01—Abstract
Summary
Summary of the 10-Q filed October 27, 2021. Cited figures are marked; the original filing is the authoritative source.
Philip Morris International (PM) reported a solid third quarter of 2021, demonstrating robust growth in net revenues and earnings, primarily driven by strong performance in reduced-risk products (RRPs), particularly IQOS.
The company saw a notable increase in net revenues to $8.12 billiona for the quarter and $23.3 billion for the nine months, up 9.1% and 9.7% respectively, year-over-year. Diluted EPS also showed healthy growth, reaching $1.55 for the quarter and $4.48 for the nine months, an increase of 4.7% and 14.9% respectively. PMI's strategic transition towards smoke-free products continues to gain traction, with RRP net revenues growing 37.5% for the nine months.
This growth was driven by higher heated tobacco unit volumes across key markets in Europe and Asia, coupled with favorable pricing. However, the company is facing challenges related to global semiconductor shortages, which are impacting IQOS device supply and are expected to persist into the first half of 2022, potentially hindering near-term user growth. Despite this, PMI remains optimistic about the long-term demand for its RRPs and has strategically acquired companies like Fertin Pharma and Vectura to bolster its innovation pipeline in oral and inhaled therapeutics.
02—Key points
Key Highlights
- Net revenues increased by 9.1% to $8.12 billion for the third quarter of 2021, and by 9.7% to $23.3 billion for the first nine months of 2021, compared to the prior year.
- Diluted EPS grew by 4.7% to $1.55 for the third quarter and by 14.9% to $4.48 for the first nine months, reflecting strong operational performance.
- Reduced-Risk Products (RRPs) net revenues surged by 37.5% for the nine months, indicating successful market penetration and consumer adoption.
- Acquisition of Fertin Pharma and Vectura Group plc in Q3 2021 strengthens PMI's capabilities in RRP development and expands its product portfolio.
- The company is experiencing IQOS device supply constraints due to global semiconductor shortages, which are expected to impact user growth into the first half of 2022.
- PMI's dividend per share increased to an annualized rate of $5.00, demonstrating a commitment to returning capital to shareholders.
- Net cash provided by operating activities increased by $1.3 billion to $7.9 billion for the first nine months of 2021, supported by higher net earnings and favorable currency movements.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2021, Philip Morris International Inc. kept $0.30.
- Revenue$8.12B100.0%
- Cost of revenue−$2.60B32.0%
- Gross profit$5.53B68.0%
- Operating costs−$2.07B25.5%
- Operating income$3.46B42.5%
- Interest, other & tax−$1.03B12.7%
- Net income$2.43B29.9%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2021filed October 27, 2021Financial Statements
Q3 FY2021 against Q3 FY2020
| Line item | Q3 FY2021Q3 FY2020 | Change |
|---|---|---|
| Revenue | $8.12B$7.45B | +9.1% |
| Cost of Revenue | $2.60B$2.42B | +7.5% |
| Gross Profit | $5.53B$5.03B | +9.9% |
| Operating Income | $3.46B$3.24B | +6.5% |
| Net Income | $2.43B$2.31B | +5.2% |
| EPS (Basic) | $1.55$1.48 | +4.7% |
| EPS (Diluted) | $1.55$1.48 | +4.7% |
| Shares Outstanding (Basic) | 1.56B1.56B | 0.0% |
| Shares Outstanding (Diluted) | 1.56B1.56B | +0.1% |
05—Questions
Frequently Asked Questions
How did Philip Morris International's net revenues perform in Q3 2021?
Philip Morris International reported a net revenue of $8.12 billion for the third quarter of 2021, an increase of 9.1% compared to the same period in 2020.
What is the company's outlook for IQOS device supply given the current semiconductor shortages?
PMI is experiencing IQOS device supply constraints due to global semiconductor shortages, which are expected to persist into the first half of 2022. The company will prioritize device replacements for existing users over new user acquisition and has adjusted the launch timeline for IQOS ILUMA outside Japan.
What are the key strategic acquisitions made by PMI during the quarter?
During the third quarter of 2021, PMI acquired Fertin Pharma A/S, a Danish company specializing in oral delivery systems, and Vectura Group plc, a UK-based inhaled therapeutics company. These acquisitions are expected to bolster PMI's innovation pipeline and expand its reach in reduced-risk products and beyond nicotine categories.
How did reduced-risk products (RRPs) contribute to PMI's revenue growth?
Reduced-Risk Products (RRPs) were a significant growth driver, with net revenues increasing by 37.5% for the first nine months of 2021. This growth was primarily fueled by higher heated tobacco unit volumes in key markets and favorable pricing.
06—Continue