Summary
Philip Morris International (PM) reported a slight decrease in net revenues for the first nine months of 2019, down 0.2% to $22.1 billion, while net revenues for the third quarter increased by 1.8% to $7.6 billion. This performance was impacted by unfavorable currency movements, significant charges related to a Russia excise and VAT audit, asset impairments, and the deconsolidation of its Canadian subsidiary, RBH, which collectively led to a notable decline in diluted earnings per share (EPS) for both periods. Despite these headwinds, the company saw strong growth in Reduced-Risk Products (RRPs), with net revenues up 36.5% year-to-date, driven by strong performance in heated tobacco units, particularly in the European Union and East Asia & Australia. Operationally, excluding these significant charges and currency impacts, the company demonstrated underlying growth, driven by favorable pricing and RRP volume/mix across key segments. The company continues to invest in its RRP portfolio, aiming to transition smokers to less harmful alternatives, with IQOS authorization from the FDA in the U.S. being a key development. Management expects continued investment in RRPs to moderate over time, with an expectation that these products will drive future growth.
Financial Highlights
48 data points| Revenue | $7.64B |
| Cost of Revenue | $2.60B |
| Gross Profit | $5.04B |
| Operating Income | $2.79B |
| Net Income | $1.90B |
| EPS (Basic) | $1.22 |
| EPS (Diluted) | $1.22 |
| Shares Outstanding (Basic) | 1.56B |
| Shares Outstanding (Diluted) | 1.56B |
Key Highlights
- 1Net revenues slightly decreased by 0.2% year-to-date but increased by 1.8% for the third quarter, reflecting mixed performance across regions and currency impacts.
- 2Reduced-Risk Products (RRPs) revenue surged by 36.5% year-to-date, indicating strong consumer adoption and a successful transition strategy.
- 3Diluted EPS saw a significant decline of 7.3% year-to-date and 15.3% for the third quarter, primarily due to substantial charges including a Russia excise and VAT audit charge ($374 million pre-tax), asset impairments, Canadian tobacco litigation expenses, and the deconsolidation of RBH.
- 4The company achieved FDA authorization for a version of its Platform 1 (IQOS) product in the United States, a critical step in expanding its reduced-risk product offerings.
- 5Shipment volumes for heated tobacco units experienced significant growth of 45.7% year-to-date, driven by strong performance in the EU, Eastern Europe, and East Asia & Australia.
- 6Total combustible product net revenues declined by 5.8% year-to-date, reflecting a continued shift away from traditional cigarettes.
- 7The company repaid a significant amount of long-term debt, reducing interest expenses and optimizing its capital structure, while maintaining strong liquidity with no outstanding borrowings under its committed credit facilities at the end of the period.