10-QPeriod: Q2 FY2018

Philip Morris International Inc. Quarterly Report for Q2 Ended Jun 30, 2018

Filed July 26, 2018For Securities:PM

Summary

Philip Morris International Inc. (PM) reported strong financial performance for the second quarter and first half of 2018. Net revenues increased by 12.6% 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.

Financial Highlights

48 data points
Beta

Revenue

$7.73B

64.5% Gross Margin

Net Income

$2.20B

28.4% Net Margin

EPS (Diluted)

$1.41

Total Assets

$40.72B

Cash & Equivalents

$6.62B

Free Cash Flow

$3.58B

Financial Statements
Beta
Revenue$7.73B
Cost of Revenue$2.74B
Gross Profit$4.98B
Operating Income$3.09B
Net Income$2.20B
EPS (Basic)$1.41
EPS (Diluted)$1.41
Shares Outstanding (Basic)1.55B
Shares Outstanding (Diluted)1.55B

Key Highlights

  • 1Net 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.
  • 2Diluted Earnings Per Share (EPS) increased by 11.1% for the first six months and 23.7% for the second quarter.
  • 3Reduced-Risk Products (RRPs) revenue more than doubled, reaching $2.15 billion for the six-month period, indicating strong adoption of IQOS and related products.
  • 4Operating income saw a healthy increase of 7.1% for the six months and 13.0% for the quarter, supported by pricing and operational efficiencies.
  • 5The effective tax rate decreased significantly due to the Tax Cuts and Jobs Act, positively impacting EPS.
  • 6The company reaffirmed its full-year 2018 diluted EPS forecast, projecting growth of 29% to 32% at prevailing exchange rates.
  • 7PMI is strategically transitioning towards a smoke-free future, with RRPs playing an increasingly important role in revenue and growth.

Frequently Asked Questions

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.

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.

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.

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.