01—Abstract
Summary
Summary of the 10-Q filed April 27, 2021. Cited figures are marked; the original filing is the authoritative source.
Philip Morris International Inc. (PM) reported a strong first quarter for 2021, with net revenues increasing by 6.0% to $7.6 billiona 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 billionb, 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%c, 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.
02—Key points
Key Highlights
- Net revenues increased by 6.0% to $7.6 billion, driven by favorable pricing and currency tailwinds.
- Diluted EPS grew by a substantial 32.5% to $1.55, exceeding the prior year's comparable period.
- Reduced-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.
- Operating income increased by 23.5% to $3.4 billion, indicating improved operational efficiency and profitability.
- The European Union and East Asia & Australia segments showed particularly strong performance, with double-digit revenue growth.
- The company maintained a healthy liquidity position with $3.9 billion in cash and cash equivalents and a strong credit rating from major agencies.
- Shareholder returns remained a priority, with $1.9 billion in dividends paid in the first quarter.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2021, Philip Morris International Inc. kept $0.32.
- Revenue$7.58B100.0%
- Cost of revenue−$2.27B30.0%
- Gross profit$5.31B70.0%
- Operating costs−$1.87B24.6%
- Operating income$3.44B45.4%
- Interest, other & tax−$1.03B13.5%
- Net income$2.42B31.9%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2021filed April 27, 2021Financial Statements
Q1 FY2021 against Q1 FY2020
| Line item | Q1 FY2021Q1 FY2020 | Change |
|---|---|---|
| Revenue | $7.58B$7.15B | +6.0% |
| Cost of Revenue | $2.27B$2.40B | −5.3% |
| Gross Profit | $5.31B$4.75B | +11.8% |
| Operating Income | $3.44B$2.79B | +23.5% |
| Net Income | $2.42B$1.83B | +32.4% |
| EPS (Basic) | $1.55$1.17 | +32.5% |
| EPS (Diluted) | $1.55$1.17 | +32.5% |
| Shares Outstanding (Basic) | 1.56B1.56B | +0.1% |
| Shares Outstanding (Diluted) | 1.56B1.56B | +0.1% |
05—Questions
Frequently Asked Questions
What was the primary driver for the increase in net revenues?
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.
How are Reduced-Risk Products (RRPs) performing?
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.
What is the company's financial health and liquidity situation?
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.
Are there any significant legal or regulatory risks impacting the company?
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.
06—Continue