Revises 2021 Full-Year
Reported Diluted EPS Forecast to a Range of $5.93 to $6.03, Now
Reflecting Adjusted Diluted EPS Growth of Around 11% to 13% on an
Organic Basis; Anticipates 2021 Full-Year Heated Tobacco Unit
Shipment Volume of 95 to 100 Billion Units
Regulatory News:
Philip Morris International Inc. (NYSE: PM) today announces its
2021 first-quarter results. Growth rates presented in this press
release on an organic basis reflect currency-neutral underlying
results. Adjustments, other calculations and reconciliations to the
most directly comparable U.S. GAAP measures are included in the
schedules to this press release.
2021 FIRST-QUARTER HIGHLIGHTS
- Reported diluted EPS of $1.55, up by 32.5%; up by 23.9%,
excluding currency
- Adjusted diluted EPS of $1.57, up by 29.8%; up by 21.5% on an
organic basis
- Cigarette and heated tobacco unit shipment volume down by 3.7%
(reflecting cigarette shipment volume down by 7.3%, and heated
tobacco unit shipment volume up by 29.9% to 21.7 billion
units)
- Market share for heated tobacco units in IQOS markets,
excluding the U.S., up by 1.7 points to 7.6%
- Net revenues up by 6.0%; up by 2.9% on an organic basis
- Net revenues from smoke-free products accounted for 28.0% of
total net revenues
- Operating income up by 23.5%; up by 16.8%, excluding
currency
- Adjusted operating income up by 18.5% on an organic basis
- Adjusted operating income margin of 46.0%, up by 5.9 points on
an organic basis
- Total IQOS users at quarter-end estimated at approximately 19.1
million, of which approximately 14.0 million have switched to IQOS
and stopped smoking
- During the quarter, PMI declared a regular quarterly dividend
of $1.20 per common share, representing an annualized rate of
$4.80
"We are pleased to have delivered a very strong start to the
year, with top- and bottom-line results coming in well ahead of our
expectations for the first quarter despite the ongoing challenges
of the pandemic," said André Calantzopoulos, Chief Executive
Officer.
"This performance was driven by the continued strength of IQOS,
in particular, reflecting excellent user, volume and market share
momentum, as well as further progress with manufacturing and
operating cost efficiencies. Our results also benefited from the
timing of specific factors, notably associated with shipments in
certain markets and the phasing of commercial investments, which
are expected to partially reverse in the second quarter."
"While the speed and shape of the global recovery from the
pandemic remains uncertain, we are raising our full-year outlook,
on an underlying basis, to reflect the strong results and positive
momentum of the first quarter. Our guidance now represents organic
adjusted diluted EPS growth of 11% to 13%, reflecting net revenue
growth of 5% to 7% on the same basis."
2021 FULL-YEAR FORECAST
Full-Year
2021 Forecast
2020
Organic Growth
Reported Diluted EPS
$5.93
-
$6.03
$ 5.16
Asset impairment and exit costs
0.02
0.08
Fair value adjustment for equity security
investments
0.04
Tax items
(0.06
)
Brazil indirect tax credit
(0.05
)
Adjusted Diluted EPS
$5.95
-
$6.05
$ 5.17
Currency
(0.20)
Adjusted Diluted EPS, excluding
currency
$5.75
-
$5.85
$ 5.17
11%
-
13%
PMI revises its full-year reported diluted EPS forecast to a
range of $5.93 to $6.03, at prevailing exchange rates, representing
a projected increase of around 15% to 17% versus reported diluted
EPS of $5.16 in 2020. This compares to the previously communicated
forecast range of $5.90 to $6.00, provided on February 10,
2021.
On an organic basis, this forecast represents a projected
increase of around 11% to 13% versus adjusted diluted EPS of $5.17
in 2020, as outlined in the table above.
The revised full-year guidance reflects:
- Better underlying business performance driven by the strength
of IQOS, particularly in the EU Region and Japan;
- A favorable currency impact, at prevailing exchange rates, of
approximately $0.20 per share, compared to approximately $0.25 per
share previously; and
- Asset impairment and exit costs of $0.02 per share resulting
from product distribution restructuring in Korea and organizational
design optimization.
2021 Full-Year Forecast Assumptions
This forecast assumes:
- A gradual improvement in the general operating environment,
with potential volatility around the duration and effects of
pandemic-related mobility restrictions across PMI's key
markets;
- Lack of near-term recovery in PMI's duty-free business given
the uncertain outlook for global travel, with current dynamics
persisting through year end;
- A limited impact from the current global shortage of
semiconductors on the supply of our electronic devices to
consumers;
- An estimated total international industry volume progression,
excluding China and the U.S., of approximately -3% to flat;
- A total cigarette and heated tobacco unit shipment volume
progression for PMI of approximately -2% to +1%;
- Heated tobacco unit shipment volume of 95 to 100 billion units,
compared to a range of 90 to 100 billion units previously;
- Net revenue growth of approximately 5% to 7% on an organic
basis, compared to a range of approximately 4% to 7%
previously;
- An increase in adjusted operating income margin of around 200
basis points on an organic basis, compared to at least 150 basis
points, previously;
- Operating cash flow of around $11 billion at prevailing
exchange rates and subject to year-end working capital
requirements;
- Capital expenditures of approximately $0.8 billion;
- An effective tax rate, excluding discrete tax events, of around
22%;
- No share repurchases;
- Second-quarter reported diluted EPS in a range of $1.50 to
$1.55, including a favorable currency impact, at prevailing
exchange rates, of around $0.04 per share, notably reflecting:
- Strong organic net revenue growth, partly driven by a favorable
comparison versus the second quarter of 2020;
- Continued improvement in adjusted operating income margin on an
organic basis; and
- A partial reversal of the approximately $0.08 per share benefit
recorded in the first quarter related to the timing of specific
factors, notably associated with shipments in certain markets and
the phasing of commercial investments.
- A second half of 2021 reflecting:
- The assumption that many of PMI's key markets will have largely
emerged from pandemic-related restrictions;
- Continued robust organic net revenue growth;
- Incremental commercial investments, compared to the first half
of 2021, of approximately $300 to $400 million; and
- Lower organic adjusted operating income margin expansion
compared to the first half of 2021.
The foregoing is underpinned by the assumption that, even in the
event of prolonged pandemic-related restrictions, there will not be
a return to the depressed consumption levels of the second quarter
of 2020. This assumption is consistent with the less severe impact
on consumption levels observed in the second half of 2020 as
COVID-19 spread in a number of markets.
This forecast excludes the impact of any future acquisitions,
unanticipated or unquantifiable asset impairment and exit cost
charges, future changes in currency exchange rates, further
developments pertaining to the judgment in the two Québec Class
Action lawsuits and the Companies’ Creditors Arrangement Act (CCAA)
protection granted to PMI's Canadian subsidiary, Rothmans, Benson
& Hedges, Inc. (RBH), any unusual events, any intensification
of the global shortage of semiconductors and the related impact on
the supply of our electronic devices, and any COVID-19-related
developments different from the assumptions set forth in the
company's forecast.
Factors described in the Forward-Looking and Cautionary
Statements section of this release represent continuing risks to
these projections.
COVID-19: Business Continuity Update
Since the onset of the COVID-19 pandemic, PMI has undertaken a
number of business continuity measures to mitigate potential
disruption to its operations and route-to-market in order to
preserve the availability of products to its customers and adult
consumers.
Currently:
- PMI has sufficient access to the inputs for its products and is
not facing any significant business continuity issues with respect
to key suppliers;
- All of PMI's cigarette and heated tobacco unit manufacturing
facilities globally are operational;
- COVID-related restrictions do not have a significant impact on
the availability of PMI’s products to its customers and adult
consumers; and
- PMI has ample liquidity through cash on hand, the ongoing cash
generation of its business, and its access to the commercial paper
and debt markets.
Conference Call
A conference call, hosted by Emmanuel Babeau, Chief Financial
Officer, will be webcast at 9:00 a.m., Eastern Time, on April 20,
2021. Access is at www.pmi.com/2021Q1earnings.
CONSOLIDATED SHIPMENT VOLUME & MARKET
SHARE
PMI Shipment Volume by Region
First-Quarter
(million units)
2021
2020
Change
Cigarettes
European Union
36,769
40,646
(9.5
)%
Eastern Europe
19,966
21,419
(6.8
)%
Middle East & Africa
27,642
29,996
(7.8
)%
South & Southeast Asia
34,888
37,595
(7.2
)%
East Asia & Australia
11,362
12,299
(7.6
)%
Latin America & Canada
14,885
15,063
(1.2
)%
Total PMI
145,512
157,018
(7.3
)%
Heated Tobacco Units
European Union
6,426
4,661
37.9
%
Eastern Europe
5,635
4,366
29.1
%
Middle East & Africa
396
470
(15.7
)%
South & Southeast Asia
33
—
—
%
East Asia & Australia
9,139
7,122
28.3
%
Latin America & Canada
105
108
(2.8
)%
Total PMI
21,734
16,727
29.9
%
Cigarettes and Heated Tobacco
Units
European Union
43,195
45,307
(4.7
)%
Eastern Europe
25,601
25,785
(0.7
)%
Middle East & Africa
28,038
30,466
(8.0
)%
South & Southeast Asia
34,921
37,595
(7.1
)%
East Asia & Australia
20,501
19,421
5.6
%
Latin America & Canada
14,990
15,171
(1.2
)%
Total PMI
167,246
173,745
(3.7
)%
During the quarter, PMI's total shipment volume decreased by
3.7%, due to:
- the EU, reflecting lower cigarette shipment volume, notably in
the Czech Republic, Poland and Spain, partly offset by higher
heated tobacco unit shipment volume across the Region, notably in
Italy;
- Eastern Europe, reflecting lower cigarette shipment volume,
notably in Ukraine, partly offset by higher heated tobacco unit
shipment volume across the Region, primarily in Russia;
- Middle East & Africa, mainly reflecting lower cigarette
shipment volume, mainly in North Africa (primarily Egypt) and PMI
Duty Free, partly offset by Turkey;
- South & Southeast Asia, primarily reflecting lower
cigarette shipment volume, primarily in Indonesia and the
Philippines, partly offset by Pakistan; and
- Latin America & Canada, reflecting lower cigarette shipment
volume, notably in Colombia, partly offset by Brazil;
partly offset by
- East Asia & Australia, reflecting higher heated tobacco
unit shipment volume, primarily in Japan, partly offset by lower
cigarette shipment volume, mainly in Japan.
First-Quarter Impact of Inventory Movements
Excluding the net unfavorable impact of estimated distributor
inventory movements of approximately 0.9 billion units, PMI’s total
in-market sales declined by 3.3%, due to a 6.2% decline in
cigarettes, partly offset by a 22.7% increase in heated tobacco
units.
The net unfavorable impact of approximately 0.9 billion units
reflected:
- A net unfavorable impact of 2.0 billion cigarettes, mainly due
to inventory movements in the first quarter of 2020 related to
higher shipments to distributors at the onset of the pandemic;
partly offset by
- A net favorable impact of 1.1 billion heated tobacco units,
mainly driven by inventory movements in the first quarter of 2020
due to the temporary shutdown of the company's Bologna
manufacturing facility due to pandemic-related lockdown
restrictions.
PMI's total heated tobacco unit in-market sales volume in the
quarter was 21.3 billion units, broadly consistent with heated
tobacco unit shipment volume. The company believes that the current
level of heated tobacco unit inventory is appropriate based on
anticipated sales.
PMI Shipment Volume by Brand
PMI Shipment Volume by Brand
First-Quarter
(million units)
2021
2020
Change
Cigarettes
Marlboro
53,682
59,245
(9.4
)%
L&M
20,367
22,641
(10.0
)%
Chesterfield
12,758
12,903
(1.1
)%
Philip Morris
10,184
11,463
(11.2
)%
Parliament
8,957
7,573
18.3
%
Sampoerna A
8,698
8,548
1.8
%
Dji Sam Soe
5,704
6,175
(7.6
)%
Bond Street
4,527
5,612
(19.3
)%
Lark
3,899
4,025
(3.1
)%
Sampoerna Hijau
2,199
1,477
48.9
%
Others
14,537
17,356
(16.2
)%
Total Cigarettes
145,512
157,018
(7.3
)%
Heated Tobacco Units
21,734
16,727
29.9
%
Total PMI
167,246
173,745
(3.7
)%
Note: Sampoerna A includes Sampoerna;
Philip Morris includes Philip Morris/Dubliss; and Lark includes
Lark Harmony.
PMI's cigarette shipment volume of the following brands
decreased:
- Marlboro, mainly due to Japan, North Africa, the Philippines,
PMI Duty Free and Spain, partly offset by Turkey;
- L&M, notably due to Egypt and Poland;
- Chesterfield, mainly due to the GCC and Spain, partly offset by
Brazil and Russia;
- Philip Morris, primarily due to Italy and Russia;
- Dji Sam Soe in Indonesia, mainly due to Dji Sam Soe Magnum
Mild;
- Bond Street, notably due to Russia and Ukraine;
- Lark, primarily due to Japan and PMI Duty Free; and
- "Others," notably due to: mid-price Fortune in the Philippines
and Sampoerna U in Indonesia; partly offset by low price Morven in
Pakistan.
PMI's cigarette shipment volume of the following brands
increased:
- Parliament, mainly driven by Russia, Saudi Arabia and
Turkey;
- Sampoerna A in Indonesia, primarily driven by premium A Mild;
and
- Sampoerna Hijau in Indonesia.
The increase in PMI's heated tobacco unit shipment volume was
mainly driven by the EU (notably Italy), Eastern Europe (notably
Russia) and Japan.
First-Quarter International Share of Market
PMI's total international market share (excluding China and the
U.S.), defined as PMI's cigarette and heated tobacco unit sales
volume as a percentage of total industry cigarette and heated
tobacco unit sales volume, decreased by 0.7 points to 26.8%,
reflecting:
- Total international market share for cigarettes of 23.3%, down
by 1.4 points; and
- Total international market share for heated tobacco units of
3.5%, up by 0.7 points.
PMI's total international cigarette sales volume as a percentage
of total industry cigarette sales volume was down by 1.2 points to
24.3%, mainly reflecting: out-switching to heated tobacco units, as
well as lower cigarette market share and/or an unfavorable
geographic mix impact, notably in Japan, the Philippines, PMI Duty
Free and Ukraine, partly offset by Turkey.
CONSOLIDATED FINANCIAL SUMMARY
Financial Summary
-
Quarters Ended
March 31,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2021
2020
Total
Excl.
Curr.
Total
Cur-
rency
Price
Vol/
Mix
Cost/
Other
(in millions)
Net Revenues
$
7,585
$
7,153
6.0
%
2.9
%
432
225
206
(31
)
32
Cost of Sales
(2,274
)
(2,402
)
5.3
%
9.0
%
128
(87
)
—
29
186
Marketing, Administration and Research
Costs
(1,849
)
(1,944
)
4.9
%
2.4
%
95
49
—
—
46
Amortization of Intangibles
(18
)
(18
)
—
%
—
%
—
—
—
—
—
Operating Income
$
3,444
$
2,789
23.5
%
16.8
%
655
187
206
(2
)
264
Asset Impairment & Exit Costs (1)
(48
)
—
—
%
—
%
(48
)
—
—
—
(48
)
Adjusted Operating Income
$
3,492
$
2,789
25.2
%
18.5
%
703
187
206
(2
)
312
Adjusted Operating Income
Margin
46.0
%
39.0
%
7.0
pp
5.9
pp
(1) Included in Marketing, Administration
and Research Costs above.
During the quarter, net revenues increased by 2.9% on an organic
basis, mainly reflecting: a favorable pricing variance (notably
driven by Germany, Japan, the Philippines and Turkey, partly offset
by Indonesia); and higher fees for certain distribution rights
billed to customers in certain markets, shown in "Cost/Other";
partly offset by unfavorable volume/mix, primarily due to lower
cigarette volume (mainly in Indonesia, Japan, North Africa, the
Philippines, PMI Duty Free and Spain), partially offset by higher
heated tobacco unit volume (notably in the EU, Japan and Russia,
partly offset by PMI Duty Free).
Operating income increased by 16.8%, excluding currency,
primarily reflecting: a favorable pricing variance; lower
manufacturing costs (driven by productivity gains related to
reduced-risk and combustible products); lower marketing,
administration and research costs (largely driven by cost
efficiencies, partially offset by the impact of 2021 asset
impairment and exit costs of $48 million related to product
distribution restructuring in Korea and organizational design
optimization); and higher fees for certain distribution rights, as
noted above for net revenues.
Adjusted operating income increased by 18.5%, on an organic
basis. Adjusted operating income margin increased by 5.9 points on
the same basis, as detailed in Schedule 6.
EUROPEAN UNION REGION
Financial Summary
-
Quarters Ended
March 31,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2021
2020
Total
Excl.
Curr.
Total
Cur-
rency
Price
Vol/
Mix
Cost/
Other
(in millions)
Net Revenues
$
2,909
$
2,535
14.8
%
5.5
%
374
235
37
102
—
Operating Income
$
1,490
$
1,158
28.7
%
15.2
%
332
156
37
101
38
Asset Impairment & Exit Costs (1)
(9
)
—
—
%
—
%
(9
)
—
—
—
(9
)
Adjusted Operating Income
$
1,499
$
1,158
29.4
%
16.0
%
341
156
37
101
47
Adjusted Operating Income
Margin
51.5
%
45.7
%
5.8
pp
4.5
pp
(1) Included in marketing, administration
and research costs at the consolidated operating income level.
During the quarter, net revenues increased by 5.5% on an organic
basis, reflecting: favorable volume/mix, mainly driven by higher
heated tobacco unit volume (notably in Germany and Italy), partly
offset by lower cigarette volume (notably in Spain); and a
favorable pricing variance (driven by higher combustible pricing,
particularly in Germany).
Operating income increased by 15.2%, excluding currency,
primarily reflecting: favorable volume/mix, driven by the same
factors as for net revenues noted above; lower manufacturing costs
(driven mainly by reduced-risk products); and a favorable pricing
variance; partly offset by higher marketing, administration and
research costs (including the impact of 2021 asset impairment and
exit costs related to organizational design optimization).
Adjusted operating income increased by 16.0% on an organic
basis. Adjusted operating income margin increased by 4.5 points on
the same basis, as detailed in Schedule 6.
Total Market, PMI Shipment & Market Share
Commentaries
European Union Key Data
First-Quarter
Change
2021
2020
% / pp
Total Market (billion units)
105.8
109.4
(3.3
)%
PMI Shipment Volume (million
units)
Cigarettes
36,769
40,646
(9.5
)%
Heated Tobacco Units
6,426
4,661
37.9
%
Total EU
43,195
45,307
(4.7
)%
PMI Market Share
Marlboro
17.1%
17.6%
(0.5
)
L&M
5.8%
6.5%
(0.7
)
Chesterfield
5.5%
5.6%
(0.1
)
Philip Morris
2.2%
2.6%
(0.4
)
HEETS
5.7%
3.9%
1.8
Others
3.2%
3.2%
—
Total EU
39.5%
39.4%
0.1
Note: HEETS includes HEETS Dimensions.
In the quarter, the estimated total market in the EU decreased
by 3.3% to 105.8 billion units, notably driven by:
- Czech Republic, down by 24.9%, mainly reflecting lower border
sales due to pandemic-related lockdown measures;
- Denmark, down by 58.9%, or by 15.1% excluding the net
unfavorable impact of estimated trade inventory movements,
primarily reflecting the impact of excise tax-driven price
increases;
- Romania, down by 12.8%, mainly reflecting the impact of
pandemic-related lockdown measures; and
- Spain, down by 7.7%, notably reflecting lower in-bound tourism
due to the pandemic;
partly offset by
- Germany, up by 8.5%, primarily reflecting the pandemic-related
impact of lower cross-border (non-domestic) purchases and reduced
out-bound tourism.
PMI's total shipment volume decreased by 4.7% to 43.2 billion
units, or by 3.0% excluding the net unfavorable impact of estimated
distributor inventory movements (notably in Spain), reflecting:
- lower cigarette shipment volume, mainly due to the lower total
market, as well as lower market share (notably in Germany, Italy
and Poland, partly reflecting out-switching to heated tobacco
units);
partly offset by
- higher heated tobacco unit shipment volume across the Region,
driven by higher market share (notably in Germany, Hungary, Italy
and Poland).
EASTERN EUROPE REGION
Financial Summary
-
Quarters Ended
March 31,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2021
2020
Total
Excl.
Curr.
Total
Cur-
rency
Price
Vol/
Mix
Cost/
Other
(in millions)
Net Revenues
$
796
$
788
1.0
%
10.5
%
8
(75
)
24
59
—
Operating Income
$
261
$
99
+100
%
+100
%
162
7
24
57
74
Asset Impairment & Exit Costs (1)
(2
)
—
—
%
—
%
(2
)
—
—
—
(2
)
Adjusted Operating Income
$
263
$
99
+100
%
+100
%
164
7
24
57
76
Adjusted Operating Income
Margin
33.0
%
12.6
%
20.4
pp
16.8
pp
(1) Included in marketing, administration
and research costs at the consolidated operating income level.
During the quarter, net revenues increased by
10.5% on an organic basis, reflecting: favorable volume/mix, driven
by higher heated tobacco unit volume (primarily in Russia and
Ukraine); partly offset by unfavorable cigarette volume (mainly in
Ukraine); and a favorable pricing variance, driven by higher
combustible pricing (notably in Ukraine).
Operating income increased by over 100%, excluding currency
(note: currency variance includes a favorable comparison due to an
adverse transaction currency impact in the first quarter of 2020
related to the revaluation of foreign currency payables in Russia),
primarily reflecting: favorable volume/mix, driven by the same
factors as for net revenues noted above; lower manufacturing costs
(primarily related to reduced-risk products, mainly in Russia); a
favorable pricing variance; and lower marketing, administration and
research costs.
Adjusted operating income increased by over 100% on an organic
basis. Adjusted operating income margin increased by 16.8 points on
the same basis, as detailed in Schedule 6.
Total Market, PMI Shipment & Market Share
Commentaries
In the quarter, the estimated total market in Eastern Europe
decreased, mainly due to:
- Ukraine, down by 15.7%, or by 9.9% excluding the net
unfavorable impact of estimated trade inventory movements, mainly
reflecting the impact of excise tax-driven price increases and a
higher prevalence of illicit trade;
partly offset by
- Russia, up by 3.6%, primarily reflecting the net favorable
impact of estimated trade inventory movements, partly related to
the ban on discounts on cigarettes effective April 1, 2021.
Excluding these movements, the total estimated market decreased by
2.4%, mainly due to the impact of excise tax-driven price
increases, partly offset by a lower prevalence of illicit
trade.
PMI Shipment Volume
First-Quarter
(million units)
2021
2020
Change
Cigarettes
19,966
21,419
(6.8)%
Heated Tobacco Units
5,635
4,366
29.1%
Total Eastern Europe
25,601
25,785
(0.7)%
PMI's total shipment volume decreased by 0.7% to 25.6 billion
units, notably due to:
- Ukraine, down by 10.9%, or by 7.7% excluding the net
unfavorable impact of estimated distributor inventory movements,
mainly reflecting the lower total market, partly offset by a higher
market share driven by heated tobacco units;
partly offset by
- Russia, up by 4.2%. Excluding the net favorable impact of
estimated distributor inventory movements of 0.4 billion cigarettes
and 0.2 billion heated tobacco units, PMI's in-market sales
increased by 0.3%, mainly reflecting the higher total market,
partly offset by a lower market share due to cigarettes.
MIDDLE EAST & AFRICA REGION
Financial Summary
-
Quarters Ended
March 31,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2021
2020
Total
Excl.
Curr.
Total
Cur-
rency
Price
Vol/
Mix
Cost/
Other
(in millions)
Net Revenues
$
801
$
876
(8.6
)%
(5.9
)%
(75
)
(23
)
77
(159
)
30
Operating Income
$
335
$
321
4.4
%
8.4
%
14
(13
)
77
(130
)
80
Asset Impairment & Exit Costs (1)
(2
)
—
—
%
—
%
(2
)
—
—
—
(2
)
Adjusted Operating Income
$
337
$
321
5.0
%
9.0
%
16
(13
)
77
(130
)
82
Adjusted Operating Income
Margin
42.1
%
36.6
%
5.5
pp
5.9
pp
(1) Included in marketing, administration
and research costs at the consolidated operating income level.
During the quarter, net revenues decreased by 5.9% on an organic
basis, primarily reflecting: unfavorable volume/mix, mainly due to
lower cigarette and heated tobacco unit volume in PMI Duty Free, as
well as lower cigarette volume in North Africa (particularly
Egypt); partly offset by a favorable pricing variance (driven by
combustible pricing, mainly in Turkey); and higher fees for certain
distribution rights billed to customers in certain markets, shown
in "Cost/Other."
Operating income increased by 8.4%, excluding currency, mainly
reflecting: a favorable pricing variance; lower marketing,
administration and research costs; higher fees for certain
distribution rights, as noted above for net revenues; and lower
manufacturing costs; partly offset by unfavorable volume/mix, due
to the same factors as for net revenues noted above.
Adjusted operating income increased by 9.0% on an organic basis.
Adjusted operating income margin increased by 5.9 points on the
same basis, as detailed in Schedule 6.
Total Market, PMI Shipment & Market Share
Commentaries
In the quarter, the estimated total market in the Middle East
& Africa decreased, mainly due to:
- International Duty Free, down by 58.4%, reflecting the impact
of government travel restrictions and reduced passenger traffic due
to the pandemic; and
- South Africa, down by 29.2%, primarily reflecting a higher
estimated prevalence of illicit trade resulting from the
pandemic-related ban on all tobacco sales from March 27, 2020,
through August 17, 2020;
partly offset by
- Egypt, up by 7.6%, or by 4.6% excluding the net favorable
impact of estimated trade inventory movements, notably reflecting a
lower estimated prevalence of illicit trade and in-switching to
cigarettes from other combustible tobacco products.
PMI Shipment Volume
First-Quarter
(million units)
2021
2020
Change
Cigarettes
27,642
29,996
(7.8)%
Heated Tobacco Units
396
470
(15.7)%
Total Middle East & Africa
28,038
30,466
(8.0)%
PMI's total shipment volume decreased by 8.0% to 28.0 billion
units, notably due to:
- Egypt, down by 16.6%, or by 9.1% excluding the net unfavorable
impact of estimated distributor inventory movements, mainly
reflecting a lower market share (notably for L&M); and
- PMI Duty Free, down by 67.4%, or by 54.5% excluding the net
unfavorable impact of estimated distributor inventory movements
(due to cigarettes), mainly reflecting the lower total market for
both cigarettes and heated tobacco units;
partly offset by
- Turkey, up by 7.9%, primarily reflecting a higher market share,
driven by the growth of Marlboro and Parliament, partly offset by a
lower total market.
SOUTH & SOUTHEAST ASIA REGION
Financial Summary
-
Quarters Ended
March 31,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2021
2020
Total
Excl.
Curr.
Total
Cur-
rency
Price
Vol/
Mix
Cost/
Other
(in millions)
Net Revenues
$
1,173
$
1,251
(6.2
)%
(8.5
)%
(78
)
28
(38
)
(68
)
—
Operating Income
$
529
$
599
(11.7
)%
(13.9
)%
(70
)
13
(38
)
(72
)
27
Asset Impairment & Exit Costs (1)
(3
)
—
—
%
—
%
(3
)
—
—
—
(3
)
Adjusted Operating Income
$
532
$
599
(11.2
)%
(13.4
)%
(67
)
13
(38
)
(72
)
30
Adjusted Operating Income
Margin
45.4
%
47.9
%
(2.5
)pp
(2.6
)pp
(1) Included in marketing, administration
and research costs at the consolidated operating income level.
During the quarter, net revenues decreased by 8.5% on an organic
basis, reflecting: unfavorable volume/mix, due to lower cigarette
volume in Indonesia and the Philippines, partly offset by favorable
cigarette mix in Indonesia and the Philippines; and an unfavorable
pricing variance, due to Indonesia, partially offset by the
Philippines.
Operating income decreased by 13.9%, excluding currency,
primarily reflecting: unfavorable volume/mix, due to the same
factors as for net revenues noted above; and an unfavorable pricing
variance; partly offset by lower marketing, administration and
research costs.
Adjusted operating income decreased by 13.4% on an organic
basis. Adjusted operating income margin decreased by 2.6 points on
the same basis, as detailed in Schedule 6.
Total Market, PMI Shipment & Market Share
Commentaries
In the quarter, the estimated total market in South &
Southeast Asia increased, notably due to:
- Indonesia, up by 4.9%, mainly reflecting the growth of the
tax-advantaged 'below tier one' segment; and
- Pakistan, up by 26.7%, or by 5.0% excluding the net favorable
impact of estimated trade inventory movements, primarily reflecting
a lower prevalence of illicit trade;
partly offset by
- the Philippines, down by 14.4%, primarily reflecting the impact
of industry-wide price increases in the fourth quarter of
2020.
PMI Shipment Volume
First-Quarter
(million units)
2021
2020
Change
Cigarettes
34,888
37,595
(7.2)%
Heated Tobacco Units
33
—
—%
Total South & Southeast
Asia
34,921
37,595
(7.1)%
PMI's total shipment volume decreased by 7.1% to 34.9 billion
units, notably due to:
- Indonesia, down by 2.7%, primarily reflecting a lower market
share, mainly due to adult smoker down-trading to the 'below tier
one' segment as a result of significantly lower retail prices;
and
- the Philippines, down by 23.9%, mainly reflecting the lower
total market, and a lower market share (due primarily to mid-price
Fortune, reflecting the impact of price increases in the fourth
quarter of 2020, partly offset by Marlboro);
partly offset by
- Pakistan, up by 19.8%, primarily reflecting the higher total
market.
EAST ASIA & AUSTRALIA REGION
Financial Summary
-
Quarters Ended
March 31,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2021
2020
Total
Excl.
Curr.
Total
Cur-
rency
Price
Vol/
Mix
Cost/
Other
(in millions)
Net Revenues
$
1,472
$
1,255
17.3
%
11.6
%
217
71
105
41
—
Operating Income
$
695
$
486
43.0
%
39.3
%
209
18
105
58
28
Asset Impairment & Exit Costs (1)
(31
)
—
—
%
—
%
(31
)
—
—
—
(31
)
Adjusted Operating Income
$
726
$
486
49.4
%
45.7
%
240
18
105
58
59
Adjusted Operating Income
Margin
49.3
%
38.7
%
10.6
pp
11.8
pp
(1) Included in marketing, administration
and research costs at the consolidated operating income level.
During the quarter, net revenues increased by 11.6% on an
organic basis, reflecting: a favorable pricing variance, primarily
driven by higher heated tobacco and combustible pricing in Japan;
and favorable volume/mix, mainly due to higher heated tobacco unit
volume in Japan, partly offset by: lower cigarette volume (mainly
in Japan, partially offset by Australia), unfavorable cigarette mix
(mainly in Australia and Japan), and unfavorable heated tobacco
unit mix in Japan.
Operating income increased by 39.3%, excluding currency, mainly
reflecting: a favorable pricing variance; favorable volume/mix, due
to the same factors as for net revenues noted above; and lower
manufacturing costs (primarily related to reduced-risk products in
Japan). Marketing, administration and research costs were
essentially stable, despite the unfavorable impact of 2021 asset
impairment and exit costs (primarily related to product
distribution restructuring in Korea).
Adjusted operating income increased by 45.7% on an organic
basis. Adjusted operating income margin increased by 11.8 points on
the same basis, as detailed in Schedule 6.
Total Market, PMI Shipment & Market Share
Commentaries
In the quarter, the estimated total market in East Asia &
Australia, excluding China, decreased, primarily due to:
- Japan, down by 8.0%, primarily due to the impact of excise
tax-driven price increases in October 2020;
partly offset by
- Korea, up by 3.7%, mainly reflecting the shift of adult smokers
from duty-free to domestic purchases due to the pandemic-related
decline in international travel; and
- Taiwan, up by 12.7%, mainly reflecting the same factor as for
Korea.
PMI Shipment Volume
First-Quarter
(million units)
2021
2020
Change
Cigarettes
11,362
12,299
(7.6)%
Heated Tobacco Units
9,139
7,122
28.3%
Total East Asia & Australia
20,501
19,421
5.6%
PMI's total shipment volume increased by 5.6% to 20.5 billion
units, or decreased by 0.2% excluding the net favorable impact of
estimated distributor inventory movements, notably reflecting:
- Japan, up by 7.8%. Excluding the net favorable impact of
estimated distributor inventory movements of 1.1 billion heated
tobacco units (primarily driven by inventory movements in the first
quarter of 2020), PMI's in-market sales decreased by 0.8%, mainly
due to the lower total market, partly offset by a higher market
share driven by heated tobacco units.
LATIN AMERICA & CANADA REGION
Financial Summary
-
Quarters Ended
March 31,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2021
2020
Total
Excl.
Curr.
Total
Cur-
rency
Price
Vol/
Mix
Cost/
Other
(in millions)
Net Revenues
$
434
$
448
(3.1
)%
(0.7
)%
(14
)
(11
)
1
(6
)
2
Operating Income
$
134
$
126
6.3
%
1.6
%
8
6
1
(16
)
17
Asset Impairment & Exit Costs (1)
(1
)
—
—
%
—
%
(1
)
—
—
—
(1
)
Adjusted Operating Income
$
135
$
126
7.1
%
2.4
%
9
6
1
(16
)
18
Adjusted Operating Income
Margin
31.1
%
28.1
%
3.0
pp
0.9
pp
(1) Included in marketing, administration
and research costs at the consolidated operating income level.
During the quarter, net revenues decreased by 0.7% on an organic
basis, mainly reflecting: unfavorable volume/mix, notably due to
lower cigarette volume in Colombia, partly offset by Brazil.
Operating income increased by 1.6%, excluding currency,
primarily reflecting: lower marketing, administration and research
costs (mainly related to combustible products); partly offset by
unfavorable volume/mix, due to the same factors as for net revenues
noted above.
Adjusted operating income increased by 2.4% on an organic basis.
Adjusted operating income margin increased by 0.9 points on the
same basis, as detailed in Schedule 6.
Total Market, PMI Shipment & Market Share
Commentaries
In the quarter, the estimated total market in Latin America
& Canada increased, mainly due to:
- Argentina, up by 14.2%, or by 9.4% excluding the net favorable
impact of estimated trade inventory movements, primarily reflecting
a lower estimated prevalence of illicit trade; and
- Brazil, up by 8.3%, mainly reflecting a lower estimated
prevalence of illicit trade due to: reduced price gaps with legal
products and the impact of border restrictions imposed as a result
of the pandemic.
PMI Shipment Volume
First-Quarter
(million units)
2021
2020
Change
Cigarettes
14,885
15,063
(1.2)%
Heated Tobacco Units
105
108
(2.8)%
Total Latin America &
Canada
14,990
15,171
(1.2)%
PMI's total shipment volume decreased by 1.2% to 15.0 billion
units, notably due to:
- Colombia, down by 15.3%, primarily reflecting a lower total
market, primarily due to the impact of price increases in January
2021 and increased pandemic-related restrictions;
partly offset by
- Brazil, up by 9.7%, mainly reflecting the higher total
market.
Excluding the net unfavorable impact of estimated distributor
inventory movements, PMI's heated tobacco unit in-market sales
volume in the Region increased by 10.1%.
Philip Morris International: Delivering a Smoke-Free
Future
Philip Morris International (PMI) is leading a transformation in
the tobacco industry to create a smoke-free future and ultimately
replace cigarettes with smoke-free products to the benefit of
adults who would otherwise continue to smoke, society, the company
and its shareholders. PMI is a leading international tobacco
company engaged in the manufacture and sale of cigarettes, as well
as smoke-free products, associated electronic devices and
accessories, and other nicotine-containing products in markets
outside the U.S. In addition, PMI ships versions of its IQOS
Platform 1 device and consumables to Altria Group, Inc. for sale
under license in the U.S., where these products have received
marketing authorizations from the U.S. Food and Drug Administration
(FDA) under the premarket tobacco product application (PMTA)
pathway; the FDA has also authorized the marketing of a version of
IQOS and its consumables as a Modified Risk Tobacco Product (MRTP),
finding that an exposure modification order for these products is
appropriate to promote the public health. PMI is building a future
on a new category of smoke-free products that, while not risk-free,
are a much better choice than continuing to smoke. Through
multidisciplinary capabilities in product development,
state-of-the-art facilities and scientific substantiation, PMI aims
to ensure that its smoke-free products meet adult consumer
preferences and rigorous regulatory requirements. PMI's smoke-free
product portfolio includes heat-not-burn and nicotine-containing
vapor products. As of March 31, 2021, PMI's smoke-free products are
available for sale in 66 markets in key cities or nationwide, and
PMI estimates that approximately 14.0 million adults around the
world have already switched to IQOS and stopped smoking. For more
information, please visit www.pmi.com and www.pmiscience.com.
Forward-Looking and Cautionary Statements
This press release contains projections of future results and
other forward-looking statements. Achievement of future results is
subject to risks, uncertainties and inaccurate assumptions. In the
event that risks or uncertainties materialize, or underlying
assumptions prove inaccurate, actual results could vary materially
from those contained in such forward-looking statements. Pursuant
to the “safe harbor” provisions of the Private Securities
Litigation Reform Act of 1995, PMI is identifying important factors
that, individually or in the aggregate, could cause actual results
and outcomes to differ materially from those contained in any
forward-looking statements made by PMI.
PMI's business risks include: excise tax increases and
discriminatory tax structures; increasing marketing and regulatory
restrictions that could reduce our competitiveness, eliminate our
ability to communicate with adult consumers, or ban certain of our
products; health concerns relating to the use of tobacco and other
nicotine-containing products and exposure to environmental tobacco
smoke; litigation related to tobacco use and intellectual property;
intense competition; the effects of global and individual country
economic, regulatory and political developments, natural disasters
and conflicts; changes in adult smoker behavior; lost revenues as a
result of counterfeiting, contraband and cross-border purchases;
governmental investigations; unfavorable currency exchange rates
and currency devaluations, and limitations on the ability to
repatriate funds; adverse changes in applicable corporate tax laws;
adverse changes in the cost, availability, and quality of tobacco
and other agricultural products and raw materials, as well as
components and materials for our electronic devices; and the
integrity of its information systems and effectiveness of its data
privacy policies. PMI's future profitability may also be adversely
affected should it be unsuccessful in its attempts to produce and
commercialize reduced-risk products or if regulation or taxation do
not differentiate between such products and cigarettes; if it is
unable to successfully introduce new products, promote brand
equity, enter new markets or improve its margins through increased
prices and productivity gains; if it is unable to expand its brand
portfolio internally or through acquisitions and the development of
strategic business relationships; or if it is unable to attract and
retain the best global talent. Future results are also subject to
the lower predictability of our reduced-risk product category's
performance.
The COVID-19 pandemic has created significant societal and
economic disruption, and resulted in closures of stores, factories
and offices, and restrictions on manufacturing, distribution and
travel, all of which will adversely impact our business, results of
operations, cash flows and financial position during the
continuation of the pandemic. Our business continuity plans and
other safeguards may not be effective to mitigate the impact of the
pandemic. Currently, significant risks include our diminished
ability to convert adult smokers to our RRPs, significant volume
declines in our duty-free business and certain other key markets,
disruptions or delays in our manufacturing and supply chain,
increased currency volatility, and delays in certain cost saving,
transformation and restructuring initiatives. Our business could
also be adversely impacted if key personnel or a significant number
of employees or business partners become unavailable due to the
COVID-19 outbreak. The significant adverse impact of COVID-19 on
the economic or political conditions in markets in which we operate
could result in changes to the preferences of our adult consumers
and lower demand for our products, particularly for our mid-price
or premium-price brands. Continuation of the pandemic could disrupt
our access to the credit markets or increase our borrowing costs.
Governments may temporarily be unable to focus on the development
of science-based regulatory frameworks for the development and
commercialization of RRPs or on the enforcement or implementation
of regulations that are significant to our business. In addition,
messaging about the potential negative impacts of the use of our
products on COVID-19 risks may lead to increasingly restrictive
regulatory measures on the sale and use of our products, negatively
impact demand for our products, the willingness of adult consumers
to switch to our RRPs and our efforts to advocate for the
development of science-based regulatory frameworks for the
development and commercialization of RRPs.
The impact of these risks also depends on factors beyond our
knowledge or control, including the duration and severity of the
pandemic, its recurrence in our key markets, actions taken to
contain its spread and to mitigate its public health effects, and
the ultimate economic consequences thereof.
PMI is further subject to other risks detailed from time to time
in its publicly filed documents, including the Form 10-K for the
year ended December 31, 2020. PMI cautions that the foregoing list
of important factors is not a complete discussion of all potential
risks and uncertainties. PMI does not undertake to update any
forward-looking statement that it may make from time to time,
except in the normal course of its public disclosure
obligations.
Key Terms, Definitions and Explanatory Notes
General
- "PMI" refers to Philip Morris International Inc. and its
subsidiaries. Trademarks and service marks that are the registered
property of, or licensed by, the subsidiaries of PMI, are
italicized.
- Comparisons are made to the same prior-year period unless
otherwise stated.
- Unless otherwise stated, references to total industry, total
market, PMI shipment volume and PMI market share performance
reflect cigarettes and heated tobacco units.
- References to total international market, defined as worldwide
cigarette and heated tobacco unit volume excluding the U.S., total
industry, total market and market shares are PMI estimates for
tax-paid products based on the latest available data from a number
of internal and external sources and may, in defined instances,
exclude the People's Republic of China and/or PMI's duty free
business.
- 2020 and 2021 estimates for total industry volume and market
share in certain geographies reflect limitations on the
availability and accuracy of industry data during pandemic-related
restrictions.
- "OTP" is defined as "other tobacco products," primarily
roll-your-own and make-your-own cigarettes, pipe tobacco, cigars
and cigarillos, and does not include reduced-risk products.
- "Combustible products" is the term PMI uses to refer to
cigarettes and OTP, combined.
- In-market sales, or "IMS," is defined as sales to the retail
channel, depending on the market and distribution model.
- "Total shipment volume" is defined as the combined total of
cigarette shipment volume and heated tobacco unit shipment
volume.
- "North Africa" is defined as Algeria, Egypt, Libya, Morocco and
Tunisia.
- "The GCC" (Gulf Cooperation Council) is defined as Bahrain,
Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates
(UAE).
- Following the deconsolidation of PMI's Canadian subsidiary,
Rothmans, Benson & Hedges, Inc. (RBH) on March 22, 2019, PMI
continues to report the volume of brands sold by RBH for which
other PMI subsidiaries are the trademark owner. These include
HEETS, Next, Philip Morris and Rooftop.
- From time to time, PMI’s shipment volumes are subject to the
impact of distributor inventory movements, and estimated total
industry/market volumes are subject to the impact of inventory
movements in various trade channels that include estimated trade
inventory movements of PMI’s competitors arising from
market-specific factors that significantly distort reported volume
disclosures. Such factors may include changes to the manufacturing
supply chain, shipment methods, consumer demand, timing of excise
tax increases or other influences that may affect the timing of
sales to customers. In such instances, in addition to reviewing PMI
shipment volumes and certain estimated total industry/market
volumes on a reported basis, management reviews these measures on
an adjusted basis that excludes the impact of distributor and/or
estimated trade inventory movements. Management also believes that
disclosing PMI shipment volumes and estimated total industry/market
volumes in such circumstances on a basis that excludes the impact
of distributor and/or estimated trade inventory movements, such as
on an IMS basis, improves the comparability of performance and
trends for these measures over different reporting periods.
Financial
- Net revenues related to combustible products refer to the
operating revenues generated from the sale of these products,
including shipping and handling charges billed to customers, net of
sales and promotion incentives, and excise taxes. PMI recognizes
revenue when control is transferred to the customer, typically
either upon shipment or delivery of goods.
- Net revenues related to RRPs represent the sale of heated
tobacco units, heat-not-burn devices and related accessories, and
other nicotine-containing products, primarily e-vapor products,
including shipping and handling charges billed to customers, net of
sales and promotion incentives, and excise taxes. PMI recognizes
revenue when control is transferred to the customer, typically
either upon shipment or delivery of goods.
- "Cost of sales" consists principally of: tobacco leaf,
non-tobacco raw materials, labor and manufacturing costs; shipping
and handling costs; and the cost of devices produced by third-party
electronics manufacturing service providers. Estimated costs
associated with device warranty programs are generally provided for
in cost of sales in the period the related revenues are
recognized.
- "Marketing, administration and research costs" include the
costs of marketing and selling our products, other costs generally
not related to the manufacture of our products (including general
corporate expenses), and costs incurred to develop new products.
The most significant components of our marketing, administration
and research costs are marketing and sales expenses and general and
administrative expenses.
- "Cost/Other" in the Consolidated Financial Summary table of
total PMI and the six operating segments of this release reflects
the currency-neutral variances of: cost of sales (excluding the
volume/mix cost component); marketing, administration and research
costs (including asset impairment and exit costs); and amortization
of intangibles. “Cost/Other” also includes the currency-neutral net
revenue variance, unrelated to volume/mix and price components,
attributable to fees for certain distribution rights billed to
customers in certain markets in the ME&A Region.
- "Adjusted Operating Income Margin" is calculated as adjusted
operating income, divided by net revenues.
- "Adjusted EBITDA" is defined as earnings before interest,
taxes, depreciation, amortization and equity (income)/loss in
unconsolidated subsidiaries, excluding asset impairment and exit
costs, and unusual items.
- "Net debt" is defined as total debt, less cash and cash
equivalents.
- Growth rates presented on an organic basis reflect
currency-neutral underlying results.
- Management reviews net revenues, operating income, operating
income margin, operating cash flow and earnings per share, or
"EPS," on an adjusted basis, which may exclude the impact of
currency and other items such as acquisitions, asset impairment and
exit costs, tax items and other special items. Organic growth rates
reflect the way management views underlying performance for these
measures. PMI believes that such measures provide useful insight
into underlying business trends and results.
- Management reviews these measures because they exclude changes
in currency exchange rates and other factors that may distort
underlying business trends, thereby improving the comparability of
PMI’s business performance between reporting periods. Furthermore,
PMI uses several of these measures in its management compensation
program to promote internal fairness and a disciplined assessment
of performance against company targets. PMI discloses these
measures to enable investors to view the business through the eyes
of management.
- Non-GAAP measures used in this release should neither be
considered in isolation nor as a substitute for the financial
measures prepared in accordance with U.S. GAAP. For a
reconciliation of non-GAAP measures to the most directly comparable
U.S. GAAP measures, see the relevant schedules provided with this
press release.
- U.S. GAAP Treatment of Argentina as a Highly Inflationary
Economy. Following the categorization of Argentina by the
International Practices Task Force of the Center for Audit Quality
as a country with a three-year cumulative inflation rate greater
than 100%, the country is considered highly inflationary in
accordance with U.S. GAAP. Consequently, PMI began to account for
the operations of its Argentinian affiliates as highly
inflationary, and to treat the U.S. dollar as the functional
currency of the affiliates, effective July 1, 2018.
- "Fair value adjustment for equity security investments"
reflects the adjustment resulting from share price movements in
passive investments for publicly traded entities that are not
controlled or influenced by PMI. Under U.S. GAAP, such adjustments
are required, since January 1, 2018, to be reflected directly in
the income statement.
Reduced-Risk Products
- Reduced-risk products (“RRPs”) is the term PMI uses to refer to
products that present, are likely to present, or have the potential
to present less risk of harm to smokers who switch to these
products versus continuing smoking. PMI has a range of RRPs in
various stages of development, scientific assessment and
commercialization. PMI's RRPs are smoke-free products that produce
an aerosol that contains far lower quantities of harmful and
potentially harmful constituents than found in cigarette
smoke.
- "Heated tobacco units," or "HTUs," is the term PMI uses to
refer to heated tobacco consumables, which include the company's
HEETS, HEETS Creations, HEETS Dimensions, HEETS Marlboro and HEETS
FROM MARLBORO (defined collectively as HEETS), Marlboro Dimensions,
Marlboro HeatSticks and Parliament HeatSticks, as well as the
KT&G-licensed brands, Fiit and Miix (outside of Korea).
- Market share for HTUs is defined as the total sales volume for
HTUs as a percentage of the total estimated sales volume for
cigarettes and HTUs.
- Unless otherwise stated, all references to IQOS are to PMI's
Platform 1 IQOS devices and heated tobacco consumables.
- The IQOS heat-not-burn device is a precisely controlled heating
device into which a specially designed and proprietary tobacco unit
is inserted and heated to generate an aerosol.
- "PMI heat-not-burn products" include licensed KT&G
heat-not-burn products.
- "PMI HTUs" include licensed KT&G HTUs.
- “Total IQOS users” is defined as the estimated number of Legal
Age (minimum 18 years) users of PMI heat-not-burn products for
which PMI HTUs represented at least 5% of their daily tobacco
consumption over the past seven days. Note: as of December 2020,
PMI heat-not-burn products and HTUs include licensed KT&G
heat-not-burn products and HTUs, respectively.
- The estimated number of adults who have "switched to IQOS and
stopped smoking" reflects:
- for markets where there are no heat-not-burn products other
than PMI heat-not-burn products: daily individual consumption of
PMI HTUs represents the totality of their daily tobacco consumption
in the past seven days;
- for markets where PMI heat-not-burn products are among other
heat-not-burn products: daily individual consumption of HTUs
represents the totality of their daily tobacco consumption in the
past seven days, of which at least 70% is PMI HTUs.
Note: as of December 2020, PMI heat-not-burn products and HTUs
include licensed KT&G heat-not-burn products and HTUs,
respectively.
IQOS in the United States
- On April 30, 2019, the U.S. Food and Drug Administration (FDA)
announced that the marketing of a version of PMI's Platform 1
product, namely, IQOS 2.4, together with its heated tobacco units
(the term PMI uses to refer to heated tobacco consumables), is
appropriate for the protection of public health and authorized it
for sale in the U.S. The FDA’s decision followed its comprehensive
assessment of PMI’s premarket tobacco product applications (PMTAs)
submitted to the Agency in 2017.
- In the third quarter of 2019, PMI brought IQOS 2.4 and three
variants of its heated tobacco units to the U.S. through its
license with Altria Group, Inc., whose subsidiary, Philip Morris
USA Inc., is responsible for marketing the product and complying
with the provisions set forth in the FDA's marketing orders.
- On July 7, 2020, the FDA authorized the marketing of a version
of PMI's Platform 1 product, namely, IQOS 2.4, together with its
heated tobacco units, as a Modified Risk Tobacco Product (MRTP). In
doing so, the agency found that an IQOS exposure modification order
is appropriate to promote the public health. The decision followed
a review of the extensive scientific evidence package PMI submitted
to the FDA in December 2016 to support its MRTP applications.
- On December 7, 2020, the FDA confirmed that the marketing of a
version of PMI's Platform 1 product, namely, IQOS 3, is appropriate
for the protection of public health and authorized it for sale in
the U.S. The FDA’s decision followed an assessment of a PMI's PMTA
filed with the agency in March 2020.
- Shipment volume of heated tobacco units to the U.S. is included
in the heated tobacco unit shipment volume of the Latin America
& Canada segment. Revenues from shipments of Platform 1
devices, heated tobacco units and accessories to Altria Group, Inc.
for sale under license in the U.S. are included in Net Revenues of
the Latin America & Canada segment.
Appendix 1
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Key Market Data
Quarters Ended March
31,
Market
Total Market,
bio units
PMI Shipments, bio
units
PMI Market Share, %
(1)
Total
Cigarette
HTU
Total
HTU
2021
2020
% Change
2021
2020
% Change
2021
2020
% Change
2021
2020
% Change
2021
2020
pp Change
2021
2020
pp Change
Total
611.2
615.6
(0.7
)
167.2
173.7
(3.7
)
145.5
157.0
(7.3
)
21.7
16.7
29.9
26.8
27.5
(0.7
)
3.5
2.8
0.7
European Union
France
8.2
8.3
(2.1
)
3.8
4.0
(6.4
)
3.7
4.0
(6.8
)
0.1
—
—
43.6
44.5
(0.9
)
0.6
0.4
0.2
Germany
17.4
16.0
8.5
7.1
6.7
5.1
6.5
6.4
1.8
0.6
0.4
60.3
40.9
42.2
(1.3
)
3.6
2.4
1.2
Italy
15.9
15.7
1.4
9.6
9.2
4.7
7.5
7.8
(3.7
)
2.2
1.4
50.2
52.8
51.9
0.9
11.3
7.4
3.9
Poland
10.8
10.8
(0.8
)
4.0
4.3
(8.8
)
3.4
3.9
(13.0
)
0.6
0.5
25.3
36.7
40.0
(3.3
)
5.4
4.3
1.1
Spain
9.6
10.4
(7.7
)
2.7
3.7
(26.1
)
2.6
3.5
(26.0
)
0.1
0.1
(28.0
)
31.2
30.9
0.3
1.2
0.9
0.3
Eastern Europe
Russia
48.6
46.9
3.6
15.7
15.0
4.2
12.1
12.4
(2.4
)
3.6
2.6
35.4
31.3
32.3
(1.0
)
7.7
6.5
1.2
Middle East & Africa
Saudi Arabia
5.5
4.3
27.1
2.2
1.1
+100
2.2
1.0
+100
—
—
—
42.1
40.6
1.5
0.8
—
0.8
Turkey
25.2
25.9
(2.8
)
11.0
10.2
7.9
11.0
10.2
7.9
—
—
—
43.4
38.9
4.5
—
—
—
South & Southeast Asia
Indonesia
70.8
67.4
4.9
19.9
20.4
(2.7
)
19.9
20.4
(2.7
)
—
—
—
28.1
30.3
(2.2
)
—
—
—
Philippines
13.1
15.3
(14.4
)
8.2
10.7
(23.9
)
8.1
10.7
(24.2
)
—
—
—
62.4
70.1
(7.7
)
0.2
—
0.2
East Asia & Australia
Australia
2.4
2.5
(4.3
)
0.8
0.7
11.8
0.8
0.7
11.8
—
—
—
32.7
28.0
4.7
—
—
—
Japan
32.6
35.5
(8.0
)
13.8
12.8
7.8
5.9
6.8
(13.7
)
7.9
6.0
32.4
39.2
36.3
2.9
23.4
19.1
4.3
Korea
16.8
16.2
3.7
3.4
3.5
(4.1
)
2.2
2.4
(8.3
)
1.1
1.1
5.6
20.1
21.8
(1.7
)
6.8
6.6
0.2
Latin America & Canada
Argentina
9.1
8.0
14.2
5.3
5.3
(0.2
)
5.3
5.3
(0.2
)
—
—
—
57.6
65.9
(8.3
)
—
—
—
Mexico
6.8
6.7
1.7
4.0
4.1
(0.7
)
4.0
4.1
(1.0
)
—
—
—
59.6
61.0
(1.4
)
0.3
0.2
0.1
(1) Market share estimates are calculated
using IMS data
Note: % change for Total Market and PMI
shipments is computed based on millions of units. "-" indicates
volume below 50 million units and market share below 0.1%
Schedule 1
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Diluted Earnings Per Share
(EPS)
($ in millions, except per share
data) / (Unaudited)
Diluted EPS
Quarters Ended
March 31,
2021 Diluted Earnings Per Share
(1)
$
1.55
2020 Diluted Earnings Per Share
(1)
$
1.17
Change
$
0.38
% Change
32.5
%
Reconciliation:
2020 Diluted Earnings Per Share
(1)
$
1.17
2020 Asset impairment and exit costs
—
2020 Fair value adjustment for equity
security investments
0.04
2020 Tax items
—
2021 Asset impairment and exit costs
(0.02
)
2021 Tax items
—
Currency
0.10
Interest
(0.02
)
Change in tax rate
0.04
Operations (2)
0.24
2021 Diluted Earnings Per Share
(1)
$
1.55
(1) Basic and diluted EPS were calculated
using the following (in millions):
Quarters Ended
March 31,
2021
2020
Net Earnings attributable to PMI
$
2,418
$
1,826
Less: Distributed and undistributed
earnings attributable to share-based payment awards
7
5
Net Earnings for basic and diluted EPS
$
2,411
$
1,821
Weighted-average shares for basic EPS
1,558
1,557
Plus Contingently Issuable Performance
Stock Units
2
1
Weighted-average shares for diluted
EPS
1,560
1,558
(2) Includes the impact of shares
outstanding and share-based payments
Schedule 2
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP
Measures
Reconciliation of Reported
Diluted EPS to Reported Diluted EPS, excluding Currency,
and Reconciliation of Reported
Diluted EPS to Adjusted Diluted EPS, excluding Currency
(Unaudited)
Quarters Ended March
31,
2021
2020
% Change
Reported Diluted EPS
$
1.55
$
1.17
32.5
%
Less: Currency
0.10
Reported Diluted EPS, excluding
Currency
$
1.45
$
1.17
23.9
%
Quarters Ended March
31,
Year Ended
2021
2020
% Change
2020
Reported Diluted EPS
$
1.55
$
1.17
32.5
%
$
5.16
Asset impairment and exit costs
0.02
—
0.08
Fair value adjustment for equity security
investments
—
0.04
0.04
Tax items
—
—
(0.06
)
Brazil indirect tax credit
—
—
(0.05
)
Adjusted Diluted EPS
$
1.57
$
1.21
29.8
%
$
5.17
Less: Currency
0.10
Adjusted Diluted EPS, excluding
Currency
$
1.47
$
1.21
21.5
%
Schedule 3
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP
Measures
Net Revenues by Product
Category and Adjustments of Net Revenues for the Impact of Currency
and Acquisitions
($ in millions) / (Unaudited)
Net Revenues
Currency
Net Revenues excluding
Currency
Acquisitions
Net Revenues excluding
Currency & Acquisitions
Quarters Ended March
31,
Net Revenues
Total
Excluding Currency
Excluding Currency &
Acquisitions
2021
Combustible Products
2020
% Change
$ 1,950
$ 160
$ 1,791
$ —
$ 1,791
European Union
$ 1,911
2.1%
(6.3)%
(6.3)%
492
(31)
522
—
522
Eastern Europe
523
(6.0)%
(0.1)%
(0.1)%
780
(23)
803
—
803
Middle East & Africa
832
(6.3)%
(3.5)%
(3.5)%
1,171
28
1,144
—
1,144
South & Southeast Asia
1,251
(6.4)%
(8.6)%
(8.6)%
648
35
613
—
613
East Asia & Australia
642
1.0%
(4.5)%
(4.5)%
422
(11)
433
—
433
Latin America & Canada
440
(4.1)%
(1.6)%
(1.6)%
$ 5,463
$ 158
$ 5,306
$ —
$ 5,306
Total Combustible
$ 5,598
(2.4)%
(5.2)%
(5.2)%
2021
Reduced-Risk Products
2020
% Change
$ 959
$ 75
$ 883
$ —
$ 883
European Union
$ 624
53.5%
41.4%
41.4%
304
(44)
349
—
349
Eastern Europe
265
14.7%
31.4%
31.4%
21
—
21
—
21
Middle East & Africa
44
(51.5)%
(52.0)%
(52.0)%
2
—
1
—
1
South & Southeast Asia
—
—%
—%
—%
824
36
788
—
788
East Asia & Australia
613
34.4%
28.5%
28.5%
12
—
12
—
12
Latin America & Canada
8
49.3%
51.2%
51.2%
$ 2,122
$ 67
$ 2,054
$ —
$ 2,054
Total RRPs
$ 1,555
36.5 %
32.1 %
32.1 %
2021
PMI
2020
% Change
$ 2,909
$ 235
$ 2,674
$ —
$ 2,674
European Union
$ 2,535
14.8%
5.5%
5.5%
796
(75)
871
—
871
Eastern Europe
788
1.0%
10.5%
10.5%
801
(23)
824
—
824
Middle East & Africa
876
(8.6)%
(5.9)%
(5.9)%
1,173
28
1,145
—
1,145
South & Southeast Asia
1,251
(6.2)%
(8.5)%
(8.5)%
1,472
71
1,401
—
1,401
East Asia & Australia
1,255
17.3%
11.6%
11.6%
434
(11)
445
—
445
Latin America & Canada
448
(3.1)%
(0.7)%
(0.7)%
$ 7,585
$ 225
$ 7,360
$ —
$ 7,360
Total PMI
$ 7,153
6.0 %
2.9 %
2.9 %
Note: Sum of product categories or Regions
might not foot to Total PMI due to roundings. “-“ indicates amounts
between -$0.5 million and +$0.5 million
Schedule 4
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP
Measures
Adjustments of Operating
Income for the Impact of Currency and Acquisitions
($ in millions) / (Unaudited)
Operating Income
Currency
Operating Income excluding
Currency
Acquisitions
Operating Income excluding
Currency & Acquisitions
Operating Income
Total
Excluding Currency
Excluding Currency &
Acquisitions
2021
Quarters Ended March
31,
2020
% Change
$ 1,490
(1)
$ 156
$ 1,334
$ —
$ 1,334
European Union
$ 1,158
28.7%
15.2%
15.2%
261
(1)
7
254
—
254
Eastern Europe
99
+100%
+100%
+100%
335
(1)
(13)
348
—
348
Middle East & Africa
321
4.4%
8.4%
8.4%
529
(1)
13
516
—
516
South & Southeast Asia
599
(11.7)%
(13.9)%
(13.9)%
695
(1)
18
677
—
677
East Asia & Australia
486
43.0%
39.3%
39.3%
134
(1)
6
128
—
128
Latin America & Canada
126
6.3%
1.6%
1.6%
$ 3,444
$ 187
$ 3,257
$ —
$ 3,257
Total PMI
$ 2,789
23.5%
16.8%
16.8%
(1) Includes asset impairment and exit
costs of $48 million: EU ($9 million), EE ($2 million), ME&A
($2 million), S&SA ($3 million), EA&A ($31 million) and
LA&C ($1 million)
Schedule 5
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP
Measures
Reconciliation of Operating
Income to Adjusted Operating Income, excluding Currency and
Acquisitions
($ in millions) / (Unaudited)
Operating Income
Asset Impairment & Exit
Costs
Adjusted Operating
Income
Currency
Adjusted Operating Income
excluding Currency
Acqui- sitions
Adjusted Operating Income
excluding Currency & Acqui- sitions
Operating Income
Asset Impairment & Exit
Costs
Adjusted Operating
Income
Total
Excluding Currency
Excluding Currency &
Acqui- sitions
2021
Quarters Ended March
31,
2020
% Change
$ 1,490
$ (9)
$ 1,499
$ 156
$ 1,343
$ —
$ 1,343
European Union
$ 1,158
$ —
$ 1,158
29.4%
16.0%
16.0%
261
(2)
263
7
256
—
256
Eastern Europe
99
—
99
+100%
+100%
+100%
335
(2)
337
(13)
350
—
350
Middle East & Africa
321
—
321
5.0%
9.0%
9.0%
529
(3)
532
13
519
—
519
South & Southeast Asia
599
—
599
(11.2)%
(13.4)%
(13.4)%
695
(31)
726
18
708
—
708
East Asia & Australia
486
—
486
49.4%
45.7%
45.7%
134
(1)
135
6
129
—
129
Latin America & Canada
126
—
126
7.1%
2.4%
2.4%
$ 3,444
$ (48)
$ 3,492
$ 187
$ 3,305
$ —
$ 3,305
Total PMI
$ 2,789
$ —
$ 2,789
25.2 %
18.5 %
18.5 %
Schedule 6
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP
Measures
Reconciliation of Adjusted
Operating Income Margin, excluding Currency and
Acquisitions
($ in millions) / (Unaudited)
Adjusted Operating Income
(1)
Net Revenues
Adjusted Operating Income
Margin
Adjusted Operating Income
excluding Currency (1)
Net Revenues excluding
Currency (2)
Adjusted Operating Income
Margin excluding Currency
Adjusted Operating Income
excluding Currency & Acqui- sitions (1)
Net Revenues excluding
Currency & Acqui- sitions (2)
Adjusted Operating Income
Margin excluding Currency & Acqui- sitions
Adjusted Operating Income
(1)
Net Revenues
Adjusted Operating Income
Margin
Adjusted Operating Income
Margin
Adjusted Operating Income
Margin excluding Currency
Adjusted Operating Income
Margin excluding Currency & Acqui- sitions
2021
Quarters Ended March
31,
2020
% Points Change
$ 1,499
$ 2,909
51.5%
$ 1,343
$ 2,674
50.2%
$ 1,343
$ 2,674
50.2%
European Union
$ 1,158
$ 2,535
45.7%
5.8
4.5
4.5
263
796
33.0%
256
871
29.4%
256
871
29.4%
Eastern Europe
99
788
12.6%
20.4
16.8
16.8
337
801
42.1%
350
824
42.5%
350
824
42.5%
Middle East & Africa
321
876
36.6%
5.5
5.9
5.9
532
1,173
45.4%
519
1,145
45.3%
519
1,145
45.3%
South & Southeast Asia
599
1,251
47.9%
(2.5)
(2.6)
(2.6)
726
1,472
49.3%
708
1,401
50.5%
708
1,401
50.5%
East Asia & Australia
486
1,255
38.7%
10.6
11.8
11.8
135
434
31.1%
129
445
29.0%
129
445
29.0%
Latin America & Canada
126
448
28.1%
3.0
0.9
0.9
$ 3,492
$ 7,585
46.0 %
$ 3,305
$ 7,360
44.9 %
$ 3,305
$ 7,360
44.9 %
Total PMI
$ 2,789
$ 7,153
39.0 %
7.0
5.9
5.9
(1) For the calculation of Adjusted
Operating Income and Adjusted Operating Income excluding currency
and acquisitions refer to Schedule 5
(2) For the calculation of Net Revenues
excluding currency and acquisitions refer to Schedule 3
Schedule 7
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Condensed Statements of
Earnings
($ in millions, except per share
data) / (Unaudited)
Quarters Ended March
31,
2021
2020
Change
Fav./(Unfav.)
Revenues including Excise Taxes
$
19,355
$
18,253
6.0
%
Excise Taxes on products
11,770
11,100
(6.0
)%
Net Revenues
7,585
7,153
6.0
%
Cost of sales
2,274
2,402
5.3
%
Gross profit
5,311
4,751
11.8
%
Marketing, administration and research
costs (1)
1,849
1,944
4.9
%
Amortization of intangibles
18
18
Operating Income
3,444
2,789
23.5
%
Interest expense, net
167
129
(29.5
)%
Pension and other employee benefit
costs
28
23
(21.7
)%
Earnings before income taxes
3,249
2,637
23.2
%
Provision for income taxes
697
596
(16.9
)%
Equity investments and securities
(income)/loss, net
(43
)
54
Net Earnings
2,595
1,987
30.6
%
Net Earnings attributable to
noncontrolling interests
177
161
Net Earnings attributable to
PMI
$
2,418
$
1,826
32.4
%
Per share data (2):
Basic Earnings Per Share
$
1.55
$
1.17
32.5
%
Diluted Earnings Per Share
$
1.55
$
1.17
32.5
%
(1) Includes in 2021 asset impairment and
exit costs ($48 million).
(2) Net Earnings and weighted-average
shares used in the basic and diluted Earnings Per Share
computations for the quarters ended March 31, 2021 and 2020 are
shown on Schedule 1, Footnote 1
Schedule 8
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Condensed Balance
Sheets
($ in millions, except ratios) /
(Unaudited)
March 31,
December 31,
2021
2020
Assets
Cash and cash equivalents
$
3,902
$
7,280
All other current assets
14,008
14,212
Property, plant and equipment, net
5,952
6,365
Goodwill
5,768
5,964
Other intangible assets, net
1,952
2,019
Equity investments
4,637
4,798
Other assets
3,585
4,177
Total assets
$
39,804
$
44,815
Liabilities and Stockholders' (Deficit)
Equity
Short-term borrowings
$
192
$
244
Current portion of long-term debt
1,930
3,124
All other current liabilities
13,093
16,247
Long-term debt
27,276
28,168
Deferred income taxes
511
684
Other long-term liabilities
6,376
6,979
Total liabilities
49,378
55,446
Total PMI stockholders' deficit
(11,548
)
(12,567
)
Noncontrolling interests
1,974
1,936
Total stockholders' (deficit)
equity
(9,574
)
(10,631
)
Total liabilities and stockholders'
(deficit) equity
$
39,804
$
44,815
Schedule 9
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP
Measures
Calculation of Total Debt to
Adjusted EBITDA and Net Debt to Adjusted EBITDA Ratios
($ in millions, except ratios) /
(Unaudited)
Year Ended March 31,
2021
Year Ended December 31,
2020
April ~ December
January ~ March
12 months
2020
2021
rolling
Net Earnings
$
6,605
$
2,595
$
9,200
$
8,592
Equity investments and securities
(income)/loss, net
(70
)
(43
)
(113
)
(16
)
Provision for income taxes
1,781
697
2,478
2,377
Interest expense, net
489
167
656
618
Depreciation and amortization
740
245
985
981
Asset impairment and exit costs and Others
(1)
30
48
78
30
Adjusted EBITDA
$
9,575
$
3,709
$
13,284
$
12,582
March 31,
December 31,
2021
2020
Short-term borrowings
$
192
$
244
Current portion of long-term debt
1,930
3,124
Long-term debt
27,276
28,168
Total Debt
$
29,398
$
31,536
Cash and cash equivalents
3,902
7,280
Net Debt
$
25,496
$
24,256
Ratios:
Total Debt to Adjusted EBITDA
2.21
2.51
Net Debt to Adjusted EBITDA
1.92
1.93
(1) For the period April 2020 to December
2020 and for the year ended December 31, 2020, “Others” include the
Brazil indirect tax credit $119 million that was recorded in the
fourth quarter of 2020.
Schedule 10
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP
Measures
Reconciliation of Operating
Cash Flow to Operating Cash Flow, excluding Currency
($ in millions) / (Unaudited)
Quarters Ended March
31,
2021
2020
% Change
Net cash provided by operating
activities (1)
$
435
$
1,111
(60.8
)%
Less: Currency
177
Net cash provided by operating
activities, excluding currency
$
258
$
1,111
(76.8
)%
(1) Operating cash flow
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210420005602/en/
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