Philip Morris International Inc. (PMI) Reports 2013 Second-Quarter Results; Revises 2013 Full-Year R

Philip Morris International Inc. (PMI) Reports 2013 Second-Quarter Results; Revises 2013 Full-Year Reported Diluted EPS Forecast for Currency Only; Underlying Business Outlook Unchanged

NEW YORK--(BUSINESS WIRE)-- Regulatory News:

Second-Quarter 2013

  • Reported diluted earnings per share of $1.30, down by $0.06 or 4.4% versus $1.36 in 2012
    • Excluding unfavorable currency of $0.07, reported diluted earnings per share up by $0.01 or 0.7% versus $1.36 in 2012 as detailed in the attached Schedule 13
  • Adjusted diluted earnings per share of $1.30, down by $0.06 or 4.4% versus $1.36 in 2012
    • Excluding unfavorable currency of $0.07, adjusted diluted earnings per share up by $0.01 or 0.7% versus $1.36 in 2012 as detailed in the attached Schedule 12
  • Cigarette shipment volume of 228.9 billion units, down by 3.9%
    • Cigarette shipment volume decrease of 2.6%, excluding the Philippines
  • Reported net revenues, excluding excise taxes, of $7.9 billion, down by 2.5%
    • Excluding unfavorable currency, reported net revenues, excluding excise taxes, up by 0.5%
  • Reported operating companies income of $3.4 billion, down by 7.3%
    • Excluding unfavorable currency, reported operating companies income down by 3.3%
  • Adjusted operating companies income, reflecting the items detailed in the attached Schedule 11, of $3.4 billion, down by 7.4%
    • Excluding unfavorable currency, adjusted operating companies income down by 3.4%
  • Reported operating income of $3.3 billion, down by 7.5%
  • Repurchased 16.7 million shares of the company's common stock for $1.5 billion

Six Months Year-to-Date 2013

  • Reported diluted earnings per share of $2.58, down by $0.02 or 0.8% versus $2.60 in 2012
    • Excluding unfavorable currency of $0.14, reported diluted earnings per share up by $0.12 or 4.6% versus $2.60 in 2012 as detailed in the attached Schedule 17
  • Adjusted diluted earnings per share of $2.59, down by $0.02 or 0.8% versus $2.61 in 2012
    • Excluding unfavorable currency of $0.14, adjusted diluted earnings per share up by $0.12 or 4.6% versus $2.61 in 2012 as detailed in the attached Schedule 16
  • Cigarette shipment volume of 433.8 billion units, down by 5.1%
    • Cigarette shipment volume decrease of 2.4%, excluding the Philippines
  • Reported net revenues, excluding excise taxes, of $15.5 billion, down by 0.4%
    • Excluding unfavorable currency, reported net revenues, excluding excise taxes, up by 1.8%
  • Reported operating companies income of $6.9 billion, down by 4.0%
    • Excluding unfavorable currency, reported operating companies income down by 0.2%
  • Adjusted operating companies income, reflecting the items detailed in the attached Schedule 15, of $6.9 billion, down by 4.1%
    • Excluding unfavorable currency, adjusted operating companies income down by 0.3%
  • Reported operating income of $6.7 billion, down by 4.1%
  • Repurchased 33.4 million shares of the company's common stock for $3.0 billion

Full-Year 2013

  • PMI revises, for prevailing exchange rates only, its 2013 full-year reported diluted earnings per share forecast to be in a range of $5.43 to $5.53, versus $5.17 in 2012
    • Excluding an unfavorable currency impact, at prevailing exchange rates, of approximately $0.31 for the full-year 2013, reported diluted earnings per share are projected to increase by approximately 10-12% versus adjusted diluted earnings per share of $5.22 in 2012, as detailed in the attached Schedule 20.

Philip Morris International Inc. (NYSE / Euronext Paris: PM) today announced its 2013 second-quarter results.

"As expected, despite strong pricing and a robust share performance, our second-quarter results were primarily impacted by lower industry volume in several key markets, as well as the timing of inventory movements in Japan, higher costs, predominantly in Asia, and stiffer currency headwinds," said André Calantzopoulos, Chief Executive Officer.

"For the second half of the year, we expect volume/mix to improve, pricing to remain strong and our total cost variance, excluding currency, to be flat. While industry volume remains a challenge, our underlying business performance is such that we continue to expect to meet our mid to long-term currency-neutral adjusted diluted EPS growth rate target of 10-12% in 2013."

Conference Call

A conference call, hosted by Jacek Olczak, Chief Financial Officer, with members of the investor community and news media, will be webcast at 9:00 a.m., Eastern Time, on July 18, 2013. Access is available at www.pmi.com/webcasts.

Dividends and Share Repurchase Program

During the quarter, PMI declared a regular quarterly dividend of $0.85, representing an annualized rate of $3.40 per common share, and spent $1.5 billion to repurchase 16.7 million shares, as shown in the table below.

Current $18 Billion, Three-Year Program

   

Value

   

Shares

($ Mio.

000

August-December 2012 2,853 32,206
January-March 2013 1,500 16,685
April-June 2013

1,545

16,665

Total Under Program 5,898 65,556
 

Since May 2008, when PMI began its first share repurchase program, the company has spent an aggregate of $30.9 billion to repurchase 522.3 million shares at an average price of $59.15 per share, or 24.8% of the shares outstanding at the time of the spin-off in March 2008.

Acquisitions and Agreements

During the quarter, PMI announced that Grupo Carso, S.A.B. de C. V. ("Grupo Carso") will sell to PMI its 20% interest in PMI's Mexican tobacco business. The final purchase price, estimated to be approximately $700 million, will be determined by a pre-agreed formula. It is subject to a potential adjustment based on the actual performance of the Mexican tobacco business over the three-year period ending two fiscal years after the closing of the purchase. The transaction, as a result of which PMI will own 100% of its Mexican business, is expected to be completed by September 30, 2013, subject to the approval of the Mexican antitrust authority, and is projected to be marginally accretive to PMI's earnings per share as of the fourth quarter of 2013.

2013 Full-Year Forecast

PMI revises, for prevailing exchange rates only, its 2013 full-year reported diluted earnings per share forecast to be in a range of $5.43 to $5.53, versus $5.17 in 2012.

Excluding an unfavorable currency impact, at prevailing exchange rates, of approximately $0.31 for the full-year 2013, reported diluted earnings per share are projected to increase by approximately 10-12% versus adjusted diluted earnings per share of $5.22 in 2012, as detailed in the attached Schedule 20, unchanged from the constant-currency earnings per share forecast disclosed on May 14, 2013.

This forecast includes a one-year gross productivity and cost savings target for 2013 of approximately $300 million and a share repurchase target for 2013 of $6.0 billion.

This forecast excludes the impact of any potential future acquisitions, unanticipated asset impairment and exit cost charges, future changes in currency exchange rates and any unusual events.

The factors described in the Forward-Looking and Cautionary Statements section of this release represent continuing risks to these projections.

2013 SECOND-QUARTER CONSOLIDATED RESULTS

In this press release, "PMI" refers to Philip Morris International Inc. and its subsidiaries. References to total international cigarette market, defined as worldwide cigarette volume excluding the United States, total cigarette market, total market and market shares are PMI estimates 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. The term "net revenues" refers to operating revenues from the sale of our products, excluding excise taxes and net of sales and promotion incentives. Operating companies income, or "OCI," is defined as operating income before general corporate expenses and the amortization of intangibles. PMI's management evaluates business segment performance and allocates resources based on OCI. Management also reviews OCI, OCI margins 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, discrete tax items and unusual items), earnings before interest, taxes, depreciation, and amortization, or "EBITDA," free cash flow, defined as net cash provided by operating activities less capital expenditures, and net debt. PMI believes it is appropriate to disclose these measures as they improve comparability and help investors analyze business performance and trends. Non-GAAP measures used in this release should be considered neither in isolation nor as a substitute for the financial measures prepared in accordance with U.S. GAAP. Comparisons are to the same prior-year period unless otherwise stated. For a reconciliation of non-GAAP measures to corresponding GAAP measures, see the relevant schedules provided with this release.

NET REVENUES

 

   

PMI Net Revenues ($ Millions)

         

Second-Quarter

Six Months Year-To-Date

      Excl. Excl.

2013

2012

Change

Curr.

2013

2012

Change

Curr.

European Union $2,206 $2,285 (3.5)% (2.4)% $4,176 $4,338 (3.7)% (3.8)%
Eastern Europe, Middle East & Africa 2,181 2,151 1.4% 3.7% 4,224 3,986 6.0% 6.9%
Asia 2,692 2,855 (5.7)% (0.8)% 5,482 5,632 (2.7)% 2.0%
Latin America & Canada

838

829

1.1% 4.5%

1,619

1,612

0.4% 3.3%
Total PMI $7,917 $8,120 (2.5)% 0.5% $15,501 $15,568 (0.4)% 1.8%
 

Net revenues of $7.9 billion were down by 2.5%, including unfavorable currency of $243 million. Excluding currency, net revenues increased by 0.5%, driven by favorable pricing of $499 million across all Regions, partially offset by unfavorable volume/mix of $459 million.

OPERATING COMPANIES INCOME

 

   

PMI Operating Companies Income ($ Millions)

               

Second-Quarter

Six Months Year-To-Date

      Excl. Excl.

2013

2012

Change

Curr.

2013

2012

Change

Curr.

European Union $1,082 $1,117 (3.1)% (3.3)% $2,020 $2,147 (5.9)% (5.4)%
Eastern Europe, Middle East & Africa 945 948 (0.3)% 2.6% 1,880 1,758 6.9% 8.7%
Asia 1,128 1,364 (17.3)% (9.1)% 2,470 2,771 (10.9)% (3.1)%
Latin America & Canada

255

249

2.4% 5.6%

509

486

4.7% 7.2%
Total PMI $3,410 $3,678 (7.3)% (3.3)% $6,879 $7,162 (4.0)% (0.2)%
 

Reported operating companies income of $3.4 billion was down by 7.3%, including unfavorable currency of $146 million. Excluding currency, operating companies income decreased by 3.3%, due to unfavorable volume/mix of $386 million, primarily in Japan, the Philippines and Russia, and higher costs, principally related to manufacturing in Indonesia, brand support in the Philippines, and the annualization of business infrastructure investments in Russia, partly offset by favorable pricing.

Adjusted operating companies income decreased by 7.4% as shown in the table below and detailed in Schedule 11. Adjusted operating companies income, excluding unfavorable currency, decreased by 3.4%.

PMI Operating Companies Income ($ Millions)

                   

Second-Quarter

Six Months Year-To-Date

2013

2012

Change

2013

2012

Change

Reported OCI $3,410 $3,678 (7.3)% $6,879 $7,162 (4.0)%
Asset impairment & exit costs

(5)

(8)

(8)

(16)

Adjusted OCI $3,415 $3,686 (7.4)% $6,887 $7,178 (4.1)%
Adjusted OCI Margin* 43.1% 45.4% (2.3) p.p. 44.4% 46.1% (1.7) p.p.

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

Adjusted operating companies income margin, excluding unfavorable currency, decreased by 1.8 points to 43.6%, as detailed in Schedule 11, primarily reflecting unfavorable volume/mix and higher costs.

SHIPMENT VOLUME & MARKET SHARE

PMI Cigarette Shipment Volume (Million Units)

               

Second-Quarter

Six Months Year-To-Date

2013

2012

Change

2013

2012

Change

European Union 48,723 51,804 (5.9)% 91,690 99,593 (7.9)%
Eastern Europe, Middle East & Africa 76,298 79,156 (3.6)% 143,132 145,084 (1.3)%
Asia 80,588 83,472 (3.5)% 153,207 164,502 (6.9)%
Latin America & Canada

23,290

23,864

(2.4)%

45,817

48,207

(5.0)%
Total PMI 228,899 238,296 (3.9)% 433,846 457,386 (5.1)%
 

2013 Second-Quarter

PMI's cigarette shipment volume of 228.9 billion units decreased by 3.9%, or 9.4 billion units, due principally to a total industry volume decline, partially offset by a slight gain in market share excluding China. The decrease in PMI's cigarette shipment volume mainly reflected: in the EU, the unfavorable impact of excise tax-driven price increases, the weak economic and employment environment, the share growth of the other tobacco products (OTP) category, and the increased prevalence of illicit trade; in EEMA, the impact of tax-driven price increases and the reversal of favorable distributor inventory movements in Russia in the first quarter of 2013, and in Turkey, the renewed growth in illicit trade, partly offset by the Middle East and North Africa; in Asia, the unfavorable impact of the disruptive January 2013 excise tax increase in the Philippines and the timing of inventory movements in Japan, partly offset by Indonesia; in Latin America & Canada, a lower total market in Argentina and Brazil, partly offset by Mexico. Excluding the Philippines, PMI's cigarette shipment volume decreased by 2.6%.

Total cigarette shipments of Marlboro of 72.4 billion units decreased by 5.9%, due primarily to declines in: the EU, notably France, the Netherlands, Poland and the United Kingdom, partly offset by Germany and Italy; EEMA, primarily Russia and Ukraine, partly offset by the Middle East and North Africa; Asia, predominantly Japan and the Philippines; and Latin America & Canada, mainly Argentina and Brazil, partly offset by Mexico. Excluding the Philippines, total cigarette shipments of Marlboro decreased by 3.9%.

Total cigarette shipments of L&M of 25.1 billion units increased by 6.1%, driven notably by Egypt, partly offset by Algeria and Turkey. Total cigarette shipments of Bond Street of 11.6 billion units decreased by 8.9%, due predominantly to Russia and Ukraine. Total cigarette shipments of Philip Morris of 8.8 billion units decreased by 8.5%, due primarily to Italy and the Philippines. Total cigarette shipments of Parliament of 11.5 billion units increased by 4.0%, driven by Korea and Turkey. Total cigarette shipments of Chesterfield of 8.9 billion units decreased by 7.9%, due primarily to Russia and Ukraine, partly offset by Germany. Total cigarette shipments of Lark of 7.9 billion units decreased by 7.9%, due predominantly to Turkey.

Total shipment volume of OTP, in cigarette equivalent units, increased by 3.0%. Total shipment volume for cigarettes and OTP, in cigarette equivalent units, decreased by 3.7%.

PMI's market share increased in a number of key markets, including Algeria, Argentina, Belgium, Canada, Egypt, France, Germany, Indonesia, Italy, Korea, the Netherlands, Portugal, Saudi Arabia, Spain, Ukraine, and the United Kingdom.

EUROPEAN UNION REGION (EU)

2013 Second-Quarter

Net revenues of $2.2 billion decreased by 3.5%. Excluding unfavorable currency of $25 million, net revenues decreased by 2.4%, due to unfavorable volume/mix of $131 million, largely reflecting a lower total market, notably in France, Germany and Poland, partly offset by favorable pricing of $77 million, driven mainly by France and Spain.

Operating companies income of $1.1 billion decreased by 3.1%, including favorable currency of $2 million. Excluding currency, operating companies income decreased by 3.3%, principally reflecting unfavorable volume/mix of $114 million, partially offset by favorable pricing.

Adjusted operating companies income decreased by 3.1%, as shown in the table below and detailed on Schedule 11. Adjusted operating companies income, excluding favorable currency, decreased by 3.3%.

EU Operating Companies Income ($ Millions)

                   

Second-Quarter

Six Months Year-To-Date

2013

2012

Change

2013

2012

Change

Reported OCI $1,082 $1,117 (3.1)% $2,020 $2,147 (5.9)%
Asset impairment & exit costs

0

0

0

0

Adjusted OCI $1,082 $1,117 (3.1)% $2,020 $2,147 (5.9)%
Adjusted OCI Margin* 49.0% 48.9% 0.1 p.p. 48.4% 49.5% (1.1) p.p.

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

Adjusted operating companies income margin, excluding favorable currency, decreased by 0.5 points to 48.4%, as detailed on Schedule 11, primarily as a result of unfavorable volume/mix.

The total cigarette market in the EU of 121.6 billion units decreased by 8.0%, due primarily to tax-driven price increases, the unfavorable economic and employment environment, particularly in southern Europe, and the increased prevalence of illicit trade. The total OTP market in the EU of 41.0 billion cigarette equivalent units decreased by 0.4%, reflecting a lower total fine cut market, down by 0.8% to 35.7 billion cigarette equivalent units.

Although PMI's cigarette shipment volume of 48.7 billion units decreased by 5.9%, due principally to a lower total market across the Region, PMI's market share increased by 0.7 points to 39.3%. On a June year-to-date basis, PMI's market share increased by 0.7 points to 38.7%. While shipment volume of Marlboro of 23.9 billion units in the quarter decreased by 3.2%, mainly due to a lower total market, market share increased by 0.5 points to 19.4%. Despite a shipment volume decrease for L&M of 4.8% to 8.5 billion units, market share increased by 0.3 points to 6.9%. Shipment volume of Chesterfield of 4.9 billion units increased by 2.9% and market share increased by 0.2 points to 4.0%, driven by gains, notably in Austria, the Czech Republic, Portugal, Spain and the United Kingdom, partly offset by Germany. Although shipment volume of Philip Morris of 2.5 billion units decreased by 8.4%, market share increased by 0.3 points to 2.0%, with gains notably in France, Italy and Portugal.

PMI's shipments of OTP of 5.5 billion cigarette equivalent units increased by 3.2%, driven by higher share. PMI's OTP tota


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BANTOBACCONOW

Philip Morris International (PMI) proudly announced its 2nd quarter earnings Thursday morning. For most companies, a positive earnings report is a day to celebrate. For PMI, it should be a day of shame, because PMI is in the business of selling the only consumer product that, when used exactly as intended, kills.

Let's get some perspective on PMI's numbers for 2012:

- PMI's Share of the Global Market = 16.3%

- Total Number of Deaths from Tobacco in 2012 = 6 million

(more than 2x the population of Chicago, IL)

- PMI's 2012 Death Toll = 978,000

(more than the population of Austin, TX)

- PMI's 2012 Earnings = $14.2 billion

(more than 100x what the U.S. FDA spent on anti-tobacco campaigns in 2011)

- PMI's Earnings per Death = $14,519.00

PMI spends billions on marketing, influencing politics, and hiring lobbyists to maintain this death rate. ASH, on the other hand, relies on the generosity of its donors to fight PMI, to stand up for health, and to save lives.

By working around the world for strong tobacco control laws and to expose the tactics of the tobacco industry, ASH is helping to change the fate of 100s of millions of people. We have already seen much progres, but the fight is far from fair...and far from won.

PMI announced no anticipated global profit losses, but with your help, that can change!

Please make a contribution by clicking here today to support ASH's life-saving work.

Sincerely,

Kimberley Intino
ASH Deputy Director of Development
intinok@ash.org

July 23 2013 at 8:35 AM Report abuse rate up rate down Reply