10-KPeriod: FY2021

Philip Morris International Inc. Annual Report, Year Ended Dec 31, 2021

Filed February 11, 2022For Securities:PM

Summary

Philip Morris International Inc. (PM) reported strong financial performance in 2021, with net revenues increasing by 9.4% to $31.4 billion. This growth was primarily driven by a significant increase in reduced-risk product (RRP) net revenues, up 33.5% to $9.1 billion, 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.

Financial Highlights

51 data points
Beta

Revenue

$31.41B

68.1% Gross Margin

Net Income

$9.11B

29.0% Net Margin

EPS (Diluted)

$5.83

Total Assets

$41.29B

Cash & Equivalents

$4.50B

Free Cash Flow

$11.22B

Financial Statements
Beta
Revenue$31.41B
Cost of Revenue$10.03B
Gross Profit$21.38B
R&D Expenses$617.00M
Operating Income$12.97B
Interest Expense$737.00M
Net Income$9.11B
EPS (Basic)$5.83
EPS (Diluted)$5.83
Shares Outstanding (Basic)1.56B
Shares Outstanding (Diluted)1.56B

Key Highlights

  • 1Net revenues increased by 9.4% to $31.4 billion in 2021, primarily driven by the growth in reduced-risk products (RRPs).
  • 2Reduced-Risk Product (RRP) net revenues surged by 33.5% to $9.1 billion, demonstrating strong consumer adoption and market penetration.
  • 3Heated 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.
  • 4The company announced a strategic expansion into wellness and healthcare with key acquisitions, signaling a long-term diversification strategy.
  • 5Diluted Earnings Per Share (EPS) grew by 13.0% to $5.83, indicating improved profitability and operational efficiency.
  • 6Despite 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.
  • 7PMI returned approximately $11.9 billion to shareholders through dividends ($7.6 billion) and share repurchases ($0.785 billion) in 2021.

Frequently Asked Questions

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.

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).

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.

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.