10-QPeriod: Q3 FY2017

Philip Morris International Inc. Quarterly Report for Q3 Ended Sep 30, 2017

Filed October 26, 2017For Securities:PM

Summary

Philip Morris International Inc. (PM) reported solid financial results for the nine months ended September 30, 2017, with net earnings attributable to PMI increasing by 1.6% to $5.3 billion, or $3.43 per diluted share, up from $5.26 billion, or $3.38 per diluted share, in the prior year period. This growth was driven by higher pricing and favorable volume/mix in key segments like Asia and Latin America & Canada, partially offset by unfavorable currency impacts. The company also experienced a significant increase in net revenues from Reduced-Risk Products (RRPs), primarily driven by strong performance in Japan, indicating progress in their strategic shift towards smoke-free alternatives. The company's balance sheet shows a healthy increase in cash and cash equivalents to $7.7 billion, up from $4.2 billion at the end of 2016, supported by strong operating cash flows. Despite an increase in total liabilities, particularly long-term debt, the company maintains significant liquidity with substantial unused committed credit facilities. Management reaffirmed its 2017 full-year diluted EPS forecast, signaling confidence in continued operational performance and strategic execution.

Financial Highlights

50 data points
Beta

Revenue

$7.47B

63.4% Gross Margin

Net Income

$1.97B

26.4% Net Margin

EPS (Diluted)

$1.27

Total Assets

$41.95B

Cash & Equivalents

$7.74B

Free Cash Flow

$1.49B

Financial Statements
Beta
Revenue$7.47B
Cost of Revenue$2.73B
Gross Profit$4.74B
Operating Income$3.09B
Net Income$1.97B
EPS (Basic)$1.27
EPS (Diluted)$1.27
Shares Outstanding (Basic)1.55B
Shares Outstanding (Diluted)1.55B

Key Highlights

  • 1Net earnings attributable to PMI increased by 1.6% to $5.3 billion for the first nine months of 2017.
  • 2Diluted EPS grew by 1.5% to $3.43 for the first nine months of 2017.
  • 3Net revenues from Reduced-Risk Products (RRPs) saw a substantial increase, reaching $2.1 billion for the nine-month period, primarily driven by sales in Japan.
  • 4Cash and cash equivalents significantly increased to $7.7 billion as of September 30, 2017, up from $4.2 billion at the end of 2016.
  • 5Total shipment volume for cigarettes and heated tobacco units decreased by 4.9% for the nine months ended September 30, 2017, primarily due to declines in the European Union and EEMA regions.
  • 6The company reaffirmed its 2017 full-year diluted EPS forecast, projecting a range of $4.75 to $4.80.
  • 7Philip Morris International continues to invest in RRPs, with capital expenditures for capacity expansion reaching $995 million in the first nine months of 2017.

Frequently Asked Questions

For the nine months ended September 30, 2017, Philip Morris International Inc. reported net earnings attributable to PMI of $5.3 billion, a 1.6% increase compared to $5.26 billion in the same period of 2016. Diluted EPS rose by 1.5% to $3.43 from $3.38.

Net revenues from RRPs increased significantly to $2.1 billion for the nine months ended September 30, 2017, up from $394 million in the prior year period, driven primarily by strong sales in Japan. This indicates continued growth and consumer adoption of their smoke-free alternatives.

The company's liquidity position appears strong, with cash and cash equivalents at $7.7 billion as of September 30, 2017, a substantial increase from $4.2 billion at the end of 2016. They also have $8.0 billion in committed credit facilities, with no borrowings outstanding as of the reporting date. The company reaffirmed its full-year 2017 EPS forecast, suggesting confidence in ongoing operations.

Total shipment volume for cigarettes and heated tobacco units decreased by 4.9% for the nine months ended September 30, 2017. This decline was primarily attributed to lower cigarette shipment volumes in the European Union and the Eastern Europe, Middle East & Africa (EEMA) regions, with specific impacts noted in countries like Germany, Italy, Spain, Saudi Arabia, and Russia.