10-QPeriod: Q3 FY2015

Philip Morris International Inc. Quarterly Report for Q3 Ended Sep 30, 2015

Filed October 30, 2015For Securities:PM

Summary

Philip Morris International Inc. (PM) reported its third-quarter and nine-month results for the period ending September 29, 2015. For the nine months, net revenues decreased by 7.7% to $55.5 billion, impacted by unfavorable currency movements and a slight decline in cigarette shipment volume. Operating income also saw a decrease of 4.9% to $8.7 billion, affected by currency headwinds, lower volume/mix, and increased operating expenses, partially offset by price increases and the non-recurrence of prior-year asset impairment and exit costs. For the three months, net revenues fell by 9.0% to $19.4 billion, also impacted by currency and volume/mix declines, though price increases provided some offset. Operating income decreased by 11.5%. The company revised its full-year 2015 diluted EPS forecast to $4.35-$4.40, reflecting improved business outlook and currency impacts. Despite these challenges, the company's strong pricing power and focus on operating efficiencies supported its financial performance, and it maintained a significant market share across its diverse geographic segments.

Financial Highlights

51 data points
Beta

Revenue

$19.42B

23.4% Gross Margin

Net Income

$1.94B

10.0% Net Margin

EPS (Diluted)

$1.25

Total Assets

$32.01B

Cash & Equivalents

$2.39B

Free Cash Flow

$2.47B

Financial Statements
Beta
Revenue$19.42B
Cost of Revenue$2.38B
Gross Profit$4.54B
Operating Income$2.96B
Net Income$1.94B
EPS (Basic)$1.25
EPS (Diluted)$1.25
Shares Outstanding (Basic)1.55B

Key Highlights

  • 1Net revenues for the nine months ended September 30, 2015, decreased by 7.7% to $55.5 billion, primarily due to unfavorable currency impacts and a slight decrease in cigarette shipment volume.
  • 2Operating income for the nine months decreased by 4.9% to $8.7 billion, impacted by currency headwinds, lower volume/mix, and higher operating expenses.
  • 3Diluted EPS for the nine months was $3.62, a decrease from $3.73 in the prior year, with currency movements being a significant factor.
  • 4The company revised its full-year 2015 reported diluted EPS forecast to a range of $4.35 to $4.40.
  • 5PMI's market share increased in several key markets across its segments, demonstrating brand strength despite overall volume pressures.
  • 6Significant investments were made in Reduced-Risk Products (RRPs), with the iQOS system undergoing commercialization efforts in various markets.
  • 7The company maintained strong liquidity with $2.4 billion in cash and cash equivalents and fully available committed credit facilities totaling $8.0 billion at the end of the quarter.

Frequently Asked Questions

The primary driver of the revenue decline was unfavorable currency movements, which reduced net revenues by $3.6 billion, coupled with an unfavorable volume/mix that decreased revenues by $150 million. Price increases provided a partial offset of $1.6 billion.

PMI continued to invest in RRPs, with the iQOS system undergoing commercialization. The company reported substantial reductions in harmful constituent biomarkers in consumers who switched to iQOS and was proceeding with product launches and planned expansions in several international markets.

Philip Morris International revised its full-year 2015 reported diluted EPS forecast to be in the range of $4.35 to $4.40, at prevailing exchange rates at that time. This reflects an improved business outlook and currency impacts.

The company maintained a strong liquidity position with $2.4 billion in cash and cash equivalents. It had fully available committed credit facilities totaling $8.0 billion and reported no commercial paper outstanding. Total debt was $28.9 billion at September 30, 2015.