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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 | |
---|---|---|---|---|---|---|---|---|
-1.07 | -1.11% | 95.02 | 96.62 | 94.941 | 95.80 | 5,391,014 | 00:55:12 |
Revises and Narrows 2021 Full-Year Reported Diluted EPS Forecast to a Range of $5.77 to $5.82, or $6.01 to $6.06 on an Adjusted Basis, Representing Currency-Neutral Growth of 13% to 14%
Regulatory News:
Philip Morris International Inc. (NYSE: PM) today announces its 2021 third-quarter results. Growth rates presented in this press release on an organic basis reflect currency-neutral underlying results. Adjusted net revenues exclude the impact related to the Saudi Arabia customs assessments. A glossary of key terms, definitions and explanatory notes is included at the end of this press release. Adjustments, other calculations and reconciliations to the most directly comparable U.S. GAAP measures are included in the schedules to this press release.
2021 THIRD-QUARTER & YEAR-TO-DATE HIGHLIGHTS
2021 Third-Quarter
2021 Nine Months Year-to-Date
"Our business delivered another strong quarterly performance, coming ahead of our expectations with adjusted diluted EPS of $1.58, representing growth of 8.5%, excluding currency," said Jacek Olczak, Chief Executive Officer.
"The continued excellent performance of IQOS drove total shipment volume and organic net revenue growth of 2.1% and 7.6%, respectively, and was complemented by further sequential share gains for our combustible products."
"Today, we are reaffirming our strong growth outlook for 2021, with an adjusted diluted EPS forecast toward the upper-half of our previous range and representing currency-neutral growth of 13% to 14%, despite ongoing tightness in device supplies due to the global shortage of semiconductors, which impacts our ability to fulfill consumer demand for IQOS."
"We confirm our confidence in our 2021 to 2023 growth targets, despite device constraints that could persist into the first half of 2022, with temporarily lower IQOS user growth rates."
2021 FULL-YEAR FORECAST
Full-Year
2021 Forecast
2020
Growth
Reported Diluted EPS
$5.77
-
$5.82
$ 5.16
Saudi Arabia customs assessments
0.14
—
Asset impairment and exit costs
0.09
0.08
Asset acquisition cost
0.03
—
Equity investee ownership dilution
(0.02)
—
Fair value adjustment for equity security investments
0.04
Tax items
(0.06
)
Brazil indirect tax credit
(0.05
)
Adjusted Diluted EPS
$6.01
-
$6.06
$ 5.17
Currency
(0.17)
Adjusted Diluted EPS, excluding currency
$5.84
-
$5.89
$ 5.17
13%
-
14%
PMI revises and narrows its full-year reported diluted EPS forecast to a range of $5.77 to $5.82, at prevailing exchange rates, from a range of $5.76 to $5.86 previously, primarily reflecting:
This forecast represents a projected currency-neutral increase in adjusted diluted EPS of around 13% to 14% versus adjusted diluted EPS of $5.17 in 2020, as outlined in the table above.
2021 Full-Year Forecast Assumptions
This forecast assumes:
The foregoing is underpinned by the assumption that, even in the event of prolonged pandemic-related restrictions, there will not be a return to the depressed consumption levels of the second quarter of 2020. This assumption is consistent with the less severe impact on consumption levels observed in the second half of 2020 as COVID-19 spread in a number of markets.
This forecast excludes the impact of any future acquisitions, unanticipated or unquantifiable asset impairment and exit cost charges, future changes in currency exchange rates, further developments pertaining to the judgment in the two Québec Class Action lawsuits and the Companies’ Creditors Arrangement Act (CCAA) protection granted to PMI's Canadian subsidiary, Rothmans, Benson & Hedges, Inc. (RBH), any unusual events, any intensification of the global shortage of semiconductors and the related impact on the supply of our electronic devices, and any COVID-19-related developments different from the assumptions set forth in the company's forecast.
Factors described in the Forward-Looking and Cautionary Statements section of this release represent continuing risks to these projections.
IQOS Device Supply
As communicated in September, the global semiconductor shortage is resulting in a tightness in IQOS device supply. This is affecting the availability and assortment of IQOS devices in certain markets, which is hampering the company’s ability to operate at full commercial and competitive capacity to fully meet demand. This has been reflected in lower IQOS user growth rates in the third quarter.
At this stage, supply forecasting remains volatile. PMI therefore assumes that the tight supply situation will persist into the first half of 2022 and, where necessary, the company will prioritize device replacements for existing IQOS users over device sales targeting user acquisition. PMI is also adjusting its launch timeline for IQOS ILUMA outside Japan, with additional major launches now assumed for the second half of 2022.
PMI views this as a temporary phenomenon and expects IQOS user growth to re-accelerate once shortages ease, as consumer demand remains robust. PMI confirms its confidence in its 2021 to 2023 organic compound annual growth targets for net revenues and adjusted diluted EPS (more than 5% and 9%, respectively), though there are short-term shortage scenarios under which the transitory IQOS device supply impact on user growth could result in full-year 2022 organic growth rates below the company's 2021 to 2023 growth targets.
Acquisitions
On August 9, 2021, PMI acquired 100% of OtiTopic, Inc., a U.S. respiratory drug development company with a late-stage dry powder inhalation aspirin treatment for acute myocardial infarction. The cost of the acquisition was $51 million, excluding potential additional contingent payments related to the achievement of certain milestones.
On September 15, 2021, PMI acquired 100% of Fertin Pharma A/S, a Danish company that is a leading developer and manufacturer of innovative pharmaceutical and well-being products based on oral and intra-oral delivery systems, for a total consideration of DKK 5.2 billion (approximately $820 million).
As of September 30, 2021, PMI held a 96.86% controlling interest in Vectura Group plc (Vectura), an inhaled therapeutics company based in the United Kingdom, following a series of purchases of Vectura shares and valid acceptances of PMI's offer at a price of 165 pence per share. The delisting and cancellation of trading of Vectura shares was effective as of today. PMI intends to exercise its right to compulsorily acquire the remaining shares of Vectura, in accordance with applicable English law.
Conference Call
A conference call, hosted by Emmanuel Babeau, Chief Financial Officer, will be webcast at 9:00 a.m., Eastern Time, on October 19, 2021. Access is at www.pmi.com/2021Q3earnings.
CONSOLIDATED SHIPMENT VOLUME & MARKET SHARE
PMI Shipment Volume by Region
Third-Quarter
Nine Months Year-to-Date
(million units)
2021
2020
Change
2021
2020
Change
Cigarettes
European Union
41,965
45,179
(7.1
)%
120,238
126,142
(4.7
)%
Eastern Europe
25,020
25,661
(2.5
)%
67,771
70,737
(4.2
)%
Middle East & Africa
35,166
30,903
13.8
%
93,155
88,087
5.8
%
South & Southeast Asia
35,578
37,238
(4.5
)%
105,787
108,179
(2.2
)%
East Asia & Australia
11,120
10,784
3.1
%
33,450
35,154
(4.8
)%
Americas
15,994
15,699
1.9
%
46,092
45,542
1.2
%
Total PMI
164,843
165,464
(0.4
)%
466,493
473,841
(1.6
)%
Heated Tobacco Units
European Union
7,058
5,181
36.2
%
20,405
14,069
45.0
%
Eastern Europe
6,119
4,882
25.3
%
18,594
14,374
29.4
%
Middle East & Africa
577
179
+100%
1,485
834
78.1
%
South & Southeast Asia
79
10
+100%
151
10
+100%
East Asia & Australia
9,435
8,601
9.7
%
28,478
24,799
14.8
%
Americas
221
114
93.9
%
466
316
47.5
%
Total PMI
23,489
18,967
23.8
%
69,579
54,402
27.9
%
Cigarettes and Heated Tobacco Units
European Union
49,023
50,360
(2.7
)%
140,643
140,211
0.3
%
Eastern Europe
31,139
30,543
2.0
%
86,365
85,111
1.5
%
Middle East & Africa
35,743
31,082
15.0
%
94,640
88,921
6.4
%
South & Southeast Asia
35,657
37,248
(4.3
)%
105,938
108,189
(2.1
)%
East Asia & Australia
20,555
19,385
6.0
%
61,928
59,953
3.3
%
Americas
16,215
15,813
2.5
%
46,558
45,858
1.5
%
Total PMI
188,332
184,431
2.1
%
536,072
528,243
1.5
%
Third-Quarter
PMI's total shipment volume increased by 2.1%, driven by:
partly offset by
Impact of Inventory Movements
Excluding the net favorable impact of estimated distributor inventory movements of approximately 2.8 billion units, PMI’s total in-market sales increased by 0.6%, driven by a 20.2% increase in heated tobacco units, partly offset by a 1.8% decrease in cigarettes.
The net favorable impact of approximately 2.8 billion units reflected:
PMI's total heated tobacco unit in-market sales volume in the quarter was 24.6 billion units, reflecting sequential growth of 7.2% compared to the second quarter of 2021.
Nine Months Year-to-Date
PMI's total shipment volume increased by 1.5%, driven by:
partly offset by
Impact of Inventory Movements
Excluding the net favorable impact of estimated distributor inventory movements of approximately 5.0 billion units, PMI’s total in-market sales increased by 0.5%, driven by a 23.3% increase in heated tobacco units, partly offset by a 2.1% decrease in cigarettes.
The net favorable impact of approximately 5.0 billion units reflected:
PMI's total heated tobacco unit in-market sales volume in the nine months year-to-date was 68.8 billion units.
PMI Shipment Volume by Brand
PMI Shipment Volume by Brand
Third-Quarter
Nine Months Year-to-Date
(million units)
2021
2020
Change
2021
2020
Change
Cigarettes
Marlboro
65,139
61,581
5.8
%
177,287
175,638
0.9
%
L&M
21,564
24,189
(10.9
)%
64,028
69,215
(7.5
)%
Chesterfield
15,994
13,768
16.2
%
43,021
39,274
9.5
%
Philip Morris
11,107
12,254
(9.4
)%
31,881
34,823
(8.4
)%
Parliament
11,556
9,540
21.1
%
30,535
25,575
19.4
%
Sampoerna A
9,717
7,999
21.5
%
27,601
23,801
16.0
%
Dji Sam Soe
5,518
6,372
(13.4
)%
16,644
18,344
(9.3
)%
Bond Street
3,042
6,441
(52.8
)%
12,200
18,481
(34.0
)%
Lark
4,070
3,846
5.8
%
11,851
12,059
(1.7
)%
Next
2,388
2,327
2.7
%
6,556
6,703
(2.2
)%
Others
14,748
17,147
(14.0
)%
44,889
49,928
(10.1
)%
Total Cigarettes
164,843
165,464
(0.4
)%
466,493
473,841
(1.6
)%
Heated Tobacco Units
23,489
18,967
23.8
%
69,579
54,402
27.9
%
Total PMI
188,332
184,431
2.1
%
536,072
528,243
1.5
%
Note: Lark includes Lark Harmony; Next includes Next Dubliss; Philip Morris includes Philip Morris/Dubliss; and Sampoerna A includes Sampoerna.
Third-Quarter
The increase in PMI's heated tobacco unit shipment volume was mainly driven by the EU (notably Italy), Eastern Europe (notably Russia) and Japan.
PMI's cigarette shipment volume of the following brands increased:
PMI's cigarette shipment volume of the following brands decreased:
International Share of Market
PMI's total international market share (excluding China and the U.S.), defined as PMI's cigarette and heated tobacco unit sales volume as a percentage of total industry cigarette and heated tobacco unit sales volume, was flat at 28.0%, reflecting:
PMI's total international cigarette sales volume as a percentage of total industry cigarette sales volume was down by 0.4 points to 25.6%, mainly reflecting lower cigarette market share and/or an unfavorable geographic mix impact, notably in Egypt, France, Japan, the Philippines, Russia and Ukraine, partly offset by Indonesia, PMI Duty-Free and Turkey.
Nine Months Year-to-Date
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.
PMI's cigarette shipment volume of the following brands increased:
PMI's cigarette shipment volume of the following brands decreased:
International Share of Market
PMI's total international market share (excluding China and the U.S.) decreased by 0.6 points to 27.3%, reflecting:
PMI's total international cigarette sales volume as a percentage of total industry cigarette sales volume was down by 0.9 points to 24.9%, mainly reflecting lower cigarette market share and/or an unfavorable geographic mix impact, notably in Japan, the Philippines, Russia and Ukraine, partly offset by Indonesia and Turkey.
CONSOLIDATED FINANCIAL SUMMARY
Third-Quarter
Financial Summary -
Quarters Ended September 30Change Fav./(Unfav.)
Variance Fav./(Unfav.)
(in millions)2021
2020
Total
Excl. Curr.
Total
Cur- rency
Acqui- sitions
Price
Vol/ Mix
Cost/ Other
Net Revenues$8,122
$7,446
9.1
%
7.6
%
676
107
2
158
439
(30
)
Cost of Sales(2,596)
(2,416)
(7.5
)%
(5.8
)%
(180
)
(40
)
(1
)
—
(211
)
72
Marketing, Administration and Research Costs
(2,053)
(1,769)
(16.1)
%
(15.9)
%
(284
)
(2
)
(1
)
—
—
(281
)
Amortization of Intangibles(18)
(18)
—
%
—
%
—
—
—
—
—
—
Operating Income
$3,455
$3,243
6.5
%
4.5
%
212
65
—
158
228
(239
)
Asset Impairment & Exit Costs (1)(43)
—
—
%
—
%
(43
)
—
—
—
—
(43
)
Asset Acquisition Cost (1)(51)
—
—
%
—
%
(51
)
—
—
—
—
(51
)
Adjusted Operating Income$3,549
$3,243
9.4
%
7.4
%
306
65
—
158
228
(145
)
Adjusted Operating Income Margin43.7
%
43.6
%
0.1 pp(0.1
)pp
(1) Included in Marketing, Administration and Research Costs above.Net revenues increased by 7.6% on an organic basis, mainly reflecting: favorable volume/mix, primarily driven by higher heated tobacco unit volume (notably in the EU, particularly Germany, Italy and Poland, as well as Japan, PMI Duty Free and Russia) and higher device volume (primarily in Japan, driven by the launch of IQOS ILUMA), partly offset by lower cigarette volume (mainly in Australia, France, Germany, Italy and the Philippines, partly offset by Indonesia, Japan, PMI Duty Free and Turkey) and unfavorable cigarette mix (mainly in Germany, Japan and Russia); and a favorable pricing variance (notably driven by Japan, the Philippines, Russia and Turkey, partly offset by Indonesia, Poland and Ukraine).
Operating income increased by 4.5%, excluding currency, primarily reflecting: favorable volume/mix, primarily driven by higher heated tobacco unit volume, partly offset by lower cigarette volume and unfavorable cigarette mix (each mainly reflecting the same geographies as for net revenues noted above); a favorable pricing variance; and lower manufacturing costs (driven by productivity gains related to reduced-risk products); partly offset by higher marketing, administration and research costs (due mainly to investments behind reduced-risk products, asset acquisition costs related to OtiTopic, and higher asset impairment and exit costs due to organizational design optimization and product distribution restructuring in South Korea).
Adjusted operating income increased by 7.4% on an organic basis. Adjusted operating income margin decreased by 0.1 point on the same basis, as detailed in Schedule 8.
Nine Months Year-to-Date
Financial Summary -
Nine Months Ended September 30,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2021
2020
Total
Excl. Curr.
Total
Cur- rency
Acqui- sitions
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 23,301
$ 21,250
9.7
%
6.1
%
2,051
752
2
590
983
(276
)
Saudi Arabia Customs Assessments
(246
)
—
—
%
—
%
(246
)
—
—
—
—
(246
)
Adjusted Net Revenues
$ 23,547
$ 21,250
10.8
%
7.3
%
2,297
752
2
590
983
(30
)
Net Revenues (1)
$ 23,301
$ 21,250
9.7
%
6.1
%
2,051
752
2
590
983
(276
)
Cost of Sales
(7,223
)
(6,997
)
(3.2
)%
0.5
%
(226
)
(260
)
(1
)
—
(329
)
364
Marketing, Administration and Research Costs
(5,995
)
(5,435
)
(10.3
)%
(8.2
)%
(560
)
(112
)
(1
)
—
—
(447
)
Amortization of Intangibles
(55
)
(55
)
—
%
1.8
%
—
(1
)
—
—
—
1
Operating Income
$ 10,028
$ 8,763
14.4
%
10.1
%
1,265
379
—
590
654
(358
)
Asset Impairment & Exit Costs (2)
(170
)
(71
)
-(100
)%
-(100
)%
(99
)
—
—
—
—
(99
)
Saudi Arabia Customs Assessments (3)
(246
)
—
—
%
—
%
(246
)
—
—
—
—
(246
)
Asset Acquisition Cost (2)
(51
)
—
—
%
—
%
(51
)
—
—
—
—
(51
)
Adjusted Operating Income
$ 10,495
$ 8,834
18.8
%
14.5
%
1,661
379
—
590
654
38
Adjusted Operating Income Margin
44.6
%
41.6
%
3.0
pp
2.8
pp
(1) Cost/Other variance includes a reduction in net revenues of $246 million in 2021 related to the Saudi Arabia customs assessments.
(2) Included in Marketing, Administration and Research Costs above.
(3) Included in Net Revenues above.
Net revenues increased by 6.1%, excluding currency, mainly reflecting: favorable volume/mix, primarily driven by higher heated tobacco unit volume (notably in the EU, particularly Germany, Hungary, Italy and Poland, as well as Japan and Russia), partly offset by lower cigarette volume (mainly in the EU Region, notably the Czech Republic, France and Germany, as well as Japan, Kuwait, North Africa, the Philippines, Russia and Ukraine, partially offset by Indonesia, PMI Duty Free, and Turkey); and a favorable pricing variance (notably driven by the Czech Republic, Germany, Japan, Kazakhstan, North Africa, the Philippines, Russia and Turkey, partly offset by Indonesia, Poland and Ukraine); partially offset by the unfavorable impact of the Saudi Arabia customs assessments of $246 million, shown in "Cost/Other". Adjusted net revenues increased by 7.3% on an organic basis, as detailed above and in Schedule 5.
Operating income increased by 10.1%, excluding currency, primarily reflecting: favorable volume/mix, mainly driven by the same factors as for net revenues noted above; a favorable pricing variance; and lower manufacturing costs (driven by productivity gains related to reduced-risk and combustible products); partly offset by the unfavorable impact of the Saudi Arabia customs assessments (as noted above for net revenues); and higher marketing, administration and research costs, including higher asset impairment and exit costs (mainly related to organizational design optimization, as well as product distribution restructuring in South Korea) and asset acquisition costs related to OtiTopic.
Adjusted operating income increased by 14.5% on an organic basis. Adjusted operating income margin increased by 2.8 points on the same basis, as detailed in Schedule 8.
EUROPEAN UNION REGION
Third-Quarter
Financial Summary -
Quarters Ended September 30,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2021
2020
Total
Excl.
Curr.
Total
Cur- rency
Acqui- sitions
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 3,192
$ 2,950
8.2
%
3.9
%
242
128
2
(5
)
117
—
Operating Income
$ 1,680
$ 1,588
5.8
%
0.8
%
92
79
—
(5
)
102
(84
)
Asset Impairment & Exit Costs (1)
(12
)
—
—
%
—
%
(12
)
—
—
—
—
(12
)
Adjusted Operating Income
$ 1,692
$ 1,588
6.5
%
1.6
%
104
79
—
(5
)
102
(72
)
Adjusted Operating Income Margin
53.0
%
53.8
%
(0.8
)pp
(1.2
)pp
(1) Included in marketing, administration and research costs at the consolidated operating income level.
Net revenues increased by 3.8% on an organic basis, as detailed in Schedule 5, reflecting: favorable volume/mix, mainly driven by higher heated tobacco unit volume (notably in Germany, Hungary, Italy and Poland), partly offset by lower cigarette volume (notably in France, Germany and Italy) and unfavorable cigarette mix (primarily in Germany). Pricing variance was slightly unfavorable, reflecting lower pricing for reduced-risk products (notably for heated tobacco units in Poland and devices in Germany and Italy), partly offset by higher combustible pricing (notably in Germany, partially offset by Poland).
Operating income increased by 0.8%, excluding currency, primarily reflecting: favorable volume/mix, driven by the same factors as for net revenues noted above; and lower manufacturing costs; partly offset by higher marketing, administration and research costs.
Adjusted operating income increased by 1.6% on an organic basis. Adjusted operating income margin decreased by 1.1 points on the same basis, as detailed in Schedule 8.
Nine Months Year-to-Date
Financial Summary -
Nine Months Ended September 30,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2021
2020
Total
Excl. Curr.
Total
Cur- rency
Acqui- sitions
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 9,250
$ 7,960
16.2
%
8.0
%
1,290
651
2
67
570
—
Operating Income
$ 4,811
$ 3,924
22.6
%
12.1
%
887
413
—
67
507
(100
)
Asset Impairment & Exit Costs (1)
(56
)
(27
)
-(100
)%
-(100
)%
(29
)
—
—
—
—
(29
)
Adjusted Operating Income
$ 4,867
$ 3,951
23.2
%
12.7
%
916
413
—
67
507
(71
)
Adjusted Operating Income Margin
52.6
%
49.6
%
3.0
pp
2.2
pp
(1) Included in marketing, administration and research costs at the consolidated operating income level.
Net revenues increased by 8.0% on an organic basis, reflecting: favorable volume/mix, mainly driven by higher heated tobacco unit volume (notably in Germany, Hungary, Italy and Poland), partly offset by lower cigarette volume (notably in the Czech Republic, France and Germany) and unfavorable cigarette mix (primarily in Germany and Poland); and a favorable pricing variance, driven by higher combustible pricing (mainly in Germany and Portugal, partly offset by France and Poland) and higher heated tobacco unit pricing (notably in the Czech Republic, partially offset by Poland), partly offset by lower device pricing (notably in Germany and Italy).
Operating income increased by 12.1%, excluding currency, primarily reflecting: favorable volume/mix, driven by the same factors as for net revenues noted above; lower manufacturing costs (driven by combustible and reduced-risk products); and a favorable pricing variance; partly offset by higher marketing, administration and research costs (including higher asset impairment and exit costs, mainly related to organizational design optimization).
Adjusted operating income increased by 12.7% on an organic basis. Adjusted operating income margin increased by 2.2 points on the same basis, as detailed in Schedule 8.
Total Market, PMI Shipment & Market Share Commentaries
European Union Key Data
Third-Quarter
Nine Months Year-to-Date
Change
Change
2021
2020
% / pp
2021
2020
% / pp
Total Market (billion units)
132.4
132.6
(0.1
)%
360.5
358.1
0.7
%
PMI Shipment Volume (million units)
Cigarettes
41,965
45,179
(7.1
)%
120,238
126,142
(4.7
)%
Heated Tobacco Units
7,058
5,181
36.2
%
20,405
14,069
45.0
%
Total EU
49,023
50,360
(2.7
)%
140,643
140,211
0.3
%
PMI Market Share
Marlboro
16.5%
17.5%
(1.0
)
16.7%
17.6%
(0.9
)
L&M
5.6%
6.0%
(0.4
)
5.7%
6.3%
(0.6
)
Chesterfield
5.5%
5.5%
—
5.5%
5.6%
(0.1
)
Philip Morris
2.2%
2.5%
(0.3
)
2.2%
2.5%
(0.3
)
HEETS
5.3%
3.9%
1.4
5.5%
3.9%
1.6
Others
3.1%
3.0%
0.1
3.0%
3.0%
—
Total EU
38.2%
38.4%
(0.2
)
38.6%
38.9%
(0.3
)
Note: HEETS includes HEETS Dimensions.
Third-Quarter
The estimated total market in the EU decreased by 0.1% to 132.4 billion units, mainly due to:
partly offset by
PMI's total shipment volume decreased by 2.7% to 49.0 billion units, primarily due to:
partly offset by
Excluding the net unfavorable impact of estimated distributor inventory movements, PMI's total in-market sales volume decreased by 0.5%.
Nine Months Year-to-Date
The estimated total market in the EU increased by 0.7% to 360.5 billion units, primarily driven by:
partly offset by
PMI's total shipment volume increased by 0.3% to 140.6 billion units, primarily driven by:
partly offset by
Excluding the net favorable impact of estimated distributor inventory movements, PMI's total in-market sales volume was essentially stable.
EASTERN EUROPE REGION
Third-Quarter
Financial Summary -
Quarters Ended September 30,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2021
2020
Total
Excl. Curr.
Total
Cur- rency
Acqui- sitions
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 941
$ 899
4.7
%
6.1
%
42
(13
)
—
22
33
—
Operating Income
$ 338
$ 245
38.0
%
25.7
%
93
30
—
22
27
14
Asset Impairment & Exit Costs (1)
(2
)
—
—
%
—
%
(2
)
—
—
—
—
(2
)
Adjusted Operating Income
$ 340
$ 245
38.8
%
26.5
%
95
30
—
22
27
16
Adjusted Operating Income Margin
36.1
%
27.3
%
8.8
pp
5.2
pp
(1) Included in marketing, administration and research costs at the consolidated operating income level.
Net revenues increased by 6.1% on an organic basis, reflecting: favorable volume/mix, driven by higher heated tobacco unit volume (primarily in Russia and Ukraine), partly offset by unfavorable cigarette volume/mix (primarily in Russia); and a favorable pricing variance, mainly driven by higher combustible pricing (notably in Russia), partly offset by lower heated tobacco unit pricing (primarily in Ukraine, partly offset by Russia).
Operating income increased by 25.7%, excluding currency, primarily reflecting: favorable volume/mix, driven by the same factors as for net revenues noted above; a favorable pricing variance; and lower manufacturing costs (primarily related to reduced-risk products, mainly in Russia).
Adjusted operating income increased by 26.5% on an organic basis. Adjusted operating income margin increased by 5.2 points on the same basis, as detailed in Schedule 8.
Nine Months Year-to-Date
Financial Summary -
Nine Months Ended September 30,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2021
2020
Total
Excl. Curr.
Total
Cur- rency
Acqui- sitions
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 2,632
$ 2,470
6.6
%
9.6
%
162
(74
)
—
68
168
—
Operating Income
$ 913
$ 610
49.7
%
50.0
%
303
(2
)
—
68
140
97
Asset Impairment & Exit Costs (1)
(11
)
(7
)
(57.1
)%
(57.1
)%
(4
)
—
—
—
—
(4
)
Adjusted Operating Income
$ 924
$ 617
49.8
%
50.1
%
307
(2
)
—
68
140
101
Adjusted Operating Income Margin
35.1
%
25.0
%
10.1
pp
9.2
pp
(1) Included in marketing, administration and research costs at the consolidated operating income level.
Net revenues increased by 9.6% on an organic basis, reflecting: favorable volume/mix, driven by higher heated tobacco unit volume (mainly in Russia and Ukraine), partly offset by unfavorable cigarette volume (primarily in Russia and Ukraine) and unfavorable cigarette mix (mainly in Russia); and a favorable pricing variance, mainly driven by higher combustible pricing (primarily in Kazakhstan, Russia and Ukraine), partially offset by lower device pricing (mainly in Russia) and lower heated tobacco unit pricing (primarily in Ukraine, partly offset by Russia).
Operating income increased by 50.0%, excluding currency, primarily reflecting: favorable volume/mix, driven by the same factors as for net revenues noted above; lower manufacturing costs (mainly related to reduced-risk products, primarily in Russia); and a favorable pricing variance.
Adjusted operating income increased by 50.1% on an organic basis. Adjusted operating income margin increased by 9.2 points on the same basis, as detailed in Schedule 8.
Total Market, PMI Shipment & Market Share Commentaries
PMI Shipment Volume
Third-Quarter
Nine Months Year-to-Date
(million units)
2021
2020
Change
2021
2020
Change
Cigarettes
25,020
25,661
(2.5)%
67,771
70,737
(4.2)%
Heated Tobacco Units
6,119
4,882
25.3%
18,594
14,374
29.4%
Total Eastern Europe
31,139
30,543
2.0%
86,365
85,111
1.5%
Third-Quarter
The estimated total market in Eastern Europe decreased, mainly due to:
PMI's total shipment volume increased by 2.0% to 31.1 billion units, notably driven by:
partly offset by
Nine Months Year-to-Date
The estimated total market in Eastern Europe decreased, primarily due to:
PMI's total shipment volume increased by 1.5% to 86.4 billion units, notably driven by:
partly offset by
Excluding the net favorable impact of estimated distributor inventory movements, PMI's total in-market sales volume decreased by 0.5%.
MIDDLE EAST & AFRICA REGION
Third-Quarter
Financial Summary -
Quarters Ended September 30,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2021
2020
Total
Excl. Curr.
Total
Cur- rency
Acqui- sitions
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 945
$ 768
23.0
%
26.6
%
177
(27
)
—
64
169
(29
)
Operating Income
$ 388
$ 261
48.7
%
59.8
%
127
(29
)
—
64
135
(43
)
Asset Impairment & Exit Costs (1)
(3
)
—
—
%
—
%
(3
)
—
—
—
—
(3
)
Adjusted Operating Income
$ 391
$ 261
49.8
%
60.9
%
130
(29
)
—
64
135
(40
)
Adjusted Operating Income Margin
41.4
%
34.0
%
7.4
pp
9.2
pp
(1) Included in Marketing, Administration and Research Costs above.
Net revenues increased by 26.6% on an organic basis, primarily reflecting: favorable volume/mix, mainly driven by higher cigarette volume (primarily in PMI Duty Free and Turkey, partly offset by North Africa), higher heated tobacco unit volume (mainly in PMI Duty Free) and favorable cigarette mix (notably in PMI Duty Free); and a favorable pricing variance, driven by combustible pricing (mainly in Turkey); partly offset by lower fees for certain distribution rights billed to customers in certain markets, shown in "Cost/Other".
Operating income increased by 59.8%, excluding currency, mainly reflecting: favorable volume/mix, mainly driven by the same factors as for net revenues noted above; a favorable pricing variance; and lower manufacturing costs; partly offset by lower fees for certain distribution rights, as noted above for net revenues; and higher marketing, administration and research costs.
Adjusted operating income increased by 60.9% on an organic basis. Adjusted operating income margin increased by 9.2 points on the same basis, as detailed in Schedule 8.
Nine Months Year-to-Date
Financial Summary -
Nine Months Ended September 30,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2021
2020
Total
Excl. Curr.
Total
Cur- rency
Acqui- sitions
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 2,306
$ 2,348
(1.8
)%
1.0
%
(42
)
(66
)
—
191
110
(277
)
Saudi Arabia Customs Assessments
(246
)
—
—
%
—
%
(246
)
—
—
—
—
(246
)
Adjusted Net Revenues
$ 2,552
$ 2,348
8.7
%
11.5
%
204
(66
)
—
191
110
(31
)
Net Revenues (1)
$ 2,306
$ 2,348
(1.8
)%
1.0
%
(42
)
(66
)
—
191
110
(277
)
Operating Income
$ 739
$ 819
(9.8
)%
(0.7
)%
(80
)
(74
)
—
191
70
(267
)
Asset Impairment & Exit Costs (2)
(13
)
(9
)
(44.4
)%
(44.4
)%
(4
)
—
—
—
—
(4
)
Saudi Arabia Customs Assessments (3)
(246
)
—
—
%
—
%
(246
)
—
—
—
—
(246
)
Adjusted Operating Income
$ 998
$ 828
20.5
%
29.5
%
170
(74
)
—
191
70
(17
)
Adjusted Operating Income Margin
39.1
%
35.3
%
3.8
pp
5.6
pp
(1) Cost/Other variance includes a reduction in net revenues of $246 million in 2021 related to the Saudi Arabia customs assessments.
(2) Included in Marketing, Administration and Research Costs above.
(3) Included in Net Revenues above.
Net revenues increased by 1.0%, excluding currency, despite the unfavorable impact of the Saudi Arabia customs assessments of $246 million, shown in "Cost/Other".
Adjusted net revenues increased by 11.5% on an organic basis, as detailed above and in Schedule 5, primarily reflecting: a favorable pricing variance, mainly driven by combustible pricing (mainly in Egypt and Turkey); and favorable volume/mix, primarily driven by favorable cigarette mix (mainly in PMI Duty Free, Saudi Arabia and Turkey), higher heated tobacco unit volume (mainly in Egypt, Jordan and PMI Duty Free) and higher cigarette volume (primarily in PMI Duty Free and Turkey, partly offset by Kuwait and North Africa); partially offset by lower fees for certain distribution rights billed to customers in certain markets, shown in "Cost/Other".
Operating income decreased by 0.7%, excluding currency, predominantly due to the unfavorable impact of the Saudi Arabia customs assessments, as noted above for net revenues.
Adjusted operating income increased by 29.5% on an organic basis, mainly reflecting: a favorable pricing variance; favorable volume/mix, driven by the same factors as for net revenues noted above; and lower manufacturing costs (primarily related to combustible products); partly offset by lower fees for certain distribution rights, as noted above for net revenues; and higher marketing, administration and research costs.
Adjusted operating income margin increased by 5.6 points on an organic basis, as detailed in Schedule 8.
Total Market, PMI Shipment & Market Share Commentaries
PMI Shipment Volume
Third-Quarter
Nine Months Year-to-Date
(million units)
2021
2020
Change
2021
2020
Change
Cigarettes
35,166
30,903
13.8%
93,155
88,087
5.8%
Heated Tobacco Units
577
179
+100%
1,485
834
78.1%
Total Middle East & Africa
35,743
31,082
15.0%
94,640
88,921
6.4%
Third-Quarter
The estimated total market in the Middle East & Africa increased, mainly driven by:
partly offset by
PMI's total shipment volume increased by 15.0% to 35.7 billion units, notably driven by:
partly offset by
Excluding the net favorable impact of estimated distributor inventory movements, PMI's total in-market sales volume increased by 8.5%.
Nine Months Year-to-Date
The estimated total market in the Middle East & Africa increased, mainly driven by:
partly offset by
PMI's total shipment volume increased by 6.4% to 94.6 billion units, notably driven by:
partly offset by
SOUTH & SOUTHEAST ASIA REGION
Third-Quarter
Financial Summary -
Quarters Ended September 30,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2021
2020
Total
Excl. Curr.
Total
Cur- rency
Acqui- sitions
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 1,065
$ 1,071
(0.6
)%
(1.1
)%
(6
)
6
—
14
(26
)
—
Operating Income
$ 348
$ 402
(13.4
)%
(14.4
)%
(54
)
4
—
14
(42
)
(30
)
Asset Impairment & Exit Costs (1)
(4
)
—
—
%
—
%
(4
)
—
—
—
—
(4
)
Adjusted Operating Income
$ 352
$ 402
(12.4
)%
(13.4
)%
(50
)
4
—
14
(42
)
(26
)
Adjusted Operating Income Margin
33.1
%
37.5
%
(4.4
)pp
(4.6
)pp
(1) Included in marketing, administration and research costs at the consolidated operating income level.
Net revenues decreased by 1.1% on an organic basis, reflecting: unfavorable volume/mix, due to lower cigarette volume (primarily in the Philippines, partly offset by Indonesia); partially offset by a favorable pricing variance, driven by combustible pricing (mainly in the Philippines, partly offset by Indonesia).
Operating income decreased by 14.4%, excluding currency, primarily reflecting: unfavorable volume/mix, due to the same factors as for net revenues noted above; and higher manufacturing costs; partly offset by a favorable pricing variance.
Adjusted operating income decreased by 13.4% on an organic basis. Adjusted operating income margin decreased by 4.6 points on the same basis, as detailed in Schedule 8.
Nine Months Year-to-Date
Financial Summary -
Nine Months Ended September 30,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2021
2020
Total
Excl. Curr.
Total
Cur- rency
Acqui- sitions
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 3,284
$ 3,211
2.3
%
(0.9
)%
73
102
—
(4
)
(25
)
—
Operating Income
$ 1,208
$ 1,290
(6.4
)%
(9.1
)%
(82
)
36
—
(4
)
(81
)
(33
)
Asset Impairment & Exit Costs (1)
(17
)
(11
)
(54.5
)%
(54.5
)%
(6
)
—
—
—
—
(6
)
Adjusted Operating Income
$ 1,225
$ 1,301
(5.8
)%
(8.6
)%
(76
)
36
—
(4
)
(81
)
(27
)
Adjusted Operating Income Margin
37.3
%
40.5
%
(3.2
)pp
(3.1
)pp
(1) Included in marketing, administration and research costs at the consolidated operating income level.
Net revenues decreased by 0.9% on an organic basis, reflecting: unfavorable volume/mix, mainly due to lower cigarette volume (primarily the Philippines, partly offset by India and Indonesia), partially offset by favorable cigarette mix (mainly in Indonesia and the Philippines). Pricing variance was slightly unfavorable, reflecting lower pricing for combustible products (notably in Indonesia, largely offset by the Philippines).
Operating income decreased by 9.1%, excluding currency, primarily reflecting: unfavorable volume/mix, due to the same factors as for net revenues noted above; and higher marketing, administration and research costs.
Adjusted operating income decreased by 8.6% on an organic basis. Adjusted operating income margin decreased by 3.1 points on the same basis, as detailed in Schedule 8.
Total Market, PMI Shipment & Market Share Commentaries
PMI Shipment Volume
Third-Quarter
Nine Months Year-to-Date
(million units)
2021
2020
Change
2021
2020
Change
Cigarettes
35,578
37,238
(4.5)%
105,787
108,179
(2.2)%
Heated Tobacco Units
79
10
+100%
151
10
+100%
Total South & Southeast Asia
35,657
37,248
(4.3)%
105,938
108,189
(2.1)%
Third-Quarter
The estimated total market in South & Southeast Asia increased, mainly driven by:
partly offset by
PMI's total shipment volume decreased by 4.3% to 35.7 billion units, mainly due to:
partly offset by
Nine Months Year-to-Date
The estimated total market in South & Southeast Asia increased, mainly driven by:
partly offset by:
PMI's total shipment volume decreased by 2.1% to 105.9 billion units, notably due to:
partly offset by:
EAST ASIA & AUSTRALIA REGION
Third-Quarter
Financial Summary -
Quarters Ended September 30,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2021
2020
Total
Excl. Curr.
Total
Cur- rency
Acqui- sitions
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 1,523
$ 1,358
12.2
%
12.7
%
165
(7
)
—
47
125
—
Operating Income
$ 631
$ 637
(0.9
)%
2.7
%
(6
)
(23
)
—
47
3
(33
)
Asset Impairment & Exit Costs (1)
(21
)
—
—
%
—
%
(21
)
—
—
—
—
(21
)
Adjusted Operating Income
$ 652
$ 637
2.4
%
6.0
%
15
(23
)
—
47
3
(12
)
Adjusted Operating Income Margin
42.8
%
46.9
%
(4.1
)pp
(2.8
)pp
(1) Included in marketing, administration and research costs at the consolidated operating income level.
Net revenues increased by 12.7% on an organic basis, reflecting: favorable volume/mix, mainly driven by higher heated tobacco unit volume and favorable device volume/mix (predominantly in Japan, driven by the launch of IQOS ILUMA), partly offset by unfavorable cigarette mix (primarily in Japan) and lower cigarette volume (particularly in Australia, partly offset by Japan); and a favorable pricing variance, primarily driven by higher heated tobacco, combustible and device pricing in Japan.
Operating income increased by 2.7%, excluding currency, mainly reflecting: a favorable pricing variance; and lower manufacturing costs (primarily related to reduced-risk products in Japan); partly offset by higher marketing, administration and research costs (notably due to the launch of IQOS ILUMA in Japan and higher asset impairment and exit costs, mainly related to product distribution restructuring in South Korea). Volume/mix was slightly favorable, notably reflecting higher heated tobacco unit and cigarette volume in Japan, largely offset by lower cigarette volume in Australia and unfavorable cigarette mix in Japan.
Adjusted operating income increased by 6.0% on an organic basis. Adjusted operating income margin decreased by 2.8 points on the same basis, as detailed in Schedule 8.
Nine Months Year-to-Date
Financial Summary -
Nine Months Ended September 30,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2021
2020
Total
Excl.
Curr.
Total
Cur- rency
Acqui- sitions
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 4,509
$ 4,045
11.5
%
9.0
%
464
101
—
240
123
—
Operating Income
$ 2,041
$ 1,792
13.9
%
14.2
%
249
(6
)
—
240
21
(6
)
Asset Impairment & Exit Costs (1)
(67
)
(13
)
-(100
)%
-(100
)%
(54
)
—
—
—
—
(54
)
Adjusted Operating Income
$ 2,108
$ 1,805
16.8
%
17.1
%
303
(6
)
—
240
21
48
Adjusted Operating Income Margin
46.8
%
44.6
%
2.2
pp
3.4
pp
(1) Included in marketing, administration and research costs at the consolidated operating income level.
Net revenues increased by 9.0% on an organic basis, mainly reflecting: a favorable pricing variance, primarily driven by higher heated tobacco and combustible pricing in Japan, partly offset by lower combustible pricing in Australia; and favorable volume/mix, mainly driven by higher heated tobacco unit volume and favorable device volume/mix in Japan (driven by the launch of IQOS ILUMA), partly offset by lower cigarette volume (primarily in Australia, Japan and South Korea) and unfavorable cigarette mix (mainly in Australia and Japan).
Operating income increased by 14.2%, excluding currency, mainly reflecting: a favorable pricing variance; lower manufacturing costs (primarily related to reduced-risk products in Japan); and favorable volume/mix, driven by higher heated tobacco unit volume in Japan, partly offset by lower cigarette volume (primarily in Australia, Japan and South Korea), unfavorable cigarette mix (mainly in Australia and Japan) and unfavorable heated tobacco unit mix in Japan; partially offset by higher marketing, administration and research costs (notably reflecting the same factors as in the quarter).
Adjusted operating income increased by 17.1%, on an organic basis. Adjusted operating income margin increased by 3.4 points on the same basis, as detailed in Schedule 8.
Total Market, PMI Shipment & Market Share Commentaries
PMI Shipment Volume
Third-Quarter
Nine Months Year-to-Date
(million units)
2021
2020
Change
2021
2020
Change
Cigarettes
11,120
10,784
3.1%
33,450
35,154
(4.8)%
Heated Tobacco Units
9,435
8,601
9.7%
28,478
24,799
14.8%
Total East Asia & Australia
20,555
19,385
6.0%
61,928
59,953
3.3%
Third-Quarter
The estimated total market in East Asia & Australia, excluding China, decreased, primarily due to:
PMI's total shipment volume increased by 6.0% to 20.6 billion units, mainly driven by:
partly offset by
Excluding the net favorable impact of estimated distributor inventory movements, PMI's total in-market sales volume declined by 1.7%.
Nine Months Year-to-Date
The estimated total market in East Asia & Australia, excluding China, decreased, mainly due to:
PMI's total shipment volume increased by 3.3% to 61.9 billion units, mainly driven by:
partly offset by
Excluding the net favorable impact of estimated distributor inventory movements, PMI's total in-market sales volume declined by 0.6%.
AMERICAS REGION
Third-Quarter
Financial Summary -
Quarters Ended September 30,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2021
2020
Total
Excl. Curr.
Total
Cur- rency
Acqui- sitions
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 456
$ 400
14.0
%
9.0
%
56
20
—
16
21
(1
)
Operating Income
$ 121
$ 110
10.0
%
6.4
%
11
4
—
16
3
(12
)
Asset Impairment & Exit Costs (1)
(1
)
—
—
%
—
%
(1
)
—
—
—
—
(1
)
Adjusted Operating Income
$ 122
$ 110
10.9
%
7.3
%
12
4
—
16
3
(11
)
Adjusted Operating Income Margin
26.8
%
27.5
%
(0.7
)pp
(0.4
)pp
(1) Included in marketing, administration and research costs at the consolidated operating income level.
Net revenues increased by 9.0% on an organic basis, reflecting: favorable volume/mix, mainly driven by higher cigarette volume (primarily in Colombia and Mexico) and higher device volume (notably in Canada); and a favorable pricing variance driven by combustible products (notably in Argentina and Mexico).
Operating income increased by 6.4%, excluding currency, primarily reflecting: a favorable pricing variance; partly offset by higher manufacturing costs; and higher marketing, administration and research costs.
Adjusted operating income increased by 7.3% on an organic basis. Adjusted operating income margin decreased by 0.4 points on the same basis, as detailed in Schedule 8.
Nine Months Year-to-Date
Financial Summary -
Nine Months Ended September 30,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2021
2020
Total
Excl. Curr.
Total
Cur- rency
Acqui- sitions
Price
Vol/ Mix
Cost/ Other
(in millions)
Net Revenues
$ 1,320
$ 1,216
8.6
%
5.4
%
104
38
—
28
37
1
Operating Income
$ 367
$ 328
11.9
%
8.2
%
39
12
—
28
(3
)
2
Asset Impairment & Exit Costs (1)
(6
)
(4
)
(50.0
)%
(50.0
)%
(2
)
—
—
—
—
(2
)
Adjusted Operating Income
$ 373
$ 332
12.3
%
8.7
%
41
12
—
28
(3
)
4
Adjusted Operating Income Margin
28.3
%
27.3
%
1.0
pp
0.9
pp
(1) Included in marketing, administration and research costs at the consolidated operating income level.
Net revenues increased by 5.4% on an organic basis, mainly reflecting: favorable volume/mix, primarily driven by higher cigarette volume (mainly in Brazil and Mexico) and higher device volume (notably in Canada); and a favorable pricing variance, driven by higher combustible pricing (notably in Argentina and Colombia).
Operating income increased by 8.2%, excluding currency, primarily reflecting: a favorable pricing variance; and lower marketing, administration and research costs; partly offset by higher manufacturing costs.
Adjusted operating income increased by 8.7% on an organic basis. Adjusted operating income margin increased by 0.9 points on the same basis, as detailed in Schedule 8.
Total Market, PMI Shipment & Market Share Commentaries
PMI Shipment Volume
Third-Quarter
Nine Months Year-to-Date
(million units)
2021
2020
Change
2021
2020
Change
Cigarettes
15,994
15,699
1.9%
46,092
45,542
1.2%
Heated Tobacco Units
221
114
93.9%
466
316
47.5%
Total Americas
16,215
15,813
2.5%
46,558
45,858
1.5%
Third-Quarter
The estimated total market in Americas decreased, notably due to:
partly offset by
PMI's total shipment volume increased by 2.5% to 16.2 billion units, notably driven by:
partly offset by
Nine Months Year-to-Date
The estimated total market in Americas increased, mainly driven by:
partly offset by
PMI's total shipment volume increased by 1.5% to 46.6 billion units, primarily driven by:
partly offset by
OTHER
Third-Quarter and Nine Months Year-to-Date
Following the acquisitions of Fertin Pharma A/S, OtiTopic, Inc. and Vectura Group plc., PMI added the "Other" category in the third quarter of 2021. Business operations for the Other category are evaluated separately from the geographical operating segments.
Due to the timing of the Fertin Pharma and Vectura acquisitions, the company did not record the immaterial results of operations from these two acquisitions in its consolidated statements of earnings from the acquisition dates through September 30, 2021.
PMI accounted for the OtiTopic transaction as an asset acquisition since the in-process research and development of the dry power inhalation aspirin treatment represented substantially all of the fair value of the gross assets acquired and had no alternative future use. As a result, PMI recorded a pre-tax charge of $51 million to research and development costs within marketing, administration and research costs of the Other category for the third quarter and the nine months year-to-date. The charge has been excluded from adjusted results.
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, its shareholders and other stakeholders. PMI is a leading international tobacco company engaged in the manufacture and sale of cigarettes, as well as smoke-free products, associated electronic devices and accessories, and other nicotine-containing products in markets outside the U.S. In addition, versions of PMI's IQOS Platform 1 device and consumables have received marketing authorizations from the U.S. Food and Drug Administration (FDA) under the premarket tobacco product application (PMTA) pathway; the FDA has also authorized the marketing of a version of IQOS and its consumables as a Modified Risk Tobacco Product (MRTP), finding that an exposure modification order for these products is appropriate to promote the public health. 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 product portfolio includes heat-not-burn, nicotine-containing vapor products and oral nicotine products. As of September 30, 2021, PMI's smoke-free products are available for sale in 70 markets in key cities or nationwide, and PMI estimates that approximately 14.9 million adults around the world have already switched to IQOS and stopped smoking. 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 in certain markets or countries; health concerns relating to the use of tobacco and other nicotine-containing products and exposure to environmental tobacco smoke; litigation related to tobacco use and intellectual property; 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, availability, and quality of tobacco and other agricultural products and raw materials, as well as components and materials for our electronic devices; 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.
In addition, PMI’s business risks also include risks and uncertainties related to PMI’s acquisitions of Fertin Pharma A/S (“Fertin”), OtiTopic, Inc. ("OtiTopic") and Vectura Group plc (“Vectura”), including, amongst other things: (1) the possibility that the integration of the operations of Fertin and Vectura with those of PMI may be more difficult and/or take longer than anticipated, and may not accelerate PMI’s desired entry into additional smoke-free and beyond nicotine platforms as quickly as anticipated; (2) the possibility that the respective integrations of Fertin and Vectura into PMI may be more costly than anticipated and may have unanticipated adverse results relating to Fertin, Vectura or PMI’s existing businesses; (3) the inability to gain access to or acquire differentiated proprietary assets, technology and/or pharmaceutical development expertise as anticipated by these acquisitions; (4) risks associated with third-party contracts containing consent and/or other contractual provisions that may be triggered by the acquisitions; (5) the success of the research and development efforts of Fertin, OtiTopic and Vectura, including the ability to obtain regulatory approval for new products, and the ability to commercialize or license these new products; (6) any unanticipated safety, quality or efficacy concerns and the impact of identified concerns associated with the products developed by Fertin, OtiTopic and Vectura; and (7) the ability of PMI to retain key personnel of Fertin and Vectura, or hire key talent to work in the Fertin and Vectura businesses due to their affiliation with PMI.
The COVID-19 pandemic has created significant societal and economic disruption, and resulted in closures of stores, factories and offices, and restrictions on manufacturing, distribution and travel, all of which will adversely impact our business, results of operations, cash flows and financial position during the continuation of the pandemic. Our business continuity plans and other safeguards may not be effective to mitigate the impact of the pandemic. Currently, significant risks include our diminished ability to convert adult smokers to our reduced-risk products, significant volume declines in our duty-free business and certain other key markets, disruptions or delays in our manufacturing and supply chain, increased currency volatility, and delays in certain cost saving, transformation and restructuring initiatives. Our business could also be adversely impacted if key personnel or a significant number of employees or business partners become unavailable due to the continuation of the COVID-19 pandemic. The significant adverse impact of COVID-19 on the economic or political conditions in markets in which we operate could result in changes to the preferences of our adult consumers and lower demand for our products, particularly for our mid-price or premium-price brands. Continuation of the pandemic could disrupt our access to the credit markets or increase our borrowing costs. Governments may temporarily be unable to focus on the development of science-based regulatory frameworks for the development and commercialization of reduced-risk products or on the enforcement or implementation of regulations that are significant to our business. In addition, messaging about the potential negative impacts of the use of our products on COVID-19 risks may lead to increasingly restrictive regulatory measures on the sale and use of our products, negatively impact demand for our products, the willingness of adult consumers to switch to our reduced-risk products and our efforts to advocate for the development of science-based regulatory frameworks for the development and commercialization of reduced-risk products.
The impact of these risks also depends on factors beyond our knowledge or control, including the duration and severity of the pandemic, its recurrence in our key markets, actions taken to contain its spread and to mitigate its public health effects, and the ultimate economic consequences thereof.
PMI is further subject to other risks detailed from time to time in its publicly filed documents, including the Form 10-Q for the quarter ended June 30, 2021. 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
Note: as of December 2020, PMI heat-not-burn products and HTUs include licensed KT&G heat-not-burn products and HTUs, respectively.
IQOS in the United States
Appendix 1
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Key Market Data
Quarters Ended September 30,
Market
Total Market,
bio units
PMI Shipments, bio units
PMI Market Share, % (1)
Total
Cigarette
HTU
Total
HTU
2021
2020
% Change
2021
2020
% Change
2021
2020
% Change
2021
2020
% Change
2021
2020
pp Change
2021
2020
pp Change
Total
679.6
674.3
0.8
188.3
184.4
2.1
164.8
165.5
(0.4
)
23.5
19.0
23.8
28.0
28.0
—
3.6
3.0
0.6
European Union
France
9.0
9.8
(8.0
)
3.7
4.2
(10.8
)
3.6
4.1
(11.7
)
0.1
—
—
44.0
45.3
(1.3
)
0.6
0.5
0.1
Germany
20.5
20.4
0.7
7.3
7.4
(1.1
)
6.8
7.0
(3.8
)
0.6
0.4
50.0
35.8
36.4
(0.6
)
2.8
1.9
0.9
Italy
19.2
18.8
2.1
9.4
9.7
(3.1
)
7.3
8.2
(11.1
)
2.1
1.5
41.0
52.9
52.1
0.8
10.8
7.8
3.0
Poland
14.0
13.5
3.4
5.3
5.1
3.8
4.5
4.5
(0.3
)
0.8
0.6
32.7
38.0
37.8
0.2
6.0
4.7
1.3
Spain
12.1
11.7
3.1
3.4
3.7
(9.1
)
3.2
3.6
(10.1
)
0.1
0.1
25.3
32.1
32.2
(0.1
)
1.1
0.9
0.2
Eastern Europe
Russia
59.3
59.8
(0.9
)
18.8
18.6
0.7
15.0
15.5
(3.8
)
3.8
3.1
23.3
32.0
31.8
0.2
6.9
5.8
1.1
Middle East & Africa
Saudi Arabia
5.4
5.5
(1.6
)
2.3
2.4
(4.2
)
2.3
2.4
(5.0
)
—
—
—
40.8
36.9
3.9
1.1
0.4
0.7
Turkey
36.1
32.1
12.5
16.0
13.5
18.4
16.0
13.5
18.4
—
—
—
44.2
42.0
2.2
—
—
—
South & Southeast Asia
Indonesia
74.3
70.1
6.0
20.8
19.8
5.1
20.8
19.8
5.1
—
—
—
28.0
28.2
(0.2
)
—
—
—
Philippines
14.4
17.5
(17.7
)
8.9
11.7
(23.8
)
8.9
11.7
(24.1
)
—
—
—
61.9
66.8
(4.9
)
0.3
—
0.3
East Asia & Australia
Australia
2.3
3.2
(28.0
)
0.8
1.0
(19.0
)
0.8
1.0
(19.0
)
—
—
—
33.7
29.8
3.9
—
—
—
Japan
39.7
40.8
(2.8
)
13.6
11.9
14.6
5.4
4.6
18.4
8.2
7.3
12.2
38.3
36.9
1.4
22.9
20.4
2.5
South Korea
19.2
20.2
(5.2
)
3.7
3.9
(5.9
)
2.5
2.7
(7.1
)
1.2
1.2
(3.2
)
19.2
19.5
(0.3
)
6.1
6.0
0.1
Americas
Argentina
8.4
8.6
(2.1
)
4.8
4.9
(2.5
)
4.8
4.9
(2.5
)
—
—
—
56.6
56.8
(0.2
)
—
—
—
Mexico
7.8
7.7
0.8
5.0
4.8
3.9
5.0
4.8
3.8
—
—
—
64.6
62.7
1.9
0.3
0.2
0.1
(1) Market share estimates are calculated using IMS data
Note: % change for Total Market and PMI shipments is computed based on millions of units. "-" indicates volume below 50 million units and market share below 0.1%
Appendix 2
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Key Market Data
Nine Months Ended September 30,
Market
Total Market,
bio units
PMI Shipments, bio units
PMI Market Share, % (1)
Total
Cigarette
HTU
Total
HTU
2021
2020
% Change
2021
2020
% Change
2021
2020
% Change
2021
2020
% Change
2021
2020
pp Change
2021
2020
pp Change
Total
1,946.1
1,897.3
2.6
536.1
528.2
1.5
466.5
473.8
(1.6
)
69.6
54.4
27.9
27.3
27.9
(0.6
)
3.5
2.9
0.6
European Union
France
26.3
28.0
(6.1
)
11.6
12.7
(8.3
)
11.4
12.5
(8.8
)
0.2
0.1
36.9
43.7
44.9
(1.2
)
0.6
0.5
0.1
Germany
56.5
56.4
0.1
21.6
22.0
(1.4
)
20.0
20.8
(4.0
)
1.7
1.2
44.2
38.3
38.9
(0.6
)
3.0
2.1
0.9
Italy
53.0
50.8
4.2
28.9
26.7
8.1
22.4
22.8
(1.5
)
6.5
4.0
62.8
52.9
52.0
0.9
11.1
7.6
3.5
Poland
37.2
35.0
6.4
13.9
13.6
2.3
11.7
12.1
(2.7
)
2.2
1.6
40.9
37.4
38.9
(1.5
)
5.9
4.5
1.4
Spain
32.2
31.7
1.4
10.2
10.1
1.1
9.8
9.8
0.5
0.4
0.3
18.0
31.5
31.5
—
1.2
1.0
0.2
Eastern Europe
Russia
163.7
163.4
0.2
52.0
51.6
0.9
40.4
42.3
(4.5
)
11.7
9.3
25.3
31.5
32.3
(0.8
)
7.2
6.1
1.1
Middle East & Africa
Saudi Arabia
16.2
15.8
2.0
6.6
6.2
5.3
6.4
6.2
3.5
0.2
—
—
41.5
38.5
3.0
0.9
0.2
0.7
Turkey
92.1
86.4
6.6
40.4
35.3
14.6
40.4
35.3
14.6
—
—
—
43.9
40.8
3.1
—
—
—
South & Southeast Asia
Indonesia
217.4
201.4
7.9
60.8
58.3
4.3
60.8
58.3
4.3
—
—
—
28.0
28.9
(0.9
)
—
—
—
Philippines
41.2
47.0
(12.3
)
25.6
32.1
(20.3
)
25.5
32.1
(20.6
)
0.1
—
—
62.2
68.4
(6.2
)
0.3
—
0.3
East Asia & Australia
Australia
7.1
8.3
(14.5
)
2.3
2.5
(6.4
)
2.3
2.5
(6.4
)
—
—
—
32.4
29.6
2.8
—
—
—
Japan
107.3
111.4
(3.7
)
41.6
38.8
7.2
16.8
17.7
(4.9
)
24.7
21.1
17.3
38.6
36.7
1.9
23.0
20.0
3.0
South Korea
54.1
54.8
(1.4
)
10.7
11.3
(5.3
)
7.2
7.8
(7.6
)
3.5
3.5
(0.3
)
19.7
20.7
(1.0
)
6.4
6.4
—
Americas
Argentina
26.1
24.3
7.5
14.6
14.9
(2.4
)
14.6
14.9
(2.4
)
—
—
—
55.8
61.5
(5.7
)
—
—
—
Mexico
22.6
21.9
3.0
14.1
13.6
3.9
14.1
13.6
3.7
0.1
—
—
62.5
62.0
0.5
0.3
0.2
0.1
(1) Market share estimates are calculated using IMS data
Note: % change for Total Market and PMI shipments is computed based on millions of units. "-" indicates volume below 50 million units and market share below 0.1%
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,
$
1.55
2021 Diluted Earnings Per Share (1)
$
4.48
$
1.48
2020 Diluted Earnings Per Share (1)
$
3.90
$
0.07
Change
$
0.58
4.7
%
% Change
14.9
%
Reconciliation:
$
1.48
2020 Diluted Earnings Per Share (1)
$
3.90
—
2020 Asset impairment and exit costs
0.04
—
2020 Fair value adjustment for equity security investments
0.04
(0.06
)
2020 Tax items
(0.06
)
(0.02
)
2021 Asset impairment and exit costs
(0.09
)
—
2021 Saudi Arabia customs assessments
(0.14
)
(0.03
)
2021 Asset acquisition cost
(0.03
)
0.02
2021 Equity investee ownership dilution
0.02
—
2021 Tax items
—
0.04
Currency
0.18
0.01
Interest
(0.01
)
0.04
Change in tax rate
0.07
0.07
Operations (2)
0.56
$
1.55
2021 Diluted Earnings Per Share (1)
$
4.48
(1) Basic and diluted EPS were calculated using the following (in millions):
Quarters Ended
Nine Months Ended
September 30,
September 30,
2021
2020
2021
2020
$ 2,426
$ 2,307
Net Earnings attributable to PMI
$ 7,016
$ 6,080
7
5
Less: Distributed and undistributed earnings attributable to share-based payment awards
21
15
$ 2,419
$ 2,302
Net Earnings for basic and diluted EPS
$ 6,995
$ 6,065
1,558
1,558
Weighted-average shares for basic EPS
1,558
1,557
2
—
Plus Contingently Issuable Performance Stock Units
2
—
1,560
1,558
Weighted-average shares for diluted EPS
1,560
1,557
(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,
2021
2020
% Change
2021
2020
% Change
$ 1.55
$ 1.48
4.7
%
Reported Diluted EPS
$ 4.48
$ 3.90
14.9
%
0.04
Less: Currency
0.18
$ 1.51
$ 1.48
2.0
%
Reported Diluted EPS, excluding Currency
$ 4.30
$ 3.90
10.3
%
Quarters Ended September 30,
Nine Months Ended September 30,
Year Ended
2021
2020
% Change
2021
2020
% Change
2020
$ 1.55
$ 1.48
4.7
%
Reported Diluted EPS
$ 4.48
$ 3.90
14.9
%
$ 5.16
—
—
Saudi Arabia customs assessments
0.14
—
—
0.02
—
Asset impairment and exit costs
0.09
0.04
0.08
0.03
—
Asset acquisition cost
0.03
—
—
(0.02
)
—
Equity investee ownership dilution
(0.02
)
—
—
—
—
Fair value adjustment for equity security investments
—
0.04
0.04
—
(0.06
)
Tax items
—
(0.06
)
(0.06
)
—
—
Brazil indirect tax credit
—
—
(0.05
)
$ 1.58
$ 1.42
11.3
%
Adjusted Diluted EPS
$ 4.72
$ 3.92
20.4
%
$ 5.17
0.04
Less: Currency
0.18
$ 1.54
$ 1.42
8.5
%
Adjusted Diluted EPS, excluding Currency
$ 4.54
$ 3.92
15.8
%
Schedule 3
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Net Revenues by Product Category and Adjustments of Net Revenues for the Impact of Currency and Acquisitions
($ in millions) / (Unaudited)
Net Revenues
Currency
Net Revenues excluding Currency
Acquisitions
Net Revenues excluding Currency & Acquisitions
Quarters Ended September 30,
Net Revenues
Total
Excluding Currency
Excluding Currency & Acquisitions
2021
Combustible Products
2020
% Change
$ 2,170
$ 88
$ 2,082
$ —
$ 2,082
European Union
$ 2,244
(3.3)%
(7.2)%
(7.2)%
635
(7)
641
—
641
Eastern Europe
636
(0.2)%
0.9%
0.9%
901
(28)
928
—
928
Middle East & Africa
768
17.3%
20.8%
20.8%
1,061
6
1,055
—
1,055
South & Southeast Asia
1,071
(0.9)%
(1.5)%
(1.5)%
591
4
587
—
587
East Asia & Australia
605
(2.2)%
(2.9)%
(2.9)%
438
19
418
—
418
Americas
393
11.4%
6.5%
6.5%
$ 5,796
$ 83
$ 5,713
$ —
$ 5,713
Total Combustible
$ 5,716
1.4%
(0.1)%
(0.1)%
2021
Reduced-Risk Products
2020
% Change
$ 1,022
$ 40
$ 982
$ 2
$ 979
European Union
$ 706
44.7%
39.0%
38.7%
306
(6)
313
—
313
Eastern Europe
263
16.4%
18.8%
18.8%
44
1
44
—
44
Middle East & Africa
—
—%
—%
—%
4
—
4
—
4
South & Southeast Asia
—
—%
—%
—%
932
(11)
943
—
943
East Asia & Australia
753
23.7%
25.1%
25.1%
18
1
18
—
18
Americas
7
+100%
+100%
+100%
$ 2,326
$ 24
$ 2,302
$ 2
$ 2,300
Total RRPs
$ 1,730
34.5%
33.1%
33.0%
2021
PMI
2020
% Change
$ 3,192
$ 128
$ 3,064
$ 2
$ 3,062
European Union
$ 2,950
8.2%
3.9%
3.8%
941
(13)
954
—
954
Eastern Europe
899
4.7%
6.1%
6.1%
945
(27)
972
—
972
Middle East & Africa
768
23.0%
26.6%
26.6%
1,065
6
1,059
—
1,059
South & Southeast Asia
1,071
(0.6)%
(1.1)%
(1.1)%
1,523
(7)
1,530
—
1,530
East Asia & Australia
1,358
12.2%
12.7%
12.7%
456
20
436
—
436
Americas
400
14.0%
9.0%
9.0%
$ 8,122
$ 107
$ 8,015
$ 2
$ 8,013
Total PMI
$ 7,446
9.1%
7.6%
7.6%
Note: Sum of product categories or Regions might not foot to Total PMI due to roundings. "-" indicates amounts between -$0.5 million and +$0.5 million
Schedule 4
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Net Revenues by Product Category and Adjustments of Net Revenues for the Impact of Currency and Acquisitions
($ in millions) / (Unaudited)
Net Revenues
Currency
Net Revenues excluding Currency
Acquisitions
Net Revenues excluding Currency & Acquisitions
Nine Months Ended
September 30,
Net Revenues
Total
Excluding Currency
Excluding Currency & Acquisitions
2021
Combustible Products
2020
% Change
$ 6,283
$ 445
$ 5,838
$ —
$ 5,838
European Union
$ 6,099
3.0%
(4.3)%
(4.3)%
1,681
(29)
1,710
—
1,710
Eastern Europe
1,681
—%
1.7%
1.7%
2,208
(1)
(67)
2,275
—
2,275
Middle East & Africa
2,296
(3.9)%
(0.9)%
(0.9)%
3,277
102
3,175
—
3,175
South & Southeast Asia
3,211
2.1%
(1.1)%
(1.1)%
1,850
65
1,786
—
1,786
East Asia & Australia
1,876
(1.4)%
(4.8)%
(4.8)%
1,278
37
1,241
—
1,241
Americas
1,196
6.9%
3.8%
3.8%
$ 16,577
$ 552
$ 16,025
$ —
$ 16,025
Total Combustible
$ 16,360
1.3%
(2.0)%
(2.0)%
2021
Reduced-Risk Products
2020
% Change
$ 2,967
$ 206
$ 2,761
$ 2
$ 2,759
European Union
$ 1,861
59.5%
48.4%
48.3%
951
(45)
996
—
996
Eastern Europe
789
20.5%
26.2%
26.2%
98
1
97
—
97
Middle East & Africa
52
90.2%
87.7%
87.7%
7
—
7
—
7
South & Southeast Asia
—
—%
—%
—%
2,659
36
2,622
—
2,622
East Asia & Australia
2,169
22.6%
20.9%
20.9%
42
1
41
—
41
Americas
20
+100%
+100%
+100%
$ 6,724
$ 200
$ 6,524
$ 2
$ 6,522
Total RRPs
$ 4,890
37.5%
33.4%
33.4%
2021
PMI
2020
% Change
$ 9,250
$ 651
$ 8,599
$ 2
$ 8,597
European Union
$ 7,960
16.2%
8.0%
8.0%
2,632
(74)
2,706
—
2,706
Eastern Europe
2,470
6.6%
9.6%
9.6%
2,306
(1)
(66)
2,372
—
2,372
Middle East & Africa
2,348
(1.8)%
1.0%
1.0%
3,284
102
3,182
—
3,182
South & Southeast Asia
3,211
2.3%
(0.9)%
(0.9)%
4,509
101
4,408
—
4,408
East Asia & Australia
4,045
11.5%
9.0%
9.0%
1,320
38
1,282
—
1,282
Americas
1,216
8.6%
5.4%
5.4%
$ 23,301
$ 752
$ 22,549
$ 2
$ 22,547
Total PMI
$ 21,250
9.7%
6.1%
6.1%
(1) Includes a reduction in net revenues of $246 million related to the Saudi Arabia customs assessments
Note: Sum of product categories or Regions might not foot to Total PMI due to roundings. "-" indicates amounts between -$0.5 million and +$0.5 million
Schedule 5
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Net Revenues to Adjusted Net Revenues, excluding Currency and Acquisitions
($ in millions) / (Unaudited)
Net Revenues
Special Items
Adjusted Net Revenues
Currency
Adjusted Net Revenues excluding Currency
Acqui- sitions
Adjusted Net Revenues excluding Currency & Acqui- sitions
Net Revenues
Special Items
Adjusted Net Revenues
Total
Excluding Currency
Excluding Currency & Acqui- sitions
2021
Quarters Ended
September 30,
2020
% Change
$ 3,192
$ —
$ 3,192
$ 128
$ 3,064
$ 2
$ 3,062
European Union
$ 2,950
$ —
$ 2,950
8.2%
3.9%
3.8%
941
—
941
(13)
954
—
954
Eastern Europe
899
—
899
4.7%
6.1%
6.1%
945
—
945
(27)
972
—
972
Middle East & Africa
768
—
768
23.0%
26.6%
26.6%
1,065
—
1,065
6
1,059
—
1,059
South & Southeast Asia
1,071
—
1,071
(0.6)%
(1.1)%
(1.1)%
1,523
—
1,523
(7)
1,530
—
1,530
East Asia & Australia
1,358
—
1,358
12.2%
12.7%
12.7%
456
—
456
20
436
—
436
Americas
400
—
400
14.0%
9.0%
9.0%
$ 8,122
$ —
$ 8,122
$ 107
$ 8,015
$ 2
$ 8,013
Total PMI
$ 7,446
$ —
$ 7,446
9.1%
7.6%
7.6%
2021
Nine Months Ended
September 30,
2020
% Change
$ 9,250
$ —
$ 9,250
$ 651
$ 8,599
$ 2
$ 8,597
European Union
$ 7,960
$ —
$ 7,960
16.2%
8.0%
8.0%
2,632
—
2,632
(74)
2,706
—
2,706
Eastern Europe
2,470
—
2,470
6.6%
9.6%
9.6%
2,306
(246)
(1)
2,552
(66)
2,618
—
2,618
Middle East & Africa
2,348
—
2,348
8.7%
11.5%
11.5%
3,284
—
3,284
102
3,182
—
3,182
South & Southeast Asia
3,211
—
3,211
2.3%
(0.9)%
(0.9)%
4,509
—
4,509
101
4,408
—
4,408
East Asia & Australia
4,045
—
4,045
11.5%
9.0%
9.0%
1,320
—
1,320
38
1,282
—
1,282
Americas
1,216
—
1,216
8.6%
5.4%
5.4%
$ 23,301
$ (246)
$ 23,547
$ 752
$ 22,795
$ 2
$ 22,793
Total PMI
$ 21,250
$ —
$ 21,250
10.8%
7.3%
7.3%
(1) Represents the Saudi Arabia customs assessments
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
2021
Quarters Ended
September 30,
2020
% Change
$ 1,680
(1)
$ 79
$ 1,601
$ —
$ 1,601
European Union
$ 1,588
5.8%
0.8%
0.8%
338
(1)
30
308
—
308
Eastern Europe
245
38.0%
25.7%
25.7%
388
(1)
(29)
417
—
417
Middle East & Africa
261
48.7%
59.8%
59.8%
348
(1)
4
344
—
344
South & Southeast Asia
402
(13.4)%
(14.4)%
(14.4)%
631
(1)
(23)
654
—
654
East Asia & Australia
637
(0.9)%
2.7%
2.7%
121
(1)
4
117
—
117
Americas
110
10.0%
6.4%
6.4%
(51)
(2)
—
(51)
—
(51)
Other
—
—%
—%
—%
$ 3,455
$ 65
$ 3,390
$ —
$ 3,390
Total PMI
$ 3,243
6.5%
4.5%
4.5%
2021
Nine Months Ended
September 30,
2020
% Change
$ 4,811
(3)
$ 413
$ 4,398
$ —
$ 4,398
European Union
$ 3,924
(5)
22.6%
12.1%
12.1%
913
(3)
(2)
915
—
915
Eastern Europe
610
(5)
49.7%
50.0%
50.0%
739
(4)
(74)
813
—
813
Middle East & Africa
819
(5)
(9.8)%
(0.7)%
(0.7)%
1,208
(3)
36
1,172
—
1,172
South & Southeast Asia
1,290
(5)
(6.4)%
(9.1)%
(9.1)%
2,041
(3)
(6)
2,047
—
2,047
East Asia & Australia
1,792
(5)
13.9%
14.2%
14.2%
367
(3)
12
355
—
355
Americas
328
(5)
11.9%
8.2%
8.2%
(51)
(2)
—
(51)
—
(51)
Other
—
—%
—%
—%
$ 10,028
$ 379
$ 9,649
$ —
$ 9,649
Total PMI
$ 8,763
14.4%
10.1%
10.1%
(1) Includes asset impairment and exit costs: EU ($12 million), EE ($2 million), ME&A ($3 million), S&SA ($4 million), EA&A ($21 million) and AMCS ($1 million)
(2) Includes asset acquisition cost ($51 million) related to OtiTopic Inc. in August 2021
(3) Includes asset impairment and exit costs: EU ($56 million), EE ($11 million), S&SA ($17 million), EA&A ($67 million) and AMCS ($6 million)
(4) Includes the Saudi Arabia customs assessments ($246 million) and asset impairment and exit costs ($13 million)
(5) Includes asset impairment and exit costs: EU ($27 million), EE ($7 million), ME&A ($9 million), S&SA ($11 million), EA&A ($13 million) and AMCS ($4 million)
Schedule 7
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Operating Income to Adjusted Operating Income, excluding Currency and Acquisitions
($ 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
2021
Quarters Ended
September 30,
2020
% Change
$ 1,680
$ (12)
(1)
$ 1,692
$ 79
$ 1,613
$ —
$ 1,613
European Union
$ 1,588
$ —
$ 1,588
6.5%
1.6%
1.6%
338
(2)
(1)
340
30
310
—
310
Eastern Europe
245
—
245
38.8%
26.5%
26.5%
388
(3)
(1)
391
(29)
420
—
420
Middle East & Africa
261
—
261
49.8%
60.9%
60.9%
348
(4)
(1)
352
4
348
—
348
South & Southeast Asia
402
—
402
(12.4)%
(13.4)%
(13.4)%
631
(21)
(1)
652
(23)
675
—
675
East Asia & Australia
637
—
637
2.4%
6.0%
6.0%
121
(1)
(1)
122
4
118
—
118
Americas
110
—
110
10.9%
7.3%
7.3%
(51)
(51)
(2)
—
—
—
—
—
Other
—
—
—
—%
—%
—%
$ 3,455
$ (94)
$ 3,549
$ 65
$ 3,484
$ —
$ 3,484
Total PMI
$ 3,243
$ —
$ 3,243
9.4%
7.4%
7.4%
2021
Nine Months Ended
September 30,
2020
% Change
$ 4,811
$ (56)
(1)
$ 4,867
$ 413
$ 4,454
$ —
$ 4,454
European Union
$ 3,924
$ (27)
(1)
$ 3,951
23.2%
12.7%
12.7%
913
(11)
(1)
924
(2)
926
—
926
Eastern Europe
610
(7)
(1)
617
49.8%
50.1%
50.1%
739
(259)
(3)
998
(74)
1,072
—
1,072
Middle East & Africa
819
(9)
(1)
828
20.5%
29.5%
29.5%
1,208
(17)
(1)
1,225
36
1,189
—
1,189
South & Southeast Asia
1,290
(11)
(1)
1,301
(5.8)%
(8.6)%
(8.6)%
2,041
(67)
(1)
2,108
(6)
2,114
—
2,114
East Asia & Australia
1,792
(13)
(1)
1,805
16.8%
17.1%
17.1%
367
(6)
(1)
373
12
361
—
361
Americas
328
(4)
(1)
332
12.3%
8.7%
8.7%
(51)
(51)
(2)
—
—
—
—
—
Other
—
—
—
—%
—%
—%
$ 10,028
$ (467)
$ 10,495
$ 379
$ 10,116
$ —
$ 10,116
Total PMI
$ 8,763
$ (71)
$ 8,834
18.8%
14.5%
14.5%
(1) Represents asset impairment and exit costs
(2) Represents asset acquisition cost related to OtiTopic Inc. in August 2021
(3) Includes the Saudi Arabia customs assessments ($246 million) and asset impairment and exit costs ($13 million)
Schedule 8
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Adjusted Operating Income Margin, excluding Currency and Acquisitions
($ in millions) / (Unaudited)
Adjusted Operating Income (1)
Adjusted Net Revenues (2)
Adjusted Operating Income Margin
Adjusted Operating Income excluding Currency (1)
Adjusted Net Revenues excluding Currency (2)
Adjusted Operating Income Margin excluding Currency
Adjusted Operating Income excluding Currency & Acqui- sitions (1)
Adjusted Net Revenues excluding Currency & Acqui- sitions (2)
Adjusted Operating Income Margin excluding Currency & Acqui- sitions
Adjusted Operating Income (1)
Adjusted Net Revenues (2)
Adjusted Operating Income Margin
Adjusted Operating Income Margin
Adjusted Operating Income Margin excluding Currency
Adjusted Operating Income Margin excluding Currency & Acqui- sitions
2021
Quarters Ended
September 30,
2020
% Points Change
$ 1,692
$ 3,192
53.0
%
$ 1,613
$ 3,064
52.6
%
$ 1,613
$ 3,062
52.7
%
European Union
$ 1,588
$ 2,950
53.8
%
(0.8)
(1.2)
(1.1)
340
941
36.1
%
310
954
32.5
%
310
954
32.5
%
Eastern Europe
245
899
27.3
%
8.8
5.2
5.2
391
945
41.4
%
420
972
43.2
%
420
972
43.2
%
Middle East & Africa
261
768
34.0
%
7.4
9.2
9.2
352
1,065
33.1
%
348
1,059
32.9
%
348
1,059
32.9
%
South & Southeast Asia
402
1,071
37.5
%
(4.4)
(4.6)
(4.6)
652
1,523
42.8
%
675
1,530
44.1
%
675
1,530
44.1
%
East Asia & Australia
637
1,358
46.9
%
(4.1)
(2.8)
(2.8)
122
456
26.8
%
118
436
27.1
%
118
436
27.1
%
Americas
110
400
27.5
%
(0.7)
(0.4)
(0.4)
$ 3,549
$ 8,122
43.7
%
$ 3,484
$ 8,015
43.5
%
$ 3,484
$ 8,013
43.5
%
Total PMI
$ 3,243
$ 7,446
43.6
%
0.1
(0.1)
(0.1)
2021
Nine Months Ended
September 30,
2020
% Points Change
$ 4,867
$ 9,250
52.6
%
$ 4,454
$ 8,599
51.8
%
$ 4,454
$ 8,597
51.8
%
European Union
$ 3,951
$ 7,960
49.6
%
3.0
2.2
2.2
924
2,632
35.1
%
926
2,706
34.2
%
926
2,706
34.2
%
Eastern Europe
617
2,470
25.0
%
10.1
9.2
9.2
998
2,552
39.1
%
1,072
2,618
40.9
%
1,072
2,618
40.9
%
Middle East & Africa
828
2,348
35.3
%
3.8
5.6
5.6
1,225
3,284
37.3
%
1,189
3,182
37.4
%
1,189
3,182
37.4
%
South & Southeast Asia
1,301
3,211
40.5
%
(3.2)
(3.1)
(3.1)
2,108
4,509
46.8
%
2,114
4,408
48.0
%
2,114
4,408
48.0
%
East Asia & Australia
1,805
4,045
44.6
%
2.2
3.4
3.4
373
1,320
28.3
%
361
1,282
28.2
%
361
1,282
28.2
%
Americas
332
1,216
27.3
%
1.0
0.9
0.9
$ 10,495
$ 23,547
44.6
%
$ 10,116
$ 22,795
44.4
%
$ 10,116
$ 22,793
44.4
%
Total PMI
$ 8,834
$ 21,250
41.6
%
3.0
2.8
2.8
(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 Adjusted Net Revenues excluding currency and acquisitions refer to Schedule 5
Schedule 9
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Condensed Statements of Earnings
($ in millions, except per share data) / (Unaudited)
Quarters Ended September 30,
Nine Months Ended September 30,
2021
2020
Change
Fav./(Unfav.)
2021
2020
Change
Fav./(Unfav.)
$ 21,617
$ 20,444
5.7
%
Revenues including Excise Taxes (1)
$ 61,393
$ 56,516
8.6
%
13,495
12,998
(3.8
)%
Excise Taxes on products
38,092
35,266
(8.0
)%
8,122
7,446
9.1
%
Net Revenues (1)
23,301
21,250
9.7
%
2,596
2,416
(7.5
)%
Cost of sales
7,223
6,997
(3.2
)%
5,526
5,030
9.9
%
Gross profit
16,078
14,253
12.8
%
2,053
1,769
(16.1
)%
Marketing, administration and research costs (2)
5,995
5,435
(10.3
)%
18
18
Amortization of intangibles
55
55
3,455
3,243
6.5
%
Operating Income
10,028
8,763
14.4
%
154
163
5.5
%
Interest expense, net
482
454
(6.2
)%
27
23
(17.4
)%
Pension and other employee benefit costs
82
68
(20.6
)%
3,274
3,057
7.1
%
Earnings before income taxes
9,464
8,241
14.8
%
735
640
(14.8
)%
Provision for income taxes
2,078
1,764
(17.8
)%
(49
)
(20
)
Equity investments and securities (income)/loss, net
(95
)
4
2,588
2,437
6.2
%
Net Earnings
7,481
6,473
15.6
%
162
130
Net Earnings attributable to noncontrolling interests
465
393
$ 2,426
$ 2,307
5.2
%
Net Earnings attributable to PMI
$ 7,016
$ 6,080
15.4
%
Per share data (3):
$ 1.55
$ 1.48
4.7
%
Basic Earnings Per Share
$ 4.49
$ 3.90
15.1
%
$ 1.55
$ 1.48
4.7
%
Diluted Earnings Per Share
$ 4.48
$ 3.90
14.9
%
(1) Nine months ended September 30, 2021 includes a reduction in net revenues of $246 million related to the Saudi Arabia customs assessments
(2) Quarter ended September 30, 2021 includes asset acquisition cost ($51 million) related to OtiTopic Inc. in August 2021 and asset impairment and exit costs ($43 million). Nine months ended September 30, 2021 includes asset acquisition cost ($51 million) and asset impairment and exit costs ($170 million). Nine months ended September 30, 2020 includes asset impairment and exit costs ($71 million)
(3) Net Earnings and weighted-average shares used in the basic and diluted Earnings Per Share computations for the quarters and for the nine months ended September 30, 2021 and 2020 are shown on Schedule 1, Footnote 1
Schedule 10
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Condensed Balance Sheets
($ in millions) / (Unaudited)
September 30,
December 31,
2021
2020
Assets
Cash and cash equivalents
$
4,491
$
7,280
All other current assets
13,355
14,212
Property, plant and equipment, net
6,061
6,365
Goodwill
6,814
5,964
Other intangible assets, net
2,893
2,019
Equity investments
4,624
4,798
Other assets
3,351
4,177
Total assets
$
41,589
$
44,815
Liabilities and Stockholders' (Deficit) Equity
Short-term borrowings
$
223
$
244
Current portion of long-term debt
3,114
3,124
All other current liabilities
14,540
16,247
Long-term debt
25,768
28,168
Deferred income taxes
720
684
Other long-term liabilities
5,856
6,979
Total liabilities
50,221
55,446
Total PMI stockholders' deficit
(10,551
)
(12,567
)
Noncontrolling interests
1,919
1,936
Total stockholders' (deficit) equity
(8,632
)
(10,631
)
Total liabilities and stockholders' (deficit) equity
$
41,589
$
44,815
Schedule 11
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Calculation of Total Debt to Adjusted EBITDA and Net Debt to Adjusted EBITDA Ratios
($ in millions, except ratios) / (Unaudited)
Year Ended September 30, 2021
Year Ended December 31, 2020
October ~ December
January ~ September
12 months
2020
2021
rolling
Net Earnings
$
2,119
$
7,481
$
9,600
$
8,592
Equity investments and securities (income)/loss, net
(20
)
(95
)
(115
)
(16
)
Provision for income taxes
613
2,078
2,691
2,377
Interest expense, net
164
482
646
618
Depreciation and amortization
272
719
991
981
Asset impairment and exit costs and Others (1)
(41
)
467
426
30
Adjusted EBITDA
$
3,107
$
11,132
$
14,239
$
12,582
September 30,
December 31,
2021
2020
Short-term borrowings
$
223
$
244
Current portion of long-term debt
3,114
3,124
Long-term debt
25,768
28,168
Total Debt
$
29,105
$
31,536
Cash and cash equivalents
4,491
7,280
Net Debt
$
24,614
$
24,256
Ratios:
Total Debt to Adjusted EBITDA
2.04
2.51
Net Debt to Adjusted EBITDA
1.73
1.93
(1) For the period January 2021 to September 2021 "Others" includes a reduction in net revenues of $246 million related to the Saudi Arabia customs assessments that was recorded in the second quarter of 2021 and asset acquisition cost of $51 million related to OtiTopic Inc. in August 2021. For the period October 2020 to December 2020 and for the year ended December 31, 2020, "Others" include the Brazil indirect tax credit $119 million that was recorded in the fourth quarter of 2020.
Schedule 12
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Operating Cash Flow to Operating Cash Flow, excluding Currency
($ in millions) / (Unaudited)
Quarters Ended September 30,
Nine Months Ended September 30,
2021
2020
% Change
2021
2020
% Change
$ 3,870
$ 3,614
7.1%
Net cash provided by operating activities (1)
$ 7,935
$ 6,650
19.3%
140
Less: Currency
759
$ 3,730
$ 3,614
3.2%
Net cash provided by operating activities,
excluding currency
$ 7,176
$ 6,650
7.9%
(1) Operating cash flow
View source version on businesswire.com: https://www.businesswire.com/news/home/20211019005613/en/
Philip Morris International Investor Relations: New York: +1 (917) 663 2233 Lausanne: +41 (0)58 242 4666 InvestorRelations@pmi.com
Media: Lausanne: +41 (0)58 242 4500 Iro.Antoniadou@pmi.com
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