Philip Morris International Inc. Quarterly Report for Q1 Ended Mar 31, 2015

Summary

Philip Morris International Inc. (PM) reported a decrease in net revenues for the first quarter of 2015 compared to the same period in 2014, largely driven by unfavorable currency exchange rates, particularly the strengthening U.S. dollar against major currencies like the Euro. Despite a slight increase in cigarette shipment volume, net revenues fell by 2.4% to $17.35 billion. Diluted earnings per share (EPS) also saw a slight decline to $1.16 from $1.18, impacted by currency headwinds, changes in tax rates, and higher interest expenses. However, the company highlighted operational improvements and positive pricing actions across its segments, which partially offset these negative factors. Key segments, including the European Union, Eastern Europe, Middle East & Africa (EEMA), Asia, and Latin America & Canada, experienced varied performance. While pricing increases and favorable volume/mix contributed positively in some regions, adverse currency movements and higher operating costs presented challenges. The company also provided an updated 2015 full-year diluted EPS forecast, projecting a range of $4.32 to $4.42, indicating an expected improvement excluding currency impacts, driven by operational performance and strategic initiatives like the deployment of its Reduced-Risk Product, iQOS.

Key Highlights

• 1Net revenues decreased by 2.4% to $17.35 billion in Q1 2015 compared to Q1 2014, primarily due to unfavorable currency impacts from a strengthening U.S. dollar.
• 2Diluted earnings per share (EPS) declined slightly to $1.16 in Q1 2015 from $1.18 in Q1 2014, influenced by currency headwinds, tax rate changes, and increased interest expense.
• 3Total cigarette shipment volume increased by 1.4% to 198.8 billion units, driven by growth in the European Union and EEMA regions.
• 4The company increased its full-year 2015 diluted EPS forecast to a range of $4.32-$4.42, signaling confidence in operational improvements and strategic initiatives.
• 5Investments in Reduced-Risk Products (RRPs), such as iQOS, are a key strategic focus, with expanded commercialization plans in Japan and Italy.
• 6The company experienced a net cash used in operating activities of $375 million in Q1 2015, a decrease from $715 million provided in Q1 2014, largely due to unfavorable currency movements and increased working capital requirements.
• 7PMI's long-term debt stood at $25.57 billion as of March 31, 2015, with short-term borrowings significantly increasing to $3.38 billion from $1.21 billion at year-end 2014.

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