01—Abstract
Summary
Summary of the 10-Q filed April 26, 2024. Cited figures are marked; the original filing is the authoritative source.
Philip Morris International Inc. (PM) reported strong first-quarter 2024 results, with net revenues increasing by 9.7% to $8.8 billiona, driven by favorable pricing and growth in smoke-free products like Heated Tobacco Units (HTUs) and ZYN nicotine pouches.
Diluted Earnings Per Share (EPS) rose by 7.8% to $1.38b, reflecting operational improvements and strategic pricing actions, partially offset by unfavorable currency movements and increased interest expenses. The company's strategic shift towards a smoke-free future continues to gain momentum, with smoke-free product net revenues up 21.1% year-over-year.
This growth in smoke-free products, particularly HTUs and ZYN, alongside disciplined cost management and pricing strategies, positions PMI for continued financial performance. However, the company did incur significant asset impairment and exit costs related to restructuring efforts, including the optimization of IQOS sourcing for the U.S. market and cessation of operations in Venezuela.
02—Key points
Key Highlights
- Net revenues increased by 9.7% to $8.8 billion, driven by a 12.1% increase on a currency-neutral basis, with strong performance in HTUs and ZYN nicotine pouches contributing significantly.
- Diluted Earnings Per Share (EPS) grew by 7.8% to $1.38, benefiting from operational improvements and pricing actions, though impacted by unfavorable currency movements and higher interest expenses.
- Smoke-free product net revenues saw a substantial increase of 21.1%, reaching $3.4 billion, indicating strong progress in the company's smoke-free transition.
- The company incurred $168 million in pre-tax asset impairment and exit costs in Q1 2024, primarily related to the restructuring of IQOS sourcing for the U.S. market and the cessation of operations in Venezuela.
- Operating income increased by 11.5% to $3.0 billion, with a robust 23.5% increase on a currency-neutral basis, driven by pricing and volume/mix improvements.
- The company reiterated its full-year 2024 outlook, expecting net cash provided by operating activities between $10 billion to $11 billion.
- Despite a negative Fitch credit rating outlook, Moody's and S&P maintain stable outlooks, and the company has $6.2 billion in committed revolving credit facilities available.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, Philip Morris International Inc. kept $0.24.
- Revenue$8.79B100.0%
- Cost of revenue−$3.19B36.3%
- Gross profit$5.60B63.7%
- Operating costs−$2.55B29.0%
- Operating income$3.04B34.6%
- Interest, other & tax−$897.0M10.2%
- Net income$2.15B24.4%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed April 26, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $8.79B$8.02B | +9.7% |
| Cost of Revenue | $3.19B$3.04B | +5.2% |
| Gross Profit | $5.60B$4.98B | +12.4% |
| Operating Income | $3.04B$2.73B | +11.5% |
| Net Income | $2.15B$2.00B | +7.7% |
| EPS (Basic) | $1.38$1.28 | +7.8% |
| EPS (Diluted) | $1.38$1.28 | +7.8% |
| Shares Outstanding (Basic) | 1.55B1.55B | +0.1% |
| Shares Outstanding (Diluted) | 1.55B1.55B | +0.1% |
05—Questions
Frequently Asked Questions
What was the primary driver of Philip Morris International's revenue growth in Q1 2024?
Philip Morris International's revenue growth in Q1 2024 was primarily driven by a combination of favorable pricing, particularly for combustible tobacco, and strong volume/mix growth in smoke-free products, notably Heated Tobacco Units (HTUs) and ZYN nicotine pouches. Currency-neutral net revenues increased by 12.1%.
How did the company's transition to smoke-free products perform in Q1 2024?
The company's smoke-free product segment showed significant growth, with net revenues increasing by 21.1% to $3.4 billion. This was largely fueled by strong performances in Heated Tobacco Units (HTUs) and ZYN nicotine pouches, highlighting continued progress in PMI's strategic shift towards a smoke-free future.
What were the main reasons for the increase in operating income?
Operating income saw a healthy increase, growing by 11.5% overall and a more substantial 23.5% on a currency-neutral basis. This improvement was driven by favorable pricing strategies, positive volume and mix trends in both combustible and smoke-free products, and a favorable year-over-year comparison due to the absence of certain charges recorded in Q1 2023. These factors were partially offset by increased manufacturing costs, amortization of intangibles, and asset impairment and exit costs.
What impact did restructuring and exit costs have on the quarter's results?
Philip Morris International incurred pre-tax asset impairment and exit costs totaling $168 million in Q1 2024. These costs were primarily associated with the restructuring of IQOS product sourcing for the U.S. market following a settlement agreement and the cessation of operations in Venezuela. These charges negatively impacted operating income and diluted EPS.
06—Continue