01—Abstract
Summary
Summary of the 10-Q filed July 27, 2017. Cited figures are marked; the original filing is the authoritative source.
Philip Morris International Inc. (PM) reported its second-quarter 2017 financial results, showing a slight increase in net revenues to $19.3 billiona, 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 $1.14b, 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 $4.93c, excluding currency impacts.
02—Key points
Key Highlights
- Net 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.
- For 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.
- Unfavorable currency movements, driven by a stronger U.S. dollar, negatively impacted reported revenues and profitability.
- Reduced-Risk Products (RRPs), particularly IQOS heated tobacco units, showed significant growth, contributing substantially to net revenues, especially in Japan.
- Total 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.
- The company reaffirmed its full-year 2017 diluted EPS forecast, projecting a range of $4.78 to $4.93, indicating anticipated growth.
- The company continued to invest in RRP capacity expansion, with capital expenditures expected to be approximately $1.6 billion for the full year 2017.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2017, Philip Morris International Inc. kept $0.26.
- Revenue$6.92B100.0%
- Cost of revenue−$2.52B36.4%
- Gross profit$4.40B63.6%
- Operating costs−$1.66B24.0%
- Operating income$2.74B39.6%
- Interest, other & tax−$956.0M13.8%
- Net income$1.78B25.7%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2017filed July 27, 2017Financial Statements
Q2 FY2017 against Q2 FY2016
| Line item | Q2 FY2017Q2 FY2016 | Change |
|---|---|---|
| Revenue | $6.92B$19.04B | −63.7% |
| Cost of Revenue | $2.52B$2.36B | +6.6% |
| Gross Profit | $4.40B$4.29B | +2.6% |
| Operating Income | $2.74B$2.75B | −0.6% |
| Net Income | $1.78B$1.79B | −0.4% |
| EPS (Basic) | $1.14$1.15 | −0.9% |
| EPS (Diluted) | $1.14$1.15 | −0.9% |
| Shares Outstanding (Basic) | 1.55B1.55B | +0.1% |
| Shares Outstanding (Diluted) | 1.55B1.55B | +0.2% |
05—Questions
Frequently Asked Questions
What was the company's performance regarding revenue and earnings for the second quarter of 2017?
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.
How did currency fluctuations affect the company's financial results?
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.
What is the company's outlook for the full year 2017?
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%.
What is the progress and significance of Reduced-Risk Products (RRPs) for the company?
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.
06—Continue