8,624 9,913 (13.0 )% Parliament 8,460 9,199 (8.0 )%
Bond Street 6,975 8,485 (17.8 )% Dji Sam Soe 6,696 4,459 50.2 %
Lark 5,517 6,526 (15.5 )% Fortune 3,583 2,882 24.3 % Others 22,693
25,624 (11.4 )%
Total Cigarettes
164,280 173,552 (5.3 )% Heated Tobacco
Units 9,566 4,435 +100.0%
Total
PMI 173,846 177,987 (2.3 )%
Note: Sampoerna A includes Sampoerna.
PMI's cigarette shipment volume of the following brands
decreased:
- Marlboro, mainly due to Germany, Japan
and Saudi Arabia, partly offset by Indonesia and Turkey;
- L&M, mainly due to Germany, North
Africa, Russia and Saudi Arabia, partly offset by 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 Japan, Russia
and Saudi Arabia, 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; and the
successful portfolio consolidation of local, low-price brands into
international trademarks, notably in Russia; partly offset by
low-price brands in Pakistan.
PMI's cigarette shipment volume of the following brands
increased:
- Chesterfield, mainly driven by Brazil,
Colombia, Italy, Saudi Arabia and Turkey;
- Philip Morris, mainly driven by Russia,
partly offset by Argentina and Italy;
- 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 East Asia & Australia, primarily Japan and Korea.
FINANCIAL SUMMARY
Financial Summary -Quarters
Ended March 31,
ChangeFav./(Unfav.)
VarianceFav./(Unfav.) 2018 2017
Total Excl.Curr. Total
Cur-rency Price
Vol/Mix Cost/Other (in
millions) Net
Revenues $ 6,896 $ 6,064 13.7% 8.3%
832 327 342 163 — Cost of
Sales (2,615) (2,177) (20.1)%
(13.9)% (438) (136) — (335)
33
Marketing, Administration
andResearch Costs
(1,833) (1,449) (26.5)% (18.6)%
(384) (115) — — (269)
Amortization of Intangibles (22) (22)
—% —% — — —
— — Operating Income $
2,426 $ 2,416 0.4% (2.7)% 10
76 342 (172) (236) Asset Impairment
& Exit Costs — — —% —% — —
— — —
Adjusted Operating Income $
2,426 $ 2,416 0.4% (2.7)% 10
76 342 (172) (236)
Adjusted Operating
IncomeMargin
35.2 % 39.8 % (4.6)pp
(4.0)pp
NET REVENUES BY PRODUCT CATEGORY
PMI Net Revenues First-Quarter (in
millions) Excl. 2018
2017 Change Curr. Combustible
Products European Union $ 1,836 $ 1,709 7.4 % (5.8 )% Eastern
Europe 527 513 2.8 % (2.6 )% Middle East & Africa 884 957 (7.7
)% (9.0 )% South & Southeast Asia 1,081 1,031 4.8 % 5.6 % East
Asia & Australia 737 813 (9.4 )% (12.2 )% Latin America &
Canada 704 605 16.3 % 16.5 %
Total PMI
$ 5,769 $ 5,629 2.5 % (2.5
)% RRPs European Union $ 152 $ 31 +100% +100%
Eastern Europe 40 3 +100% +100% Middle East & Africa 77 4 +100%
+100% South & Southeast Asia
—
— — % — % East Asia & Australia 854 396 +100% +100% Latin
America & Canada 4 — — % — %
Total
PMI $ 1,127 $ 435 +100% +100%
Combustible Productsand
RRPs
European Union $ 1,988 $ 1,740 14.3 % 0.2 % Eastern Europe 567 516
9.9 % 4.3 % Middle East & Africa 961 961 — % (1.5 )% South
& Southeast Asia 1,081 1,031 4.8 % 5.6 % East Asia &
Australia 1,591 1,210 31.5 % 27.5 % Latin America & Canada 708
606 16.8 % 17.0 %
Total PMI $
6,896 $ 6,064 13.7 % 8.3 %
Note: Sum of product categories or Regions
might not foot to total PMI due to rounding.
During the quarter, net revenues, excluding favorable currency,
increased by 8.3%, driven by a favorable pricing variance from
across all Regions, notably S&SA and LA&C, including higher
IQOS device sales, mainly in EA&A, as well as favorable
volume/mix, driven primarily by EA&A, despite the impact of the
tax-driven cigarette industry volume decline and related
down-trading in the GCC, principally Saudi Arabia.
Operating income, excluding favorable currency, decreased by
2.7%, mainly due to: unfavorable volume/mix, largely due to the
GCC, principally Saudi Arabia; higher marketing, administration and
research costs, primarily reflecting increased investment behind
reduced-risk products, predominantly in the EU; and the full-year
contribution of $80 million to the Foundation for a Smoke-Free
World; partly offset by a favorable pricing variance across all
Regions and favorable manufacturing costs, notably in S&SA and
EA&A.
Adjusted operating income margin, excluding currency, decreased
by 4.0 points to 35.8%, reflecting the factors mentioned above, as
detailed in the attached Schedule 6.
EUROPEAN UNION REGION
Financial Summary -Quarters Ended March 31,
ChangeFav./(Unfav.)
VarianceFav./(Unfav.) 2018 2017
Total Excl.Curr. Total
Cur-rency Price
Vol/Mix Cost/Other (in
millions) Net
Revenues $ 1,988 $ 1,740 14.3 %
0.2 % 248 245 46 (43
) — Operating Income $ 740 $
748 (1.1 )% (15.8 )% (8
) 110 46 (67 ) (97
) Asset Impairment & Exit Costs — —
— % — % — — — —
—
Adjusted Operating Income $
740 $ 748 (1.1 )% (15.8 )%
(8 ) 110 46 (67 )
(97 )
Adjusted Operating
IncomeMargin
37.2 % 43.0 % (5.8)pp
(6.9)pp
During the quarter, net revenues, excluding favorable currency,
increased by 0.2%, mainly reflecting: a favorable pricing variance,
driven principally by Germany, Poland and the United Kingdom,
partly offset by France; and unfavorable volume/mix, notably in
France and Germany, partly offset by Italy.
Operating income, excluding favorable currency, decreased by
15.8%, mainly due to: unfavorable volume/mix, notably in France and
Germany, and higher marketing, administration and research costs,
primarily reflecting increased investment behind reduced-risk
products across the Region, partly offset by a favorable pricing
variance.
Adjusted operating income margin, excluding currency, decreased
by 6.9 points to 36.1%, reflecting the factors mentioned above, as
detailed on Schedule 6.
Total Market, PMI Shipment & Market
Share Commentaries
European Union Key Data First-Quarter
Change 2018 2017
% / pp Total Market (billion units) 107.7 112.3 (4.1
)%
PMI Shipment Volume (million units) Cigarettes
39,671 42,540 (6.7 )% Heated Tobacco Units 928 184
+100.0%
Total EU 40,599 42,724 (5.0
)% PMI Market Share Marlboro 18.3 % 18.8 %
(0.5 ) L&M 6.7 % 7.0 % (0.3 ) Chesterfield 5.9 % 6.1 % (0.2 )
Philip Morris 3.1 % 3.2 % (0.1 ) HEETS 0.8 % 0.1 % 0.7 Others 3.4 %
3.2 % 0.2
Total EU 38.2 %
38.4 % (0.2 )
In the quarter, the estimated total market in the EU decreased
by 4.1% to 107.7 billion units, or by 3.4% excluding the net impact
of unfavorable estimated trade inventory movements, notably due
to:
- France, down by 9.4%, primarily
reflecting the impact of significant excise-tax driven price
increases in November 2017 and March 2018;
- Germany, down by 7.9%, or by 3.0%
excluding the net impact of estimated trade inventory movements
largely related to the fourth quarter of 2017, primarily reflecting
the impact of pricing in 2017 and in March 2018; and
- Poland, down by 3.7%, or by 1.8%
excluding the net impact of estimated trade inventory movements
largely related to the fourth quarter of 2017.
PMI's total shipment volume decreased by 5.0% to 40.6 billion
units, notably due to:
- France, down by 8.9%, primarily due to
a lower total market, partly offset by higher market share
primarily driven by: Marlboro, partly resulting from the narrowing
of its retail price gap with low price brands to €0.30/pack as of
March 2018; and Philip Morris, reflecting its momentum during the
first two months of 2018 driven by its price repositioning to
€7.00/pack in November 2017;
- Germany, down by 12.4%, primarily due
to a lower total market and market share, reflecting the
unfavorable impact of the estimated trade inventory movements;
and
- Poland, down by 9.2%, primarily due to:
a lower total market, as well as lower market share, mainly due to:
Marlboro, reflecting the impact of a widened retail price gap with
the low price end of the market, as well as switching to
reduced-risk products; and L&M, reflecting an unfavorable
comparison with the first quarter of 2017 related to brand
support;
partly offset by
- Italy, up by 2.1%, driven by favorable
comparisons to the first quarter of 2017 related to distributor
inventory movements, as well as higher heated tobacco unit shipment
volume; and
- Spain, up by 1.9%, driven by favorable
comparisons to the first quarter of 2017 related to distributor
inventory movements.
PMI's total market share decreased by 0.2 points to 38.2%, with
declines in Germany, mainly reflecting the unfavorable impact of
the estimated trade inventory movements, and Poland, partly offset
by gains in France, Italy, Romania and Spain.
EASTERN EUROPE REGION
Financial Summary -Quarters Ended March 31,
ChangeFav./(Unfav.)
VarianceFav./(Unfav.) 2018 2017
Total Excl.Curr. Total
Cur-rency Price
Vol/Mix Cost/Other (in
millions) Net
Revenues $ 567 $ 516 9.9 %
4.3 % 51 29 60 (38
) — Operating Income $ 151 $
159 (5.0 )% (10.1 )% (8
) 8 60 (47 ) (29 )
Asset Impairment & Exit Costs — — — %
— % — — — —
—
Adjusted Operating Income $ 151 $
159 (5.0 )% (10.1 )% (8
) 8 60 (47 ) (29 )
Adjusted Operating
IncomeMargin
26.6 % 30.8 % (4.2)pp
(4.2)pp
During the quarter, net revenues, excluding favorable currency,
increased by 4.3%, principally driven by a favorable pricing
variance, notably in Russia and Ukraine, partly offset by
unfavorable volume/mix, primarily due to Russia.
Operating income, excluding favorable currency, decreased by
10.1%, principally due to: unfavorable volume/mix; higher
manufacturing costs; and higher marketing, administration and
research costs primarily reflecting increased investments behind
IQOS in Russia; partly offset by a favorable pricing variance.
Adjusted operating income margin, excluding currency, decreased
by 4.2 points to 26.6%, reflecting the factors mentioned above, as
detailed on Schedule 6.
Total Market, PMI Shipment & Market Share
Commentaries
In the quarter, the estimated total market in Eastern Europe
decreased, notably due to:
- Russia, down by 8.3%, or by 7.3%
excluding the unfavorable impact of estimated trade inventory
movements, primarily reflecting the timing and impact of retail
price increases in 2017 and the quarter, as well as an increase in
the prevalence of illicit trade; and
- Ukraine, down by 11.4%, or by 9.4%
excluding the net impact of estimated trade inventory movements
related to the fourth quarter of 2017, primarily reflecting the
impact of excise tax-driven retail price increases in 2017 and the
quarter.
PMI Shipment Volume First-Quarter
(million units) 2018 2017
Change Cigarettes 22,039 24,596 (10.4 )%
Heated Tobacco Units 564 54 +100.0%
Total Eastern Europe 22,603 24,650 (8.3
)%
PMI's total shipment volume decreased by 8.3% to 22.6 billion
units, notably in:
- Russia, down by 13.9%, or by 12.7%
excluding the unfavorable impact of estimated inventory movements,
mainly due to the lower total market; lower market share, largely
due to Bond Street, partly reflecting the impact of down-trading to
competitive products in the low price segment, partly offset by
higher share of premium-priced brands; and
- Ukraine, down by 9.5%, mainly due to
the lower total market;
partly offset by
- higher heated tobacco unit shipment
volume, notably in Russia and Ukraine.
MIDDLE EAST & AFRICA REGION
Financial Summary -Quarters Ended March 31,
ChangeFav./(Unfav.)
VarianceFav./(Unfav.) 2018 2017
Total Excl.Curr. Total
Cur-rency Price
Vol/Mix Cost/Other (in
millions) Net
Revenues $ 961 $ 961 — %
(1.5 )% — 14 19 (33
) — Operating Income $ 374 $
491 (23.8 )% (17.3 )% (117
) (32 ) 19 (50 )
(54 ) Asset Impairment & Exit Costs —
— — % — % — — —
— —
Adjusted Operating
Income $ 374 $ 491 (23.8 )%
(17.3 )% (117 ) (32 )
19 (50 ) (54 )
Adjusted Operating
IncomeMargin
38.9 % 51.1 % (12.2)pp
(8.2)pp
During the quarter, net revenues, excluding favorable currency
decreased by 1.5%, principally due to unfavorable volume/mix,
primarily due to Saudi Arabia, partly offset by Turkey. The
unfavorable volume/mix was partly offset by a favorable pricing
variance, driven mainly by Saudi Arabia, partly offset by
Turkey.
Operating income, excluding unfavorable currency, decreased by
17.3%, predominantly due to unfavorable volume/mix and higher
marketing, administration and research costs primarily related to
Saudi Arabia, partly offset by a favorable pricing variance.
Adjusted operating income margin, excluding currency, decreased
by 8.2 points to 42.9%, reflecting the factors mentioned above, as
detailed on Schedule 6.
Total Market, PMI Shipment & Market Share
Commentaries
In the quarter, the estimated total market in the Middle East
& Africa decreased, notably due to:
- Algeria, down by 26.7%, or by 4.4%
excluding the net unfavorable impact of estimated trade inventory
movements, primarily reflecting an increase in the prevalence of
illicit trade;
- Saudi Arabia, down by 40.8%, primarily
reflecting the impact of retail price increases in 2017 and the
quarter following the introduction of the new excise tax in June
2017 and VAT in January 2018;
partly offset by
- Turkey, up by 12.4%, primarily
reflecting a lower prevalence of illicit trade.
PMI Shipment Volume First-Quarter
(million units) 2018 2017
Change Cigarettes 29,248 31,978 (8.5)% Heated
Tobacco Units 709 51 +100.0%
Total
Middle East & Africa 29,957 32,029
(6.5)%
PMI's total shipment volume decreased by 6.5% to 30.0 billion
units, notably in:
- Algeria, down by 29.1%, mainly
reflecting the lower total market; and
- Saudi Arabia, down by 74.5%, or by
57.9% excluding the unfavorable impact of adjustments to
distributor inventory levels in the quarter, reflecting the lower
total market and market share due to the impact of the
aforementioned excise tax and VAT increases on retail prices;
partly offset by
- Turkey, up by 16.8%, reflecting a
higher total market and market share; and
- higher heated tobacco shipment volume,
notably in PMI Duty Free.
SOUTH & SOUTHEAST ASIA REGION
Financial Summary -Quarters Ended March 31,
ChangeFav./(Unfav.)
VarianceFav./(Unfav.) 2018 2017
Total Excl.Curr. Total
Cur-rency Price
Vol/Mix Cost/Other (in
millions) Net
Revenues $ 1,081 $ 1,031 4.8 %
5.6 % 50 (8 ) 102
(44 ) — Operating Income $
429 $ 370 15.9 % 19.2 %
59 (12 ) 102 (54 )
23 Asset Impairment & Exit Costs — —
— % — % — — —
— —
Adjusted Operating Income $
429 $ 370 15.9 % 19.2 %
59 (12 ) 102 (54 )
23
Adjusted Operating
IncomeMargin
39.7 % 35.9 % 3.8pp 4.6pp
During the quarter, net revenues, excluding unfavorable
currency, increased by 5.6%, reflecting: a favorable pricing
variance, driven principally by Indonesia and the Philippines,
partly offset by Thailand. The favorable pricing variance was
partly offset by unfavorable volume/mix, largely due to Indonesia,
partly offset by Pakistan and Thailand.
Operating income, excluding unfavorable currency, increased by
19.2%, mainly driven by a favorable pricing variance, as well as a
favorable manufacturing and marketing, administration and research
cost comparison, notably in Indonesia and the Philippines. The
favorable pricing variance and cost comparison were partly offset
by unfavorable volume/mix, mainly in Indonesia, partly offset by
Pakistan and Thailand.
Adjusted operating income margin, excluding currency, increased
by 4.6 points to 40.5%, reflecting the factors mentioned above, as
detailed on Schedule 6.
Total Market, PMI Shipment & Market Share
Commentaries
In the quarter, the estimated total market in South &
Southeast Asia increased, notably driven by:
- Pakistan, up over 100% or approximately
8.4 billion units, or by 31.4% excluding the favorable impact of
estimated trade inventory movements, 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;
partly offset by
- Indonesia, down by 2.3%, reflecting
soft consumer spending and above inflation excise tax-driven retail
price increases in the quarter;
- the Philippines, down by 7.8%,
reflecting the impact of excise tax-driven retail price increases
in 2017 and an approximately 25% excise-tax driven increase to the
industry weighted average retail pack price in the quarter;
and
- Thailand, down by 8.9%, primarily
reflecting the impact of excise tax-driven price increases in the
quarter.
PMI Shipment Volume First-Quarter
(million units) 2018 2017
Change Cigarettes 40,218 37,899 6.1% Heated
Tobacco Units — — —%
Total South
& Southeast Asia 40,218 37,899 6.1%
PMI's total shipment volume increased by 6.1% to 40.2 billion
units, mainly driven by:
- Pakistan, up over 100%, reflecting the
higher total market, primarily driven by the reduction in the
prevalence of illicit trade and the favorable impact of estimated
trade inventory movements; and
- Thailand, up by 45.9%, mainly
reflecting higher market share driven by the price repositioning of
L&M
partly offset by
- Indonesia, down by 1.8%, mainly due to
the lower total market, partially offset by higher market share,
driven by Marlboro Filter Black 20s and Dji Sam Soe Magnum Mild
16s; and
- the Philippines, down by 1.4%, mainly
due to the lower total market, largely offset by higher market
share.
EAST ASIA & AUSTRALIA REGION
Financial Summary -Quarters Ended March 31,
ChangeFav./(Unfav.)
VarianceFav./(Unfav.) 2018 2017
Total Excl.Curr. Total
Cur-rency Price
Vol/Mix Cost/Other (in
millions) Net
Revenues $ 1,591 $ 1,210 31.5 %
27.5 % 381 48 15 318
— Operating Income $ 515 $ 472
9.1 % 5.7 % 43 16
15 46 (34 ) Asset Impairment & Exit
Costs — — — % — % — —
— — —
Adjusted
Operating Income $ 515 $ 472 9.1 %
5.7 % 43 16 15 46
(34 )
Adjusted Operating
IncomeMargin
32.4 % 39.0 % (6.6)pp
(6.7)pp
During the quarter, net revenues, excluding favorable currency,
increased by 27.5%, reflecting a favorable pricing variance, driven
principally by Australia and Japan, as well as a favorable
volume/mix, driven by heated tobacco unit volume in Japan and
Korea.
Operating income, excluding favorable currency, increased by
5.7%, mainly driven by a favorable pricing variance, favorable
volume/mix, mainly in Korea, and a favorable manufacturing cost
comparison driven by Japan, partly offset by higher marketing,
administration and research costs, principally related to increased
investment behind reduced-risk products in Japan and Korea and
affiliate reorganization costs in Australia.
Adjusted operating income margin, excluding currency, decreased
by 6.7 points to 32.3%, reflecting the factors mentioned above, as
detailed on Schedule 6.
Total Market, PMI Shipment & Market Share
Commentaries
In the quarter, the estimated total market in East Asia &
Australia decreased, notably due to:
- Australia, down by 8.4%, primarily
reflecting the impact of excise tax-driven retail price increases
in 2017 and in the quarter;
- Japan, down by 2.3%, primarily
reflecting the decline of the total estimated cigarette market;
and
- Taiwan, down by 20.2%, primarily
reflecting the impact of excise tax-driven retail price increases
in June 2017.
PMI Shipment Volume First-Quarter
(million units) 2018 2017
Change Cigarettes 14,091 17,243 (18.3)% Heated
Tobacco Units 7,342 4,145 77.1%
Total East Asia & Australia 21,433 21,388
0.2%
PMI's total shipment volume increased by 0.2% to 21.4 billion
units, or by 11.2% excluding the unfavorable impact of an estimated
1.0 billion cigarette units and 1.4 billion heated tobacco units of
distributor inventory movements in Japan compared to the first
quarter of 2017, driven by:
- higher heated tobacco unit shipment
volume in Japan and Korea, reflecting higher market share;
largely offset by
- lower cigarette shipment in Japan and
Korea, down by 25.8% and 6.1%, respectively, primarily reflecting
the lower total cigarette market and lower cigarette market
share.
LATIN AMERICA & CANADA REGION
Financial Summary -Quarters Ended March 31,
ChangeFav./(Unfav.)
VarianceFav./(Unfav.) 2018 2017
Total Excl.Curr. Total
Cur-rency Price
Vol/Mix Cost/Other (in
millions) Net
Revenues $ 708 $ 606 16.8 %
17.0 % 102 (1 ) 100
3 — Operating Income $ 217 $
176 23.3 % 31.3 % 41
(14 ) 100 — (45 ) Asset
Impairment & Exit Costs — — — % — %
— — — — —
Adjusted Operating Income $ 217 $ 176
23.3 % 31.3 % 41 (14
) 100 — (45 )
Adjusted Operating
IncomeMargin
30.6 % 29.0 % 1.6pp 3.6pp
During the quarter, net revenues, excluding unfavorable
currency, increased by 17.0%, reflecting a favorable pricing
variance across the Region, notably Argentina, Canada and
Mexico.
Operating income, excluding unfavorable currency, increased by
31.3%, largely reflecting a favorable pricing variance, partly
offset by higher manufacturing costs, mainly in Argentina, and
higher marketing, administration and research costs, partly related
to increased investment behind reduced-risk products in the
Region.
Adjusted operating income margin, excluding currency, increased
by 3.6 points to 32.6%, principally driven by the factors mentioned
above, as detailed on Schedule 6.
Total Market, PMI Shipment & Market Share
Commentaries
In the quarter, the estimated total market in Latin America
& Canada decreased, notably due to:
- Brazil, down by 8.0%, primarily
reflecting the impact of retail price increases in 2017;
- Colombia, down by 15.7%, primarily
reflecting the impact of excise tax-driven retail price increases
of approximately 25%; and
- Mexico, down by 2.7%, primarily
reflecting the impact of the retail price increases in January
2018.
PMI Shipment Volume First-Quarter
(million units) 2018 2017
Change Cigarettes 19,013 19,296 (1.5)% Heated
Tobacco Units 23 1 +100.0%
Total
Latin America & Canada 19,036 19,297
(1.4)%
PMI's total shipment volume decreased by 1.4% to 19.0 billion
units, notably in:
- Argentina, down by 1.7%, reflecting the
lower total market and lower market share; and
- Mexico, down by 4.0%, reflecting the
lower total market and lower market share.
Philip Morris International: Who We Are
We are a leading international tobacco company engaged in the
manufacture and sale of cigarettes and other nicotine-containing
products in markets outside the United States of America. We’re
building our future on smoke-free products that are a much better
consumer choice than continuing to smoke cigarettes. Through
multidisciplinary capabilities in product development,
state-of-the-art facilities and scientific substantiation, we aim
to ensure that our smoke-free products meet adult consumer
preferences and rigorous regulatory requirements. Our vision is
that these products ultimately replace cigarettes to the benefit of
adult smokers, society, our company and our shareholders. For more
information, see www.pmi.com 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. PMI's future profitability
may also be adversely affected should it be unsuccessful in its
attempts to produce and commercialize reduced-risk products or if
regulation or taxation do not differentiate between such products
and cigarettes; if it is unable to successfully introduce new
products, promote brand equity, enter new markets or improve its
margins through increased prices and productivity gains; if it is
unable to expand its brand portfolio internally or through
acquisitions and the development of strategic business
relationships; or if it is unable to attract and retain the best
global talent.
PMI is further subject to other risks detailed from time to time
in its publicly filed documents, including the Form 10-K for the
year ended December 31, 2017. PMI cautions that the foregoing list
of important factors is not a complete discussion of all potential
risks and uncertainties. PMI does not undertake to update any
forward-looking statement that it may make from time to time,
except in the normal course of its public disclosure
obligations.
Appendix 1 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Key Market Data Quarters Ended March
31, Market Total Market,bio units PMI
Shipments, bio units PMI Market Share, % 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 9.8 10.8 (9.4 ) 4.3
4.7 (8.9 ) 4.3 4.7
(8.8 ) — — — 44.4
42.8 1.6 0.1 —
0.1
Germany 16.1 17.5
(7.9 ) 5.8 6.7 (12.4 ) 5.8
6.7 (13.2 ) 0.1 —
— 36.3 38.2 (1.9 ) 0.4
— 0.4
Italy 16.1 16.2
(0.9 ) 8.0 7.8 2.1
7.7 7.7 (0.4 ) 0.3 0.1
+100.0
52.1 51.7 0.4 1.5
0.5 1.0
Poland 9.8 10.2
(3.7 ) 3.9 4.3 (9.2 ) 3.9
4.3 (10.3 ) — —
— 39.7 42.1 (2.4 ) 0.5
— 0.5
Spain 9.9
9.9 0.3 3.2 3.2
1.9 3.2 3.2 2.2 —
— — 32.3 32.1
0.2 0.3 0.1 0.2
Eastern Europe
Russia
(1) 51.2 55.8 (8.3 ) 12.8
14.8 (13.9 ) 12.5 14.8
(15.5 ) 0.3 — — 26.3
27.4 (1.1 ) — —
—
Middle East & Africa
Saudi Arabia 4.9 8.2
(40.8 ) 1.1 4.2 (74.5 ) 1.1
4.2 (74.5 ) — —
— 41.6 54.1 (12.5 ) —
— —
Turkey (1) 24.7
22.0 12.4 11.5 9.8
16.8 11.5 9.8 16.8
— — — 43.1
42.9 0.2 — — —
South & Southeast Asia
Indonesia 69.3 71.0 (2.3
) 23.0 23.4 (1.8 ) 23.0
23.4 (1.8 ) — — —
33.2 33.0 0.2 — —
—
Philippines 15.3 16.6
(7.8 ) 10.8 11.0 (1.4 ) 10.8
11.0 (1.4 ) — —
— 70.5 65.9 4.6 —
— —
East Asia &
Australia
Australia 2.9
3.2 (8.4 ) 0.8 0.9
(5.6 ) 0.8 0.9 (5.6 ) —
— — 28.7 27.8
0.9 — — —
Japan
39.7 40.6 (2.3 ) 14.1
14.8 (4.9 ) 7.9 10.7
(25.8 ) 6.2 4.1 49.3 34.7
30.0 4.7 15.8 7.1
8.7
Korea 15.8 16.1 (2.2
) 4.0 3.0 31.7 2.9
3.0 (6.1 ) 1.2 — —
25.5 19.1 6.4 7.3
— 7.3
Latin America & Canada
Argentina 9.2 9.3
(1.0 ) 6.8 6.9 (1.7 ) 6.8
6.9 (1.7 ) — — —
74.2 74.8 (0.6 ) —
— —
Canada 4.7 4.8
(3.6 ) 1.8 1.8 2.5 1.8
1.8 2.2 — —
— 39.0 35.2 3.8 0.1
— 0.1
Mexico 7.6
7.9 (2.7 ) 4.9 5.1 (4.0 )
4.9 5.1 (4.0 ) — —
— 63.5 64.4 (0.9 ) —
— — (1) PMI Cigarette Market
Share February QTD as measured by Nielsen Note: % change for Total
Market and PMI shipments is computed based on million units
Schedule 1 PHILIP MORRIS
INTERNATIONAL INC. and Subsidiaries
Diluted Earnings Per Share
(EPS) ($ in millions, except per share data) / (Unaudited)
Diluted
EPS
Quarters Ended March 31, 2018 Diluted Earnings Per
Share (1) $ 1.00 2017 Diluted Earnings Per
Share (1) $ 1.02 Change $ (0.02 ) % Change (2.0
)%
Reconciliation:
2017 Diluted Earnings Per Share (1) $ 1.02
2017 Asset impairment and exit costs — 2017 Tax items (0.04 ) 2018
Asset impairment and exit costs — 2018 Tax items — Currency 0.03
Interest — Change in tax rate 0.03 Operations (2)
(0.04)
2018 Diluted Earnings Per Share (1) $
1.00 (1) Basic and diluted EPS were calculated using
the following (in millions):
Quarters Ended March
31, 2018 2017 Net Earnings attributable to PMI $
1,556 $ 1,590 Less distributed and undistributed earnings
attributableto share-based payment awards 3 3 Net Earnings for
basic and diluted EPS $ 1,553 $ 1,587 Weighted-average
shares for basic EPS 1,553 1,552 Plus Contingently Issuable
Performance Stock Units 1 1 Weighted-average shares for diluted EPS
1,554 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 March
31, 2018 2017 % Change
Reported Diluted EPS $ 1.00 $ 1.02
(2.0)% Currency 0.03
Reported
Diluted EPS, excluding Currency $ 0.97 $
1.02 (4.9)% Quarters Ended March
31, Year Ended 2018 2017
% Change 2017 Reported Diluted EPS $
1.00 $ 1.02 (2.0)% $ 3.88 Asset impairment
and exit costs — — — Tax items — (0.04) 0.84
Adjusted Diluted EPS $ 1.00 $ 0.98 2.0%
$ 4.72 Currency 0.03
Adjusted
Diluted EPS, excluding Currency $ 0.97 $
0.98 (1.0)%
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 EndedMarch 31,
NetRevenues
Total
ExcludingCurrency
ExcludingCurrency
&Acquisitions
2018 Combustible Products 2017 %
Change $ 1,836 $ 226 $ 1,610 $ — $ 1,610 European Union $ 1,709
7.4% (5.8)% (5.8)% 527 27 500 — 500 Eastern Europe 513 2.8% (2.6)%
(2.6)% 884 12 871 — 871 Middle East & Africa 957 (7.7)% (9.0)%
(9.0)% 1,081 (8) 1,089 — 1,089 South & Southeast Asia 1,031
4.8% 5.6% 5.6% 737 22 715 — 715 East Asia & Australia 813
(9.4)% (12.2)% (12.2)% 704 (1) 705 —
705 Latin America & Canada 605 16.3% 16.5% 16.5%
$ 5,769 $ 279 $ 5,490
$ — $ 5,490 Total Combustible $
5,629 2.5% (2.5)% (2.5)%
2018 Reduced-Risk Products 2017 %
Change $ 152 $ 19 $ 133 $ — $ 133 European Union $ 31 +100%
+100% +100% 40 2 38 — 38 Eastern Europe 3 +100% +100% +100% 77 2 76
— 76 Middle East & Africa 4 +100% +100% +100% — — — — — South
& Southeast Asia — —% —% —% 854 26 828 — 828 East Asia &
Australia 396 +100% +100% +100% 4 — 4 —
4 Latin America & Canada — —% —% —%
$
1,127 $ 48 $ 1,079 $
— $ 1,079 Total RRPs $ 435
+100% +100% +100%
2018 PMI 2017 % Change $ 1,988 $ 245 $
1,743 $ — $ 1,743 European Union $ 1,740 14.3% 0.2% 0.2% 567 29 538
— 538 Eastern Europe 516 9.9% 4.3% 4.3% 961 14 947 — 947 Middle
East & Africa 961 —% (1.5)% (1.5)% 1,081 (8) 1,089 — 1,089
South & Southeast Asia 1,031 4.8% 5.6% 5.6% 1,591 48 1,543 —
1,543 East Asia & Australia 1,210 31.5% 27.5% 27.5% 708
(1) 709 — 709 Latin America & Canada 606
16.8% 17.0% 17.0%
$ 6,896 $ 327
$ 6,569 $ — $ 6,569
Total PMI $ 6,064 13.7% 8.3%
8.3% Note: Sum of product categories or
Regions might not foot to total PMI due to roundings. “-“ indicates
amounts between -$0.5 million and +$0.5 million.
Schedule 4
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of
Non-GAAP Measures
Adjustments of Operating Income for the Impact
of Currency and Acquisitions ($ in millions) / (Unaudited)
OperatingIncome
Currency
OperatingIncomeexcludingCurrency
Acquisitions
OperatingIncomeexcludingCurrency
&Acquisitions
OperatingIncome
Total
ExcludingCurrency
ExcludingCurrency
&Acquisitions
2018 Quarters EndedMarch 31,
2017 % Change $ 740 $ 110 $ 630 $ — $ 630 European
Union $ 748 (1.1)% (15.8)% (15.8)% 151 8 143 — 143 Eastern Europe
159 (5.0)% (10.1)% (10.1)% 374 (32) 406 — 406 Middle East &
Africa 491 (23.8)% (17.3)% (17.3)% 429 (12) 441 — 441 South &
Southeast Asia 370 15.9% 19.2% 19.2% 515 16 499 — 499 East Asia
& Australia 472 9.1% 5.7% 5.7% 217 (14) 231
— 231 Latin America & Canada 176 23.3%
31.3% 31.3%
$ 2,426 $ 76 $
2,350 $ — $ 2,350 Total PMI
$ 2,416 0.4% (2.7)%
(2.7)%
Schedule 5 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 EndedMarch 31,
2017 % Change $ 740 $ — $ 740 $ 110 $ 630 $ — $ 630
European Union $ 748 $ — $ 748 (1.1)% (15.8)% (15.8)% 151 — 151 8
143 — 143 Eastern Europe 159 — 159 (5.0)% (10.1)% (10.1)% 374 — 374
(32) 406 — 406 Middle East & Africa 491 — 491 (23.8)% (17.3)%
(17.3)% 429 — 429 (12) 441 — 441 South & Southeast Asia 370 —
370 15.9% 19.2% 19.2% 515 — 515 16 499 — 499 East Asia &
Australia 472 — 472 9.1% 5.7% 5.7% 217 — 217
(14) 231 — 231 Latin America & Canada 176
— 176 23.3% 31.3% 31.3%
$ 2,426
$ — $ 2,426 $ 76
$ 2,350 $ — $ 2,350 Total
PMI $ 2,416 $ — $ 2,416
0.4% (2.7)% (2.7)%
Schedule 6 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 EndedMarch 31,
2017 % Points Change $ 740 $ 1,988 37.2% $ 630 $
1,743 36.1% $ 630 $ 1,743 36.1% European Union $ 748 $ 1,740 43.0%
(5.8) (6.9) (6.9) 151 567 26.6% 143 538 26.6% 143 538 26.6% Eastern
Europe 159 516 30.8% (4.2) (4.2) (4.2) 374 961 38.9% 406 947 42.9%
406 947 42.9% Middle East & Africa 491 961 51.1% (12.2) (8.2)
(8.2) 429 1,081 39.7% 441 1,089 40.5% 441 1,089 40.5% South &
Southeast Asia 370 1,031 35.9% 3.8 4.6 4.6 515 1,591 32.4% 499
1,543 32.3% 499 1,543 32.3% East Asia & Australia 472 1,210
39.0% (6.6) (6.7) (6.7) 217 708 30.6% 231 709
32.6% 231 709 32.6% Latin America & Canada
176 606 29.0% 1.6 3.6 3.6
$
2,426 $ 6,896 35.2% $
2,350 $ 6,569 35.8% $
2,350 $ 6,569 35.8% Total
PMI $ 2,416 $ 6,064
39.8% (4.6) (4.0)
(4.0) (1) For the calculation of Adjusted Operating
Income and Adjusted Operating Income excluding currency and
acquisitions refer to Schedule 5 (2) For the calculation of Net
Revenues excluding currency and acquisitions refer to Schedule 3
Schedule 7 PHILIP MORRIS
INTERNATIONAL INC. and Subsidiaries
Condensed Statements of
Earnings ($ in millions, except per share data) / (Unaudited)
Quarters Ended March 31, 2018
2017 ChangeFav./(Unfav.) Revenues
including Excise Taxes $ 18,426 $ 16,556 11.3% Excise Taxes on
products 11,530 10,492 (9.9)%
Net Revenues
6,896 6,064 13.7% Cost of sales 2,615
2,177 (20.1)%
Gross profit 4,281 3,887
10.1% Marketing, administration and research costs 1,833
1,449 (26.5)% Asset impairment and exit costs — — Amortization of
intangibles 22 22
Operating Income
2,426 2,416 0.4% Interest expense, net 227 219
(3.7)% Pension and other employee benefit costs 6 20
70.0% Earnings before income taxes 2,193 2,177 0.7% Provision for
income taxes 559 541 (3.3)% Equity investments and securities
(income)/loss, net (13) (22) Net Earnings
1,647 1,658 (0.7)% Net Earnings attributable to noncontrolling
interests 91 68
Net Earnings attributable
to PMI $ 1,556 $ 1,590
(2.1)% Per share data (1): Basic Earnings
Per Share $ 1.00 $ 1.02 (2.0)% Diluted
Earnings Per Share $ 1.00 $ 1.02 (2.0)%
(1) Net Earnings and weighted-average
shares used in the basic and diluted Earnings Per Share
computations for the quarters endedMarch 31, 2018 and 2017 are
shown on Schedule 1, Footnote 1.
Schedule 8 PHILIP MORRIS
INTERNATIONAL INC. and Subsidiaries
Condensed Balance Sheets
($ in millions, except ratios) / (Unaudited)
March
31, December 31, 2018 2017 Assets
Cash and cash equivalents $ 7,200 $ 8,447 All other current assets
13,393
13,147 Property, plant and equipment, net
7,459
7,271 Goodwill
7,667
7,666 Other intangible assets, net
2,455
2,432 Investments in unconsolidated subsidiaries and equity
securities
1,395
1,074 Other assets
3,501
2,931
Total assets $ 43,070 $
42,968 Liabilities and Stockholders' (Deficit)
Equity Short-term borrowings $ 608 $ 499 Current portion of
long-term debt
4,662
2,506 All other current liabilities
12,418
12,957 Long-term debt
29,578
31,334 Deferred income taxes
822
799 Other long-term liabilities
5,464
5,103
Total liabilities
53,552
53,198 Total PMI stockholders' deficit
(12,350)
(12,086) Noncontrolling interests
1,868
1,856
Total stockholders' (deficit) equity
(10,482)
(10,230) Total liabilities and stockholders' (deficit)
equity
$
43,070
$
42,968
Schedule 9 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 March 31, 2018
Year EndedDecember
31,2017
April ~ December January ~ March 12 months 2017 2018
rolling
Net Earnings $ 4,683 $
1,647 $ 6,330 $ 6,341 Equity
(income)/loss in unconsolidated subsidiaries, net
(37)
(11)
(48)
(59)
Provision for income taxes
3,766
559
4,325
4,307 Interest expense, net
695
227
922
914 Depreciation and amortization
678
242
920
875 Asset impairment and exit costs
—
—
—
—
Adjusted EBITDA $ 9,785 $
2,664 $ 12,449 $ 12,378
March 31, December 31, 2018 2017
Short-term borrowings $ 608 $ 499 Current portion of long-term debt
4,662
2,506 Long-term debt
29,578
31,334
Total Debt $ 34,848 $
34,339 Cash and cash equivalents
7,200
8,447
Net Debt $ 27,648 $ 25,892
Ratios: Total Debt to Adjusted EBITDA
2.80
2.77 Net Debt to Adjusted EBITDA
2.22
2.09 Schedule
10 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 March 31,
2018 2017 % Change Net cash
provided by operating activities (1) $ 1,380 $
843 63.7% Currency 137
Net cash provided by operating activities, excluding
currency $ 1,243 $ 843 47.4%
(1) Operating cash flow
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Philip Morris International Inc.Investor Relations:New York: +1
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4666InvestorRelations@pmi.comorMedia:Lausanne: +41 (0)58 242
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