10-QPeriod: Q2 FY2013

Philip Morris International Inc. Quarterly Report for Q2 Ended Jun 30, 2013

Filed August 2, 2013For Securities:PM

Summary

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 million, 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 million 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.

Financial Highlights

51 data points
Beta

Revenue

$20.48B

25.5% Gross Margin

Net Income

$2.12B

10.4% Net Margin

EPS (Diluted)

$1.30

Total Assets

$37.14B

Cash & Equivalents

$3.59B

Free Cash Flow

$2.86B

Financial Statements
Beta
Revenue$20.48B
Cost of Revenue$2.70B
Gross Profit$5.22B
Operating Income$3.34B
Net Income$2.12B
EPS (Basic)$1.30
EPS (Diluted)$1.30
Shares Outstanding (Basic)1.63B

Key Highlights

  • 1Net 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.
  • 2Net 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.
  • 3Diluted 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.
  • 4Cigarette 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.
  • 5The 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.
  • 6Long-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.
  • 7The 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.

Frequently Asked Questions

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.

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.

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.

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.