Philip Morris International Inc. Philip Morris International Inc. (PMI) Reports 2017 Results; Excluding Currency & Tax Items,...

2017 Full-Year

 
 
    -- Reported diluted earnings per share of $3.88, down by $0.60 or 13.4% 

versus $4.48 in 2016, including the unfavorable impact of tax items of

$0.84 per share primarily related to the implementation of the Tax

Cuts and Jobs Act, as detailed in the attached Schedule 17

 
    -- Excluding unfavorable currency of $0.21, and the aforementioned tax 

items, adjusted diluted earnings per share of $4.93, up by $0.45 or

10.0% versus $4.48 in 2016, as detailed in the attached Schedule 17

 
    -- Cigarette and heated tobacco unit shipment volume of 798.2 billion, 

down by 2.7%

 
    -- International market share, excluding China and the United States, 

down by 0.1 point to 28.0%

 
    -- Reported net revenues of $78.1 billion, up by 4.2% 
 
    -- Net revenues, excluding excise taxes, of $28.7 billion, up by 7.7% 

Excluding unfavorable currency of $437 million, net revenues,

excluding excise taxes, up by 9.4% as detailed in the attached

Schedule 14

 
    -- Reported operating income of $11.5 billion, up by 6.4% 
 
    -- Operating companies income of $11.8 billion, up by 6.0% 

Excluding unfavorable currency of $155 million, operating

companies income up by 7.4% as detailed in the attached Schedule 14

 
    -- Adjusted operating companies income, reflecting the items detailed in 

the attached Schedule 16, of $11.8 billion, up by 6.0%

Excluding unfavorable currency of $155 million, adjusted operating

companies income up by 7.4% as detailed in the attached Schedule 16

 
    -- Regular quarterly dividend increase of 2.9% to an annualized rate of 

$4.28 per common share

2017 Fourth-Quarter

 
 
    -- Reported diluted earnings per share of $0.44, down by $0.66 or 60.0% 

versus $1.10 in 2016, including the unfavorable impact of tax items of

$0.88 per share primarily related to the implementation of the Tax

Cuts and Jobs Act, as detailed in the attached Schedule 13

 
    -- Excluding favorable currency of $0.01, and the aforementioned tax 

items, adjusted diluted earnings per share of $1.31, up by $0.21 or

19.1% versus $1.10 in 2016 as detailed in the attached Schedule 13

 
    -- Cigarette and heated tobacco unit shipment volume of 212.1 billion, up 

by 3.8%

 
    -- Reported net revenues of $21.6 billion, up by 12.5% 
 
    -- Net revenues, excluding excise taxes, of $8.3 billion, up by 19.0% 

Excluding favorable currency of $14 million, net revenues,

excluding excise taxes, up by 18.8% as detailed in the attached

Schedule 10

 
    -- Reported operating income of $3.3 billion, up by 27.0% 
 
    -- Operating companies income of $3.4 billion, up by 25.5% 

Excluding favorable currency of $196 million, operating companies

income up by 18.2% as detailed in the attached Schedule 10

 
    -- Adjusted operating companies income, reflecting the items detailed in 

the attached Schedule 12, of $3.4 billion, up by 25.5%

Excluding favorable currency of $196 million, adjusted operating

companies income up by 18.2% as detailed in the attached Schedule

12

2018 Full-Year Forecast

 
 
    -- Reported diluted earnings per share forecast to be in a range of $5.20 

to $5.35, at prevailing exchange rates, representing a projected

increase of approximately 34% to 38% versus reported diluted earnings

per share of $3.88 in 2017.

Excluding a favorable currency impact, at prevailing exchange

rates, of approximately $0.16, the forecast range represents a

projected increase of approximately 7% to 10% versus adjusted

diluted earnings per share of $4.72 in 2017 as detailed in the

attached Schedule 17.

 
    -- This forecast assumes: 

Net revenue growth, excluding excise taxes, of over 8.0%,

excluding currency;Operating cash flow of over $9.0 billion;Capital expenditures of approximately $1.7 billion; andNo share repurchases.

 
    -- This forecast excludes the impact of any future acquisitions, 

unanticipated asset impairment and exit cost charges, future changes

in currency exchange rates, further developments related to the Tax

Cuts and Jobs Act as discussed below, and any unusual events. Factors

described in the Forward-Looking and Cautionary Statements section of

this release represent continuing risks to these projections.

Impact of U.S. Tax Reform

In December 2017, the Tax Cuts and Jobs Act (the "Act") was signed into law. The principal elements of the Act relevant to our consolidated financial statements for the year ended December 31, 2017, were:

 
 
    -- A reduction of the U.S. federal corporate tax rate from 35% to 21%; and 
 
    -- The requirement to pay a one-time transition tax on accumulated 

foreign earnings, including 2017 earnings ("transition tax").

In connection with these elements of the Act, PMI recognized a provisional expense of $1.6 billion, which was included as a component of income tax expense as follows:

 
 
    -- A provisional charge of $1.4 billion, which represents the transition 

tax of $2.2 billion, net of a reversal of $0.7 billion of previously

recorded deferred tax liabilities on part of the accumulated foreign

earnings, and other items of $0.1 billion; and

 
    -- Re-measurement of U.S. deferred tax assets and liabilities using a 

rate of 21%, which, under the Act, is expected to be in place when

such deferred assets and liabilities reverse in the future. In

connection with this re-measurement, we recorded a provisional charge

of $0.2 billion.

While the impacts of the Act reduced net earnings by $1.6 billion, there was no net impact on operating cash flows for the year, as the changes in deferred taxes and income taxes payable offset the net earnings impact. At December 31, 2017, PMI recorded an income tax payable of $1.7 billion representing the transition tax of $2.2 billion, primarily offset by foreign tax credits related to foreign withholding taxes previously paid of $0.5 billion. The income tax payable is due over an 8-year period beginning in 2018.

Other provisions of the Act did not have a significant impact on PMI's consolidated financial statements for the year ended December 31, 2017, but may impact the effective tax rate in subsequent periods.

The Act has significant complexity and our final tax liability may materially differ from these estimates, due to, among other things, changes in PMI's assumptions, guidance that may be issued by the U.S. Treasury Department and the Internal Revenue Service and related interpretations and clarifications of tax law. For the transition tax, further information is required to finalize the estimated amount of accumulated foreign earnings as well as to validate the amount of earnings represented by the aggregate foreign cash position as defined in the Act. For the re-measurement of the deferred tax assets and liabilities, further analysis will be required to refine PMI's calculations and related account balances. PMI will complete the remaining elements of its analysis during 2018, and any adjustments to the provisional charges will be included in income tax expense or benefit in the appropriate period, in accordance with guidance provided by Staff Accounting Bulletin No. 118.

Following the enactment of the Act, PMI's 2018 full-year diluted earnings per share forecast -- based on the current interpretation of the legislation -- assumes a full-year effective tax rate of approximately 28%, subject to future regulatory developments and earnings mix by taxing jurisdiction. The difference between the 21% statutory rate under the new law and PMI's effective rate reflects the fact that PMI operates in markets outside of the United States and is driven by three main factors: foreign tax rate differences, non-deductibility of interest expense and a partial disallowance of foreign tax credits related to the application of the rules for global intangible low-taxed income.

2017 FULL-YEAR AND FOURTH-QUARTER CONSOLIDATED RESULTS

Philip Morris International Inc. (NYSE/Euronext Paris: PM) today announced its 2017 full-year and fourth-quarter results.

" A strong fourth-quarter performance helped drive robust full-year results, exemplified by currency-neutral, double-digit adjusted earnings per share growth, despite previously disclosed challenges in Russia and Saudi Arabia ," said André Calantzopoulos, Chief Executive Officer.

" The excellent performance of our flagship smoke-free product IQOS -- not only in Asia, but also in the vast majority of our launch geographies -- underscored its great promise and the commitment of our employees to lead the transformation of our industry towards a smoke-free future. Continued investment behind IQOS in 2018 is expected to further drive its positive momentum ."

" For the first time since 2011, we have entered the year with annual guidance that reflects a positive currency impact.Our combustible product portfolio provides us with a strong foundation.The confirmed potential of our smoke-free alternatives reinforces our strong determination to deploy all necessary resources to accelerate their growth, which will drive our business success and ability to generously reward our shareholders over the long term ."

Conference Call

A conference call, hosted by André Calantzopoulos, Chief Executive Officer, and Martin King, Chief Financial Officer, with members of the investor community and news media, will be webcast at 9:00 a.m., Eastern Time, on February 8, 2018. Access is at www.pmi.com/2017Q4earnings . 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 .

Dividends

During 2017, PMI increased its regular quarterly dividend by 2.9%, from $1.04 to $1.07, representing an annualized rate of $4.28 per common share. Since its spin-off in March 2008, PMI has increased its regular quarterly dividend by 132.6% from the initial annualized rate of $1.84 per common share, or a compound annual growth rate of 9.8%.

Key Terms, Definitions and Explanatory Notes

General

 
 
    -- "PMI" refers to Philip Morris International Inc. and its subsidiaries. 

Trademarks and service marks that are the registered property of, or

licensed by, the subsidiaries of PMI, are italicized.

 
    -- Comparisons are made to the same prior-year period unless otherwise 

stated.

 
    -- Unless otherwise stated, references to total industry, total market, 

PMI volume and PMI market share performance reflect cigarettes and

heated tobacco units.

 
    -- References to total international market, defined as worldwide 

cigarette and heated tobacco unit volume excluding the United States,

total industry, total market and market shares are PMI estimates for

tax-paid products based on the latest available data from a number of

internal and external sources and may, in defined instances, exclude

the People's Republic of China and/or PMI's duty free business.

 
    -- "Combustible products" is the term PMI uses to refer to cigarettes and 

OTP, combined.

 
    -- "OTP" is defined as other tobacco products, primarily roll-your-own 

and make-your-own cigarettes, pipe tobacco, cigars and cigarillos, and

does not include reduced-risk products.

 
    -- "Total shipment volume" is defined as the combined total of cigarette 

shipment volume and heated tobacco unit shipment volume.

 
    -- "EEMA" is defined as Eastern Europe, Middle East & Africa and includes 

PMI's international duty free business.

 
    -- "North Africa" is defined as Algeria, Egypt, Libya, Morocco and 

Tunisia.

Financial

 
 
    -- Net revenues, excluding excise taxes, related to combustible products 

refer to the operating revenues generated from the sale of these

products, net of sales and promotion incentives.

 
    -- "Operating Companies Income," or "OCI," is defined as operating 

income, excluding general corporate expenses and the amortization of

intangibles, plus equity (income)/loss in unconsolidated subsidiaries,

net. Management evaluates business segment performance and allocates

resources based on OCI.

 
    -- "Adjusted EBITDA" is defined as earnings before interest, taxes, 

depreciation and amortization, excluding asset impairment and exit

costs, and unusual items.

 
    -- "Net debt" is defined as total debt, less cash and cash equivalents. 
 
    -- Management reviews OCI, OCI margins, operating cash flow and earnings 

per share, or "EPS," on an adjusted basis, which may exclude the

impact of currency and other items such as acquisitions, asset

impairment and exit costs, tax items and other special items.

 
    -- Management reviews these measures because they exclude changes in 

currency exchange rates and other factors that may distort underlying

business trends, thereby improving the comparability of PMI's business

performance between reporting periods. Furthermore, PMI uses several

of these measures in its management compensation program to promote

internal fairness and a disciplined assessment of performance against

company targets. PMI discloses these measures to enable investors to

view the business through the eyes of management.

 
    -- Non-GAAP measures used in this release should neither be considered in 

isolation nor as a substitute for the financial measures prepared in

accordance with U.S. GAAP. For a reconciliation of non-GAAP measures

to the most directly comparable GAAP measures, see the relevant

schedules provided with this press release.

Reduced-Risk Products

 
 
    -- "Reduced-risk products," or "RRPs," is the term PMI uses to refer to 

products that present, are likely to present, or have the potential to

present less risk of harm to smokers who switch to these products

versus continued smoking. PMI has a range of RRPs in various stages of

development, scientific assessment and commercialization. Because

PMI's RRPs do not burn tobacco, they produce far lower quantities of

harmful and potentially harmful compounds than found in cigarette

smoke.

 
    -- "Heated tobacco units" is the term PMI uses to refer to heated tobacco 

consumables, which include the company's

HEETS

,

HEETS

Marlboro

and

HEETS FROM MARLBORO

, defined collectively as

HEETS

,

as well as

MarlboroHeatSticks

and

Parliament

HeatSticks

.

 
    -- Net revenues, excluding excise taxes, related to RRPs represent the 

sale of heated tobacco units,

IQOS

devices and related

accessories, and other nicotine-containing products, primarily e-vapor

products, net of sales and promotion incentives.

SHIPMENT VOLUME

 
PMI           Fourth-Quarter                Full-Year 
Shipment 
Volume 
by Region 
(million 
units) 
              2017      2016      Change    2017      2016      Change 
Cigarettes 
European      45,881    45,193    1.5  %    187,293   193,586   (3.3 )% 
Union 
EEMA          66,332    67,763    (2.1 )%   256,157   271,393   (5.6 )% 
Asia          61,234    63,815    (4.0 )%   234,253   260,029   (9.9 )% 
Latin         22,922    23,794    (3.7 )%   84,223    87,938    (4.2 )% 
America 
& Canada 
Total PMI     196,369   200,565   (2.1 )%   761,926   812,946   (6.3 )% 
Heated 
Tobacco 
Units 
European      849       122       +100.0%   1,889     224       +100.0% 
Union 
EEMA          820       63        +100.0%   1,581     100       +100.0% 
Asia          14,032    3,510     +100.0%   32,729    7,070     +100.0% 
Latin         15        -         -    %    27        -         -    % 
America 
& Canada 
Total PMI     15,716    3,695     +100.0%   36,226    7,394     +100.0% 
Cigarettes 
and Heated 
Tobacco 
Units 
European      46,730    45,315    3.1  %    189,182   193,810   (2.4 )% 
Union 
EEMA          67,152    67,826    (1.0 )%   257,738   271,493   (5.1 )% 
Asia          75,266    67,325    11.8 %    266,982   267,099   -    % 
Latin         22,937    23,794    (3.6 )%   84,250    87,938    (4.2 )% 
America 
& Canada 
Total PMI     212,085   204,260   3.8  %    798,152   820,340   (2.7 )% 
 
 

2017 Full-Year

Estimated international cigarette and heated tobacco unit volume, excluding China and the United States, of 2.8 trillion, down by 2.8%

PMI's total shipment volume decreased by 2.7%, principally due to:

 
 
    -- the EU, notably reflecting lower cigarette shipment volume in Greece, 

Italy and Spain, partly offset by higher heated tobacco unit shipment

volume;

 
    -- EEMA, notably reflecting lower cigarette shipment volume in Russia, 

Saudi Arabia - where PMI's cigarette shipment volume declined by

35.8%, impacted by the new excise tax implemented in June 2017 that

resulted in the doubling of retail prices - and Ukraine; partly offset

by higher cigarette shipment volume in North Africa, notably Algeria,

and higher heated tobacco unit shipment volume;

 
    -- Asia, notably reflecting lower cigarette shipment volume in Indonesia, 

Japan, Korea, Pakistan - impacted by excise tax-driven price increases

and an increase in the prevalence of illicit trade - and the

Philippines; fully offset by higher heated tobacco unit shipment

volume, mainly in Japan and Korea; and

 
    -- Latin America & Canada, notably reflecting lower cigarette shipment 

volume in Argentina, Brazil, Canada, Colombia and Mexico.

Excluding the favorable net impact of estimated cigarette and heated tobacco unit inventory movements of approximately 3.3 billion units, PMI's total shipment volume decreased by 3.1%. The favorable inventory movements were driven primarily by approximately 8.5 billion units net in Japan reflecting: the increasing demand for HeatSticks , anticipated to further increase in the first quarter of 2018 following a planned lifting of the restriction on IQOS device sales; the establishment of appropriate distributor inventory levels of heated tobacco units, given the current high dependence on a single manufacturing center; and the transition from air freight to sea freight of heated tobacco units, largely completed in the fourth quarter of 2017. These favorable inventory movements were partly offset by a reduction of combustible product inventory levels, mainly in: the EU, notably Italy and Spain; and EEMA, notably North Africa, Russia and Saudi Arabia.

2017 Fourth-Quarter

PMI's total shipment volume increased by 3.8%, principally driven by:

 
 
    -- the EU, notably reflecting higher cigarette shipment volume in France, 

Germany and Portugal, partly offset by lower cigarette shipment volume

in Spain; and

 
    -- Higher heated tobacco unit shipment volume across all Regions, notably 

in Asia driven by Japan and Korea.

The increase in PMI's total shipment volume was partly offset by lower cigarette shipment volume in:

 
 
    -- EEMA, notably Russia, as well as Saudi Arabia where PMI's cigarette 

shipment volume declined by 60.3%, reflecting the impact of the

aforementioned new excise tax, partly offset by North Africa, notably

Algeria, and Turkey;

 
    -- Asia, notably Japan and Korea, partly offset by the Philippines; and 
 
    -- Latin America & Canada, notably Argentina, Brazil and Colombia, partly 

offset by Mexico and Venezuela.

Excluding the favorable net impact of estimated cigarette and heated tobacco unit inventory movements of approximately 5.0 billion units, driven primarily by Japan, reflecting the same dynamics as for the full year, PMI's total shipment volume increased by 1.4%.

PMI shipment volume by brand is shown in the table below.

 
PMI             Fourth-Quarter                Full-Year 
Shipment 
Volume 
by Brand 
(million 
units) 
                2017      2016      Change    2017      2016      Change 
Cigarettes 
Marlboro        70,251    70,295    (0.1  )%  270,366   281,720   (4.0  )% 
L&M             21,726    23,177    (6.3  )%  90,817    96,770    (6.2  )% 
Chesterfield    14,764    12,088    22.1  %   55,075    46,291    19.0  % 
Philip          12,389    9,069     36.6  %   48,522    35,914    35.1  % 
Morris 
Parliament      12,243    11,424    7.2   %   43,965    45,671    (3.7  )% 
Bond            9,312     11,775    (20.9 )%  37,987    44,567    (14.8 )% 
Street 
Lark            5,838     6,540     (10.7 )%  24,373    27,571    (11.6 )% 
Others          49,846    56,197    (11.3 )%  190,821   234,442   (18.6 )% 
Total           196,369   200,565   (2.1  )%  761,926   812,946   (6.3  )% 
Cigarettes 
Heated          15,716    3,695     +100.0%   36,226    7,394     +100.0% 
Tobacco 
Units 
Total PMI       212,085   204,260   3.8   %   798,152   820,340   (2.7  )% 
 
 

2017 Full-Year

PMI's cigarette shipment volume of Marlboro decreased in: the EU, mainly due to Greece, Italy and Spain; EEMA, predominantly due to Saudi Arabia, reflecting the impact of the new excise tax implemented in June 2017 that resulted in the doubling of the retail price of Marlboro from SAR 12 to SAR 24 per pack, partly offset by North Africa, notably Algeria and Egypt, and Turkey; Asia, mainly due to Japan and Korea, principally reflecting out-switching to heated tobacco products, partly offset by Indonesia and the Philippines; and Latin America & Canada, mainly due to Argentina and Brazil.

PMI's cigarette shipment volume of the following brands decreased: L&M , mainly due to Russia, Saudi Arabia and Turkey, partly offset by Algeria, Argentina, Colombia and Kazakhstan; Parliament , mainly due to Japan, Russia and Saudi Arabia, partly offset by Kazakhstan; Bond Street , mainly due to Kazakhstan, Russia and Ukraine; Lark , principally due to Japan; and "Others," mainly due to low-price brands in Indonesia, Pakistan, the Philippines, Russia and Ukraine.

PMI's cigarette shipment volume of the following brands increased: Chesterfield, notably driven by Argentina, Brazil, Colombia, Saudi Arabia, Turkey and Venezuela, partly offset by Italy and Russia; and Philip Morris , mainly driven by Russia and Ukraine, notably reflecting successful portfolio consolidation of local, low-price brands in "Others," partly offset by Argentina and Italy.

2017 Fourth-Quarter

PMI's cigarette shipment volume of Marlboro was essentially flat, with declines in: EEMA, predominantly due to Saudi Arabia, reflecting the same dynamic as for the full year, partly offset by North Africa, notably Algeria and Egypt; and Latin America & Canada, mainly due to Argentina and Brazil; offset by growth in the EU, driven notably by France, Germany and Italy. Cigarette shipment volume of Marlboro was flat in Asia, with growth in Indonesia and the Philippines offset by declines in Japan and Korea, principally reflecting out-switching to heated tobacco products .

PMI's cigarette shipment volume of the following brands decreased: L&M , mainly due to Russia and Saudi Arabia, partly offset by Algeria, Germany and Kazakhstan; Bond Street , mainly due to Kazakhstan, Russia and Ukraine; Lark , principally due to Japan, partly offset by Turkey; and "Others," mainly due to local, low-price brands in Indonesia, the Philippines, Russia and Ukraine, partly offset by premium local brands in Indonesia.

PMI's cigarette shipment volume of the following brands increased: Parliament , notably driven by Russia and Turkey, partly offset by Japan, Korea and Saudi Arabia; Chesterfield, mainly driven by Argentina, Brazil, reflecting successful brand portfolio consolidation, Colombia, Saudi Arabia and Turkey, partly offset by Italy and Russia; and Philip Morris , mainly driven by Russia and Ukraine, notably reflecting successful portfolio consolidation of local, low-price brands in "Others," partly offset by Argentina and Italy.

NET REVENUES (Excluding Excise Taxes)

 
PMI                   Fourth-Quarter                        Full-Year 
Net 
Revenues(Excluding 
Excise Taxes) 
(in millions)                                      Excl.                                   Excl. 
                      2017      2016      Change   Curr.    2017       2016       Change   Curr. 
Combustible 
Products 
European              $ 2,140   $ 1,919   11.5 %   4.7  %   $ 8,048    $ 8,105    (0.7 )%  (1.2 )% 
Union 
EEMA                  1,680     1,792     (6.3 )%  (5.1 )%  6,550      6,991      (6.3 )%  (2.1 )% 
Asia                  2,003     2,133     (6.1 )%  (4.4 )%  7,572      8,015      (5.5 )%  (5.0 )% 
Latin America         828       785       5.5  %   5.3  %   2,937      2,841      3.4  %   5.3  % 
& Canada 
Total PMI             $ 6,651   $ 6,628   0.3  %   (0.8 )%  $ 25,107   $ 25,952   (3.3 )%  (1.9 )% 
RRPs 
European              $ 124     $ 25      +100%    +100%    $ 269      $ 57       +100%    +100% 
Union 
EEMA                  85        6         +100%    +100%    149        9          +100%    +100% 
Asia                  1,432     312       +100%    +100%    3,218      666        +100%    +100% 
Latin America         3         -         +100%    +100%    4          1          +100%    +100% 
& Canada 
Total PMI             $ 1,643   $ 343     +100%    +100%    $ 3,640    $ 733      +100%    +100% 
Combustible 
Products 
and RRPs 
European              $ 2,264   $ 1,944   16.5 %   9.3  %   $ 8,318    $ 8,162    1.9  %   1.4  % 
Union 
EEMA                  1,764     1,798     (1.9 )%  (0.6 )%  6,699      7,000      (4.3 )%  (0.1 )% 
Asia                  3,435     2,444     40.5 %   44.8 %   10,790     8,681      24.3 %   25.9 % 
Latin America         831       785       5.9  %   5.6  %   2,941      2,842      3.5  %   5.4  % 
& Canada 
Total PMI             $ 8,294   $ 6,971   19.0 %   18.8 %   $ 28,748   $ 26,685   7.7  %   9.4  % 
 
 

Note: Sum of product categories or Regions might not foot to total PMI due to rounding.

2017 Full-Year

Net revenues, excluding excise taxes, of $28.7 billion increased by 7.7%, as detailed above and in the attached Schedule 14. Excluding unfavorable currency of $437 million, net revenues, excluding excise taxes, increased by 9.4%, driven by a favorable pricing variance of $1.4 billion from across all Regions, despite low price realization in Russia, and favorable volume/mix of $1.1 billion, driven by Asia and despite unfavorable volume/mix in EEMA, mainly due to Russia and Saudi Arabia.

2017 Fourth-Quarter

Net revenues, excluding excise taxes, of $8.3 billion increased by 19.0%, as detailed above and in the attached Schedule 10. Excluding favorable currency of $14 million, net revenues, excluding excise taxes, increased by 18.8%, driven by a favorable pricing variance of $302 million from across all Regions, despite low price realization in Russia, and favorable volume/mix of $1.0 billion, driven by the EU and Asia and despite unfavorable volume/mix in EEMA, mainly due to Saudi Arabia.

OPERATING COMPANIES INCOME

 
PMI          Fourth-Quarter                         Full-Year 
OCI 
(in                                       Excl.                                    Excl. 
millions) 
             2017      2016      Change   Curr.     2017       2016       Change   Curr. 
European     $ 992     $ 898     10.5 %   6.1   %   $ 3,775    $ 3,994    (5.5 )%  (4.4 )% 
Union 
EEMA         700       627       11.6 %   (30.5 )%  2,888      3,016      (4.2 )%  (6.9 )% 
Asia         1,396     908       53.7 %   64.4  %   4,149      3,196      29.8 %   33.7 % 
Latin        293       261       12.3 %   16.1  %   1,002      938        6.8  %   14.3 % 
America 
& 
Canada 
Total        $ 3,381   $ 2,694   25.5 %   18.2  %   $ 11,814   $ 11,144   6.0  %   7.4  % 
PMI 
 
 

2017 Full-Year

Operating companies income of $11.8 billion increased by 6.0%. Excluding unfavorable currency of $155 million, operating companies income increased by 7.4%, reflecting a favorable pricing variance across all Regions, and favorable volume/mix of $7 million, partly offset by an unfavorable cost comparison, primarily reflecting increased investment behind reduced-risk products, predominantly in the EU and Asia.

Adjusted operating companies income and margin are shown in the table below and detailed in Schedule 16. Adjusted operating companies income, excluding unfavorable currency, increased by 7.4%. Adjusted operating companies income margin, excluding unfavorable currency, decreased by 0.8 points to 41.0%, reflecting the factors mentioned above, as detailed on Schedule 16.

2017 Fourth-Quarter

In the quarter, operating companies income of $3.4 billion increased by 25.5%. Excluding favorable currency of $196 million, operating companies income increased by 18.2%, mainly driven by a favorable pricing variance across all Regions and favorable volume/mix of $491 million, driven by the EU and Asia, partly offset by an unfavorable cost comparison, primarily reflecting increased investment behind reduced-risk products, predominantly in the EU.

Adjusted operating companies income and margin are shown in the table below and detailed in Schedule 12. Adjusted operating companies income, excluding favorable currency, increased by 18.2%. Adjusted operating companies income margin, excluding favorable currency, decreased by 0.1 point to 38.5%, reflecting the factors mentioned above, as detailed on Schedule 12.

 
PMI           Fourth-Quarter                         Full-Year 
OCI 
(in                                          Excl.                                    Excl. 
millions) 
              2017       2016       Change   Curr.   2017        2016        Change   Curr. 
OCI           $ 3,381    $ 2,694    25.5 %   18.2 %  $ 11,814    $ 11,144    6.0  %   7.4  % 
Asset         -          -                           -           - 
impairment 
& 
exit 
costs 
Adjusted      $ 3,381    $ 2,694    25.5 %   18.2 %  $ 11,814    $ 11,144    6.0  %   7.4  % 
OCI 
Adjusted      40.8    %  38.6    %  2.2      (0.1 )  41.1     %  41.8     %  (0.7 )   (0.8 ) 
OCI 
Margin* 
 
 

*Margins are calculated as adjusted OCI, divided by net revenues, excluding excise taxes.

EUROPEAN UNION REGION (EU)

2017 Full-Year

Net revenues, excluding excise taxes, of $8.3 billion, increased by 1.9%. Excluding favorable currency of $45 million, net revenues, excluding excise taxes, increased by 1.4%, mainly reflecting a favorable pricing variance of $156 million, driven principally by Germany, Poland and the United Kingdom, partly offset by France, Greece and Italy. The favorable pricing was partly offset by unfavorable volume/mix of $45 million, mainly driven by Germany, Spain and the United Kingdom, partly offset by Poland and Romania.

Operating companies income of $3.8 billion decreased by 5.5%. Excluding unfavorable currency of $43 million, operating companies income decreased by 4.4%, mainly due to: unfavorable volume/mix of $119 million, mainly in Germany, Spain and the United Kingdom, partly offset by Poland and Romania; and increased investment behind reduced-risk products across the Region; partly offset by favorable pricing.

Adjusted operating companies income and margin are shown in the table below and detailed on Schedule 16. Adjusted operating companies income, excluding unfavorable currency, decreased by 4.4%. Adjusted operating companies income margin, excluding unfavorable currency, decreased by 2.7 points to 46.2%, reflecting the factors mentioned above, as detailed on Schedule 16.

2017 Fourth-Quarter

Net revenues, excluding excise taxes, of $2.3 billion, increased by 16.5%. Excluding favorable currency of $139 million, net revenues, excluding excise taxes, increased by 9.3%, mainly reflecting; a favorable pricing variance of $34 million, driven principally by Germany and the United Kingdom, partly offset by France, Greece and Italy; and favorable volume/mix of $147 million across the Region, notably in Germany and Italy.

Operating companies income of $992 million increased by 10.5%. Excluding favorable currency of $39 million, operating companies income increased by 6.1%, mainly driven by: a favorable pricing variance and favorable volume/mix of $101 million across the Region, notably in Germany and Italy; partly offset by increased investment behind reduced-risk products across the Region.

Adjusted operating companies income and margin are shown in the table below and detailed on Schedule 12. Adjusted operating companies income, excluding favorable currency, increased by 6.1%. Adjusted operating companies income margin, excluding favorable currency, decreased by 1.4 points to 44.8%, reflecting the factors mentioned above, as detailed on Schedule 12.

 
EU            Fourth-Quarter                     Full-Year 
OCI 
(in                                      Excl.                                  Excl. 
millions) 
              2017     2016     Change   Curr.   2017       2016       Change   Curr. 
OCI           $ 992    $ 898    10.5 %   6.1  %  $ 3,775    $ 3,994    (5.5 )%  (4.4 )% 
Asset         -        -                         -          - 
impairment 
& 
exit 
costs 
Adjusted      $ 992    $ 898    10.5 %   6.1  %  $ 3,775    $ 3,994    (5.5 )%  (4.4 )% 
OCI 
Adjusted      43.8  %  46.2  %  (2.4 )   (1.4 )  45.4    %  48.9    %  (3.5 )   (2.7 ) 
OCI 
Margin* 
 
 

*Margins are calculated as adjusted OCI, divided by net revenues, excluding excise taxes.

EU Total Market, PMI Shipment & Market Share Commentaries

 
EU              Fourth-Quarter                     Full-Year 
PMI 
Shipment 
Volume 
by 
Brand 
(million 
units) 
                2017      2016      Change         2017        2016       Change 
Cigarettes 
Marlboro        23,317    22,663    2.9   %        93,088      96,245     (3.3  )% 
L&M             8,269     8,063     2.6   %        34,261      34,691     (1.2  )% 
Chesterfield    6,818     7,029     (3.0  )%       29,087      30,140     (3.5  )% 
Philip          3,523     3,668     (4.0  )%       15,158      16,290     (6.9  )% 
Morris 
Others          3,954     3,770     4.9   %        15,699      16,220     (3.2  )% 
Total           45,881    45,193    1.5   %        187,293     193,586    (3.3  )% 
Cigarettes 
Heated          849       122       +100.0%        1,889       224        +100.0% 
Tobacco 
Units 
Total           46,730    45,315    3.1   %        189,182     193,810    (2.4  )% 
EU 
EU              Fourth-Quarter                      Full-Year 
Market 
Shares 
by 
Brand 
                                     Change                         Change 
                2017      2016       p.p.           2017       2016        p.p. 
Marlboro        19.2 %    19.0 %     0.2            18.8    %  19.0 %      (0.2  ) 
L&M             6.9  %    6.9  %     -              6.9     %  6.9  %      - 
Chesterfield    5.9  %    5.9  %     -              6.0     %  5.9  %      0.1 
Philip          3.0  %    3.1  %     (0.1        )  3.1     %  3.2  %      (0.1  ) 
Morris 
HEETS           0.6  %    0.1  %     0.5            0.3     %  -    %      0.3 
Others          3.3  %    3.2  %     0.1            3.2     %  3.3  %      (0.1  ) 
Total           38.9 %    38.2 %     0.7            38.3    %  38.3 %      - 
EU 
 
 

2017 Full-Year

The estimated total market in the EU decreased by 1.9% to 492.1 billion units. PMI's Regional market share was flat at 38.3%, with gains in France, Germany and Poland offset by declines in Italy and Spain.

PMI's total shipment volume decreased by 2.4% to 189.2 billion units, or by 1.9% excluding estimated net inventory movements, notably in Italy and Spain. The decrease in cigarette shipment volume of Marlboro was mainly due to Greece, Italy and Spain. The decrease in cigarette shipment volume of L&M was mainly due to Germany, Romania and Spain, partly offset by France. The decrease in cigarette shipment volume of Chesterfield was mainly due to Italy, Portugal and Spain, partly offset by Poland. The decrease in cigarette shipment volume of Philip Morris was mainly due to Italy. The decrease in cigarette shipment volume of "Others" was due notably to Muratti in Italy.

2017 Fourth-Quarter

The estimated total market in the EU increased by 0.4% to 119.3 billion units. PMI's total shipment volume increased by 3.1% to 46.7 billion units, mainly driven by higher cigarette shipment volume in France, Germany and Portugal, partly offset by Spain, as well as higher heated tobacco unit shipment volume. The increase in cigarette shipment volume of Marlboro was notably driven by France, Germany and Italy, partly offset by Spain. The increase in cigarette shipment volume of L&M was mainly driven by Germany. The decrease in cigarette shipment volume of Chesterfield was mainly due to Italy, partly offset by Poland. The decrease in cigarette shipment volume of Philip Morris was mainly due to Italy and Spain, partly offset by France. The increase in cigarette shipment volume of "Others" was driven mainly by Merit in Italy and local brands in Portugal.

PMI's total market share increased by 0.7 points to 38.9%, with gains in France, Germany and Italy, partly offset by declines in Poland and Spain.

Key Market Commentaries

In France , estimated industry size, PMI shipment volume and market share performance, shown in the table below, include cigarettes and PMI's heated tobacco units.

 
France Key      Fourth-Quarter                Full-Year 
Market 
Data 
                                  Change                          Change 
                2017     2016     % / p.p.    2017      2016      % / p.p. 
Total Market    10.4     10.5     (1.0 )%     44.4      44.9      (1.2 )% 
(billion 
units) 
PMI             4,585    4,375    4.8  %      19,264    19,247    0.1  % 
Shipments 
(million 
units) 
PMI Market 
Share 
Marlboro        27.7  %  26.9  %  0.8         27.1   %  26.4   %  0.7 
Philip          10.6  %  10.4  %  0.2         10.3   %  10.2   %  0.1 
Morris 
Chesterfield    2.9   %  3.1   %  (0.2 )      3.0    %  3.1    %  (0.1 ) 
Others*         2.8   %  2.9   %  (0.1 )      2.8    %  2.7    %  0.1 
Total           44.0  %  43.3  %  0.7         43.2   %  42.4   %  0.8 
 
 

*Includes heated tobacco units.

For the full year, the estimated total market decreased by 1.2%. The increase in PMI's shipment volume was driven by higher market share, notably of Marlboro , reflecting the growth of both Marlboro Red and Gold in 30s packs launched in March 2017.

In the quarter, the estimated total market decreased by 1.0%. The increase in PMI's shipment volume was driven by higher market share, reflecting the same dynamics as for the full year.

In Germany , estimated industry size, PMI shipment volume and market share performance, shown in the table below, include cigarettes and PMI's heated tobacco units.

 
Germany Key      Fourth-Quarter               Full-Year 
Market 
Data 
                                   Change                         Change 
                 2017     2016     % / p.p.   2017      2016      % / p.p. 
Total Market     19.2     18.4     4.2  %     76.9      78.1      (1.6 )% 
(billion 
units) 
PMI Shipments    7,560    6,890    9.7  %     28,575    28,958    (1.3 )% 
(million 
units) 
PMI Market 
Share 
Marlboro         24.4  %  22.9  %  1.5        22.7   %  22.5   %  0.2 
L&M              12.0  %  11.5  %  0.5        11.5   %  11.6   %  (0.1 ) 
Chesterfield     1.4   %  1.6   %  (0.2 )     1.5    %  1.6    %  (0.1 ) 
Others*          1.6   %  1.4   %  0.2        1.5    %  1.4    %  0.1 
Total            39.4  %  37.4  %  2.0        37.2   %  37.1   %  0.1 
 
 

*Includes heated tobacco units.

For the full year, the estimated total market decreased by 1.6%, or by 2.7% excluding the net impact of estimated trade inventory movements, mainly reflecting the impact of price increases in March 2017. The decrease in PMI's shipment volume was mainly due to the lower total market, partly offset by higher market share.

In the quarter, the estimated total market increased by 4.2%. Excluding the net impact of estimated trade inventory movements, the estimated total market was flat. The increase in PMI's total shipment volume and market share largely reflected the benefit of the trade inventory movements.

In Italy , estimated industry size, PMI shipment volume and market share performance, shown in the table below, include cigarettes and PMI's heated tobacco units.

 
Italy Key       Fourth-Quarter               Full-Year 
Market 
Data 
                                  Change                         Change 
                2017     2016     % / p.p.   2017      2016      % / p.p. 
Total           16.7     16.6     0.7  %     69.8      72.1      (3.2 )% 
Market 
(billion 
units) 
PMI             9,029    8,830    2.2  %     36,767    38,744    (5.1 )% 
Shipments 
(million 
units) 
PMI Market 
Share 
Marlboro        23.8  %  23.6  %  0.2        23.9   %  24.3   %  (0.4 ) 
Chesterfield    11.4  %  11.3  %  0.1        11.3   %  11.5   %  (0.2 ) 
Philip          7.6   %  8.2   %  (0.6 )     7.7    %  8.5    %  (0.8 ) 
Morris 
HEETS           1.2   %  0.3   %  0.9        0.7    %  0.1    %  0.6 
Others          8.6   %  8.2   %  0.4        8.6    %  8.1    %  0.5 
Total           52.6  %  51.6  %  1.0        52.2   %  52.5   %  (0.3 ) 
 
 

For the full year, the estimated total market decreased by 3.2%, partly reflecting the implementation of the Tobacco Product Directive's ban on pack sizes of ten cigarettes at the end of 2016. The decline of PMI's shipments, down by 3.6% excluding the net impact of distributor inventory movements, mainly reflected the lower total market, as well as lower cigarette market share, principally due to Marlboro , partly reflecting the ban on pack sizes of ten cigarettes, and low-price Philip Morris , impacted by the growth of the super-low price segment, partly offset by HEETS and Merit in "Others."

In the quarter, the estimated total market increased by 0.7%, largely reflecting a favorable comparison with the fourth quarter of 2016 driven by estimated trade inventory movements associated with the implementation of the Tobacco Products Directive. Excluding these inventory movements, the estimated total market declined by 2.9%. The increase of PMI's shipments mainly reflected the higher total market and market share, principally driven by: Marlboro , benefiting from a favorable comparison with the fourth quarter of 2016 following the aforementioned ban on pack sizes of ten cigarettes; HEETS ; and Merit in "Others," partly offset by low-price Philip Morris , impacted by the growth of the super-low price segment.

In Poland , estimated industry size, PMI shipment volume and market share performance, shown in the table below, include cigarettes and PMI's heated tobacco units.

 
Poland Key      Fourth-Quarter               Full-Year 
Market 
Data 
                                  Change                         Change 
                2017     2016     % / p.p.   2017      2016      % / p.p. 
Total Market    9.4      9.0      4.8  %     41.7      41.3      0.9  % 
(billion 
units) 
PMI             4,089    3,970    3.0  %     17,784    17,485    1.7  % 
Shipments 
(million 
units) 
PMI Market 
Share 
Marlboro        11.2  %  12.6  %  (1.4 )     10.7   %  11.6   %  (0.9 ) 
L&M             18.6  %  19.6  %  (1.0 )     18.4   %  18.5   %  (0.1 ) 
Chesterfield    10.0  %  9.3   %  0.7        10.4   %  9.1    %  1.3 
HEETS           0.6   %  -     %  0.6        0.2    %  -      %  0.2 
Others          3.0   %  2.7   %  0.3        3.0    %  3.1    %  (0.1 ) 
Total           43.4  %  44.2  %  (0.8 )     42.7   %  42.3   %  0.4 
 
 

For the full year, the estimated total market increased by 0.9%. The increase in PMI's shipment volume was primarily driven by the higher total market and higher market share, driven by Chesterfield , benefiting from brand support, partly offset by Marlboro , reflecting pressure from competitive brands in the below premium segment.

In the quarter, the estimated total market increased by 4.8%. The increase in PMI's shipment volume primarily reflected the higher total market, partly offset by lower market share, notably of Marlboro and L&M, impacted by the growth of the super-low price segment, partly offset by Chesterfield and HEETS .

In Spain , estimated industry size, PMI shipment volume and market share performance, shown in the table below, include cigarettes and PMI's heated tobacco units.

 
Spain Key       Fourth-Quarter               Full-Year 
Market 
Data 
                                  Change                         Change 
                2017     2016     % / p.p.   2017      2016      % / p.p. 
Total           10.9     11.4     (4.4  )%   45.0      46.7      (3.5  )% 
Market 
(billion 
units) 
PMI             3,325    3,734    (10.9 )%   14,456    16,374    (11.7 )% 
Shipments 
(million 
units) 
PMI Market 
Share 
Marlboro        16.2  %  17.7  %  (1.5  )    16.5   %  18.0   %  (1.5  ) 
L&M             5.3   %  5.3   %  -          5.3    %  5.4    %  (0.1  ) 
Chesterfield    8.6   %  8.6   %  -          8.6    %  8.6    %  - 
Others*         1.8   %  1.8   %  -          1.9    %  1.9    %  - 
Total           31.9  %  33.4  %  (1.5  )    32.3   %  33.9   %  (1.6  ) 
 
 

*Includes heated tobacco units.

For the full year, the estimated total market decreased by 3.5%, or by 2.5% excluding the net impact of estimated trade inventory movements. The decline of PMI's shipment volume, down by 8.0% excluding the net impact of distributor inventory movements, mainly reflected the lower total market, and lower market share, due to Marlboro , reflecting the impact of price increases, particularly above the round EUR5.00 per pack price point in the vending channel, as well as a challenging comparison with 2016 in which the market share of Marlboro grew by 1.0 point.

In the quarter, the estimated total market decreased by 4.4%, or by 1.4% excluding the net impact of estimated trade inventory movements. The decline of PMI's shipment volume, down by 8.7% excluding the net impact of distributor inventory movements, was mainly due to the lower total market and lower market share, principally due to Marlboro , mainly reflecting the impact of price increases.

EASTERN EUROPE, MIDDLE EAST & AFRICA REGION (EEMA)

2017 Full-Year

Net revenues, excluding excise taxes, of $6.7 billion decreased by 4.3%. Excluding unfavorable currency of $291 million, net revenues, excluding excise taxes, decreased by 0.1%, principally due to unfavorable volume/mix of $374 million, primarily reflecting a lower total market in Russia, and a lower total market and market share in Saudi Arabia, mainly resulting from the implementation of the new excise tax. The unfavorable volume/mix was partly offset by a favorable pricing variance of $364 million, despite low price realization in Russia, driven notably by Egypt and Ukraine.

Operating companies income of $2.9 billion decreased by 4.2%. Excluding favorable currency of $81 million, operating companies income decreased by 6.9%, principally due to: unfavorable volume/mix of $344 million, predominantly in Russia and Saudi Arabia, partly offset by a favorable pricing variance.

Adjusted operating companies income and margin are shown in the table below and detailed on Schedule 16. Adjusted operating companies income, excluding favorable currency, decreased by 6.9%. Adjusted operating companies income margin, excluding favorable currency, decreased by 2.9 points to 40.2%, reflecting the factors mentioned above, as detailed on Schedule 16.

2017 Fourth-Quarter

Net revenues, excluding excise taxes, of $1.8 billion decreased by 1.9%. Excluding unfavorable currency of $23 million, net revenues, excluding excise taxes, decreased by 0.6%, principally due to unfavorable volume/mix of $30 million, primarily reflecting a lower total market in Russia, and a lower total market and market share in Saudi Arabia, mainly resulting from the implementation of the new excise tax, partly offset by Turkey and North Africa. The unfavorable volume/mix was partly offset by a favorable pricing variance of $19 million, driven mainly by North Africa, notably Egypt, Russia, despite low price realization, and Ukraine, partly offset by Turkey.

Operating companies income of $700 million increased by 11.6%. Excluding favorable currency of $264 million, operating companies income decreased by 30.5%, principally due to unfavorable volume/mix of $45 million, and unfavorable costs compared to the fourth quarter of 2016 due to: increased investment behind reduced-risk products; investment income in Russia; and other operating costs, primarily in Saudi Arabia; partly offset by a favorable pricing variance.

Adjusted operating companies income and margin are shown in the table below and detailed on Schedule 12. Adjusted operating companies income, excluding favorable currency, decreased by 30.5%. Adjusted operating companies income margin, excluding favorable currency, decreased by 10.5 points to 24.4%, reflecting the factors mentioned above, as detailed on Schedule 12.

 
EEMA          Fourth-Quarter                       Full-Year 
OCI 
(in                                      Excl.                                    Excl. 
millions) 
              2017     2016     Change   Curr.     2017       2016       Change   Curr. 
OCI           $ 700    $ 627    11.6 %   (30.5 )%  $ 2,888    $ 3,016    (4.2 )%  (6.9 )% 
Asset         -        -                           -          - 
impairment 
& 
exit 
costs 
Adjusted      $ 700    $ 627    11.6 %   (30.5 )%  $ 2,888    $ 3,016    (4.2 )%  (6.9 )% 
OCI 
Adjusted      39.7  %  34.9  %  4.8      (10.5 )   43.1    %  43.1    %  -        (2.9 ) 
OCI 
Margin* 
 
 

*Margins are calculated as adjusted OCI, divided by net revenues, excluding excise taxes.

EEMA Total Market, PMI Shipment & Market Share Commentaries

 
EEMA PMI           Fourth-Quarter              Full-Year 
Shipment 
Volume by Brand 
(million units) 
                   2017     2016     Change    2017      2016      Change 
Cigarettes 
Marlboro           18,314   18,813   (2.7  )%  70,122    73,818    (5.0  )% 
L&M                11,004   12,672   (13.2 )%  46,923    52,183    (10.1 )% 
Bond Street        8,886    11,243   (21.0 )%  36,336    42,553    (14.6 )% 
Parliament         9,775    8,439    15.8  %   33,299    33,940    (1.9  )% 
Philip Morris      5,273    1,235    +100.0%   19,086    2,058     +100.0% 
Others             13,080   15,361   (14.8 )%  50,391    66,841    (24.6 )% 
Total              66,332   67,763   (2.1  )%  256,157   271,393   (5.6  )% 
Cigarettes 
Heated Tobacco     820      63       +100.0%   1,581     100       +100.0% 
Units 
Total EEMA         67,152   67,826   (1.0  )%  257,738   271,493   (5.1  )% 
 
 

2017 Full-Year

The estimated total market in EEMA decreased by 2.8% to 1.0 trillion units. PMI's Regional market share decreased by 0.3 points to 24.9%.

PMI's total shipment volume decreased by 5.1% to 257.7 billion units, mainly reflecting: lower cigarette shipment volume in Russia, Saudi Arabia - where PMI's cigarette shipment volume declined by 35.8%, impacted by the new excise tax implemented in June 2017 that resulted in the doubling of retail prices - and Ukraine; partly offset by higher cigarette shipment volume in North Africa, notably Algeria, and higher heated tobacco unit shipment volume. The decrease in cigarette shipment volume of Marlboro was predominantly due to Saudi Arabia, reflecting the impact of the excise tax that resulted in the doubling of the brand's retail price from SAR 12 to SAR 24 per pack, partly offset by North Africa, mainly Algeria and Egypt, and Turkey. The decrease in cigarette shipment volume of L&M was mainly due to Russia, Saudi Arabia and Turkey, partly offset by Algeria and Kazakhstan. The decrease in cigarette shipment volume of Bond Street was mainly due to Kazakhstan, Russia and Ukraine. The decrease in cigarette shipment volume of Parliament was mainly due to Russia and Saudi Arabia, partly offset by Kazakhstan. The increase in cigarette shipment volume of Philip Morris was driven mainly by Russia and Ukraine, largely reflecting successful portfolio consolidation of local, low-price brands in "Others."

2017 Fourth-Quarter

PMI's total shipment volume decreased by 1.0% to 67.2 billion units, mainly reflecting: lower cigarette shipment volume in Russia, and Saudi Arabia - where PMI's cigarette shipment volume declined by 60.3%, reflecting the impact of the aforementioned excise tax - partly offset by North Africa, notably Algeria, and Turkey, as well as higher heated tobacco shipment volume. The decrease in cigarette shipment volume of Marlboro was predominantly due to Saudi Arabia, reflecting the same dynamic as for the full year, partly offset by North Africa, notably Algeria, and Turkey. The decrease in cigarette shipment volume of L&M was mainly due to Russia and Saudi Arabia, partly offset by Algeria and Kazakhstan. The decrease in cigarette shipment volume of Bond Street was mainly due to Kazakhstan, Russia and Ukraine. The increase in cigarette shipment volume of Parliament was mainly driven by Russia and Turkey, partly offset by Saudi Arabia. The increase in cigarette shipment volume of Philip Morris was mainly driven by Russia and Ukraine, largely reflecting successful portfolio consolidation of local, low-price brands in "Others."

Key Market Commentaries

In North Africa , estimated cigarette industry size, PMI cigarette shipment volume and cigarette market share performance are shown in the table below.

 
North Africa    Fourth-Quarter               Full-Year 
Key 
Market Data 
                                  Change                         Change 
                2017     2016     % / p.p.   2017      2016      % / p.p. 
Total           38.7     35.7     8.3  %     144.9     142.3     1.9  % 
Cigarette 
Market 
(billion 
units) 
PMI             9,131    8,141    12.2 %     35,085    34,035    3.1  % 
Cigarette 
Shipments 
(million 
units) 
PMI 
Cigarette 
Market 
Share 
Marlboro        9.9   %  8.7   %  1.2        9.3    %  8.3    %  1.0 
L&M             11.3  %  11.5  %  (0.2 )     11.8   %  12.2   %  (0.4 ) 
Others          2.9   %  2.4   %  0.5        2.9    %  2.7    %  0.2 
Total           24.1  %  22.6  %  1.5        24.0   %  23.2   %  0.8 
 
 

For the full year, the estimated total cigarette market increased by 1.9%, mainly driven by Egypt, partially offset by Tunisia. The increase in PMI's cigarette shipment volume was mainly driven by the higher cigarette market, as well as higher cigarette market share, notably of Marlboro in Algeria, partly offset by L&M in Egypt.

In the quarter, the estimated total cigarette market increased by 8.3%, mainly driven by Algeria and Egypt, partially offset by Tunisia. The increase in PMI's cigarette shipment volume mainly reflected higher cigarette market and market share, notably of Marlboro in Algeria and Egypt and L&M in Algeria.

In Russia , estimated industry size and PMI shipment volume, shown in the table below, include cigarettes and PMI's heated tobacco units. Market share performance, as measured by Nielsen and shown in the table below, reflects that of cigarettes.

 
Russia        Fourth-Quarter                 Full-Year 
Key 
Market 
Data 
                                  Change                         Change 
              2017      2016      % / p.p.   2017      2016      % / p.p. 
Total         66.5      71.0      (6.4 )%    260.0     280.0     (7.2 )% 
Market 
(billion 
units) 
PMI           19,052    20,574    (7.4 )%    72,417    79,706    (9.1 )% 
Shipments 
(million 
units) 
PMI 
Cigarette 
Market 
Share 
Marlboro      1.7    %  1.3    %  0.4        1.5    %  1.4    %  0.1 
Parliament    3.5    %  3.7    %  (0.2 )     3.5    %  3.8    %  (0.3 ) 
Bond          8.0    %  8.9    %  (0.9 )     8.6    %  8.4    %  0.2 
Street 
Philip        5.6    %  0.5    %  5.1        4.3    %  0.2    %  4.1 
Morris 
Others        7.9    %  12.8   %  (4.9 )     9.2    %  13.4   %  (4.2 ) 
Total         26.7   %  27.2   %  (0.5 )     27.1   %  27.2   %  (0.1 ) 
 
 

For the full year, the estimated total market decreased by 7.2%, reflecting the impact of excise tax-driven price increases and an increase in the prevalence of illicit trade. The decline of PMI's shipment volume was mainly due to the lower total market. PMI's market share decreased by 0.1 point. The decline of "Others" largely reflected the successful portfolio consolidation of local, low-price brands into Philip Morris .

In the quarter, the estimated total market decreased by 6.4%, reflecting the same dynamics as for the full-year. The decline of PMI's shipment volume was mainly due to the lower total market. The decrease in PMI's market share was mainly due to Bond Street , largely reflecting the impact of competitive product offerings in the low price segment, partly offset by Marlboro , as well as Philip Morris , reflecting the same dynamic as in the quarter.

In Turkey , estimated cigarette industry size, PMI cigarette shipment volume and cigarette market share performance, as measured by Nielsen, are shown in the table below.

 
Turkey        Fourth-Quarter                 Full-Year 
Key 
Market 
Data 
                                  Change                         Change 
              2017      2016      % / p.p.   2017      2016      % / p.p. 
Total         28.5      26.0      9.8  %     106.2     105.5     0.7  % 
Cigarette 
Market 
(billion 
units) 
PMI           13,555    12,074    12.3 %     49,649    49,624    0.1  % 
Cigarette 
Shipments 
(million 
units) 
PMI 
Cigarette 
Market 
Share 
Marlboro      10.4   %  10.3   %  0.1        10.2   %  10.2   %  - 
Parliament    11.4   %  11.8   %  (0.4 )     11.5   %  11.7   %  (0.2 ) 
Lark          6.9    %  7.0    %  (0.1 )     6.9    %  7.4    %  (0.5 ) 
Others        14.7   %  15.3   %  (0.6 )     14.7   %  15.0   %  (0.3 ) 
Total         43.4   %  44.4   %  (1.0 )     43.3   %  44.3   %  (1.0 ) 
 
 

For the full year, the estimated total cigarette market increased by 0.7%. Excluding the net impact of estimated trade inventory movements, the estimated total cigarette market declined by 1.6%. The decrease in PMI's cigarette market share, as measured by Nielsen, was mainly due to Lark , and L&M and Muratti in "Others," partly offset by Chesterfield , principally reflecting competitive pressure from super-low price alternatives.

In the quarter, the estimated total cigarette market increased by 9.8%. Excluding the net impact of estimated trade inventory movements ahead of speculated January 2018 price increases, the estimated total cigarette market increased by 6.3%. The increase in PMI's cigarette shipments was mainly due to the higher total market. The decrease in PMI's cigarette market share, as measured by Nielsen, was mainly due to L&M and Muratti in "Others," partly offset by Chesterfield , reflecting competitive pressure from super-low price alternatives.

In Ukraine , estimated industry size and PMI shipment volume, shown in the table below, include cigarettes and PMI's heated tobacco units. Market share performance, as measured by Nielsen and shown in the table below, reflects that of cigarettes.

 
Ukraine Key      Fourth-Quarter               Full-Year 
Market 
Data 
                                   Change                         Change 
                 2017     2016     % / p.p.   2017      2016      % / p.p. 
Total Market     16.4     17.1     (3.8 )%    67.1      73.1      (8.2  )% 
(billion 
units) 
PMI Shipments    4,834    4,797    0.8  %     19,356    22,022    (12.1 )% 
(million 
units) 
PMI Cigarette 
Market Share 
Marlboro         3.0   %  3.1   %  (0.1 )     3.0    %  3.1    %  (0.1  ) 
Parliament       3.3   %  3.0   %  0.3        3.2    %  2.9    %  0.3 
Bond Street      7.7   %  9.2   %  (1.5 )     8.4    %  10.0   %  (1.6  ) 
Philip Morris    4.0   %  -     %  4.0        3.1    %  -      %  3.1 
Others           8.9   %  12.4  %  (3.5 )     9.6    %  13.2   %  (3.6  ) 
Total            26.9  %  27.7  %  (0.8 )     27.3   %  29.2   %  (1.9  ) 
 
 

For the full year, the estimated total market decreased by 8.2%, mainly due to the impact of price increases and an increase in the prevalence of illicit trade. The decrease in PMI's shipment volume was primarily due to the lower total market, as well as lower cigarette market share, as measured by Nielsen, notably of low-price Bond Street , reflecting competitive pressure from lower-priced alternatives, partly offset by Parliament and Philip Morris , following the successful portfolio consolidation of a local, low-price brand in "Others."

In the quarter, the estimated total market decreased by 3.8%, or by 7.0% excluding the net impact of estimated trade inventory movements, mainly due to the impact of price increases. The decrease in PMI's cigarette market share, as measured by Nielsen, reflected the same dynamics as for the quarter.

ASIA REGION

2017 Full-Year

Net revenues, excluding excise taxes, of $10.8 billion increased by 24.3%. Excluding unfavorable currency of $137 million, net revenues, excluding excise taxes, increased by 25.9%, reflecting: a favorable pricing variance of $559 million, driven principally by Australia, Indonesia, Japan and the Philippines; and a favorable volume/mix of $1.7 billion, driven by heated tobacco unit volume in Japan and Korea, partly offset by unfavorable cigarette volume/mix, notably in Australia, reflecting a lower total market impacted by excise tax-driven price increases, and Indonesia.

Operating companies income of $4.1 billion increased by 29.8%. Excluding unfavorable currency of $123 million, operating companies income increased by 33.7%, mainly driven by a favorable pricing variance and favorable volume/mix of $622 million, mainly in Japan and Korea, partly offset by Australia and Indonesia. The increase was partly offset by higher costs, principally related to increased investment behind reduced-risk products.

Adjusted operating companies income and margin are shown in the table below and detailed on Schedule 16. Adjusted operating companies income, excluding unfavorable currency, increased by 33.7%. Adjusted operating companies income margin, excluding unfavorable currency, increased by 2.3 points to 39.1%, reflecting the factors mentioned above, as detailed on Schedule 16.

2017 Fourth-Quarter

Net revenues, excluding excise taxes, of $3.4 billion increased by 40.5%. Excluding unfavorable currency of $104 million, net revenues, excluding excise taxes, increased by 44.8%, reflecting: a favorable pricing variance of $166 million, driven principally by Australia, Indonesia, Japan and the Philippines, partly offset by Korea; and a favorable volume/mix of $929 million, predominantly driven by heated tobacco unit volume in Japan and Korea, as well as cigarette volume in the Philippines, partly offset by cigarette volume in Australia, reflecting the same dynamic as for the full year, and Indonesia.

Operating companies income of $1.4 billion increased by 53.7%. Excluding unfavorable currency of $97 million, operating companies income increased by 64.4%, mainly driven by a favorable pricing variance and favorable volume/mix of $471 million, mainly in Japan, Korea and the Philippines, partly offset by Australia and Indonesia.

Adjusted operating companies income and margin are shown in the table below and detailed on Schedule 12. Adjusted operating companies income, excluding unfavorable currency, increased by 64.4%. Adjusted operating companies income margin, excluding unfavorable currency, increased by 5.0 points to 42.2%, reflecting the factors mentioned above, as detailed on Schedule 12.

 
Asia          Fourth-Quarter                       Full-Year 
OCI 
(in                                        Excl.                                  Excl. 
millions) 
              2017       2016     Change   Curr.   2017       2016       Change   Curr. 
OCI           $ 1,396    $ 908    53.7 %   64.4 %  $ 4,149    $ 3,196    29.8 %   33.7 % 
Asset         -          -                         -          - 
impairment 
& 
exit 
costs 
Adjusted      $ 1,396    $ 908    53.7 %   64.4 %  $ 4,149    $ 3,196    29.8 %   33.7 % 
OCI 
Adjusted      40.6    %  37.2  %  3.4      5.0     38.5    %  36.8    %  1.7      2.3 
OCI 
Margin* 
 
 

*Margins are calculated as adjusted OCI, divided by net revenues, excluding excise taxes.

Asia Total Market, PMI Shipment & Market Share Commentaries

 
Asia PMI           Fourth-Quarter              Full-Year 
Shipment 
Volume by Brand 
(million units) 
                   2017     2016     Change    2017      2016      Change 
Cigarettes 
Marlboro           19,191   19,186   -     %   73,446    76,463    (3.9  )% 
Lark               3,078    4,178    (26.3 )%  14,474    17,600    (17.8 )% 
Parliament         2,096    2,608    (19.6 )%  9,224     10,142    (9.1  )% 
Others             36,869   37,843   (2.6  )%  137,109   155,824   (12.0 )% 
Total              61,234   63,815   (4.0  )%  234,253   260,029   (9.9  )% 
Cigarettes 
Heated Tobacco     14,032   3,510    +100.0%   32,729    7,070     +100.0% 
Units 
Total Asia         75,266   67,325   11.8  %   266,982   267,099   -     % 
 
 

2017 Full-Year

The estimated total market in Asia, excluding China, decreased by 3.1% to 1.1 trillion units. PMI's Regional market share, excluding China, was flat at 23.8%.

PMI's total shipment volume of 267.0 billion units was flat, mainly reflecting: lower cigarette shipment volume in Indonesia, Japan, Korea, Pakistan - impacted by excise tax-driven price increases in 2017 and an increase in the prevalence of illicit trade - and the Philippines, fully offset by higher heated tobacco unit shipment volume, mainly in Japan and Korea. The decrease in cigarette shipment volume of Marlboro was mainly due to Japan and Korea, primarily reflecting out-switching to heated tobacco products, partly offset by Indonesia and the Philippines. The decrease in cigarette shipment volume of Lark was principally due to Japan. The decrease in cigarette shipment volume of Parliament was mainly due to Japan and Korea. The decrease in cigarette shipment volume of "Others" was mainly due to local, low-price brands in Indonesia, Pakistan and the Philippines.

PMI's total shipment volume benefited from the favorable net impact of estimated combustible and heated tobacco unit inventory movements, which were driven by approximately 8.5 billion units net in Japan, reflecting: the increasing demand for HeatSticks , anticipated to further increase in the first quarter of 2018 following a planned lifting of the restriction on IQOS device sales; the establishment of appropriate distributor inventory levels of heated tobacco units, given the current high dependence on a single manufacturing center; and the transition from air freight to sea freight of heated tobacco units, largely completed in the fourth quarter of 2017. Excluding the impact of total estimated net inventory movements, PMI's total shipment volume decreased by 3.1%.

2017 Fourth-Quarter

PMI's total shipment volume increased by 11.8% to 75.3 billion units, principally reflecting: higher heated tobacco unit shipment volume, mainly in Japan and Korea, and higher cigarette shipment volume in Indonesia and the Philippines, partly offset by lower cigarette shipment volume in Japan and Korea. Cigarette shipment volume of Marlboro was flat, with growth in Indonesia and the Philippines offset by declines in Japan and Korea, principally reflecting out-switching to heated tobacco products . The decrease in cigarette shipment volume of Lark was principally due to Japan. The decrease in cigarette shipment volume of Parliament was principally due to Japan and Korea. The decrease in cigarette shipment volume of "Others" was mainly due to low-price brands in Indonesia and the Philippines.

PMI's total shipment volume benefited from the favorable net impact of estimated combustible and heated tobacco unit inventory movements, which were driven by approximately 5.0 billion units in Japan, reflecting the same dynamics as for the full year. Excluding the impact of total estimated net inventory movements, PMI's total shipment volume increased by 4.7%.

Key Market Commentaries

In Indonesia , estimated cigarette industry size, PMI cigarette shipment volume, cigarette market share and segmentation performance are shown in the tables below.

 
Indonesia    Fourth-Quarter                 Full-Year 
Key 
Market 
Data 
                                 Change                           Change 
             2017      2016      % / p.p.   2017       2016       % / p.p. 
Total        81.5      80.5      1.3  %     307.4      315.6      (2.6 )% 
Cigarette 
Market 
(billion 
units) 
PMI          26,903    26,732    0.6  %     101,324    105,524    (4.0 )% 
Cigarette 
Shipments 
(million 
units) 
PMI 
Cigarette 
Market 
Share 
Sampoerna    14.3   %  14.0   %  0.3        13.8    %  14.0    %  (0.2 ) 
A 
Dji Sam      8.7    %  6.4    %  2.3        7.4     %  6.5     %  0.9 
Soe 
Sampoerna    2.6    %  5.2    %  (2.6 )     4.1     %  5.2     %  (1.1 ) 
U 
Others       7.4    %  7.6    %  (0.2 )     7.7     %  7.7     %  - 
Total        33.0   %  33.2   %  (0.2 )     33.0    %  33.4    %  (0.4 ) 
 
 
Indonesia       Fourth-Quarter             Full-Year 
Segmentation 
Data 
                                  Change                     Change 
                2017     2016     p.p.     2017     2016     p.p. 
Segment % of 
Total Market 
Hand-Rolled     17.4  %  18.2  %  (0.8  )  17.6  %  18.2  %  (0.6 ) 
Kretek 
(SKT) 
Machine-Made    77.7  %  76.3  %  1.4      77.2  %  75.8  %  1.4 
Kretek (SKM) 
Whites (SPM)    4.9   %  5.5   %  (0.6  )  5.2   %  6.0   %  (0.8 ) 
Total           100.0 %  100.0 %  -        100.0 %  100.0 %  - 
PMI % Share 
of Segment 
Hand-Rolled     37.5  %  37.8  %  (0.3  )  37.5  %  37.3  %  0.2 
Kretek 
(SKT) 
Machine-Made    30.1  %  29.0  %  1.1      29.4  %  28.9  %  0.5 
Kretek (SKM) 
Whites (SPM)    63.5  %  76.3  %  (12.8 )  70.2  %  79.5  %  (9.3 ) 
 
 

For the full year, the estimated total cigarette market decreased by 2.6%, reflecting a soft economic environment and the impact of above-inflation excise tax-driven price increases. The decrease in PMI's shipments was mainly due to the lower total market and lower cigarette market share, notably due to a decline of Sampoerna U , reflecting the impact of price increases, partly offset by a growth of Dji Sam Soe , driven by the variant Magnum Mild .

In the quarter, the estimated total cigarette market increased by 1.3%, reflecting a favorable comparison with the fourth quarter of 2016, which declined by 3.1%. The increase in PMI's cigarette shipments was primarily driven by the higher estimated total cigarette market, partly offset by lower cigarette market share, largely reflecting the same dynamics as for the full year.

In Japan , PMI shipments reflect cigarette and heated tobacco unit volume. The estimated total market and PMI's market share reflect total industry cigarette and heated tobacco unit volume.

 
Japan Key     Fourth-Quarter                 Full-Year 
Market 
Data 
                                  Change                         Change 
              2017      2016      % / p.p.   2017      2016      % / p.p. 
Total         43.4      45.3      (4.1  )%   171.5     179.0     (4.2  )% 
Market 
(billion 
units) 
PMI 
Shipments 
(million 
units) 
Cigarettes    7,683     10,631    (27.7 )%   34,853    43,915    (20.6 )% 
Heated        13,134    3,510     +100%      31,291    7,069     +100% 
Tobacco 
Units 
Total         20,816    14,141    47.2  %    66,144    50,985    29.7  % 
PMI Market 
Share 
Marlboro      8.1    %  10.2   %  (2.1  )    9.3    %  10.6   %  (1.3  ) 
HeatSticks    13.9   %  4.9    %  9.0        10.8   %  2.9    %  7.9 
Parliament    1.9    %  2.2    %  (0.3  )    2.1    %  2.3    %  (0.2  ) 
Lark          8.0    %  9.3    %  (1.3  )    8.6    %  9.6    %  (1.0  ) 
Others        1.3    %  1.7    %  (0.4  )    1.3    %  1.7    %  (0.4  ) 
Total         33.2   %  28.3   %  4.9        32.1   %  27.1   %  5.0 
 
 

For the full year, the estimated total market decreased by 4.2%. PMI's shipment volume increased by 13.1%, excluding the net impact of estimated cigarette and heated tobacco unit distributor inventory movements, driven by higher market share of HeatSticks.

In the quarter, the estimated total market decreased by 4.1%. PMI's shipment volume increased by 11.9%, excluding the net impact of estimated cigarette and heated tobacco unit distributor inventory movements, driven by higher market share of HeatSticks.

In Korea , PMI shipments reflect cigarette and heated tobacco unit volume. The estimated total market and PMI's market share reflect total industry cigarette and heated tobacco unit volume.

 
Korea Key      Fourth-Quarter               Full-Year 
Market 
Data 
                                 Change                         Change 
               2017     2016     % / p.p.   2017      2016      % / p.p. 
Total          16.4     18.0     (9.1  )%   70.6      73.6      (4.1  )% 
Market 
(billion 
units) 
PMI 
Shipments 
(million 
units) 
Cigarettes     3,079    3,937    (21.8 )%   13,499    15,490    (12.9 )% 
Heated         898      -        -     %    1,438     -         -     % 
Tobacco 
Units 
Total          3,977    3,937    1.0   %    14,937    15,490    (3.6  )% 
PMI Market 
Share 
Marlboro       8.6   %  10.0  %  (1.4  )    8.7    %  9.6    %  (0.9  ) 
Parliament     7.9   %  8.9   %  (1.0  )    8.0    %  7.9    %  0.1 
HEETS          5.5   %  -     %  5.5        2.0    %  -      %  2.0 
Virginia S.    2.0   %  2.4   %  (0.4  )    2.0    %  3.0    %  (1.0  ) 
Others         0.4   %  0.4   %  -          0.5    %  0.5    %  - 
Total          24.4  %  21.7  %  2.7        21.2   %  21.0   %  0.2 
 
 

For the full year, the estimated total market decreased by 4.1%, or by 3.3% excluding the net impact of estimated cigarette trade inventory movements. The decrease in PMI's shipment volume was due to the lower total market, partly offset by higher market share driven by the May 2017 launch of HEETS .

In the quarter, the estimated total market decreased by 9.1%, or by 3.0% excluding the net impact of estimated cigarette trade inventory movements notably related to inventory movements in the fourth quarter of 2016 ahead of the implementation of graphic health warnings. The increase in PMI's shipment volume mainly reflected higher market share, mainly driven by the same dynamics as for the full year, despite PMI's principal competitors' new product launches.

In the Philippines , estimated cigarette industry size, PMI cigarette shipment volume and cigarette market share performance are shown in the table below.

 
Philippines    Fourth-Quarter                 Full-Year 
Key 
Market 
Data 
                                   Change                         Change 
               2017      2016      % / p.p.   2017      2016      % / p.p. 
Total          20.7      19.2      7.8  %     74.9      79.3      (5.6  )% 
Cigarette 
Market 
(billion 
units) 
PMI            14,315    13,053    9.7  %     50,618    56,611    (10.6 )% 
Cigarette 
Shipments 
(million 
units) 
PMI 
Cigarette 
Market 
Share 
Marlboro       35.6   %  29.9   %  5.7        33.0   %  28.4   %  4.6 
Fortune        17.9   %  20.5   %  (2.6 )     18.0   %  23.4   %  (5.4  ) 
Jackpot        5.6    %  6.8    %  (1.2 )     6.1    %  7.9    %  (1.8  ) 
Others         10.2   %  11.0   %  (0.8 )     10.5   %  11.6   %  (1.1  ) 
Total          69.3   %  68.2   %  1.1        67.6   %  71.3   %  (3.7  ) 
 
 

For the full year, the decline of the estimated total cigarette market of 6.7%, excluding the net impact of estimated trade inventory movements, was mainly due to the impact of excise tax-driven price increases. The decline in PMI's cigarette shipment volume was due to the lower total cigarette market, as well as lower cigarette market share, particularly of PMI's low and super-low price brands as a result of the timing of competitors' price increases, which initially widened the price gaps to PMI's principal competitor's discounted brands, partly offset by Marlboro , which benefited from in-switching from lower-priced brands.

In the quarter, the estimated total cigarette market increased by 7.8%, or by 1.1% excluding the net impact of estimated trade inventory movements regarding an anticipated Marlboro price increase in January 2018. The increase in PMI's cigarette shipment volume reflected the higher total cigarette market, as well as higher cigarette market share, particularly of Marlboro , which benefited from in-switching from lower-priced brands following significant competitor price increases in the quarter.

LATIN AMERICA & CANADA REGION

2017 Full-Year

Net revenues, excluding excise taxes, of $2.9 billion increased by 3.5%. Excluding unfavorable currency of $54 million, net revenues, excluding excise taxes, increased by 5.4%, primarily reflecting a favorable pricing variance of $307 million across the Region, notably Argentina, Canada and Mexico, partly offset by unfavorable volume/mix of $154 million, notably due to Argentina, Brazil, Canada and Mexico.

Operating companies income of $1.0 billion increased by 6.8%. Excluding unfavorable currency of $70 million, operating companies income increased by 14.3%, primarily reflecting a favorable pricing variance, partly offset by unfavorable volume/mix of $152 million, notably due to Argentina, Brazil, Canada and Mexico.

Adjusted operating companies income and margin are shown in the table below and detailed on Schedule 16. Adjusted operating companies income, excluding unfavorable currency, increased by 14.3%. Adjusted operating companies income margin, excluding unfavorable currency, increased by 2.8 points to 35.8%, principally driven by the factors mentioned above, as detailed on Schedule 16.

2017 Fourth-Quarter

Net revenues, excluding excise taxes, of $831 million increased by 5.9%. Excluding favorable currency of $2 million, net revenues, excluding excise taxes, increased by 5.6%, primarily reflecting a favorable pricing variance of $83 million across the Region, notably Argentina, Canada and Mexico, partly offset by unfavorable volume/mix of $39 million, mainly due to Brazil and Canada, partly offset by Mexico.

Operating companies income of $293 million increased by 12.3%. Excluding unfavorable currency of $10 million, operating companies income increased by 16.1%, primarily reflecting a favorable pricing variance, partly offset by unfavorable volume/mix of $36 million, mainly due to Brazil and Canada, partly offset by Mexico.

Adjusted operating companies income and margin are shown in the table below and detailed on Schedule 12. Adjusted operating companies income, excluding unfavorable currency, increased by 16.1%. Adjusted operating companies income margin, excluding unfavorable currency, increased by 3.4 points to 36.6%, principally driven by the factors mentioned above, as detailed on Schedule 12.

 
Latin         Fourth-Quarter                     Full-Year 
America 
& 
Canada 
OCI 
(in                                      Excl.                                Excl. 
millions) 
              2017     2016     Change   Curr.   2017       2016     Change   Curr. 
OCI           $ 293    $ 261    12.3 %   16.1 %  $ 1,002    $ 938    6.8 %    14.3 % 
Asset         -        -                         -          - 
impairment 
& 
exit 
costs 
Adjusted      $ 293    $ 261    12.3 %   16.1 %  $ 1,002    $ 938    6.8 %    14.3 % 
OCI 
Adjusted      35.3  %  33.2  %  2.1      3.4     34.1    %  33.0  %  1.1      2.8 
OCI 
Margin* 
 
 

*Margins are calculated as adjusted OCI, divided by net revenues, excluding excise taxes.

Latin America & Canada Total Market, PMI Shipment & Market Share Commentaries

 
Latin America      Fourth-Quarter              Full-Year 
& Canada PMI 
ShipmentVolume 
by Brand 
(million units) 
                   2017     2016     Change    2017     2016     Change 
Cigarettes 
Marlboro           9,429    9,632    (2.1  )%  33,711   35,194   (4.2  )% 
Philip Morris      3,335    3,912    (14.8 )%  13,320   16,463   (19.1 )% 
Chesterfield       3,317    1,565    +100.0%   9,852    2,626    +100.0% 
Others             6,841    8,685    (21.2 )%  27,340   33,655   (18.8 )% 
Total              22,922   23,794   (3.7  )%  84,223   87,938   (4.2  )% 
Cigarettes 
Heated Tobacco     15       -        -     %   27       -        -     % 
Units 
Total Latin        22,937   23,794   (3.6  )%  84,250   87,938   (4.2  )% 
America 
& Canada 
 
 

2017 Full-Year

The estimated total market in Latin America & Canada decreased by 3.8% to 213.0 billion units. PMI's Regional market share decreased by 0.1 point to 39.6%.

PMI's total shipment volume decreased by 4.2% to 84.3 billion units, mainly due to lower cigarette shipment volume in Argentina, Brazil, Canada, Colombia and Mexico. The decrease in cigarette shipment volume of Marlboro was mainly due to Argentina and Brazil. The decrease in cigarette shipment volume of Philip Morris was mainly due to Argentina. The increase in cigarette shipment volume of Chesterfield was driven by Argentina, Brazil, Colombia and Venezuela, partly offset by Mexico. The decrease in cigarette shipment volume of "Others" was principally due to mainly local brands in Argentina, Brazil, Colombia and Venezuela, largely reflecting successful brand portfolio consolidation, Canada and Mexico.

2017 Fourth-Quarter

PMI's total shipment volume decreased by 3.6% to 22.9 billion units, mainly due to Argentina, Brazil and Colombia, partly offset by Mexico and Venezuela. The decrease in cigarette shipment volume of Marlboro was mainly due to Argentina and Brazil, partly offset by Mexico. The decrease in cigarette shipment volume of Philip Morris was mainly due to Argentina. The increase in cigarette shipment volume of Chesterfield was mainly driven by Argentina, Brazil, Colombia and Venezuela. The decrease in cigarette shipment volume of "Others" was principally due to mainly local brands in Brazil and Colombia, reflecting successful brand portfolio consolidation.

Key Market Commentaries

In Argentina , estimated cigarette industry size, PMI cigarette shipment volume and cigarette market share performance are shown in the table below.

 
Argentina       Fourth-Quarter               Full-Year 
Key 
Market 
Data 
                                  Change                         Change 
                2017     2016     % / p.p.   2017      2016      % / p.p. 
Total           9.2      9.4      (2.5 )%    36.2      36.1      0.2  % 
Cigarette 
Market 
(billion 
units) 
PMI             6,859    7,123    (3.7 )%    27,002    27,512    (1.9 )% 
Cigarette 
Shipments 
(million 
units) 
PMI 
Cigarette 
Market 
Share 
Marlboro        19.7  %  20.8  %  (1.1 )     20.0   %  22.4   %  (2.4 ) 
Chesterfield    17.2  %  11.3  %  5.9        15.9   %  5.5    %  10.4 
Philip          32.0  %  37.3  %  (5.3 )     33.0   %  41.6   %  (8.6 ) 
Morris 
Others          5.7   %  6.1   %  (0.4 )     5.8    %  6.8    %  (1.0 ) 
Total           74.6  %  75.5  %  (0.9 )     74.7   %  76.3   %  (1.6 ) 
 
 

For the full year, the estimated total cigarette market increased by 0.2%, reflecting higher tax declarations by local manufacturers, as well as a favorable comparison to the full year 2016, which declined by 11.6% mainly due to the impact of tax-driven price increases. The decrease in PMI's cigarette shipment volume was mainly due to lower cigarette market share, reflecting the growth of the low price segment, where local manufacturers are exempt from paying minimum excise tax, resulting in widened price gaps with premium Marlboro and mid-price Philip Morris , partly offset by low-price Chesterfield that benefited from successful brand portfolio consolidation of a low-price brand in "Others."

In the quarter, the estimated total cigarette market decreased by 2.5%, mainly due to the impact of excise-tax driven price increases. The decrease in PMI's cigarette shipment volume was mainly due to the lower total market and lower cigarette market share, largely reflecting the same dynamics as for the full year.

In Canada , estimated industry size, PMI shipment volume and market share performance, shown in the table below, include cigarettes and PMI's heated tobacco units.

 
Canada Key      Fourth-Quarter               Full-Year 
Market 
Data 
                                  Change                        Change 
                2017     2016     % / p.p.   2017     2016      % / p.p. 
Total Market    6.6      6.8      (2.6 )%    24.6     26.3      (6.3 )% 
(billion 
units) 
PMI             2,477    2,584    (4.1 )%    9,259    10,049    (7.9 )% 
Shipments 
(million 
units) 
PMI Market 
Share 
Belmont         4.3   %  3.8   %  0.5        4.1   %  3.7    %  0.4 
Canadian        9.5   %  10.3  %  (0.8 )     9.5   %  10.2   %  (0.7 ) 
Classics 
Next            11.6  %  11.6  %  -          11.5  %  11.3   %  0.2 
Others*         12.0  %  13.1  %  (1.1 )     12.2  %  13.2   %  (1.0 ) 
Total           37.4  %  38.8  %  (1.4 )     37.3  %  38.4   %  (1.1 ) 
 
 

*Includes heated tobacco units.

For the full year, the estimated total market decreased by 6.3%, mainly due to the impact of price increases. The decrease in PMI's shipment volume mainly reflected the lower total market, as well as lower cigarette market share, unfavorably impacted by estimated net trade inventory movements.

In the quarter, the estimated total market decreased by 2.6%, mainly reflecting the same dynamics as for the full year. The decrease in PMI's shipment volume and market share reflected the impact of estimated trade inventory movements.

In Mexico , estimated cigarette industry size, PMI cigarette shipment volume and cigarette market share performance are shown in the table below.

 
Mexico Key      Fourth-Quarter               Full-Year 
Market 
Data 
                                  Change                         Change 
                2017     2016     % / p.p.   2017      2016      % / p.p. 
Total           10.2     9.7      4.5  %     35.8      36.2      (1.1 )% 
Cigarette 
Market 
(billion 
units) 
PMI             7,260    7,066    2.7  %     24,351    25,080    (2.9 )% 
Cigarette 
Shipments 
(million 
units) 
PMI 
Cigarette 
Market Share 
Marlboro        52.4  %  52.1  %  0.3        49.4   %  49.0   %  0.4 
Delicados       8.3   %  9.5   %  (1.2 )     8.3    %  9.7    %  (1.4 ) 
Benson &        5.1   %  5.0   %  0.1        5.0    %  4.7    %  0.3 
Hedges 
Others          5.5   %  5.9   %  (0.4 )     5.4    %  5.9    %  (0.5 ) 
Total           71.3  %  72.5  %  (1.2 )     68.1   %  69.3   %  (1.2 ) 
 
 

For the full year, the estimated total cigarette market decreased by 1.1%, or increased by 1.2% excluding the net impact of estimated trade inventory movements. The decrease in PMI's cigarette shipment volume mainly reflected the lower total cigarette market, as well as lower cigarette market share. The decrease of PMI's cigarette market share largely reflected the net impact of the estimated trade inventory movements, as well as lower share of Delicados , impacted by competitive pressure in the low price segment.

In the quarter, the estimated total cigarette market increased by 4.5%, or by 3.1% excluding the net impact of estimated trade inventory movements. The increase in PMI's cigarette shipment volume mainly reflected the higher total cigarette market. The decrease of PMI's cigarette market share largely reflected the same dynamics as for the full year.

Philip Morris International: Who We Are

We are a leading international tobacco company engaged in the manufacture and sale of cigarettes and other nicotine-containing products in markets outside the United States of America. We're building our future on smoke-free products that are a much better consumer choice than continuing to smoke cigarettes. Through multidisciplinary capabilities in product development, state-of-the-art facilities and scientific substantiation, we aim to ensure that our smoke-free products meet adult consumer preferences and rigorous regulatory requirements. Our vision is that these products ultimately replace cigarettes to the benefit of adult smokers, society, our company and our shareholders. For more information, see www.pmi.com and www.pmiscience.com .

Forward-Looking and Cautionary Statements

This press release contains projections of future results and other forward-looking statements. Achievement of future results is subject to risks, uncertainties and inaccurate assumptions. In the event that risks or uncertainties materialize, or underlying assumptions prove inaccurate, actual results could vary materially from those contained in such forward-looking statements. Pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, PMI is identifying important factors that, individually or in the aggregate, could cause actual results and outcomes to differ materially from those contained in any forward-looking statements made by PMI.

PMI's business risks include: excise tax increases and discriminatory tax structures; increasing marketing and regulatory restrictions that could reduce our competitiveness, eliminate our ability to communicate with adult consumers, or ban certain of our products; health concerns relating to the use of tobacco products and exposure to environmental tobacco smoke; litigation related to tobacco use; intense competition; the effects of global and individual country economic, regulatory and political developments, natural disasters and conflicts; changes in adult smoker behavior; lost revenues as a result of counterfeiting, contraband and cross-border purchases; governmental investigations; unfavorable currency exchange rates and currency devaluations, and limitations on the ability to repatriate funds; adverse changes in applicable corporate tax laws; adverse changes in the cost and quality of tobacco and other agricultural products and raw materials; and the integrity of its information systems. PMI's future profitability may also be adversely affected should it be unsuccessful in its attempts to produce and commercialize reduced-risk products or if regulation or taxation do not differentiate between such products and cigarettes; if it is unable to successfully introduce new products, promote brand equity, enter new markets or improve its margins through increased prices and productivity gains; if it is unable to expand its brand portfolio internally or through acquisitions and the development of strategic business relationships; or if it is unable to attract and retain the best global talent.

PMI is further subject to other risks detailed from time to time in its publicly filed documents, including the Form 10-Q for the quarter ended September 30, 2017. PMI cautions that the foregoing list of important factors is not a complete discussion of all potential risks and uncertainties. PMI does not undertake to update any forward-looking statement that it may make from time to time, except in the normal course of its public disclosure obligations.

 
                                                                                                                              Schedule 1 
PHILIP MORRIS INTERNATIONAL INC. 
and Subsidiaries 
Condensed  Statements of Earnings 
For the Quarters Ended December 31, 
($  in millions, except per share data) 
(Unaudited) 
                                                                                                      2017        2016        % Change 
Net Revenues                                                                                          $ 21,585    $ 19,189    12.5  % 
Cost of sales                                                                                         3,001       2,499       20.1  % 
Excise Taxes on products (1)                                                                          13,291      12,218      8.8   % 
Gross profit                                                                                          5,293       4,472       18.4  % 
Marketing, administration and research costs                                                          1,952       1,842 
Asset impairment and exit costs                                                                       -           - 
Amortization of intangibles                                                                           23          18 
Operating Income (2)                                                                                  3,318       2,612       27.0  % 
Interest expense, net                                                                                 259         201 
Earnings before income taxes                                                                          3,059       2,411       26.9  % 
Provision for income taxes                                                                            2,265       658         100+% 
Equity (income)/loss in unconsolidated subsidiaries, net                                              (2       )  (22      ) 
Net Earnings                                                                                          796         1,775       (55.2 )% 
Net Earnings attributable to noncontrolling interests                                                 102         64 
Net Earnings attributable to PMI                                                                      $ 694       $ 1,711     (59.4 )% 
Per share data (3): 
Basic Earnings Per Share                                                                              $ 0.44      $ 1.10      (60.0 )% 
Diluted Earnings Per Share                                                                            $ 0.44      $ 1.10      (60.0 )% 
(1) The segment detail of Excise Taxes on products sold for the  quarters ended December 31, 2017 and 2016 is shown  on  Schedule 2. 
(2) PMI's management evaluates segment performance and allocates  resources based on operating companies income,  which PMI  defines as operating income, excluding general corporate expenses  and amortization of intangibles, plus  equity (income)/loss in  unconsolidated subsidiaries, net. The reconciliation from  operating income to operating  companies income is as follows: 
                                                                                                      2017        2016        % Change 
Operating Income                                                                                      $ 3,318     $ 2,612     27.0  % 
Excluding: 
- Amortization of intangibles                                                                         23          18 
- General corporate expenses (included in marketing, administration  and  research costs above)    38          42 
Plus: Equity (income)/loss in unconsolidated subsidiaries, net                                        (2       )  (22      ) 
Operating Companies Income                                                                            $ 3,381     $ 2,694     25.5  % 
(3) Net Earnings and weighted-average shares used in the basic and  diluted earnings per share computations for the  quarters  ended December 31, 2017 and 2016 are shown on Schedule 4, Footnote  1. 
 
 
                                                                                                                                                             Schedule 2 
PHILIP MORRIS INTERNATIONAL 
INC. 
and 
Subsidiaries 
Selected  Financial Data 
by Business Segment 
For the Quarters Ended 
December 31, 
($ 
in millions) 
(Unaudited) 
                                                                                             Net Revenues excluding Excise Taxes 
                                                                                             EuropeanUnion    EEMA        Asia       LatinAmerica &Canada    Total 
2017                                        Net Revenues (1)                                 $ 7,424          $ 4,868     $ 6,584    $ 2,709                 $ 21,585 
                                            Excise Taxes on products                         (5,160  )        (3,104  )   (3,149  )  (1,878  )               (13,291  ) 
                                            Net Revenues excluding Excise Taxes              2,264            1,764       3,435      831                     8,294 
2016                                        Net Revenues                                     $ 6,465          $ 4,636     $ 5,517    $ 2,571                 $ 19,189 
                                            Excise Taxes on products                         (4,521  )        (2,838  )   (3,073  )  (1,786  )               (12,218  ) 
                                            Net Revenues excluding Excise Taxes              1,944            1,798       2,444      785                     6,971 
Variance                                    Currency                                         139              (23     )   (104    )  2                       14 
                                            Acquisitions                                     -                -           -          -                       - 
                                            Operations                                       181              (11     )   1,095      44                      1,309 
                                            Variance Total                                   320              (34     )   991        46                      1,323 

                                            Variance Total (%)                               16.5    %        (1.9    )%  40.5    %  5.9     %               19.0     % 
                                            Variance excluding Currency                      181              (11     )   1,095      44                      1,309 
                                            Variance excluding Currency (%)                  9.3     %        (0.6    )%  44.8    %  5.6     %               18.8     % 
                                            Variance excluding Currency & Acquisitions       181              (11     )   1,095      44                      1,309 
                                            Variance excluding Currency & Acquisitions (%)   9.3     %        (0.6    )%  44.8    %  5.6     %               18.8     % 
(1) 2017 Currency increased / (decreased) 
Net Revenues as follows: 
                                            European Union                                   $ 455 
                                            EEMA                                             (293    ) 
                                            Asia                                             (141    ) 
                                            Latin America & Canada                           (78     ) 
                                                                                             $ (57   ) 
 
 
                                                                                                                                              Schedule 3 
PHILIP MORRIS INTERNATIONAL 
INC. 
and 
Subsidiaries 
Selected  Financial Data 
by Business Segment 
For the Quarters Ended 
December 31, 
($ 
in millions) 
(Unaudited) 
                                                                              Operating Companies Income 
                                                                               EuropeanUnion    EEMA       Asia       LatinAmerica& Canada    Total 
2017                          Operating Companies Income                       $ 992            $ 700      $ 1,396    $ 293                   $ 3,381 
2016                          Operating Companies Income                       898              627        908        261                     2,694 
Variance 
                              2016 Asset impairment and exit costs             -                -          -          -                       - 
                              2017 Asset impairment and exit costs             -                -          -          -                       - 
                              Currency                                         39               264        (97     )  (10   )                 196 
                              Acquisitions                                     -                -          -          -                       - 
                              Operations                                       55               (191   )   585        42                      491 
                              Variance Total                                   94               73         488        32                      687 
                              Variance Total (%)                               10.5  %          11.6   %   53.7    %  12.3  %                 25.5    % 
                              Variance excluding Currency                      55               (191   )   585        42                      491 
                              Variance excluding Currency (%)                  6.1   %          (30.5  )%  64.4    %  16.1  %                 18.2    % 
                              Variance excluding Currency & Acquisitions       55               (191   )   585        42                      491 
                              Variance excluding Currency & Acquisitions (%)   6.1   %          (30.5  )%  64.4    %  16.1  %                 18.2    % 
 
 
                                                          Schedule 4 
PHILIP MORRIS INTERNATIONAL INC. 
and Subsidiaries 
Diluted  Earnings Per Share 
For the Quarters Ended December 31, 
($  in millions, except per share data) 
(Unaudited) 
                                                          Diluted 
                                                          E.P.S. 
2017 Diluted Earnings Per Share                           $ 0.44     (1) 
2016 Diluted Earnings Per Share                           $ 1.10     (1) 
Change                                                    $ (0.66 ) 
% Change                                                  (60.0   )% 
Reconciliation: 
2016 Diluted Earnings Per Share                           $ 1.10     (1) 
Special Items: 
2016 Asset impairment and exit costs                      - 
2016 Tax items                                            - 
2017 Asset impairment and exit costs                      - 
2017 Tax items                                            (0.88   ) 
Currency                                                  0.01 
Interest                                                  (0.02   ) 
Change in tax rate                                        (0.04   ) 
Operations                                                0.27       (2) 
2017 Diluted Earnings Per Share                           $ 0.44     (1) 
(1) Basic and diluted EPS were calculated 
using the following (in  millions): 
                                                 Q4       Q4 
                                                 2017     2016 
Net Earnings attributable to PMI                 $ 694    $ 1,711 
Less distributed and undistributed 
earnings attributable 
to share-based payment awards                    4        5 
Net Earnings for basic and diluted EPS           $ 690    $ 1,706 
Weighted-average shares for basic EPS            1,553    1,552 
Plus Contingently Issuable Performance           1        - 
Stock Units (PSUs) 
Weighted-average shares for diluted EPS          1,554    1,552 
(2) Includes the impact of shares outstanding 
and share-based  payments 
 
 
                                                                                                                    Schedule 5 
  PHILIP MORRIS INTERNATIONAL INC. 
  and Subsidiaries 
  Condensed  Statements of Earnings 
  For the Years Ended December 31, 
  ($  in millions, except per share data) 
  (Unaudited) 
                                                                                                       2017       2016       % Change 
  Net Revenues                                                                                         $ 78,098   $ 74,953   4.2   % 
  Cost of sales                                                                                        10,432     9,391      11.1  % 
  Excise Taxes on products (1)                                                                         49,350     48,268     2.2   % 
  Gross profit                                                                                         18,316     17,294     5.9   % 
  Marketing, administration and research costs                                                         6,725      6,405 
  Asset impairment and exit costs                                                                      -          - 
  Amortization of intangibles                                                                          88         74 
  Operating Income (2)                                                                                 11,503     10,815     6.4   % 
  Interest expense, net                                                                                914        891 
  Earnings before income taxes                                                                         10,589     9,924      6.7   % 
  Provision for income taxes                                                                           4,307      2,768      55.6  % 
  Equity (income)/loss in unconsolidated subsidiaries, net                                             (59      ) (94      ) 
  Net Earnings                                                                                         6,341      7,250      (12.5 )% 
  Net Earnings attributable to noncontrolling interests                                                306        283 
  Net Earnings attributable to PMI                                                                     $ 6,035    $ 6,967    (13.4 )% 
  Per share data (3): 
  Basic Earnings Per Share                                                                             $ 3.88     $ 4.48     (13.4 )% 
  Diluted Earnings Per Share                                                                           $ 3.88     $ 4.48     (13.4 )% 
  (1) The segment detail of Excise Taxes on products sold for the  year ended December 31, 2017 and 2016 is shown on  Schedule 6. 
  (2) PMI's management evaluates segment performance and allocates  resources based on operating companies income,  which PMI  defines as operating income, excluding general corporate expenses  and amortization of intangibles, plus  equity (income)/loss in  unconsolidated subsidiaries, net. The reconciliation from  operating income to operating  companies income is as follows: 
                                                                                                       2017       2016       % Change 
  Operating Income                                                                                     $ 11,503   $ 10,815   6.4   % 
  Excluding: 
  - Amortization of intangibles                                                                        88         74 
  - General corporate expenses (included in marketing, administration  and  research costs above)   164        161 
  Plus: Equity (income)/loss in unconsolidated subsidiaries, net                                       (59      ) (94      ) 
  Operating Companies Income                                                                           $ 11,814   $ 11,144   6.0   % 

  (3) Net Earnings and weighted-average shares used in the basic and  diluted Earnings Per Share computations for the  year ended  December 31, 2017 and 2016 are shown on Schedule 8, Footnote 1. 
 
 
                                                                                                                                                               Schedule 6 
PHILIP MORRIS INTERNATIONAL 
INC. 
and 
Subsidiaries 
Selected  Financial Data 
by Business Segment 
For the Years Ended 
December 31, 
($ 
in millions) 
(Unaudited) 
                                                                                             Net Revenues excluding Excise Taxes 
                                                                                             EuropeanUnion    EEMA         Asia        LatinAmerica &Canada    Total 
2017                                        Net Revenues (1)                                 $ 27,580         $ 18,045     $ 22,635    $ 9,838                 $ 78,098 
                                            Excise Taxes on products                         (19,262  )       (11,346  )   (11,845  )  (6,897  )               (49,350  ) 
                                            Net Revenues excluding Excise Taxes              8,318            6,699        10,790      2,941                   28,748 
2016                                        Net Revenues                                     $ 27,129         $ 18,286     $ 20,531    $ 9,007                 $ 74,953 
                                            Excise Taxes on products                         (18,967  )       (11,286  )   (11,850  )  (6,165  )               (48,268  ) 
                                            Net Revenues excluding Excise Taxes              8,162            7,000        8,681       2,842                   26,685 
Variance                                    Currency                                         45               (291     )   (137     )  (54     )               (437     ) 
                                            Acquisitions                                     -                -            -           -                       - 
                                            Operations                                       111              (10      )   2,246       153                     2,500 
                                            Variance Total                                   156              (301     )   2,109       99                      2,063 
                                            Variance Total (%)                               1.9      %       (4.3     )%  24.3     %  3.5     %               7.7      % 
                                            Variance excluding Currency                      111              (10      )   2,246       153                     2,500 
                                            Variance excluding Currency (%)                  1.4      %       (0.1     )%  25.9     %  5.4     %               9.4      % 
                                            Variance excluding Currency & Acquisitions       111              (10      )   2,246       153                     2,500 
                                            Variance excluding Currency & Acquisitions (%)   1.4      %       (0.1     )%  25.9     %  5.4     %               9.4      % 
(1) 2017 Currency increased / (decreased) 
Net Revenues as follows: 
                                            European Union                                   $ 139 
                                            EEMA                                             (1,925   ) 
                                            Asia                                             (165     ) 
                                            Latin America & Canada                           (404     ) 
                                                                                             $ (2,355 ) 
 
 
                                                                                                                                               Schedule 7 
PHILIP MORRIS INTERNATIONAL 
INC. 
and 
Subsidiaries 
Selected  Financial Data 
by Business Segment 
For the Years Ended 
December 31, 
($ 
in millions) 
(Unaudited) 
                                                                              Operating Companies Income 
                                                                               EuropeanUnion    EEMA        Asia       LatinAmerica& Canada    Total 
2017                          Operating Companies Income                       $ 3,775          $ 2,888     $ 4,149    $ 1,002                 $ 11,814 
2016                          Operating Companies Income                       3,994            3,016       3,196      938                     11,144 
Variance 
                              2016 Asset impairment and exit costs             -                -           -          -                       - 
                              2017 Asset impairment and exit costs             -                -           -          -                       - 
                              Currency                                         (43     )        81          (123    )  (70     )               (155     ) 
                              Acquisitions                                     -                -           -          -                       - 
                              Operations                                       (176    )        (209    )   1,076      134                     825 
                              Variance Total                                   (219    )        (128    )   953        64                      670 
                              Variance Total (%)                               (5.5    )%       (4.2    )%  29.8    %  6.8     %               6.0      % 
                              Variance excluding Currency                      (176    )        (209    )   1,076      134                     825 
                              Variance excluding Currency (%)                  (4.4    )%       (6.9    )%  33.7    %  14.3    %               7.4      % 
                              Variance excluding Currency & Acquisitions       (176    )        (209    )   1,076      134                     825 
                              Variance excluding Currency & Acquisitions (%)   (4.4    )%       (6.9    )%  33.7    %  14.3    %               7.4      % 
 
 
                                                    Schedule 8 
PHILIP MORRIS INTERNATIONAL 
INC. 
and Subsidiaries 
Diluted  Earnings Per Share 
For the Years Ended 
December 31, 
($  in millions, except 
per share data) 
(Unaudited) 
                                                    Diluted 
                                                    E.P.S. 
2017 Diluted Earnings                               $ 3.88            (1) 
Per Share 
2016 Diluted Earnings                               $ 4.48            (1) 
Per Share 
Change                                              $ (0.60 ) 
% Change                                            (13.4   )% 
Reconciliation: 
2016 Diluted Earnings                               $ 4.48            (1) 
Per Share 
Special Items: 
2016 Asset impairment                               - 
and exit costs 
2016 Tax items                                      - 
2017 Asset impairment                               - 
and exit costs 
2017 Tax items                                      (0.84   ) 
Currency                                            (0.21   ) 
Interest                                            0.01 
Change in tax rate                                  (0.03   ) 
Operations                                          0.47              (2) 
2017 Diluted Earnings                               $ 3.88            (1) 
Per Share 
(1) Basic and diluted 
EPS were calculated 
using the following 
(in  millions): 
                                 YTDDecember2017    YTDDecember2016 
Net Earnings attributable        $ 6,035            $ 6,967 
to PMI 
Less distributed and 
undistributed 
earnings attributable 
to share-based payment awards    14                 19 
Net Earnings for basic           $ 6,021            $ 6,948 
and diluted EPS 
Weighted-average shares          1,552              1,551 
for basic EPS 
Plus Contingently Issuable       1                  - 
Performance 
Stock Units (PSUs) 
Weighted-average shares          1,553              1,551 
for diluted EPS 
(2) Includes the impact 
of shares outstanding 
and share-based  payments 
 
 
                                                     Schedule 9 
PHILIP MORRIS INTERNATIONAL 
INC. 
and Subsidiaries 
Condensed  Balance Sheets 
($ in millions, except ratios) 
(Unaudited) 
                                  December 31,       December 31, 
                                  2017               2016 
Assets 
Cash and cash equivalents         $ 8,447            $ 4,239 
All other current assets          13,147             13,369 
Property, plant and               7,271              6,064 
equipment, net 
Goodwill                          7,666              7,324 
Other intangible assets, net      2,432              2,470 
Investments in unconsolidated     1,074              1,011 
subsidiaries 
Other assets                      2,931              2,374 
Total assets                      $ 42,968           $ 36,851 
Liabilities and Stockholders' 
(Deficit)  Equity 
Short-term borrowings             $ 499              $ 643 
Current portion of                2,506              2,573 
long-term debt 
All other current liabilities     12,957             13,251 
Long-term debt                    31,334             25,851 
Deferred income taxes             799                1,897 
Other long-term liabilities       5,103              3,536 
Total liabilities                 53,198             47,751 
Total PMI stockholders'           (12,086  )         (12,688  ) 
deficit 
Noncontrolling interests          1,856              1,788 
Total stockholders' deficit       (10,230  )         (10,900  ) 
Total liabilities and             $ 42,968           $ 36,851 

stockholders' 
(deficit) equity 
Total debt                        $ 34,339           $ 29,067 
Total debt to Adjusted EBITDA     2.77           (1) 2.51           (1) 
Net debt to Adjusted EBITDA       2.09           (1) 2.15           (1) 
(1) For the calculation 
of Total 
Debt to Adjusted 
EBITDA and Net 
Debt to Adjusted 
EBITDA ratios, 
refer to  Schedule 18. 
 
 
                                                                                                                                                                                                                                                                                                                                                             Schedule 10 
PHILIP MORRIS INTERNATIONAL INC. 
and Subsidiaries 
Reconciliation  of Non-GAAP Measures 
Adjustments for the Impact of Currency and  Acquisitions 
For the Quarters Ended December 31, 
($  in millions) 
(Unaudited) 
2017                                                                                                                                                                                                                                                       2016                                                                 % Change in Net Revenues 
                                                                                                                                                                                                                                                                                                                                excluding Excise Taxes 
NetRevenues                  LessExciseTaxes    NetRevenuesexcludingExciseTaxes    LessCurrency    NetRevenuesexcludingExciseTaxes  &Currency    LessAcquisitions    NetRevenuesexcludingExciseTaxes,Currency  &Acquisitions                             NetRevenues    LessExciseTaxes    NetRevenuesexcludingExciseTaxes    Total    ExcludingCurrency   ExcludingCurrency &Acquisitions 
$  7,424                     $ 5,160            $ 2,264                            $ 139           $ 2,125                                        $ -                 $ 2,125                                                      European Union          $ 6,465        $ 4,521            $ 1,944                            16.5 %   9.3   %             9.3   % 
4,868                        3,104              1,764                              (23   )         1,787                                          -                   1,787                                                        EEMA                    4,636          2,838              1,798                              (1.9 )%  (0.6  )%            (0.6  )% 
6,584                        3,149              3,435                              (104  )         3,539                                          -                   3,539                                                        Asia                    5,517          3,073              2,444                              40.5 %   44.8  %             44.8  % 
2,709                        1,878              831                                2               829                                            -                   829                                                          Latin America & Canada  2,571          1,786              785                                5.9  %   5.6   %             5.6   % 
$  21,585                    $ 13,291           $ 8,294                            $ 14            $ 8,280                                        $ -                 $ 8,280                                                      PMI Total               $ 19,189       $ 12,218           $ 6,971                            19.0 %   18.8  %             18.8  % 
2017                                                                                                                                                                                                                                                       2016                                                                 % Change in 
                                                                                                                                                                                                                                                                                                                                Operating Companies Income 
OperatingCompaniesIncome                                                           LessCurrency    OperatingCompaniesIncomeexcludingCurrency      LessAcquisitions    OperatingCompaniesIncomeexcludingCurrency  &Acquisitions                                                              OperatingCompaniesIncome           Total    ExcludingCurrency   ExcludingCurrency &Acquisitions 
$  992                                                                             $ 39            $ 953                                          $ -                 $ 953                                                        European Union                                            $ 898                              10.5 %   6.1   %             6.1   % 
700                                                                                264             436                                            -                   436                                                          EEMA                                                      627                                11.6 %   (30.5 )%            (30.5 )% 
1,396                                                                              (97   )         1,493                                          -                   1,493                                                        Asia                                                      908                                53.7 %   64.4  %             64.4  % 
293                                                                                (10   )         303                                            -                   303                                                          Latin America & Canada                                    261                                12.3 %   16.1  %             16.1  % 
$  3,381                                                                           $ 196           $ 3,185                                        $ -                 $ 3,185                                                      PMI Total                                                 $ 2,694                            25.5 %   18.2  %             18.2  % 
 
 
                                                                                                                                                                                                                                                                                                                                                                   Schedule 11 
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries 
Reconciliation  of Non-GAAP Measures 
Selected Financial Data by Product Category 
For  the Quarters Ended December 31, 
($ in millions) /  (Unaudited) 
2017                                                                                                                                                                                                                                                     2016                                                                         % Change in Combustible ProductsNet Revenues  excluding ExciseTaxes 
NetRevenues (1)     LessExciseTaxes (3)    NetRevenuesexcludingExciseTaxes    LessCurrency    NetRevenuesexcludingExciseTaxes  &Currency    LessAcquisitions    NetRevenuesexcludingExciseTaxes,Currency  &Acquisitions    Combustible Products        NetRevenues (1)    LessExciseTaxes (3)    NetRevenuesexcludingExciseTaxes    Total    ExcludingCurrency   ExcludingCurrency &Acquisitions 
$  7,278            $ 5,138                $ 2,140                            $ 130           $ 2,009                                        $ -                 $ 2,009                                                     European Union              $ 6,437            $ 4,518                $ 1,919                            11.5 %   4.7  %              4.7  % 
4,778               3,098                  1,680                              (22   )         1,702                                          -                   1,702                                                       EEMA                        4,630              2,838                  1,792                              (6.3 )%  (5.1 )%             (5.1 )% 
5,093               3,089                  2,003                              (36   )         2,039                                          -                   2,039                                                       Asia                        5,205              3,072                  2,133                              (6.1 )%  (4.4 )%             (4.4 )% 
2,706               1,878                  828                                2               826                                            -                   826                                                         Latin America & Canada      2,571              1,786                  785                                5.5  %   5.3  %              5.3  % 
$  19,855           $ 13,204               $ 6,651                            $ 75            $ 6,576                                        $ -                 $ 6,576                                                     Total CombustibleProducts   $ 18,843           $ 12,215               $ 6,628                            0.3  %   (0.8 )%             (0.8 )% 

2017                                                                                                                                                                                                                                                     2016                                                                         % Change in Reduced-RiskProducts Net Revenues  excludingExcise Taxes 
NetRevenues (2)     LessExciseTaxes (3)    NetRevenuesexcludingExciseTaxes    LessCurrency    NetRevenuesexcludingExciseTaxes  &Currency    LessAcquisitions    NetRevenuesexcludingExciseTaxes,Currency  &Acquisitions    Reduced-RiskProducts        NetRevenues (2)    LessExciseTaxes (3)    NetRevenuesexcludingExciseTaxes    Total    ExcludingCurrency   ExcludingCurrency &Acquisitions 
$  147              $ 23                   $ 124                              $ 7             $ 116                                          $ -                 $ 116                                                       European Union              $ 27               3                      $ 25                               +100%    +100%               +100% 
90                  5                      85                                 -               85                                             -                   85                                                          EEMA                        6                  -                      6                                  +100%    +100%               +100% 
1,491               59                     1,432                              (68   )         1,500                                          -                   1,500                                                       Asia                        312                -                      312                                +100%    +100%               +100% 
3                   -                      3                                  -               3                                              -                   3                                                           Latin America & Canada      -                  -                      -                                  +100%    +100%               +100% 
$  1,730            $ 87                   $ 1,643                            $ (60 )         $ 1,704                                        $ -                 $ 1,704                                                     Total Reduced-RiskProducts  $ 345              $ 3                    $ 343                              +100%    +100%               +100% 
$  21,585           $ 13,291               $ 8,294                            $ 14            $ 8,280                                        $ -                 $ 8,280                                                     PMI Total                   $ 19,189           $ 12,218               $ 6,971                            19.0 %   18.8%               18.8% 
(1) Net revenue amounts for our combustible products refer to the  operating revenues generated from the sale of these products, net  of sales and promotion incentives. These net revenue amounts  consist of  the sale of our cigarettes and other tobacco  products combined. Other tobacco products primarily include  tobacco for roll-your-own and make-your-own cigarettes, pipe  tobacco, cigars and cigarillos and do  not include  reduced-risk products. 
(2) Net revenue amounts for our reduced-risk products refer to the  operating revenues generated from the sale of these products, net  of sales and promotion incentives. These net revenue amounts  consist of  the sale of our heated tobacco units, our IQOS devices and related accessories, and other nicotine-containing  products, which primarily include our e-vapor products.  Reduced-risk products is the term we  use to refer to products  that present, are likely to present, or have the potential to  present less risk of harm to smokers who switch to these products  versus continued smoking. We have a range of reduced-  risk  products in various stages of development, scientific assessment  and commercialization. Because our reduced-risk products do not  burn tobacco, they produce far lower quantities of harmful and  potentially  harmful compounds than found in cigarette smoke. 
(3) PMI often collects excise taxes from its customers and then  remits them to governments, and, in those circumstances, PMI  includes the excise taxes in its net revenues and in excise taxes  on products. In  some jurisdictions, including Japan, PMI is  not responsible for collecting excise taxes. 
Note: Sum of product categories or  Regions might not foot to PMI total due to rounding. 
 
 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        Schedule 12 
PHILIP MORRIS INTERNATIONAL INC. 
and Subsidiaries 
Reconciliation  of Non-GAAP Measures 
Reconciliation of Operating Companies  Income to Adjusted Operating Companies Income & 
Reconciliation  of Adjusted Operating Companies Income Margin, excluding Currency  and Acquisitions 
For the Quarters Ended December 31, 
($  in millions) 
(Unaudited) 
2017                                                                                                                                                                                                                                                                                                                                                                                                                           2016                                                                                                                % Change in AdjustedOperating Companies Income 
OperatingCompaniesIncome                              LessAssetImpairment& ExitCosts                    AdjustedOperatingCompaniesIncome                           LessCurrency    AdjustedOperatingCompaniesIncomeexcludingCurrency                    LessAcquisitions                                                 AdjustedOperatingCompaniesIncomeexcludingCurrency  &Acquisitions                                     OperatingCompaniesIncome            LessAssetImpairment& ExitCosts        AdjustedOperatingCompaniesIncome          Adjusted   AdjustedexcludingCurrency                                 AdjustedexcludingCurrency &Acquisitions 
$  992                                                $ -                                               $ 992                                                      $ 39            $ 953                                                                $ -                                                              $ 953                                                                      European  Union          $ 898                               $ -                                   $ 898                                     10.5 %     6.1   %                                                   6.1   % 
700                                                   -                                                 700                                                        264             436                                                                  -                                                                436                                                                        EEMA                       627                                 -                                     627                                       11.6 %     (30.5 )%                                                  (30.5 )% 
1,396                                                 -                                                 1,396                                                      (97   )         1,493                                                                -                                                                1,493                                                                      Asia                       908                                 -                                     908                                       53.7 %     64.4  %                                                   64.4  % 
293                                                   -                                                 293                                                        (10   )         303                                                                  -                                                                303                                                                        Latin America  & Canada  261                                 -                                     261                                       12.3 %     16.1  %                                                   16.1  % 
$  3,381                                              $ -                                               $ 3,381                                                    $ 196           $ 3,185                                                              $ -                                                              $ 3,185                                                                    PMI Total                  $ 2,694                             $ -                                   $ 2,694                                   25.5 %     18.2  %                                                   18.2  % 

2017                                                                                                                                                                                                                                                                                                                                                                                                                           2016                                                                                                                % Points Change 
AdjustedOperatingCompaniesIncomeexcludingCurrency     NetRevenuesexcludingExciseTaxes  &Currency(1)    AdjustedOperatingCompaniesIncomeMarginexcludingCurrency                    AdjustedOperatingCompaniesIncomeexcludingCurrency  &Acquisitions    Net RevenuesexcludingExcise Taxes,Currency  &Acquisitions(1)    AdjustedOperatingCompaniesIncomeMarginexcludingCurrency  &Acquisitions                               AdjustedOperatingCompaniesIncome    NetRevenuesexcludingExciseTaxes(1)    AdjustedOperatingCompaniesIncomeMargin               AdjustedOperatingCompaniesIncomeMarginexcludingCurrency   AdjustedOperatingCompaniesIncomeMarginexcludingCurrency &Acquisitions 
$  953                                                $ 2,125                                           44.8    %                                                                  $ 953                                                                $ 2,125                                                          44.8    %                                                                  European  Union          $ 898                               $ 1,944                               46.2    %                                            (1.4  )                                                   (1.4  ) 
436                                                   1,787                                             24.4    %                                                                  436                                                                  1,787                                                            24.4    %                                                                  EEMA                       627                                 1,798                                 34.9    %                                            (10.5 )                                                   (10.5 ) 
1,493                                                 3,539                                             42.2    %                                                                  1,493                                                                3,539                                                            42.2    %                                                                  Asia                       908                                 2,444                                 37.2    %                                            5.0                                                       5.0 
303                                                   829                                               36.6    %                                                                  303                                                                  829                                                              36.6    %                                                                  Latin America  & Canada  261                                 785                                   33.2    %                                            3.4                                                       3.4 
$  3,185                                              $ 8,280                                           38.5    %                                                                  $ 3,185                                                              $ 8,280                                                          38.5    %                                                                  PMI Total                  $ 2,694                             $ 6,971                               38.6    %                                            (0.1  )                                                   (0.1  ) 
(1) For the calculation of Net Revenues excluding Excise Taxes,  currency and acquisitions, refer to Schedule 10. 
 
 
                                                                    Schedule 13 
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 and Adjusted Diluted  EPS, excluding Currency 
For the Quarters Ended December 31, 
(Unaudited) 
                                            2017     2016     % Change 
Reported Diluted EPS                        $ 0.44   $ 1.10   (60.0 )% 
Less: 
Currency impact                             0.01 
Reported Diluted EPS, excluding Currency    $ 0.43   $ 1.10   (60.9 )% 
                                            2017     2016     % Change 
Reported Diluted EPS                        $ 0.44   $ 1.10   (60.0 )% 
Adjustments: 
Asset impairment and exit costs             -        - 
Tax items                                   0.88     - 
Adjusted Diluted EPS                        $ 1.32   $ 1.10   20.0  % 
Less: 
Currency impact                             0.01 
Adjusted Diluted EPS, excluding Currency    $ 1.31   $ 1.10   19.1  % 
 
 
                                                                                                                                                                                                                                                                                                                                                             Schedule 14 
PHILIP MORRIS INTERNATIONAL INC. 
and Subsidiaries 
Reconciliation  of Non-GAAP Measures 
Adjustments for the Impact of Currency and  Acquisitions 
For the Years Ended December 31, 
($ in  millions) 
(Unaudited) 
2017                                                                                                                                                                                                                                                       2016                                                                 % Change in Net Revenuesexcluding Excise Taxes 
NetRevenues                  LessExciseTaxes    NetRevenuesexcludingExciseTaxes    LessCurrency    NetRevenuesexcludingExciseTaxes  &Currency    LessAcquisitions    NetRevenuesexcludingExciseTaxes,Currency  &Acquisitions                             NetRevenues    LessExciseTaxes    NetRevenuesexcludingExciseTaxes    Total    ExcludingCurrency   ExcludingCurrency &Acquisitions 
$  27,580                    $ 19,262           $ 8,318                            $ 45            $ 8,273                                        $ -                 $ 8,273                                                      European Union          $ 27,129       $ 18,967           $ 8,162                            1.9  %   1.4  %              1.4  % 
18,045                       11,346             6,699                              (291   )        6,990                                          -                   6,990                                                        EEMA                    18,286         11,286             7,000                              (4.3 )%  (0.1 )%             (0.1 )% 
22,635                       11,845             10,790                             (137   )        10,927                                         -                   10,927                                                       Asia                    20,531         11,850             8,681                              24.3 %   25.9 %              25.9 % 
9,838                        6,897              2,941                              (54    )        2,995                                          -                   2,995                                                        Latin America & Canada  9,007          6,165              2,842                              3.5  %   5.4  %              5.4  % 
$  78,098                    $ 49,350           $ 28,748                           $ (437 )        $ 29,185                                       $ -                 $ 29,185                                                     PMI Total               $ 74,953       $ 48,268           $ 26,685                           7.7  %   9.4  %              9.4  % 
2017                                                                                                                                                                                                                                                       2016                                                                 % Change inOperating Companies Income 
OperatingCompaniesIncome                                                           LessCurrency    OperatingCompaniesIncomeexcludingCurrency      Less                OperatingCompaniesIncomeexcludingCurrency  &Acquisitions                                                              OperatingCompaniesIncome           Total    ExcludingCurrency   ExcludingCurrency &Acquisitions 
                                                                                                                                                  Acquisitions 
$  3,775                                                                           $ (43  )        $ 3,818                                        $ -                 $ 3,818                                                      European Union                                            $ 3,994                            (5.5 )%  (4.4 )%             (4.4 )% 

2,888                                                                              81              2,807                                          -                   2,807                                                        EEMA                                                      3,016                              (4.2 )%  (6.9 )%             (6.9 )% 
4,149                                                                              (123   )        4,272                                          -                   4,272                                                        Asia                                                      3,196                              29.8 %   33.7 %              33.7 % 
1,002                                                                              (70    )        1,072                                          -                   1,072                                                        Latin America & Canada                                    938                                6.8  %   14.3 %              14.3 % 
$  11,814                                                                          $ (155 )        $ 11,969                                       $ -                 $ 11,969                                                     PMI Total                                                 $ 11,144                           6.0  %   7.4  %              7.4  % 
 
 
                                                                                                                                                                                                                                                                                                                                                                   Schedule 15 
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries 
Reconciliation  of Non-GAAP Measures 
Selected Financial Data by Product Category 
For  the Years Ended December 31, 
($ in millions) / (Unaudited) 
2017                                                                                                                                                                                                                                                     2016                                                                         % Change in Combustible ProductsNet Revenues  excluding ExciseTaxes 
NetRevenues (1)     LessExciseTaxes (3)    NetRevenuesexcludingExciseTaxes    LessCurrency    NetRevenuesexcludingExciseTaxes  &Currency    LessAcquisitions    NetRevenuesexcludingExciseTaxes,Currency  &Acquisitions    Combustible Products        NetRevenues (1)    LessExciseTaxes (3)    NetRevenuesexcludingExciseTaxes    Total    ExcludingCurrency   ExcludingCurrency &Acquisitions 
$  27,261           $ 19,213               $ 8,048                            $ 39            $ 8,009                                        $ -                 $ 8,009                                                     European Union              $ 27,067           $ 18,962               $ 8,105                            (0.7 )%  (1.2 )%             (1.2 )% 
17,886              11,336                 6,550                              (290   )        6,840                                          -                   6,840                                                       EEMA                        18,276             11,286                 6,991                              (6.3 )%  (2.1 )%             (2.1 )% 
19,325              11,753                 7,572                              (43    )        7,615                                          -                   7,615                                                       Asia                        19,865             11,850                 8,015                              (5.5 )%  (5.0 )%             (5.0 )% 
9,833               6,896                  2,937                              (54    )        2,991                                          -                   2,991                                                       Latin America & Canada      9,006              6,164                  2,841                              3.4  %   5.3  %              5.3  % 
$  74,305           $ 49,198               $ 25,107                           $ (348 )        $ 25,456                                       $ -                 $ 25,456                                                    Total Combustible Products  $ 74,214           $ 48,262               $ 25,952                           (3.3 )%  (1.9 )%             (1.9 )% 
2017                                                                                                                                                                                                                                                     2016                                                                         % Change in Reduced-RiskProducts Net Revenues  excludingExcise Taxes 
NetRevenues (2)     LessExciseTaxes (3)    NetRevenuesexcludingExciseTaxes    LessCurrency    NetRevenuesexcludingExciseTaxes  &Currency    LessAcquisitions    NetRevenuesexcludingExciseTaxes,Currency  &Acquisitions    Reduced-Risk Products       NetRevenues (2)    LessExciseTaxes (3)    NetRevenuesexcludingExciseTaxes    Total    ExcludingCurrency   ExcludingCurrency &Acquisitions 
$  320              $ 51                   $ 269                              $ 5             $ 264                                          $ -                 $ 264                                                       European Union              $ 62               5                      $ 57                               +100%    +100%               +100% 
158                 10                     149                                -               149                                            -                   149                                                         EEMA                        9                  -                      9                                  +100%    +100%               +100% 
3,310               92                     3,218                              (94    )        3,312                                          -                   3,312                                                       Asia                        666                -                      666                                +100%    +100%               +100% 
5                   -                      4                                  -               4                                              -                   4                                                           Latin America & Canada      2                  1                      1                                  +100%    +100%               +100% 
$  3,793            $ 153                  $ 3,640                            $ (89  )        $ 3,729                                        $ -                 $ 3,729                                                     Total Reduced-RiskProducts  $ 739              $ 6                    $ 733                              +100%    +100%               +100% 
$  78,098           $ 49,350               $ 28,748                           $ (437 )        $ 29,185                                       $ -                 $ 29,185                                                    PMI Total                   $ 74,953           $ 48,268               $ 26,685                           7.7  %   9.4  %              9.4  % 
(1) Net revenue amounts for our combustible products refer to the  operating revenues generated from the sale of these products, net  of sales and promotion incentives. These net revenue amounts  consist of  the sale of our cigarettes and other tobacco  products combined. Other tobacco products primarily include  tobacco for roll-your-own and make-your-own cigarettes, pipe  tobacco, cigars and cigarillos and do  not include  reduced-risk products. 
(2) Net revenue amounts for our reduced-risk products refer to the  operating revenues generated from the sale of these products, net  of sales and promotion incentives. These net revenue amounts  consist of  the sale of our heated tobacco units, our IQOS devices and related accessories, and other nicotine-containing  products, which primarily include our e-vapor products.  Reduced-risk products is the term we  use to refer to products  that present, are likely to present, or have the potential to  present less risk of harm to smokers who switch to these products  versus continued smoking. We have a range of reduced-  risk  products in various stages of development, scientific assessment  and commercialization. Because our reduced-risk products do not  burn tobacco, they produce far lower quantities of harmful and  potentially  harmful compounds than found in cigarette smoke. 
(3) PMI often collects excise taxes from its customers and then  remits them to governments, and, in those circumstances, PMI  includes the excise taxes in its net revenues and in excise taxes  on products. In  some jurisdictions, including Japan, PMI is  not responsible for collecting excise taxes. 
Note: Sum of product categories or  Regions might not foot to PMI total due to rounding. 
 
 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          Schedule 16 
PHILIP MORRIS INTERNATIONAL INC. 
and Subsidiaries 
Reconciliation  of Non-GAAP Measures 
Reconciliation of Operating Companies  Income to Adjusted Operating Companies Income & 
Reconciliation  of Adjusted Operating Companies Income Margin, excluding Currency  and Acquisitions 

For the Years Ended December 31, 
($  in millions) 
(Unaudited) 
2017                                                                                                                                                                                                                                                                                                                                                                                                                             2016                                                                                                                % Change in Adjusted 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     Operating Companies Income 
OperatingCompaniesIncome                              LessAssetImpairment &Exit  Costs                   AdjustedOperatingCompaniesIncome                           LessCurrency    AdjustedOperatingCompaniesIncomeexcludingCurrency                    LessAcquisitions                                                 AdjustedOperatingCompaniesIncomeexcludingCurrency  &Acquisitions                                     OperatingCompaniesIncome            LessAssetImpairment&  ExitCosts      AdjustedOperatingCompaniesIncome          Adjusted   AdjustedexcludingCurrency                                 AdjustedexcludingCurrency &Acquisitions 
$  3,775                                              $ -                                                 $ 3,775                                                    $ (43  )        $ 3,818                                                              $ -                                                              $ 3,818                                                                    European Union             $ 3,994                             $ -                                   $ 3,994                                   (5.5 )%    (4.4 )%                                                   (4.4 )% 
2,888                                                 -                                                   2,888                                                      81              2,807                                                                -                                                                2,807                                                                      EEMA                       3,016                               -                                     3,016                                     (4.2 )%    (6.9 )%                                                   (6.9 )% 
4,149                                                 -                                                   4,149                                                      (123   )        4,272                                                                -                                                                4,272                                                                      Asia                       3,196                               -                                     3,196                                     29.8 %     33.7 %                                                    33.7 % 
1,002                                                 -                                                   1,002                                                      (70    )        1,072                                                                -                                                                1,072                                                                      Latin America  & Canada  938                                 -                                     938                                       6.8  %     14.3 %                                                    14.3 % 
$  11,814                                             $ -                                                 $ 11,814                                                   $ (155 )        $ 11,969                                                             $ -                                                              $ 11,969                                                                   PMI Total                  $ 11,144                            $ -                                   $ 11,144                                  6.0  %     7.4  %                                                    7.4  % 
2017                                                                                                                                                                                                                                                                                                                                                                                                                             2016                                                                                                                % Points Change 
AdjustedOperatingCompaniesIncomeexcludingCurrency     Net RevenuesexcludingExcise Taxes&  Currency(1)    AdjustedOperatingCompaniesIncomeMarginexcludingCurrency                    AdjustedOperatingCompaniesIncomeexcludingCurrency  &Acquisitions    Net RevenuesexcludingExcise Taxes,Currency  &Acquisitions(1)    AdjustedOperatingCompaniesIncomeMarginexcludingCurrency  &Acquisitions                               AdjustedOperatingCompaniesIncome    NetRevenuesexcludingExciseTaxes(1)    AdjustedOperatingCompaniesIncomeMargin               AdjustedOperatingCompaniesIncomeMarginexcludingCurrency   AdjustedOperatingCompaniesIncomeMarginexcludingCurrency  &Acquisitions 
$  3,818                                              $ 8,273                                             46.2     %                                                                 $ 3,818                                                              $ 8,273                                                          46.2     %                                                                 European Union             $ 3,994                             $ 8,162                               48.9     %                                           (2.7 )                                                    (2.7 ) 
2,807                                                 6,990                                               40.2     %                                                                 2,807                                                                6,990                                                            40.2     %                                                                 EEMA                       3,016                               7,000                                 43.1     %                                           (2.9 )                                                    (2.9 ) 
4,272                                                 10,927                                              39.1     %                                                                 4,272                                                                10,927                                                           39.1     %                                                                 Asia                       3,196                               8,681                                 36.8     %                                           2.3                                                       2.3 
1,072                                                 2,995                                               35.8     %                                                                 1,072                                                                2,995                                                            35.8     %                                                                 Latin America  & Canada  938                                 2,842                                 33.0     %                                           2.8                                                       2.8 
$  11,969                                             $ 29,185                                            41.0     %                                                                 $ 11,969                                                             $ 29,185                                                         41.0     %                                                                 PMI Total                  $ 11,144                            $ 26,685                              41.8     %                                           (0.8 )                                                    (0.8 ) 
(1) For the calculation of Net Revenues excluding Excise Taxes,  currency and acquisitions, refer to Schedule 14. 
 
 
                                                                         Schedule 17 
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 and Adjusted Diluted  EPS, excluding Currency 
For the Years Ended December 31, 
(Unaudited) 
                                           2017      2016     % Change 
Reported Diluted EPS                       $ 3.88    $ 4.48   (13.4 )% 
Less: 
Currency impact                            (0.21  ) 
Reported Diluted EPS, excluding Currency   $ 4.09    $ 4.48   (8.7  )% 
                                           2017      2016     % Change 
Reported Diluted EPS                       $ 3.88    $ 4.48   (13.4 )% 
Adjustments: 
Asset impairment and exit costs            -         - 

Tax items                                  0.84      - 
Adjusted Diluted EPS                       $ 4.72    $ 4.48   5.4   % 
Less: 
Currency impact                            (0.21  ) 
Adjusted Diluted EPS, excluding Currency   $ 4.93    $ 4.48   10.0  % 
 
 
                                                     Schedule 18 
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) 
                               For the Year Ended    For the Year Ended 
                               December 31,          December 31, 
                               2017                  2016 
Net Earnings                   $ 6,341               $ 7,250 
Equity (income)/loss           (59      )            (94      ) 
in unconsolidated 
subsidiaries, net 
Provision for Income Taxes     4,307                 2,768 
Interest expense, net          914                   891 
Depreciation and               875                   743 
amortization 
Asset impairment               -                     - 
and exit costs 
Adjusted EBITDA                $ 12,378              $ 11,558 
                               December 31,          December 31, 
                               2017                  2016 
Short-term borrowings          $ 499                 $ 643 
Current portion of             2,506                 2,573 
long-term debt 
Long-term debt                 31,334                25,851 
Total Debt                     $ 34,339              $ 29,067 
Less: Cash and cash            8,447                 4,239 
equivalents 
Net Debt                       $ 25,892              $ 24,828 
Ratios: 
Total Debt to Adjusted         2.77                  2.51 
EBITDA 
Net Debt to Adjusted EBITDA    2.09                  2.15 
 
 
                                                                                      Schedule 19 
PHILIP 
MORRIS 
INTERNATIONAL 
INC. 
and 
Subsidiaries 
Reconciliation 
of 
Non-GAAP 
Measures 
Reconciliation 
of 
Operating 
Cash Flow 
to 
Operating 
Cash 
Flow, 
excluding 
Currency 
For the 
Years 
Ended 
December 
31, 
($ 
in 
millions) 
(Unaudited) 
                  For the Quarters Ended                   For the Years Ended 
                  December 31,                             December 31, 
                  2017      2016                % Change   2017      2016             % Change 
Net cash          $ 2,921   $ 2,149             35.9 %     $ 8,912   $ 8,077          10.3 % 
provided 
by 
operating 
activities 
(1) 
Less: 
Currency          194                                      392 
impact 
Net cash          $ 2,727   $ 2,149             26.9 %     $ 8,520   $ 8,077          5.5  % 
provided 
by 
operating 
activities, 
excluding 
currency 
(1) 
Operating 
cash 
flow. 
 
 

Philip Morris International Inc. Investor Relations: New York: [phone] Lausanne: [phone] [e-mail] or Media: Lausanne: [phone] [e-mail]

View source version on businesswire.com:http://www.businesswire.com/news/home/20180208005598/en/

 
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(END) Dow Jones Newswires

February 08, 2018 06:59 ET (11:59 GMT)