10-QPeriod: Q2 FY2017

Philip Morris International Inc. Quarterly Report for Q2 Ended Jun 30, 2017

Filed July 27, 2017For Securities:PM

Summary

Philip Morris International Inc. (PM) reported its second-quarter 2017 financial results, showing a slight increase in net revenues to $19.3 billion, up from $19.0 billion in the prior year's quarter, and a net earnings attributable to PMI of $1.8 billion, a marginal decrease from $1.8 billion. Diluted EPS for the quarter was $1.14, a slight decrease from $1.15 in the second quarter of 2016. For the first six months of 2017, net revenues were $35.9 billion, largely flat year-over-year, with net earnings attributable to PMI increasing to $3.4 billion from $3.3 billion. Diluted EPS for the six-month period rose to $2.17 from $2.13. The company experienced an unfavorable currency impact, particularly from the strengthening U.S. dollar, which offset some of the gains from price increases across various segments. The company's strategic focus on Reduced-Risk Products (RRPs), particularly the IQOS heated tobacco product, continues to be a significant growth driver, with substantial increases in RRP net revenues, largely from Japan. Despite an overall decline in cigarette shipment volumes, particularly in Asia and EEMA, the growth in heated tobacco units partially compensated for the volume decrease. The company reaffirmed its full-year 2017 diluted EPS forecast, anticipating a range of $4.78 to $4.93, excluding currency impacts.

Financial Highlights

50 data points
Beta

Revenue

$6.92B

63.6% Gross Margin

Net Income

$1.78B

25.7% Net Margin

EPS (Diluted)

$1.14

Total Assets

$38.66B

Cash & Equivalents

$6.29B

Free Cash Flow

$2.96B

Financial Statements
Beta
Revenue$6.92B
Cost of Revenue$2.52B
Gross Profit$4.40B
Operating Income$2.74B
Net Income$1.78B
EPS (Basic)$1.14
EPS (Diluted)$1.14
Shares Outstanding (Basic)1.55B
Shares Outstanding (Diluted)1.55B

Key Highlights

  • 1Net revenues for the second quarter of 2017 increased slightly to $19.3 billion, while net earnings attributable to PMI were $1.8 billion, and diluted EPS was $1.14.
  • 2For the first six months of 2017, net revenues were $35.9 billion, and net earnings attributable to PMI increased to $3.4 billion, with diluted EPS at $2.17.
  • 3Unfavorable currency movements, driven by a stronger U.S. dollar, negatively impacted reported revenues and profitability.
  • 4Reduced-Risk Products (RRPs), particularly IQOS heated tobacco units, showed significant growth, contributing substantially to net revenues, especially in Japan.
  • 5Total cigarette shipment volumes declined across most segments, with notable decreases in Asia and EEMA, although this was partially offset by the growth in heated tobacco units.
  • 6The company reaffirmed its full-year 2017 diluted EPS forecast, projecting a range of $4.78 to $4.93, indicating anticipated growth.
  • 7The company continued to invest in RRP capacity expansion, with capital expenditures expected to be approximately $1.6 billion for the full year 2017.

Frequently Asked Questions

For the second quarter of 2017, Philip Morris International Inc. reported net revenues of $19.3 billion, a slight increase from $19.0 billion in the same period of 2016. Net earnings attributable to PMI were $1.8 billion, marginally down from $1.8 billion in Q2 2016. Diluted earnings per share (EPS) were $1.14, a slight decrease from $1.15 in the prior year's quarter.

The company experienced an unfavorable currency impact during the reporting periods due to the strengthening of the U.S. dollar against several major currencies (e.g., Euro, Turkish Lira, Egyptian Pound). This negatively impacted reported net revenues and profitability, partially offsetting gains from price increases and operational improvements.

Philip Morris International reaffirmed its full-year 2017 reported diluted EPS forecast to be in the range of $4.78 to $4.93. Excluding unfavorable currency impacts and a specific tax item, this represents an anticipated growth of approximately 9% to 12% compared to the adjusted diluted EPS of $4.48 in 2016. The company also projected net revenue growth, excluding excise taxes, of over 7%.

Reduced-Risk Products, particularly the IQOS heated tobacco product, continue to be a key strategic focus and growth driver. RRP net revenues saw a substantial increase, largely driven by performance in Japan. The company is investing heavily in expanding RRP manufacturing capacity to meet growing demand and is actively pursuing regulatory approvals and science-based regulatory frameworks for these products globally.