01—Abstract
Summary
Summary of the 10-Q filed August 5, 2011. Cited figures are marked; the original filing is the authoritative source.
Philip Morris International Inc. (PM) reported solid financial results for the six months and three months ended June 30, 2011.
The company demonstrated significant revenue growth, driven by a combination of price increases and favorable currency movements, particularly in emerging markets. Net earnings attributable to PMI and diluted earnings per share (EPS) saw substantial year-over-year increases. The company also raised its full-year 2011 EPS forecast, signaling confidence in its ongoing performance.
Despite a challenging regulatory environment and increasing excise taxes globally, PM's strategic pricing and focus on key growth regions like Asia have contributed to its financial strength. Key operational highlights include strong performance in the Asia segment, bolstered by increased shipments to Japan and growth in Indonesia, as well as favorable currency impacts across various regions.
The company continues its share repurchase program, returning capital to shareholders. Management remains focused on navigating regulatory headwinds and managing operational costs while driving top-line growth.
02—Key points
Key Highlights
- Net revenues increased by 11.5% to $36.8 billion for the six months ended June 30, 2011, compared to $33.0 billion in the prior year period.
- Diluted EPS for the six months ended June 30, 2011, was $2.42, an increase of 22.8% compared to $1.97 in the prior year period.
- The company raised its full-year 2011 reported diluted EPS forecast to a range of $4.70 to $4.80.
- Asia segment showed robust growth with net revenues up 26.4% and operating companies income up 58.8% for the six months ended June 30, 2011, driven by strong pricing, favorable currency, and acquisitions.
- Favorable currency movements provided a significant boost to net revenues and operating income across multiple segments.
- Share repurchases continued, with $2.9 billion spent in the first six months of 2011 under the $12 billion share repurchase program.
- The company successfully managed excise taxes and regulatory challenges, with a focus on strategic pricing and cost management.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2011, Philip Morris International Inc. kept $0.12.
- Revenue$20.23B100.0%
- Cost of revenue−$14.80B73.2%
- Gross profit$5.43B26.8%
- Operating costs−$1.72B8.5%
- Operating income$3.71B18.3%
- Interest, other & tax−$1.30B6.4%
- Net income$2.41B11.9%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2011filed August 5, 2011Financial Statements
Q2 FY2011 against Q2 FY2010
| Line item | Q2 FY2011Q2 FY2010 | Change |
|---|---|---|
| Revenue | $20.23B$17.38B | +16.4% |
| Cost of Revenue | $2.84B$2.55B | +11.5% |
| Gross Profit | $5.43B$4.51B | +20.4% |
| Operating Income | $3.71B$2.91B | +27.7% |
| Net Income | $2.41B$1.98B | +21.5% |
| EPS (Basic) | $1.35$1.07 | +26.2% |
| EPS (Diluted) | $1.35$1.07 | +26.2% |
| Shares Outstanding (Basic) | 1.77B1.85B | −4.0% |
| Shares Outstanding (Diluted) | 1.77B1.85B | −4.2% |
05—Questions
Frequently Asked Questions
What was the main driver of Philip Morris International's revenue growth in the first half of 2011?
Philip Morris International's revenue growth was driven by a combination of price increases across its markets, favorable currency exchange rate movements (especially against the Australian dollar, Canadian dollar, Euro, Indonesian rupiah, Japanese yen, and Mexican peso), and the impact of acquisitions, particularly the business combination in the Philippines. The Asia segment, in particular, benefited from higher pricing and increased shipments to Japan due to competitor shortages.
How did the company's profitability change compared to the previous year?
Profitability improved significantly. Net earnings attributable to PMI for the six months ended June 30, 2011, increased by 17.4% to $4.3 billion, and diluted EPS rose by 22.8% to $2.42. This was primarily due to higher operating income, driven by price increases and favorable currency, which more than offset a higher effective tax rate and increased manufacturing and marketing costs.
What is the company's outlook for the remainder of 2011?
Philip Morris International raised its full-year 2011 reported diluted EPS forecast to a range of $4.70 to $4.80, representing an approximate 20% to 22.5% increase over 2010. This revised guidance reflects an improved business outlook, largely driven by performance in Japan, and favorable currency exchange rates.
Are there any significant legal or regulatory risks facing the company?
Yes, Philip Morris International operates in a highly regulated industry and faces ongoing legal and regulatory risks. These include potential increases in excise taxes, restrictions on marketing and advertising, requirements for larger health warnings on packaging, potential plain packaging legislation, and ongoing litigation related to tobacco products. The company actively monitors and engages with these evolving regulatory landscapes and legal challenges.
06—Continue