01—Abstract
Summary
Summary of the 10-K filed February 11, 2022. Cited figures are marked; the original filing is the authoritative source.
Philip Morris International Inc. (PM) reported strong financial performance in 2021, with net revenues increasing by 9.4% to $31.4 billiona.
This growth was primarily driven by a significant increase in reduced-risk product (RRP) net revenues, up 33.5% to $9.1 billionb, led by the continued strength of the IQOS brand. Despite a decline in cigarette shipment volumes globally, the company's strategic focus on transitioning to a smoke-free future is evident in the robust performance of its RRP portfolio. The company also announced its ambition to expand into wellness and healthcare, highlighted by strategic acquisitions of Vectura Group PLC and Fertin Pharma A/S.
While facing ongoing regulatory challenges and the persistent decline in cigarette consumption, PM's ability to drive RRP adoption and its diversified product strategy position it for continued growth in the evolving tobacco and nicotine market. The company remains committed to returning capital to shareholders, evidenced by significant dividend payments and ongoing share repurchases.
02—Key points
Key Highlights
- Net revenues increased by 9.4% to $31.4 billion in 2021, primarily driven by the growth in reduced-risk products (RRPs).
- Reduced-Risk Product (RRP) net revenues surged by 33.5% to $9.1 billion, demonstrating strong consumer adoption and market penetration.
- Heated Tobacco Unit (HTU) shipment volume increased by 24.8% to 95.0 billion units, with significant growth in the European Union and East Asia & Australia regions.
- The company announced a strategic expansion into wellness and healthcare with key acquisitions, signaling a long-term diversification strategy.
- Diluted Earnings Per Share (EPS) grew by 13.0% to $5.83, indicating improved profitability and operational efficiency.
- Despite an import ban on IQOS Platform 1 products in the U.S. due to an ITC ruling, the company is pursuing contingency plans including domestic production, aiming to resume U.S. supply in the first half of 2023.
- PMI returned approximately $11.9 billion to shareholders through dividends ($7.6 billion) and share repurchases ($0.785 billion) in 2021.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, Philip Morris International Inc. kept $0.29.
- Revenue$31.41B100.0%
- Cost of revenue−$10.03B31.9%
- Gross profit$21.38B68.1%
- Operating costs−$8.40B26.7%
- Operating income$12.97B41.3%
- Interest, other & tax−$3.87B12.3%
- Net income$9.11B29.0%
Where FY2021 revenue went
$31.41B- Cost of revenue: $10.03B, 32% of revenue
- Net income: $9.11B, 29% of revenue
- Other operating costs: $7.78B, 25% of revenue
- Interest, other & tax: $3.87B, 12% of revenue
- R&D: $617.0M, 2.0% of revenue
Kept 29% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 11, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $31.41B$28.69B | +9.4% |
| Cost of Revenue | $10.03B$9.57B | +4.8% |
| Gross Profit | $21.38B$19.13B | +11.8% |
| R&D Expenses | $617.00M$495.00M | +24.6% |
| Operating Income | $12.97B$11.67B | +11.2% |
| Interest Expense | $737.00M$728.00M | +1.2% |
| Net Income | $9.11B$8.06B | +13.1% |
| EPS (Basic) | $5.83$5.16 | +13.0% |
| EPS (Diluted) | $5.83$5.16 | +13.0% |
| Shares Outstanding (Basic) | 1.56B1.56B | +0.1% |
| Shares Outstanding (Diluted) | 1.56B1.56B | +0.1% |
05—Questions
Frequently Asked Questions
What was the primary driver of Philip Morris International's revenue growth in 2021?
The primary driver of Philip Morris International's (PM) revenue growth in 2021 was the significant increase in net revenues from Reduced-Risk Products (RRPs), which grew by 33.5% to $9.1 billion. This growth was mainly attributed to the strong performance of the IQOS brand and its associated heated tobacco units.
How is Philip Morris International diversifying its business beyond traditional tobacco products?
Philip Morris International is actively diversifying its business by expanding into the wellness and healthcare sectors. This strategy was underscored by significant acquisitions in 2021, including Vectura Group PLC (an inhaled therapeutics company) and Fertin Pharma A/S (a developer and manufacturer of oral and intra-oral delivery systems).
What is the current status of IQOS sales in the United States?
Currently, IQOS products are not available for sale in the United States due to an importation ban and cease-and-desist orders imposed by the U.S. International Trade Commission (ITC) in late 2021. PMI has appealed these decisions and is developing contingency plans, including domestic production, with the aim of resuming U.S. supply in the first half of 2023.
What is Philip Morris International's strategy for managing the decline in cigarette volumes?
Philip Morris International's strategy to address the decline in cigarette volumes is centered on its transformation towards a 'smoke-free future.' The company is strategically reallocating resources from cigarettes to RRPs, streamlining its cigarette portfolio, and focusing on driving the adoption of its RRPs among adult smokers who would otherwise continue to smoke.
06—Continue