Philip Morris International Inc. Quarterly Report for Q2 Ended Jun 30, 2016

Summary

Philip Morris International Inc. (PM) reported its financial results for the second quarter and the first half of 2016. For the first half of the year, net revenues were $35.83 billion, a slight decrease from $36.12 billion in the prior year period, primarily driven by unfavorable currency movements impacting revenues by $994 million, partially offset by price increases of $616 million. Diluted earnings per share (EPS) for the first half stood at $2.13, down from $2.37 in the prior year, largely due to the negative impact of currency fluctuations. The company's operating income also saw a decline, primarily attributed to currency headwinds and unfavorable volume/mix. Despite the overall decline in EPS and operating income, driven largely by currency impacts, the company saw positive developments in certain areas. Pricing actions across various segments provided a significant offset to volume and currency pressures. Furthermore, the company is actively investing in Reduced-Risk Products (RRPs), with total shipment volume of HeatSticks showing a substantial increase. The company maintained a strong liquidity position with significant committed credit facilities and no outstanding commercial paper. The company also reaffirmed its full-year 2016 reported diluted EPS forecast, excluding currency impacts, projecting a 10-12% increase.

Key Highlights

• 1Net revenues for the first six months of 2016 were $35.83 billion, a decrease of 0.8% compared to the prior year, primarily due to unfavorable currency impacts.
• 2Diluted earnings per share (EPS) for the first six months of 2016 decreased to $2.13 from $2.37 in the prior year, largely driven by a significant unfavorable currency impact of $0.28.
• 3Operating income for the first six months of 2016 decreased by 9.3% to $5.23 billion, primarily due to unfavorable currency movements, unfavorable volume/mix, and higher marketing, administration, and research costs.
• 4Price increases across various segments provided a significant offset to unfavorable currency and volume/mix impacts, contributing positively to net revenues and operating income.
• 5The company's cigarette shipment volume decreased by 3.2% for the first six months of 2016, with declines across most segments, particularly in EEMA and Asia.
• 6Shipment volume of HeatSticks (an RRP) saw a significant increase, reaching 1.6 billion units in the first six months of 2016, up from 56 million units in the prior year period.
• 7The company maintained strong liquidity with $8.0 billion in committed credit facilities and no commercial paper outstanding as of June 30, 2016.

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