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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Philip Morris International Inc | NYSE:PM | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.05 | 0.05% | 97.45 | 97.90 | 96.65 | 97.76 | 4,517,747 | 01:00:00 |
Increases 2019 Full-Year Reported Diluted EPS Forecast to at Least $4.94 (from at Least $4.87) vs. $5.08 in 2018; Reflecting Currency-Neutral Like-for-Like Adjusted Diluted EPS Growth of at Least 9%
Regulatory News:
Philip Morris International Inc. (NYSE: PM) today announced its 2019 second-quarter results and increases its 2019 full-year reported diluted earnings per share forecast. Comparisons presented in this press release on a "like-for-like" basis reflect pro forma 2018 results, which have been adjusted for the deconsolidation of PMI's Canadian subsidiary, Rothmans, Benson & Hedges, Inc. (RBH), effective March 22, 2019 (the date of deconsolidation). In addition, reflecting the deconsolidation, PMI's total market share has been restated for previous periods.
2019 SECOND-QUARTER & YEAR-TO-DATE HIGHLIGHTS
2019 Second-Quarter
2019 Six Months Year-to-Date
"Building on our encouraging start to the year, we delivered another strong quarter that continues to demonstrate the soundness of our strategies and the quality of our execution," said André Calantzopoulos, Chief Executive Officer.
"Of particular note is our combined cigarette and heated tobacco unit shipment volume, which -- for the first six months of the year -- was up by 0.1% on a like-for-like basis. This positive performance was led by robust in-market heated tobacco unit year-to-date sales growth of 34.0%, making HEETS/HeatSticks, combined, a top-ten international tobacco brand, despite only being present in approximately one quarter of our markets. In the markets where they are sold, our heated tobacco brands held a sizable combined share of 5.0% year-to-date, driving a total international share of 2.1%, up by 0.6 points."
"Our strong year-to-date results are the reason behind today's announcement to increase our full-year guidance and raise our currency-neutral, like-for-like 2019 full-year adjusted diluted EPS growth rate by one percentage point to at least 9% in a further demonstration of our overall confidence in PMI's short and long-term growth prospects. This projection includes additional investment behind our RRP portfolio to support geographic expansion and portfolio development that should help us enter 2020 in an even stronger position."
2019 FULL-YEAR FORECAST
Full-Year
2019 EPS Forecast
2019 Forecast
2018
Adjusted Growth
Reported Diluted EPS
≥ $4.94
(a)
$5.08
2018 Tax items
—
0.02
2019 Tax items
(0.04
)
—
2019 Asset impairment and exit costs
0.03
—
2019 Canadian tobacco litigation-related expense
0.09
—
2019 Loss on deconsolidation of RBH
0.12
—
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, excl. 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.
(b) Net reported diluted EPS attributable to RBH from March 22, 2018 through December 31, 2018.
(c) Pro forma.
PMI revises its full-year 2019 reported diluted EPS forecast to be at least $4.94 at prevailing exchange rates, compared to the previously communicated forecast of at least $4.87, versus $5.08 in 2018.
This revised full-year guidance reflects:
2019 Full-Year Forecast Overview & Assumptions
This forecast assumes:
This forecast further assumes:
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 Berlin, Germany, by January 2020. Factors described in the Forward-Looking and Cautionary Statements section of this release represent continuing risks to these projections.
FDA Authorization for Sale of IQOS in the United States
On April 30, 2019, the U.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 in the United States. The FDA’s decision follows its comprehensive assessment of PMI’s premarket tobacco product applications (PMTAs) submitted to the Agency in 2017.
PMI will bring IQOS to the U.S. through an exclusive license with Altria Group, Inc., whose subsidiary, Philip Morris USA, will market the product and comply with the provisions set forth in the FDA's marketing order, and has the expertise and infrastructure to ensure a successful launch, beginning with the initial lead market of Atlanta, Georgia.
For additional information about the FDA's marketing order, see the FDA News Release of April 30, 2019, set out at the end of this release.
Conference Call
A conference call, hosted by Martin King, Chief Financial Officer, will be webcast at 9:00 a.m., Eastern Time, on July 18, 2019. Access is at www.pmi.com/2019Q2earnings. The audio webcast may also be accessed on iOS or Android devices by downloading PMI’s free Investor Relations Mobile Application at www.pmi.com/irapp.
CONSOLIDATED SHIPMENT VOLUME & MARKET SHARE
PMI Shipment Volume by Region
Second-Quarter
Six Months Year-to-Date
(million units)
2019
2018
Change
2019
2018
Change
Cigarettes
European Union
46,367
47,984
(3.4
)%
85,855
87,655
(2.1
)%
Eastern Europe
27,080
28,454
(4.8
)%
47,400
50,493
(6.1
)%
Middle East & Africa
31,659
34,177
(7.4
)%
64,963
63,425
2.4
%
South & Southeast Asia
46,376
44,788
3.5
%
87,868
85,006
3.4
%
East Asia & Australia
13,845
15,114
(8.4
)%
25,958
29,205
(11.1
)%
Latin America & Canada
18,472
20,204
(8.6
)%
36,052
39,217
(8.1
)%
Total PMI
183,799
190,721
(3.6
)%
348,096
355,001
(1.9
)%
Heated Tobacco Units
European Union
3,043
1,195
+100%
5,336
2,123
+100%
Eastern Europe
2,807
951
+100%
4,355
1,515
+100%
Middle East & Africa
719
971
(26.0
)%
1,473
1,680
(12.3
)%
South & Southeast Asia
—
—
—
%
—
—
—
%
East Asia & Australia
8,428
7,838
7.5
%
15,277
15,180
0.6
%
Latin America & Canada
59
32
84.4
%
113
55
+100%
Total PMI
15,056
10,987
37.0
%
26,554
20,553
29.2
%
Cigarettes and Heated Tobacco Units
European Union
49,410
49,179
0.5
%
91,191
89,778
1.6
%
Eastern Europe
29,887
29,405
1.6
%
51,755
52,008
(0.5
)%
Middle East & Africa
32,378
35,148
(7.9
)%
66,436
65,105
2.0
%
South & Southeast Asia
46,376
44,788
3.5
%
87,868
85,006
3.4
%
East Asia & Australia
22,273
22,952
(3.0
)%
41,235
44,385
(7.1
)%
Latin America & Canada
18,531
20,236
(8.4
)%
36,165
39,272
(7.9
)%
Total PMI
198,855
201,708
(1.4
)%
374,650
375,554
(0.2
)%
Second-Quarter
PMI's total shipment volume decreased by 1.4%, or by 0.7% on a like-for-like basis, principally due to:
partly offset by
Impact of Inventory Movements
On a like-for-like basis, excluding the net unfavorable impact of estimated distributor inventory movements of approximately 0.2 billion units, PMI’s total in-market sales declined by 0.6%, due to a 2.6% decline of cigarette in-market sales, partially offset by a 33.3% increase in heated tobacco unit in-market sales.
Six Months Year-to-Date
PMI's total shipment volume decreased by 0.2%, or increased by 0.1% on a like-for-like basis, due to:
partly offset by
Impact of Inventory Movements
On a like-for-like basis, excluding the net unfavorable impact of estimated distributor inventory movements of approximately 1.3 billion units, PMI’s total in-market sales growth was 0.5%, driven by a 34.0% increase in heated tobacco unit in-market sales, partly offset by a 1.4% decline of cigarette in-market sales.
PMI Shipment Volume by Brand
PMI Shipment Volume by Brand
Second-Quarter
Six Months Year-to-Date
(million units)
2019
2018
Change
2019
2018
Change
Cigarettes
Marlboro
68,060
68,893
(1.2
)%
128,024
126,866
0.9
%
L&M
23,522
23,196
1.4
%
45,337
42,422
6.9
%
Chesterfield
14,202
14,926
(4.8
)%
28,501
28,801
(1.0
)%
Philip Morris
12,950
12,523
3.4
%
23,673
23,182
2.1
%
Parliament
9,847
10,993
(10.4
)%
18,677
19,453
(4.0
)%
Sampoerna A
9,355
10,174
(8.0
)%
17,256
18,798
(8.2
)%
Dji Sam Soe
7,839
6,877
14.0
%
14,490
13,573
6.8
%
Bond Street
7,741
8,390
(7.7
)%
13,412
15,365
(12.7
)%
Lark
5,349
5,969
(10.4
)%
10,619
11,546
(8.0
)%
Fortune
3,441
4,155
(17.2
)%
6,487
7,739
(16.2
)%
Others
21,493
24,625
(12.7
)%
41,620
47,256
(11.9
)%
Total Cigarettes
183,799
190,721
(3.6
)%
348,096
355,001
(1.9
)%
Heated Tobacco Units
15,056
10,987
37.0
%
26,554
20,553
29.2
%
Total PMI
198,855
201,708
(1.4
)%
374,650
375,554
(0.2
)%
Note: Sampoerna A includes Sampoerna; Philip Morris includes Philip Morris/Dubliss; and Lark includes Lark Harmony.
Second-Quarter
PMI's cigarette shipment volume of the following brands decreased:
The increase in PMI's heated tobacco unit shipment volume was mainly driven by the EU, notably Italy, Eastern Europe, notably Russia and Ukraine, as well as Japan, partly offset by Korea and PMI Duty Free.
PMI's cigarette shipment volume of the following brands increased:
International Share of Market
PMI's total international market share (excluding China and the United States), defined as PMI's cigarette and heated tobacco unit sales volume as a percentage of total industry cigarette and heated tobacco unit sales volume, increased by 0.1 point to 28.3%, reflecting:
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 0.3 points.
Six Months Year-to-Date
PMI's cigarette shipment volume of the following brands decreased:
The increase in PMI's heated tobacco unit shipment volume was mainly driven by: the EU, notably Italy, Eastern Europe, notably Russia and Ukraine, and Japan; partly offset by Korea and PMI Duty Free.
PMI's cigarette shipment volume of the following brands increased:
International Share of Market
PMI's total international market share (excluding China and the United States), defined as PMI's cigarette and heated tobacco unit sales volume as a percentage of total industry cigarette and heated tobacco unit sales volume, increased by 0.5 points to 28.2%, reflecting:
PMI's total international cigarette market share, defined as PMI's cigarette sales volume as a percentage of total industry cigarette sales volume, was 26.8%, up by 0.1 point.
CONSOLIDATED FINANCIAL SUMMARY
Second-Quarter
Financial Summary - Quarters Ended June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other (1)
(in millions)
Net Revenues
$ 7,699
$ 7,726
(0.3
)%
5.4
%
(27
)
(447
)
459
209
(248
)
Cost of Sales
(2,665)
(2,744)
2.9
%
(2.0
)%
79
134
—
(84
)
29
Marketing, Administration and Research Costs
(1,831)
(1,868)
2.0
%
(5.9
)%
37
148
—
—
(111
)
Amortization of Intangibles
(16)
(21)
23.8
%
23.8
%
5
—
—
—
5
Operating Income
$ 3,187
$ 3,093
3.0
%
8.4
%
94
(165
)
459
125
(325
)
Asset Impairment & Exit Costs (2)
(23
)
—
—
%
—
%
(23
)
—
—
—
(23
)
Adjusted Operating Income
$ 3,210
$ 3,093
3.8
%
9.1
%
117
(165
)
459
125
(302
)
Adjusted Operating Income Margin
41.7
%
40.0
%
1.7pp
1.4pp
(1) Cost/Other variance includes the impact of the RBH deconsolidation.
(2) Included in Marketing, Administration and Research Costs above.
Net revenues, excluding unfavorable currency, increased by 5.4%, mainly reflecting: a favorable pricing variance, driven notably by Germany, Indonesia, Japan, the Philippines and Turkey, partly offset by Argentina; as well as a favorable volume/mix, mainly driven by favorable volume/mix of heated tobacco units, notably in the EU and Eastern Europe, partly offset by unfavorable volume/mix of cigarettes, mainly in the EU and East Asia & Australia. The currency-neutral growth in net revenues of 5.4% came despite the unfavorable impact of $248 million, shown in "Cost/Other," predominantly resulting from the deconsolidation of RBH. On a like-for-like basis, net revenues, excluding unfavorable currency, increased by 9.0%, as detailed in the attached Schedule 9.
Operating income, excluding unfavorable currency, increased by 8.4%. Excluding asset impairment and exit charges related to a plant closure in Colombia as part of global manufacturing infrastructure optimization, adjusted operating income, excluding unfavorable currency, increased by 9.1%, primarily reflecting: a favorable pricing variance; favorable volume/mix, notably in the EU; partly offset by higher manufacturing costs, higher marketing, administration and research costs and the net unfavorable impact resulting from the deconsolidation of RBH shown in "Cost/Other." On a like-for-like basis, adjusted operating income, excluding unfavorable currency, increased by 15.7%, as detailed in the attached Schedule 9.
Adjusted operating income margin, excluding currency, increased by 1.4 points to 41.4%, reflecting the factors mentioned above, as detailed in the attached Schedule 8, or by 2.4 points to 41.4% on a like-for-like basis, as detailed in the attached Schedule 9.
Six Months Year-to-Date
Financial Summary - Six Months Ended June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other (1)
(in millions)
Net Revenues
$ 14,450
$ 14,622
(1.2
)%
4.4
%
(172
)
(816
)
687
194
(237
)
Cost of Sales
(5,130
)
(5,359
)
4.3
%
(0.3
)%
229
244
—
(74
)
59
Marketing, Administration and Research Costs (2)
(4,048
)
(3,701
)
(9.4
)%
(16.5
)%
(347
)
262
—
—
(609
)
Amortization of Intangibles
(35
)
(43
)
18.6
%
16.3
%
8
1
—
—
7
Operating Income
$ 5,237
$ 5,519
(5.1
)%
0.5
%
(282
)
(309
)
687
120
(780
)
Asset Impairment & Exit Costs (3)
(43
)
—
—
%
—
%
(43
)
—
—
—
(43
)
Canadian Tobacco Litigation-Related Expense (3)
(194
)
—
—
%
—
%
(194
)
—
—
—
(194
)
Loss on Deconsolidation of RBH (3)
(239
)
—
—
%
—
%
(239
)
—
—
—
(239
)
Adjusted Operating Income
$ 5,713
$ 5,519
3.5
%
9.1
%
194
(309
)
687
120
(304
)
Adjusted Operating Income Margin
39.5
%
37.7
%
1.8pp
1.7pp
(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, and the impact of the RBH deconsolidation.
(3) Included in Marketing, Administration and Research Costs above.
Net revenues, excluding unfavorable currency, increased by 4.4%, mainly reflecting: a favorable pricing variance, notably in Canada, Germany, Indonesia, Japan, the Philippines and Turkey, partly offset by Argentina and Saudi Arabia; and favorable volume/mix, mainly driven by favorable volume/mix of heated tobacco units in the EU and Eastern Europe, partly offset by unfavorable volume/mix of cigarettes, mainly in the EU, Eastern Europe and East Asia & Australia, as well as unfavorable volume/mix of heated tobacco units in East Asia & Australia. The currency-neutral growth in net revenues of 4.4% came despite the unfavorable impact of $237 million, shown in "Cost/Other," predominantly resulting from the deconsolidation of RBH. On a like-for-like basis, net revenues, excluding unfavorable currency, increased by 6.2%, as detailed in the attached Schedule 9.
Operating income, excluding unfavorable currency, increased by 0.5%. Excluding the loss on deconsolidation of RBH, the Canadian tobacco litigation-related expense, and asset impairment and exit charges related to plant closures in Colombia and Pakistan as part of global manufacturing infrastructure optimization, adjusted operating income, excluding unfavorable currency, increased by 9.1%, primarily reflecting: a favorable pricing variance; favorable volume/mix, mainly in the EU, partly offset by East Asia & Australia; and lower manufacturing costs; partly offset by higher marketing, administration and research costs, the net unfavorable impact resulting from the deconsolidation of RBH, shown in "Cost/Other," as well as increased investment behind reduced-risk products mainly in the EU and Eastern Europe. On a like-for-like basis, adjusted operating income, excluding unfavorable currency, increased by 12.7%, as detailed in the attached Schedule 9.
Adjusted operating income margin, excluding currency, increased by 1.7 points to 39.4%, reflecting the factors mentioned above, as detailed in the attached Schedule 8, or by 2.2 points to 39.4% on a like-for-like basis, as detailed in the attached Schedule 9.
EUROPEAN UNION REGION
Second-Quarter
Financial Summary - Quarters Ended June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 2,577
$ 2,503
3.0
%
11.6
%
74
(216
)
84
206
—
Operating Income
$ 1,195
$ 1,177
1.5
%
11.8
%
18
(121
)
84
168
(113
)
Asset Impairment & Exit Costs
—
—
—
%
—
%
—
—
—
—
—
Adjusted Operating Income
$ 1,195
$ 1,177
1.5
%
11.8
%
18
(121
)
84
168
(113
)
Adjusted Operating Income Margin
46.4
%
47.0
%
(0.6)pp
0.1pp
Net revenues, excluding unfavorable currency, increased by 11.6%, reflecting a favorable pricing variance, driven principally by France and Germany, and favorable volume/mix, driven by favorable heated tobacco unit volume, notably in the Czech Republic, Germany, Italy and Poland, partly offset by unfavorable cigarette volume, notably in France and Italy, and unfavorable cigarette volume/mix in Germany.
Operating income, excluding unfavorable currency, increased by 11.8%, mainly reflecting: a favorable pricing variance; favorable volume/mix, notably in the Czech Republic, Italy and Poland, driven by heated tobacco unit volume, partly offset by lower cigarette volume, notably in France and Italy, and unfavorable volume/mix in Germany; partially offset by higher manufacturing costs and higher marketing, administration and research costs primarily related to reduced-risk products.
Adjusted operating income margin, excluding currency, increased by 0.1 point to 47.1%, reflecting the factors mentioned above, as detailed on Schedule 8.
Six Months Year-to-Date
Financial Summary - Six Months Ended June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 4,736
$ 4,491
5.5
%
13.4
%
245
(359
)
152
452
—
Operating Income
$ 2,091
$ 1,917
9.1
%
19.2
%
174
(195
)
152
365
(148
)
Asset Impairment & Exit Costs
—
—
—
%
—
%
—
—
—
—
—
Adjusted Operating Income
$ 2,091
$ 1,917
9.1
%
19.2
%
174
(195
)
152
365
(148
)
Adjusted Operating Income Margin
44.2
%
42.7
%
1.5pp
2.2pp
Net revenues, excluding unfavorable currency, increased by 13.4%, reflecting a favorable pricing variance, driven principally by Germany, and favorable volume/mix, primarily reflecting favorable heated tobacco unit volume/mix, notably in the Czech Republic, Germany, Italy and Poland, partly offset by lower cigarette volume, notably in France and Italy, and lower cigarette volume/mix in Germany.
Operating income, excluding unfavorable currency, increased by 19.2%, mainly reflecting: a favorable pricing variance; favorable volume/mix, notably in the Czech Republic, Italy and Poland, driven by heated tobacco unit volume, partially offset by lower cigarette volume/mix, notably in France, Germany and Italy; partially offset by higher manufacturing costs and higher marketing, administration and research costs primarily related to reduced-risk products.
Adjusted operating income margin, excluding currency, increased by 2.2 points to 44.9%, reflecting the factors mentioned above, as detailed on Schedule 8.
Total Market, PMI Shipment & Market Share Commentaries
European Union Key Data
Second-Quarter
Six Months Year-to-Date
Change
Change
2019
2018
% / pp
2019
2018
% / pp
Total Market (billion units)
124.3
126.2
(1.5
)%
231.5
234.0
(1.1
)%
PMI Shipment Volume (million units)
Cigarettes
46,367
47,984
(3.4
)%
85,855
87,655
(2.1
)%
Heated Tobacco Units
3,043
1,195
+100.0%
5,336
2,123
+100.0%
Total EU
49,410
49,179
0.5
%
91,191
89,778
1.6
%
PMI Market Share
Marlboro
18.1
%
18.5
%
(0.4
)
18.1
%
18.4
%
(0.3
)
L&M
6.9
%
7.0
%
(0.1
)
6.8
%
6.9
%
(0.1
)
Chesterfield
5.8
%
5.9
%
(0.1
)
5.9
%
5.9
%
—
Philip Morris
2.7
%
2.9
%
(0.2
)
2.8
%
3.0
%
(0.2
)
HEETS
2.4
%
1.0
%
1.4
2.3
%
0.9
%
1.4
Others
3.0
%
3.1
%
(0.1
)
3.0
%
3.2
%
(0.2
)
Total EU
38.9
%
38.4
%
0.5
38.9
%
38.3
%
0.6
Second-Quarter
The estimated total market in the EU decreased by 1.5% to 124.3 billion units, mainly due to:
partly offset by
PMI's total shipment volume increased by 0.5% to 49.4 billion units, notably driven by:
partly offset by:
Six Months Year-to-Date
The estimated total market in the EU decreased by 1.1% to 231.5 billion units, notably due to:
partly offset by
PMI's total shipment volume increased by 1.6% to 91.2 billion units, notably driven by:
partly offset by
EASTERN EUROPE REGION
Second-Quarter
Financial Summary - Quarters Ended June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 822
$ 760
8.2
%
16.8
%
62
(66
)
36
92
—
Operating Income
$ 256
$ 261
(1.9
)%
4.2
%
(5
)
(16
)
36
27
(52
)
Asset Impairment & Exit Costs
—
—
—
%
—
%
—
—
—
—
—
Adjusted Operating Income
$ 256
$ 261
(1.9
)%
4.2
%
(5
)
(16
)
36
27
(52
)
Adjusted Operating Income Margin
31.1
%
34.3
%
(3.2)pp
(3.7)pp
Net revenues, excluding unfavorable currency, increased by 16.8%, reflecting a favorable pricing variance, driven notably by Russia and Ukraine, and favorable volume/mix, predominantly driven by heated tobacco unit volume in Russia, partly offset by lower cigarette volume/mix in Russia.
Operating income, excluding unfavorable currency, increased by 4.2%, reflecting: a favorable pricing variance; favorable volume/mix, predominantly driven by heated tobacco unit volume in Russia, partly offset by lower cigarette volume/mix in Russia; partly offset by higher marketing, administration and research costs, notably reflecting increased investments behind reduced-risk products, primarily in Russia in support of geographic expansion.
Adjusted operating income margin, excluding currency, decreased by 3.7 points to 30.6%, reflecting the factors mentioned above, as detailed on Schedule 8.
Six Months Year-to-Date
Financial Summary - Six Months Ended June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 1,401
$ 1,327
5.6
%
15.4
%
74
(130
)
53
151
—
Operating Income
$ 385
$ 412
(6.6
)%
1.9
%
(27
)
(35
)
53
41
(86
)
Asset Impairment & Exit Costs
—
—
—
%
—
%
—
—
—
—
—
Adjusted Operating Income
$ 385
$ 412
(6.6
)%
1.9
%
(27
)
(35
)
53
41
(86
)
Adjusted Operating Income Margin
27.5
%
31.0
%
(3.5)pp
(3.6)pp
Net revenues, excluding unfavorable currency, increased by 15.4%, reflecting a favorable pricing variance, driven notably by Ukraine, and favorable volume/mix, predominantly driven by heated tobacco unit volume in Russia, partly offset by lower cigarette volume/mix in Russia.
Operating income, excluding unfavorable currency, increased by 1.9%, reflecting: a favorable pricing variance; favorable volume/mix, predominantly driven by heated tobacco unit volume in Russia, partly offset by lower cigarette volume/mix in Russia; partly offset by higher manufacturing costs and higher marketing, administration and research costs, notably reflecting increased investments behind reduced-risk products, primarily in Russia in support of geographic expansion.
Adjusted operating income margin, excluding currency, decreased by 3.6 points to 27.4%, reflecting the factors mentioned above, as detailed on Schedule 8.
Total Market, PMI Shipment & Market Share Commentaries
PMI Shipment Volume
Second-Quarter
Six Months Year-to-Date
(million units)
2019
2018
Change
2019
2018
Change
Cigarettes
27,080
28,454
(4.8
)%
47,400
50,493
(6.1
)%
Heated Tobacco Units
2,807
951
+100.0%
4,355
1,515
+100.0%
Total Eastern Europe
29,887
29,405
1.6
%
51,755
52,008
(0.5
)%
Second-Quarter
The estimated total market in Eastern Europe decreased, notably due to:
PMI's total shipment volume increased by 1.6% to 29.9 billion units, driven by:
partly offset by
Six Months Year-to-Date
The estimated total market in Eastern Europe decreased, notably due to:
PMI's total shipment volume decreased by 0.5% to 51.8 billion units, primarily in:
partly offset by
MIDDLE EAST & AFRICA REGION
Second-Quarter
Financial Summary - Quarters Ended June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 1,004
$ 1,022
(1.8
)%
7.0
%
(18
)
(90
)
115
(48
)
5
Operating Income
$ 441
$ 403
9.4
%
20.8
%
38
(46
)
115
(47
)
16
Asset Impairment & Exit Costs
—
—
—
%
—
%
—
—
—
—
—
Adjusted Operating Income
$ 441
$ 403
9.4
%
20.8
%
38
(46
)
115
(47
)
16
Adjusted Operating Income Margin
43.9
%
39.4
%
4.5pp
5.1pp
Net revenues, excluding unfavorable currency, increased by 7.0%, primarily reflecting a favorable pricing variance, driven predominantly by Turkey, partly offset by unfavorable volume/mix, notably due to unfavorable heated tobacco unit volume in PMI Duty Free, and unfavorable cigarette volume in the GCC, primarily Saudi Arabia, and Turkey, partly offset by Egypt.
Operating income, excluding unfavorable currency, increased by 20.8%, 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, and unfavorable cigarette volume in the GCC, primarily Saudi Arabia, and Turkey.
Adjusted operating income margin, excluding currency, increased by 5.1 points to 44.5%, reflecting the factors mentioned above, as detailed on Schedule 8.
Six Months Year-to-Date
Financial Summary - Six Months Ended June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 1,931
$ 1,983
(2.6
)%
5.3
%
(52
)
(158
)
65
25
16
Operating Income
$ 785
$ 777
1.0
%
10.3
%
8
(72
)
65
(12
)
27
Asset Impairment & Exit Costs
—
—
—
%
—
%
—
—
—
—
—
Adjusted Operating Income
$ 785
$ 777
1.0
%
10.3
%
8
(72
)
65
(12
)
27
Adjusted Operating Income Margin
40.7
%
39.2
%
1.5pp
1.8pp
Net revenues, excluding unfavorable currency, increased by 5.3%, mainly reflecting: a favorable pricing variance, driven by Egypt, PMI Duty Free and Turkey, partly offset by Saudi Arabia; favorable volume/mix, driven by favorable cigarette volume/mix, notably in Saudi Arabia and Turkey, partly offset by unfavorable cigarette and heated tobacco unit volume in PMI Duty Free; and a favorable cost/other variance mainly driven by the timing of other revenues.
Operating income, excluding unfavorable currency, increased by 10.3%, mainly reflecting: a favorable pricing variance, lower manufacturing costs and a favorable cost/other variance, as noted above; partly offset by unfavorable volume/mix, notably due to unfavorable cigarette and heated tobacco unit volume in PMI Duty Free, partly offset by favorable cigarette volume/mix in Saudi Arabia and favorable cigarette volume in Turkey.
Adjusted operating income margin, excluding currency, increased by 1.8 points to 41.0%, reflecting the factors mentioned above, as detailed on Schedule 8.
Total Market, PMI Shipment & Market Share Commentaries
PMI Shipment Volume
Second-Quarter
Six Months Year-to-Date
(million units)
2019
2018
Change
2019
2018
Change
Cigarettes
31,659
34,177
(7.4
)%
64,963
63,425
2.4
%
Heated Tobacco Units
719
971
(26.0
)%
1,473
1,680
(12.3
)%
Total Middle East & Africa
32,378
35,148
(7.9
)%
66,436
65,105
2.0
%
Second-Quarter
The estimated total market in the Middle East & Africa increased, notably driven by:
partly offset by
PMI's total shipment volume decreased by 7.9% to 32.4 billion units, notably in:
partly offset by
Six Months Year-to-Date
The estimated total market in the Middle East & Africa increased, notably driven by:
partly offset by
PMI's total shipment volume increased by 2.0% to 66.4 billion units, notably in:
partly offset by
SOUTH & SOUTHEAST ASIA REGION
Second-Quarter
Financial Summary - Quarters Ended June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 1,248
$ 1,156
8.0
%
10.7
%
92
(32
)
114
10
—
Operating Income
$ 492
$ 440
11.8
%
15.0
%
52
(14
)
114
9
(57
)
Asset Impairment & Exit Costs
—
—
—
%
—
%
—
—
—
—
—
Adjusted Operating Income
$ 492
$ 440
11.8
%
15.0
%
52
(14
)
114
9
(57
)
Adjusted Operating Income Margin
39.4
%
38.1
%
1.3pp
1.4pp
Net revenues, excluding unfavorable currency, increased by 10.7%, predominantly reflecting a favorable pricing variance driven by Indonesia and the Philippines.
Operating income, excluding unfavorable currency, increased by 15.0%, predominantly reflecting a favorable pricing variance, partly offset by higher manufacturing costs, mainly due to Indonesia, and higher marketing, administration and research costs, notably due to the Philippines, partly offset by Indonesia.
Adjusted operating income margin, excluding currency, increased by 1.4 points to 39.5%, reflecting the factors mentioned above, as detailed on Schedule 8.
Six Months Year-to-Date
Financial Summary - Six Months Ended June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 2,361
$ 2,237
5.5
%
9.7
%
124
(93
)
190
27
—
Operating Income
$ 932
$ 869
7.2
%
12.3
%
63
(44
)
190
23
(106
)
Asset Impairment & Exit Costs (1)
(20
)
—
—
%
—
%
(20
)
—
—
—
(20
)
Adjusted Operating Income
$ 952
$ 869
9.6
%
14.6
%
83
(44
)
190
23
(86
)
Adjusted Operating Income Margin
40.3
%
38.8
%
1.5pp
1.8pp
(1) Included in marketing, administration and research costs at the consolidated operating income level.
Net revenues, excluding unfavorable currency, increased by 9.7%, reflecting: a favorable pricing variance, driven principally by Indonesia and the Philippines, as well as a favorable volume/mix, largely driven by favorable cigarette volume and mix in the Philippines, partly offset by lower cigarette volume and mix in Indonesia.
Operating income, excluding unfavorable currency, increased by 12.3%. Excluding asset impairment and exit costs related to a plant closure in Pakistan in the first quarter of 2019 as part of global manufacturing infrastructure optimization, adjusted operating income, excluding unfavorable currency, increased by 14.6%, mainly reflecting: a favorable pricing variance; favorable volume/mix, mainly driven by favorable cigarette volume and mix in the Philippines, partly offset by lower cigarette volume and mix in Indonesia; partly offset by higher manufacturing costs, mainly due to Indonesia and the Philippines, and higher marketing, administration and research costs, partly due to the Philippines.
Adjusted operating income margin, excluding currency, increased by 1.8 points to 40.6%, reflecting the factors mentioned above, as detailed on Schedule 8.
Total Market, PMI Shipment & Market Share Commentaries
PMI Shipment Volume
Second-Quarter
Six Months Year-to-Date
(million units)
2019
2018
Change
2019
2018
Change
Cigarettes
46,376
44,788
3.5
%
87,868
85,006
3.4
%
Heated Tobacco Units
—
—
—
%
—
—
—
%
Total South & Southeast Asia
46,376
44,788
3.5
%
87,868
85,006
3.4
%
Second-Quarter
The estimated total market in South & Southeast Asia increased, notably driven by:
partly offset by
PMI's total shipment volume increased by 3.5% to 46.4 billion units, notably driven by:
Six Months Year-to-Date
The estimated total market in South & Southeast Asia increased, notably driven by:
partly offset by
PMI's total shipment volume increased by 3.4% to 87.9 billion units, notably driven by:
partly offset by
EAST ASIA & AUSTRALIA REGION
Second-Quarter
Financial Summary - Quarters Ended June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 1,521
$ 1,478
2.9
%
4.6
%
43
(25
)
121
(53
)
—
Operating Income
$ 642
$ 498
28.9
%
23.7
%
144
26
121
(32
)
29
Asset Impairment & Exit Costs
—
—
—
%
—
%
—
—
—
—
—
Adjusted Operating Income
$ 642
$ 498
28.9
%
23.7
%
144
26
121
(32
)
29
Adjusted Operating Income Margin
42.2
%
33.7
%
8.5pp
6.1pp
During the quarter, net revenues, excluding currency, increased by 4.6%, reflecting a favorable pricing variance, driven predominantly by Japan, partly offset by unfavorable volume/mix, mainly due to unfavorable cigarette volume in Australia and Japan and unfavorable cigarette and heated tobacco unit volume in Korea.
Operating income, excluding favorable currency, increased by 23.7%, mainly reflecting a favorable pricing variance and lower manufacturing costs, mainly in Korea, as well as lower marketing, administration and research costs, partly offset by unfavorable volume/mix, mainly due to unfavorable cigarette volume in Australia and Japan and unfavorable cigarette and heated tobacco unit volume in Korea, partially offset by heated tobacco unit volume in Japan.
Adjusted operating income margin, excluding currency, increased by 6.1 points to 39.8%, reflecting the factors mentioned above, as detailed on Schedule 8.
Six Months Year-to-Date
Financial Summary - Six Months Ended June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 2,842
$ 3,069
(7.4
)%
(6.6
)%
(227
)
(25
)
207
(409
)
—
Operating Income
$ 1,069
$ 1,013
5.5
%
3.5
%
56
21
207
(254
)
82
Asset Impairment & Exit Costs
—
—
—
%
—
%
—
—
—
—
—
Adjusted Operating Income
$ 1,069
$ 1,013
5.5
%
3.5
%
56
21
207
(254
)
82
Adjusted Operating Income Margin
37.6
%
33.0
%
4.6pp
3.6pp
Net revenues, excluding unfavorable currency, decreased by 6.6%, reflecting a challenging comparison with the first six months of 2018 in which net revenues, excluding currency, grew by 16.8%, partly fueled by higher IQOS device shipments. The decline of 6.6% primarily reflected unfavorable volume/mix, due to lower cigarette shipment volume in Australia, lower cigarette and IQOS device shipment volume in Japan, and lower cigarette, heated tobacco unit and IQOS device shipment volume in Korea, partly offset by a favorable pricing variance driven predominantly by Japan.
Operating income, excluding favorable currency, increased by 3.5%, mainly reflecting: a favorable pricing variance, lower manufacturing costs related to Japan and Korea, lower marketing, administration and research costs, notably in Australia and Korea, partly offset by Japan; partly offset by unfavorable volume/mix as described above.
Adjusted operating income margin, excluding currency, increased by 3.6 points to 36.6%, reflecting the factors mentioned above, as detailed on Schedule 8.
Total Market, PMI Shipment & Market Share Commentaries
PMI Shipment Volume
Second-Quarter
Six Months Year-to-Date
(million units)
2019
2018
Change
2019
2018
Change
Cigarettes
13,845
15,114
(8.4
)%
25,958
29,205
(11.1
)%
Heated Tobacco Units
8,428
7,838
7.5
%
15,277
15,180
0.6
%
Total East Asia & Australia
22,273
22,952
(3.0
)%
41,235
44,385
(7.1
)%
Second-Quarter
The estimated total market in East Asia & Australia, excluding China, decreased, notably due to:
PMI's total shipment volume decreased by 3.0% to 22.3 billion units, notably in:
Six Months Year-to-Date
The estimated total market in East Asia & Australia, excluding China, decreased, notably due to:
PMI's total shipment volume decreased by 7.1% to 41.2 billion units, notably in:
LATIN AMERICA & CANADA REGION
Second-Quarter
Financial Summary - Quarters Ended June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other (1)
(in millions)
Net Revenues
$ 527
$ 807
(34.7
)%
(32.5
)%
(280
)
(18
)
(11
)
2
(253
)
Operating Income
$ 161
$ 314
(48.7
)%
(50.6
)%
(153
)
6
(11
)
—
(148
)
Asset Impairment & Exit Costs (2)
(23
)
—
—
%
—
%
(23
)
—
—
—
(23
)
Adjusted Operating Income
$ 184
$ 314
(41.4
)%
(43.3
)%
(130
)
6
(11
)
—
(125
)
Adjusted Operating Income Margin
34.9
%
38.9
%
(4.0)pp
(6.2)pp
(1) Unfavorable Cost/Other variance includes the impact of the RBH deconsolidation.
(2) Included in marketing, administration and research costs at the consolidated operating income level.
Net revenues, excluding unfavorable currency, decreased by 32.5%, almost entirely due to the unfavorable impact of $253 million, shown in "Cost/Other," resulting from the deconsolidation of RBH. On a like-for-like basis, net revenues, excluding unfavorable currency, decreased by 2.0%, as detailed in the attached Schedule 10, mainly due to an unfavorable pricing variance primarily resulting from the adoption of highly inflationary accounting in Argentina.
Operating income, excluding favorable currency, decreased by 50.6%, predominantly due to the unfavorable impact, shown in "Cost/Other," resulting from the deconsolidation of RBH. Excluding asset impairment and exit costs related to a plant closure in Colombia as part of global manufacturing infrastructure optimization, adjusted operating income, excluding favorable currency, decreased by 43.3%. On a like-for-like basis, excluding favorable currency, adjusted operating income increased by 29.0%, as detailed in the attached Schedule 10, mainly reflecting lower manufacturing costs, and lower marketing, administration and research costs, partly resulting from the adoption of highly inflationary accounting in Argentina.
Adjusted operating income margin, excluding currency, decreased by 6.2 points to 32.7%, reflecting the factors mentioned above, as detailed on Schedule 8, or increased by 7.9 points to 32.7% on a like-for-like basis, as detailed in the attached Schedule 10.
Six Months Year-to-Date
Financial Summary - Six Months Ended June 30,
Change Fav./(Unfav.)
Variance Fav./(Unfav.)
2019
2018
Total
Excl. Curr.
Total
Cur- rency
Price
Vol/ Mix
Cost/ Other (1)
(in millions)
Net Revenues
$ 1,179
$ 1,515
(22.2
)%
(18.8
)%
(336
)
(51
)
20
(52
)
(253
)
Operating Income (Loss)
$ (25)
$ 531
-(100)%
-(100)%
(556
)
16
20
(43
)
(549
)
Asset Impairment & Exit Costs (2)
(23
)
—
—
%
—
%
(23
)
—
—
—
(23
)
Canadian Tobacco Litigation-Related Expense (2)
(194
)
—
—
%
—
%
(194
)
—
—
—
(194
)
Loss on Deconsolidation of RBH (2)
(239
)
—
—
%
—
%
(239
)
—
—
—
(239
)
Adjusted Operating Income
$ 431
$ 531
(18.8
)%
(21.8
)%
(100
)
16
20
(43
)
(93
)
Adjusted Operating Income Margin
36.6
%
35.0
%
1.6pp
(1.3)pp
(1) Unfavorable Cost/Other variance includes the impact of the RBH deconsolidation.
(2) Included in marketing, administration and research costs at the consolidated operating income level.
Net revenues, excluding unfavorable currency, decreased by 18.8%, predominantly due to: the unfavorable impact of $253 million, shown in "Cost/Other," resulting from the deconsolidation of RBH. On a like-for-like basis, net revenues, excluding unfavorable currency, decreased by 2.7%, as detailed in the attached Schedule 10, reflecting: unfavorable volume, mainly due to Argentina and Canada, partly offset by Mexico (largely due to the timing of retail price increases compared to 2018); partly offset by a favorable pricing variance, notably in Canada and Mexico, partially offset by Argentina mainly due to the adoption of highly inflationary accounting.
Operating income, excluding favorable currency, decreased by over 100%, predominantly due to the unfavorable impact, shown in "Cost/Other," resulting from the deconsolidation of RBH. Excluding asset impairment and exit costs related to a plant closure in Colombia as part of global manufacturing infrastructure optimization, the Canadian tobacco litigation-related expense and the loss on deconsolidation of RBH, adjusted operating income, excluding favorable currency, decreased by 21.8%. On a like-for-like basis, excluding favorable currency, adjusted operating income increased by 16.9%, as detailed in the attached Schedule 10. This increase reflected: a favorable pricing variance; lower manufacturing costs and lower marketing, administration and research costs, partly resulting from the adoption of highly inflationary accounting in Argentina; partly offset by an unfavorable volume/mix, mainly due to lower cigarette volume in Argentina and Canada, partly offset by higher cigarette volume in Mexico (largely due to the timing of retail price increases compared to 2018).
Adjusted operating income margin, excluding currency, decreased by 1.3 points to 33.7%, reflecting the factors mentioned above, as detailed on Schedule 8, or increased by 5.6 points to 33.7% on a like-for-like basis, as detailed in the attached Schedule 10.
Total Market, PMI Shipment & Market Share Commentaries
PMI Shipment Volume
Second-Quarter
Six Months Year-to-Date
(million units)
2019
2018
Change
2019
2018
Change
Cigarettes
18,472
20,204
(8.6
)%
36,052
39,217
(8.1
)%
Heated Tobacco Units
59
32
84.4
%
113
55
+100.0%
Total Latin America & Canada
18,531
20,236
(8.4
)%
36,165
39,272
(7.9
)%
Second-Quarter
The estimated total market in Latin America & Canada decreased, notably due to:
partly offset by:
PMI's total shipment volume decreased by 8.4% to 18.5 billion units, or by 1.4% on a like-for-like basis, in part due to:
partly offset by
Six Months Year-to-Date
The estimated total market in Latin America & Canada decreased, notably due to:
partly offset by:
PMI's total shipment volume decreased by 7.9% to 36.2 billion units, or by 4.4% on a like-for-like basis mainly due to:
partly offset by
FDA NEWS RELEASE (APRIL 30, 2019)
(https://www.fda.gov/news-events/press-announcements/fda-permits-sale-iqos-tobacco-heating-system-through-premarket-tobacco-product-application-pathway)
FDA permits sale of IQOS Tobacco Heating System through premarket tobacco product application pathway
Agency places stringent marketing restrictions on heated tobacco products aimed at preventing youth access and exposure to the new products
For Immediate Release: April 30, 2019
The U.S. Food and Drug Administration today announced it has authorized the marketing of new tobacco products manufactured by Philip Morris Products S.A. for the IQOS “Tobacco Heating System” – an electronic device that heats tobacco-filled sticks wrapped in paper to generate a nicotine-containing aerosol. The FDA has placed stringent marketing restrictions on the products in an effort to prevent youth access and exposure.
Following a rigorous science-based review through the premarket tobacco product application (PMTA) pathway, the agency determined that authorizing these products for the U.S. market is appropriate for the protection of the public health because, among several key considerations, the products produce fewer or lower levels of some toxins than combustible cigarettes. The products authorized for sale include the IQOS device, Marlboro Heatsticks, Marlboro Smooth Menthol Heatsticks and Marlboro Fresh Menthol Heatsticks. While today’s action permits the tobacco products to be sold in the U.S., it does not mean these products are safe or “FDA approved.” All tobacco products are potentially harmful and addictive and those who do not use tobacco products should continue not to. Additionally, today’s action is not a decision on the separate modified risk tobacco product (MRTP) applications that the company also submitted for these products to market them with claims of reduced exposure or reduced risk.
“Ensuring new tobacco products undergo a robust premarket evaluation by the FDA is a critical part of our mission to protect the public, particularly youth, and to reduce tobacco-related disease and death. While the authorization of new tobacco products doesn’t mean they are safe, the review process makes certain that the marketing of the products is appropriate for the protection of the public health, taking into account the risks and benefits to the population as a whole. This includes how the products may impact youth use of nicotine and tobacco, and the potential for the products to completely move adult smokers away from use of combustible cigarettes,” said Mitch Zeller, J.D., director of the FDA’s Center for Tobacco Products. “Importantly, the FDA is putting in place postmarket requirements aimed at, among other things, monitoring market dynamics such as potential youth uptake. We’ll be keeping a close watch on the marketplace, including how the company is marketing these products, and will take action as necessary to ensure the continued sale of these products in the U.S. remains appropriate and make certain that the company complies with the agency’s marketing restrictions to prevent youth access and exposure. As other manufacturers seek to market new tobacco products, the FDA remains committed to upholding the vital public health standards under the law and using all the tools at our disposal to ensure the efficient and appropriate oversight of tobacco products.”
Under the PMTA pathway, manufacturers must demonstrate to the agency, among other things, that marketing of the new tobacco product would be appropriate for the protection of the public health. That standard requires the FDA to consider the risks and benefits to the population as a whole, including users and non-users of tobacco products. Importantly this includes youth. The agency’s evaluation includes reviewing a tobacco product’s components, ingredients, additives and health risks, as well as how the product is manufactured, packaged and labeled. The review for the IQOS products took into account the increased or decreased likelihood that existing tobacco product users will stop using tobacco products, and the increased or decreased likelihood that those who do not use tobacco products will start using them.
In particular, through the FDA’s scientific evaluation of the company’s applications, peer-reviewed published literature and other sources, the agency found that the aerosol produced by the IQOS Tobacco Heating System contains fewer toxic chemicals than cigarette smoke, and many of the toxins identified are present at lower levels than in cigarette smoke. For example, the carbon monoxide exposure from IQOS aerosol is comparable to environmental exposure, and levels of acrolein and formaldehyde are 89% to 95% and 66% to 91% lower than from combustible cigarettes, respectively.
Additionally, IQOS delivers nicotine in levels close to combustible cigarettes suggesting a likelihood that IQOS users may be able to completely transition away from combustible cigarettes and use IQOS exclusively. Available data, while limited, also indicate that few non-tobacco users would be likely to choose to start using IQOS, including youth.
While these non-combusted cigarettes may be referred to as “heat-not-burn” or “heated” tobacco products, they meet the definition of a cigarette in the Federal Food, Drug and Cosmetic Act. Therefore, these products must adhere to existing restrictions for cigarettes under FDA regulations, as well as other federal laws that, among other things, prohibit television and radio advertising. In addition, to further limit youth access to the products and exposure to their advertising and promotion, the FDA is placing stringent restrictions on how the products are marketed – particularly via websites and through social media platforms – by including requirements that advertising be targeted to adults. The company must also give notification to the FDA of, among other things, its labeling, advertising, marketing plans, including information about specific adult target audiences, and how it plans to restrict youth access and limit youth exposure to the products’ labeling, advertising, marketing and promotion. The agency has issued a document providing its rationale for these postmarket requirements, which highlight important considerations for reviewing the company’s applications as well any potential future PMTAs for other products.
The FDA also is requiring all package labels and advertisements for these products to include a warning about the addictiveness of nicotine, in addition to other warnings required for cigarettes, to prevent consumer misperceptions about the relative addiction risk of using IQOS compared to combusted cigarettes.
With the authorization of these products, the FDA will evaluate new available data regarding the products through postmarketing records and reports required in the marketing order. The company is required to report regularly to the FDA with information regarding the products on the market, including, but not limited to, ongoing and completed consumer research studies, advertising, marketing plans, sales data, information on current and new users, manufacturing changes and adverse experiences. The FDA may withdraw a marketing order if it, among other reasons, determines that the continued marketing of a product is no longer appropriate for the protection of the public health, such as if there is an uptake of the product by youth.
The FDA is continuing its substantive scientific review of the company’s MRTP applications. The company would need to receive an MRTP order from the FDA before they could market a tobacco product with any implicit or explicit claims that, among other things, a product reduces exposure to certain chemicals or that use of the product is less harmful than another tobacco product or would reduce the risk of disease. If a company markets a tobacco product as an MRTP without authorization, the company would be in violation of the law and may face FDA advisory or enforcement actions.
Philip Morris International: Delivering a Smoke-Free Future
Philip Morris International (PMI) is leading a transformation in the tobacco industry to create a smoke-free future and ultimately replace cigarettes with smoke-free products to the benefit of adults who would otherwise continue to smoke, society, the company and its shareholders. PMI is a leading international tobacco company engaged in the manufacture and sale of cigarettes, smoke-free products and associated electronic devices and accessories, and other nicotine-containing products in markets outside the U.S. PMI is building a future on a new category of smoke-free products that, while not risk-free, are a much better choice than continuing to smoke. Through multidisciplinary capabilities in product development, state-of-the-art facilities and scientific substantiation, PMI aims to ensure that its smoke-free products meet adult consumer preferences and rigorous regulatory requirements. PMI's smoke-free IQOS product portfolio includes heat-not-burn and nicotine-containing vapor products. As of June 30, 2019, PMI estimates that approximately 8.0 million adult smokers around the world have already stopped smoking and switched to PMI’s heat-not-burn product, available for sale in 48 markets in key cities or nationwide under the IQOS brand. For more information, please visit www.pmi.com and www.pmiscience.com.
Forward-Looking and Cautionary Statements
This press release contains projections of future results and other forward-looking statements. Achievement of future results is subject to risks, uncertainties and inaccurate assumptions. In the event that risks or uncertainties materialize, or underlying assumptions prove inaccurate, actual results could vary materially from those contained in such forward-looking statements. Pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, PMI is identifying important factors that, individually or in the aggregate, could cause actual results and outcomes to differ materially from those contained in any forward-looking statements made by PMI.
PMI's business risks include: excise tax increases and discriminatory tax structures; increasing marketing and regulatory restrictions that could reduce our competitiveness, eliminate our ability to communicate with adult consumers, or ban certain of our products; health concerns relating to the use of tobacco products and exposure to environmental tobacco smoke; litigation related to tobacco use; intense competition; the effects of global and individual country economic, regulatory and political developments, natural disasters and conflicts; changes in adult smoker behavior; lost revenues as a result of counterfeiting, contraband and cross-border purchases; governmental investigations; unfavorable currency exchange rates and currency devaluations, and limitations on the ability to repatriate funds; adverse changes in applicable corporate tax laws; adverse changes in the cost and quality of tobacco and other agricultural products and raw materials; and the integrity of its information systems and effectiveness of its data privacy policies. PMI's future profitability may also be adversely affected should it be unsuccessful in its attempts to produce and commercialize reduced-risk products or if regulation or taxation do not differentiate between such products and cigarettes; if it is unable to successfully introduce new products, promote brand equity, enter new markets or improve its margins through increased prices and productivity gains; if it is unable to expand its brand portfolio internally or through acquisitions and the development of strategic business relationships; or if it is unable to attract and retain the best global talent. Future results are also subject to the lower predictability of our reduced-risk product category's performance.
PMI is further subject to other risks detailed from time to time in its publicly filed documents, including the Form 10-Q for the quarter ended March 31, 2019. PMI cautions that the foregoing list of important factors is not a complete discussion of all potential risks and uncertainties. PMI does not undertake to update any forward-looking statement that it may make from time to time, except in the normal course of its public disclosure obligations.
Key Terms, Definitions and Explanatory Notes
General
Financial
Reduced-Risk Products
Appendix 1
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Key Market Data
Quarters Ended June 30,
Market
Total Market, bio units
PMI Shipments, bio units
PMI Market Share, % (1)
Total
Cigarette
HTU
Total
HTU
2019
2018
% Change
2019
2018
% Change
2019
2018
% Change
2019
2018
% Change
2019
2018
pp Change
2019
2018
pp Change
Total PMI
696.0
702.5
(0.9
)
198.9
201.7
(1.4
)
183.8
190.7
(3.6
)
15.1
11.0
37.0
28.3
28.2
0.1
2.1
1.6
0.5
European Union
France
9.8
10.5
(6.6
)
4.5
5.0
(10.6
)
4.5
5.0
(10.8
)
—
—
—
44.7
45.2
(0.5
)
0.2
0.1
0.1
Germany
18.9
19.6
(3.4
)
7.3
7.4
(2.0
)
7.1
7.3
(3.8
)
0.2
0.1
+100
38.5
38.0
0.5
1.1
0.4
0.7
Italy
17.1
17.7
(3.1
)
9.3
9.3
0.1
8.5
9.0
(5.5
)
0.8
0.3
+100
51.8
51.3
0.5
4.6
1.9
2.7
Poland
12.3
11.4
8.0
5.0
4.7
6.7
4.8
4.6
2.9
0.3
0.1
+100
40.8
41.3
(0.5
)
2.0
0.6
1.4
Spain
11.6
11.6
(0.6
)
3.9
3.9
(0.9
)
3.8
3.8
(1.7
)
0.1
0.1
60.8
31.2
31.8
(0.6
)
0.7
0.4
0.3
Eastern Europe
Russia
59.8
62.1
(3.8
)
17.7
17.5
1.1
15.9
16.9
(6.1
)
1.8
0.6
+100
29.6
28.1
1.5
2.9
0.8
2.1
Middle East & Africa
Saudi Arabia
5.4
5.0
6.7
0.8
1.7
(50.2
)
0.8
1.7
(50.2
)
—
—
—
38.9
40.1
(1.2
)
—
—
—
Turkey
31.3
28.6
9.2
12.5
13.5
(7.6
)
12.5
13.5
(7.6
)
—
—
—
39.9
47.2
(7.3
)
—
—
—
South & Southeast Asia
Indonesia
78.8
75.2
4.8
24.9
25.0
(0.1
)
24.9
25.0
(0.1
)
—
—
—
31.7
33.2
(1.5
)
—
—
—
Philippines
18.6
18.9
(1.5
)
13.1
13.2
(0.4
)
13.1
13.2
(0.4
)
—
—
—
70.4
69.6
0.8
—
—
—
East Asia & Australia
Australia
2.9
3.3
(10.8
)
0.9
1.0
(7.6
)
0.9
1.0
(7.6
)
—
—
—
31.0
29.9
1.1
—
—
—
Japan
40.6
42.4
(4.3
)
15.1
15.1
(0.4
)
8.0
8.7
(8.5
)
7.1
6.4
10.6
33.9
34.4
(0.5
)
16.6
15.5
1.1
Korea
17.7
17.9
(1.2
)
4.1
4.5
(9.8
)
2.8
3.1
(9.9
)
1.3
1.4
(9.5
)
23.1
25.3
(2.2
)
7.3
8.0
(0.7
)
Latin America & Canada
Argentina
7.8
8.6
(9.9
)
5.6
6.2
(10.0
)
5.6
6.2
(10.0
)
—
—
—
72.1
72.2
(0.1
)
—
—
—
Mexico
10.0
9.2
8.3
7.0
6.1
13.4
7.0
6.1
13.4
—
—
—
69.5
66.4
3.1
—
—
—
(1) Market share estimates are calculated using IMS data
Note: % change for Total Market and PMI shipments is computed based on millions of units; PMI Market Share estimates for previous periods are restated to reflect RBH deconsolidation and exclude RBH-owned brands.
Appendix 2
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Key Market Data
Six Months Ended June 30,
Market
Total Market, bio units
PMI Shipments, bio units
PMI Market Share, % (1)
Total
Cigarette
HTU
Total
HTU
2019
2018
% Change
2019
2018
% Change
2019
2018
% Change
2019
2018
% Change
2019
2018
pp Change
2019
2018
pp Change
Total PMI
1,322.2
1,336.9
(1.1
)
374.7
375.6
(0.2
)
348.1
355.0
(1.9
)
26.6
20.6
29.2
28.2
27.7
0.5
2.1
1.5
0.6
European Union
France
18.9
20.4
(7.3
)
8.6
9.4
(8.4
)
8.6
9.4
(8.7
)
—
—
—
44.9
45.0
(0.1
)
0.2
0.1
0.1
Germany
34.3
35.6
(3.7
)
13.4
13.3
0.8
13.0
13.1
(0.9
)
0.4
0.1
+100
38.9
37.2
1.7
1.1
0.4
0.7
Italy
32.8
33.8
(3.0
)
17.0
17.3
(1.3
)
15.6
16.7
(6.3
)
1.4
0.6
+100
51.4
51.7
(0.3
)
4.2
1.7
2.5
Poland
22.9
21.2
8.0
9.2
8.6
7.5
8.8
8.5
3.8
0.4
0.1
+100
40.4
40.6
(0.2
)
1.9
0.5
1.4
Spain
21.8
21.6
0.9
7.5
7.1
4.6
7.3
7.1
3.4
0.1
0.1
+100
31.4
32.0
(0.6
)
0.6
0.3
0.3
Eastern Europe
Russia
106.4
111.9
(4.9
)
29.9
30.3
(1.5
)
27.2
29.4
(7.6
)
2.7
0.9
+100
29.0
27.5
1.5
3.0
0.6
2.4
Middle East & Africa
Saudi Arabia
10.6
9.9
7.5
4.7
2.8
69.0
4.7
2.8
69.0
—
—
—
40.3
40.8
(0.5
)
—
—
—
Turkey
60.8
54.5
11.5
26.4
25.0
5.6
26.4
25.0
5.6
—
—
—
43.4
45.9
(2.5
)
—
—
—
South & Southeast Asia
Indonesia
147.5
144.5
2.1
47.1
48.0
(1.8
)
47.1
48.0
(1.8
)
—
—
—
31.9
33.2
(1.3
)
—
—
—
Philippines
35.4
34.3
3.2
24.9
24.0
3.7
24.9
24.0
3.7
—
—
—
70.3
69.9
0.4
—
—
—
East Asia & Australia
Australia
6.0
6.2
(2.6
)
1.7
1.8
(8.4
)
1.7
1.8
(8.4
)
—
—
—
27.6
29.3
(1.7
)
—
—
—
Japan
78.4
82.0
(4.4
)
27.2
29.3
(7.1
)
14.4
16.7
(13.3
)
12.7
12.6
1.2
34.1
34.6
(0.5
)
16.8
15.7
1.1
Korea
33.3
33.7
(1.1
)
7.7
8.6
(9.7
)
5.3
6.0
(11.6
)
2.4
2.6
(5.4
)
23.2
25.4
(2.2
)
7.3
7.6
(0.3
)
Latin America & Canada
Argentina
16.2
17.8
(8.6
)
11.7
13.1
(10.5
)
11.7
13.1
(10.5
)
—
—
—
72.0
73.5
(1.5
)
—
—
—
Mexico
17.4
16.9
3.3
11.7
11.0
6.3
11.7
11.0
6.3
—
—
—
67.0
65.1
1.9
—
—
—
(1) Market share estimates are calculated using IMS data
Note: % change for Total Market and PMI shipments is computed based on millions of units; PMI Market Share estimates for previous periods are restated to reflect RBH deconsolidation and exclude RBH-owned brands.
Appendix 3
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Shipment Volume Adjusted for the Impact of RBH Deconsolidation
(in million units) / (Unaudited)
Total PMI
Quarters Ended June 30,
Six Months Ended June 30,
2019
2018
% Change
2019
2018
% Change
Total Shipment Volume
198,855
201,708
(1.4
)%
374,650
375,554
(0.2
)%
Shipment Volume for RBH-owned brands (1)
(1,460
)
(1,460
)
(2)
Total Shipment Volume
198,855
200,248
(3)
(0.7
)%
374,650
374,094
(3)
0.1
%
Latin America & Canada
Total Shipment Volume
18,531
20,236
(8.4
)%
36,165
39,272
(7.9
)%
Shipment Volume for RBH-owned brands
(1,446
)
(1,446
)
(2)
Total Shipment Volume
18,531
18,790
(3)
(1.4
)%
36,165
37,826
(3)
(4.4
)%
(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
Six Months Ended
June 30,
June 30,
$
1.49
2019 Diluted Earnings Per Share (1)
$
2.36
$
1.41
2018 Diluted Earnings Per Share (1)
$
2.41
$
0.08
Change
$
(0.05
)
5.7
%
% Change
(2.1
)%
Reconciliation:
$
1.41
2018 Diluted Earnings Per Share (1)
$
2.41
—
2018 Asset impairment and exit costs
—
—
2018 Tax items
—
(0.01
)
2019 Asset impairment and exit costs
(0.02
)
—
2019 Canadian tobacco litigation-related expense
(0.09
)
—
2019 Loss on deconsolidation of RBH
(0.12
)
0.04
2019 Tax items
0.04
(0.07
)
Currency
(0.13
)
0.01
Interest
0.04
(0.01
)
Change in tax rate
0.03
0.12
Operations (2)
0.20
$
1.49
2019 Diluted Earnings Per Share (1)
$
2.36
(1) Basic and diluted EPS were calculated using the following (in millions):
Quarters Ended
Six Months Ended
June 30,
June 30,
2019
2018
2019
2018
$ 2,319
$ 2,198
Net Earnings attributable to PMI
$ 3,673
$ 3,754
5
5
Less distributed and undistributed earnings attributable to share-based payment awards
8
8
$ 2,314
$ 2,193
Net Earnings for basic and diluted EPS
$ 3,665
$ 3,746
1,556
1,555
Weighted-average shares for basic EPS
1,556
1,554
—
—
Plus Contingently Issuable Performance Stock Units
—
—
1,556
1,555
Weighted-average shares for diluted EPS
1,556
1,554
(2) Includes the impact of shares outstanding and share-based payments
Schedule 2
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Reported Diluted EPS to Reported Diluted EPS, excluding Currency,
and Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS, excluding Currency
(Unaudited)
Quarters Ended June 30,
Six Months Ended June 30,
2019
2018
% Change
2019
2018
% Change
$ 1.49
$ 1.41
5.7
%
Reported Diluted EPS
$ 2.36
$ 2.41
(2.1
)%
(0.07
)
Currency
(0.13
)
$ 1.56
$ 1.41
10.6
%
Reported Diluted EPS, excluding Currency
$ 2.49
$ 2.41
3.3
%
Quarters Ended June 30,
Six Months Ended June 30,
Year Ended
2019
2018
% Change
2019
2018
% Change
2018
$ 1.49
$ 1.41
5.7
%
Reported Diluted EPS
$ 2.36
$ 2.41
(2.1
)%
$ 5.08
0.01
—
Asset impairment and exit costs
0.02
—
—
—
—
Canadian tobacco litigation-related expense
0.09
—
—
—
—
Loss on deconsolidation of RBH
0.12
—
—
(0.04
)
—
Tax items
(0.04
)
—
0.02
$ 1.46
$ 1.41
3.5
%
Adjusted Diluted EPS
$ 2.55
$ 2.41
5.8
%
$ 5.10
(0.07
)
Currency
(0.13
)
$ 1.53
$ 1.41
8.5
%
Adjusted Diluted EPS, excluding Currency
$ 2.68
$ 2.41
11.2
%
Schedule 3
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Reported Diluted EPS to Pro Forma Adjusted Diluted EPS
(Unaudited)
Quarter Ended
Quarter Ended
Six Months Ended
Quarter Ended
Nine Months Ended
Quarter Ended
Year Ended
Quarter Ended
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
(2) Represents the impact of net earnings attributable to RBH from March 22, 2019 through end of period date
(3) Includes approximately $0.06 per share of net earnings attributable to RBH from January 1, 2019 through March 21, 2019
Note: EPS is computed independently for each of the periods presented. Accordingly, the sum of the quarterly EPS amounts may not agree to the total for the year.
Schedule 4
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Net Revenues by Product Category and Adjustments of Net Revenues for the Impact of Currency and Acquisitions
($ in millions) / (Unaudited)
Net Revenues
Currency
Net Revenues excluding Currency
Acquisitions
Net Revenues excluding Currency & Acquisitions
Quarters Ended June 30,
Net Revenues
Total
Excluding Currency
Excluding Currency & Acquisitions
2019
Combustible Products
2018
% Change
$ 2,149
$ (180
)
$ 2,329
$ —
$ 2,329
European Union
$ 2,321
(7.4
)%
0.3
%
0.3
%
640
(51
)
691
—
691
Eastern Europe
695
(7.9
)%
(0.6
)%
(0.6
)%
918
(87
)
1,005
—
1,005
Middle East & Africa
910
0.8
%
10.4
%
10.4
%
1,248
(32
)
1,280
—
1,280
South & Southeast Asia
1,156
8.0
%
10.7
%
10.7
%
756
(18
)
774
—
774
East Asia & Australia
822
(8.0
)%
(5.8
)%
(5.8
)%
522
(18
)
540
—
540
Latin America & Canada
802
(34.9
)%
(32.7
)%
(32.7
)%
$ 6,233
$ (385
)
$ 6,618
$ —
$ 6,618
Total Combustible
$ 6,706
(7.1
)%
(1.3
)%
(1.3
)%
2019
Reduced-Risk Products
2018
% Change
$ 428
$ (36
)
$ 464
$ —
$ 464
European Union
$ 182
+100
%
+100
%
+100
%
182
(15
)
197
—
197
Eastern Europe
65
+100
%
+100
%
+100
%
86
(3
)
89
—
89
Middle East & Africa
112
(22.8
)%
(20.3
)%
(20.3
)%
—
—
—
—
—
South & Southeast Asia
—
—
%
—
%
—
%
765
(7
)
772
—
772
East Asia & Australia
656
16.6
%
17.7
%
17.7
%
5
—
5
—
5
Latin America & Canada
5
(2.4
)%
6.1
%
6.1
%
$ 1,466
$ (62
)
$ 1,528
$ —
$ 1,528
Total RRPs
$ 1,020
43.7
%
49.8
%
49.8
%
2019
PMI
2018
% Change
$ 2,577
$ (216
)
$ 2,793
$ —
$ 2,793
European Union
$ 2,503
3.0
%
11.6
%
11.6
%
822
(66
)
888
—
888
Eastern Europe
760
8.2
%
16.8
%
16.8
%
1,004
(90
)
1,094
—
1,094
Middle East & Africa
1,022
(1.8
)%
7.0
%
7.0
%
1,248
(32
)
1,280
—
1,280
South & Southeast Asia
1,156
8.0
%
10.7
%
10.7
%
1,521
(25
)
1,546
—
1,546
East Asia & Australia
1,478
2.9
%
4.6
%
4.6
%
527
(18
)
545
—
545
Latin America & Canada
807
(34.7
)%
(32.5
)%
(32.5
)%
$ 7,699
$ (447)
$ 8,146
$ —
$ 8,146
Total PMI
$ 7,726
(0.3
)%
5.4
%
5.4
%
Note: Sum of product categories or Regions might not foot to Total PMI due to roundings. “-“ indicates amounts between -$0.5 million and +$0.5 million.
Schedule 5
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Net Revenues by Product Category and Adjustments of Net Revenues for the Impact of Currency and Acquisitions
($ in millions) / (Unaudited)
Net Revenues
Currency
Net Revenues excluding Currency
Acquisitions
Net Revenues excluding Currency & Acquisitions
Six Months Ended June 30,
Net Revenues
Total
Excluding Currency
Excluding Currency & Acquisitions
2019
Combustible Products
2018
% Change
$ 3,961
$ (300
)
$ 4,261
$ —
$ 4,261
European Union
$ 4,157
(4.7
)%
2.5
%
2.5
%
1,110
(102
)
1,213
—
1,213
Eastern Europe
1,222
(9.1
)%
(0.8
)%
(0.8
)%
1,746
(155
)
1,901
—
1,901
Middle East & Africa
1,794
(2.7
)%
6.0
%
6.0
%
2,361
(93
)
2,454
—
2,454
South & Southeast Asia
2,237
5.5
%
9.7
%
9.7
%
1,394
(25
)
1,419
—
1,419
East Asia & Australia
1,559
(10.6
)%
(9.0
)%
(9.0
)%
1,168
(50
)
1,218
—
1,218
Latin America & Canada
1,506
(22.4
)%
(19.1
)%
(19.1
)%
$ 11,741
$ (725
)
$ 12,466
$ —
$ 12,466
Total Combustible
$ 12,475
(5.9
)%
(0.1
)%
(0.1
)%
2019
Reduced-Risk Products
2018
% Change
$ 775
$ (59
)
$ 834
$ —
$ 834
European Union
$ 334
+100
%
+100
%
+100
%
291
(28
)
318
—
318
Eastern Europe
105
+100
%
+100
%
+100
%
185
(3
)
188
—
188
Middle East & Africa
189
(2.3
)%
(0.6
)%
(0.6
)%
—
—
—
—
—
South & Southeast Asia
—
—
%
—
%
—
%
1,448
—
1,448
—
1,448
East Asia & Australia
1,510
(4.1
)%
(4.1
)%
(4.1
)%
11
(1
)
12
—
12
Latin America & Canada
9
18.9
%
28.1
%
28.1
%
$ 2,709
$ (91
)
$ 2,800
$ —
$ 2,800
Total RRPs
$ 2,147
26.2
%
30.4
%
30.4
%
2019
PMI
2018
% Change
$ 4,736
$ (359
)
$ 5,095
$ —
$ 5,095
European Union
$ 4,491
5.5
%
13.4
%
13.4
%
1,401
(130
)
1,531
—
1,531
Eastern Europe
1,327
5.6
%
15.4
%
15.4
%
1,931
(158
)
2,089
—
2,089
Middle East & Africa
1,983
(2.6
)%
5.3
%
5.3
%
2,361
(93
)
2,454
—
2,454
South & Southeast Asia
2,237
5.5
%
9.7
%
9.7
%
2,842
(25
)
2,867
—
2,867
East Asia & Australia
3,069
(7.4
)%
(6.6
)%
(6.6
)%
1,179
(51
)
1,230
—
1,230
Latin America & Canada
1,515
(22.2
)%
(18.8
)%
(18.8
)%
$ 14,450
$ (816
)
$ 15,266
$ —
$ 15,266
Total PMI
$ 14,622
(1.2
)%
4.4
%
4.4
%
Note: Sum of product categories or Regions might not foot to Total PMI due to roundings. “-“ indicates amounts between -$0.5 million and +$0.5 million.
Schedule 6
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Adjustments of Operating Income for the Impact of Currency and Acquisitions
($ in millions) / (Unaudited)
Operating Income
Currency
Operating Income excluding Currency
Acquisitions
Operating Income excluding Currency & Acquisitions
Operating Income
Total
Excluding Currency
Excluding Currency & Acquisitions
2019
Quarters Ended June 30,
2018
% Change
$ 1,195
$ (121
)
$ 1,316
$ —
$ 1,316
European Union
$ 1,177
1.5
%
11.8
%
11.8
%
256
(16
)
272
—
272
Eastern Europe
261
(1.9
)%
4.2
%
4.2
%
441
(46
)
487
—
487
Middle East & Africa
403
9.4
%
20.8
%
20.8
%
492
(14
)
506
—
506
South & Southeast Asia
440
11.8
%
15.0
%
15.0
%
642
26
616
—
616
East Asia & Australia
498
28.9
%
23.7
%
23.7
%
161
(1)
6
155
—
155
Latin America & Canada
314
(48.7
)%
(50.6
)%
(50.6
)%
$ 3,187
$ (165
)
$ 3,352
$ —
$ 3,352
Total PMI
$ 3,093
3.0
%
8.4
%
8.4
%
2019
Six Months Ended June 30,
2018
% Change
$ 2,091
$ (195
)
$ 2,286
$ —
$ 2,286
European Union
$ 1,917
9.1
%
19.2
%
19.2
%
385
(35
)
420
—
420
Eastern Europe
412
(6.6
)%
1.9
%
1.9
%
785
(72
)
857
—
857
Middle East & Africa
777
1.0
%
10.3
%
10.3
%
932
(2)
(44
)
976
—
976
South & Southeast Asia
869
7.2
%
12.3
%
12.3
%
1,069
21
1,048
—
1,048
East Asia & Australia
1,013
5.5
%
3.5
%
3.5
%
(25
)
(3)
16
(41
)
—
(41
)
Latin America & Canada
531
-(100)%
-(100)%
-(100)%
$ 5,237
$ (309
)
$ 5,546
$ —
$ 5,546
Total PMI
$ 5,519
(5.1
)%
0.5
%
0.5
%
(1) Includes asset impairment and exit costs ($23 million)
(2) Includes asset impairment and exit costs ($20 million)
(3) Includes asset impairment and exit costs ($23 million), Canadian tobacco litigation-related expense ($194 million) and the loss on deconsolidation of RBH ($239 million)
Schedule 7
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Operating Income to Adjusted Operating Income, excluding Currency and Acquisitions
($ in millions) / (Unaudited)
Operating Income
Asset Impairment & Exit Costs and Others
Adjusted Operating Income
Currency
Adjusted Operating Income excluding Currency
Acqui- sitions
Adjusted Operating Income excluding Currency & Acqui- sitions
Operating Income
Asset Impairment & Exit Costs
Adjusted Operating Income
Total
Excluding Currency
Excluding Currency & Acqui- sitions
2019
Quarters Ended June 30,
2018
% Change
$ 1,195
$ —
$ 1,195
$ (121
)
$ 1,316
$ —
$ 1,316
European Union
$ 1,177
$ —
$ 1,177
1.5
%
11.8
%
11.8
%
256
—
256
(16
)
272
—
272
Eastern Europe
261
—
261
(1.9
)%
4.2
%
4.2
%
441
—
441
(46
)
487
—
487
Middle East & Africa
403
—
403
9.4
%
20.8
%
20.8
%
492
—
492
(14
)
506
—
506
South & Southeast Asia
440
—
440
11.8
%
15.0
%
15.0
%
642
—
642
26
616
—
616
East Asia & Australia
498
—
498
28.9
%
23.7
%
23.7
%
161
(23
)
(1)
184
6
178
—
178
Latin America & Canada
314
—
314
(41.4
)%
(43.3
)%
(43.3
)%
$ 3,187
$ (23
)
$ 3,210
$ (165
)
$ 3,375
$ —
$ 3,375
Total PMI
$ 3,093
$ —
$ 3,093
3.8
%
9.1
%
9.1
%
2019
Six Months Ended June 30,
2018
% Change
$ 2,091
$ —
$ 2,091
$ (195
)
$ 2,286
$ —
$ 2,286
European Union
$ 1,917
$ —
$ 1,917
9.1
%
19.2
%
19.2
%
385
—
385
(35
)
420
—
420
Eastern Europe
412
—
412
(6.6
)%
1.9
%
1.9
%
785
—
785
(72
)
857
—
857
Middle East & Africa
777
—
777
1.0
%
10.3
%
10.3
%
932
(20
)
(1)
952
(44
)
996
—
996
South & Southeast Asia
869
—
869
9.6
%
14.6
%
14.6
%
1,069
—
1,069
21
1,048
—
1,048
East Asia & Australia
1,013
—
1,013
5.5
%
3.5
%
3.5
%
(25
)
(456
)
(2)
431
16
415
—
415
Latin America & Canada
531
—
531
(18.8
)%
(21.8
)%
(21.8
)%
$ 5,237
$ (476
)
$ 5,713
$ (309
)
$ 6,022
$ —
$ 6,022
Total PMI
$ 5,519
$ —
$ 5,519
3.5
%
9.1
%
9.1
%
(1) Represents asset impairment and exit costs
(2) Includes asset impairment and exit costs ($23 million), Canadian tobacco litigation-related expense ($194 million) and the loss on deconsolidation of RBH ($239 million)
Schedule 8
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Adjusted Operating Income Margin, excluding Currency and Acquisitions
($ in millions) / (Unaudited)
Adjusted Operating Income (1)
Net Revenues
Adjusted Operating Income Margin
Adjusted Operating Income excluding Currency (1)
Net Revenues excluding Currency (2)
Adjusted Operating Income Margin excluding Currency
Adjusted Operating Income excluding Currency & Acqui- sitions (1)
Net Revenues excluding Currency & Acqui- sitions (2)
Adjusted Operating Income Margin excluding Currency & Acqui- sitions
Adjusted Operating Income (1)
Net Revenues
Adjusted Operating Income Margin
Adjusted Operating Income Margin
Adjusted Operating Income Margin excluding Currency
Adjusted Operating Income Margin excluding Currency & Acqui- sitions
2019
Quarters Ended June 30,
2018
% Points Change
$ 1,195
$ 2,577
46.4
%
$ 1,316
$ 2,793
47.1
%
$ 1,316
$ 2,793
47.1
%
European Union
$ 1,177
$ 2,503
47.0
%
(0.6
)
0.1
0.1
256
822
31.1
%
272
888
30.6
%
272
888
30.6
%
Eastern Europe
261
760
34.3
%
(3.2
)
(3.7
)
(3.7
)
441
1,004
43.9
%
487
1,094
44.5
%
487
1,094
44.5
%
Middle East & Africa
403
1,022
39.4
%
4.5
5.1
5.1
492
1,248
39.4
%
506
1,280
39.5
%
506
1,280
39.5
%
South & Southeast Asia
440
1,156
38.1
%
1.3
1.4
1.4
642
1,521
42.2
%
616
1,546
39.8
%
616
1,546
39.8
%
East Asia & Australia
498
1,478
33.7
%
8.5
6.1
6.1
184
527
34.9
%
178
545
32.7
%
178
545
32.7
%
Latin America & Canada
314
807
38.9
%
(4.0
)
(6.2
)
(6.2
)
$ 3,210
$ 7,699
41.7
%
$ 3,375
$ 8,146
41.4
%
$ 3,375
$ 8,146
41.4
%
Total PMI
$ 3,093
$ 7,726
40.0
%
1.7
1.4
1.4
2019
Six Months Ended June 30,
2018
% Points Change
$ 2,091
$ 4,736
44.2
%
$ 2,286
$ 5,095
44.9
%
$ 2,286
$ 5,095
44.9
%
European Union
$ 1,917
$ 4,491
42.7
%
1.5
2.2
2.2
385
1,401
27.5
%
420
1,531
27.4
%
420
1,531
27.4
%
Eastern Europe
412
1,327
31.0
%
(3.5
)
(3.6
)
(3.6
)
785
1,931
40.7
%
857
2,089
41.0
%
857
2,089
41.0
%
Middle East & Africa
777
1,983
39.2
%
1.5
1.8
1.8
952
2,361
40.3
%
996
2,454
40.6
%
996
2,454
40.6
%
South & Southeast Asia
869
2,237
38.8
%
1.5
1.8
1.8
1,069
2,842
37.6
%
1,048
2,867
36.6
%
1,048
2,867
36.6
%
East Asia & Australia
1,013
3,069
33.0
%
4.6
3.6
3.6
431
1,179
36.6
%
415
1,230
33.7
%
415
1,230
33.7
%
Latin America & Canada
531
1,515
35.0
%
1.6
(1.3
)
(1.3
)
$ 5,713
$ 14,450
39.5
%
$ 6,022
$ 15,266
39.4
%
$ 6,022
$ 15,266
39.4
%
Total PMI
$ 5,519
$ 14,622
37.7
%
1.8
1.7
1.7
(1) For the calculation of Adjusted Operating Income and Adjusted Operating Income excluding currency and acquisitions refer to Schedule 7
(2) For the calculation of Net Revenues excluding currency and acquisitions refer to Schedules 4 and 5
Schedule 9
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Adjustments for the Impact of RBH, excluding Currency
($ in millions, except per share data) / (Unaudited)
Quarters Ended June 30,
Six Months Ended June 30,
2019
2018
% Change
2019
2018
% Change
Net Revenues
$ 7,699
$ 7,726
(0.3
)%
$ 14,450
$ 14,622
(1.2
)%
Net Revenues attributable to RBH
(253
)
(253
)
(1)
Net Revenues
$ 7,699
$ 7,473
(2)
3.0
%
$ 14,450
$ 14,369
(2)
0.6
%
Currency
(447
)
(816
)
Net Revenues, ex. currency
$ 8,146
$ 7,473
(2)
9.0
%
$ 15,266
$ 14,369
(2)
6.2
%
Operating Income
$ 3,187
$ 3,093
3.0
%
$ 5,237
$ 5,519
(5.1
)%
Asset impairment and exit costs
(23
)
—
(43
)
—
Canadian tobacco litigation-related expense
—
—
(194
)
—
Loss on deconsolidation of RBH
—
—
(239
)
—
Adjusted Operating Income
$ 3,210
$ 3,093
3.8
%
$ 5,713
$ 5,519
3.5
%
Operating Income attributable to RBH
(177
)
(177
)
(1)
Adjusted Operating Income
$ 3,210
$ 2,916
(2)
10.1
%
$ 5,713
$ 5,342
(2)
6.9
%
Currency
(165
)
(309
)
Adjusted Operating Income, ex. currency
$ 3,375
$ 2,916
(2)
15.7
%
$ 6,022
$ 5,342
(2)
12.7
%
Adjusted OI Margin
41.7
%
40.0
%
1.7
39.5
%
37.7
%
1.8
Adjusted OI Margin attributable to RBH
(1.0
)
(0.5
)
(1)
Adjusted OI Margin
41.7
%
39.0
%
(2)
2.7
39.5
%
37.2
%
(2)
2.3
Currency
0.3
0.1
Adjusted OI Margin, ex. currency
41.4
%
39.0
%
(2)
2.4
39.4
%
37.2
%
(2)
2.2
Adjusted Diluted EPS(3)
$ 1.46
$ 1.41
3.5
%
$ 2.55
$ 2.41
5.8
%
Net earnings attributable to RBH
(0.08
)
(0.08
)
(1)
Adjusted Diluted EPS
$ 1.46
$ 1.33
(2)
9.8
%
$ 2.55
$ 2.33
(2)
9.4
%
Currency
(0.07
)
(0.13
)
Adjusted Diluted EPS, ex. currency
$ 1.53
$ 1.33
(2)
15.0
%
$ 2.68
$ 2.33
(2)
15.0
%
(1) Represents the impact attributable to RBH from March 22, 2018 through end of period date
(2) Pro forma
(3) For the calculation, see Schedule 2
Note: Financials attributable to RBH include Duty Free sales in Canada
Schedule 10
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Adjustments for the Impact of RBH, excluding Currency
($ in millions) / (Unaudited)
Latin America & Canada
Quarters Ended June 30,
Six Months Ended June 30,
2019
2018
% Change
2019
2018
% Change
Net Revenues
$ 527
$ 807
(34.7
)%
$ 1,179
$ 1,515
(22.2
)%
Net Revenues attributable to RBH
(251
)
(251
)
(1)
Net Revenues
$ 527
$ 556
(2)
(5.2
)%
$ 1,179
$ 1,264
(2)
(6.7
)%
Currency
(18
)
(51
)
Net Revenues, ex. currency
$ 545
$ 556
(2)
(2.0
)%
$ 1,230
$ 1,264
(2)
(2.7
)%
Operating Income
$ 161
$ 314
(48.7
)%
$ (25)
$ 531
-(100)%
Asset impairment and exit costs
(23
)
—
(23
)
—
Canadian tobacco litigation-related expense
—
—
(194
)
—
Loss on deconsolidation of RBH
—
—
(239
)
—
Adjusted Operating Income
$ 184
$ 314
(41.4
)%
$ 431
$ 531
(18.8
)%
Operating Income attributable to RBH
(176
)
(176
)
(1)
Adjusted Operating Income
$ 184
$ 138
(2)
33.3
%
$ 431
$ 355
(2)
21.4
%
Currency
6
16
Adjusted Operating Income, ex. currency
$ 178
$ 138
(2)
29.0
%
$ 415
$ 355
(2)
16.9
%
Adjusted OI Margin
34.9
%
38.9
%
(4.0
)
36.6
%
35.0
%
1.6
Adjusted OI Margin attributable to RBH
(14.1
)
(6.9
)
(1)
Adjusted OI Margin
34.9
%
24.8
%
(2)
10.1
36.6
%
28.1
%
(2)
8.5
Currency
2.2
2.9
Adjusted OI Margin, ex. currency
32.7
%
24.8
%
(2)
7.9
33.7
%
28.1
%
(2)
5.6
(1) Represents the impact attributable to RBH from March 22, 2018 through end of period date
(2) Pro forma
Schedule 11
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Condensed Statements of Earnings
($ in millions, except per share data) / (Unaudited)
Quarters Ended June 30,
Six Months Ended June 30,
2019
2018
Change Fav./(Unfav.)
2019
2018
Change Fav./(Unfav.)
$ 19,987
$ 21,100
(5.3
)%
Revenues including Excise Taxes
$ 37,692
$ 39,526
(4.6
)%
12,288
13,374
8.1
%
Excise Taxes on products
23,242
24,904
6.7
%
7,699
7,726
(0.3
)%
Net Revenues
14,450
14,622
(1.2
)%
2,665
2,744
2.9
%
Cost of sales
5,130
5,359
4.3
%
5,034
4,982
1.0
%
Gross profit
9,320
9,263
0.6
%
1,831
1,868
2.0
%
Marketing, administration and research costs (1)
4,048
3,701
(9.4
)%
16
21
Amortization of intangibles
35
43
3,187
3,093
3.0
%
Operating Income
5,237
5,519
(5.1
)%
150
168
10.7
%
Interest expense, net
302
395
23.5
%
20
6
-(100)%
Pension and other employee benefit costs
41
12
-(100)%
3,017
2,919
3.4
%
Earnings before income taxes
4,894
5,112
(4.3
)%
611
644
5.1
%
Provision for income taxes
1,035
1,203
14.0
%
(30
)
(20
)
Equity investments and securities (income)/loss, net
(41
)
(33
)
2,436
2,295
6.1
%
Net Earnings
3,900
3,942
(1.1
)%
117
97
Net Earnings attributable to noncontrolling interests
227
188
$ 2,319
$ 2,198
5.5
%
Net Earnings attributable to PMI
$ 3,673
$ 3,754
(2.2
)%
Per share data (2):
$ 1.49
$ 1.41
5.7
%
Basic Earnings Per Share
$ 2.36
$ 2.41
(2.1
)%
$ 1.49
$ 1.41
5.7
%
Diluted Earnings Per Share
$ 2.36
$ 2.41
(2.1
)%
(1) Six months ended June 30, 2019 includes asset impairment and exit costs ($43 million), Canadian tobacco litigation-related expense ($194 million) and the loss on deconsolidation of RBH ($239 million). Quarter ended June 30, 2019 includes asset impairment and exit costs ($23 million).
(2) Net Earnings and weighted-average shares used in the basic and diluted Earnings Per Share computations for the quarters and for the six months ended June 30, 2019 and 2018 are shown on Schedule 1, Footnote 1.
Schedule 12
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Condensed Balance Sheets
($ in millions, except ratios) / (Unaudited)
June 30,
December 31,
2019
2018
Assets
Cash and cash equivalents
$
4,008
$
6,593
All other current assets
13,155
12,849
Property, plant and equipment, net
6,917
7,201
Goodwill
5,828
7,189
Other intangible assets, net
2,130
2,278
Investments in unconsolidated subsidiaries and equity securities
4,665
1,269
Other assets
3,220
2,422
Total assets
$
39,923
$
39,801
Liabilities and Stockholders' (Deficit) Equity
Short-term borrowings
$
269
$
730
Current portion of long-term debt
4,762
4,054
All other current liabilities
13,015
12,407
Long-term debt
24,858
26,975
Deferred income taxes
786
898
Other long-term liabilities
5,642
5,476
Total liabilities
49,332
50,540
Total PMI stockholders' deficit
(11,199
)
(12,459
)
Noncontrolling interests
1,790
1,720
Total stockholders' (deficit) equity
(9,409
)
(10,739
)
Total liabilities and stockholders' (deficit) equity
$
39,923
$
39,801
Schedule 13
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Calculation of Total Debt to Adjusted EBITDA and Net Debt to Adjusted EBITDA Ratios
($ in millions, except ratios) / (Unaudited)
Year Ended June 30, 2019
Year Ended December 31, 2018
July ~ December
January ~ June
12 months
2018
2019
rolling
Net Earnings
$
4,344
$
3,900
$
8,244
$
8,286
Equity (income)/loss in unconsolidated subsidiaries, net
(37
)
(41
)
(78
)
(65
)
Provision for income taxes
1,242
1,035
2,277
2,445
Interest expense, net
270
302
572
665
Depreciation and amortization
501
472
973
989
Asset impairment and exit costs and Others (1)
—
476
476
—
Adjusted EBITDA
$
6,320
$
6,144
$
12,464
$
12,320
June 30,
December 31,
2019
2018
Short-term borrowings
$
269
$
730
Current portion of long-term debt
4,762
4,054
Long-term debt
24,858
26,975
Total Debt
$
29,889
$
31,759
Cash and cash equivalents
4,008
6,593
Net Debt
$
25,881
$
25,166
Ratios:
Total Debt to Adjusted EBITDA
2.40
2.58
Net Debt to Adjusted EBITDA
2.08
2.04
(1) Others include Canadian tobacco litigation-related expense ($194 million) and the loss on deconsolidation of RBH ($239 million)
Schedule 14
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Operating Cash Flow to Operating Cash Flow, excluding Currency
($ in millions) / (Unaudited)
Quarters Ended June 30,
Six Months Ended June 30,
2019
2018
% Change
2019
2018
% Change
$ 3,442
$ 3,993
(13.8
)%
Net cash provided by operating activities (1)
$ 4,683
$ 5,373
(12.8
)%
(614
)
Currency
(777
)
$ 4,056
$ 3,993
1.6
%
Net cash provided by operating activities, excluding currency
$ 5,460
$ 5,373
1.6
%
(1) Operating cash flow
View source version on businesswire.com: https://www.businesswire.com/news/home/20190718005305/en/
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