01—Abstract
Summary
Summary of the 10-Q filed May 2, 2014. Cited figures are marked; the original filing is the authoritative source.
Philip Morris International Inc. (PM) reported its first-quarter 2014 financial results, highlighting a decrease in net revenues and diluted EPS compared to the same period in 2013.
Net revenues declined by 4.0% to $17.78 billiona, primarily driven by unfavorable currency movements and lower shipment volumes across most segments, partially offset by price increases. Diluted EPS fell by 7.8% to $1.18, impacted by currency headwinds, higher interest expenses, and asset impairment and exit costs related to factory closures in Australia and a proposed closure in the Netherlands. The company revised its full-year 2014 diluted EPS forecast to a range of $5.09 to $5.19, anticipating growth of 6-8% compared to adjusted 2013 EPS when excluding unfavorable currency impacts and restructuring charges.
Despite the top-line and bottom-line declines, PMI demonstrated resilience in several key markets with market share gains in various European and other international regions. The company continues to execute its strategic priorities, including significant share repurchase programs and dividend payments, reflecting confidence in its long-term performance. Management is also advancing its reduced-risk product (RRP) strategy, with planned pilot tests and a national launch in 2015, signaling a commitment to future growth avenues beyond traditional combustible products.
02—Key points
Key Highlights
- Net revenues decreased by 4.0% to $17.78 billion, primarily due to unfavorable currency impacts ($1.3 billion) and lower shipment volumes (-4.4%).
- Diluted Earnings Per Share (EPS) decreased by 7.8% to $1.18, impacted by currency headwinds, higher interest expenses, and asset impairment and exit costs.
- The company announced a revised full-year 2014 diluted EPS forecast of $5.09 to $5.19, projecting 6-8% growth on an adjusted basis excluding currency impacts and restructuring charges.
- Despite an overall volume decline, Philip Morris International achieved market share gains in several key markets across its European segments and other regions.
- Total cash used in financing activities significantly increased in Q1 2014 to $805 million, primarily due to share repurchases ($1.2 billion) and dividend payments ($1.5 billion).
- The company is actively investing in reduced-risk products (RRPs), with plans for pilot city tests in the second half of 2014 and a national launch in 2015, alongside a new manufacturing facility in Italy.
- Total debt increased to $29.7 billion as of March 31, 2014, with the company issuing new Euro notes in the first quarter.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2014, Philip Morris International Inc. kept $0.11.
- Revenue$17.78B100.0%
- Cost of revenue−$13.24B74.4%
- Gross profit$4.54B25.6%
- Operating costs−$1.59B9.0%
- Operating income$2.95B16.6%
- Interest, other & tax−$1.08B6.1%
- Net income$1.88B10.5%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2014filed May 2, 2014Financial Statements
Q1 FY2014 against Q1 FY2013
| Line item | Q1 FY2014Q1 FY2013 | Change |
|---|---|---|
| Revenue | $17.78B$18.53B | −4.0% |
| Cost of Revenue | $2.37B$2.49B | −4.6% |
| Gross Profit | $4.54B$5.09B | −10.8% |
| Operating Income | $2.95B$3.39B | −13.0% |
| Net Income | $1.88B$2.13B | −11.8% |
| EPS (Basic) | $1.18$1.28 | −7.8% |
| EPS (Diluted) | $1.18$1.28 | −7.8% |
| Shares Outstanding (Basic) | 1.58B1.65B | −3.8% |
05—Questions
Frequently Asked Questions
What was the primary driver of the decrease in net revenues?
The primary driver of the decrease in net revenues was unfavorable currency movements, which reduced net revenues by $1.3 billion, and a decline in shipment volumes across most segments, totaling a 4.4% decrease. These factors were partially offset by price increases.
What is the company's outlook for full-year 2014?
Philip Morris International revised its full-year 2014 diluted EPS forecast to be in the range of $5.09 to $5.19. Excluding unfavorable currency impacts and estimated restructuring charges, the company projects an increase of approximately 6% to 8% in adjusted diluted EPS compared to 2013.
How is the company addressing the evolving regulatory landscape and shifting consumer preferences?
The company is strategically investing in reduced-risk products (RRPs) with a focus on developing and commercializing innovative tobacco and nicotine-containing products that have the potential to reduce harm compared to cigarettes. They plan pilot tests for these products in late 2014 and a national launch in 2015. The company also continues to monitor and adapt to evolving regulations across its global markets.
What was the impact of currency fluctuations on the company's results?
Currency movements had a significant negative impact on the company's results. For the first quarter of 2014, unfavorable currency movements decreased net revenues by $1.3 billion and negatively impacted diluted EPS by $0.16 per share. Key currencies contributing to this impact included the Argentine peso, Australian dollar, Indonesian rupiah, Japanese yen, Russian ruble, Swiss franc, and Turkish lira.
06—Continue