01—Abstract
Summary
Summary of the 10-Q filed July 26, 2018. Cited figures are marked; the original filing is the authoritative source.
Philip Morris International Inc. (PM) reported strong financial performance for the second quarter and first half of 2018.
Net revenues increased by 12.6%a for the six-month period and 11.7% for the quarter, driven by favorable pricing and growth in reduced-risk products (RRPs), particularly IQOS. Diluted Earnings Per Share (EPS) saw a significant increase, up 11.1% for the six months and 23.7% for the quarter, boosted by operational improvements, favorable currency movements, and a lower effective tax rate resulting from the Tax Cuts and Jobs Act.
The company also reiterated its full-year EPS forecast, signaling continued expected growth. The company continues its strategic shift towards smoke-free products, with RRPs showing substantial revenue growth.
02—Key points
Key Highlights
- Net revenues increased by 12.6% for the first six months of 2018 and 11.7% for the second quarter, driven by strong pricing and RRP growth.
- Diluted Earnings Per Share (EPS) increased by 11.1% for the first six months and 23.7% for the second quarter.
- Reduced-Risk Products (RRPs) revenue more than doubled, reaching $2.15 billion for the six-month period, indicating strong adoption of IQOS and related products.
- Operating income saw a healthy increase of 7.1% for the six months and 13.0% for the quarter, supported by pricing and operational efficiencies.
- The effective tax rate decreased significantly due to the Tax Cuts and Jobs Act, positively impacting EPS.
- The company reaffirmed its full-year 2018 diluted EPS forecast, projecting growth of 29% to 32% at prevailing exchange rates.
- PMI is strategically transitioning towards a smoke-free future, with RRPs playing an increasingly important role in revenue and growth.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2018, Philip Morris International Inc. kept $0.28.
- Revenue$7.73B100.0%
- Cost of revenue−$2.74B35.5%
- Gross profit$4.98B64.5%
- Operating costs−$1.89B24.4%
- Operating income$3.09B40.0%
- Interest, other & tax−$895.0M11.6%
- Net income$2.20B28.4%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2018filed July 26, 2018Financial Statements
Q2 FY2018 against Q2 FY2017
| Line item | Q2 FY2018Q2 FY2017 | Change |
|---|---|---|
| Revenue | $7.73B$6.92B | +11.7% |
| Cost of Revenue | $2.74B$2.52B | +8.9% |
| Gross Profit | $4.98B$4.40B | +13.3% |
| Operating Income | $3.09B$2.74B | +13.0% |
| Net Income | $2.20B$1.78B | +23.4% |
| EPS (Basic) | $1.41$1.14 | +23.7% |
| EPS (Diluted) | $1.41$1.14 | +23.7% |
| Shares Outstanding (Basic) | 1.55B1.55B | +0.1% |
| Shares Outstanding (Diluted) | 1.55B1.55B | +0.1% |
05—Questions
Frequently Asked Questions
How did Philip Morris International perform financially in the second quarter of 2018 compared to the previous year?
Philip Morris International reported a strong increase in net revenues, up 11.7% to $7.7 billion for the second quarter of 2018. Diluted Earnings Per Share (EPS) also saw a significant rise of 23.7% to $1.41, driven by favorable pricing, operational improvements, and a lower effective tax rate.
What is the company's strategy regarding reduced-risk products (RRPs), and how is it impacting performance?
PMI is actively transitioning towards a smoke-free future, with RRPs, such as IQOS, being a key strategic priority. RRP revenue more than doubled to $2.15 billion for the first six months of 2018, demonstrating significant growth and market adoption. This segment is a major contributor to the company's overall revenue growth and strategic transformation.
What factors contributed to the increase in earnings per share?
The increase in EPS was primarily driven by several factors including favorable pricing across various segments, improved operational performance, positive currency exchange rate movements, and a lower effective tax rate resulting from the Tax Cuts and Jobs Act. These factors combined to boost profitability significantly compared to the prior year.
What is the company's outlook for the remainder of 2018?
Philip Morris International reiterated its full-year 2018 diluted EPS forecast, projecting a growth range of 29% to 32% at prevailing exchange rates. This optimism is supported by ongoing RRP commercialization efforts and anticipated pricing benefits.
06—Continue