01—Abstract
Summary
Summary of the 10-Q filed August 2, 2013. Cited figures are marked; the original filing is the authoritative source.
Philip Morris International Inc. (PM) reported its second quarter and first half 2013 financial results, showing a slight decrease in net revenues and net earnings attributable to PMI compared to the same periods in the prior year.
For the six months ended June 30, 2013, net revenues were $39,010 milliona, a 2.5% increase from $38,059 million in 2012, while net earnings attributable to PMI were $4,249 million, a 5.1% decrease from $4,478 million in 2012. Diluted EPS for the six-month period decreased to $2.58 from $2.60 in the prior year. The company's performance was impacted by several factors, including unfavorable currency movements, higher interest expenses due to increased debt levels, and a decrease in cigarette shipment volume across most segments.
The Asia and European Union segments experienced notable declines in operating income, largely due to unfavorable volume/mix and currency effects. Despite these challenges, the company saw strong pricing power and implemented cost-saving measures, including a target of $300 millionb for gross productivity and cost savings in 2013. Share repurchases continued to be a significant capital allocation activity, with $3.0 billion in the first half of 2013.
02—Key points
Key Highlights
- Net revenues for the first six months of 2013 increased by 2.5% to $39,010 million, driven by price increases, though this was partially offset by unfavorable volume/mix and currency movements.
- Net earnings attributable to PMI for the six-month period decreased by 5.1% to $4,249 million, impacted by lower operating income and higher interest expenses.
- Diluted EPS for the first six months of 2013 was $2.58, a slight decrease from $2.60 in the prior year, primarily due to unfavorable currency impacts and higher interest expenses, partially offset by lower share counts and operational improvements.
- Cigarette shipment volume declined by 5.1% year-over-year for the first six months of 2013, influenced by industry-wide volume declines, tax-driven price increases, and economic pressures in key markets.
- The company continues to execute a significant share repurchase program, with $3.0 billion repurchased in the first half of 2013, contributing positively to EPS growth.
- Long-term debt increased to $21,559 million as of June 30, 2013, from $17,639 million at the end of 2012, reflecting new debt issuances.
- The company reiterated its 2013 full-year diluted EPS forecast to be in the range of $5.43 to $5.53, signaling confidence in future performance despite the near-term headwinds.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2013, Philip Morris International Inc. kept $0.10.
- Revenue$20.48B100.0%
- Cost of revenue−$15.27B74.5%
- Gross profit$5.22B25.5%
- Operating costs−$1.88B9.2%
- Operating income$3.34B16.3%
- Interest, other & tax−$1.21B5.9%
- Net income$2.12B10.4%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2013filed August 2, 2013Financial Statements
Q2 FY2013 against Q2 FY2012
| Line item | Q2 FY2013Q2 FY2012 | Change |
|---|---|---|
| Revenue | $20.48B$20.04B | +2.2% |
| Cost of Revenue | $2.70B$2.67B | +1.3% |
| Gross Profit | $5.22B$5.45B | −4.4% |
| Operating Income | $3.34B$3.60B | −7.4% |
| Net Income | $2.12B$2.32B | −8.3% |
| EPS (Basic) | $1.30$1.36 | −4.4% |
| EPS (Diluted) | $1.30$1.36 | −4.4% |
| Shares Outstanding (Basic) | 1.63B1.70B | −4.1% |
05—Questions
Frequently Asked Questions
What were the primary drivers of the net revenue increase in the first half of 2013?
The increase in net revenues for the first six months of 2013 was primarily driven by price increases across various markets, which helped to offset unfavorable volume/mix and negative currency impacts.
Why did net earnings attributable to PMI decrease in the first half of 2013?
Net earnings attributable to PMI decreased due to lower operating income, largely influenced by unfavorable volume/mix and currency headwinds, as well as higher interest expenses resulting from increased debt levels.
How did currency fluctuations impact the company's financial results?
Unfavorable currency movements had a negative impact on net revenues and operating income. Key currencies that negatively affected results included the Argentine peso, Indonesian rupiah, Japanese yen, and Russian ruble, partially offset by strength in the Mexican peso and Philippine peso.
What is the company's outlook for the full year 2013?
Philip Morris International reaffirmed its 2013 full-year reported diluted EPS forecast to be in the range of $5.43 to $5.53. The company anticipates that the bulk of its earnings per share growth will occur in the second half of the year, with a particularly strong fourth quarter expected.
06—Continue