01—Abstract
Summary
Summary of the 10-Q filed October 30, 2015. Cited figures are marked; the original filing is the authoritative source.
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 billiona, 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 $4.35b-$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.
02—Key points
Key Highlights
- Net 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.
- Operating income for the nine months decreased by 4.9% to $8.7 billion, impacted by currency headwinds, lower volume/mix, and higher operating expenses.
- Diluted EPS for the nine months was $3.62, a decrease from $3.73 in the prior year, with currency movements being a significant factor.
- The company revised its full-year 2015 reported diluted EPS forecast to a range of $4.35 to $4.40.
- PMI's market share increased in several key markets across its segments, demonstrating brand strength despite overall volume pressures.
- Significant investments were made in Reduced-Risk Products (RRPs), with the iQOS system undergoing commercialization efforts in various markets.
- The 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.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2015, Philip Morris International Inc. kept $0.10.
- Revenue$19.42B100.0%
- Cost of revenue−$14.88B76.6%
- Gross profit$4.54B23.4%
- Operating costs−$1.58B8.2%
- Operating income$2.96B15.2%
- Interest, other & tax−$1.02B5.2%
- Net income$1.94B10.0%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2015filed October 30, 2015Financial Statements
Q3 FY2015 against Q3 FY2014
| Line item | Q3 FY2015Q3 FY2014 | Change |
|---|---|---|
| Revenue | $19.42B$21.34B | −9.0% |
| Cost of Revenue | $2.38B$2.73B | −12.8% |
| Gross Profit | $4.54B$5.12B | −11.3% |
| Operating Income | $2.96B$3.35B | −11.5% |
| Net Income | $1.94B$2.15B | −9.9% |
| EPS (Basic) | $1.25$1.38 | −9.4% |
| EPS (Diluted) | $1.25$1.38 | −9.4% |
| Shares Outstanding (Basic) | 1.55B1.56B | −0.7% |
05—Questions
Frequently Asked Questions
What was the primary driver of the revenue decline in the nine months ended September 30, 2015?
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.
How did the company's investment in Reduced-Risk Products (RRPs) progress during this period?
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.
What is the company's outlook for full-year 2015 earnings per share?
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.
How did the company manage its debt and liquidity?
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.
06—Continue