01—Abstract
Summary
Summary of the 10-Q filed November 5, 2010. Cited figures are marked; the original filing is the authoritative source.
Philip Morris International Inc. (PM) reported strong financial results for the nine months and third quarter ended September 30, 2010.
The company saw a significant increase in net revenues and net earnings attributable to PMI, driven by a combination of higher pricing, favorable currency movements, and strategic acquisitions. Specifically, the nine-month period showed a 10.7% increase in net revenues to $49.9 billiona and a 14.3% increase in net earnings attributable to PMI to $5.5 billion, resulting in diluted EPS of $2.96, a 21.3% increase year-over-year. The company's operational performance was bolstered by growth across its segments, particularly in Asia due to the Philippines business combination and in Eastern Europe, Middle East & Africa driven by higher pricing.
PM also highlighted its continued share repurchase program, returning significant capital to shareholders. While facing ongoing challenges related to excise taxes, regulatory pressures, and litigation, the company raised its full-year 2010 diluted EPS forecast, indicating confidence in its operational execution and market positioning.
02—Key points
Key Highlights
- Net revenues increased by 10.7% to $49.9 billion for the nine months ended September 30, 2010, compared to the prior year period.
- Net earnings attributable to PMI rose by 14.3% to $5.5 billion for the nine months ended September 30, 2010, with diluted EPS increasing by 21.3% to $2.96.
- The company experienced strong volume growth, particularly in Asia, boosted by the Philippines business combination, and in Eastern Europe, Middle East & Africa.
- PMI repurchased approximately 78.5 million shares of common stock for $3.9 billion during the first nine months of 2010.
- The company raised its full-year 2010 diluted EPS forecast to a range of $3.90 to $3.95.
- Favorable currency movements contributed significantly to revenue and earnings growth, particularly from currencies like the Australian dollar, Canadian dollar, and Russian ruble.
- The European Union segment faced challenges with declining volume and market share in key markets like Germany and Greece, despite overall price increases.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2010, Philip Morris International Inc. kept $0.11.
- Revenue$16.94B100.0%
- Cost of revenue−$12.61B74.5%
- Gross profit$4.32B25.5%
- Operating costs−$1.49B8.8%
- Operating income$2.84B16.7%
- Interest, other & tax−$1.01B6.0%
- Net income$1.82B10.8%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2010filed November 5, 2010Financial Statements
Q3 FY2010 against Q3 FY2009
| Line item | Q3 FY2010Q3 FY2009 | Change |
|---|---|---|
| Revenue | $16.94B$16.57B | +2.2% |
| Cost of Revenue | $2.29B$2.32B | −1.3% |
| Gross Profit | $4.32B$4.27B | +1.3% |
| Operating Income | $2.84B$2.85B | −0.5% |
| Net Income | $1.82B$1.80B | +1.3% |
| EPS (Basic) | $0.99$0.93 | +6.5% |
| EPS (Diluted) | $0.99$0.93 | +6.5% |
| Shares Outstanding (Basic) | 1.83B1.93B | −5.1% |
| Shares Outstanding (Diluted) | 1.83B1.93B | −5.4% |
05—Questions
Frequently Asked Questions
What was the primary driver of Philip Morris International's revenue growth in the nine months ended September 30, 2010?
Philip Morris International's revenue growth was driven by a combination of net price increases ($1.1 billion), favorable currency movements ($734 million), and the impact of acquisitions ($460 million), partially offset by lower volume/mix ($423 million). Favorable currency movements, in particular, significantly boosted reported revenues.
How is the company managing shareholder returns?
Philip Morris International is actively returning capital to shareholders through its share repurchase program and dividend payments. For the nine months ended September 30, 2010, the company repurchased approximately 78.5 million shares for $3.9 billion and paid $3.3 billion in dividends. The company also announced a new $12 billion share repurchase program and increased its quarterly dividend.
What are the main challenges facing Philip Morris International, as highlighted in the filing?
Key challenges include increasing excise taxes globally, evolving government regulations impacting tobacco products (such as advertising restrictions, plain packaging, and ingredient bans), intense competition, fluctuating currency exchange rates, ongoing litigation, and the impact of economic downturns on consumer spending and brand preferences. The company also faces risks from illicit trade, including counterfeiting and contraband.
06—Continue