Provides 2020
Full-Year Reported Diluted EPS Forecast of $4.84 to $4.99, or
Adjusted Diluted EPS of $4.92 to $5.07, Reflecting Like-for-Like
Currency-Neutral Growth of Approximately 2% to 5%
Regulatory News:
Philip Morris International Inc. (NYSE:PM) today announces its
2020 second-quarter results. Comparisons presented in this press
release on a "like-for-like" basis reflect pro forma 2019 results,
which have been adjusted for the deconsolidation of PMI's Canadian
subsidiary, Rothmans, Benson & Hedges, Inc. (RBH), effective
March 22, 2019 (the date of deconsolidation). In addition, PMI's
total market share has been restated for previous periods to
reflect the deconsolidation.
2020 SECOND-QUARTER &
YEAR-TO-DATE HIGHLIGHTS
2020 Second-Quarter
- Reported diluted EPS of $1.25, down by 16.1%; down by 12.1%,
excluding currency
- Adjusted diluted EPS of $1.29, down by 11.6%; down by 7.5%,
excluding currency
- Cigarette and heated tobacco unit shipment volume down by 14.5%
(reflecting cigarette shipment volume down by 17.6%, and heated
tobacco unit shipment volume up by 24.3% to 18.7 billion
units)
- Market share for heated tobacco units in IQOS markets,
excluding the U.S., up by 1.8 points to 6.3%
- Net revenues down by 13.6%; down by 9.5%, excluding
currency
- Operating income down by 14.3%; down by 11.0%, excluding
currency
- Adjusted operating income down by 9.5%, excluding currency
- Adjusted operating income margin flat at 41.7%, excluding
currency
- Total IQOS users at quarter-end estimated at approximately 15.4
million, of which approximately 11.2 million have stopped smoking
and switched to IQOS
- During the quarter, PMI declared a regular quarterly dividend
of $1.17 per common share, representing an annualized rate of
$4.68
- On July 7, 2020, the U.S. Food and Drug Administration (FDA)
authorized the marketing of the IQOS tobacco heating system as a
modified risk tobacco product
2020 Six Months Year-to-Date
- Reported diluted EPS of $2.42, up by 2.5%; up by 10.6%,
excluding currency
- Adjusted diluted EPS of $2.50, down by 2.0%; up by 8.0% on a
like-for-like basis, excluding currency
- Cigarette and heated tobacco unit shipment volume down by 8.2%
(reflecting cigarette shipment volume down by 11.4%, and heated
tobacco unit shipment volume up by 33.4% to 35.4 billion units);
down by 8.0% on a like-for-like basis
- Market share for heated tobacco units in IQOS markets,
excluding the U.S., up by 1.8 points to 6.3%
- Net revenues down by 4.5%; down by 0.5% on a like-for-like
basis, excluding currency
- Operating income up by 5.4%; up by 11.1%, excluding
currency
- Adjusted operating income up by 5.4% on a like-for-like basis,
excluding currency
- Adjusted operating income margin up by 2.3 points to 41.5% on a
like-for-like basis, excluding currency
"Despite a very challenging quarter due to the pandemic, we
delivered results above our previously communicated expectations
for both net revenues and reported diluted EPS," said André
Calantzopoulos, Chief Executive Officer.
"This primarily reflected favorable sequential performance in
June, with a strong industry volume recovery -- notably in the
higher margin EU Region -- and substantial IQOS user acquisition
growth, as well as the benefit of certain non-underlying factors,
some of which we expect to reverse in the third quarter."
"We are particularly pleased by the excellent performance of
IQOS, for which we continued to grow share across a broad range of
markets. This is testament to the strength and agility of our
commercial model, which increasingly leverages our digital
assets."
"While further volatility and restrictions are clearly possible,
and the pandemic's economic impact is difficult to quantify, we
have improving visibility on the trajectory of our business for the
remainder of the year. We are therefore providing a full-year 2020
forecast, which reflects like-for-like currency-neutral adjusted
diluted EPS growth in the low-to-mid single digits."
"Importantly, we are very pleased with the U.S. FDA’s recent
authorization of IQOS as a modified risk tobacco product. This is a
historic milestone for both public health and PMI, and reflects the
FDA’s recognition that IQOS is a fundamentally different product
than cigarettes and must be regulated differently."
COVID-19: Business Continuity Update
Since the onset of COVID-19, PMI has undertaken a number of
business continuity measures to mitigate potential disruption to
its operations and route-to-market in order to preserve the
availability of products to its customers and adult consumers.
Currently, PMI has sufficient access to the inputs for its
products and is not facing any significant business continuity
issues with respect to key suppliers.
The large majority of PMI's manufacturing facilities globally
are currently operational, including all heated tobacco unit
factories. Certain cigarette production facilities are temporarily
impacted by government-mandated shutdowns or production
limitations. Such facilities account for less than 5% of PMI's
total cigarette production capacity worldwide.
Based on current sales trends, there are adequate inventories of
PMI finished goods across all key markets for cigarettes and across
all IQOS markets for heated tobacco units and tobacco heating
devices. While government-related restrictions have led to
complexities in the company's route-to-market in select
geographies, PMI does not currently anticipate out-of-stock
situations in any major operating income markets and generally
expects consumers to have adequate access to its products.
PMI has ample liquidity through cash on hand, the ongoing cash
generation of its business, and its access to the commercial paper
and debt markets. As of June 30, 2020, the company had
approximately $4.2 billion of cash and cash equivalents. The
company has a well laddered bond portfolio, and on May 1, 2020,
issued a three-tranche bond offering totaling $2.25 billion,
equally split among three, five and 10-year maturities. PMI has a
$0.3 billion (equivalent) bond maturing in September 2020.
Organizational Design Optimization
As part of its transformation to a smoke-free future, PMI seeks
to optimize its organizational design, which includes the
elimination, relocation and outsourcing of certain activities.
During the second quarter, PMI recorded pre-tax asset impairment
and exit costs of $71 million related to restructuring activities
in Switzerland and the outsourcing of certain activities performed
in the U.S. These pre-tax charges were allocated across all
segments.
2020 FULL-YEAR FORECAST
On April 21, 2020, PMI withdrew its 2020 full-year reported
diluted EPS forecast of at least $5.50, originally provided on
February 6, 2020. At the time, the company was unable to forecast
its full-year financial results with reasonable accuracy given the
uncertainty surrounding the COVID-19 pandemic and the related
impact on the company's business globally.
PMI believes that it is now in a better position to provide a
2020 full-year forecast, primarily reflecting the benefit of an
additional quarter of actual results, as well as improved
visibility on the progression of pandemic-related government
restrictions (including lockdowns) in many of its key international
markets, and the impact of such restrictions on adult smoker and
reduced-risk product user behavior, as well as the company's global
operations.
Notwithstanding this improved visibility, uncertainty remains as
to the risk and magnitude of COVID-19 resurgence, as well as the
economic consequences of the pandemic.
Full-Year
2020 EPS Forecast
2020 Forecast
2019
Adjusted Growth
Reported Diluted EPS
$4.84
-
$4.99
$4.61
Tax items
(0.04
)
Asset impairment and exit costs
0.04
0.23
Canadian tobacco litigation-related
expense
0.09
Loss on deconsolidation of RBH
0.12
Russia excise and VAT audit charge
0.20
Fair value adjustment for equity security
investments
0.04
(0.02
)
Adjusted Diluted EPS
$4.92
-
$5.07
$5.19
Net earnings attributable to RBH
(0.06
)
(a)
Adjusted Diluted EPS
$4.92
-
$5.07
$5.13
(b)
Currency
0.31
Adjusted Diluted EPS, excluding
currency
$5.23
-
$5.38
$5.13
(b)
2
%
-
5
%
(a) Net reported diluted EPS attributable
to RBH from January 1, 2019 through March 21, 2019.
(b) Pro forma.
Reported diluted earnings per share forecast to be in a range of
$4.84 to $4.99, at prevailing exchange rates versus reported
diluted earnings per share of $4.61 in 2019.
- Excluding an unfavorable currency impact, at prevailing
exchange rates, of approximately $0.31 per share, asset impairment
and exit costs of $0.04 per share, and a fair value adjustment for
equity security investments of $0.04 per share, this forecast
represents a projected increase of approximately 2% to 5% versus
pro forma adjusted diluted earnings per share of $5.13 in 2019, as
detailed in the above table.
2020 Full-Year Forecast Assumptions
This forecast assumes:
- No recurrence of national lockdowns in PMI's key international
markets during the second half of 2020;
- Lack of near-term recovery in PMI's duty-free business given
the uncertain outlook for global travel, with current dynamics
persisting at least through the third quarter;
- Full enforcement of minimum retail selling price requirements
in Indonesia as of September 2020, at the earliest;
- An estimated total international industry volume decline,
excluding China and the U.S., of approximately 7% to 9%;
- A total cigarette and heated tobacco unit shipment volume
decline for PMI of approximately 8% to 10% on a like-for-like
basis, notably due to Indonesia and PMI Duty Free;
- A full-year heated tobacco unit shipment volume that keeps PMI
on-track to reach its 2021 target of 90 to 100 billion units;
- A currency-neutral net revenue decline in the low single
digits, on a like-for-like basis. Excluding Indonesia and PMI Duty
Free, this assumes currency-neutral net revenue growth in the low
single digits on the same basis;
- An increase in currency-neutral, like-for-like adjusted
operating income margin of more than 150 basis points;
- Reported diluted EPS in the third quarter broadly in line with
the company's second-quarter 2020 EPS results, supported by a
sequential improvement in reported net revenues in the quarter,
offset by the unfavorable impact of the reversal of certain items
from the first half and the timing of certain costs;
- Operating cash flow of at least $9.0 billion, subject to
year-end working capital requirements and currency movements;
- Capital expenditures of approximately $0.7 billion;
- An effective tax rate of 22% to 23%, compared to approximately
23% assumed previously, notably reflecting changes in the company's
earnings mix and a lower corporate tax rate in Indonesia; 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 U.S. Tax Cuts and Jobs Act, further developments pertaining to
the judgment in the two Québec Class Action lawsuits and the
Companies’ Creditors Arrangement Act (CCAA) protection granted to
RBH, any unusual events, and any COVID-19-related developments
different from the assumptions set forth in the company's
forecast.
Factors described in the Forward-Looking and Cautionary
Statements section of this release represent continuing risks to
these projections.
FDA Authorizes Marketing of IQOS as a Modified Risk Tobacco
Product
On July 7, 2020, the U.S. Food and Drug Administration (FDA)
authorized the marketing of a version of IQOS, PMI’s heat-not-burn
product, as a modified risk tobacco product (MRTP). In doing so,
the agency found that an IQOS exposure modification order is
appropriate to promote the public health. IQOS is the first and
only electronic nicotine product to be granted marketing orders
through the FDA’s MRTP process.
The FDA authorized the marketing of IQOS with the following
information:
- The IQOS system heats tobacco but does not burn it
- This significantly reduces the production of harmful and
potentially harmful chemicals
- Scientific studies have shown that switching completely from
conventional cigarettes to the IQOS system reduces your body’s
exposure to harmful or potentially harmful chemicals
The agency concluded that the available scientific evidence
demonstrates that IQOS is expected to benefit the health of the
population as a whole, taking into account both users of tobacco
products and persons who do not currently use tobacco products.
The FDA’s decision further builds on the emerging independent
international scientific consensus that IQOS is a better choice
than continuing to smoke, and follows the FDA’s April 2019 decision
authorizing the commercialization of a version of IQOS in the
U.S.
The FDA’s decision provides an important example of how
governments and public health organizations can regulate smoke-free
alternatives to differentiate them from cigarettes in order to
protect and promote the public health.
This decision follows a review of the extensive scientific
evidence package PMI submitted to the FDA in December 2016 to
support its MRTP applications.
Conference Call
A conference call, hosted by Emmanuel Babeau, Chief Financial
Officer, will be webcast at 9:00 a.m., Eastern Time, on July 21,
2020. Access is at www.pmi.com/2020Q2earnings. 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.
CONSOLIDATED SHIPMENT VOLUME & MARKET
SHARE
PMI Shipment Volume by Region
Second-Quarter
Six Months
Year-to-Date
(million units)
2020
2019
Change
2020
2019
Change
Cigarettes
European Union
40,317
46,367
(13.0)%
80,963
85,855
(5.7)%
Eastern Europe
23,657
27,080
(12.6)%
45,076
47,400
(4.9)%
Middle East & Africa
27,188
31,659
(14.1)%
57,184
64,963
(12.0)%
South & Southeast Asia
33,346
46,376
(28.1)%
70,941
87,868
(19.3)%
East Asia & Australia
12,071
13,845
(12.8)%
24,370
25,958
(6.1)%
Latin America & Canada
14,780
18,472
(20.0)%
29,843
36,052
(17.2)%
Total PMI
151,359
183,799
(17.6)%
308,377
348,096
(11.4)%
Heated Tobacco Units
European Union
4,227
3,043
38.9%
8,888
5,336
66.6%
Eastern Europe
5,126
2,807
82.6%
9,492
4,355
+100%
Middle East & Africa
185
719
(74.3)%
655
1,473
(55.5)%
South & Southeast Asia
—
—
—%
—
—
—%
East Asia & Australia
9,076
8,428
7.7%
16,198
15,277
6.0%
Latin America & Canada (1)
94
59
59.3%
202
113
78.8%
Total PMI
18,708
15,056
24.3%
35,435
26,554
33.4%
Cigarettes and Heated Tobacco
Units
European Union
44,544
49,410
(9.8)%
89,851
91,191
(1.5)%
Eastern Europe
28,783
29,887
(3.7)%
54,568
51,755
5.4%
Middle East & Africa
27,373
32,378
(15.5)%
57,839
66,436
(12.9)%
South & Southeast Asia
33,346
46,376
(28.1)%
70,941
87,868
(19.3)%
East Asia & Australia
21,147
22,273
(5.1)%
40,568
41,235
(1.6)%
Latin America & Canada
14,874
18,531
(19.7)%
30,045
36,165
(16.9)%
Total PMI
170,067
198,855
(14.5)%
343,812
374,650
(8.2)%
(1) Includes shipments to Altria Group,
Inc., commencing in the third quarter of 2019, for sale in the
United States under license.
Second-Quarter
PMI's total shipment volume decreased by 14.5%, principally due
to:
- the EU, reflecting lower cigarette shipment volume, notably in
Italy, Poland and Spain, partly offset by higher heated tobacco
unit shipment volume across most markets, notably Germany, Italy
and Poland;
- Eastern Europe, reflecting lower cigarette shipment volume,
particularly in Russia and Ukraine, partly offset by higher heated
tobacco unit shipment volume across the Region, notably in
Russia;
- Middle East & Africa, reflecting lower cigarette shipment
volume, particularly in North Africa, PMI Duty Free and Turkey,
partly offset by Saudi Arabia, as well as lower heated tobacco
shipment volume in PMI Duty Free;
- South & Southeast Asia, reflecting lower cigarette shipment
volume, primarily in Indonesia, Pakistan and the Philippines;
- East Asia & Australia, reflecting lower cigarette shipment
volume, mainly in Japan, partly offset by higher heated tobacco
unit shipment volume in Japan; and
- Latin America & Canada, reflecting lower cigarette shipment
volume, primarily in Argentina and Mexico.
Impact of Inventory Movements
Excluding the net unfavorable impact of estimated distributor
inventory movements of approximately 2.3 billion units, PMI’s total
in-market sales declined by 13.4%, due to a 16.4% decline in
cigarettes, partly offset by a 24.0% increase in heated tobacco
units.
The net unfavorable impact of estimated distributor inventory
movements of approximately 2.3 billion units reflected a net
unfavorable impact of 2.5 billion cigarettes, mainly due to Italy,
Japan, PMI Duty Free, Russia and Spain, partly offset by Saudi
Arabia.
Six Months Year-to-Date
PMI's total shipment volume decreased by 8.2%, or by 8.0% on a
like-for-like basis, due to:
- the EU, reflecting lower cigarette shipment volume, notably in
Italy, Poland and Spain, partly offset by higher heated tobacco
unit shipment volume across the Region, particularly in Italy;
- Middle East & Africa, reflecting lower cigarette shipment
volume, notably in PMI Duty Free, Saudi Arabia and Turkey, partly
offset by North Africa, as well as lower heated tobacco unit
shipment volume in PMI Duty Free;
- South & Southeast Asia, reflecting lower cigarette shipment
volume, primarily in Indonesia, Pakistan and the Philippines;
- East Asia & Australia, reflecting lower cigarette shipment
volume, mainly in Japan, partly offset by higher heated tobacco
unit shipment volume in Japan; and
- Latin America & Canada, reflecting lower cigarette shipment
volume, primarily in Argentina, Canada (due to the impact of the
deconsolidation of RBH), and Mexico. On a like-for-like basis,
PMI's total shipment volume in the Region decreased by 14.6%;
partly offset by
- Eastern Europe, reflecting higher heated tobacco unit shipment
volume across the Region, notably in Russia and Ukraine, partly
offset by lower cigarette shipment volume, notably in Russia and
Ukraine.
Impact of Inventory Movements
On a like-for-like basis, excluding the net favorable impact of
estimated distributor inventory movements of approximately 3.0
billion units, PMI’s total in-market sales declined by 8.8%, due to
an 11.8% decline in cigarettes, partly offset by a 29.5% increase
in heated tobacco units.
The net favorable impact of estimated distributor inventory
movements of approximately 3.0 billion units reflected:
- a net favorable impact of 2.2 billion cigarettes, mainly driven
by Japan, Kuwait and North Africa, partly offset by Saudi Arabia
and Spain; and
- a net favorable impact of 0.8 billion heated tobacco units,
mainly driven by Japan and Russia.
PMI Shipment Volume by Brand
PMI Shipment Volume by Brand
Second-Quarter
Six Months
Year-to-Date
(million units)
2020
2019
Change
2020
2019
Change
Cigarettes
Marlboro
54,812
68,060
(19.5)%
114,057
128,024
(10.9)%
L&M
22,385
23,522
(4.8)%
45,025
45,337
(0.7)%
Chesterfield
12,604
14,202
(11.3)%
25,507
28,501
(10.5)%
Philip Morris
11,106
12,950
(14.2)%
22,569
23,673
(4.7)%
Parliament
8,462
9,847
(14.1)%
16,035
18,677
(14.1)%
Sampoerna A
7,254
9,355
(22.5)%
15,802
17,256
(8.4)%
Bond Street
6,428
7,741
(17.0)%
12,041
13,412
(10.2)%
Dji Sam Soe
5,797
7,839
(26.0)%
11,972
14,490
(17.4)%
Lark
4,189
5,349
(21.7)%
8,213
10,619
(22.7)%
Fortune
2,263
3,441
(34.2)%
4,745
6,487
(26.8)%
Others
16,059
21,493
(25.3)%
32,411
41,620
(22.1)%
Total Cigarettes
151,359
183,799
(17.6)%
308,377
348,096
(11.4)%
Heated Tobacco Units (1)
18,708
15,056
24.3%
35,435
26,554
33.4%
Total PMI
170,067
198,855
(14.5)%
343,812
374,650
(8.2)%
(1) Includes shipments to Altria Group,
Inc., commencing in the third quarter of 2019, for sale in the
United States under license.
Note: Sampoerna A includes Sampoerna;
Philip Morris includes Philip Morris/Dubliss; and Lark includes
Lark Harmony.
Second-Quarter
PMI's cigarette shipment volume of the following brands
decreased:
- Marlboro, mainly due to Indonesia, Italy, Japan, Mexico, the
Philippines and PMI Duty Free, partially offset by the GCC;
- L&M, mainly due to Egypt, PMI Duty Free, Poland and
Thailand, partly offset by Saudi Arabia and Turkey;
- Chesterfield, mainly due to Mexico, Poland, Russia and Turkey,
partly offset by Brazil and Saudi Arabia;
- Philip Morris, primarily driven by Argentina, Indonesia and
Italy;
- Parliament, mainly due to PMI Duty Free, Russia and
Turkey;
- Sampoerna A in Indonesia, mainly due to premium A Mild;
- Bond Street, mainly due to Russia and Ukraine;
- Dji Sam Soe in Indonesia, mainly due to Dji Sam Soe Magnum
Mild;
- Lark, mainly due to Japan and Turkey;
- Fortune in the Philippines; and
- "Others," notably due to: mid-price Sampoerna U in Indonesia
and low-price Morven in Pakistan.
The increase in PMI's heated tobacco unit shipment volume was
mainly driven by the EU, Eastern Europe and Japan, partly offset by
PMI Duty Free.
International Share of Market
PMI's total international market share (excluding China and the
U.S.), defined as PMI's cigarette and heated tobacco unit sales
volume as a percentage of total industry cigarette and heated
tobacco unit sales volume, decreased by 0.1 point to 28.0%,
reflecting:
- Total international market share for cigarettes of 25.0%, down
by 1.0 point; and
- Total international market share for heated tobacco units of
3.0%, up by 0.9 points.
PMI's total international cigarette sales volume as a percentage
of total industry cigarette sales volume was down by 0.7 points to
26.0%, mainly reflecting: out-switching to heated tobacco units, as
well as lower cigarette market share and/or an unfavorable
geographic mix impact, notably in Indonesia, Mexico, Pakistan, the
Philippines and PMI Duty Free, partly offset by Germany, Russia and
Turkey.
Six Months Year-to-Date
PMI's cigarette shipment volume of the following brands
decreased:
- Marlboro, mainly due to Indonesia, Italy, Mexico, the
Philippines, PMI Duty Free, Saudi Arabia, Spain and Turkey,
partially offset by Germany, Kuwait, North Africa and Russia;
- L&M, notably due to PMI Duty Free, Poland and Thailand,
partly offset by Jordan, Mexico and Turkey;
- Chesterfield, notably due to Russia and Turkey, partly offset
by Brazil and Saudi Arabia;
- Philip Morris, notably due to Argentina and Italy, partly
offset by Japan, the Philippines and Russia;
- Parliament, mainly due to PMI Duty Free, Russia and
Turkey;
- Sampoerna A in Indonesia, mainly due to premium A Mild;
- Bond Street, mainly due to Russia and Ukraine;
- Dji Sam Soe in Indonesia, mainly due to Dji Sam Soe Magnum
Mild;
- Lark, mainly due to Japan and Turkey;
- Fortune in the Philippines; and
- "Others," notably due to: the impact of the deconsolidation of
RBH in Canada; mid-price Sampoerna U in Indonesia and Muratti in
Turkey; and low-price Baronet in Mexico and Morven in
Pakistan.
The increase in PMI's heated tobacco unit shipment volume was
mainly driven by the EU (notably Italy), Eastern Europe (notably
Russia and Ukraine) and Japan, partly offset by PMI Duty Free.
International Share of Market
PMI's total international market share (excluding China and the
U.S.), decreased by 0.4 points to 27.7%, reflecting:
- Total international market share for cigarettes of 24.8%, down
by 1.2 points; and
- Total international market share for heated tobacco units of
2.9%, up by 0.8 points.
PMI's total international cigarette sales volume as a percentage
of total industry cigarette sales volume was down by 0.9 points to
25.8%, mainly reflecting: out-switching to heated tobacco units, as
well as lower cigarette market share and/or an unfavorable
geographic mix impact, notably in Indonesia, Mexico, Pakistan, the
Philippines, PMI Duty Free and Turkey, partly offset by Germany and
Russia.
CONSOLIDATED FINANCIAL SUMMARY
Second-Quarter
Financial Summary - Quarters Ended June
30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2020
2019
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 6,651
$ 7,699
(13.6
)%
(9.5
)%
(1,048
)
(317
)
172
(904
)
1
Cost of Sales
(2,179
)
(2,665
)
18.2
%
14.1
%
486
111
—
239
136
Marketing, Administration and Research
Costs (1)
(1,722
)
(1,831
)
6.0
%
0.4
%
109
101
—
—
8
Amortization of Intangibles
(19
)
(16
)
(18.8
)%
(25.0
)%
(3
)
1
—
—
(4
)
Operating Income
$ 2,731
$ 3,187
(14.3
)%
(11.0
)%
(456
)
(104
)
172
(665
)
141
Asset Impairment & Exit Costs (2)
(71
)
(23
)
-(100
)%
-(100
)%
(48
)
—
—
—
(48
)
Adjusted Operating Income
$ 2,802
$ 3,210
(12.7
)%
(9.5
)%
(408
)
(104
)
172
(665
)
189
Adjusted Operating Income Margin
42.1
%
41.7
%
0.4
pp
—
pp
(1) Favorable Cost/Other variance includes
the 2019 and 2020 asset impairment and exit costs.
(2) Included in Marketing, Administration
and Research Costs above.
Note: Net Revenues include revenues from
shipments of Platform 1 devices, heated tobacco units and
accessories to Altria Group, Inc., commencing in the third quarter
of 2019, for sale under license in the United States.
Net revenues, excluding unfavorable currency, decreased by 9.5%,
mainly reflecting: unfavorable volume/mix, primarily due to lower
cigarette volume (mainly in Indonesia, Italy, Japan, Mexico, the
Philippines, PMI Duty Free and Russia, partly offset by Saudi
Arabia), partially offset by higher heated tobacco unit volume
(notably in the EU, Japan and Russia, partly offset by PMI Duty
Free); partially offset by a favorable pricing variance (notably
driven by Germany, Mexico, the Philippines, Russia and Saudi
Arabia, partially offset by Indonesia and Turkey).
Operating income, excluding unfavorable currency, decreased by
11.0%, primarily reflecting: unfavorable volume/mix, reflecting the
same factors as for net revenues noted above, partially offset by a
favorable pricing variance, lower manufacturing costs (driven by
productivity gains related to combustible and reduced-risk
products), and lower marketing, administration and research costs
(despite pandemic-related expenses in 2020 and the unfavorable net
impact of asset impairment and exit costs).
Excluding asset impairment, exit costs and unfavorable currency,
adjusted operating income decreased by 9.5%. Adjusted operating
income margin, excluding currency, was flat at 41.7%, as detailed
in Schedule 8.
Six Months Year-to-Date
Financial Summary - Six Months Ended
June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2020
2019
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other(1)
(in millions)
Net Revenues
$ 13,804
$ 14,450
(4.5
)%
(1.8
)%
(646
)
(391
)
495
(523
)
(227
)
Cost of Sales
(4,581
)
(5,130
)
10.7
%
7.6
%
549
160
—
268
121
Marketing, Administration and Research
Costs (2)
(3,666
)
(4,048
)
9.4
%
11.2
%
382
(70
)
—
—
452
Amortization of Intangibles
(37
)
(35
)
(5.7
)%
(8.6
)%
(2
)
1
—
—
(3
)
Operating Income
$ 5,520
$ 5,237
5.4
%
11.1
%
283
(300
)
495
(255
)
343
Asset Impairment & Exit Costs (3)
(71
)
(43
)
(65.1
)%
(65.1
)%
(28
)
—
—
—
(28
)
Canadian Tobacco Litigation-Related
Expense (3)
—
(194
)
+100
%
+100
%
194
—
—
—
194
Loss on Deconsolidation of RBH (3)
—
(239
)
+100
%
+100
%
239
—
—
—
239
Adjusted Operating Income
$ 5,591
$ 5,713
(2.1
)%
3.1
%
(122
)
(300
)
495
(255
)
(62
)
Adjusted Operating Income Margin
40.5
%
39.5
%
1.0
pp
2.0
pp
(1) Cost/Other variance includes the
impact of the RBH deconsolidation.
(2) Favorable Cost/Other variance includes
the 2019 Canadian tobacco litigation-related expense, the 2019 loss
on deconsolidation of RBH, the 2019 and 2020 asset impairment and
exit costs, and the impact of the RBH deconsolidation.
(3) Included in Marketing, Administration
and Research Costs above.
Note: Net Revenues include revenues from
shipments of Platform 1 devices, heated tobacco units and
accessories to Altria Group, Inc., commencing in the third quarter
of 2019, for sale under license in the United States.
Net revenues, excluding unfavorable currency, decreased by 1.8%,
reflecting: unfavorable volume/mix, primarily due to lower
cigarette volume (mainly in Australia, Indonesia, Italy, Japan,
Mexico, the Philippines, PMI Duty Free, Poland, Spain and Turkey,
partly offset by Germany) and lower IQOS device volume (primarily
in Japan), partially offset by higher heated tobacco unit volume
(notably in the EU, Japan, Russia and Ukraine, partly offset by PMI
Duty Free); and the unfavorable impact of $227 million, shown in
"Cost/Other," mainly resulting from the deconsolidation of RBH;
partly offset by a favorable pricing variance (notably driven by
Australia, the GCC, Germany, Mexico, and the Philippines, partially
offset by Indonesia). On a like-for-like basis, net revenues,
excluding unfavorable currency, decreased by 0.5%, as detailed in
Schedule 9.
Operating income, excluding unfavorable currency, increased by
11.1%, notably reflecting a favorable comparison, shown in
"Cost/Other," of charges recorded in the first half of 2020 of $71
million, related to asset impairment and exit costs associated with
organizational design optimization, to charges recorded in the
first half of 2019 of $476 million, related to the loss on
deconsolidation of RBH, the Canadian tobacco litigation-related
expense, and asset impairment and exit costs associated with plant
closures in Colombia and Pakistan.
Excluding these charges and unfavorable currency, adjusted
operating income increased by 3.1%, primarily reflecting: a
favorable pricing variance; lower manufacturing costs (driven by
productivity gains related to combustible and reduced-risk
products); and lower marketing, administration and research costs
(despite pandemic-related expenses in 2020); partially offset by
unfavorable volume/mix, mainly due to lower cigarette volume
(mainly in Australia, Indonesia, Italy, Japan, Mexico, the
Philippines, PMI Duty Free, Poland and Spain, partly offset by
Germany), partly offset by higher heated tobacco unit volume
(notably in the EU, Japan, Russia and Ukraine, partly offset by PMI
Duty Free); and the net unfavorable impact resulting from the
deconsolidation of RBH, included in "Cost/Other." On a
like-for-like basis, adjusted operating income, excluding
unfavorable currency, increased by 5.4%, as detailed in Schedule
9.
Adjusted operating income margin, excluding currency, increased
by 2.0 points to 41.5%, as detailed in Schedule 8, or by 2.3 points
to 41.5% on a like-for-like basis, as detailed in Schedule 9.
EUROPEAN UNION REGION
Second-Quarter
Financial Summary - Quarters Ended June
30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2020
2019
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 2,475
$ 2,577
(4.0
)%
(0.1
)%
(102
)
(100
)
44
(46
)
—
Operating Income
$ 1,178
$ 1,195
(1.4
)%
4.0
%
(17
)
(65
)
44
(2
)
6
Asset Impairment & Exit Costs (1)
(27
)
—
—
%
—
%
(27
)
—
—
—
(27
)
Adjusted Operating Income
$ 1,205
$ 1,195
0.8
%
6.3
%
10
(65
)
44
(2
)
33
Adjusted Operating Income
Margin
48.7
%
46.4
%
2.3
pp
2.9
pp
(1) Included in marketing, administration
and research costs at the consolidated operating income level.
Net revenues, excluding unfavorable currency, decreased by 0.1%,
reflecting: unfavorable volume/mix, mainly due to lower cigarette
volume (notably in Italy, Poland and Spain, partly offset by
Germany), partially offset by higher heated tobacco unit volume
(notably in Germany, Italy and Poland); largely offset by a
favorable pricing variance (driven by higher combustible pricing,
notably in Germany, partly offset by lower heated tobacco unit
pricing).
Operating income, excluding unfavorable currency, increased by
4.0%, mainly reflecting: a favorable pricing variance; and lower
manufacturing costs (notably in Italy); partly offset by higher
marketing, administration and research costs (largely related to
increased investments behind reduced-risk products, as well as 2020
asset impairment and exit costs).
Excluding asset impairment, exit costs and unfavorable currency,
adjusted operating income increased by 6.3%. Adjusted operating
income margin, excluding currency, increased by 2.9 points to
49.3%, as detailed in Schedule 8.
Six Months Year-to-Date
Financial Summary - Six Months Ended
June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2020
2019
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 5,010
$ 4,736
5.8
%
9.4
%
274
(170
)
60
384
—
Operating Income
$ 2,336
$ 2,091
11.7
%
17.9
%
245
(130
)
60
376
(61
)
Asset Impairment & Exit Costs (1)
(27
)
—
—
%
—
%
(27
)
—
—
—
(27
)
Adjusted Operating Income
$ 2,363
$ 2,091
13.0
%
19.2
%
272
(130
)
60
376
(34
)
Adjusted Operating Income
Margin
47.2
%
44.2
%
3.0
pp
3.9
pp
(1) Included in marketing, administration
and research costs at the consolidated operating income level.
Net revenues, excluding unfavorable currency, increased by 9.4%,
reflecting: favorable volume/mix, mainly driven by higher heated
tobacco unit volume across the Region (notably in Germany, Italy
and Poland), partly offset by lower cigarette volume (notably in
Italy, Poland and Spain, partly offset by Germany); and a favorable
pricing variance (driven by higher combustible pricing across the
Region, notably in Germany, partly offset by lower heated tobacco
unit and IQOS device pricing).
Operating income, excluding unfavorable currency, increased by
17.9%, mainly reflecting: favorable volume/mix, driven by the same
factors as for net revenues noted above; a favorable pricing
variance; and lower manufacturing costs (notably in Germany and
Italy); partly offset by higher marketing, administration and
research costs (largely related to increased investments behind
reduced-risk products, notably in Poland, as well as 2020 asset
impairment and exit costs).
Excluding asset impairment, exit costs and unfavorable currency,
adjusted operating income increased by 19.2%. Adjusted operating
income margin, excluding currency, increased by 3.9 points to
48.1%, as detailed in Schedule 8.
Total Market, PMI Shipment & Market Share
Commentaries
European Union Key Data
Second-Quarter
Six Months
Year-to-Date
Change
Change
2020
2019
% / pp
2020
2019
% / pp
Total Market (billion units)
115.5
124.5
(7.3
)%
224.6
231.8
(3.1
)%
PMI Shipment Volume (million
units)
Cigarettes
40,317
46,367
(13.0
)%
80,963
85,855
(5.7
)%
Heated Tobacco Units
4,227
3,043
38.9
%
8,888
5,336
66.6
%
Total EU
44,544
49,410
(9.8
)%
89,851
91,191
(1.5
)%
PMI Market Share
Marlboro
17.8
%
18.0
%
(0.2
)
17.7
%
18.1
%
(0.4
)
L&M
6.5
%
6.9
%
(0.4
)
6.5
%
6.8
%
(0.3
)
Chesterfield
5.6
%
5.8
%
(0.2
)
5.6
%
5.9
%
(0.3
)
Philip Morris
2.6
%
2.7
%
(0.1
)
2.6
%
2.8
%
(0.2
)
HEETS
3.9
%
2.4
%
1.5
3.9
%
2.3
%
1.6
Others
3.0
%
3.0
%
—
3.1
%
3.0
%
0.1
Total EU
39.4
%
38.8
%
0.6
39.4
%
38.9
%
0.5
Second-Quarter
The estimated total market in the EU decreased by 7.3% to 115.5
billion units, mainly driven by:
- Czech Republic, down by 16.7%, mainly reflecting lower border
sales due to lockdown measures;
- Denmark, down by 78.5%, mainly reflecting the net unfavorable
impact of estimated trade inventory movements related to a
significant excise tax increase on April 1, 2020. Excluding these
movements, the total estimated market increased by 0.3%;
- Poland, down by 13.6%, notably reflecting lower border sales
due to lockdown measures, as well as the impact of price increases
in the first quarter of 2020;
- Romania, down by 16.6%, mainly reflecting the impact of
lockdown measures; and
- Spain, down by 17.2%, mainly reflecting lower in-bound tourism
and border sales due to lockdown measures;
partly offset by
- Germany, up by 5.9%, or by 4.2% excluding the net favorable
impact of estimated trade inventory movements, primarily reflecting
the favorable impact of reduced out-bound tourism and lower
cross-border (non-domestic) purchases due to lockdown measures,
partly offset by the impact of price increases in April and May
2020.
PMI's total shipment volume decreased by 9.8% to 44.5 billion
units, reflecting:
- lower cigarette shipment volume, mainly due to the lower total
market, lower market share (notably in Italy and Poland, partly
reflecting out-switching to heated tobacco units) and the net
unfavorable impact of estimated distributor inventory movements
(partially due to distributor inventory decreases, following
increases in the first quarter related to COVID-19, notably in
Italy and Spain);
partly offset by
- higher heated tobacco unit shipment volume, driven by higher
market share (notably in Germany, Italy and Poland).
Excluding the net unfavorable impact of estimated distributor
inventory movements, PMI's total in-market sales in the Region
decreased by 6.0%.
Six Months Year-to-Date
The estimated total market in the EU decreased by 3.1% to 224.6
billion units, notably due to:
- Czech Republic, down by 11.5%, primarily reflecting the same
factor as in the quarter;
- Poland, down by 6.4%, mainly reflecting the same factors as in
the quarter;
- Romania, down by 8.7%, primarily reflecting the same factor as
in the quarter; and
- Spain, down by 8.2%, mainly reflecting the same factors as in
the quarter;
partly offset by
- Germany, up by 4.9%, or by 2.3% excluding the net favorable
impact of estimated trade inventory movements, primarily reflecting
the same factors as in the quarter.
PMI's total shipment volume decreased by 1.5% to 89.9 billion
units, reflecting:
- lower cigarette shipment volume, mainly due to the lower total
market, as well as lower cigarette market share (notably in Italy
and Poland, partly reflecting out-switching to heated tobacco
units);
partly offset by
- higher heated tobacco unit shipment volume across the Region
(notably in Germany, Italy and Poland), driven by higher market
share.
EASTERN EUROPE REGION
Second-Quarter
Financial Summary - Quarters Ended June
30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2020
2019
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 783
$ 822
(4.7
)%
5.6
%
(39
)
(85
)
27
19
—
Operating Income
$ 266
$ 256
3.9
%
8.2
%
10
(11
)
27
10
(16
)
Asset Impairment & Exit Costs (1)
(7
)
—
—
%
—
%
(7
)
—
—
—
(7
)
Adjusted Operating Income
$ 273
$ 256
6.6
%
10.9
%
17
(11
)
27
10
(9
)
Adjusted Operating Income
Margin
34.9
%
31.1
%
3.8
pp
1.6
pp
(1) Included in marketing, administration
and research costs at the consolidated operating income level.
Net revenues, excluding unfavorable currency, increased by 5.6%,
reflecting: a favorable pricing variance, driven by higher
combustible pricing (predominantly in Russia), partly offset by
lower IQOS device pricing (mainly in Russia); and favorable
volume/mix, driven by higher heated tobacco unit volume across the
Region (primarily in Russia and Ukraine), partly offset by lower
cigarette volume (mainly in Russia and Ukraine) and unfavorable
cigarette mix in Russia.
Operating income, excluding unfavorable currency, increased by
8.2%, mainly reflecting: a favorable pricing variance; favorable
volume/mix, reflecting the same drivers as for net revenues noted
above; and lower manufacturing costs; partially offset by higher
marketing, administration and research costs (largely related to
increased investments behind reduced-risk products, notably in
Russia).
Excluding asset impairment, exit costs and unfavorable currency,
adjusted operating income increased by 10.9%. Adjusted operating
income margin, excluding currency, increased by 1.6 points to
32.7%, as detailed in Schedule 8.
Six Months Year-to-Date
Financial Summary - Six Months Ended
June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2020
2019
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 1,571
$ 1,401
12.1
%
17.8
%
170
(79
)
41
208
—
Operating Income
$ 365
$ 385
(5.2
)%
21.6
%
(20
)
(103
)
41
139
(97
)
Asset Impairment & Exit Costs (1)
(7
)
—
—
%
—
%
(7
)
—
—
—
(7
)
Adjusted Operating Income
$ 372
$ 385
(3.4
)%
23.4
%
(13
)
(103
)
41
139
(90
)
Adjusted Operating Income
Margin
23.7
%
27.5
%
(3.8
)pp
1.3
pp
(1) Included in marketing, administration
and research costs at the consolidated operating income level.
Net revenues, excluding unfavorable currency, increased by
17.8%, reflecting: favorable volume/mix, predominantly driven by
higher heated tobacco unit volume in Russia and Ukraine, partly
offset by unfavorable cigarette volume/mix in Russia and lower
cigarette volume in Ukraine; and a favorable pricing variance,
driven by higher combustible pricing (primarily in Russia), partly
offset by lower IQOS device pricing (mainly in Russia).
Operating income, excluding unfavorable currency, increased by
21.6%, mainly reflecting: favorable volume/mix, reflecting the same
drivers as for net revenues noted above; and a favorable pricing
variance; partly offset by higher manufacturing costs due to
Russia; and higher marketing, administration and research costs
(primarily related to increased investments behind reduced-risk
products, notably in Russia and Ukraine).
Excluding asset impairment, exit costs and unfavorable currency,
adjusted operating income increased by 23.4%. Adjusted operating
income margin, excluding currency, increased by 1.3 points to
28.8%, as detailed in Schedule 8.
Total Market, PMI Shipment & Market Share
Commentaries
PMI Shipment Volume
Second-Quarter
Six Months
Year-to-Date
(million units)
2020
2019
Change
2020
2019
Change
Cigarettes
23,657
27,080
(12.6)%
45,076
47,400
(4.9)%
Heated Tobacco Units
5,126
2,807
82.6%
9,492
4,355
+100%
Total Eastern Europe
28,783
29,887
(3.7)%
54,568
51,755
5.4%
Second-Quarter
The estimated total market in Eastern Europe decreased, notably
due to:
- Russia, down by 4.1%, or by 6.6% excluding the net favorable
impact of estimated trade inventory movements, primarily reflecting
the impact of price increases, partly offset by the impact of a
decrease in the prevalence of illicit trade due to lockdown
measures; and
- Ukraine, down by 15.0%, mainly reflecting the impact of excise
tax-driven price increases and reduced adult smoker average daily
consumption due to lockdown measures.
PMI's total shipment volume decreased by 3.7% to 28.8 billion
units, mainly due to:
- Ukraine, down by 14.7%, or by 11.1% excluding the net
unfavorable impact of estimated distributor inventory movements,
mainly reflecting the lower total market, partly offset by a higher
market share, driven by heated tobacco units.
Six Months Year-to-Date
The estimated total market in Eastern Europe decreased, notably
due to:
- Russia, down by 2.1%, or by 6.4% excluding the net favorable
impact of estimated trade inventory movements, primarily reflecting
the same factors as in the quarter; and
- Ukraine, down by 10.9%, mainly reflecting the same factors as
in the quarter.
PMI's total shipment volume increased by 5.4% to 54.6 billion
units, mainly due to:
- Russia, up by 10.3%, primarily reflecting a higher market
share, driven by heated tobacco units, partly offset by the lower
total market;
partly offset by
- Ukraine, down by 5.7%, mainly due to the same factors as in the
quarter.
MIDDLE EAST & AFRICA REGION
Second-Quarter
Financial Summary - Quarters Ended June
30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2020
2019
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 704
$ 1,004
(29.9
)%
(28.3
)%
(300
)
(16
)
45
(335
)
6
Operating Income
$ 237
$ 441
(46.3
)%
(47.4
)%
(204
)
5
45
(264
)
10
Asset Impairment & Exit Costs (1)
(9
)
—
—
%
—
%
(9
)
—
—
—
(9
)
Adjusted Operating Income
$ 246
$ 441
(44.2
)%
(45.4
)%
(195
)
5
45
(264
)
19
Adjusted Operating Income
Margin
34.9
%
43.9
%
(9.0
)pp
(10.4
)pp
(1) Included in marketing, administration
and research costs at the consolidated operating income level.
Net revenues, excluding unfavorable currency, decreased by
28.3%, primarily reflecting: unfavorable volume/mix, mainly due to
lower cigarette volume (predominantly in North Africa, PMI Duty
Free and South Africa, partly offset by Saudi Arabia) and lower
heated tobacco unit volume in PMI Duty Free; partially offset by a
favorable pricing variance, driven mainly by combustible pricing in
Saudi Arabia, partly offset by Turkey.
Operating income, excluding favorable currency, decreased by
47.4%, mainly reflecting: unfavorable volume/mix, due to the same
factors as for net revenues noted above; partly offset by a
favorable pricing variance.
Excluding asset impairment, exit costs and favorable currency,
adjusted operating income decreased by 45.4%. Adjusted operating
income margin, excluding currency, decreased by 10.4 points to
33.5%, as detailed in Schedule 8.
Six Months Year-to-Date
Financial Summary - Six Months Ended
June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2020
2019
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 1,580
$ 1,931
(18.2
)%
(17.2
)%
(351
)
(18
)
117
(411
)
(39
)
Operating Income
$ 558
$ 785
(28.9
)%
(27.1
)%
(227
)
(14
)
117
(294
)
(36
)
Asset Impairment & Exit Costs (1)
(9
)
—
—
%
—
%
(9
)
—
—
—
(9
)
Adjusted Operating Income
$ 567
$ 785
(27.8
)%
(26.0
)%
(218
)
(14
)
117
(294
)
(27
)
Adjusted Operating Income
Margin
35.9
%
40.7
%
(4.8
)pp
(4.3
)pp
(1) Included in marketing, administration
and research costs at the consolidated operating income level.
Net revenues, excluding unfavorable currency, decreased by
17.2%, reflecting: unfavorable volume/mix, mainly due lower
cigarette volume (mainly in PMI Duty Free and Turkey, partly offset
by Kuwait) and lower heated tobacco unit volume in PMI Duty Free;
and lower fees for certain distribution rights billed to customers
in certain markets, shown in "Cost/Other"; partially offset by a
favorable pricing variance, driven by combustible pricing (mainly
in the GCC, particularly Saudi Arabia).
Operating income, excluding unfavorable currency, decreased by
27.1%, mainly reflecting: unfavorable volume/mix, predominantly due
to lower cigarette and heated tobacco unit volume in PMI Duty Free;
and unfavorable "Cost/Other," mainly due to lower fees for certain
distribution rights, as noted above for net revenues; partially
offset by a favorable pricing variance.
Excluding asset impairment, exit costs and unfavorable currency,
adjusted operating income decreased by 26.0%. Adjusted operating
income margin, excluding currency, decreased by 4.3 points to
36.4%, as detailed in Schedule 8.
Total Market, PMI Shipment & Market Share
Commentaries
PMI Shipment Volume
Second-Quarter
Six Months
Year-to-Date
(million units)
2020
2019
Change
2020
2019
Change
Cigarettes
27,188
31,659
(14.1)%
57,184
64,963
(12.0)%
Heated Tobacco Units
185
719
(74.3)%
655
1,473
(55.5)%
Total Middle East & Africa
27,373
32,378
(15.5)%
57,839
66,436
(12.9)%
Second-Quarter
The estimated total market in the Middle East & Africa
decreased, mainly due to:
- Egypt, down by 19.6%, notably reflecting pandemic-related
supply-chain shortages involving competitors' products and
reductions in adult smoker average daily consumption during
lockdown;
- International Duty Free, down by 82.9%, reflecting the impact
of government travel restrictions and reduced passenger traffic due
to the pandemic;
- South Africa, down by 100%, reflecting the impact of the
pandemic-related ban on all tobacco sales effective March 27, 2020;
and
- Turkey, down by 6.8%, or by 16.9% excluding the net favorable
impact of estimated trade inventory movements, mainly reflecting
the impact of lockdown measures on adult smoker average daily
consumption, as well as a higher prevalence of illicit trade
related to cut tobacco following significant industry-wide price
increases in 2019.
PMI's total shipment volume decreased by 15.5% to 27.4 billion
units, notably due to:
- Egypt, down by 15.6%, or by 12.1% excluding the net unfavorable
impact of estimated distributor inventory movements, mainly
reflecting the lower total market, partly offset by a higher market
share, primarily driven by the impact of supply chain shortages for
competitors' products;
- PMI Duty Free, down by 94.4%, or by 82.1% excluding the net
unfavorable impact of estimated distributor inventory movements
(driven by cigarettes), mainly reflecting the lower total market;
and
- Turkey, down by 6.6%, mainly reflecting the lower total
market;
partly offset by
- Saudi Arabia, up by +100%. Excluding the net favorable impact
of estimated distributor inventory movements of 1.7 billion
cigarettes, largely attributable to the timing of shipments in
2019, PMI's in-market sales increased by 11.2%, mainly driven by
the reduced prevalence of non-domestic products and the shift from
duty-free to domestic sales due to the impact of pandemic-related
government travel restrictions and reduced passenger traffic.
Six Months Year-to-Date
The estimated total market in the Middle East & Africa
decreased, mainly due to:
- Egypt, down by 6.9%, notably reflecting the same factors as in
the quarter;
- International Duty Free, down by 57.8%, reflecting the same
factors as in the quarter;
- South Africa, down by 50.8%, primarily reflecting the same
factor as in the quarter; and
- Turkey, down by 9.3%, mainly reflecting the same factors as in
the quarter.
PMI's total shipment volume decreased by 12.9% to 57.8 billion
units, notably due to:
- PMI Duty Free, down by 55.9%, mainly reflecting the lower total
market; and
- Turkey, down by 17.4%, mainly reflecting the lower total market
and lower market share, due primarily to adult smoker down-trading
following the 2019 price increases.
SOUTH & SOUTHEAST ASIA REGION
Second-Quarter
Financial Summary - Quarters Ended June
30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2020
2019
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 889
$ 1,248
(28.8
)%
(25.1
)%
(359
)
(46
)
(15
)
(298
)
—
Operating Income
$ 289
$ 492
(41.3
)%
(38.0
)%
(203
)
(16
)
(15
)
(218
)
46
Asset Impairment & Exit Costs (1)
(11
)
—
—
%
—
%
(11
)
—
—
—
(11
)
Adjusted Operating Income
$ 300
$ 492
(39.0
)%
(35.8
)%
(192
)
(16
)
(15
)
(218
)
57
Adjusted Operating Income
Margin
33.7
%
39.4
%
(5.7
)pp
(5.6
)pp
(1) Included in marketing, administration
and research costs at the consolidated operating income level.
Net revenues, excluding unfavorable currency, decreased by
25.1%, reflecting: unfavorable volume/mix, mainly due to lower
cigarette volume in Indonesia and the Philippines, partly offset by
favorable mix in Indonesia; and an unfavorable pricing variance,
principally in Indonesia, partly offset by the Philippines.
Operating income, excluding unfavorable currency, decreased by
38.0%, primarily reflecting: unfavorable volume/mix, due to the
same factors as for net revenues noted above; and an unfavorable
pricing variance; partly offset by lower marketing, administration
and research costs; and lower manufacturing costs (mainly in
Indonesia).
Excluding asset impairment, exit costs and unfavorable currency,
adjusted operating income decreased by 35.8%. Adjusted operating
income margin, excluding currency, decreased by 5.6 points to
33.8%, as detailed in Schedule 8.
Six Months Year-to-Date
Financial Summary - Six Months Ended
June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2020
2019
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 2,140
$ 2,361
(9.4
)%
(8.2
)%
(221
)
(27
)
144
(338
)
—
Operating Income
$ 888
$ 932
(4.7
)%
(5.0
)%
(44
)
3
144
(236
)
45
Asset Impairment & Exit Costs (1)
(11
)
(20
)
45.0
%
45.0
%
9
—
—
—
9
Adjusted Operating Income
$ 899
$ 952
(5.6
)%
(5.9
)%
(53
)
3
144
(236
)
36
Adjusted Operating Income
Margin
42.0
%
40.3
%
1.7
pp
1.0
pp
(1) Included in marketing, administration
and research costs at the consolidated operating income level.
Net revenues, excluding unfavorable currency, decreased by 8.2%,
reflecting: unfavorable volume/mix, primarily due to lower
cigarette volume in Indonesia, Pakistan and the Philippines, partly
offset by favorable mix in Indonesia; partially offset by a
favorable pricing variance, principally driven by the Philippines,
partly offset by Indonesia.
Operating income, excluding favorable currency, decreased by
5.0%, mainly reflecting: unfavorable volume/mix, due to the same
factors as for net revenues noted above; partially offset by a
favorable pricing variance; lower marketing, administration and
research costs; and lower manufacturing costs (notably in
Indonesia).
Excluding asset impairment, exit costs and favorable currency,
adjusted operating income decreased by 5.9%. Adjusted operating
income margin, excluding currency, increased by 1.0 point to 41.3%,
as detailed in Schedule 8.
Total Market, PMI Shipment & Market Share
Commentaries
PMI Shipment Volume
Second-Quarter
Six Months
Year-to-Date
(million units)
2020
2019
Change
2020
2019
Change
Cigarettes
33,346
46,376
(28.1)%
70,941
87,868
(19.3)%
Heated Tobacco Units
—
—
—%
—
—
—%
Total South & Southeast
Asia
33,346
46,376
(28.1)%
70,941
87,868
(19.3)%
Second-Quarter
The estimated total market in South & Southeast Asia
decreased, notably due to:
- Bangladesh, down by 29.9%, or by 5.3% excluding the net
unfavorable impact of estimated trade inventory movements,
primarily reflecting the impact of lockdown restrictions on tobacco
product availability;
- India, down by 37.6%, primarily reflecting the impact of
lockdown restrictions on the movement of certain products,
including tobacco;
- Indonesia, down by 17.5%, or by 22.1% excluding the net
favorable impact of estimated trade inventory movements, mainly
reflecting the impact of pandemic-related measures on adult smoker
average daily consumption, as well as the impact of excise
tax-driven price increases;
- Pakistan, down by 25.8%, mainly reflecting the impact of excise
tax-driven price increases in June 2019 and value brand price
increases in February 2020, coupled with the impact of trade supply
disruption on tobacco product availability, due to lockdown
measures; and
- the Philippines, down by 24.6%, mainly reflecting the impact of
the strict enforcement of nationwide quarantine, as well as
industry-wide price increases in the third quarter of 2019.
PMI's total shipment volume decreased by 28.1% to 33.3 billion
units, notably due to:
- Indonesia, down by 27.7%, reflecting the lower total market, as
well as a lower market share, mainly due to: the impact of elevated
price gaps in the tier one segment (partly due to the delay in
minimum price enforcement), adult smoker down-trading to the
tax-advantaged 'below tier one' segment, and the disproportionate
impact of stricter public mobility restrictions in urban areas,
where PMI’s share is higher;
- Pakistan, down by 39.2%, due to the lower total market and a
lower market share; and
- the Philippines, down by 25.7%, mainly reflecting the lower
total market.
Six Months Year-to-Date
The estimated total market in South & Southeast Asia
decreased, notably due to:
- Bangladesh, down by 5.6%, primarily reflecting the same factor
as in the quarter;
- India, down by 23.5%, mainly reflecting the same factor as in
the quarter;
- Indonesia, down by 9.5%, or by 14.8% excluding the net
favorable impact of estimated trade inventory movements, primarily
reflecting the same factors as in the quarter;
- Pakistan, down by 25.6%, mainly due to the same factors as in
the quarter; and
- the Philippines, down by 17.1%, mainly reflecting the same
factors as in the quarter.
PMI's total shipment volume decreased by 19.3% to 70.9 billion
units, notably due to:
- Indonesia, down by 18.2%, reflecting the lower total market, as
well as a lower market share, mainly due to the same factors as in
the quarter;
- Pakistan, down by 37.4%, mainly due to the same factors as in
the quarter; and
- the Philippines, down by 17.7%, mainly reflecting the same
factor as in the quarter.
EAST ASIA & AUSTRALIA REGION
Second-Quarter
Financial Summary - Quarters Ended June
30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2020
2019
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 1,432
$ 1,521
(5.9
)%
(5.1
)%
(89
)
(12
)
30
(107
)
—
Operating Income
$ 669
$ 642
4.2
%
5.9
%
27
(11
)
30
(85
)
93
Asset Impairment & Exit Costs (1)
(13
)
—
—
%
—
%
(13
)
—
—
—
(13
)
Adjusted Operating Income
$ 682
$ 642
6.2
%
7.9
%
40
(11
)
30
(85
)
106
Adjusted Operating Income
Margin
47.6
%
42.2
%
5.4
pp
5.8
pp
(1) Included in marketing, administration
and research costs at the consolidated operating income level.
Net revenues, excluding unfavorable currency, decreased by 5.1%,
reflecting: unfavorable volume/mix, mainly due to lower cigarette
volume (primarily in Australia and Japan) and unfavorable heated
tobacco unit mix in Japan, partly offset by higher heated tobacco
unit volume in Japan; partially offset by a favorable pricing
variance, mainly driven by higher heated tobacco unit pricing in
Japan and higher combustible pricing in Australia, partly offset by
lower IQOS device pricing in Japan.
Operating income, excluding unfavorable currency, increased by
5.9%, mainly reflecting: lower manufacturing costs (notably related
to Japan and Korea); lower marketing, administration and research
costs (primarily in Japan); and a favorable pricing variance;
partly offset by unfavorable volume/mix, due to the same factors as
for net revenues noted above.
Excluding asset impairment, exit costs and unfavorable currency,
adjusted operating income increased by 7.9%. Adjusted operating
income margin, excluding currency, increased by 5.8 points to
48.0%, as detailed in Schedule 8.
Six Months Year-to-Date
Financial Summary - Six Months Ended
June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2020
2019
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 2,687
$ 2,842
(5.5
)%
(4.7
)%
(155
)
(21
)
43
(177
)
—
Operating Income
$ 1,155
$ 1,069
8.0
%
9.4
%
86
(15
)
43
(96
)
154
Asset Impairment & Exit Costs (1)
(13
)
—
—
%
—
%
(13
)
—
—
—
(13
)
Adjusted Operating Income
$ 1,168
$ 1,069
9.3
%
10.7
%
99
(15
)
43
(96
)
167
Adjusted Operating Income
Margin
43.5
%
37.6
%
5.9
pp
6.1
pp
(1) Included in marketing, administration
and research costs at the consolidated operating income level.
Net revenues, excluding unfavorable currency, decreased by 4.7%,
reflecting: unfavorable volume/mix, mainly due to lower cigarette
volume in Japan, unfavorable volume/mix in Australia, lower IQOS
device volume in Japan and unfavorable heated tobacco unit mix in
Japan, partly offset by higher heated tobacco unit volume in Japan;
partially offset by a favorable pricing variance, mainly driven by
higher combustible pricing in Australia and higher heated tobacco
pricing in Japan, partly offset by lower IQOS device pricing in
Japan.
Operating income, excluding unfavorable currency, increased by
9.4%, mainly reflecting: lower marketing, administration and
research costs (notably in Japan); lower manufacturing costs
(mainly related to Japan and Korea); and a favorable pricing
variance; partly offset by unfavorable volume/mix, primarily due to
lower cigarette volume in Japan, unfavorable volume/mix in
Australia and unfavorable heated tobacco unit mix in Japan, partly
offset by higher heated tobacco unit volume in Japan.
Excluding asset impairment, exit costs and unfavorable currency,
adjusted operating income increased by 10.7%. Adjusted operating
income margin, excluding currency, increased by 6.1 points to
43.7%, as detailed in Schedule 8.
Total Market, PMI Shipment & Market Share
Commentaries
PMI Shipment Volume
Second-Quarter
Six Months
Year-to-Date
(million units)
2020
2019
Change
2020
2019
Change
Cigarettes
12,071
13,845
(12.8)%
24,370
25,958
(6.1)%
Heated Tobacco Units
9,076
8,428
7.7%
16,198
15,277
6.0%
Total East Asia & Australia
21,147
22,273
(5.1)%
40,568
41,235
(1.6)%
Second-Quarter
The estimated total market in East Asia & Australia,
excluding China, decreased, notably due to:
- Japan, down by 12.7%, mainly reflecting the impact of reduced
adult smoker social consumption occasions due to pandemic-related
measures, as well as adult smoker out-switching from cigarettes to
the cigarillo category;
partly offset by
- Korea, up by 3.9%, notably driven by the shift of adult smokers
from duty-free to domestic purchases due to the pandemic-related
decline in international travel.
PMI's total shipment volume decreased by 5.1% to 21.1 billion
units, notably in:
- Japan, down by 6.4%, mainly due to the lower total market,
partly offset by a higher market share driven by heated tobacco
units.
Six Months Year-to-Date
The estimated total market in East Asia & Australia,
excluding China, decreased, notably due to:
- Japan, down by 9.4%, mainly reflecting the same factors as in
the quarter;
partly offset by
- Korea, up by 3.8%, notably due the same factor as in the
quarter.
PMI's total shipment volume decreased by 1.6% to 40.6 billion
units, notably in:
- Japan, down by 1.0%, or by 3.6% excluding the net favorable
impact of estimated distributor inventory movements, mainly due to
the same factors as in the quarter; and
- Korea, down by 4.6%, mainly due to a lower market share,
primarily reflecting the unfavorable impact of the growth of the
cigarette new taste dimension segment, in which PMI has a
relatively low share, partly offset by the higher total
market.
LATIN AMERICA & CANADA REGION
Second-Quarter
Financial Summary - Quarters Ended June
30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2020
2019
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 368
$ 527
(30.2
)%
(19.2
)%
(159
)
(58
)
41
(137
)
(5
)
Operating Income
$ 92
$ 161
(42.9
)%
(39.1
)%
(69
)
(6
)
41
(106
)
2
Asset Impairment & Exit Costs (1)
(4
)
(23
)
82.6
%
82.6
%
19
—
—
—
19
Adjusted Operating Income
$ 96
$ 184
(47.8
)%
(44.6
)%
(88
)
(6
)
41
(106
)
(17
)
Adjusted Operating Income
Margin
26.1
%
34.9
%
(8.8
)pp
(11.0
)pp
(1) Included in marketing, administration
and research costs at the consolidated operating income level.
Note: Net Revenues include revenues from
shipments of Platform 1 devices, heated tobacco units and
accessories to Altria Group, Inc., commencing in the third quarter
of 2019, for sale under license in the United States.
Net revenues, excluding unfavorable currency, decreased by
19.2%, mainly reflecting: unfavorable volume/mix, primarily due to
lower cigarette volume in Argentina, Colombia and Mexico; partly
offset by a favorable pricing variance, predominantly driven by
higher combustible pricing in Mexico.
Operating income, excluding unfavorable currency, decreased by
39.1%, primarily reflecting: unfavorable volume/mix (mainly due to
lower cigarette volume in Mexico); partly offset by a favorable
pricing variance; and lower marketing, administration and research
costs (driven by the favorable net impact of 2019 and 2020 asset
impairment and exit costs).
Excluding asset impairment, exit costs and unfavorable currency,
adjusted operating income decreased by 44.6%. Adjusted operating
income margin, excluding currency, decreased by 11.0 points to
23.9%, as detailed in Schedule 8.
Six Months Year-to-Date
Financial Summary - Six Months Ended
June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2020
2019
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other(1)
(in millions)
Net Revenues
$ 816
$ 1,179
(30.8
)%
(24.3
)%
(363
)
(76
)
90
(189
)
(188
)
Operating Income (Loss)
$ 218
$ (25
)
+100
%
+100
%
243
(41
)
90
(144
)
338
Asset Impairment & Exit Costs (2)
(4
)
(23
)
82.6
%
82.6
%
19
—
—
—
19
Canadian Tobacco Litigation-Related
Expense (2)
—
(194
)
+100
%
+100
%
194
—
—
—
194
Loss on Deconsolidation of RBH (2)
—
(239
)
+100
%
+100
%
239
—
—
—
239
Adjusted Operating Income
$ 222
$ 431
(48.5
)%
(39.0
)%
(209
)
(41
)
90
(144
)
(114
)
Adjusted Operating Income Margin
27.2
%
36.6
%
(9.4
)pp
(7.1
)pp
(1) Cost/Other variance includes the
impact of the RBH deconsolidation.
(2) Included in marketing, administration
and research costs at the consolidated operating income level.
Note: Net Revenues include revenues from
shipments of Platform 1 devices, heated tobacco units and
accessories to Altria Group, Inc., commencing in the third quarter
of 2019, for sale under license in the United States.
Net revenues, excluding unfavorable currency, decreased by
24.3%, reflecting: unfavorable volume/mix, due to lower cigarette
volume, notably in Argentina and Mexico; and the unfavorable impact
of the deconsolidation of RBH shown in "Cost/Other"; partly offset
by a favorable pricing variance, mainly driven by higher
combustible pricing in Mexico. On a like-for-like basis, net
revenues, excluding unfavorable currency, decreased by 10.7%, as
detailed in Schedule 10.
Operating income, excluding unfavorable currency, increased by
+100%, notably reflecting a favorable comparison, shown in
"Cost/Other," of charges recorded in the first half of 2020 of $4
million, related to asset impairment and exit costs associated with
organizational design optimization, to charges recorded in the
first half of 2019 of $456 million, related to the loss on
deconsolidation of RBH, the Canadian tobacco litigation-related
expense, and asset impairment and exit costs associated with a
plant closure in Colombia.
Excluding these charges and unfavorable currency, adjusted
operating income decreased by 39.0%, reflecting: unfavorable
volume/mix, due to the same factor as for net revenues noted above;
and the unfavorable impact of the deconsolidation of RBH, included
in "Cost/Other"; partly offset by a favorable pricing variance. On
a like-for-like basis, excluding unfavorable currency, adjusted
operating income decreased by 14.7%, as detailed in Schedule
10.
Adjusted operating income margin, excluding currency, decreased
by 7.1 points to 29.5%, as detailed in Schedule 8, or by 1.4 points
to 29.2% on a like-for-like basis, as detailed in Schedule 10.
Total Market, PMI Shipment & Market Share
Commentaries
PMI Shipment Volume
Second-Quarter
Six Months
Year-to-Date
(million units)
2020
2019
Change
2020
2019
Change
Cigarettes
14,780
18,472
(20.0)%
29,843
36,052
(17.2)%
Heated Tobacco Units
94
59
59.3%
202
113
78.8%
Total Latin America &
Canada
14,874
18,531
(19.7)%
30,045
36,165
(16.9)%
Second-Quarter
The estimated total market in Latin America & Canada
decreased, notably due to:
- Argentina, down by 7.4%, mainly reflecting retail out-of-stock
(particularly of PMI brands) due to temporary factory shutdowns
related to the pandemic, as well as the impact of price increases,
partly offset by the net favorable impact of estimated trade
inventory movements;
- Colombia, down by 25.6%, primarily reflecting reduced product
availability and adult smoker average daily consumption due to
lockdown measures; and
- Mexico, down by 24.4%, or by 16.8% excluding the net
unfavorable impact of estimated trade inventory movements
(primarily related to July 2019 price increases), mainly due to the
impact of excise tax-driven price increases in January 2020, as
well as the impact of pandemic-related measures on adult smoker
average daily consumption;
partly offset by
- Brazil, up by 8.7%, mainly reflecting a lower estimated
prevalence of illicit trade due to: reduced price gaps with legal
products and the impact of border restrictions imposed as a result
of the pandemic.
PMI's total shipment volume decreased by 19.7% to 14.9 billion
units, notably due to:
- Argentina, down by 15.2%, primarily reflecting the lower total
market and a lower market share, mainly due to the impact of retail
out-of-stock of PMI brands, as well as adult smoker down-trading to
ultra-low-price brands produced by local manufacturers; and
- Mexico, down by 32.5%, mainly due to the lower total market
(partly reflecting the net unfavorable impact of estimated trade
inventory movements noted above) and lower market share, primarily
reflecting adult smoker down-trading and the impact of the pandemic
on adult smoker consumption patterns.
Six Months Year-to-Date
The estimated total market in Latin America & Canada
decreased, notably due to:
- Argentina, down by 6.3%, mainly reflecting the same factors as
in the quarter;
- Colombia, down by 15.3%, primarily due to the same factors as
in the quarter; and
- Mexico, down by 18.4%, or by 13.6% excluding the net
unfavorable impact of estimated trade inventory movements, mainly
due to the same factors as in the quarter;
partly offset by
- Brazil, up by 9.5%, mainly reflecting the same factors as in
the quarter.
PMI's total shipment volume decreased by 16.9% to 30.0 billion
units, or by 14.6% on a like-for-like basis, notably due to:
- Argentina, down by 14.2%, primarily reflecting the same factors
as in the quarter;
- Canada, down by 34.3%, due to the unfavorable impact of the
deconsolidation of RBH; and
- Mexico, down by 25.0%, mainly due the same factors as in the
quarter.
Philip Morris International: Delivering 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 with smoke-free products 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, as well
as smoke-free products and associated electronic devices and
accessories, and other nicotine-containing products in markets
outside the United States. In addition, PMI ships a version of its
IQOS Platform 1 device and its consumables authorized by the U.S.
Food and Drug Administration to Altria Group, Inc. for sale in the
U.S. under license. 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 heat-not-burn and nicotine-containing vapor products. As
of June 30, 2020, PMI estimates that approximately 11.2 million
adult smokers around the world have already stopped smoking and
switched to PMI's heat-not-burn product, available for sale in 57
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 and other
nicotine-containing 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.
The COVID-19 pandemic has created significant societal and
economic disruption, and resulted in closures of stores, factories
and offices, and restrictions on manufacturing, distribution and
travel, all of which will adversely impact our business, results of
operations, cash flows and financial position during the
continuation of the pandemic. Our business continuity plans and
other safeguards in place may not be effective to mitigate the
impact of the pandemic. Currently, significant risks include our
diminished ability to convert adult smokers to our RRPs,
significant volume declines in our duty-free business and certain
other key markets, disruptions or delays in our manufacturing and
supply chain, increased currency volatility, and delays in certain
cost saving, transformation and restructuring initiatives. Our
business could also be adversely impacted if key personnel or a
significant number of employees or business partners become
unavailable due to the COVID-19 outbreak. The significant adverse
impact of COVID-19 on the economic or political conditions in
markets in which we operate could result in changes to the
preferences of our adult consumers and lower demand for our
products, particularly for our mid-price or premium-price brands.
Continuation of the pandemic could disrupt our access to the credit
markets or increase our borrowing costs. Governments may
temporarily be unable to focus on the development of science-based
regulatory frameworks for the development and commercialization of
RRPs or on the enforcement or implementation of regulations that
are significant to our business. In addition, messaging about the
potential negative impacts of the use of our products on COVID-19
risks may lead to increasingly restrictive regulatory measures on
the sale and use of our products, negatively impact demand for our
products, the willingness of adult consumers to switch to our RRPs
and our efforts to advocate for the development of science-based
regulatory frameworks for the development and commercialization of
RRPs.
The impact of these risks also depends on factors beyond our
knowledge or control, including the duration and severity of the
outbreak, its recurrence in our key markets, actions taken to
contain its spread and to mitigate its public health effects, and
the ultimate economic consequences thereof.
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 March 31, 2020. 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.
- References to total international market, defined as worldwide
cigarette and heated tobacco unit volume excluding the U.S., 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. In addition, to reflect the deconsolidation of PMI's
Canadian subsidiary, Rothmans, Benson & Hedges, Inc. (RBH),
effective March 22, 2019, PMI's total market share has been
restated for previous periods.
- Estimates for second-quarter 2020 and six months year-to-date
2020 total industry volume and market share in certain geographies
reflect limitations on the availability and accuracy of industry
data during pandemic-related restrictions.
- "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.
- "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).
- Following the deconsolidation of PMI's Canadian subsidiary,
Rothmans, Benson & Hedges, Inc. (RBH), PMI will continue to
report the volume of brands sold by RBH for which other PMI
subsidiaries are the trademark owner. These include HEETS, Next,
Philip Morris and Rooftop.
- 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, such as
on an IMS basis, improves the comparability of performance and
trends for these measures over different reporting periods.
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.
- "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 Consolidated Financial Summary table of
total PMI and the six operating segments of this release reflects
the currency-neutral variances of: cost of sales (excluding the
volume/mix cost component); marketing, administration and research
costs (including asset impairment and exit costs, the Canadian
tobacco litigation-related expense and the charge related to the
deconsolidation of RBH in Canada); and amortization of intangibles.
“Cost/Other” also includes the currency-neutral net revenue
variance, unrelated to volume/mix and price components,
attributable to fees for certain distribution rights billed to
customers in certain markets in the ME&A Region, as well as the
impact of the deconsolidation in RBH.
- "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. For example, PMI’s adjusted diluted EPS and other
impacted results reflect the loss on deconsolidation of RBH and the
Canadian tobacco litigation-related expense, recorded in the first
quarter of 2019, asset impairment and exit costs associated with
plant closures in Pakistan and Colombia, recorded in the first and
second quarters of 2019, respectively, and asset impairment and
exit costs associated with organizational design optimization,
recorded in the second quarter of 2020. PMI believes that the
adjusted measures, including pro forma measures, will provide
useful insight into underlying business trends and results, and
will provide a more meaningful performance comparison for the
period during which RBH remains under CCAA protection. For PMI's
2018 pro forma adjusted diluted EPS by quarter and year-to-date,
see Schedule 3 in PMI's second-quarter 2019 earnings release.
- 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
U.S. GAAP measures, see the relevant schedules provided with this
press release.
- 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.
- "Fair value adjustment for equity security investments"
reflects the adjustment resulting from share price movements in
passive investments for publicly traded entities that are not
controlled or influenced by PMI. Under U.S. GAAP, such adjustments
are required, since January 1, 2018, to be reflected directly in
the income statement.
Reduced-Risk Products
- Reduced Risk Products (“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 continuing smoking. PMI has a range of RRPs in
various stages of development, scientific assessment and
commercialization. PMI's RRPs are smoke-free products that produce
an aerosol that contains far lower quantities of harmful and
potentially harmful constituents than found in cigarette
smoke.
- "Heated tobacco units," or "HTUs," is the term PMI uses to
refer to heated tobacco consumables, which include the company's
HEETS, HEETS Creations, HEETS Marlboro and HEETS FROM MARLBORO,
defined collectively as HEETS, as well as Marlboro HeatSticks and
Parliament HeatSticks.
- Market share for HTUs is defined as the total sales volume for
HTUs as a percentage of the total estimated sales volume for
cigarettes and HTUs.
- Unless otherwise stated, all references to IQOS are to PMI's
heat-not-burn products.
- 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.
- “Total IQOS users” is defined as the estimated number of Legal
Age (minimum 18 years) IQOS users that used PMI HTUs for at least
5% of their daily tobacco consumption over the past seven
days.
- The estimated number of people who have "stopped smoking and
switched to IQOS" is defined as: for markets where IQOS is the only
heat-not-burn product, daily individual consumption of PMI HTUs
represents the totality of their daily tobacco consumption in the
past seven days; for markets where IQOS is one among other
heat-not-burn products, daily individual consumption of HTUs
represents the totality of their daily tobacco consumption in the
past seven days, of which at least 70% are PMI HTUs.
IQOS in the United States
- On April 30, 2019, the U.S. Food and Drug Administration (FDA)
announced that the marketing of a version of IQOS, PMI's
heat-not-burn product, together with its heated tobacco units (the
term PMI uses to refer to heated tobacco consumables), is
appropriate for the protection of public health and authorized it
for sale in the U.S. The FDA’s decision follows its comprehensive
assessment of PMI’s premarket tobacco product applications (PMTAs)
submitted to the Agency in 2017. In the third quarter of 2019, PMI
brought a version of its IQOS Platform 1 device and three variants
of its heated tobacco units to the U.S. through its license with
Altria Group, Inc., whose subsidiary, Philip Morris USA Inc., is
responsible for marketing the product and complying with the
provisions set forth in the FDA's marketing order. On March 30,
2020, PMI submitted a supplemental PMTA for the IQOS 3 tobacco
heating device with the FDA.
- On July 7, 2020, the FDA authorized the marketing of a version
of IQOS, together with its heated tobacco units, as a modified risk
tobacco product (MRTP). In doing so, the agency found that an IQOS
exposure modification order is appropriate to promote the public
health. The decision follows a review of the extensive scientific
evidence package PMI submitted to the FDA in December 2016 to
support its MRTP applications.
- Shipment volume of heated tobacco units to the U.S. is included
in the heated tobacco unit shipment volume of the Latin America
& Canada segment. Revenues from shipments of Platform 1
devices, heated tobacco units and accessories to Altria Group, Inc.
for sale under license in the U.S. are included in Net Revenues of
the Latin America & Canada segment.
Appendix 1
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Key Market Data
Quarters Ended June
30,
Market
Total Market, bio
units
PMI Shipments, bio
units
PMI Market Share, %
(1)
Total
Cigarette
HTU
Total
HTU
2020
2019
% Change
2020
2019
% Change
2020
2019
% Change
2020
2019
% Change
2020
2019
pp Change
2020
2019
pp Change
Total
609.2
700.3
(13.0
)
170.1
198.9
(14.5
)
151.4
183.8
(17.6
)
18.7
15.1
24.3
28.0
28.1
(0.1
)
3.0
2.1
0.9
European Union
France
9.8
9.8
0.7
4.5
4.5
0.3
4.4
4.5
(0.4
)
—
—
—
44.9
44.7
0.2
0.5
0.2
0.3
Germany
20.0
18.9
5.9
7.8
7.3
6.9
7.4
7.1
4.4
0.4
0.2
89.4
38.9
38.5
0.4
2.0
1.1
0.9
Italy
16.3
17.2
(4.8
)
7.9
9.3
(15.5
)
6.8
8.5
(20.1
)
1.1
0.8
32.3
52.1
51.7
0.4
7.7
4.6
3.1
Poland
10.6
12.3
(13.6
)
4.2
5.0
(16.8
)
3.7
4.8
(22.2
)
0.5
0.3
85.9
39.3
40.8
(1.5
)
4.4
2.0
2.4
Spain
9.6
11.6
(17.2
)
2.7
3.9
(29.5
)
2.7
3.8
(29.7
)
0.1
0.1
(23.9
)
31.3
31.2
0.1
1.0
0.7
0.3
Eastern Europe
Russia
57.2
59.6
(4.1
)
17.9
17.7
0.8
14.3
15.9
(10.1
)
3.6
1.8
95.5
32.4
29.6
2.8
5.9
2.9
3.0
Middle East & Africa
Saudi Arabia
6.0
5.4
12.0
2.7
0.8
+100
2.7
0.8
+100
—
—
—
38.6
38.9
(0.3
)
0.2
—
0.2
Turkey
29.9
32.1
(6.8
)
11.7
12.5
(6.6
)
11.7
12.5
(6.6
)
—
—
—
38.9
38.9
—
—
—
—
South & Southeast Asia
Indonesia
64.0
77.6
(17.5
)
18.0
24.9
(27.7
)
18.0
24.9
(27.7
)
—
—
—
28.2
32.2
(4.0
)
—
—
—
Philippines
14.0
18.6
(24.6
)
9.7
13.1
(25.7
)
9.7
13.1
(25.7
)
—
—
—
69.5
70.6
(1.1
)
—
—
—
East Asia & Australia
Australia
2.6
2.9
(11.2
)
0.8
0.9
(12.0
)
0.8
0.9
(12.0
)
—
—
—
30.8
31.0
(0.2
)
—
—
—
Japan
35.4
40.6
(12.7
)
14.1
15.1
(6.4
)
6.3
8.0
(20.9
)
7.8
7.1
10.0
36.5
34.0
2.5
20.0
16.6
3.4
Korea
18.4
17.7
3.9
3.8
4.1
(6.2
)
2.6
2.8
(6.1
)
1.2
1.3
(6.4
)
21.1
23.1
(2.0
)
6.6
7.3
(0.7
)
Latin America & Canada
Argentina
7.3
7.8
(7.4
)
4.8
5.6
(15.2
)
4.8
5.6
(15.2
)
—
—
—
65.4
71.8
(6.4
)
—
—
—
Mexico
7.6
10.0
(24.4
)
4.7
7.0
(32.5
)
4.7
7.0
(32.7
)
—
—
—
62.1
69.5
(7.4
)
0.2
—
0.2
(1) Market share estimates are calculated
using IMS data
Note: % change for Total Market and PMI
shipments is computed based on millions of units; PMI Market Share
estimates for previous periods are restated to reflect RBH
deconsolidation and exclude RBH-owned brands.
Appendix 2
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Key Market Data
Six Months Ended June
30,
Market
Total Market, bio
units
PMI Shipments, bio
units
PMI Market Share, %
(1)
Total
Cigarette
HTU
Total
HTU
2020
2019
% Change
2020
2019
% Change
2020
2019
% Change
2020
2019
% Change
2020
2019
pp Change
2020
2019
pp Change
Total
1,224.1
1,325.0
(7.6
)
343.8
374.7
(8.2
)
308.4
348.1
(11.4
)
35.4
26.6
33.4
27.7
28.1
(0.4
)
2.9
2.1
0.8
European Union
France
18.2
18.9
(3.9
)
8.5
8.6
(1.3
)
8.4
8.6
(2.1
)
0.1
—
—
44.7
44.9
(0.2
)
0.4
0.2
0.2
Germany
36.0
34.3
4.9
14.5
13.4
8.7
13.7
13.0
5.7
0.8
0.4
+100
40.4
38.9
1.5
2.2
1.1
1.1
Italy
32.0
32.8
(2.2
)
17.1
17.0
0.2
14.6
15.6
(6.9
)
2.5
1.4
78.6
52.0
51.4
0.6
7.5
4.2
3.3
Poland
21.4
22.9
(6.4
)
8.5
9.2
(8.0
)
7.6
8.8
(14.0
)
0.9
0.4
+100
39.7
40.4
(0.7
)
4.3
1.9
2.4
Spain
20.0
21.8
(8.2
)
6.4
7.5
(14.4
)
6.2
7.3
(15.5
)
0.2
0.1
39.8
31.1
31.4
(0.3
)
1.0
0.6
0.4
Eastern Europe
Russia
104.1
106.3
(2.1
)
32.9
29.9
10.3
26.7
27.2
(1.8
)
6.2
2.7
+100
32.4
29.1
3.3
6.2
3.0
3.2
Middle East & Africa
Saudi Arabia
10.3
10.6
(2.9
)
3.8
4.7
(19.0
)
3.8
4.7
(19.6
)
—
—
—
39.4
40.3
(0.9
)
0.1
—
0.1
Turkey
55.9
61.6
(9.3
)
21.8
26.4
(17.4
)
21.8
26.4
(17.4
)
—
—
—
38.9
42.9
(4.0
)
—
—
—
South & Southeast Asia
Indonesia
131.4
145.2
(9.5
)
38.5
47.1
(18.2
)
38.5
47.1
(18.2
)
—
—
—
29.3
32.4
(3.1
)
—
—
—
Philippines
29.3
35.3
(17.1
)
20.5
24.9
(17.7
)
20.5
24.9
(17.7
)
—
—
—
69.9
70.4
(0.5
)
—
—
—
East Asia & Australia
Australia
5.1
6.0
(15.3
)
1.5
1.7
(9.8
)
1.5
1.7
(9.8
)
—
—
—
29.4
27.6
1.8
—
—
—
Japan
70.9
78.2
(9.4
)
26.9
27.2
(1.0
)
13.1
14.4
(9.1
)
13.8
12.7
8.1
36.4
34.2
2.2
19.6
16.8
2.8
Korea
34.6
33.3
3.8
7.4
7.7
(4.6
)
5.1
5.3
(3.8
)
2.3
2.4
(6.3
)
21.4
23.2
(1.8
)
6.6
7.3
(0.7
)
Latin America & Canada
Argentina
15.3
16.3
(6.3
)
10.0
11.7
(14.2
)
10.0
11.7
(14.2
)
—
—
—
65.7
72.1
(6.4
)
—
—
—
Mexico
14.2
17.4
(18.4
)
8.8
11.7
(25.0
)
8.7
11.7
(25.2
)
—
—
—
61.6
67.0
(5.4
)
0.2
—
0.2
(1) Market share estimates are calculated
using IMS data
Note: % change for Total Market and PMI
shipments is computed based on millions of units; PMI Market Share
estimates for previous periods are restated to reflect RBH
deconsolidation and exclude RBH-owned brands.
Appendix 3
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP
Measures
Shipment Volume Adjusted for
the Impact of RBH Deconsolidation
(in million units) /
(Unaudited)
Total PMI
Quarters Ended June
30,
Six Months Ended June
30,
2020
2019
% Change
2020
2019
% Change
Total Shipment Volume
170,067
198,855
(14.5
)%
343,812
374,650
(8.2
)%
Shipment Volume for RBH-owned brands
(1)
—
(1,008)
(2)
Total Shipment Volume
170,067
198,855
(14.5
)%
343,812
373,642
(3)
(8.0
)%
Total Cigarette Shipment Volume
151,359
183,799
(17.6
)%
308,377
348,096
(11.4
)%
Shipment Volume for RBH-owned brands
(1)
—
(1,008)
(2)
Total Cigarette Shipment Volume
151,359
183,799
(17.6
)%
308,377
347,088
(3)
(11.2
)%
Total HTU Shipment Volume
18,708
15,056
24.3
%
35,435
26,554
33.4
%
Latin America & Canada
Total Shipment Volume
14,874
18,531
(19.7
)%
30,045
36,165
(16.9
)%
Shipment Volume for RBH-owned brands
—
(995)
(2)
Total Shipment Volume
14,874
18,531
(19.7
)%
30,045
35,170
(3)
(14.6
)%
(1) Includes Duty Free sales in Canada
(2) Represents volume for RBH-owned brands
from January 1, 2019 through March 21, 2019
(3) Pro forma
Note: Shipment Volume includes Cigarettes
and Heated Tobacco Units; following the deconsolidation of RBH, we
report the volume of brands sold by RBH for which other PMI
subsidiaries are the trademark owners
Schedule 1
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Diluted Earnings Per Share
(EPS)
($ in millions, except per share
data) / (Unaudited)
Quarters Ended
Diluted EPS
Six Months Ended
June 30,
June 30,
$
1.25
2020 Diluted Earnings Per
Share (1)
$
2.42
$
1.49
2019 Diluted Earnings Per
Share (1)
$
2.36
$
(0.24
)
Change
$
0.06
(16.1
)%
% Change
2.5
%
Reconciliation:
$
1.49
2019 Diluted Earnings Per
Share (1)
$
2.36
0.01
2019 Asset impairment and exit
costs
0.02
—
2019 Canadian tobacco
litigation-related expense
0.09
—
2019 Loss on deconsolidation of
RBH
0.12
(0.04
)
2019 Tax items
(0.04
)
(0.04
)
2020 Asset impairment and exit
costs
(0.04
)
—
2020 Fair value adjustment for
equity security investments
(0.04
)
—
2020 Tax items
—
(0.06
)
Currency
(0.19
)
(0.01
)
Interest
—
0.03
Change in tax rate
0.02
(0.13
)
Operations (2)
0.12
$
1.25
2020 Diluted Earnings Per
Share (1)
$
2.42
(1) Basic and diluted EPS were calculated
using the following (in millions):
Quarters Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
$ 1,947
$ 2,319
Net Earnings attributable to
PMI
$ 3,773
$ 3,673
5
5
Less: Distributed and
undistributed earnings attributable to share-based payment
awards
10
8
$ 1,942
$ 2,314
Net Earnings for basic and
diluted EPS
$ 3,763
$ 3,665
1,558
1,556
Weighted-average shares for basic
EPS
1,557
1,556
—
—
Plus Contingently Issuable
Performance Stock Units
—
—
1,558
1,556
Weighted-average shares for
diluted EPS
1,557
1,556
(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 June
30,
Six Months Ended June
30,
2020
2019
% Change
2020
2019
% Change
$ 1.25
$ 1.49
(16.1
)%
Reported Diluted EPS
$ 2.42
$ 2.36
2.5
%
(0.06)
Less: Currency
(0.19)
$ 1.31
$ 1.49
(12.1
)%
Reported Diluted EPS,
excluding Currency
$ 2.61
$ 2.36
10.6
%
Quarters Ended June
30,
Six Months Ended June
30,
Year Ended
2020
2019
% Change
2020
2019
% Change
2019
$ 1.25
$ 1.49
(16.1
)%
Reported Diluted EPS
$ 2.42
$ 2.36
2.5
%
$ 4.61
0.04
0.01
Asset impairment and exit
costs
0.04
0.02
0.23
—
—
Canadian tobacco
litigation-related expense
—
0.09
0.09
—
—
Loss on deconsolidation of
RBH
—
0.12
0.12
—
—
Russia excise and VAT audit
charge
—
—
0.20
—
—
Fair value adjustment for equity
security investments
0.04
—
(0.02)
—
(0.04)
Tax items
—
(0.04)
(0.04)
$ 1.29
$ 1.46
(11.6
)%
Adjusted Diluted EPS
$ 2.50
$ 2.55
(2.0
)%
$ 5.19
(0.06)
Less: Currency
(0.19)
$ 1.35
$ 1.46
(7.5
)%
Adjusted Diluted EPS,
excluding Currency
$ 2.69
$ 2.55
5.5
%
Schedule 3
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP
Measures
Reconciliation of Reported
Diluted EPS to Pro Forma Adjusted Diluted EPS
(Unaudited)
Quarter Ended
Quarter Ended
Six Months Ended
Quarter Ended
Nine Months Ended
Quarter Ended
Year Ended
March 31,
June 30,
June 30,
September 30,
September 30,
December 31,
December 31,
2019
2019
2019
2019
2019
2019
2019
Reported Diluted EPS
$ 0.87
$ 1.49
$ 2.36
$ 1.22
$ 3.57
$ 1.04
$ 4.61
Asset impairment and exit costs
0.01
0.01
0.02
0.01
0.03
0.20
0.23
Canadian tobacco litigation-related
expense
0.09
—
0.09
—
0.09
—
0.09
Loss on deconsolidation of RBH
0.12
—
0.12
—
0.12
—
0.12
Russia excise and VAT audit charge
—
—
—
0.20
0.20
—
0.20
Fair value adjustment for equity security
investments
—
—
—
—
—
(0.02)
(0.02)
Tax items
—
(0.04)
(0.04)
—
(0.04)
—
(0.04)
Adjusted Diluted EPS
$ 1.09
$ 1.46
$ 2.55
$ 1.43
$ 3.97
$ 1.22
$ 5.19
Net earnings attributable to RBH
(0.06)
(1)
—
(0.06)
(1)
—
(0.06)
(1)
—
(0.06)
(1)
Pro Forma Adjusted Diluted EPS
$ 1.03
$ 1.46
$ 2.49
$ 1.43
$ 3.91
$ 1.22
$ 5.13
(1) Represents the impact of net earnings
attributable to RBH from January 1, 2019 through March 21, 2019
Note: EPS is computed independently for
each of the periods presented. Accordingly, the sum of the
quarterly EPS amounts may not agree to the total for the year.
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)
Net Revenues
Currency
Net Revenues excluding
Currency
Acquisitions
Net Revenues excluding
Currency & Acquisitions
Quarters Ended June
30,
Net Revenues
Total
Excluding Currency
Excluding Currency &
Acquisitions
2020
Combustible Products
2019
% Change
$ 1,945
$ (75)
$ 2,020
$ —
$ 2,020
European Union
$ 2,149
(9.5)%
(6.0)%
(6.0)%
522
(52)
575
—
575
Eastern Europe
640
(18.3)%
(10.1)%
(10.1)%
696
(16)
712
—
712
Middle East & Africa
918
(24.2)%
(22.4)%
(22.4)%
889
(46)
935
—
935
South & Southeast Asia
1,248
(28.8)%
(25.1)%
(25.1)%
630
(15)
645
—
645
East Asia & Australia
756
(16.7)%
(14.7)%
(14.7)%
363
(57)
420
—
420
Latin America & Canada
522
(30.5)%
(19.6)%
(19.6)%
$ 5,045
$ (262)
$ 5,307
$ —
$ 5,307
Total Combustible
$ 6,233
(19.1)%
(14.9)%
(14.9)%
2020
Reduced-Risk Products
2019
% Change
$ 530
$ (25)
$ 555
$ —
$ 555
European Union
$ 428
23.9%
29.7%
29.7%
261
(33)
293
—
293
Eastern Europe
182
42.9%
60.8%
60.8%
8
—
8
—
8
Middle East & Africa
86
(90.6)%
(90.7)%
(90.7)%
—
—
—
—
—
South & Southeast Asia
—
—%
—%
—%
802
3
799
—
799
East Asia & Australia
765
4.9%
4.5%
4.5%
5
(1)
6
—
6
Latin America & Canada(1)
5
7.9%
24.4%
24.4%
$ 1,606
$ (55)
$ 1,661
$ —
$ 1,661
Total RRPs
$ 1,466
9.5%
13.3%
13.3%
2020
PMI
2019
% Change
$ 2,475
$ (100)
$ 2,575
$ —
$ 2,575
European Union
$ 2,577
(4.0)%
(0.1)%
(0.1)%
783
(85)
868
—
868
Eastern Europe
822
(4.7)%
5.6%
5.6%
704
(16)
720
—
720
Middle East & Africa
1,004
(29.9)%
(28.3)%
(28.3)%
889
(46)
935
—
935
South & Southeast Asia
1,248
(28.8)%
(25.1)%
(25.1)%
1,432
(12)
1,444
—
1,444
East Asia & Australia
1,521
(5.9)%
(5.1)%
(5.1)%
368
(58)
426
—
426
Latin America & Canada
527
(30.2)%
(19.2)%
(19.2)%
$ 6,651
$ (317)
$ 6,968
$ —
$ 6,968
Total PMI
$ 7,699
(13.6)%
(9.5)%
(9.5)%
(1) Net Revenues include revenues from
shipments of Platform 1 devices, heated tobacco units and
accessories to Altria Group, Inc., commencing in the third quarter
of 2019, for sale under license in the United States.
Note: Sum of product categories or Regions
might not foot to Total PMI due to roundings. “-“ indicates amounts
between -$0.5 million and +$0.5 million.
Schedule 5
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP
Measures
Net Revenues by Product
Category and Adjustments of Net Revenues for the Impact of Currency
and Acquisitions
($ in millions) / (Unaudited)
Net Revenues
Currency
Net Revenues excluding
Currency
Acquisitions
Net Revenues excluding
Currency & Acquisitions
Six Months Ended June
30,
Net Revenues
Total
Excluding Currency
Excluding Currency &
Acquisitions
2020
Combustible Products
2019
% Change
$ 3,855
$ (128)
$ 3,983
$ —
$ 3,983
European Union
$ 3,961
(2.7)%
0.6%
0.6%
1,045
(56)
1,101
—
1,101
Eastern Europe
1,110
(5.9)%
(0.8)%
(0.8)%
1,528
(18)
1,547
—
1,547
Middle East & Africa
1,746
(12.5)%
(11.4)%
(11.4)%
2,140
(27)
2,167
—
2,167
South & Southeast Asia
2,361
(9.4)%
(8.2)%
(8.2)%
1,272
(22)
1,294
—
1,294
East Asia & Australia
1,394
(8.8)%
(7.2)%
(7.2)%
803
(75)
878
—
878
Latin America & Canada
1,168
(31.3)%
(24.9)%
(24.9)%
$ 10,643
$ (327)
$ 10,970
$ —
$ 10,970
Total Combustible
$ 11,741
(9.4)%
(6.6)%
(6.6)%
2020
Reduced-Risk Products
2019
% Change
$ 1,155
$ (42)
$ 1,197
$ —
$ 1,197
European Union
$ 775
49.0%
54.4%
54.4%
526
(23)
549
—
549
Eastern Europe
291
81.0%
88.9%
88.9%
52
—
51
—
51
Middle East & Africa
185
(72.0)%
(72.2)%
(72.2)%
—
—
—
—
—
South & Southeast Asia
—
—%
—%
—%
1,415
1
1,414
—
1,414
East Asia & Australia
1,448
(2.3)%
(2.3)%
(2.3)%
13
(1)
14
—
14
Latin America & Canada(1)
11
24.4%
33.5%
33.5%
$ 3,161
$ (64)
$ 3,225
$ —
$ 3,225
Total RRPs
$ 2,709
16.7%
19.1%
19.1%
2020
PMI
2019
% Change
$ 5,010
$ (170)
$ 5,180
$ —
$ 5,180
European Union
$ 4,736
5.8%
9.4%
9.4%
1,571
(79)
1,650
—
1,650
Eastern Europe
1,401
12.1%
17.8%
17.8%
1,580
(18)
1,598
—
1,598
Middle East & Africa
1,931
(18.2)%
(17.2)%
(17.2)%
2,140
(27)
2,167
—
2,167
South & Southeast Asia
2,361
(9.4)%
(8.2)%
(8.2)%
2,687
(21)
2,708
—
2,708
East Asia & Australia
2,842
(5.5)%
(4.7)%
(4.7)%
816
(76)
892
—
892
Latin America & Canada
1,179
(30.8)%
(24.3)%
(24.3)%
$ 13,804
$ (391)
$ 14,195
$ —
$ 14,195
Total PMI
$ 14,450
(4.5)%
(1.8)%
(1.8)%
(1) Net Revenues include revenues from
shipments of Platform 1 devices, heated tobacco units and
accessories to Altria Group, Inc., commencing in the third quarter
of 2019, for sale under license in the United States.
Note: Sum of product categories or Regions
might not foot to Total PMI due to roundings. “-“ indicates amounts
between -$0.5 million and +$0.5 million.
Schedule 6
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP
Measures
Adjustments of Operating
Income for the Impact of Currency and Acquisitions
($ in millions) / (Unaudited)
Operating Income
Currency
Operating Income excluding
Currency
Acquisitions
Operating Income excluding
Currency & Acquisitions
Operating Income
Total
Excluding Currency
Excluding Currency &
Acquisitions
2020
Quarters Ended June
30,
2019
% Change
$ 1,178
(1)
$ (65)
$ 1,243
$ —
$ 1,243
European Union
$ 1,195
(1.4)%
4.0%
4.0%
266
(1)
(11)
277
—
277
Eastern Europe
256
3.9%
8.2%
8.2%
237
(1)
5
232
—
232
Middle East & Africa
441
(46.3)%
(47.4)%
(47.4)%
289
(1)
(16)
305
—
305
South & Southeast Asia
492
(41.3)%
(38.0)%
(38.0)%
669
(1)
(11)
680
—
680
East Asia & Australia
642
4.2%
5.9%
5.9%
92
(1)
(6)
98
—
98
Latin America & Canada
161
(2)
(42.9)%
(39.1)%
(39.1)%
$ 2,731
$ (104)
$ 2,835
$ —
$ 2,835
Total PMI
$ 3,187
(14.3)%
(11.0)%
(11.0)%
2020
Six Months Ended June
30,
2019
% Change
$ 2,336
(1)
$ (130)
$ 2,466
$ —
$ 2,466
European Union
$ 2,091
11.7%
17.9%
17.9%
365
(1)
(103)
468
—
468
Eastern Europe
385
(5.2)%
21.6%
21.6%
558
(1)
(14)
572
—
572
Middle East & Africa
785
(28.9)%
(27.1)%
(27.1)%
888
(1)
3
885
—
885
South & Southeast Asia
932
(3)
(4.7)%
(5.0)%
(5.0)%
1,155
(1)
(15)
1,170
—
1,170
East Asia & Australia
1,069
8.0%
9.4%
9.4%
218
(1)
(41)
259
—
259
Latin America & Canada
(25)
(4)
+100%
+100%
+100%
$ 5,520
$ (300)
$ 5,820
$ —
$ 5,820
Total PMI
$ 5,237
5.4%
11.1%
11.1%
(1) Includes asset impairment and exit
costs ($71 million): EU ($27 million), EE ($7 million), ME&A
($9 million), S&SA ($11 million), EA&A ($13 million) and
LA&C ($4 million).
(2) Includes asset impairment and exit
costs ($23 million)
(3) Includes asset impairment and exit
costs ($20 million)
(4) Includes asset impairment and exit
costs ($23 million), the Canadian tobacco litigation-related
expense ($194 million) and the loss on deconsolidation of RBH ($239
million)
Schedule 7
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP
Measures
Reconciliation of Operating
Income to Adjusted Operating Income, excluding Currency and
Acquisitions
($ in millions) / (Unaudited)
Operating Income
Asset Impairment & Exit
Costs and Others
Adjusted Operating
Income
Currency
Adjusted Operating
Income excluding Currency
Acqui- sitions
Adjusted Operating Income
excluding Currency & Acqui- sitions
Operating Income
Asset Impairment & Exit
Costs and Others
Adjusted Operating
Income
Total
Excluding Currency
Excluding Currency &
Acqui- sitions
2020
Quarters Ended June
30,
2019
% Change
$ 1,178
$ (27)
(1)
$ 1,205
$ (65)
$ 1,270
$ —
$ 1,270
European Union
$ 1,195
$ —
$ 1,195
0.8%
6.3%
6.3%
266
(7)
(1)
273
(11)
284
—
284
Eastern Europe
256
—
256
6.6%
10.9%
10.9%
237
(9)
(1)
246
5
241
—
241
Middle East & Africa
441
—
441
(44.2)%
(45.4)%
(45.4)%
289
(11)
(1)
300
(16)
316
—
316
South & Southeast Asia
492
—
492
(39.0)%
(35.8)%
(35.8)%
669
(13)
(1)
682
(11)
693
—
693
East Asia & Australia
642
—
642
6.2%
7.9%
7.9%
92
(4)
(1)
96
(6)
102
—
102
Latin America & Canada
161
(23)
(1)
184
(47.8)%
(44.6)%
(44.6)%
$ 2,731
$ (71)
$ 2,802
$ (104)
$ 2,906
$ —
$ 2,906
Total PMI
$ 3,187
$ (23)
$ 3,210
(12.7)%
(9.5)%
(9.5)%
2020
Six Months Ended June
30,
2019
% Change
$ 2,336
$ (27)
(1)
$ 2,363
$ (130)
$ 2,493
$ —
$ 2,493
European Union
$ 2,091
$ —
$ 2,091
13.0%
19.2%
19.2%
365
(7)
(1)
372
(103)
475
—
475
Eastern Europe
385
—
385
(3.4)%
23.4%
23.4%
558
(9)
(1)
567
(14)
581
—
581
Middle East & Africa
785
—
785
(27.8)%
(26.0)%
(26.0)%
888
(11)
(1)
899
3
896
—
896
South & Southeast Asia
932
(20)
(1)
952
(5.6)%
(5.9)%
(5.9)%
1,155
(13)
(1)
1,168
(15)
1,183
—
1,183
East Asia & Australia
1,069
—
1,069
9.3%
10.7%
10.7%
218
(4)
(1)
222
(41)
263
—
263
Latin America & Canada
(25)
(456)
(2)
431
(48.5)%
(39.0)%
(39.0)%
$ 5,520
$ (71)
$ 5,591
$ (300)
$ 5,891
$ —
$ 5,891
Total PMI
$ 5,237
$ (476)
$ 5,713
(2.1)%
3.1%
3.1%
(1) Represents asset impairment and exit
costs
(2) Includes asset impairment and exit
costs ($23 million), the Canadian tobacco litigation-related
expense ($194 million) and the loss on deconsolidation of RBH ($239
million)
Schedule 8
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP
Measures
Reconciliation of Adjusted
Operating Income Margin, excluding Currency and
Acquisitions
($ in millions) / (Unaudited)
Adjusted Operating Income
(1)
Net Revenues
Adjusted Operating Income
Margin
Adjusted Operating Income
excluding Currency (1)
Net Revenues excluding
Currency (2)
Adjusted Operating Income
Margin excluding Currency
Adjusted Operating Income
excluding Currency & Acqui- sitions (1)
Net Revenues excluding
Currency & Acqui- sitions (2)
Adjusted Operating Income
Margin excluding Currency & Acqui- sitions
Adjusted Operating Income
(1)
Net Revenues
Adjusted Operating Income
Margin
Adjusted Operating Income
Margin
Adjusted Operating Income
Margin excluding Currency
Adjusted Operating Income
Margin excluding Currency & Acqui- sitions
2020
Quarters Ended June
30,
2019
% Points Change
$ 1,205
$ 2,475
48.7%
$ 1,270
$ 2,575
49.3%
$ 1,270
$ 2,575
49.3%
European Union
$ 1,195
$ 2,577
46.4%
2.3
2.9
2.9
273
783
34.9%
284
868
32.7%
284
868
32.7%
Eastern Europe
256
822
31.1%
3.8
1.6
1.6
246
704
34.9%
241
720
33.5%
241
720
33.5%
Middle East & Africa
441
1,004
43.9%
(9.0)
(10.4)
(10.4)
300
889
33.7%
316
935
33.8%
316
935
33.8%
South & Southeast Asia
492
1,248
39.4%
(5.7)
(5.6)
(5.6)
682
1,432
47.6%
693
1,444
48.0%
693
1,444
48.0%
East Asia & Australia
642
1,521
42.2%
5.4
5.8
5.8
96
368
26.1%
102
426
23.9%
102
426
23.9%
Latin America & Canada
184
527
34.9%
(8.8)
(11.0)
(11.0)
$ 2,802
$ 6,651
42.1%
$ 2,906
$ 6,968
41.7%
$ 2,906
$ 6,968
41.7%
Total PMI
$ 3,210
$ 7,699
41.7%
0.4
—
—
2020
Six Months Ended June
30,
2019
% Points Change
$ 2,363
$ 5,010
47.2%
$ 2,493
$ 5,180
48.1%
$ 2,493
$ 5,180
48.1%
European Union
$ 2,091
$ 4,736
44.2%
3.0
3.9
3.9
372
1,571
23.7%
475
1,650
28.8%
475
1,650
28.8%
Eastern Europe
385
1,401
27.5%
(3.8)
1.3
1.3
567
1,580
35.9%
581
1,598
36.4%
581
1,598
36.4%
Middle East & Africa
785
1,931
40.7%
(4.8)
(4.3)
(4.3)
899
2,140
42.0%
896
2,167
41.3%
896
2,167
41.3%
South & Southeast Asia
952
2,361
40.3%
1.7
1.0
1.0
1,168
2,687
43.5%
1,183
2,708
43.7%
1,183
2,708
43.7%
East Asia & Australia
1,069
2,842
37.6%
5.9
6.1
6.1
222
816
27.2%
263
892
29.5%
263
892
29.5%
Latin America & Canada
431
1,179
36.6%
(9.4)
(7.1)
(7.1)
$ 5,591
$ 13,804
40.5%
$ 5,891
$ 14,195
41.5%
$ 5,891
$ 14,195
41.5%
Total PMI
$ 5,713
$ 14,450
39.5%
1.0
2.0
2.0
(1) For the calculation of Adjusted
Operating Income and Adjusted Operating Income excluding currency
and acquisitions refer to Schedule 7
(2) For the calculation of Net Revenues
excluding currency and acquisitions refer to Schedules 4 and 5
Schedule 9
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP
Measures
Adjustments for the Impact of
RBH, excluding Currency
($ in millions, except per share
data) / (Unaudited)
Quarters Ended June
30,
Six Months Ended June
30,
2020
2019
% Change
2020
2019
% Change
Net Revenues
$ 6,651
$ 7,699
(13.6
)%
$ 13,804
$ 14,450
(4.5
)%
Net Revenues attributable to RBH
—
(181)
(1)
Net Revenues
$ 6,651
$ 7,699
(13.6
)%
$ 13,804
$ 14,269
(2)
(3.3
)%
Less: Currency
(317)
(392)
Net Revenues, ex. currency
$ 6,968
$ 7,699
(9.5
)%
$ 14,196
$ 14,269
(2)
(0.5
)%
Adjusted Operating Income (3)
$ 2,802
$ 3,210
(12.7
)%
$ 5,591
$ 5,713
(2.1
)%
Operating Income attributable to RBH
—
(126)
(1)
Adjusted Operating Income
$ 2,802
$ 3,210
(12.7
)%
$ 5,591
$ 5,587
(2)
0.1
%
Less: Currency
(104)
(299)
Adjusted Operating Income, ex.
currency
$ 2,906
$ 3,210
(9.5
)%
$ 5,890
$ 5,587
(2)
5.4
%
Adjusted OI Margin
42.1%
41.7%
0.4
40.5%
39.5%
1.0
Adjusted OI Margin attributable to RBH
—
(0.3)
(1)
Adjusted OI Margin
42.1%
41.7%
0.4
40.5%
39.2%
(2)
1.3
Less: Currency
—
—
Adjusted OI Margin, ex.
currency
41.7%
41.7%
—
41.5%
39.2%
(2)
2.3
Adjusted Diluted EPS (4)
$ 1.29
$ 1.46
(11.6
)%
$ 2.50
$ 2.55
(2.0
)%
Net earnings attributable to RBH
—
(0.06)
(1)
Adjusted Diluted EPS
$ 1.29
$ 1.46
(11.6
)%
$ 2.50
$ 2.49
(2)
0.4
%
Less: Currency
(0.06)
(0.19)
Adjusted Diluted EPS, ex.
currency
$ 1.35
$ 1.46
(7.5
)%
$ 2.69
$ 2.49
(2)
8.0
%
(1) Represents the impact attributable to
RBH from January 1, 2019 through March 21, 2019
(2) Pro forma
(3) For the calculation of Adjusted
Operating Income, see Schedule 7
(4) For the calculation, see Schedule
2
Note: Financials attributable to RBH include Duty Free sales in
Canada
Schedule 10
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP
Measures
Adjustments for the Impact of
RBH, excluding Currency
($ in millions) / (Unaudited)
Latin America & Canada
Quarters Ended June
30,
Six Months Ended June
30,
2020
2019
% Change
2020
2019
% Change
Net Revenues
$ 368
$ 527
(30.2)%
$ 816
$ 1,179
(30.8)%
Net Revenues attributable to RBH
—
(179)
(1)
Net Revenues
$ 368
$ 527
(30.2)%
$ 816
$ 1,000
(2)
(18.4)%
Less: Currency
(58)
(77)
Net Revenues, ex. currency
$ 426
$ 527
(19.2)%
$ 893
$ 1,000
(2)
(10.7)%
Operating Income
$ 92
$ 161
(42.9)%
$ 218
$ (25)
+100%
Less:
Asset impairment and exit costs
(4)
(23)
(4)
(23)
Canadian tobacco litigation-related
expense
—
—
—
(194)
Loss on deconsolidation of RBH
—
—
—
(239)
Adjusted Operating Income
$ 96
$ 184
(47.8)%
$ 222
$ 431
(48.5)%
Operating Income attributable to RBH
—
(125)
(1)
Adjusted Operating Income
$ 96
$ 184
(47.8)%
$ 222
$ 306
(2)
(27.5)%
Less: Currency
(6)
(39)
Adjusted Operating Income, ex.
currency
$ 102
$ 184
(44.6)%
$ 261
$ 306
(2)
(14.7)%
Adjusted OI Margin
26.1%
34.9%
(8.8)
27.2%
36.6%
(9.4)
Adjusted OI Margin attributable to RBH
—
(6.0)
(1)
Adjusted OI Margin
26.1%
34.9%
(8.8)
27.2%
30.6%
(2)
(3.4)
Less: Currency
2.2
(2.0)
Adjusted OI Margin, ex.
currency
23.9%
34.9%
(11.0)
29.2%
30.6%
(2)
(1.4)
(1) Represents the impact attributable to
RBH from January 1, 2019 through March 21, 2019
(2) Pro forma
Schedule 11
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Condensed Statements of
Earnings
($ in millions, except per share
data) / (Unaudited)
Quarters Ended June
30,
Six Months Ended June
30,
2020
2019
Change Fav./(Unfav.)
2020
2019
Change Fav./(Unfav.)
$ 17,819
$ 19,987
(10.8)%
Revenues including Excise
Taxes
$ 36,072
$ 37,692
(4.3)%
11,168
12,288
9.1%
Excise Taxes on products
22,268
23,242
4.2%
6,651
7,699
(13.6)%
Net Revenues
13,804
14,450
(4.5)%
2,179
2,665
18.2%
Cost of sales
4,581
5,130
10.7%
4,472
5,034
(11.2)%
Gross profit
9,223
9,320
(1.0)%
1,722
1,831
6.0%
Marketing, administration and
research costs (1)
3,666
4,048
9.4%
19
16
Amortization of intangibles
37
35
2,731
3,187
(14.3)%
Operating Income
5,520
5,237
5.4%
162
150
(8.0)%
Interest expense, net
291
302
3.6%
22
20
(10.0)%
Pension and other employee
benefit costs
45
41
(9.8)%
2,547
3,017
(15.6)%
Earnings before income taxes
5,184
4,894
5.9%
528
611
13.6%
Provision for income taxes
1,124
1,035
(8.6)%
(30)
(30)
Equity investments and securities
(income)/loss, net
24
(41)
2,049
2,436
(15.9)%
Net Earnings
4,036
3,900
3.5%
102
117
Net Earnings attributable to
noncontrolling interests
263
227
$ 1,947
$ 2,319
(16.0)%
Net Earnings attributable to
PMI
$ 3,773
$ 3,673
2.7%
Per share data (2):
$ 1.25
$ 1.49
(16.1)%
Basic Earnings Per
Share
$ 2.42
$ 2.36
2.5%
$ 1.25
$ 1.49
(16.1)%
Diluted Earnings Per
Share
$ 2.42
$ 2.36
2.5%
(1) Six months ended and quarter ended
June 30, 2020 includes asset impairment and exit costs ($71
million). Six months ended June 30, 2019 includes asset impairment
and exit costs ($43 million), Canadian tobacco litigation-related
expense ($194 million) and the loss on deconsolidation of RBH ($239
million). Quarter ended June 30, 2019 includes asset impairment and
exit costs ($23 million).
(2) Net Earnings and weighted-average
shares used in the basic and diluted Earnings Per Share
computations for the quarters and for the six months ended June 30,
2020 and 2019 are shown on Schedule 1, Footnote 1.
Schedule 12
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Condensed Balance
Sheets
($ in millions, except ratios) /
(Unaudited)
June 30,
December 31,
2020
2019
Assets
Cash and cash equivalents
$
4,200
$
6,861
All other current assets
13,576
13,653
Property, plant and equipment, net
6,184
6,631
Goodwill
5,653
5,858
Other intangible assets, net
1,948
2,113
Investments in unconsolidated subsidiaries
and equity securities
4,516
4,635
Other assets
3,085
3,124
Total assets
$
39,162
$
42,875
Liabilities and Stockholders' (Deficit)
Equity
Short-term borrowings
$
281
$
338
Current portion of long-term debt
2,304
4,051
All other current liabilities
13,207
14,444
Long-term debt
27,043
26,656
Deferred income taxes
775
908
Other long-term liabilities
5,672
6,077
Total liabilities
49,282
52,474
Total PMI stockholders' deficit
(11,997
)
(11,577
)
Noncontrolling interests
1,877
1,978
Total stockholders' (deficit)
equity
(10,120
)
(9,599
)
Total liabilities and stockholders'
(deficit) equity
$
39,162
$
42,875
Schedule 13
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 June 30,
2020
Year Ended December 31,
2019
July ~ December
January ~ June
12 months
2019
2020
rolling
Net Earnings
$
3,828
$
4,036
$
7,864
$
7,728
Equity investments and securities
(income)/loss, net
(108
)
24
(84
)
(149
)
Provision for income taxes
1,258
1,124
2,382
2,293
Interest expense, net
268
291
559
570
Depreciation and amortization
492
470
962
964
Asset impairment and exit costs and Others
(1)
753
71
824
1,229
Adjusted EBITDA
$
6,491
$
6,016
$
12,507
$
12,635
June 30,
December 31,
2020
2019
Short-term borrowings
$
281
$
338
Current portion of long-term debt
2,304
4,051
Long-term debt
27,043
26,656
Total Debt
$
29,628
$
31,045
Cash and cash equivalents
4,200
6,861
Net Debt
$
25,428
$
24,184
Ratios:
Total Debt to Adjusted EBITDA
2.37
2.46
Net Debt to Adjusted EBITDA
2.03
1.91
(1) For the period July to December 2019,
Others include the Russia excise and VAT charge ($374 million). For
the year ended December 31, 2019, Others include the Canadian
tobacco litigation-related expense ($194 million), the loss on
deconsolidation of RBH ($239 million) and the Russia excise and VAT
audit charge ($374 million).
Schedule 14
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP
Measures
Reconciliation of Operating
Cash Flow to Operating Cash Flow, excluding Currency
($ in millions) / (Unaudited)
Quarters Ended June
30,
Six Months Ended June
30,
2020
2019
% Change
2020
2019
% Change
$ 1,925
$ 3,442
(44.1)%
Net cash provided by operating
activities (1)
$ 3,036
$ 4,683
(35.2)%
(198)
Less: Currency
(248)
$ 2,123
$ 3,442
(38.3)%
Net cash provided by operating
activities, excluding currency
$ 3,284
$ 4,683
(29.9)%
(1) Operating cash flow
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