Philip Morris International Inc. Quarterly Report for Q1 Ended Mar 31, 2018

Summary

Philip Morris International (PM) reported its first-quarter 2018 results, showcasing a 13.7% increase in net revenues year-over-year, reaching $6.9 billion. This growth was primarily driven by strong performance in reduced-risk products (RRPs), which saw revenues more than double to $1.1 billion, and favorable pricing across most regions. Despite revenue growth, diluted earnings per share (EPS) slightly declined by 2.0% to $1.00. This was impacted by increased marketing, administration, and research costs, particularly investments in RRPs, and a higher effective tax rate. The company also increased its full-year 2018 EPS forecast to $5.25-$5.40, anticipating continued revenue growth and a lower effective tax rate. PMI's strategic shift towards smoke-free products is evident, with RRPs, including heated tobacco units and IQOS devices, showing significant growth in both revenue and shipment volume. The company continues to invest heavily in the development and commercialization of these products, aiming to transition its business model while maintaining its leading position in the combustible products market.

Key Highlights

• 1Net revenues increased by 13.7% to $6.9 billion, driven by RRP growth and favorable pricing.
• 2Reduced-Risk Products (RRPs) revenue more than doubled to $1.1 billion, indicating strong adoption.
• 3Diluted Earnings Per Share (EPS) decreased by 2.0% to $1.00, impacted by increased operating expenses and higher taxes.
• 4The company raised its full-year 2018 diluted EPS forecast to $5.25-$5.40.
• 5Shipment volume for cigarettes decreased by 5.3%, while heated tobacco unit volume increased significantly by over 100%.
• 6Significant investments were made in RRPs, as reflected in higher marketing, administration, and research costs.
• 7The company's strong balance sheet and liquidity position remain, with no borrowings under committed credit facilities at quarter-end.

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