INTERNATIONAL & USA PRESS INQUIRIES
Please contact David Fraser for international media inquiries
October 17, 2019
Philip Morris International Inc. Reports 2019 Third-Quarter Results
DownloadRevises, for a Tax Charge of
2019 THIRD-QUARTER & YEAR-TO-DATE HIGHLIGHTS
2019 Third-Quarter
- Reported diluted EPS of
$1.22 , down by 15.3%; also down by 15.3%, excluding currency - Adjusted diluted EPS of
$1.43 , down by 0.7%; up by 5.9% on a like-for-like basis, excluding currency - Cigarette and heated tobacco unit shipment volume down by 2.1%, reflecting cigarette shipment volume down by 5.9% and heated tobacco unit shipment volume up by 84.8%; on a like-for-like basis, cigarette and heated tobacco unit shipment volume down by 1.4%
- Market share of heated tobacco units in IQOS markets, excluding the U.S., up by 1.3 points to 5.1%
- A charge of approximately
$0.20 per share related to an excise tax and Value Added Tax (VAT) audit inRussia - Net revenues up by 1.8%; up by 7.0% on a like-for-like basis, excluding currency
- Operating income down by 11.7%; down by 11.3%, excluding currency
- Adjusted operating income up by 8.0% on a like-for-like basis, excluding currency
- Adjusted operating income margin up by 0.4 points to 41.2% on a like-for-like basis, excluding currency
- Increased the regular quarterly dividend by 2.6% to an annualized rate of
$4.68 per common share - IQOS introduced for sale in the U.S. following its marketing order authorization by the
U.S. Food and Drug Administration - New IQOS 3 DUO device introduced for sale in
Japan as part of a planned introduction in most IQOS markets by year-end 2019
2019 Nine Months Year-to-Date
- Reported diluted EPS of
$3.57 , down by 7.3%; down by 3.9%, excluding currency - Adjusted diluted EPS of
$3.97 , up by 3.1%; up by 11.7% on a like-for-like basis, excluding currency - Cigarette and heated tobacco unit shipment volume down by 0.9%, reflecting cigarette shipment volume down by 3.4% and heated tobacco unit shipment volume up by 45.7%; on a like-for-like basis, cigarette and heated tobacco shipment volume down by 0.4%
- Market share of heated tobacco units in IQOS markets, excluding the U.S., up by 1.3 points to 4.9%
- Net revenues down by 0.2%; up by 6.5% on a like-for-like basis, excluding currency
- Operating income down by 7.5%; down by 3.8%, excluding currency
- Adjusted operating income up by 11.0% on a like-for-like basis, excluding currency
- Adjusted operating income margin up by 1.6 points to 40.0% on a like-for-like basis, excluding currency
"Our third quarter results continued to reflect strong underlying business performance and include the better-than-anticipated timing of pricing and costs compared to our previously communicated assumptions for the quarter," said André Calantzopoulos, Chief Executive Officer.
"The exciting global growth of our heated tobacco products drove our resilient total shipment performance, despite certain timing issues related to our combustible portfolio. The quality of our execution across the business drove growth against each of the key metrics of net revenues, operating income, margin, as well as earnings per share -- both in the quarter and year-to-date -- on a currency-neutral, adjusted like-for-like basis."
"Importantly, IQOS was introduced in the U.S. this quarter, where it is currently the only
"While we expect our net revenue and adjusted operating income growth in the fourth quarter to be in line with our year-to-date results, our currency-neutral adjusted EPS growth is anticipated to be lower than our year-to-date performance, primarily due to an unfavorable income tax rate comparison and a high relative adjusted operating income growth contribution from markets with sizable non-controlling interests. Nevertheless, we are fully on track to deliver our target of full-year currency-neutral, like-for-like adjusted diluted EPS growth of at least 9%."
2019 FULL-YEAR FORECAST
|
Full-Year |
||||||||
2019 EPS Forecast |
2019 |
|
2018 |
Adjusted |
|||||
|
|
|
|
|
|
|
|
||
Reported Diluted EPS |
≥ |
$4.73 |
(a) |
$5.08 |
|
|
|
||
2018 Tax items |
|
— |
|
0.02 |
|
|
|
||
2019 Tax items |
|
(0.04) |
|
— |
|
|
|
||
2019 Asset impairment and exit costs |
|
0.04 |
|
— |
|
|
|
||
2019 Canadian tobacco litigation-related expense |
|
0.09 |
|
— |
|
|
|
||
2019 Loss on deconsolidation of RBH |
|
0.12 |
|
— |
|
|
|
||
2019 Russia excise and VAT audit charge |
|
0.20 |
|
— |
|
|
|
||
Adjusted Diluted EPS |
|
$5.14 |
|
$5.10 |
|
|
|
||
Net earnings attributable to RBH |
|
|
|
(0.26) |
(b) |
|
|
||
Adjusted Diluted EPS |
|
$5.14 |
|
$4.84 |
(c) |
|
|
||
Currency |
|
(0.14) |
|
|
|
|
|
||
Adjusted Diluted EPS, excluding currency |
≥ |
$5.28 |
|
$4.84 |
(c) |
≥ |
9% |
(a) Reflects the exclusion of previously anticipated net EPS of approximately $0.28 attributable to RBH from March 22, 2019 through December 31, 2019. The impact relating to the eight-day stub period was not material. |
PMI revises its full-year 2019 reported diluted EPS forecast to be at least
This revised full-year guidance reflects:
- A favorable tax item of
$0.04 per share related to a reduction in estimated U.S. federal income tax on dividend repatriation for the years 2015-2018 recorded in the second quarter of 2019; - Asset impairment and exit costs of approximately
$0.04 per share resulting from plant closures as part of global manufacturing infrastructure optimization, reflecting:$0.01 per share related toPakistan recorded in the first quarter of 2019;$0.02 per share related toColombia ($0.01 per share recorded in the second quarter of 2019 and$0.01 per share in the third quarter of 2019); and$0.01 per share anticipated in the fourth quarter of 2019; - A Canadian tobacco litigation-related expense of approximately
$0.09 per share, announced onMarch 4, 2019 , as well as the net impact of the loss on deconsolidation of PMI's Canadian subsidiaryRothmans, Benson & Hedges Inc. (RBH) under U.S. GAAP of approximately$0.12 per share, recorded in the first quarter of 2019, which is a non-cash item; - A charge of approximately
$0.20 per share related to an excise and VAT tax audit inRussia (see below for a full description); - An unfavorable currency impact, at prevailing exchange rates, of approximately
$0.14 ; - The exclusion, announced on
March 22, 2019 , of RBH’s previously anticipated net earnings from PMI’s consolidated financial statements, fromMarch 22, 2019 (the date of deconsolidation) toDecember 31, 2019 , of approximately$0.28 per share; - A full-year effective tax rate of approximately 23%, excluding discrete tax items and Loss on Deconsolidation of RBH; and
- A projected increase of at least 9%, excluding currency, versus pro forma adjusted diluted earnings per share of
$4.84 in 2018, as detailed in the attached Schedule 3 and as shown in the 2019 EPS Forecast table above.
Russia Excise & VAT Audit Charge
The Moscow Tax Inspectorate for Major Taxpayers (MTI) conducted an audit of AO Philip Morris Izhora (PM Izhora), our Russian affiliate, for the 2015-2017 financial years. On
2019 Full-Year Forecast Overview & Assumptions
This forecast assumes:
- An estimated total international industry volume decline, excluding
China and the U.S., of approximately 2.5%; - A total cigarette and heated tobacco unit shipment volume decline for PMI of approximately 1.0% to 1.5% on a like-for-like basis, compared to the previously communicated decline rate of approximately 1.0%, primarily reflecting the impact of earlier-than-initially-anticipated price increases in select markets;
- Heated tobacco unit shipment volume in line with PMI's in-market heated tobacco unit sales volume, with 2019 inventory movements in individual markets expected to offset on an aggregate basis;
- Currency-neutral net revenue growth, on a like-for-like basis, of at least 6%;
- Currency-neutral net incremental investment behind RRPs of approximately
$400 million for the full year 2019; - An increase in full-year currency-neutral, like-for-like adjusted operating income margin of approximately 150 basis points versus 2018, compared to the previously communicated increase of at least 100 basis points;
- Operating cash flow of approximately
$9.2 billion , compared to the previously communicated assumption of$9.5 billion , primarily reflecting the impact of theRussia excise and VAT audit charge described above, subject to year-end working capital requirements; - Capital expenditures of approximately
$1.0 billion , compared to the previously communicated assumption of$1.1 billion ; - An effective tax rate of approximately 23%; and
- No share repurchases.
This forecast excludes the impact of any future acquisitions, unanticipated asset impairment and exit cost charges, future changes in currency exchange rates, further developments related to the Tax Cuts and Jobs Act, further developments pertaining to the judgment in the two Québec Class Action lawsuits and the Companies’ Creditors Arrangement Act (CCAA) protection granted to RBH and any unusual events.
This forecast also excludes the contemplated proposal, previously communicated by PMI's local affiliate, to end cigarette production in
Factors described in the Forward-Looking and Cautionary Statements section of this release represent continuing risks to these projections.
Conference Call
A conference call, hosted by
CONSOLIDATED SHIPMENT VOLUME & MARKET SHARE
PMI Shipment Volume by Region |
Third-Quarter |
Nine Months Year-to-Date |
||||
(million units) |
2019 |
2018 |
Change |
2019 |
2018 |
Change |
Cigarettes |
|
|
|
|
|
|
European Union |
47,238 |
48,223 |
(2.0)% |
133,093 |
135,878 |
(2.0)% |
Eastern Europe |
27,379 |
29,801 |
(8.1)% |
74,779 |
80,294 |
(6.9)% |
Middle East & Africa |
36,994 |
37,406 |
(1.1)% |
101,957 |
100,831 |
1.1% |
South & Southeast Asia |
42,362 |
45,840 |
(7.6)% |
130,230 |
130,846 |
(0.5)% |
East Asia & Australia |
12,692 |
14,186 |
(10.5)% |
38,650 |
43,391 |
(10.9)% |
Latin America & Canada |
16,854 |
19,612 |
(14.1)% |
52,906 |
58,829 |
(10.1)% |
Total PMI |
183,519 |
195,068 |
(5.9)% |
531,615 |
550,069 |
(3.4)% |
|
|
|
|
|
|
|
Heated Tobacco Units |
|
|
|
|
|
|
European Union |
3,474 |
1,730 |
+100% |
8,810 |
3,853 |
+100% |
Eastern Europe |
3,858 |
1,152 |
+100% |
8,213 |
2,667 |
+100% |
Middle East & Africa |
588 |
1,152 |
(49.0)% |
2,061 |
2,832 |
(27.2)% |
South & Southeast Asia |
— |
— |
—% |
— |
— |
—% |
East Asia & Australia |
7,976 |
4,575 |
74.3% |
23,253 |
19,755 |
17.7% |
Latin America & Canada (1) |
89 |
43 |
+100% |
202 |
98 |
+100% |
Total PMI |
15,985 |
8,652 |
84.8% |
42,539 |
29,205 |
45.7% |
|
|
|
|
|
|
|
Cigarettes and Heated Tobacco Units |
|
|
|
|
|
|
European Union |
50,712 |
49,953 |
1.5% |
141,903 |
139,731 |
1.6% |
Eastern Europe |
31,237 |
30,953 |
0.9% |
82,992 |
82,961 |
—% |
Middle East & Africa |
37,582 |
38,558 |
(2.5)% |
104,018 |
103,663 |
0.3% |
South & Southeast Asia |
42,362 |
45,840 |
(7.6)% |
130,230 |
130,846 |
(0.5)% |
East Asia & Australia |
20,668 |
18,761 |
10.2% |
61,903 |
63,146 |
(2.0)% |
Latin America & Canada |
16,943 |
19,655 |
(13.8)% |
53,108 |
58,927 |
(9.9)% |
Total PMI |
199,504 |
203,720 |
(2.1)% |
574,154 |
579,274 |
(0.9)% |
(1) Includes shipments to Altria Group, Inc., commencing in the third quarter of 2019, for sale in the United States under license. |
Third-Quarter
PMI's total shipment volume decreased by 2.1%, or by 1.4% on a like-for-like basis, principally due to:
Middle East &Africa , reflecting lower heated tobacco unit shipment volume in PMI Duty Free and cigarette shipment volume, notably inSaudi Arabia andTurkey , partly offset byEgypt ;- South &
Southeast Asia , reflecting lower cigarette shipment volume, primarily inIndonesia ,Pakistan andthe Philippines , partly offset byThailand ; and Latin America &Canada , due to lower cigarette shipment volume, primarily inCanada (reflecting the impact of the deconsolidation of RBH) andMexico , partly offset byBrazil . On a like-for-like basis, PMI's total shipment volume in the Region decreased by 6.9%;
partly offset by
- the EU, reflecting higher heated tobacco unit shipment volume across the Region, notably in
Italy , partly offset by lower cigarette shipment volume, primarily inFrance andItaly ; Eastern Europe , reflecting higher heated tobacco unit shipment volume across the Region, notably inKazakhstan ,Russia andUkraine , partly offset by lower cigarette shipment volume, mainly inRussia andUkraine ; andEast Asia &Australia , driven by higher heated tobacco unit shipment volume inJapan (mainly reflecting a favorable comparison with the third quarter of 2018 in which IQOS consumable inventories were reduced), partly offset by lower cigarette shipment volume across the Region, notably inJapan andKorea , as well as lower heated tobacco unit shipment volume inKorea .
Impact of Inventory Movements
On a like-for-like basis, excluding the net favorable impact of estimated distributor inventory movements of approximately 4.8 billion units, PMI’s total in-market sales declined by 3.6% due to a 5.7% decline of cigarette in-market sales, partially offset by a 28.3% increase in heated tobacco unit in-market sales.
The net favorable impact of estimated distributor inventory movements of approximately 4.8 billion units was driven by 3.8 billion heated tobacco units (mainly reflecting a favorable comparison with the third quarter of 2018 in which IQOS consumable inventories in
Nine Months Year-to-Date
PMI's total shipment volume decreased by 0.9%, or by 0.4% on a like-for-like basis, due to:
- South &
Southeast Asia , reflecting lower cigarette shipment volume, primarily inIndonesia andPakistan , partly offset bythe Philippines andThailand ; East Asia &Australia , primarily reflecting lower cigarette shipment volume inJapan and lower cigarette and heated tobacco unit shipment volume inKorea , partly offset by higher heated tobacco unit shipment volume inJapan ; andLatin America &Canada , reflecting lower cigarette shipment volume, principally inArgentina ,Canada (primarily reflecting the impact of the deconsolidation of RBH),Mexico andVenezuela , partly offset byBrazil . On a like-for-like basis, PMI's total shipment volume in the Region decreased by 5.2%;
partly offset by
- the EU, reflecting higher heated tobacco unit shipment volume across the Region, notably in
Italy , and higher cigarette shipment volume inPoland , partly offset by lower cigarette shipment volume inFrance andItaly ; and Middle East &Africa , primarily reflecting higher cigarette shipment volume, notably inEgypt andSaudi Arabia , partly offset by lower cigarette and heated tobacco unit shipment volume in PMI Duty Free.
PMI's total shipment volume in
Impact of Inventory Movements
On a like-for-like basis, excluding the net favorable impact of estimated distributor inventory movements of approximately 3.6 billion units, PMI’s total in-market sales declined by 1.0% due to a 2.9% decline of cigarette in-market sales, partly offset by a 31.8% increase in heated tobacco unit in-market sales.
The net favorable impact of estimated distributor inventory movements of approximately 3.6 billion units reflected 2.9 billion heated tobacco units, driven primarily by
PMI Shipment Volume by Brand
PMI Shipment Volume by Brand |
Third-Quarter |
Nine Months Year-to-Date |
||||
(million units) |
2019 |
2018 |
Change |
2019 |
2018 |
Change |
Cigarettes |
|
|
|
|
|
|
Marlboro |
68,859 |
69,121 |
(0.4)% |
196,883 |
195,987 |
0.5% |
L&M |
24,428 |
24,329 |
0.4% |
69,765 |
66,751 |
4.5% |
Chesterfield |
15,001 |
15,821 |
(5.2)% |
43,502 |
44,622 |
(2.5)% |
Philip Morris |
13,275 |
13,505 |
(1.7)% |
36,949 |
36,687 |
0.7% |
Parliament |
10,407 |
11,588 |
(10.2)% |
29,085 |
31,041 |
(6.3)% |
Sampoerna A |
8,756 |
10,333 |
(15.3)% |
26,012 |
29,131 |
(10.7)% |
Dji Sam Soe |
8,599 |
7,578 |
13.5% |
23,089 |
21,151 |
9.2% |
Bond Street |
7,687 |
8,595 |
(10.6)% |
21,099 |
23,960 |
(11.9)% |
Lark |
4,955 |
6,058 |
(18.2)% |
15,575 |
17,604 |
(11.5)% |
Fortune |
3,215 |
4,052 |
(20.7)% |
9,702 |
11,791 |
(17.7)% |
Others |
18,337 |
24,088 |
(23.9)% |
59,954 |
71,344 |
(16.0)% |
Total Cigarettes |
183,519 |
195,068 |
(5.9)% |
531,615 |
550,069 |
(3.4)% |
Heated Tobacco Units (1) |
15,985 |
8,652 |
84.8% |
42,539 |
29,205 |
45.7% |
Total PMI |
199,504 |
203,720 |
(2.1)% |
574,154 |
579,274 |
(0.9)% |
(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. |
Third-Quarter
PMI's cigarette shipment volume of the following brands decreased:
Marlboro , mainly due to the GCC,Japan , partly reflecting the impact of out-switching to heated tobacco units, andMexico , partly offset bythe Philippines andTurkey ;- Chesterfield, mainly due to
Argentina ,Mexico ,Russia andSaudi Arabia , partly offset byBrazil ; Philip Morris , mainly due toUkraine , partly offset byIndonesia ;- Parliament, mainly due to
Japan ,Korea ,Russia andTurkey ; - Sampoerna A in
Indonesia , mainly reflecting the impact of retail price increases resulting in widened price gaps with competitors' products; Bond Street , mainly due toRussia andUkraine ;- Lark, mainly due to
Japan andTurkey ; - Fortune in
the Philippines , mainly reflecting up-trading toMarlboro resulting from narrowed price gaps with the below premium price segment; and - "Others," notably due to: the impact of the deconsolidation of RBH in
Canada ; mid-price Sampoerna U inIndonesia , partly reflecting the impact of above-inflation retail price increases; and low-price brands, notably Morven inPakistan , partly offset by Jackpot inthe Philippines .
The increase in PMI's heated tobacco unit shipment volume was mainly driven by the EU, notably
PMI's cigarette shipment volume of the following brands increased:
- L&M, mainly driven by
Egypt andThailand , partly offset byRussia andTurkey ; and - Dji Sam Soe in
Indonesia , driven by the strong performance of the DSS Magnum Mild 16 variant and the introduction of 20s and 50s variants.
International Share of Market
PMI's total international market share (excluding
- Total international cigarette market share of 26.5%, down by 0.6 points; and
- Total international heated tobacco unit market share of 2.3%, up by 0.6 points.
PMI's total international cigarette market share, defined as PMI's cigarette sales volume as a percentage of total industry cigarette sales volume, was 27.3%, down by 0.4 points, mainly reflecting: out-switching to IQOS, notably in the EU Region,
Nine Months Year-to-Date
PMI's cigarette shipment volume of the following brands decreased:
- Chesterfield, mainly due to
Argentina ,Italy ,Russia andVenezuela , partly offset byBrazil ,Mexico andPoland ; - Parliament, mainly due to
Korea andRussia , partly offset byTurkey ; - Sampoerna A in
Indonesia , reflecting the same factor as in the quarter; Bond Street , mainly due toRussia andUkraine ;- Lark, mainly due to
Japan andTurkey ; - Fortune in
the Philippines , mainly reflecting the same factor as in the quarter; and - "Others," notably due to: the impact of the deconsolidation of RBH in
Canada ; mid-price Sampoerna U inIndonesia , partly reflecting the impact of above-inflation retail price increases; and low-price brands, notably inMexico , mainly reflecting the morphing of Delicados into Chesterfield, andRussia , partly offset by Jackpot inthe Philippines .
The increase in PMI's heated tobacco unit shipment volume was mainly driven by: the EU, notably
PMI's cigarette shipment volume of the following brands increased:
Marlboro , mainly driven byIndonesia , reflecting the growth of the Filter Black 12s and 20s variants,the Philippines , reflecting up-trading resulting from narrowed price gaps with the below premium price segment,Saudi Arabia andTurkey , partially offset byItaly andJapan , partly reflecting the impact of out-switching to heated tobacco units, as well asFrance and PMI Duty Free;- L&M, mainly driven by
Egypt ,Saudi Arabia andThailand , partly offset byRussia andTurkey ; Philip Morris , mainly driven byIndonesia andRussia , partly offset byArgentina ; and- Dji Sam Soe in
Indonesia , driven by the same factors as in the quarter.
International Share of Market
PMI's total international market share (excluding
- Total international cigarette market share of 26.2%, down by 0.3 points; and
- Total international heated tobacco unit market share of 2.1%, up by 0.5 points.
PMI's total international cigarette market share, defined as PMI's cigarette sales volume as a percentage of total industry cigarette sales volume, was 26.9%, down by 0.2 points.
CONSOLIDATED FINANCIAL SUMMARY
Third-Quarter
Financial Summary - |
|
|
|
|
Change |
|
Variance |
|||||||
|
2019 |
2018 |
|
Total |
Excl. |
|
Total |
Cur- |
Price |
Vol/ |
Cost/ |
|||
(in millions) |
|
|
|
|||||||||||
Net Revenues |
|
$ 7,642 |
$ 7,504 |
|
1.8% |
3.4% |
|
138 |
(115) |
266 |
263 |
(276) |
||
Cost of Sales |
|
(2,605) |
(2,618) |
|
0.5% |
(0.6)% |
|
13 |
30 |
— |
(181) |
164 |
||
Marketing, Administration and Research Costs (2) |
|
(2,234) |
(1,710) |
|
(30.6)% |
(34.8)% |
|
(524) |
71 |
— |
— |
(595) |
||
Amortization of Intangibles |
|
(15) |
(20) |
|
25.0% |
15.0% |
|
5 |
2 |
— |
— |
3 |
||
Operating Income |
|
$ 2,788 |
$ 3,156 |
|
(11.7)% |
(11.3)% |
|
(368) |
(12) |
266 |
82 |
(704) |
||
Asset Impairment & Exit Costs (3) |
|
(22) |
— |
|
—% |
—% |
|
(22) |
— |
— |
— |
(22) |
||
Russia Excise and VAT Audit Charge (3) |
|
(374) |
— |
|
—% |
—% |
|
(374) |
— |
— |
— |
(374) |
||
Adjusted Operating Income |
|
$ 3,184 |
$ 3,156 |
|
0.9% |
1.3% |
|
28 |
(12) |
266 |
82 |
(308) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Adjusted Operating Income Margin |
|
41.7% |
42.1% |
|
(0.4)pp |
(0.9)pp |
|
|
|
|
|
|
||
(1) Cost/Other variance includes the impact of the RBH deconsolidation. |
||||||||||||||
(2) Unfavorable Cost/Other variance includes 2019 asset impairment and exit costs and the Russia excise and VAT audit charge. |
||||||||||||||
(3) Included in Marketing, Administration and Research Costs above. |
||||||||||||||
Note: Net Revenues include revenues from shipments of the IQOS heated tobacco device, 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, increased by 3.4%, mainly reflecting: a favorable pricing variance, driven notably by
Operating income, excluding unfavorable currency, decreased by 11.3%. Excluding asset impairment and exit charges related to a plant closure in
Adjusted operating income margin, excluding currency, decreased by 0.9 points to 41.2%, reflecting the factors mentioned above, as detailed in the attached Schedule 8, or increased by 0.4 points to 41.2% on a like-for-like basis, as detailed in the attached Schedule 9.
Nine Months Year-to-Date
Financial Summary - |
|
|
|
|
Change |
|
Variance |
|||||||||
|
2019 |
2018 |
|
Total |
Excl. |
|
Total |
Cur- |
Price |
Vol/ |
Cost/ |
|||||
(in millions) |
|
|
|
|||||||||||||
Net Revenues |
|
$ |
22,092 |
$ |
22,126 |
|
(0.2)% |
4.1% |
|
(34) |
(931) |
953 |
457 |
(513) |
||
Cost of Sales |
|
(7,735) |
(7,977) |
|
3.0% |
(0.4)% |
|
242 |
274 |
— |
(255) |
223 |
||||
Marketing, Administration and Research Costs (2) |
|
(6,282) |
(5,411) |
|
(16.1)% |
(22.3)% |
|
(871) |
333 |
— |
— |
(1,204) |
||||
Amortization of Intangibles |
|
(50) |
(63) |
|
20.6% |
15.9% |
|
13 |
3 |
— |
— |
10 |
||||
Operating Income |
|
$ |
8,025 |
$ |
8,675 |
|
(7.5)% |
(3.8)% |
|
(650) |
(321) |
953 |
202 |
(1,484) |
||
Asset Impairment & Exit Costs (3) |
|
(65) |
— |
|
—% |
—% |
|
(65) |
— |
— |
— |
(65) |
||||
Canadian Tobacco Litigation-Related Expense (3) |
|
(194) |
— |
|
—% |
—% |
|
(194) |
— |
— |
— |
(194) |
||||
Loss on Deconsolidation of RBH (3) |
|
(239) |
— |
|
—% |
—% |
|
(239) |
— |
— |
— |
(239) |
||||
Russia Excise and VAT Audit Charge (3) |
|
(374) |
— |
|
—% |
—% |
|
(374) |
— |
— |
— |
(374) |
||||
Adjusted Operating Income |
|
$ |
8,897 |
$ |
8,675 |
|
2.6% |
6.3% |
|
222 |
(321) |
953 |
202 |
(612) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjusted Operating Income Margin |
|
40.3% |
39.2% |
|
1.1pp |
0.8pp |
|
|
|
|
|
|
||||
(1) Cost/Other variance includes the impact of the RBH deconsolidation. |
||||||||||||||||
(2) Unfavorable Cost/Other variance includes the 2019 Canadian tobacco litigation-related expense, the loss on deconsolidation of RBH, asset impairment and exit costs, the impact of the RBH deconsolidation and the Russia excise and VAT audit charge. |
||||||||||||||||
(3) Included in Marketing, Administration and Research Costs above. |
||||||||||||||||
Note: Net Revenues include revenues from shipments of the IQOS heated tobacco device, 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, increased by 4.1%, mainly reflecting: a favorable pricing variance, notably in
Operating income, excluding unfavorable currency, decreased by 3.8%. Excluding the loss on deconsolidation of RBH, the Canadian tobacco litigation-related expense, and asset impairment and exit charges related to plant closures in
Adjusted operating income margin, excluding currency, increased by 0.8 points to 40.0%, reflecting the factors mentioned above, as detailed in the attached Schedule 8, or by 1.6 points to 40.0% on a like-for-like basis, as detailed in the attached Schedule 9.
EUROPEAN
Third-Quarter
Financial Summary - |
|
|
|
|
Change |
|
Variance |
|||||||||
|
2019 |
2018 |
|
Total |
Excl. |
|
Total |
Cur- |
Price |
Vol/ |
Cost/ |
|||||
(in millions) |
|
|
|
|||||||||||||
Net Revenues |
|
$ |
2,645 |
$ |
2,467 |
|
7.2% |
11.2% |
|
178 |
(98) |
54 |
222 |
— |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating Income |
|
$ |
1,255 |
$ |
1,179 |
|
6.4% |
12.0% |
|
76 |
(66) |
54 |
153 |
(65) |
||
Asset Impairment & Exit Costs |
|
— |
— |
|
—% |
—% |
|
— |
— |
— |
— |
— |
||||
Adjusted Operating Income |
|
$ |
1,255 |
$ |
1,179 |
|
6.4% |
12.0% |
|
76 |
(66) |
54 |
153 |
(65) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjusted Operating Income Margin |
|
47.4% |
47.8% |
|
(0.4)pp |
0.4pp |
|
|
|
|
|
|
Net revenues, excluding unfavorable currency, increased by 11.2%, reflecting a favorable pricing variance, driven principally by
Operating income, excluding unfavorable currency, increased by 12.0%, mainly reflecting: a favorable pricing variance; favorable volume/mix, driven by heated tobacco unit volume, notably in the
Adjusted operating income margin, excluding currency, increased by 0.4 points to 48.2%, reflecting the factors mentioned above, as detailed on Schedule 8.
Nine Months Year-to-Date
Financial Summary - |
|
|
|
|
Change |
|
Variance |
|||||||||
|
2019 |
2018 |
|
Total |
Excl. |
|
Total |
Cur- |
Price |
Vol/ |
Cost/ |
|||||
(in millions) |
|
|
|
|||||||||||||
Net Revenues |
|
$ |
7,381 |
$ |
6,958 |
|
6.1% |
12.6% |
|
423 |
(457) |
206 |
674 |
— |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating Income |
|
$ |
3,346 |
$ |
3,096 |
|
8.1% |
16.5% |
|
250 |
(261) |
206 |
518 |
(213) |
||
Asset Impairment & Exit Costs |
|
— |
— |
|
—% |
—% |
|
— |
— |
— |
— |
— |
||||
Adjusted Operating Income |
|
$ |
3,346 |
$ |
3,096 |
|
8.1% |
16.5% |
|
250 |
(261) |
206 |
518 |
(213) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjusted Operating Income Margin |
|
45.3% |
44.5% |
|
0.8pp |
1.5pp |
|
|
|
|
|
|
Net revenues, excluding unfavorable currency, increased by 12.6%, reflecting a favorable pricing variance, driven principally by
Operating income, excluding unfavorable currency, increased by 16.5%, mainly reflecting: a favorable pricing variance; favorable volume/mix, notably in the
Adjusted operating income margin, excluding currency, increased by 1.5 points to 46.0%, reflecting the factors mentioned above, as detailed on Schedule 8.
Total Market, PMI Shipment & Market Share Commentaries
European Union Key Data |
|
Third-Quarter |
|
Nine Months Year-to-Date |
||||||||||
|
|
|
|
Change |
|
|
|
Change |
||||||
|
|
2019 |
2018 |
% / pp |
|
2019 |
2018 |
% / pp |
||||||
Total Market (billion units) |
|
132.1 |
131.4 |
0.5% |
|
363.8 |
365.2 |
(0.4)% |
||||||
|
|
|
|
|
|
|
|
|
||||||
PMI Shipment Volume (million units) |
|
|
|
|
|
|
|
|
||||||
Cigarettes |
|
47,238 |
48,223 |
(2.0)% |
|
133,093 |
135,878 |
(2.0)% |
||||||
Heated Tobacco Units |
|
3,474 |
1,730 |
+100.0% |
|
8,810 |
3,853 |
+100.0% |
||||||
Total EU |
|
50,712 |
49,953 |
1.5% |
|
141,903 |
139,731 |
1.6% |
||||||
|
|
|
|
|
|
|
|
|
||||||
PMI Market Share |
|
|
|
|
|
|
|
|
||||||
Marlboro |
|
18.0% |
18.5% |
(0.5) |
|
18.1% |
18.4% |
(0.3) |
||||||
L&M |
|
6.7% |
7.0% |
(0.3) |
|
6.7% |
6.9% |
(0.2) |
||||||
Chesterfield |
|
5.8% |
5.9% |
(0.1) |
|
5.8% |
5.9% |
(0.1) |
||||||
Philip Morris |
|
2.7% |
2.9% |
(0.2) |
|
2.7% |
3.0% |
(0.3) |
||||||
HEETS |
|
2.5% |
1.2% |
1.3 |
|
2.3% |
1.0% |
1.3 |
||||||
Others |
|
3.0% |
3.0% |
— |
|
3.2% |
3.2% |
— |
||||||
Total EU |
|
38.7% |
38.5% |
0.2 |
|
38.8% |
38.4% |
0.4 |
Third-Quarter
The estimated total market in the EU increased by 0.5% to 132.1 billion units, mainly driven by:
Germany , up by 1.3%, primarily reflecting the impact of estimated trade inventory movements of competitors' products, partly offset by the impact of price increases inMarch 2019 ; andPoland , up by 4.3%, primarily reflecting a lower prevalence of illicit trade;
partly offset by
France , down by 4.8%, mainly due to the impact of significant excise-tax driven price increases, and an increase in the prevalence of illicit trade.
PMI's total shipment volume increased by 1.5% to 50.7 billion units, reflecting:
- higher heated tobacco unit shipment volume across the Region, notably
Italy , driven by higher market share;
partly offset by:
- lower cigarette shipment volume, mainly in
France , due to the lower total market and lower cigarette market share, andItaly , partly reflecting out-switching to heated tobacco units.
Nine Months Year-to-Date
The estimated total market in the EU decreased by 0.4% to 363.8 billion units, notably due to:
France , down by 6.4%, primarily reflecting the impact of price increases in 2018 and the first quarter of 2019;Germany , down by 1.9%, primarily reflecting the impact of price increases in 2018 andMarch 2019 ; andItaly , down by 1.8%, primarily reflecting the impact of price increases in 2018 and the first quarter of 2019;
partly offset by
Poland , up by 6.7%, reflecting the same factor as in the quarter; andSpain , up by 0.9%, partly reflecting a lower prevalence of illicit trade.
PMI's total shipment volume increased by 1.6% to 141.9 billion units, reflecting:
- higher heated tobacco unit shipment volume across the Region, notably
Italy , driven by higher market share;
partly offset by
- lower cigarette shipment volume, mainly in
France andItaly , reflecting the same factors as in the quarter, partly offset byPoland , mainly driven by the higher total market.
Third-Quarter
Financial Summary - |
|
|
|
|
Change |
|
Variance |
||||||||||||||
|
2019 |
2018 |
|
Total |
Excl. |
|
Total |
Cur- |
Price |
Vol/ |
Cost/ |
||||||||||
(in millions) |
|
|
|
||||||||||||||||||
Net Revenues |
|
$ 899 |
$ 778 |
|
15.6% |
16.5% |
|
121 |
(7) |
(3) |
131 |
— |
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Operating Income (Loss) |
|
$ (101) |
$ 270 |
|
-(100)% |
-(100)% |
|
(371) |
25 |
(3) |
32 |
(425) |
|||||||||
Asset Impairment & Exit Costs |
|
— |
— |
|
—% |
—% |
|
— |
— |
— |
— |
— |
|||||||||
Russia Excise and VAT Audit Charge (1) |
|
(374) |
— |
|
—% |
—% |
|
(374) |
— |
— |
— |
(374) |
|||||||||
Adjusted Operating Income |
|
$ 273 |
$ 270 |
|
1.1% |
(8.1)% |
|
3 |
25 |
(3) |
32 |
(51) |
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Adjusted Operating Income Margin |
|
30.4% |
34.7% |
|
(4.3)pp |
(7.3)pp |
|
|
|
|
|
|
|||||||||
(1) Included in marketing, administration and research costs at the consolidated operating income level. |
Net revenues, excluding unfavorable currency, increased by 16.5%, reflecting favorable volume/mix, predominantly driven by heated tobacco unit volume in
Operating income, excluding favorable currency, decreased by over 100% due primarily to the unfavorable impact, shown in "Cost/Other," of the
Adjusted operating income margin, excluding currency, decreased by 7.3 points to 27.4%, reflecting the factors mentioned above, as detailed on Schedule 8.
Nine Months Year-to-Date
Financial Summary - |
|
|
|
|
Change |
|
Variance |
||||||||||||||
|
2019 |
2018 |
|
Total |
Excl. |
|
Total |
Cur- |
Price |
Vol/ |
Cost/ |
||||||||||
(in millions) |
|
|
|
||||||||||||||||||
Net Revenues |
|
$ 2,300 |
$ 2,105 |
|
9.3% |
15.8% |
|
195 |
(137) |
50 |
282 |
— |
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Operating Income |
|
$ 284 |
$ 682 |
|
(58.4)% |
(56.9)% |
|
(398) |
(10) |
50 |
73 |
(511) |
|||||||||
Asset Impairment & Exit Costs |
|
— |
— |
|
—% |
—% |
|
— |
— |
— |
— |
— |
|||||||||
Russia Excise and VAT Audit Charge (1) |
|
(374) |
— |
|
—% |
—% |
|
(374) |
— |
— |
— |
(374) |
|||||||||
Adjusted Operating Income |
|
$ 658 |
$ 682 |
|
(3.5)% |
(2.1)% |
|
(24) |
(10) |
50 |
73 |
(137) |
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Adjusted Operating Income Margin |
|
28.6% |
32.4% |
|
(3.8)pp |
(5.0)pp |
|
|
|
|
|
|
|||||||||
(1) Included in marketing, administration and research costs at the consolidated operating income level. |
Net revenues, excluding unfavorable currency, increased by 15.8%, reflecting a favorable pricing variance, driven notably by
Operating income, excluding unfavorable currency, decreased by 56.9% due primarily to the unfavorable impact, shown in "Cost/Other," of the
Adjusted operating income margin, excluding currency, decreased by 5.0 points to 27.4%, reflecting the factors mentioned above, as detailed on Schedule 8.
Total Market, PMI Shipment & Market Share Commentaries
PMI Shipment Volume |
Third-Quarter |
Nine Months Year-to-Date |
|||||||
(million units) |
2019 |
2018 |
Change |
2019 |
2018 |
Change |
|||
Cigarettes |
27,379 |
29,801 |
(8.1)% |
|
74,779 |
80,294 |
(6.9)% |
||
Heated Tobacco Units |
3,858 |
1,152 |
+100.0% |
|
8,213 |
2,667 |
+100.0% |
||
Total Eastern Europe |
31,237 |
30,953 |
0.9% |
|
82,992 |
82,961 |
—% |
Third-Quarter
The estimated total market in
Russia , down by 5.9%, primarily reflecting the impact of price increases, as well as an increase in the prevalence of illicit trade; andUkraine , down by 14.5%, primarily reflecting the impact of excise tax-driven price increases, as well as an increase in the prevalence of illicit trade;
partly offset by
Kazakhstan , up by 4.6%, partly reflecting a lower prevalence of illicit trade.
PMI's total shipment volume increased by 0.9% to 31.2 billion units, driven by:
Kazakhstan , up by 7.9%, mainly reflecting a higher total market and a higher market share of heated tobacco units; andRussia , up by 2.8%, mainly reflecting a higher market share of heated tobacco units, partially offset by the lower total market;
partly offset by
Ukraine , down by 6.3%, reflecting a lower total market, partly offset by higher market share of heated tobacco units.
Nine Months Year-to-Date
The estimated total market in
Russia , down by 5.3%, reflecting the same factors as in the quarter; andUkraine , down by 13.4%, reflecting the same factors as in the quarter;
partly offset by
Kazakhstan , up by 5.2%, reflecting the same factor as in the quarter.
PMI's total shipment volume was flat at 83.0 billion units, notably reflecting:
Kazakhstan , up by 10.5%, reflecting a higher total market and a higher market share of heated tobacco units; andRussia , up by 0.1%, mainly reflecting a higher market share of heated tobacco units, partially offset by the lower total market;
offset by
Ukraine , down by 3.2%, reflecting a lower total market, partly offset by a higher market share, notably of heated tobacco units.
Third-Quarter
Financial Summary - |
|
|
|
|
Change |
|
Variance |
|||||||||||||
|
2019 |
2018 |
|
Total |
Excl. |
|
Total |
Cur- |
Price |
Vol/ |
Cost/ |
|||||||||
(in millions) |
|
|
|
|||||||||||||||||
Net Revenues |
|
$ 1,127 |
$ 1,143 |
|
(1.4)% |
—% |
|
(16) |
(16) |
89 |
(70) |
(19) |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating Income |
|
$ 519 |
$ 491 |
|
5.7% |
4.9% |
|
28 |
4 |
89 |
(69) |
4 |
||||||||
Asset Impairment & Exit Costs |
|
— |
— |
|
—% |
—% |
|
— |
— |
— |
— |
— |
||||||||
Adjusted Operating Income |
|
$ 519 |
$ 491 |
|
5.7% |
4.9% |
|
28 |
4 |
89 |
(69) |
4 |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Adjusted Operating Income Margin |
|
46.1% |
43.0% |
|
3.1pp |
2.1pp |
|
|
|
|
|
|
Net revenues, excluding unfavorable currency, were flat, reflecting a favorable pricing variance, driven predominantly by
Operating income, excluding favorable currency, increased by 4.9%, mainly reflecting a favorable pricing variance and lower manufacturing costs, partly offset by unfavorable volume/mix, reflecting the same drivers as for net revenues noted above, and the timing of other revenues.
Adjusted operating income margin, excluding currency, increased by 2.1 points to 45.1%, reflecting the factors mentioned above, as detailed on Schedule 8.
Nine Months Year-to-Date
Financial Summary - |
|
|
|
|
Change |
|
Variance |
|||||||||||||
|
2019 |
2018 |
|
Total |
Excl. |
|
Total |
Cur- |
Price |
Vol/ |
Cost/ |
|||||||||
(in millions) |
|
|
|
|||||||||||||||||
Net Revenues |
|
$ 3,058 |
$ 3,126 |
|
(2.2)% |
3.4% |
|
(68) |
(174) |
154 |
(45) |
(3) |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating Income |
|
$ 1,304 |
$ 1,268 |
|
2.8% |
8.2% |
|
36 |
(68) |
154 |
(81) |
31 |
||||||||
Asset Impairment & Exit Costs |
|
— |
— |
|
—% |
—% |
|
— |
— |
— |
— |
— |
||||||||
Adjusted Operating Income |
|
$ 1,304 |
$ 1,268 |
|
2.8% |
8.2% |
|
36 |
(68) |
154 |
(81) |
31 |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Adjusted Operating Income Margin |
|
42.6% |
40.6% |
|
2.0pp |
1.9pp |
|
|
|
|
|
|
Net revenues, excluding unfavorable currency, increased by 3.4%, mainly reflecting: a favorable pricing variance, primarily driven by
Operating income, excluding unfavorable currency, increased by 8.2%, mainly reflecting a favorable pricing variance and lower manufacturing costs, partly offset by unfavorable volume/mix, notably due to unfavorable cigarette and heated tobacco unit volume in PMI Duty Free, partly offset by cigarette mix in
Adjusted operating income margin, excluding currency, increased by 1.9 points to 42.5%, reflecting the factors mentioned above, as detailed on Schedule 8.
Total Market, PMI Shipment & Market Share Commentaries
PMI Shipment Volume |
Third-Quarter |
|
Nine Months Year-to-Date |
||||||
(million units) |
2019 |
2018 |
Change |
|
2019 |
2018 |
Change |
||
Cigarettes |
36,994 |
37,406 |
(1.1)% |
|
101,957 |
100,831 |
1.1% |
||
Heated Tobacco Units |
588 |
1,152 |
(49.0)% |
|
2,061 |
2,832 |
(27.2)% |
||
Total Middle East & Africa |
37,582 |
38,558 |
(2.5)% |
|
104,018 |
103,663 |
0.3% |
Third-Quarter
The estimated total market in the
Algeria , up by 7.5%, partly reflecting the impact of estimated trade inventory movements;Egypt , up by 10.1%, mainly due to the timing of estimated trade inventory movements in the third quarter of 2019 related to anticipated price increases compared to estimated unfavorable trade inventory movements in the third quarter of 2018 following theJuly 2018 health tax increase; andSaudi Arabia , up by 4.1%, primarily reflecting a recovery of the total market following the introduction of the new excise tax inJune 2017 and VAT inJanuary 2018 , respectively;
partly offset by
- Duty Free, down by 5.6%, mainly reflecting increased enforcement of traveler allowances, notably by
China .
PMI's total shipment volume decreased by 2.5% to 37.6 billion units, notably due to:
- PMI Duty Free, down by 11.1%. Excluding the net unfavorable impact of estimated distributor inventory movements, primarily of heated tobacco units, PMI's in market sales declined by 8.0%, primarily reflecting the lower total market;
Saudi Arabia , down by 21.1%. Net unfavorable estimated distributor inventory movements totaled 0.6 billion cigarettes, mainly attributable to the pay-back of adjustments in the first half of 2019 resulting from the delayed importation deadline before the implementation of plain packaging scheduled forJanuary 1, 2020 . Excluding the impact of these inventory movements, PMI's in-market sales grew by 1.9%; andTurkey , down by 10.7%, mainly reflecting lower market share, primarily driven by the timing of above-inflation retail price increases inApril 2019 compared to competition, as well as the impact of price increases inAugust 2019 ;
partly offset by
Egypt , up by 22.6%, primarily reflecting higher market share, driven by L&M, as well as a higher total market.
Nine Months Year-to-Date
The estimated total market in the
Algeria , up by 5.9%, partly reflecting the timing of estimated trade inventory movements in 2019 compared to 2018;Egypt , up by 1.8%, mainly reflecting the same factor as in the quarter;Saudi Arabia , up by 6.3%, primarily reflecting a favorable comparison with the first nine months of 2018, which was down by 24.5%, mainly due to the impact of retail price increases in 2017, the first quarter of 2018 following the introduction of the new excise tax inJune 2017 and VAT inJanuary 2018 ; andTurkey , up by 8.2%, notably reflecting a lower prevalence of illicit trade;
partly offset by
- Duty Free, down by 5.4%, mainly reflecting the lower total market.
PMI's total shipment volume increased by 0.3% to 104.0 billion units, notably in:
Egypt , up by 14.6%, mainly reflecting the same factors as in the quarter; andSaudi Arabia , up by 26.1%. Net favorable estimated distributor inventory movements totaled 1.1 billion cigarettes, mainly attributable to the timing of shipments compared to 2018. Excluding the impact of these inventory movements, PMI's in-market sales grew by 4.6%, partly reflecting a higher total market;
partly offset by
- PMI Duty Free, down by 10.6%. Excluding the net unfavorable impact of estimated distributor inventory movements of 0.8 billion units, PMI's in-market sales decline was 5.6%, mainly reflecting the same factor as in the quarter.
SOUTH &
Third-Quarter
Financial Summary - |
|
|
|
|
Change |
|
Variance |
||||||||||||||
|
2019 |
2018 |
|
Total |
Excl. |
|
Total |
Cur- |
Price |
Vol/ |
Cost/ |
||||||||||
(in millions) |
|
|
|
||||||||||||||||||
Net Revenues |
|
$ 1,246 |
$ 1,197 |
|
4.1% |
2.8% |
|
49 |
15 |
123 |
(89) |
— |
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Operating Income |
|
$ 539 |
$ 455 |
|
18.5% |
14.3% |
|
84 |
19 |
123 |
(64) |
6 |
|||||||||
Asset Impairment & Exit Costs |
|
— |
— |
|
—% |
—% |
|
— |
— |
— |
— |
— |
|||||||||
Adjusted Operating Income |
|
$ 539 |
$ 455 |
|
18.5% |
14.3% |
|
84 |
19 |
123 |
(64 ) |
6 |
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Adjusted Operating Income Margin |
|
43.3% |
38.0% |
|
5.3pp |
4.2pp |
|
|
|
|
|
|
Net revenues, excluding favorable currency, increased by 2.8%, predominantly reflecting a favorable pricing variance driven by
Operating income, excluding favorable currency, increased by 14.3%, predominantly reflecting: a favorable pricing variance; lower manufacturing costs, mainly in
Adjusted operating income margin, excluding currency, increased by 4.2 points to 42.2%, reflecting the factors mentioned above, as detailed on Schedule 8.
Nine Months Year-to-Date
Financial Summary - |
|
|
|
|
Change |
|
Variance |
||||||||||||||
|
2019 |
2018 |
|
Total |
Excl. |
|
Total |
Cur- |
Price |
Vol/ |
Cost/ |
||||||||||
(in millions) |
|
|
|
||||||||||||||||||
Net Revenues |
|
$ 3,607 |
$ 3,434 |
|
5.0% |
7.3% |
|
173 |
(78) |
313 |
(62) |
— |
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Operating Income |
|
$ 1,471 |
$ 1,324 |
|
11.1% |
13.0% |
|
147 |
(25) |
313 |
(41) |
(100) |
|||||||||
Asset Impairment & Exit Costs (1) |
|
(20) |
— |
|
—% |
—% |
|
(20) |
— |
— |
— |
(20) |
|||||||||
Adjusted Operating Income |
|
$ 1,491 |
$ 1,324 |
|
12.6% |
14.5% |
|
167 |
(25) |
313 |
(41) |
(80) |
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Adjusted Operating Income Margin |
|
41.3% |
38.6% |
|
2.7pp |
2.5pp |
|
|
|
|
|
|
|||||||||
(1) Included in marketing, administration and research costs at the consolidated operating income level. |
Net revenues, excluding unfavorable currency, increased by 7.3%, reflecting: a favorable pricing variance, driven principally by
Operating income, excluding unfavorable currency, increased by 13.0%. Excluding asset impairment and exit costs related to a plant closure in
Adjusted operating income margin, excluding currency, increased by 2.5 points to 41.1%, reflecting the factors mentioned above, as detailed on Schedule 8.
Total Market, PMI Shipment & Market Share Commentaries
PMI Shipment Volume |
Third-Quarter |
Nine Months Year-to-Date |
|||||||
(million units) |
2019 |
2018 |
Change |
2019 |
2018 |
Change |
|||
Cigarettes |
42,362 |
45,840 |
(7.6)% |
|
130,230 |
130,846 |
(0.5)% |
||
Heated Tobacco Units |
— |
— |
—% |
|
— |
— |
—% |
||
Total South & Southeast Asia |
42,362 |
45,840 |
(7.6 )% |
|
130,230 |
130,846 |
(0.5)% |
Third-Quarter
The estimated total market in South &
Indonesia , down by 1.6%, mainly due to estimated trade inventory movements;Pakistan , down by 49.8%, mainly due to estimated trade inventory movements following those of the second quarter 2019 related to anticipated excise tax-driven price increases compared to the prior year. Excluding the impact of these inventory movements, the total market is estimated to have declined by 14.7%; andthe Philippines , down by 5.8%, mainly due to the impact of price increases in the below premium segment in the fourth quarter of 2018, as well as price increases in the third-quarter of 2019;
partly offset by
Thailand , up by 3.3%, primarily reflecting on-going recovery from theSeptember 2017 excise tax reform.
PMI's total shipment volume decreased by 7.6% to 42.4 billion units, notably due to:
Indonesia , down by 5.7%, mainly reflecting a lower market share, primarily due to widening price gaps between Sampoerna A and competitive brands following its price increase inOctober 2018 , as well as a lower total market;Pakistan , down by 54.1%, mainly reflecting a lower total market; andthe Philippines , down by 2.8%, mainly reflecting a lower total market, partly offset by higher market share, notably ofMarlboro ;
partly offset by
Thailand , up by 8.0%, mainly reflecting a higher market share driven by the continued strong performance of L&M 7.1 and the favorable impact of distribution expansion in 2018, as well as a higher total market.
Nine Months Year-to-Date
The estimated total market in South &
Pakistan , down by 9.8%, mainly reflecting the impact of excise tax-driven price increases; andVietnam , down by 4.4%, mainly reflecting the impact of excise tax-driven price increases;
partly offset by
Indonesia , up by 0.7%, reflecting the absence of an excise tax increase in 2019; andThailand , up by 12.9%, reflecting the same factor as in the quarter.
PMI's total shipment volume decreased by 0.5% to 130.2 billion units, notably due to:
Indonesia , down by 3.2%, mainly reflecting a lower market share primarily due to the widened retail price gap of Sampoerna A to competitive brands following its price increase inOctober 2018 , partly offset by a higher total market; andPakistan , down by 2.4%, mainly reflecting a lower total market, partly offset by a higher market share resulting from the timing of estimated trade inventory movements of competitors' brands;
partly offset by
the Philippines , up by 1.5%, mainly reflecting a higher market share, notably ofMarlboro ; andThailand , up by 20.2%, reflecting the same factors as in the quarter.
Third-Quarter
Financial Summary - |
|
|
|
|
Change |
|
Variance |
|||||||||
|
2019 |
2018 |
|
Total |
Excl. |
|
Total |
Cur- |
Price |
Vol/ |
Cost/ |
|||||
(in millions) |
|
|
|
|||||||||||||
Net Revenues |
|
$ 1,252 |
$ 1,166 |
|
7.4% |
7.5% |
|
86 |
(1) |
(21) |
108 |
— |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating Income |
|
$ 451 |
$ 426 |
|
5.9% |
3.1% |
|
25 |
12 |
(21) |
64 |
(30) |
||||
Asset Impairment & Exit Costs |
|
— |
— |
|
—% |
—% |
|
— |
— |
— |
— |
— |
||||
Adjusted Operating Income |
|
$ 451 |
$ 426 |
|
5.9% |
3.1% |
|
25 |
12 |
(21) |
64 |
(30) |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjusted Operating Income Margin |
|
36.0% |
36.5% |
|
(0.5)pp |
(1.5)pp |
|
|
|
|
|
|
Net revenues, excluding unfavorable currency, increased by 7.5%, reflecting favorable volume/mix, mainly driven by heated tobacco units in
Operating income, excluding favorable currency, increased by 3.1%, mainly reflecting favorable volume/mix, mainly driven by favorable heated tobacco unit volume in
Adjusted operating income margin, excluding currency, decreased by 1.5 points to 35.0%, reflecting the factors mentioned above, as detailed on Schedule 8.
Nine Months Year-to-Date
Financial Summary - |
|
|
|
|
Change |
|
Variance |
||||||||||||||
|
2019 |
2018 |
|
Total |
Excl. |
|
Total |
Cur- |
Price |
Vol/ |
Cost/ |
||||||||||
(in millions) |
|
|
|
||||||||||||||||||
Net Revenues |
|
$ 4,094 |
$ 4,235 |
|
(3.3)% |
(2.7)% |
|
(141) |
(26) |
186 |
(301) |
— |
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Operating Income |
|
$ 1,520 |
$ 1,439 |
|
5.6% |
3.3% |
|
81 |
33 |
186 |
(190) |
52 |
|||||||||
Asset Impairment & Exit Costs |
|
— |
— |
|
—% |
—% |
|
— |
— |
— |
— |
— |
|||||||||
Adjusted Operating Income |
|
$ 1,520 |
$ 1,439 |
|
5.6% |
3.3% |
|
81 |
33 |
186 |
(190) |
52 |
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Adjusted Operating Income Margin |
|
37.1% |
34.0% |
|
3.1pp |
2.1pp |
|
|
|
|
|
|
Net revenues, excluding unfavorable currency, decreased by 2.7%, reflecting: unfavorable volume/mix, mainly due to lower cigarette shipment volume in
Operating income, excluding favorable currency, increased by 3.3%, mainly reflecting: a favorable pricing variance and lower manufacturing costs related to
Adjusted operating income margin, excluding currency, increased by 2.1 points to 36.1%, reflecting the factors mentioned above, as detailed on Schedule 8.
Total Market, PMI Shipment & Market Share Commentaries
PMI Shipment Volume |
Third-Quarter |
Nine Months Year-to-Date |
|||||||
(million units) |
2019 |
2018 |
Change |
2019 |
2018 |
Change |
|||
Cigarettes |
12,692 |
14,186 |
(10.5)% |
|
38,650 |
43,391 |
(10.9)% |
||
Heated Tobacco Units |
7,976 |
4,575 |
74.3% |
|
23,253 |
19,755 |
17.7% |
||
Total East Asia & Australia |
20,668 |
18,761 |
10.2% |
|
61,903 |
63,146 |
(2.0)% |
Third-Quarter
The estimated total market in
Australia , down by 7.4%, or by 11.0% excluding the impact of estimated trade inventory movements, mainly reflecting the impact of excise tax-driven retail price increases;Japan , down by 12.9%, or by 4.5% excluding the impact of estimated trade inventory movements, mainly reflecting the impact of theOctober 1, 2018 excise tax-driven retail price increases, as well as out-switching to the low-price cigarillo category;Korea , down by 1.9%, reflecting the secular decline of the cigarette category, partly offset by the growth of the heat-not-burn category; andTaiwan , down by 7.9%, continuing to reflect the impact of significant excise tax-driven retail price increases inJune 2017 , as well as an increase in the prevalence of illicit trade.
PMI's total shipment volume increased by 10.2% to 20.7 billion units, notably in:
Japan , up by 24.5%. Excluding the net favorable impact of estimated distributor inventory movements of approximately 4.4 billion units, comprised of approximately 3.9 billion heated tobacco units and approximately 0.5 billion cigarettes, mainly reflecting a favorable comparison with the third quarter of 2018 in which IQOS consumable inventories inJapan were reduced, PMI's in-market sales decline was 11.2%, reflecting the lower total market, partly offset by higher heated tobacco unit market share;
partly offset by
Korea , down by 10.5%, principally due to lower market share, as well as a lower total market.
Nine Months Year-to-Date
The estimated total market in
Australia , down by 4.3%, or by 9.6% excluding the impact of estimated trade inventory movements, mainly reflecting the same factor as in the quarter;Japan , down by 7.7%, or by 4.5% excluding the impact of estimated trade inventory movements, mainly reflecting the same factor as in the quarter;Korea , down by 1.4%, mainly reflecting the same factor as in the quarter; andTaiwan , down by 5.2%, mainly reflecting the same factors as in the quarter.
PMI's total shipment volume decreased by 2.0% to 61.9 billion units, notably in:
Korea , down by 10.0%, principally due to lower cigarette and heated tobacco unit market share, as well as a lower total market;
partly offset by
Japan , up by 1.4%. Excluding the net favorable impact of estimated distributor inventory movements of approximately 3.9 billion units, comprised of approximately 3.8 billion heated tobacco units and approximately 0.1 billion cigarettes, reflecting the same factor as in the quarter, PMI's in-market sales decline was 7.6%, primarily reflecting the lower total market.
Third-Quarter
Financial Summary - |
|
|
|
|
Change |
|
Variance |
||||||||||||||
|
2019 |
2018 |
|
Total |
Excl. |
|
Total |
Cur- |
Price |
Vol/ |
Cost/ |
||||||||||
(in millions) |
|
|
|
||||||||||||||||||
Net Revenues |
|
$ 473 |
$ 753 |
|
(37.2)% |
(36.1)% |
|
(280) |
(8) |
24 |
(39) |
(257) |
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Operating Income |
|
$ 125 |
$ 335 |
|
(62.7)% |
(60.9)% |
|
(210) |
(6) |
24 |
(34) |
(194) |
|||||||||
Asset Impairment & Exit Costs (2) |
|
(22) |
— |
|
—% |
—% |
|
(22) |
— |
— |
— |
(22) |
|||||||||
Adjusted Operating Income |
|
$ 147 |
$ 335 |
|
(56.1)% |
(54.3)% |
|
(188) |
(6) |
24 |
(34) |
(172) |
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Adjusted Operating Income Margin |
|
31.1% |
44.5% |
|
(13.4)pp |
(12.7)pp |
|
|
|
|
|
|
(1) Unfavorable Cost/Other variance includes the impact of the RBH deconsolidation. |
Net revenues, excluding unfavorable currency, decreased by 36.1%, almost entirely due to the unfavorable impact of the deconsolidation of RBH shown in "Cost/Other." On a like-for-like basis, net revenues, excluding unfavorable currency, decreased by 3.8%, as detailed in the attached Schedule 10, reflecting unfavorable volume/mix, mainly due to
Operating income, excluding unfavorable currency, decreased by 60.9%, predominantly due to the unfavorable impact of the deconsolidation of RBH, shown in "Cost/Other." Excluding asset impairment and exit costs related to a plant closure in
Adjusted operating income margin, excluding currency, decreased by 12.7 points to 31.8%, reflecting the factors mentioned above, as detailed on Schedule 8, or increased by 4.0 points to 31.7% on a like-for-like basis, as detailed in the attached Schedule 10.
Nine Months Year-to-Date
Financial Summary - |
|
|
|
|
Change |
|
Variance |
||||||||||||||
|
2019 |
2018 |
|
Total |
Excl. |
|
Total |
Cur- |
Price |
Vol/ |
Cost/ |
||||||||||
(in millions) |
|
|
|
||||||||||||||||||
Net Revenues |
|
$ 1,652 |
$ 2,268 |
|
(27.2)% |
(24.6)% |
|
(616) |
(59) |
44 |
(91) |
(510) |
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Operating Income |
|
$ 100 |
$ 866 |
|
(88.5)% |
(89.6)% |
|
(766) |
10 |
44 |
(77) |
(743) |
|||||||||
Asset Impairment & Exit Costs (2) |
|
(45) |
— |
|
—% |
—% |
|
(45) |
— |
— |
— |
(45) |
|||||||||
Canadian Tobacco Litigation-Related Expense (2) |
|
(194) |
— |
|
—% |
—% |
|
(194) |
— |
— |
— |
(194) |
|||||||||
Loss on Deconsolidation of RBH (2) |
|
(239) |
— |
|
—% |
—% |
|
(239) |
— |
— |
— |
(239) |
|||||||||
Adjusted Operating Income |
|
$ 578 |
$ 866 |
|
(33.3)% |
(34.4)% |
|
(288) |
10 |
44 |
(77) |
(265) |
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Adjusted Operating Income Margin |
|
35.0% |
38.2% |
|
(3.2)pp |
(5.0)pp |
|
|
|
|
|
|
(1) Unfavorable Cost/Other variance includes the impact of the RBH deconsolidation. |
Net revenues, excluding unfavorable currency, decreased by 24.6%, predominantly due to the unfavorable impact of the deconsolidation of RBH, shown in "Cost/Other." On a like-for-like basis, net revenues, excluding unfavorable currency, decreased by 3.0%, as detailed in the attached Schedule 10, reflecting: unfavorable volume, mainly due to
Operating income, excluding favorable currency, decreased by 89.6%, predominantly due to the unfavorable impact of the deconsolidation of RBH and reporting adjustments, shown in "Cost/Other." Excluding asset impairment and exit costs related to a plant closure in
Adjusted operating income margin, excluding currency, decreased by 5.0 points to 33.2%, reflecting the factors mentioned above, as detailed on Schedule 8, or increased by 5.2 points to 33.2% on a like-for-like basis, as detailed in the attached Schedule 10.
Total Market, PMI Shipment & Market Share Commentaries
PMI Shipment Volume |
Third-Quarter |
Nine Months Year-to-Date |
|||||||
(million units) |
2019 |
2018 |
Change |
2019 |
2018 |
Change |
|||
Cigarettes |
16,854 |
19,612 |
(14.1)% |
|
52,906 |
58,829 |
(10.1 )% |
||
Heated Tobacco Units |
89 |
43 |
+100.0% |
|
202 |
98 |
+100.0% |
||
Total Latin America & Canada |
16,943 |
19,655 |
(13.8)% |
|
53,108 |
58,927 |
(9.9 )% |
Third-Quarter
The estimated total market in
Canada , down by 11.1%, primarily due to the impact of cumulative price increases, as well as the growing prevalence of e-vapor products;Mexico , down by 9.8%, or by 2.3% excluding estimated net trade inventory movements related to the timing of price increases; andVenezuela , down by 55.1%, mainly reflecting the deterioration of the socioeconomic environment and the impact of inflation-driven price increases;
partly offset by:
Argentina , up by 2.3%. Excluding estimated net trade inventory movements related to the timing of price increases, the total market decreased by 1.6%, primarily due to the impact of cumulative price increases and the impact of the economic downturn as of the second half of 2018; andBrazil , up by 5.4%. Excluding estimated net trade inventory movements primarily related to the timing of price increases, the total market increased by 0.7%.
PMI's total shipment volume decreased by 13.8% to 16.9 billion units, or by 6.9% on a like-for-like basis, in part due to:
Mexico , down by 17.3%, driven by the lower total market and lower market share, largely reflecting the timing of retail price increases compared to 2018.
Nine Months Year-to-Date
The estimated total market in
Argentina , down by 4.9%, reflecting the same factors as in the quarter;Canada , down by 8.9%, reflecting the same factors as in the quarter; andVenezuela , down by 57.6%, reflecting the same factors as in the quarter.
PMI's total shipment volume decreased by 9.9% to 53.1 billion units, or by 5.2% on a like-for-like basis, in part due to:
Argentina , down by 8.1%, primarily reflecting the lower total market, as well as lower market share;Mexico , down by 1.9%, primarily reflecting the lower total market, as well as lower market share; andVenezuela , down by 76.9%, primarily reflecting the lower total market, as well as lower market share.
Forward-Looking and Cautionary Statements
This press release contains projections of future results and other forward-looking statements. Achievement of future results is subject to risks, uncertainties and inaccurate assumptions. In the event that risks or uncertainties materialize, or underlying assumptions prove inaccurate, actual results could vary materially from those contained in such forward-looking statements. Pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, PMI is identifying important factors that, individually or in the aggregate, could cause actual results and outcomes to differ materially from those contained in any forward-looking statements made by PMI.
PMI's business risks include: excise tax increases and discriminatory tax structures; increasing marketing and regulatory restrictions that could reduce our competitiveness, eliminate our ability to communicate with adult consumers, or ban certain of our products; health concerns relating to the use of tobacco products and exposure to environmental tobacco smoke; litigation related to tobacco use; intense competition; the effects of global and individual country economic, regulatory and political developments, natural disasters and conflicts; changes in adult smoker behavior; lost revenues as a result of counterfeiting, contraband and cross-border purchases; governmental investigations; unfavorable currency exchange rates and currency devaluations, and limitations on the ability to repatriate funds; adverse changes in applicable corporate tax laws; adverse changes in the cost and quality of tobacco and other agricultural products and raw materials; and the integrity of its information systems and effectiveness of its data privacy policies. PMI's future profitability may also be adversely affected should it be unsuccessful in its attempts to produce and commercialize reduced-risk products or if regulation or taxation do not differentiate between such products and cigarettes; if it is unable to successfully introduce new products, promote brand equity, enter new markets or improve its margins through increased prices and productivity gains; if it is unable to expand its brand portfolio internally or through acquisitions and the development of strategic business relationships; or if it is unable to attract and retain the best global talent. Future results are also subject to the lower predictability of our reduced-risk product category's performance.
PMI is further subject to other risks detailed from time to time in its publicly filed documents, including the Form 10-Q for the quarter ended
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 United States , total industry, total market and market shares are PMI estimates for tax-paid products based on the latest available data from a number of internal and external sources and may, in defined instances, excludethe 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), effectiveMarch 22, 2019 , PMI's total market share has been restated for previous periods. - "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 asAlgeria ,Egypt ,Libya ,Morocco andTunisia . - "The GCC" (
Gulf Cooperation Council ) is defined asBahrain ,Kuwait ,Oman ,Qatar ,Saudi Arabia and theUnited 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, which accounted for approximately 40% of RBH's total shipment volume in 2018. - 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.
- [NEW] "Cost/Other" in the Consolidated Financial Summary table of total PMI and the six reporting segments of this release reflects the currency-neutral variances of: cost of sales (excluding the volume/mix cost component); marketing, administration and research costs (including asset impairment and exit costs, the Canadian tobacco litigation-related expense and the charge related to the deconsolidation of RBH in
Canada , and theRussia excise & VAT audit charge); 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.
- [NEW] Management reviews net revenues, OI, OI margins, operating cash flow and earnings per share, or "EPS," on an adjusted basis, which may exclude the impact of currency and other items such as acquisitions, asset impairment and exit costs, tax items and other special items. 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, and the
Russia excise & VAT charge, recorded in the third quarter of 2019. 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 third-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 ofArgentina by theInternational Practices Task Force of theCenter 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, effectiveJuly 1, 2018 . The move to highly inflationary accounting inArgentina reduced PMI's currency-neutral net revenue growth by approximately 0.6 points in 2018.
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 Marlboro and HEETS FROM MARLBORO, defined collectively as HEETS, as well as
Marlboro HeatSticks and Parliament HeatSticks. - 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.
[NEW] IQOS in
- On
April 30, 2019 , theU.S. Food and Drug Administration (FDA ) announced that the marketing of IQOS, PMI's electrically heated tobacco system, is appropriate for the protection of public health and authorized it for sale inthe United States . 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 the IQOS device and three variants of its heated tobacco units (the term PMI uses to refer to heated tobacco consumables) to the U.S. through its license withAltria Group, Inc. , whose subsidiary,Philip Morris USA Inc. , will market the product and comply with the provisions set forth in theFDA's marketing order. - Shipment volume of heated tobacco units to
the United States is included in the heated tobacco unit shipment volume of theLatin America &Canada segment. Revenues from shipments of the IQOS heated tobacco device, heated tobacco units and accessories toAltria Group, Inc. for sale under license inthe United States are included in Net Revenues of theLatin America &Canada segment.
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Appendix 1 |
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PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries |
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Key Market Data |
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Quarters Ended September 30, |
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Market |
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Total Market, |
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PMI Shipments, bio units |
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PMI Market Share, % (1) |
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Total |
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Cigarette |
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HTU |
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Total |
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HTU |
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2019 |
2018 |
% |
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2019 |
2018 |
% |
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2019 |
2018 |
% |
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2019 |
2018 |
% |
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2019 |
2018 |
pp |
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2019 |
2018 |
pp |
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Total PMI |
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696.1 |
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720.1 |
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(3.3 |
) |
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199.5 |
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203.7 |
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(2.1 |
) |
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183.5 |
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195.1 |
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(5.9 |
) |
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16.0 |
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8.7 |
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84.8 |
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28.8 |
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28.9 |
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(0.1 |
) |
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2.3 |
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1.7 |
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0.6 |
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European Union |
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France |
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10.2 |
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10.7 |
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(4.8 |
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4.5 |
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4.6 |
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(2.8 |
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4.5 |
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4.6 |
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(3.0 |
) |
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— |
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— |
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— |
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45.0 |
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45.7 |
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(0.7 |
) |
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0.2 |
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0.1 |
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0.1 |
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Germany |
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20.7 |
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20.5 |
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1.3 |
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7.4 |
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7.3 |
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1.7 |
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7.2 |
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7.2 |
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(0.1 |
) |
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0.2 |
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0.1 |
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+100.0 |
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35.7 |
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35.5 |
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0.2 |
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1.1 |
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0.5 |
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0.6 |
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Italy |
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18.3 |
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18.3 |
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0.3 |
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9.5 |
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9.3 |
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2.2 |
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8.5 |
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8.8 |
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(3.6 |
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1.1 |
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0.5 |
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95.8 |
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52.0 |
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51.9 |
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0.1 |
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4.6 |
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2.0 |
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2.6 |
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Poland |
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12.5 |
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11.9 |
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4.3 |
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5.3 |
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5.2 |
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2.3 |
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5.0 |
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5.1 |
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(1.5 |
) |
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0.3 |
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0.1 |
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+100.0 |
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42.5 |
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43.4 |
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(0.9 |
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2.4 |
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0.9 |
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1.5 |
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Spain |
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12.6 |
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12.5 |
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0.8 |
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3.8 |
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3.9 |
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(1.5 |
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3.8 |
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3.8 |
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(2.0 |
) |
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0.1 |
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0.1 |
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25.9 |
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31.6 |
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32.4 |
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(0.8 |
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0.7 |
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0.4 |
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0.3 |
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Eastern Europe |
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Russia |
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61.4 |
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65.3 |
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(5.9 |
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18.9 |
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18.4 |
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2.8 |
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16.2 |
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17.6 |
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(8.0 |
) |
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2.7 |
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0.7 |
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+100.0 |
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30.9 |
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28.3 |
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2.6 |
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4.0 |
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1.1 |
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2.9 |
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Middle East & Africa |
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Saudi Arabia |
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5.5 |
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5.3 |
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4.1 |
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2.0 |
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2.5 |
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(21.1 |
) |
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2.0 |
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2.5 |
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(21.1 |
) |
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— |
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— |
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— |
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40.8 |
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41.7 |
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(0.9 |
) |
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— |
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— |
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— |
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Turkey |
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33.8 |
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33.7 |
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0.3 |
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14.2 |
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15.9 |
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(10.7 |
) |
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14.2 |
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15.9 |
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(10.7 |
) |
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— |
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— |
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— |
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41.9 |
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47.1 |
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(5.2 |
) |
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— |
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— |
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— |
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South & Southeast Asia |
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Indonesia |
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79.0 |
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80.3 |
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(1.6 |
) |
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25.0 |
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26.5 |
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(5.7 |
) |
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25.0 |
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26.5 |
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(5.7 |
) |
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— |
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— |
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— |
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31.7 |
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33.0 |
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(1.3 |
) |
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— |
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— |
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— |
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Philippines |
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17.2 |
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18.3 |
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(5.8 |
) |
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12.4 |
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12.7 |
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(2.8 |
) |
|
12.4 |
|
12.7 |
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(2.8 |
) |
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— |
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— |
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— |
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71.8 |
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69.5 |
|
2.3 |
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— |
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— |
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— |
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East Asia & Australia |
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Australia |
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3.2 |
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3.4 |
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(7.4 |
) |
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0.9 |
|
1.0 |
|
(11.8 |
) |
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0.9 |
|
1.0 |
|
(11.8 |
) |
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— |
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— |
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— |
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27.7 |
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29.1 |
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(1.4 |
) |
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— |
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— |
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— |
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Japan |
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42.1 |
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48.3 |
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(12.9 |
) |
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13.3 |
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10.7 |
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24.5 |
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6.5 |
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7.5 |
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(13.4 |
) |
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6.8 |
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3.2 |
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+100.0 |
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34.3 |
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33.7 |
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0.6 |
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17.0 |
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15.5 |
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1.5 |
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Korea |
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18.4 |
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18.7 |
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(1.9 |
) |
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4.1 |
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4.6 |
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(10.5 |
) |
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2.9 |
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3.2 |
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(7.1 |
) |
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1.1 |
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1.4 |
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(18.4 |
) |
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22.2 |
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24.2 |
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(2.0 |
) |
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6.2 |
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7.4 |
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(1.2 |
) |
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Latin America & Canada |
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Argentina |
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8.3 |
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8.1 |
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2.3 |
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5.9 |
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6.1 |
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(3.0 |
) |
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5.9 |
|
6.1 |
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(3.0 |
) |
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— |
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— |
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— |
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70.4 |
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75.2 |
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(4.8 |
) |
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— |
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— |
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— |
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Mexico |
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7.7 |
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8.5 |
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(9.8 |
) |
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4.9 |
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5.9 |
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(17.3 |
) |
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4.9 |
|
5.9 |
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(17.3 |
) |
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— |
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— |
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— |
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63.4 |
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69.1 |
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(5.7 |
) |
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— |
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— |
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— |
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(1) Market share estimates are calculated using IMS data |
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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. |
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Appendix 2 |
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PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries |
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Key Market Data |
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Nine Months Ended September 30, |
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Market |
|
Total Market, |
|
PMI Shipments, bio units |
|
PMI Market Share, % (1) |
|||||||||||||||||||||||||||||||||||||
|
|
Total |
|
Cigarette |
|
HTU |
|
Total |
|
HTU |
|||||||||||||||||||||||||||||||||
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2019 |
2018 |
% |
|
2019 |
2018 |
% |
|
2019 |
2018 |
% |
|
2019 |
2018 |
% |
|
2019 |
2018 |
pp |
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2019 |
2018 |
pp |
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Total PMI |
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2,023.2 |
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2,057.6 |
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(1.7 |
) |
|
574.2 |
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579.3 |
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(0.9 |
) |
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531.6 |
|
550.1 |
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(3.4 |
) |
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42.5 |
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29.2 |
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45.7 |
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28.3 |
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28.1 |
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0.2 |
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2.1 |
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1.6 |
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0.5 |
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European Union |
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France |
|
29.1 |
|
31.1 |
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(6.4 |
) |
|
13.1 |
|
14.0 |
|
(6.6 |
) |
|
13.1 |
|
14.0 |
|
(6.8 |
) |
|
0.1 |
|
— |
|
— |
|
|
44.9 |
|
45.3 |
|
(0.4 |
) |
|
0.2 |
|
0.1 |
|
0.1 |
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Germany |
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55.1 |
|
56.1 |
|
(1.9 |
) |
|
20.8 |
|
20.5 |
|
1.1 |
|
|
20.2 |
|
20.3 |
|
(0.6 |
) |
|
0.6 |
|
0.3 |
|
+100.0 |
|
|
37.7 |
|
36.6 |
|
1.1 |
|
|
1.1 |
|
0.5 |
|
0.6 |
|
|
Italy |
|
51.1 |
|
52.0 |
|
(1.8 |
) |
|
26.6 |
|
26.6 |
|
(0.1 |
) |
|
24.1 |
|
25.5 |
|
(5.3 |
) |
|
2.5 |
|
1.1 |
|
+100.0 |
|
|
51.6 |
|
51.8 |
|
(0.2 |
) |
|
4.3 |
|
1.8 |
|
2.5 |
|
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Poland |
|
35.4 |
|
33.1 |
|
6.7 |
|
|
14.5 |
|
13.8 |
|
5.5 |
|
|
13.8 |
|
13.6 |
|
1.8 |
|
|
0.7 |
|
0.2 |
|
+100.0 |
|
|
41.1 |
|
41.6 |
|
(0.5 |
) |
|
2.1 |
|
0.7 |
|
1.4 |
|
|
Spain |
|
34.4 |
|
34.1 |
|
0.9 |
|
|
11.3 |
|
11.1 |
|
2.5 |
|
|
11.1 |
|
10.9 |
|
1.5 |
|
|
0.2 |
|
0.1 |
|
79.7 |
|
|
31.5 |
|
32.1 |
|
(0.6 |
) |
|
0.7 |
|
0.4 |
|
0.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Eastern Europe |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Russia |
|
|
167.7 |
|
177.2 |
|
(5.3 |
) |
|
48.8 |
|
48.7 |
|
0.1 |
|
|
43.4 |
|
47.1 |
|
(7.8 |
) |
|
5.3 |
|
1.6 |
|
+100.0 |
|
|
29.7 |
|
27.8 |
|
1.9 |
|
|
3.3 |
|
0.8 |
|
2.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Middle East & Africa |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Saudi Arabia |
|
16.1 |
|
15.2 |
|
6.3 |
|
|
6.7 |
|
5.3 |
|
26.1 |
|
|
6.7 |
|
5.3 |
|
26.1 |
|
|
— |
|
— |
|
— |
|
|
40.5 |
|
41.1 |
|
(0.6 |
) |
|
— |
|
— |
|
— |
|
|
Turkey |
|
|
95.4 |
|
88.2 |
|
8.2 |
|
|
40.6 |
|
40.9 |
|
(0.7 |
) |
|
40.6 |
|
40.9 |
|
(0.7 |
) |
|
— |
|
— |
|
— |
|
|
42.5 |
|
46.4 |
|
(3.9 |
) |
|
— |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
South & Southeast Asia |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Indonesia |
|
226.3 |
|
224.8 |
|
0.7 |
|
|
72.1 |
|
74.5 |
|
(3.2 |
) |
|
72.1 |
|
74.5 |
|
(3.2 |
) |
|
— |
|
— |
|
— |
|
|
31.9 |
|
33.1 |
|
(1.2 |
) |
|
— |
|
— |
|
— |
|
|
Philippines |
|
52.6 |
|
52.6 |
|
(0.1 |
) |
|
37.2 |
|
36.7 |
|
1.5 |
|
|
37.2 |
|
36.7 |
|
1.5 |
|
|
— |
|
— |
|
— |
|
|
70.8 |
|
69.8 |
|
1.0 |
|
|
— |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
East Asia & Australia |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Australia |
|
9.2 |
|
9.6 |
|
(4.3 |
) |
|
2.6 |
|
2.8 |
|
(9.6 |
) |
|
2.6 |
|
2.8 |
|
(9.6 |
) |
|
— |
|
— |
|
— |
|
|
27.6 |
|
29.3 |
|
(1.7 |
) |
|
— |
|
— |
|
— |
|
|
Japan |
|
120.3 |
|
130.4 |
|
(7.7 |
) |
|
40.5 |
|
39.9 |
|
1.4 |
|
|
20.9 |
|
24.2 |
|
(13.3 |
) |
|
19.5 |
|
15.8 |
|
23.9 |
|
|
34.3 |
|
34.2 |
|
0.1 |
|
|
16.9 |
|
15.6 |
|
1.3 |
|
|
Korea |
|
51.7 |
|
52.4 |
|
(1.4 |
) |
|
11.8 |
|
13.1 |
|
(10.0 |
) |
|
8.2 |
|
9.1 |
|
(10.0 |
) |
|
3.6 |
|
4.0 |
|
(9.9 |
) |
|
22.9 |
|
24.9 |
|
(2.0 |
) |
|
6.9 |
|
7.6 |
|
(0.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Latin America & Canada |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Argentina |
|
24.6 |
|
25.8 |
|
(4.9 |
) |
|
17.6 |
|
19.1 |
|
(8.1 |
) |
|
17.6 |
|
19.1 |
|
(8.1 |
) |
|
— |
|
— |
|
— |
|
|
71.5 |
|
74.0 |
|
(2.5 |
) |
|
— |
|
— |
|
— |
|
|
Mexico |
|
25.1 |
|
25.4 |
|
(1.1 |
) |
|
16.6 |
|
16.9 |
|
(1.9 |
) |
|
16.6 |
|
16.9 |
|
(1.9 |
) |
|
— |
|
— |
|
— |
|
|
65.9 |
|
66.4 |
|
(0.5 |
) |
|
— |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
(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 September 30, |
|
Nine Months Ended September 30, |
|||||||||||
|
|
|
2019 |
2018 |
% Change |
|
2019 |
2018 |
% Change |
|||||||
|
Total Shipment Volume |
|
199,504 |
|
203,720 |
|
(2.1)% |
|
574,154 |
|
579,274 |
|
(0.9)% |
|||
|
Shipment Volume for RBH-owned brands (1) |
|
|
|
(1,462) |
|
|
|
|
|
(2,922) |
(2) |
|
|||
|
Total Shipment Volume |
|
199,504 |
|
202,258 |
(3) |
(1.4)% |
|
574,154 |
|
576,352 |
(3) |
(0.4)% |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Latin America & Canada |
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Total Shipment Volume |
|
16,943 |
|
19,655 |
|
(13.8)% |
|
53,108 |
|
58,927 |
|
(9.9)% |
|||
|
Shipment Volume for RBH-owned brands |
|
|
|
(1,450) |
|
|
|
|
|
(2,896) |
(2) |
|
|||
|
Total Shipment Volume |
|
16,943 |
|
18,205 |
(3) |
(6.9)% |
|
53,108 |
|
56,031 |
(3) |
(5.2)% |
(1) Includes Duty Free sales in Canada (2) Represents volume for RBH-owned brands from March 22, 2018 through end of period date (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 |
|
Nine Months Ended |
||||||||||||||||||
|
|
September 30, |
|
|
September 30, |
|||||||||||||||||||
|
|
|
|
$ |
1.22 |
|
|
|
|
2019 Diluted Earnings Per Share (1) |
|
|
|
$ |
3.57 |
|
|
|
||||||
|
|
|
|
$ |
1.44 |
|
|
|
|
2018 Diluted Earnings Per Share (1) |
|
|
|
$ |
3.85 |
|
|
|
||||||
|
|
|
|
$ |
(0.22 |
) |
|
|
|
Change |
|
|
|
$ |
(0.28 |
) |
|
|
||||||
|
|
|
|
(15.3 |
)% |
|
|
|
% Change |
|
|
|
(7.3 |
)% |
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
Reconciliation: |
|
|
|
|
|
|
||||||||||
|
|
|
|
$ |
1.44 |
|
|
|
|
2018 Diluted Earnings Per Share (1) |
|
|
|
$ |
3.85 |
|
|
|
||||||
|
|
|
|
— |
|
|
|
|
2018 Asset impairment and exit costs |
|
|
|
— |
|
|
|
||||||||
|
|
|
|
— |
|
|
|
|
2018 Tax items |
|
|
|
— |
|
|
|
||||||||
|
|
|
|
(0.01 |
) |
|
|
|
2019 Asset impairment and exit costs |
|
|
|
(0.03 |
) |
|
|
||||||||
|
|
|
|
— |
|
|
|
|
2019 Canadian tobacco litigation-related expense |
|
|
|
(0.09 |
) |
|
|
||||||||
|
|
|
|
— |
|
|
|
|
2019 Loss on deconsolidation of RBH |
|
|
|
(0.12 |
) |
|
|
||||||||
|
|
|
|
(0.20 |
) |
|
|
|
2019 Russia excise and VAT audit charge |
|
|
|
(0.20 |
) |
|
|
||||||||
|
|
|
|
— |
|
|
|
|
2019 Tax items |
|
|
|
0.04 |
|
|
|
||||||||
|
|
|
|
— |
|
|
|
|
Currency |
|
|
|
(0.13 |
) |
|
|
||||||||
|
|
|
|
0.01 |
|
|
|
|
Interest |
|
|
|
0.04 |
|
|
|
||||||||
|
|
|
|
— |
|
|
|
|
Change in tax rate |
|
|
|
0.03 |
|
|
|
||||||||
|
|
|
|
(0.02 |
) |
|
|
|
Operations (2) |
|
|
|
0.18 |
|
|
|
||||||||
|
|
|
|
$ |
1.22 |
|
|
|
|
2019 Diluted Earnings Per Share (1) |
|
|
|
$ |
3.57 |
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
(1) Basic and diluted EPS were calculated using the following (in millions): |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Quarters Ended |
|
|
|
Nine Months Ended |
||||||||||||||||||
|
|
September 30, |
|
|
|
September 30, |
||||||||||||||||||
|
|
2019 |
|
2018 |
|
|
|
2019 |
|
2018 |
||||||||||||||
|
|
$ 1,896 |
|
$ 2,247 |
|
Net Earnings attributable to PMI |
|
$ 5,569 |
|
$ 6,001 |
||||||||||||||
|
|
5 |
|
5 |
|
Less distributed and undistributed earnings attributable |
|
13 |
|
13 |
||||||||||||||
|
|
$ 1,891 |
|
$ 2,242 |
|
Net Earnings for basic and diluted EPS |
|
$ 5,556 |
|
$ 5,988 |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
1,556 |
|
1,555 |
|
Weighted-average shares for basic EPS |
|
1,556 |
|
|
1,555 |
|
||||||||||||
|
|
— |
|
|
— |
|
|
Plus Contingently Issuable Performance Stock Units |
|
— |
|
— |
|
|||||||||||
|
|
1,556 |
|
1,555 |
|
Weighted-average shares for diluted EPS |
|
1,556 |
|
|
1,555 |
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
(2) Includes the impact of shares outstanding and share-based payments |
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 2 |
|
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries |
|||||||||||||
Reconciliation of Non-GAAP Measures |
|||||||||||||
Reconciliation of Reported Diluted EPS to Reported Diluted EPS, excluding Currency, |
|||||||||||||
and Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS, excluding Currency |
|||||||||||||
(Unaudited) |
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
|
|
||||
|
|
2019 |
2018 |
% Change |
|
|
|
2019 |
2018 |
% Change |
|
|
|
|
|
$ 1.22 |
$ 1.44 |
(15.3)% |
|
Reported Diluted EPS |
|
$ 3.57 |
$ 3.85 |
(7.3)% |
|
|
|
|
|
— |
|
|
|
Currency |
|
(0.13) |
|
|
|
|
|
|
|
$ 1.22 |
$ 1.44 |
(15.3)% |
|
Reported Diluted EPS, excluding Currency |
|
$ 3.70 |
$ 3.85 |
(3.9)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
|
Year Ended |
||||
|
|
2019 |
2018 |
% Change |
|
|
|
2019 |
2018 |
% Change |
|
|
2018 |
|
|
$ 1.22 |
$ 1.44 |
(15.3)% |
|
Reported Diluted EPS |
|
$ 3.57 |
$ 3.85 |
(7.3)% |
|
|
$ 5.08 |
|
|
0.01 |
— |
|
|
Asset impairment and exit costs |
|
0.03 |
— |
|
|
|
— |
|
|
— |
— |
|
|
Canadian tobacco litigation-related expense |
|
0.09 |
— |
|
|
|
— |
|
|
— |
— |
|
|
Loss on deconsolidation of RBH |
|
0.12 |
— |
|
|
|
— |
|
|
0.20 |
— |
|
|
Russia excise and VAT audit charge |
|
0.20 |
— |
|
|
|
— |
|
|
— |
— |
|
|
Tax items |
|
(0.04) |
— |
|
|
|
0.02 |
|
|
$ 1.43 |
$ 1.44 |
(0.7)% |
|
Adjusted Diluted EPS |
|
$ 3.97 |
$ 3.85 |
3.1% |
|
|
$ 5.10 |
|
|
— |
|
|
|
Currency |
|
(0.13) |
|
|
|
|
|
|
|
$ 1.43 |
$ 1.44 |
(0.7)% |
|
Adjusted Diluted EPS, excluding Currency |
|
$ 4.10 |
$ 3.85 |
6.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
Quarter |
Six Months |
Quarter |
Nine Months |
Quarter |
Year |
Quarter |
||||||||||
|
|
|
March 31, |
June 30, |
June 30, |
September 30, |
September 30, |
December 31, |
December 31, |
March 31, |
||||||||||
|
|
|
2018 |
2018 |
2018 |
2018 |
2018 |
2018 |
2018 |
2019 |
||||||||||
|
Reported Diluted EPS |
|
$ 1.00 |
|
$ 1.41 |
|
$ 2.41 |
|
$ 1.44 |
|
$ 3.85 |
|
$ 1.23 |
|
$5.08 |
|
$ 0.87 |
|
||
|
Asset impairment and exit costs |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
0.01 |
|
||
|
Canadian tobacco litigation-related expense |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
0.09 |
|
||
|
Loss on deconsolidation of RBH |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
0.12 |
|
||
|
Tax items |
|
— |
|
— |
|
— |
|
— |
|
— |
|
0.02 |
|
0.02 |
|
— |
|
||
|
Adjusted Diluted EPS |
|
$ 1.00 |
|
$ 1.41 |
|
$ 2.41 |
|
$ 1.44 |
|
$ 3.85 |
|
$ 1.25 |
|
$ 5.10 |
|
$ 1.09 |
(3) |
||
|
Net earnings attributable to RBH |
|
— |
(1) |
(0.08) |
|
(0.08) |
(1) |
(0.09) |
|
(0.18) |
(1) |
(0.08) |
|
(0.26) |
(1) |
— |
(2) |
||
|
Pro Forma Adjusted Diluted EPS |
|
$ 1.00 |
|
$ 1.33 |
|
$ 2.33 |
|
$ 1.35 |
|
$ 3.67 |
|
$ 1.17 |
|
$ 4.84 |
|
|
|
(1) Represents the impact of net earnings attributable to RBH from March 22, 2018 through end of period date |
|
|
|
|
|
|
|
|
|
|
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 |
Currency |
Net |
Acquisitions |
Net |
|
Quarters Ended |
|
Net |
|
Total |
Excluding |
Excluding |
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 |
|
Combustible Products |
|
2018 |
|
% Change |
||||||
$ 2,178 |
$ (81) |
$ 2,259 |
$ — |
$ 2,259 |
|
European Union |
|
$ 2,225 |
|
(2.1)% |
1.6% |
1.6% |
664 |
(4) |
668 |
— |
668 |
|
Eastern Europe |
|
705 |
|
(5.8)% |
(5.2)% |
(5.2)% |
1,064 |
(17) |
1,081 |
— |
1,081 |
|
Middle East & Africa |
|
1,019 |
|
4.4% |
6.1% |
6.1% |
1,246 |
15 |
1,231 |
— |
1,231 |
|
South & Southeast Asia |
|
1,197 |
|
4.1% |
2.8% |
2.8% |
680 |
(8) |
687 |
— |
687 |
|
East Asia & Australia |
|
789 |
|
(13.8)% |
(12.8)% |
(12.8)% |
466 |
(8) |
473 |
— |
473 |
|
Latin America & Canada |
|
748 |
|
(37.7)% |
(36.7)% |
(36.7)% |
$ 6,298 |
$ (102) |
$ 6,399 |
$ — |
$ 6,399 |
|
Total Combustible |
|
$ 6,681 |
|
(5.7)% |
(4.2)% |
(4.2)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 |
|
Reduced-Risk Products |
|
2018 |
|
% Change |
||||||
$ 467 |
$ (17) |
$ 484 |
$ — |
$ 484 |
|
European Union |
|
$ 242 |
|
92.5% |
99.6% |
99.6% |
235 |
(3) |
238 |
— |
238 |
|
Eastern Europe |
|
73 |
|
+100% |
+100% |
+100% |
63 |
1 |
62 |
— |
62 |
|
Middle East & Africa |
|
124 |
|
(49.2)% |
(49.9)% |
(49.9)% |
— |
— |
— |
— |
— |
|
South & Southeast Asia |
|
— |
|
—% |
—% |
—% |
572 |
7 |
566 |
— |
566 |
|
East Asia & Australia |
|
377 |
|
51.6% |
49.9% |
49.9% |
7 |
— |
8 |
— |
8 |
|
Latin America & Canada(1) |
|
5 |
|
44.2% |
50.5% |
50.5% |
$ 1,344 |
$ (13) |
$ 1,358 |
$ — |
$ 1,358 |
|
Total RRPs |
|
$ 823 |
|
63.4% |
65.1% |
65.1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 |
|
PMI |
|
2018 |
|
% Change |
||||||
$ 2,645 |
$ (98) |
$ 2,743 |
$ — |
$ 2,743 |
|
European Union |
|
$ 2,467 |
|
7.2% |
11.2% |
11.2% |
899 |
(7) |
906 |
— |
906 |
|
Eastern Europe |
|
778 |
|
15.6% |
16.5% |
16.5% |
1,127 |
(16) |
1,143 |
— |
1,143 |
|
Middle East & Africa |
|
1,143 |
|
(1.4)% |
—% |
—% |
1,246 |
15 |
1,231 |
— |
1,231 |
|
South & Southeast Asia |
|
1,197 |
|
4.1% |
2.8% |
2.8% |
1,252 |
(1) |
1,253 |
— |
1,253 |
|