01—Abstract
Summary
Summary of the 10-Q filed October 27, 2022. Cited figures are marked; the original filing is the authoritative source.
Philip Morris International Inc. (PM) reported mixed results for the nine months ended September 30, 2022.
Net revenues saw a slight increase of 1.3% to $23.6 billiona, driven by favorable pricing and growth in Reduced-Risk Products (RRPs), particularly Heated Tobacco Units (HTUs). However, net earnings attributable to PMI decreased by 5.2% to $6.7 billion, impacted by increased costs related to the war in Ukraine, higher amortization and impairment charges on intangibles, and significant costs associated with the Swedish Match acquisition offer. The company is actively managing its exit from the Russian market and temporarily suspending operations in Ukraine.
Despite a challenging geopolitical and macroeconomic environment, PMI is progressing with its strategic shift towards a smoke-free future. The company highlighted continued growth in its RRP portfolio, with shipment volumes increasing by 10.9%b for HTUs.
The announced agreement with Altria to end the U.S. commercial relationship for IQOS by April 2024, allowing PMI full U.S. commercialization rights for IQOS, is a significant development. The proposed acquisition of Swedish Match is on track for a Q4 2022 closing, pending regulatory approvals, which is expected to further diversify PMI's product offerings.
02—Key points
Key Highlights
- Net revenues increased by 1.3% to $23.6 billion for the nine months ended September 30, 2022, driven by favorable pricing and RRP growth.
- Net earnings attributable to PMI decreased by 5.2% to $6.7 billion for the nine months ended September 30, 2022, due to war-related charges, intangible impairments, and acquisition costs.
- Heated Tobacco Unit (HTU) shipment volumes increased by 10.9% for the nine months ended September 30, 2022.
- PMI announced an agreement with Altria to gain full U.S. commercialization rights for IQOS by April 30, 2024, for a payment of $2.7 billion.
- The proposed acquisition of Swedish Match is on track for Q4 2022 closing, pending regulatory approvals.
- The company incurred significant costs ($266 million pre-tax) in the first nine months of 2022 related to the Swedish Match acquisition offer.
- Operations in Russia and Ukraine continue to be impacted by the geopolitical situation, leading to charges and an intention to exit the Russian market.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2022, Philip Morris International Inc. kept $0.26.
- Revenue$8.03B100.0%
- Cost of revenue−$2.94B36.5%
- Gross profit$5.10B63.5%
- Operating costs−$2.13B26.5%
- Operating income$2.97B37.0%
- Interest, other & tax−$881.0M11.0%
- Net income$2.09B26.0%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2022filed October 27, 2022Financial Statements
Q3 FY2022 against Q3 FY2021
| Line item | Q3 FY2022Q3 FY2021 | Change |
|---|---|---|
| Revenue | $8.03B$8.12B | −1.1% |
| Cost of Revenue | $2.94B$2.60B | +13.1% |
| Gross Profit | $5.10B$5.53B | −7.8% |
| Operating Income | $2.97B$3.46B | −14.1% |
| Net Income | $2.09B$2.43B | −14.0% |
| EPS (Basic) | $1.34$1.55 | −13.5% |
| EPS (Diluted) | $1.34$1.55 | −13.5% |
| Shares Outstanding (Basic) | 1.55B1.56B | −0.5% |
| Shares Outstanding (Diluted) | 1.55B1.56B | −0.5% |
05—Questions
Frequently Asked Questions
What is the financial performance of Philip Morris International for the nine months ended September 30, 2022?
For the nine months ended September 30, 2022, Philip Morris International reported net revenues of $23.6 billion, a 1.3% increase compared to the same period in 2021. However, net earnings attributable to PMI decreased by 5.2% to $6.7 billion, impacted by various factors including war-related charges, higher intangible asset impairment charges, and costs associated with the Swedish Match acquisition offer.
How is the company managing the situation in Russia and Ukraine?
PMI has temporarily suspended operations in Ukraine and is scaling down manufacturing operations in Russia, with plans to exit the Russian market in an orderly manner. The company has incurred pre-tax charges of $128 million for the nine months ended September 30, 2022, related to circumstances driven by the war. These geopolitical events have materially impacted the business, results of operations, cash flows, and financial position.
What is the significance of the agreement with Altria regarding IQOS in the U.S.?
PMI announced an agreement with Altria to end their commercial relationship for IQOS in the U.S. as of April 30, 2024. Following this, PMI will obtain full rights to commercialize IQOS in the U.S., for which it will pay a total cash consideration of $2.7 billion. This agreement marks a significant step for PMI to control its U.S. market strategy for its flagship reduced-risk product.
What is the status of the Swedish Match acquisition?
PMI's offer to acquire Swedish Match has been increased to SEK 116 per share and has received approval from the European Commission, subject to the divestiture of a subsidiary. The transaction is expected to close in the fourth quarter of 2022, subject to the fulfillment of offer conditions. This acquisition is a key part of PMI's strategy to diversify its product portfolio.
06—Continue