Philip Morris International Inc. Quarterly Report for Q1 Ended Mar 31, 2009

Summary

Philip Morris International Inc. (PM) reported a decrease in net revenues and net earnings attributable to PMI for the first quarter of 2009 compared to the same period in 2008. Net revenues declined by 7.4% to $13.3 billion, and net earnings attributable to PMI fell by 11.8% to $1.5 billion. This decline was primarily attributed to unfavorable currency exchange rates, which significantly impacted reported revenues and operating income, as well as higher interest expenses due to increased debt levels. Despite the top-line and bottom-line decrease, the company maintained its diluted EPS forecast for the full year, indicating confidence in its operational performance. Despite the overall revenue decline, the company highlighted operational improvements in certain segments, particularly in Asia and Eastern Europe, Middle East & Africa, driven by price increases and volume/mix improvements. The company also completed a significant acquisition in Canada (Rothmans) in late 2008, which contributed to revenue growth in the Latin America & Canada segment, albeit offset by unfavorable currency. The balance sheet shows a decrease in total assets and total liabilities, with a notable increase in cash and cash equivalents. The company continued its share repurchase program, demonstrating a commitment to returning value to shareholders.

Key Highlights

• 1Net revenues decreased by 7.4% to $13.3 billion in Q1 2009 compared to Q1 2008, primarily driven by unfavorable currency movements (-$697 million excluding excise taxes).
• 2Net earnings attributable to PMI decreased by 11.8% to $1.5 billion, or $0.74 per diluted share, down from $1.67 billion or $0.79 per diluted share in Q1 2008.
• 3The company reaffirmed its full-year 2009 diluted EPS forecast of $2.85 to $3.00, excluding currency impacts, projecting a 10%-14% increase.
• 4Total cigarette volume remained flat year-over-year at 203.4 billion units, with gains in Asia and Latin America & Canada offset by declines in the European Union.
• 5The balance sheet shows a reduction in total assets from $33.0 billion to $30.7 billion and total liabilities from $25.1 billion to $24.6 billion, while cash and cash equivalents increased significantly from $1.5 billion to $2.4 billion.
• 6The company repurchased $1.3 billion of its common stock in Q1 2009 as part of its ongoing $13.0 billion share repurchase program.
• 7Long-term debt increased to $13.1 billion from $11.4 billion, reflecting new debt issuances in March 2009, mainly in Euro and Swiss Franc notes.

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