Summary
Philip Morris International Inc. (PMI) for the year ending December 31, 2014, demonstrated resilience despite facing significant currency headwinds and restructuring charges. While net revenues remained relatively flat year-over-year, a substantial decline in diluted EPS was primarily driven by unfavorable currency movements, particularly impacting the Argentine peso, Australian dollar, Canadian dollar, Euro, Indonesian rupiah, Japanese yen, Kazakhstan tenge, Russian ruble, Turkish lira, and the Ukraine hryvnia. The company also incurred significant asset impairment and exit costs related to factory closures and restructuring initiatives. Despite these challenges, PMI continued to execute its pricing strategies, which helped offset some of the negative impacts on operating income. The company also made strategic acquisitions, including Nicocigs Limited, to expand its presence in the e-vapor market. Looking ahead, PMI provided guidance for 2015, forecasting a decline in reported diluted EPS, largely due to continued currency pressures. However, the company emphasized its focus on innovation, particularly with its reduced-risk product (RRP) portfolio, including iQOS, signaling a strategic shift towards developing and commercializing products with the potential to reduce individual risk and population harm.
Financial Highlights
53 data points| Revenue | $80.11B |
| Cost of Revenue | $10.44B |
| Gross Profit | $19.33B |
| R&D Expenses | $433.00M |
| Operating Income | $11.70B |
| Interest Expense | $1.17B |
| Net Income | $7.49B |
| EPS (Basic) | $4.76 |
| EPS (Diluted) | $4.76 |
| Shares Outstanding (Basic) | 1.57B |
Key Highlights
- 1Net revenues were largely flat at $80.1 billion in 2014 compared to $80.0 billion in 2013, but excluding excise taxes, net revenues decreased by 4.6% to $29.8 billion due to unfavorable currency movements and volume/mix, partially offset by price increases.
- 2Diluted earnings per share (EPS) decreased by 9.5% to $4.76 in 2014 from $5.26 in 2013, significantly impacted by unfavorable currency movements (which reduced EPS by $0.80) and asset impairment/exit costs ($0.26 per share).
- 3The company recorded pre-tax asset impairment and exit costs of $535 million in 2014, primarily related to factory closures in the Netherlands, Australia, and Canada, and restructuring of its U.S. leaf purchasing model.
- 4Total cigarette shipment volume decreased by 2.8% in 2014, with notable declines in the EEMA and Asia regions, although market share increased or remained flat in several key markets.
- 5PMI acquired Nicocigs Limited, a UK-based e-vapor company, for $103 million plus contingent payments, as part of its strategy to develop reduced-risk products (RRPs).
- 6Despite a challenging operating environment, PMI continued to return capital to shareholders, with dividends declared per share increasing to $3.88 in 2014 from $3.58 in 2013.
- 7The company is actively developing a portfolio of reduced-risk products (RRPs), including the iQOS heated tobacco product, which was launched in pilot cities in Japan and Italy in late 2014.