10-QPeriod: Q1 FY2021

Philip Morris International Inc. Quarterly Report for Q1 Ended Mar 31, 2021

Filed April 27, 2021For Securities:PM

Summary

Philip Morris International Inc. (PM) reported a strong first quarter for 2021, with net revenues increasing by 6.0% to $7.6 billion and diluted earnings per share (EPS) rising 32.5% to $1.55, demonstrating robust operational performance and the positive impact of favorable currency movements. The company's strategic focus on Reduced-Risk Products (RRPs) continues to yield results, with RRP net revenues growing by 36.5% year-over-year to $2.1 billion, now representing a significant 27.7% of total net revenues. This growth was particularly strong in the European Union and East Asia & Australia segments. While combustible product net revenues saw a slight decline of 2.4%, the company's pricing strategies and market share in RRPs offset this. PMI also maintained a strong financial position with significant liquidity and a credit rating of A/A/A2 from major agencies, underscoring its financial stability.

Financial Highlights

48 data points
Beta

Revenue

$7.58B

70.0% Gross Margin

Net Income

$2.42B

31.9% Net Margin

EPS (Diluted)

$1.55

Total Assets

$39.80B

Cash & Equivalents

$3.91B

Free Cash Flow

$256.00M

Financial Statements
Beta
Revenue$7.58B
Cost of Revenue$2.27B
Gross Profit$5.31B
Operating Income$3.44B
Net Income$2.42B
EPS (Basic)$1.55
EPS (Diluted)$1.55
Shares Outstanding (Basic)1.56B
Shares Outstanding (Diluted)1.56B

Key Highlights

  • 1Net revenues increased by 6.0% to $7.6 billion, driven by favorable pricing and currency tailwinds.
  • 2Diluted EPS grew by a substantial 32.5% to $1.55, exceeding the prior year's comparable period.
  • 3Reduced-Risk Products (RRPs) revenue surged by 36.5% to $2.1 billion, becoming a key growth driver and representing 27.7% of total net revenues.
  • 4Operating income increased by 23.5% to $3.4 billion, indicating improved operational efficiency and profitability.
  • 5The European Union and East Asia & Australia segments showed particularly strong performance, with double-digit revenue growth.
  • 6The company maintained a healthy liquidity position with $3.9 billion in cash and cash equivalents and a strong credit rating from major agencies.
  • 7Shareholder returns remained a priority, with $1.9 billion in dividends paid in the first quarter.

Frequently Asked Questions

Net revenues increased by 6.0% driven by a combination of favorable pricing variances across several markets, higher fees for certain distribution rights, and a favorable currency impact. The growth in sales of Reduced-Risk Products (RRPs), particularly heated tobacco units, also significantly contributed to this increase.

RRPs are a key growth area for PMI, with net revenues increasing by 36.5% to $2.1 billion in the first quarter of 2021. This segment now constitutes 27.7% of total net revenues and is showing strong growth, especially in the European Union and East Asia & Australia regions, indicating a successful transition towards smoke-free alternatives.

PMI maintains a strong financial position with $3.9 billion in cash and cash equivalents as of March 31, 2021. The company has substantial committed credit facilities totaling $7.25 billion, with no borrowings outstanding under these facilities at quarter-end. Credit ratings from Moody's, S&P, and Fitch remain solid, indicating financial stability and access to capital markets.

The company is subject to ongoing tobacco-related litigation in various jurisdictions, which could potentially result in material financial impacts, though no probable losses have been accrued at this time. Regulatory environments worldwide continue to evolve, with increasing restrictions on tobacco products and evolving frameworks for Reduced-Risk Products. PMI actively engages with regulators, advocating for science-based regulations that differentiate between combustible and smoke-free products.