2017 Full-Year
-- Reported diluted earnings per share of $3.88, down by $0.60 or 13.4%
versus $4.48 in 2016, including the unfavorable impact of tax
items of
$0.84 per share primarily related to the implementation of the
Tax
Cuts and Jobs Act, as detailed in the attached Schedule 17
-- Excluding unfavorable currency of $0.21, and the aforementioned tax
items, adjusted diluted earnings per share of $4.93, up by $0.45
or
10.0% versus $4.48 in 2016, as detailed in the attached Schedule
17
-- Cigarette and heated tobacco unit shipment volume of 798.2 billion,
down by 2.7%
-- International market share, excluding China and the United States,
down by 0.1 point to 28.0%
-- Reported net revenues of $78.1 billion, up by 4.2%
-- Net revenues, excluding excise taxes, of $28.7 billion, up by 7.7%
Excluding unfavorable currency of $437 million, net
revenues,
excluding excise taxes, up by 9.4% as detailed in the
attached
Schedule 14
-- Reported operating income of $11.5 billion, up by 6.4%
-- Operating companies income of $11.8 billion, up by 6.0%
Excluding unfavorable currency of $155 million, operating
companies income up by 7.4% as detailed in the attached Schedule
14
-- Adjusted operating companies income, reflecting the items detailed in
the attached Schedule 16, of $11.8 billion, up by 6.0%
Excluding unfavorable currency of $155 million, adjusted
operating
companies income up by 7.4% as detailed in the attached Schedule
16
-- Regular quarterly dividend increase of 2.9% to an annualized rate of
$4.28 per common share
2017 Fourth-Quarter
-- Reported diluted earnings per share of $0.44, down by $0.66 or 60.0%
versus $1.10 in 2016, including the unfavorable impact of tax
items of
$0.88 per share primarily related to the implementation of the
Tax
Cuts and Jobs Act, as detailed in the attached Schedule 13
-- Excluding favorable currency of $0.01, and the aforementioned tax
items, adjusted diluted earnings per share of $1.31, up by $0.21
or
19.1% versus $1.10 in 2016 as detailed in the attached Schedule
13
-- Cigarette and heated tobacco unit shipment volume of 212.1 billion, up
by 3.8%
-- Reported net revenues of $21.6 billion, up by 12.5%
-- Net revenues, excluding excise taxes, of $8.3 billion, up by 19.0%
Excluding favorable currency of $14 million, net revenues,
excluding excise taxes, up by 18.8% as detailed in the
attached
Schedule 10
-- Reported operating income of $3.3 billion, up by 27.0%
-- Operating companies income of $3.4 billion, up by 25.5%
Excluding favorable currency of $196 million, operating
companies
income up by 18.2% as detailed in the attached Schedule 10
-- Adjusted operating companies income, reflecting the items detailed in
the attached Schedule 12, of $3.4 billion, up by 25.5%
Excluding favorable currency of $196 million, adjusted
operating
companies income up by 18.2% as detailed in the attached
Schedule
12
2018 Full-Year Forecast
-- Reported diluted earnings per share forecast to be in a range of $5.20
to $5.35, at prevailing exchange rates, representing a
projected
increase of approximately 34% to 38% versus reported diluted
earnings
per share of $3.88 in 2017.
Excluding a favorable currency impact, at prevailing
exchange
rates, of approximately $0.16, the forecast range represents
a
projected increase of approximately 7% to 10% versus
adjusted
diluted earnings per share of $4.72 in 2017 as detailed in
the
attached Schedule 17.
-- This forecast assumes:
Net revenue growth, excluding excise taxes, of over 8.0%,
excluding currency;Operating cash flow of over $9.0
billion;Capital expenditures of approximately $1.7 billion; andNo
share repurchases.
-- This forecast excludes the impact of any future acquisitions,
unanticipated asset impairment and exit cost charges, future
changes
in currency exchange rates, further developments related to the
Tax
Cuts and Jobs Act as discussed below, and any unusual events.
Factors
described in the Forward-Looking and Cautionary Statements
section of
this release represent continuing risks to these
projections.
Impact of U.S. Tax Reform
In December 2017, the Tax Cuts and Jobs Act (the "Act") was
signed into law. The principal elements of the Act relevant to our
consolidated financial statements for the year ended December 31,
2017, were:
-- A reduction of the U.S. federal corporate tax rate from 35% to 21%; and
-- The requirement to pay a one-time transition tax on accumulated
foreign earnings, including 2017 earnings ("transition
tax").
In connection with these elements of the Act, PMI recognized a
provisional expense of $1.6 billion, which was included as a
component of income tax expense as follows:
-- A provisional charge of $1.4 billion, which represents the transition
tax of $2.2 billion, net of a reversal of $0.7 billion of
previously
recorded deferred tax liabilities on part of the accumulated
foreign
earnings, and other items of $0.1 billion; and
-- Re-measurement of U.S. deferred tax assets and liabilities using a
rate of 21%, which, under the Act, is expected to be in place
when
such deferred assets and liabilities reverse in the future.
In
connection with this re-measurement, we recorded a provisional
charge
of $0.2 billion.
While the impacts of the Act reduced net earnings by $1.6
billion, there was no net impact on operating cash flows for the
year, as the changes in deferred taxes and income taxes payable
offset the net earnings impact. At December 31, 2017, PMI recorded
an income tax payable of $1.7 billion representing the transition
tax of $2.2 billion, primarily offset by foreign tax credits
related to foreign withholding taxes previously paid of $0.5
billion. The income tax payable is due over an 8-year period
beginning in 2018.
Other provisions of the Act did not have a significant impact on
PMI's consolidated financial statements for the year ended December
31, 2017, but may impact the effective tax rate in subsequent
periods.
The Act has significant complexity and our final tax liability
may materially differ from these estimates, due to, among other
things, changes in PMI's assumptions, guidance that may be issued
by the U.S. Treasury Department and the Internal Revenue Service
and related interpretations and clarifications of tax law. For the
transition tax, further information is required to finalize the
estimated amount of accumulated foreign earnings as well as to
validate the amount of earnings represented by the aggregate
foreign cash position as defined in the Act. For the re-measurement
of the deferred tax assets and liabilities, further analysis will
be required to refine PMI's calculations and related account
balances. PMI will complete the remaining elements of its analysis
during 2018, and any adjustments to the provisional charges will be
included in income tax expense or benefit in the appropriate
period, in accordance with guidance provided by Staff Accounting
Bulletin No. 118.
Following the enactment of the Act, PMI's 2018 full-year diluted
earnings per share forecast -- based on the current interpretation
of the legislation -- assumes a full-year effective tax rate of
approximately 28%, subject to future regulatory developments and
earnings mix by taxing jurisdiction. The difference between the 21%
statutory rate under the new law and PMI's effective rate reflects
the fact that PMI operates in markets outside of the United States
and is driven by three main factors: foreign tax rate differences,
non-deductibility of interest expense and a partial disallowance of
foreign tax credits related to the application of the rules for
global intangible low-taxed income.
2017 FULL-YEAR AND FOURTH-QUARTER CONSOLIDATED RESULTS
Philip Morris International Inc. (NYSE/Euronext Paris: PM) today
announced its 2017 full-year and fourth-quarter results.
" A strong fourth-quarter performance helped drive robust
full-year results, exemplified by currency-neutral, double-digit
adjusted earnings per share growth, despite previously disclosed
challenges in Russia and Saudi Arabia ," said André Calantzopoulos,
Chief Executive Officer.
" The excellent performance of our flagship smoke-free product
IQOS -- not only in Asia, but also in the vast majority of our
launch geographies -- underscored its great promise and the
commitment of our employees to lead the transformation of our
industry towards a smoke-free future. Continued investment behind
IQOS in 2018 is expected to further drive its positive momentum
."
" For the first time since 2011, we have entered the year with
annual guidance that reflects a positive currency impact.Our
combustible product portfolio provides us with a strong
foundation.The confirmed potential of our smoke-free alternatives
reinforces our strong determination to deploy all necessary
resources to accelerate their growth, which will drive our business
success and ability to generously reward our shareholders over the
long term ."
Conference Call
A conference call, hosted by André Calantzopoulos, Chief
Executive Officer, and Martin King, Chief Financial Officer, with
members of the investor community and news media, will be webcast
at 9:00 a.m., Eastern Time, on February 8, 2018. Access is at
www.pmi.com/2017Q4earnings . The audio webcast may also be accessed
on iOS or Android devices by downloading PMI's free Investor
Relations Mobile Application at www.pmi.com/irapp .
Dividends
During 2017, PMI increased its regular quarterly dividend by
2.9%, from $1.04 to $1.07, representing an annualized rate of $4.28
per common share. Since its spin-off in March 2008, PMI has
increased its regular quarterly dividend by 132.6% from the initial
annualized rate of $1.84 per common share, or a compound annual
growth rate of 9.8%.
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 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 United
States,
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.
-- "Combustible products" is the term PMI uses to refer to cigarettes and
OTP, combined.
-- "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.
-- "Total shipment volume" is defined as the combined total of cigarette
shipment volume and heated tobacco unit shipment volume.
-- "EEMA" is defined as Eastern Europe, Middle East & Africa and includes
PMI's international duty free business.
-- "North Africa" is defined as Algeria, Egypt, Libya, Morocco and
Tunisia.
Financial
-- Net revenues, excluding excise taxes, related to combustible products
refer to the operating revenues generated from the sale of
these
products, net of sales and promotion incentives.
-- "Operating Companies Income," or "OCI," is defined as operating
income, excluding general corporate expenses and the
amortization of
intangibles, plus equity (income)/loss in unconsolidated
subsidiaries,
net. Management evaluates business segment performance and
allocates
resources based on OCI.
-- "Adjusted EBITDA" is defined as earnings before interest, taxes,
depreciation and amortization, excluding asset impairment and
exit
costs, and unusual items.
-- "Net debt" is defined as total debt, less cash and cash equivalents.
-- Management reviews OCI, OCI margins, 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.
-- 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 GAAP measures, see the
relevant
schedules provided with this press release.
Reduced-Risk Products
-- "Reduced-risk products," or "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 continued smoking. PMI has a range of RRPs in various
stages of
development, scientific assessment and commercialization.
Because
PMI's RRPs do not burn tobacco, they produce far lower
quantities of
harmful and potentially harmful compounds than found in
cigarette
smoke.
-- "Heated tobacco units" is the term PMI uses to refer to heated tobacco
consumables, which include the company's
HEETS
,
HEETS
Marlboro
and
HEETS FROM MARLBORO
, defined collectively as
HEETS
,
as well as
MarlboroHeatSticks
and
Parliament
HeatSticks
.
-- Net revenues, excluding excise taxes, related to RRPs represent the
sale of heated tobacco units,
IQOS
devices and related
accessories, and other nicotine-containing products, primarily
e-vapor
products, net of sales and promotion incentives.
SHIPMENT VOLUME
PMI Fourth-Quarter Full-Year
Shipment
Volume
by Region
(million
units)
2017 2016 Change 2017 2016 Change
Cigarettes
European 45,881 45,193 1.5 % 187,293 193,586 (3.3 )%
Union
EEMA 66,332 67,763 (2.1 )% 256,157 271,393 (5.6 )%
Asia 61,234 63,815 (4.0 )% 234,253 260,029 (9.9 )%
Latin 22,922 23,794 (3.7 )% 84,223 87,938 (4.2 )%
America
& Canada
Total PMI 196,369 200,565 (2.1 )% 761,926 812,946 (6.3 )%
Heated
Tobacco
Units
European 849 122 +100.0% 1,889 224 +100.0%
Union
EEMA 820 63 +100.0% 1,581 100 +100.0%
Asia 14,032 3,510 +100.0% 32,729 7,070 +100.0%
Latin 15 - - % 27 - - %
America
& Canada
Total PMI 15,716 3,695 +100.0% 36,226 7,394 +100.0%
Cigarettes
and Heated
Tobacco
Units
European 46,730 45,315 3.1 % 189,182 193,810 (2.4 )%
Union
EEMA 67,152 67,826 (1.0 )% 257,738 271,493 (5.1 )%
Asia 75,266 67,325 11.8 % 266,982 267,099 - %
Latin 22,937 23,794 (3.6 )% 84,250 87,938 (4.2 )%
America
& Canada
Total PMI 212,085 204,260 3.8 % 798,152 820,340 (2.7 )%
2017 Full-Year
Estimated international cigarette and heated tobacco unit
volume, excluding China and the United States, of 2.8 trillion,
down by 2.8%
PMI's total shipment volume decreased by 2.7%, principally due
to:
-- the EU, notably reflecting lower cigarette shipment volume in Greece,
Italy and Spain, partly offset by higher heated tobacco unit
shipment
volume;
-- EEMA, notably reflecting lower cigarette shipment volume in Russia,
Saudi Arabia - where PMI's cigarette shipment volume declined
by
35.8%, impacted by the new excise tax implemented in June 2017
that
resulted in the doubling of retail prices - and Ukraine; partly
offset
by higher cigarette shipment volume in North Africa, notably
Algeria,
and higher heated tobacco unit shipment volume;
-- Asia, notably reflecting lower cigarette shipment volume in Indonesia,
Japan, Korea, Pakistan - impacted by excise tax-driven price
increases
and an increase in the prevalence of illicit trade - and the
Philippines; fully offset by higher heated tobacco unit
shipment
volume, mainly in Japan and Korea; and
-- Latin America & Canada, notably reflecting lower cigarette shipment
volume in Argentina, Brazil, Canada, Colombia and Mexico.
Excluding the favorable net impact of estimated cigarette and
heated tobacco unit inventory movements of approximately 3.3
billion units, PMI's total shipment volume decreased by 3.1%. The
favorable inventory movements were driven primarily by
approximately 8.5 billion units net in Japan reflecting: the
increasing demand for HeatSticks , anticipated to further increase
in the first quarter of 2018 following a planned lifting of the
restriction on IQOS device sales; the establishment of appropriate
distributor inventory levels of heated tobacco units, given the
current high dependence on a single manufacturing center; and the
transition from air freight to sea freight of heated tobacco units,
largely completed in the fourth quarter of 2017. These favorable
inventory movements were partly offset by a reduction of
combustible product inventory levels, mainly in: the EU, notably
Italy and Spain; and EEMA, notably North Africa, Russia and Saudi
Arabia.
2017 Fourth-Quarter
PMI's total shipment volume increased by 3.8%, principally
driven by:
-- the EU, notably reflecting higher cigarette shipment volume in France,
Germany and Portugal, partly offset by lower cigarette shipment
volume
in Spain; and
-- Higher heated tobacco unit shipment volume across all Regions, notably
in Asia driven by Japan and Korea.
The increase in PMI's total shipment volume was partly offset by
lower cigarette shipment volume in:
-- EEMA, notably Russia, as well as Saudi Arabia where PMI's cigarette
shipment volume declined by 60.3%, reflecting the impact of
the
aforementioned new excise tax, partly offset by North Africa,
notably
Algeria, and Turkey;
-- Asia, notably Japan and Korea, partly offset by the Philippines; and
-- Latin America & Canada, notably Argentina, Brazil and Colombia, partly
offset by Mexico and Venezuela.
Excluding the favorable net impact of estimated cigarette and
heated tobacco unit inventory movements of approximately 5.0
billion units, driven primarily by Japan, reflecting the same
dynamics as for the full year, PMI's total shipment volume
increased by 1.4%.
PMI shipment volume by brand is shown in the table below.
PMI Fourth-Quarter Full-Year
Shipment
Volume
by Brand
(million
units)
2017 2016 Change 2017 2016 Change
Cigarettes
Marlboro 70,251 70,295 (0.1 )% 270,366 281,720 (4.0 )%
L&M 21,726 23,177 (6.3 )% 90,817 96,770 (6.2 )%
Chesterfield 14,764 12,088 22.1 % 55,075 46,291 19.0 %
Philip 12,389 9,069 36.6 % 48,522 35,914 35.1 %
Morris
Parliament 12,243 11,424 7.2 % 43,965 45,671 (3.7 )%
Bond 9,312 11,775 (20.9 )% 37,987 44,567 (14.8 )%
Street
Lark 5,838 6,540 (10.7 )% 24,373 27,571 (11.6 )%
Others 49,846 56,197 (11.3 )% 190,821 234,442 (18.6 )%
Total 196,369 200,565 (2.1 )% 761,926 812,946 (6.3 )%
Cigarettes
Heated 15,716 3,695 +100.0% 36,226 7,394 +100.0%
Tobacco
Units
Total PMI 212,085 204,260 3.8 % 798,152 820,340 (2.7 )%
2017 Full-Year
PMI's cigarette shipment volume of Marlboro decreased in: the
EU, mainly due to Greece, Italy and Spain; EEMA, predominantly due
to Saudi Arabia, reflecting the impact of the new excise tax
implemented in June 2017 that resulted in the doubling of the
retail price of Marlboro from SAR 12 to SAR 24 per pack, partly
offset by North Africa, notably Algeria and Egypt, and Turkey;
Asia, mainly due to Japan and Korea, principally reflecting
out-switching to heated tobacco products, partly offset by
Indonesia and the Philippines; and Latin America & Canada,
mainly due to Argentina and Brazil.
PMI's cigarette shipment volume of the following brands
decreased: L&M , mainly due to Russia, Saudi Arabia and Turkey,
partly offset by Algeria, Argentina, Colombia and Kazakhstan;
Parliament , mainly due to Japan, Russia and Saudi Arabia, partly
offset by Kazakhstan; Bond Street , mainly due to Kazakhstan,
Russia and Ukraine; Lark , principally due to Japan; and "Others,"
mainly due to low-price brands in Indonesia, Pakistan, the
Philippines, Russia and Ukraine.
PMI's cigarette shipment volume of the following brands
increased: Chesterfield, notably driven by Argentina, Brazil,
Colombia, Saudi Arabia, Turkey and Venezuela, partly offset by
Italy and Russia; and Philip Morris , mainly driven by Russia and
Ukraine, notably reflecting successful portfolio consolidation of
local, low-price brands in "Others," partly offset by Argentina and
Italy.
2017 Fourth-Quarter
PMI's cigarette shipment volume of Marlboro was essentially
flat, with declines in: EEMA, predominantly due to Saudi Arabia,
reflecting the same dynamic as for the full year, partly offset by
North Africa, notably Algeria and Egypt; and Latin America &
Canada, mainly due to Argentina and Brazil; offset by growth in the
EU, driven notably by France, Germany and Italy. Cigarette shipment
volume of Marlboro was flat in Asia, with growth in Indonesia and
the Philippines offset by declines in Japan and Korea, principally
reflecting out-switching to heated tobacco products .
PMI's cigarette shipment volume of the following brands
decreased: L&M , mainly due to Russia and Saudi Arabia, partly
offset by Algeria, Germany and Kazakhstan; Bond Street , mainly due
to Kazakhstan, Russia and Ukraine; Lark , principally due to Japan,
partly offset by Turkey; and "Others," mainly due to local,
low-price brands in Indonesia, the Philippines, Russia and Ukraine,
partly offset by premium local brands in Indonesia.
PMI's cigarette shipment volume of the following brands
increased: Parliament , notably driven by Russia and Turkey, partly
offset by Japan, Korea and Saudi Arabia; Chesterfield, mainly
driven by Argentina, Brazil, reflecting successful brand portfolio
consolidation, Colombia, Saudi Arabia and Turkey, partly offset by
Italy and Russia; and Philip Morris , mainly driven by Russia and
Ukraine, notably reflecting successful portfolio consolidation of
local, low-price brands in "Others," partly offset by Argentina and
Italy.
NET REVENUES (Excluding Excise Taxes)
PMI Fourth-Quarter Full-Year
Net
Revenues(Excluding
Excise Taxes)
(in millions) Excl. Excl.
2017 2016 Change Curr. 2017 2016 Change Curr.
Combustible
Products
European $ 2,140 $ 1,919 11.5 % 4.7 % $ 8,048 $ 8,105 (0.7 )% (1.2 )%
Union
EEMA 1,680 1,792 (6.3 )% (5.1 )% 6,550 6,991 (6.3 )% (2.1 )%
Asia 2,003 2,133 (6.1 )% (4.4 )% 7,572 8,015 (5.5 )% (5.0 )%
Latin America 828 785 5.5 % 5.3 % 2,937 2,841 3.4 % 5.3 %
& Canada
Total PMI $ 6,651 $ 6,628 0.3 % (0.8 )% $ 25,107 $ 25,952 (3.3 )% (1.9 )%
RRPs
European $ 124 $ 25 +100% +100% $ 269 $ 57 +100% +100%
Union
EEMA 85 6 +100% +100% 149 9 +100% +100%
Asia 1,432 312 +100% +100% 3,218 666 +100% +100%
Latin America 3 - +100% +100% 4 1 +100% +100%
& Canada
Total PMI $ 1,643 $ 343 +100% +100% $ 3,640 $ 733 +100% +100%
Combustible
Products
and RRPs
European $ 2,264 $ 1,944 16.5 % 9.3 % $ 8,318 $ 8,162 1.9 % 1.4 %
Union
EEMA 1,764 1,798 (1.9 )% (0.6 )% 6,699 7,000 (4.3 )% (0.1 )%
Asia 3,435 2,444 40.5 % 44.8 % 10,790 8,681 24.3 % 25.9 %
Latin America 831 785 5.9 % 5.6 % 2,941 2,842 3.5 % 5.4 %
& Canada
Total PMI $ 8,294 $ 6,971 19.0 % 18.8 % $ 28,748 $ 26,685 7.7 % 9.4 %
Note: Sum of product categories or Regions might not foot to
total PMI due to rounding.
2017 Full-Year
Net revenues, excluding excise taxes, of $28.7 billion increased
by 7.7%, as detailed above and in the attached Schedule 14.
Excluding unfavorable currency of $437 million, net revenues,
excluding excise taxes, increased by 9.4%, driven by a favorable
pricing variance of $1.4 billion from across all Regions, despite
low price realization in Russia, and favorable volume/mix of $1.1
billion, driven by Asia and despite unfavorable volume/mix in EEMA,
mainly due to Russia and Saudi Arabia.
2017 Fourth-Quarter
Net revenues, excluding excise taxes, of $8.3 billion increased
by 19.0%, as detailed above and in the attached Schedule 10.
Excluding favorable currency of $14 million, net revenues,
excluding excise taxes, increased by 18.8%, driven by a favorable
pricing variance of $302 million from across all Regions, despite
low price realization in Russia, and favorable volume/mix of $1.0
billion, driven by the EU and Asia and despite unfavorable
volume/mix in EEMA, mainly due to Saudi Arabia.
OPERATING COMPANIES INCOME
PMI Fourth-Quarter Full-Year
OCI
(in Excl. Excl.
millions)
2017 2016 Change Curr. 2017 2016 Change Curr.
European $ 992 $ 898 10.5 % 6.1 % $ 3,775 $ 3,994 (5.5 )% (4.4 )%
Union
EEMA 700 627 11.6 % (30.5 )% 2,888 3,016 (4.2 )% (6.9 )%
Asia 1,396 908 53.7 % 64.4 % 4,149 3,196 29.8 % 33.7 %
Latin 293 261 12.3 % 16.1 % 1,002 938 6.8 % 14.3 %
America
&
Canada
Total $ 3,381 $ 2,694 25.5 % 18.2 % $ 11,814 $ 11,144 6.0 % 7.4 %
PMI
2017 Full-Year
Operating companies income of $11.8 billion increased by 6.0%.
Excluding unfavorable currency of $155 million, operating companies
income increased by 7.4%, reflecting a favorable pricing variance
across all Regions, and favorable volume/mix of $7 million, partly
offset by an unfavorable cost comparison, primarily reflecting
increased investment behind reduced-risk products, predominantly in
the EU and Asia.
Adjusted operating companies income and margin are shown in the
table below and detailed in Schedule 16. Adjusted operating
companies income, excluding unfavorable currency, increased by
7.4%. Adjusted operating companies income margin, excluding
unfavorable currency, decreased by 0.8 points to 41.0%, reflecting
the factors mentioned above, as detailed on Schedule 16.
2017 Fourth-Quarter
In the quarter, operating companies income of $3.4 billion
increased by 25.5%. Excluding favorable currency of $196 million,
operating companies income increased by 18.2%, mainly driven by a
favorable pricing variance across all Regions and favorable
volume/mix of $491 million, driven by the EU and Asia, partly
offset by an unfavorable cost comparison, primarily reflecting
increased investment behind reduced-risk products, predominantly in
the EU.
Adjusted operating companies income and margin are shown in the
table below and detailed in Schedule 12. Adjusted operating
companies income, excluding favorable currency, increased by 18.2%.
Adjusted operating companies income margin, excluding favorable
currency, decreased by 0.1 point to 38.5%, reflecting the factors
mentioned above, as detailed on Schedule 12.
PMI Fourth-Quarter Full-Year
OCI
(in Excl. Excl.
millions)
2017 2016 Change Curr. 2017 2016 Change Curr.
OCI $ 3,381 $ 2,694 25.5 % 18.2 % $ 11,814 $ 11,144 6.0 % 7.4 %
Asset - - - -
impairment
&
exit
costs
Adjusted $ 3,381 $ 2,694 25.5 % 18.2 % $ 11,814 $ 11,144 6.0 % 7.4 %
OCI
Adjusted 40.8 % 38.6 % 2.2 (0.1 ) 41.1 % 41.8 % (0.7 ) (0.8 )
OCI
Margin*
*Margins are calculated as adjusted OCI, divided by net
revenues, excluding excise taxes.
EUROPEAN UNION REGION (EU)
2017 Full-Year
Net revenues, excluding excise taxes, of $8.3 billion, increased
by 1.9%. Excluding favorable currency of $45 million, net revenues,
excluding excise taxes, increased by 1.4%, mainly reflecting a
favorable pricing variance of $156 million, driven principally by
Germany, Poland and the United Kingdom, partly offset by France,
Greece and Italy. The favorable pricing was partly offset by
unfavorable volume/mix of $45 million, mainly driven by Germany,
Spain and the United Kingdom, partly offset by Poland and
Romania.
Operating companies income of $3.8 billion decreased by 5.5%.
Excluding unfavorable currency of $43 million, operating companies
income decreased by 4.4%, mainly due to: unfavorable volume/mix of
$119 million, mainly in Germany, Spain and the United Kingdom,
partly offset by Poland and Romania; and increased investment
behind reduced-risk products across the Region; partly offset by
favorable pricing.
Adjusted operating companies income and margin are shown in the
table below and detailed on Schedule 16. Adjusted operating
companies income, excluding unfavorable currency, decreased by
4.4%. Adjusted operating companies income margin, excluding
unfavorable currency, decreased by 2.7 points to 46.2%, reflecting
the factors mentioned above, as detailed on Schedule 16.
2017 Fourth-Quarter
Net revenues, excluding excise taxes, of $2.3 billion, increased
by 16.5%. Excluding favorable currency of $139 million, net
revenues, excluding excise taxes, increased by 9.3%, mainly
reflecting; a favorable pricing variance of $34 million, driven
principally by Germany and the United Kingdom, partly offset by
France, Greece and Italy; and favorable volume/mix of $147 million
across the Region, notably in Germany and Italy.
Operating companies income of $992 million increased by 10.5%.
Excluding favorable currency of $39 million, operating companies
income increased by 6.1%, mainly driven by: a favorable pricing
variance and favorable volume/mix of $101 million across the
Region, notably in Germany and Italy; partly offset by increased
investment behind reduced-risk products across the Region.
Adjusted operating companies income and margin are shown in the
table below and detailed on Schedule 12. Adjusted operating
companies income, excluding favorable currency, increased by 6.1%.
Adjusted operating companies income margin, excluding favorable
currency, decreased by 1.4 points to 44.8%, reflecting the factors
mentioned above, as detailed on Schedule 12.
EU Fourth-Quarter Full-Year
OCI
(in Excl. Excl.
millions)
2017 2016 Change Curr. 2017 2016 Change Curr.
OCI $ 992 $ 898 10.5 % 6.1 % $ 3,775 $ 3,994 (5.5 )% (4.4 )%
Asset - - - -
impairment
&
exit
costs
Adjusted $ 992 $ 898 10.5 % 6.1 % $ 3,775 $ 3,994 (5.5 )% (4.4 )%
OCI
Adjusted 43.8 % 46.2 % (2.4 ) (1.4 ) 45.4 % 48.9 % (3.5 ) (2.7 )
OCI
Margin*
*Margins are calculated as adjusted OCI, divided by net
revenues, excluding excise taxes.
EU Total Market, PMI Shipment & Market Share
Commentaries
EU Fourth-Quarter Full-Year
PMI
Shipment
Volume
by
Brand
(million
units)
2017 2016 Change 2017 2016 Change
Cigarettes
Marlboro 23,317 22,663 2.9 % 93,088 96,245 (3.3 )%
L&M 8,269 8,063 2.6 % 34,261 34,691 (1.2 )%
Chesterfield 6,818 7,029 (3.0 )% 29,087 30,140 (3.5 )%
Philip 3,523 3,668 (4.0 )% 15,158 16,290 (6.9 )%
Morris
Others 3,954 3,770 4.9 % 15,699 16,220 (3.2 )%
Total 45,881 45,193 1.5 % 187,293 193,586 (3.3 )%
Cigarettes
Heated 849 122 +100.0% 1,889 224 +100.0%
Tobacco
Units
Total 46,730 45,315 3.1 % 189,182 193,810 (2.4 )%
EU
EU Fourth-Quarter Full-Year
Market
Shares
by
Brand
Change Change
2017 2016 p.p. 2017 2016 p.p.
Marlboro 19.2 % 19.0 % 0.2 18.8 % 19.0 % (0.2 )
L&M 6.9 % 6.9 % - 6.9 % 6.9 % -
Chesterfield 5.9 % 5.9 % - 6.0 % 5.9 % 0.1
Philip 3.0 % 3.1 % (0.1 ) 3.1 % 3.2 % (0.1 )
Morris
HEETS 0.6 % 0.1 % 0.5 0.3 % - % 0.3
Others 3.3 % 3.2 % 0.1 3.2 % 3.3 % (0.1 )
Total 38.9 % 38.2 % 0.7 38.3 % 38.3 % -
EU
2017 Full-Year
The estimated total market in the EU decreased by 1.9% to 492.1
billion units. PMI's Regional market share was flat at 38.3%, with
gains in France, Germany and Poland offset by declines in Italy and
Spain.
PMI's total shipment volume decreased by 2.4% to 189.2 billion
units, or by 1.9% excluding estimated net inventory movements,
notably in Italy and Spain. The decrease in cigarette shipment
volume of Marlboro was mainly due to Greece, Italy and Spain. The
decrease in cigarette shipment volume of L&M was mainly due to
Germany, Romania and Spain, partly offset by France. The decrease
in cigarette shipment volume of Chesterfield was mainly due to
Italy, Portugal and Spain, partly offset by Poland. The decrease in
cigarette shipment volume of Philip Morris was mainly due to Italy.
The decrease in cigarette shipment volume of "Others" was due
notably to Muratti in Italy.
2017 Fourth-Quarter
The estimated total market in the EU increased by 0.4% to 119.3
billion units. PMI's total shipment volume increased by 3.1% to
46.7 billion units, mainly driven by higher cigarette shipment
volume in France, Germany and Portugal, partly offset by Spain, as
well as higher heated tobacco unit shipment volume. The increase in
cigarette shipment volume of Marlboro was notably driven by France,
Germany and Italy, partly offset by Spain. The increase in
cigarette shipment volume of L&M was mainly driven by Germany.
The decrease in cigarette shipment volume of Chesterfield was
mainly due to Italy, partly offset by Poland. The decrease in
cigarette shipment volume of Philip Morris was mainly due to Italy
and Spain, partly offset by France. The increase in cigarette
shipment volume of "Others" was driven mainly by Merit in Italy and
local brands in Portugal.
PMI's total market share increased by 0.7 points to 38.9%, with
gains in France, Germany and Italy, partly offset by declines in
Poland and Spain.
Key Market Commentaries
In France , estimated industry size, PMI shipment volume and
market share performance, shown in the table below, include
cigarettes and PMI's heated tobacco units.
France Key Fourth-Quarter Full-Year
Market
Data
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Market 10.4 10.5 (1.0 )% 44.4 44.9 (1.2 )%
(billion
units)
PMI 4,585 4,375 4.8 % 19,264 19,247 0.1 %
Shipments
(million
units)
PMI Market
Share
Marlboro 27.7 % 26.9 % 0.8 27.1 % 26.4 % 0.7
Philip 10.6 % 10.4 % 0.2 10.3 % 10.2 % 0.1
Morris
Chesterfield 2.9 % 3.1 % (0.2 ) 3.0 % 3.1 % (0.1 )
Others* 2.8 % 2.9 % (0.1 ) 2.8 % 2.7 % 0.1
Total 44.0 % 43.3 % 0.7 43.2 % 42.4 % 0.8
*Includes heated tobacco units.
For the full year, the estimated total market decreased by 1.2%.
The increase in PMI's shipment volume was driven by higher market
share, notably of Marlboro , reflecting the growth of both Marlboro
Red and Gold in 30s packs launched in March 2017.
In the quarter, the estimated total market decreased by 1.0%.
The increase in PMI's shipment volume was driven by higher market
share, reflecting the same dynamics as for the full year.
In Germany , estimated industry size, PMI shipment volume and
market share performance, shown in the table below, include
cigarettes and PMI's heated tobacco units.
Germany Key Fourth-Quarter Full-Year
Market
Data
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Market 19.2 18.4 4.2 % 76.9 78.1 (1.6 )%
(billion
units)
PMI Shipments 7,560 6,890 9.7 % 28,575 28,958 (1.3 )%
(million
units)
PMI Market
Share
Marlboro 24.4 % 22.9 % 1.5 22.7 % 22.5 % 0.2
L&M 12.0 % 11.5 % 0.5 11.5 % 11.6 % (0.1 )
Chesterfield 1.4 % 1.6 % (0.2 ) 1.5 % 1.6 % (0.1 )
Others* 1.6 % 1.4 % 0.2 1.5 % 1.4 % 0.1
Total 39.4 % 37.4 % 2.0 37.2 % 37.1 % 0.1
*Includes heated tobacco units.
For the full year, the estimated total market decreased by 1.6%,
or by 2.7% excluding the net impact of estimated trade inventory
movements, mainly reflecting the impact of price increases in March
2017. The decrease in PMI's shipment volume was mainly due to the
lower total market, partly offset by higher market share.
In the quarter, the estimated total market increased by 4.2%.
Excluding the net impact of estimated trade inventory movements,
the estimated total market was flat. The increase in PMI's total
shipment volume and market share largely reflected the benefit of
the trade inventory movements.
In Italy , estimated industry size, PMI shipment volume and
market share performance, shown in the table below, include
cigarettes and PMI's heated tobacco units.
Italy Key Fourth-Quarter Full-Year
Market
Data
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total 16.7 16.6 0.7 % 69.8 72.1 (3.2 )%
Market
(billion
units)
PMI 9,029 8,830 2.2 % 36,767 38,744 (5.1 )%
Shipments
(million
units)
PMI Market
Share
Marlboro 23.8 % 23.6 % 0.2 23.9 % 24.3 % (0.4 )
Chesterfield 11.4 % 11.3 % 0.1 11.3 % 11.5 % (0.2 )
Philip 7.6 % 8.2 % (0.6 ) 7.7 % 8.5 % (0.8 )
Morris
HEETS 1.2 % 0.3 % 0.9 0.7 % 0.1 % 0.6
Others 8.6 % 8.2 % 0.4 8.6 % 8.1 % 0.5
Total 52.6 % 51.6 % 1.0 52.2 % 52.5 % (0.3 )
For the full year, the estimated total market decreased by 3.2%,
partly reflecting the implementation of the Tobacco Product
Directive's ban on pack sizes of ten cigarettes at the end of 2016.
The decline of PMI's shipments, down by 3.6% excluding the net
impact of distributor inventory movements, mainly reflected the
lower total market, as well as lower cigarette market share,
principally due to Marlboro , partly reflecting the ban on pack
sizes of ten cigarettes, and low-price Philip Morris , impacted by
the growth of the super-low price segment, partly offset by HEETS
and Merit in "Others."
In the quarter, the estimated total market increased by 0.7%,
largely reflecting a favorable comparison with the fourth quarter
of 2016 driven by estimated trade inventory movements associated
with the implementation of the Tobacco Products Directive.
Excluding these inventory movements, the estimated total market
declined by 2.9%. The increase of PMI's shipments mainly reflected
the higher total market and market share, principally driven by:
Marlboro , benefiting from a favorable comparison with the fourth
quarter of 2016 following the aforementioned ban on pack sizes of
ten cigarettes; HEETS ; and Merit in "Others," partly offset by
low-price Philip Morris , impacted by the growth of the super-low
price segment.
In Poland , estimated industry size, PMI shipment volume and
market share performance, shown in the table below, include
cigarettes and PMI's heated tobacco units.
Poland Key Fourth-Quarter Full-Year
Market
Data
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Market 9.4 9.0 4.8 % 41.7 41.3 0.9 %
(billion
units)
PMI 4,089 3,970 3.0 % 17,784 17,485 1.7 %
Shipments
(million
units)
PMI Market
Share
Marlboro 11.2 % 12.6 % (1.4 ) 10.7 % 11.6 % (0.9 )
L&M 18.6 % 19.6 % (1.0 ) 18.4 % 18.5 % (0.1 )
Chesterfield 10.0 % 9.3 % 0.7 10.4 % 9.1 % 1.3
HEETS 0.6 % - % 0.6 0.2 % - % 0.2
Others 3.0 % 2.7 % 0.3 3.0 % 3.1 % (0.1 )
Total 43.4 % 44.2 % (0.8 ) 42.7 % 42.3 % 0.4
For the full year, the estimated total market increased by 0.9%.
The increase in PMI's shipment volume was primarily driven by the
higher total market and higher market share, driven by Chesterfield
, benefiting from brand support, partly offset by Marlboro ,
reflecting pressure from competitive brands in the below premium
segment.
In the quarter, the estimated total market increased by 4.8%.
The increase in PMI's shipment volume primarily reflected the
higher total market, partly offset by lower market share, notably
of Marlboro and L&M, impacted by the growth of the super-low
price segment, partly offset by Chesterfield and HEETS .
In Spain , estimated industry size, PMI shipment volume and
market share performance, shown in the table below, include
cigarettes and PMI's heated tobacco units.
Spain Key Fourth-Quarter Full-Year
Market
Data
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total 10.9 11.4 (4.4 )% 45.0 46.7 (3.5 )%
Market
(billion
units)
PMI 3,325 3,734 (10.9 )% 14,456 16,374 (11.7 )%
Shipments
(million
units)
PMI Market
Share
Marlboro 16.2 % 17.7 % (1.5 ) 16.5 % 18.0 % (1.5 )
L&M 5.3 % 5.3 % - 5.3 % 5.4 % (0.1 )
Chesterfield 8.6 % 8.6 % - 8.6 % 8.6 % -
Others* 1.8 % 1.8 % - 1.9 % 1.9 % -
Total 31.9 % 33.4 % (1.5 ) 32.3 % 33.9 % (1.6 )
*Includes heated tobacco units.
For the full year, the estimated total market decreased by 3.5%,
or by 2.5% excluding the net impact of estimated trade inventory
movements. The decline of PMI's shipment volume, down by 8.0%
excluding the net impact of distributor inventory movements, mainly
reflected the lower total market, and lower market share, due to
Marlboro , reflecting the impact of price increases, particularly
above the round EUR5.00 per pack price point in the vending
channel, as well as a challenging comparison with 2016 in which the
market share of Marlboro grew by 1.0 point.
In the quarter, the estimated total market decreased by 4.4%, or
by 1.4% excluding the net impact of estimated trade inventory
movements. The decline of PMI's shipment volume, down by 8.7%
excluding the net impact of distributor inventory movements, was
mainly due to the lower total market and lower market share,
principally due to Marlboro , mainly reflecting the impact of price
increases.
EASTERN EUROPE, MIDDLE EAST & AFRICA REGION (EEMA)
2017 Full-Year
Net revenues, excluding excise taxes, of $6.7 billion decreased
by 4.3%. Excluding unfavorable currency of $291 million, net
revenues, excluding excise taxes, decreased by 0.1%, principally
due to unfavorable volume/mix of $374 million, primarily reflecting
a lower total market in Russia, and a lower total market and market
share in Saudi Arabia, mainly resulting from the implementation of
the new excise tax. The unfavorable volume/mix was partly offset by
a favorable pricing variance of $364 million, despite low price
realization in Russia, driven notably by Egypt and Ukraine.
Operating companies income of $2.9 billion decreased by 4.2%.
Excluding favorable currency of $81 million, operating companies
income decreased by 6.9%, principally due to: unfavorable
volume/mix of $344 million, predominantly in Russia and Saudi
Arabia, partly offset by a favorable pricing variance.
Adjusted operating companies income and margin are shown in the
table below and detailed on Schedule 16. Adjusted operating
companies income, excluding favorable currency, decreased by 6.9%.
Adjusted operating companies income margin, excluding favorable
currency, decreased by 2.9 points to 40.2%, reflecting the factors
mentioned above, as detailed on Schedule 16.
2017 Fourth-Quarter
Net revenues, excluding excise taxes, of $1.8 billion decreased
by 1.9%. Excluding unfavorable currency of $23 million, net
revenues, excluding excise taxes, decreased by 0.6%, principally
due to unfavorable volume/mix of $30 million, primarily reflecting
a lower total market in Russia, and a lower total market and market
share in Saudi Arabia, mainly resulting from the implementation of
the new excise tax, partly offset by Turkey and North Africa. The
unfavorable volume/mix was partly offset by a favorable pricing
variance of $19 million, driven mainly by North Africa, notably
Egypt, Russia, despite low price realization, and Ukraine, partly
offset by Turkey.
Operating companies income of $700 million increased by 11.6%.
Excluding favorable currency of $264 million, operating companies
income decreased by 30.5%, principally due to unfavorable
volume/mix of $45 million, and unfavorable costs compared to the
fourth quarter of 2016 due to: increased investment behind
reduced-risk products; investment income in Russia; and other
operating costs, primarily in Saudi Arabia; partly offset by a
favorable pricing variance.
Adjusted operating companies income and margin are shown in the
table below and detailed on Schedule 12. Adjusted operating
companies income, excluding favorable currency, decreased by 30.5%.
Adjusted operating companies income margin, excluding favorable
currency, decreased by 10.5 points to 24.4%, reflecting the factors
mentioned above, as detailed on Schedule 12.
EEMA Fourth-Quarter Full-Year
OCI
(in Excl. Excl.
millions)
2017 2016 Change Curr. 2017 2016 Change Curr.
OCI $ 700 $ 627 11.6 % (30.5 )% $ 2,888 $ 3,016 (4.2 )% (6.9 )%
Asset - - - -
impairment
&
exit
costs
Adjusted $ 700 $ 627 11.6 % (30.5 )% $ 2,888 $ 3,016 (4.2 )% (6.9 )%
OCI
Adjusted 39.7 % 34.9 % 4.8 (10.5 ) 43.1 % 43.1 % - (2.9 )
OCI
Margin*
*Margins are calculated as adjusted OCI, divided by net
revenues, excluding excise taxes.
EEMA Total Market, PMI Shipment & Market Share
Commentaries
EEMA PMI Fourth-Quarter Full-Year
Shipment
Volume by Brand
(million units)
2017 2016 Change 2017 2016 Change
Cigarettes
Marlboro 18,314 18,813 (2.7 )% 70,122 73,818 (5.0 )%
L&M 11,004 12,672 (13.2 )% 46,923 52,183 (10.1 )%
Bond Street 8,886 11,243 (21.0 )% 36,336 42,553 (14.6 )%
Parliament 9,775 8,439 15.8 % 33,299 33,940 (1.9 )%
Philip Morris 5,273 1,235 +100.0% 19,086 2,058 +100.0%
Others 13,080 15,361 (14.8 )% 50,391 66,841 (24.6 )%
Total 66,332 67,763 (2.1 )% 256,157 271,393 (5.6 )%
Cigarettes
Heated Tobacco 820 63 +100.0% 1,581 100 +100.0%
Units
Total EEMA 67,152 67,826 (1.0 )% 257,738 271,493 (5.1 )%
2017 Full-Year
The estimated total market in EEMA decreased by 2.8% to 1.0
trillion units. PMI's Regional market share decreased by 0.3 points
to 24.9%.
PMI's total shipment volume decreased by 5.1% to 257.7 billion
units, mainly reflecting: lower cigarette shipment volume in
Russia, Saudi Arabia - where PMI's cigarette shipment volume
declined by 35.8%, impacted by the new excise tax implemented in
June 2017 that resulted in the doubling of retail prices - and
Ukraine; partly offset by higher cigarette shipment volume in North
Africa, notably Algeria, and higher heated tobacco unit shipment
volume. The decrease in cigarette shipment volume of Marlboro was
predominantly due to Saudi Arabia, reflecting the impact of the
excise tax that resulted in the doubling of the brand's retail
price from SAR 12 to SAR 24 per pack, partly offset by North
Africa, mainly Algeria and Egypt, and Turkey. The decrease in
cigarette shipment volume of L&M was mainly due to Russia,
Saudi Arabia and Turkey, partly offset by Algeria and Kazakhstan.
The decrease in cigarette shipment volume of Bond Street was mainly
due to Kazakhstan, Russia and Ukraine. The decrease in cigarette
shipment volume of Parliament was mainly due to Russia and Saudi
Arabia, partly offset by Kazakhstan. The increase in cigarette
shipment volume of Philip Morris was driven mainly by Russia and
Ukraine, largely reflecting successful portfolio consolidation of
local, low-price brands in "Others."
2017 Fourth-Quarter
PMI's total shipment volume decreased by 1.0% to 67.2 billion
units, mainly reflecting: lower cigarette shipment volume in
Russia, and Saudi Arabia - where PMI's cigarette shipment volume
declined by 60.3%, reflecting the impact of the aforementioned
excise tax - partly offset by North Africa, notably Algeria, and
Turkey, as well as higher heated tobacco shipment volume. The
decrease in cigarette shipment volume of Marlboro was predominantly
due to Saudi Arabia, reflecting the same dynamic as for the full
year, partly offset by North Africa, notably Algeria, and Turkey.
The decrease in cigarette shipment volume of L&M was mainly due
to Russia and Saudi Arabia, partly offset by Algeria and
Kazakhstan. The decrease in cigarette shipment volume of Bond
Street was mainly due to Kazakhstan, Russia and Ukraine. The
increase in cigarette shipment volume of Parliament was mainly
driven by Russia and Turkey, partly offset by Saudi Arabia. The
increase in cigarette shipment volume of Philip Morris was mainly
driven by Russia and Ukraine, largely reflecting successful
portfolio consolidation of local, low-price brands in "Others."
Key Market Commentaries
In North Africa , estimated cigarette industry size, PMI
cigarette shipment volume and cigarette market share performance
are shown in the table below.
North Africa Fourth-Quarter Full-Year
Key
Market Data
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total 38.7 35.7 8.3 % 144.9 142.3 1.9 %
Cigarette
Market
(billion
units)
PMI 9,131 8,141 12.2 % 35,085 34,035 3.1 %
Cigarette
Shipments
(million
units)
PMI
Cigarette
Market
Share
Marlboro 9.9 % 8.7 % 1.2 9.3 % 8.3 % 1.0
L&M 11.3 % 11.5 % (0.2 ) 11.8 % 12.2 % (0.4 )
Others 2.9 % 2.4 % 0.5 2.9 % 2.7 % 0.2
Total 24.1 % 22.6 % 1.5 24.0 % 23.2 % 0.8
For the full year, the estimated total cigarette market
increased by 1.9%, mainly driven by Egypt, partially offset by
Tunisia. The increase in PMI's cigarette shipment volume was mainly
driven by the higher cigarette market, as well as higher cigarette
market share, notably of Marlboro in Algeria, partly offset by
L&M in Egypt.
In the quarter, the estimated total cigarette market increased
by 8.3%, mainly driven by Algeria and Egypt, partially offset by
Tunisia. The increase in PMI's cigarette shipment volume mainly
reflected higher cigarette market and market share, notably of
Marlboro in Algeria and Egypt and L&M in Algeria.
In Russia , estimated industry size and PMI shipment volume,
shown in the table below, include cigarettes and PMI's heated
tobacco units. Market share performance, as measured by Nielsen and
shown in the table below, reflects that of cigarettes.
Russia Fourth-Quarter Full-Year
Key
Market
Data
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total 66.5 71.0 (6.4 )% 260.0 280.0 (7.2 )%
Market
(billion
units)
PMI 19,052 20,574 (7.4 )% 72,417 79,706 (9.1 )%
Shipments
(million
units)
PMI
Cigarette
Market
Share
Marlboro 1.7 % 1.3 % 0.4 1.5 % 1.4 % 0.1
Parliament 3.5 % 3.7 % (0.2 ) 3.5 % 3.8 % (0.3 )
Bond 8.0 % 8.9 % (0.9 ) 8.6 % 8.4 % 0.2
Street
Philip 5.6 % 0.5 % 5.1 4.3 % 0.2 % 4.1
Morris
Others 7.9 % 12.8 % (4.9 ) 9.2 % 13.4 % (4.2 )
Total 26.7 % 27.2 % (0.5 ) 27.1 % 27.2 % (0.1 )
For the full year, the estimated total market decreased by 7.2%,
reflecting the impact of excise tax-driven price increases and an
increase in the prevalence of illicit trade. The decline of PMI's
shipment volume was mainly due to the lower total market. PMI's
market share decreased by 0.1 point. The decline of "Others"
largely reflected the successful portfolio consolidation of local,
low-price brands into Philip Morris .
In the quarter, the estimated total market decreased by 6.4%,
reflecting the same dynamics as for the full-year. The decline of
PMI's shipment volume was mainly due to the lower total market. The
decrease in PMI's market share was mainly due to Bond Street ,
largely reflecting the impact of competitive product offerings in
the low price segment, partly offset by Marlboro , as well as
Philip Morris , reflecting the same dynamic as in the quarter.
In Turkey , estimated cigarette industry size, PMI cigarette
shipment volume and cigarette market share performance, as measured
by Nielsen, are shown in the table below.
Turkey Fourth-Quarter Full-Year
Key
Market
Data
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total 28.5 26.0 9.8 % 106.2 105.5 0.7 %
Cigarette
Market
(billion
units)
PMI 13,555 12,074 12.3 % 49,649 49,624 0.1 %
Cigarette
Shipments
(million
units)
PMI
Cigarette
Market
Share
Marlboro 10.4 % 10.3 % 0.1 10.2 % 10.2 % -
Parliament 11.4 % 11.8 % (0.4 ) 11.5 % 11.7 % (0.2 )
Lark 6.9 % 7.0 % (0.1 ) 6.9 % 7.4 % (0.5 )
Others 14.7 % 15.3 % (0.6 ) 14.7 % 15.0 % (0.3 )
Total 43.4 % 44.4 % (1.0 ) 43.3 % 44.3 % (1.0 )
For the full year, the estimated total cigarette market
increased by 0.7%. Excluding the net impact of estimated trade
inventory movements, the estimated total cigarette market declined
by 1.6%. The decrease in PMI's cigarette market share, as measured
by Nielsen, was mainly due to Lark , and L&M and Muratti in
"Others," partly offset by Chesterfield , principally reflecting
competitive pressure from super-low price alternatives.
In the quarter, the estimated total cigarette market increased
by 9.8%. Excluding the net impact of estimated trade inventory
movements ahead of speculated January 2018 price increases, the
estimated total cigarette market increased by 6.3%. The increase in
PMI's cigarette shipments was mainly due to the higher total
market. The decrease in PMI's cigarette market share, as measured
by Nielsen, was mainly due to L&M and Muratti in "Others,"
partly offset by Chesterfield , reflecting competitive pressure
from super-low price alternatives.
In Ukraine , estimated industry size and PMI shipment volume,
shown in the table below, include cigarettes and PMI's heated
tobacco units. Market share performance, as measured by Nielsen and
shown in the table below, reflects that of cigarettes.
Ukraine Key Fourth-Quarter Full-Year
Market
Data
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Market 16.4 17.1 (3.8 )% 67.1 73.1 (8.2 )%
(billion
units)
PMI Shipments 4,834 4,797 0.8 % 19,356 22,022 (12.1 )%
(million
units)
PMI Cigarette
Market Share
Marlboro 3.0 % 3.1 % (0.1 ) 3.0 % 3.1 % (0.1 )
Parliament 3.3 % 3.0 % 0.3 3.2 % 2.9 % 0.3
Bond Street 7.7 % 9.2 % (1.5 ) 8.4 % 10.0 % (1.6 )
Philip Morris 4.0 % - % 4.0 3.1 % - % 3.1
Others 8.9 % 12.4 % (3.5 ) 9.6 % 13.2 % (3.6 )
Total 26.9 % 27.7 % (0.8 ) 27.3 % 29.2 % (1.9 )
For the full year, the estimated total market decreased by 8.2%,
mainly due to the impact of price increases and an increase in the
prevalence of illicit trade. The decrease in PMI's shipment volume
was primarily due to the lower total market, as well as lower
cigarette market share, as measured by Nielsen, notably of
low-price Bond Street , reflecting competitive pressure from
lower-priced alternatives, partly offset by Parliament and Philip
Morris , following the successful portfolio consolidation of a
local, low-price brand in "Others."
In the quarter, the estimated total market decreased by 3.8%, or
by 7.0% excluding the net impact of estimated trade inventory
movements, mainly due to the impact of price increases. The
decrease in PMI's cigarette market share, as measured by Nielsen,
reflected the same dynamics as for the quarter.
ASIA REGION
2017 Full-Year
Net revenues, excluding excise taxes, of $10.8 billion increased
by 24.3%. Excluding unfavorable currency of $137 million, net
revenues, excluding excise taxes, increased by 25.9%, reflecting: a
favorable pricing variance of $559 million, driven principally by
Australia, Indonesia, Japan and the Philippines; and a favorable
volume/mix of $1.7 billion, driven by heated tobacco unit volume in
Japan and Korea, partly offset by unfavorable cigarette volume/mix,
notably in Australia, reflecting a lower total market impacted by
excise tax-driven price increases, and Indonesia.
Operating companies income of $4.1 billion increased by 29.8%.
Excluding unfavorable currency of $123 million, operating companies
income increased by 33.7%, mainly driven by a favorable pricing
variance and favorable volume/mix of $622 million, mainly in Japan
and Korea, partly offset by Australia and Indonesia. The increase
was partly offset by higher costs, principally related to increased
investment behind reduced-risk products.
Adjusted operating companies income and margin are shown in the
table below and detailed on Schedule 16. Adjusted operating
companies income, excluding unfavorable currency, increased by
33.7%. Adjusted operating companies income margin, excluding
unfavorable currency, increased by 2.3 points to 39.1%, reflecting
the factors mentioned above, as detailed on Schedule 16.
2017 Fourth-Quarter
Net revenues, excluding excise taxes, of $3.4 billion increased
by 40.5%. Excluding unfavorable currency of $104 million, net
revenues, excluding excise taxes, increased by 44.8%, reflecting: a
favorable pricing variance of $166 million, driven principally by
Australia, Indonesia, Japan and the Philippines, partly offset by
Korea; and a favorable volume/mix of $929 million, predominantly
driven by heated tobacco unit volume in Japan and Korea, as well as
cigarette volume in the Philippines, partly offset by cigarette
volume in Australia, reflecting the same dynamic as for the full
year, and Indonesia.
Operating companies income of $1.4 billion increased by 53.7%.
Excluding unfavorable currency of $97 million, operating companies
income increased by 64.4%, mainly driven by a favorable pricing
variance and favorable volume/mix of $471 million, mainly in Japan,
Korea and the Philippines, partly offset by Australia and
Indonesia.
Adjusted operating companies income and margin are shown in the
table below and detailed on Schedule 12. Adjusted operating
companies income, excluding unfavorable currency, increased by
64.4%. Adjusted operating companies income margin, excluding
unfavorable currency, increased by 5.0 points to 42.2%, reflecting
the factors mentioned above, as detailed on Schedule 12.
Asia Fourth-Quarter Full-Year
OCI
(in Excl. Excl.
millions)
2017 2016 Change Curr. 2017 2016 Change Curr.
OCI $ 1,396 $ 908 53.7 % 64.4 % $ 4,149 $ 3,196 29.8 % 33.7 %
Asset - - - -
impairment
&
exit
costs
Adjusted $ 1,396 $ 908 53.7 % 64.4 % $ 4,149 $ 3,196 29.8 % 33.7 %
OCI
Adjusted 40.6 % 37.2 % 3.4 5.0 38.5 % 36.8 % 1.7 2.3
OCI
Margin*
*Margins are calculated as adjusted OCI, divided by net
revenues, excluding excise taxes.
Asia Total Market, PMI Shipment & Market Share
Commentaries
Asia PMI Fourth-Quarter Full-Year
Shipment
Volume by Brand
(million units)
2017 2016 Change 2017 2016 Change
Cigarettes
Marlboro 19,191 19,186 - % 73,446 76,463 (3.9 )%
Lark 3,078 4,178 (26.3 )% 14,474 17,600 (17.8 )%
Parliament 2,096 2,608 (19.6 )% 9,224 10,142 (9.1 )%
Others 36,869 37,843 (2.6 )% 137,109 155,824 (12.0 )%
Total 61,234 63,815 (4.0 )% 234,253 260,029 (9.9 )%
Cigarettes
Heated Tobacco 14,032 3,510 +100.0% 32,729 7,070 +100.0%
Units
Total Asia 75,266 67,325 11.8 % 266,982 267,099 - %
2017 Full-Year
The estimated total market in Asia, excluding China, decreased
by 3.1% to 1.1 trillion units. PMI's Regional market share,
excluding China, was flat at 23.8%.
PMI's total shipment volume of 267.0 billion units was flat,
mainly reflecting: lower cigarette shipment volume in Indonesia,
Japan, Korea, Pakistan - impacted by excise tax-driven price
increases in 2017 and an increase in the prevalence of illicit
trade - and the Philippines, fully offset by higher heated tobacco
unit shipment volume, mainly in Japan and Korea. The decrease in
cigarette shipment volume of Marlboro was mainly due to Japan and
Korea, primarily reflecting out-switching to heated tobacco
products, partly offset by Indonesia and the Philippines. The
decrease in cigarette shipment volume of Lark was principally due
to Japan. The decrease in cigarette shipment volume of Parliament
was mainly due to Japan and Korea. The decrease in cigarette
shipment volume of "Others" was mainly due to local, low-price
brands in Indonesia, Pakistan and the Philippines.
PMI's total shipment volume benefited from the favorable net
impact of estimated combustible and heated tobacco unit inventory
movements, which were driven by approximately 8.5 billion units net
in Japan, reflecting: the increasing demand for HeatSticks ,
anticipated to further increase in the first quarter of 2018
following a planned lifting of the restriction on IQOS device
sales; the establishment of appropriate distributor inventory
levels of heated tobacco units, given the current high dependence
on a single manufacturing center; and the transition from air
freight to sea freight of heated tobacco units, largely completed
in the fourth quarter of 2017. Excluding the impact of total
estimated net inventory movements, PMI's total shipment volume
decreased by 3.1%.
2017 Fourth-Quarter
PMI's total shipment volume increased by 11.8% to 75.3 billion
units, principally reflecting: higher heated tobacco unit shipment
volume, mainly in Japan and Korea, and higher cigarette shipment
volume in Indonesia and the Philippines, partly offset by lower
cigarette shipment volume in Japan and Korea. Cigarette shipment
volume of Marlboro was flat, with growth in Indonesia and the
Philippines offset by declines in Japan and Korea, principally
reflecting out-switching to heated tobacco products . The decrease
in cigarette shipment volume of Lark was principally due to Japan.
The decrease in cigarette shipment volume of Parliament was
principally due to Japan and Korea. The decrease in cigarette
shipment volume of "Others" was mainly due to low-price brands in
Indonesia and the Philippines.
PMI's total shipment volume benefited from the favorable net
impact of estimated combustible and heated tobacco unit inventory
movements, which were driven by approximately 5.0 billion units in
Japan, reflecting the same dynamics as for the full year. Excluding
the impact of total estimated net inventory movements, PMI's total
shipment volume increased by 4.7%.
Key Market Commentaries
In Indonesia , estimated cigarette industry size, PMI cigarette
shipment volume, cigarette market share and segmentation
performance are shown in the tables below.
Indonesia Fourth-Quarter Full-Year
Key
Market
Data
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total 81.5 80.5 1.3 % 307.4 315.6 (2.6 )%
Cigarette
Market
(billion
units)
PMI 26,903 26,732 0.6 % 101,324 105,524 (4.0 )%
Cigarette
Shipments
(million
units)
PMI
Cigarette
Market
Share
Sampoerna 14.3 % 14.0 % 0.3 13.8 % 14.0 % (0.2 )
A
Dji Sam 8.7 % 6.4 % 2.3 7.4 % 6.5 % 0.9
Soe
Sampoerna 2.6 % 5.2 % (2.6 ) 4.1 % 5.2 % (1.1 )
U
Others 7.4 % 7.6 % (0.2 ) 7.7 % 7.7 % -
Total 33.0 % 33.2 % (0.2 ) 33.0 % 33.4 % (0.4 )
Indonesia Fourth-Quarter Full-Year
Segmentation
Data
Change Change
2017 2016 p.p. 2017 2016 p.p.
Segment % of
Total Market
Hand-Rolled 17.4 % 18.2 % (0.8 ) 17.6 % 18.2 % (0.6 )
Kretek
(SKT)
Machine-Made 77.7 % 76.3 % 1.4 77.2 % 75.8 % 1.4
Kretek (SKM)
Whites (SPM) 4.9 % 5.5 % (0.6 ) 5.2 % 6.0 % (0.8 )
Total 100.0 % 100.0 % - 100.0 % 100.0 % -
PMI % Share
of Segment
Hand-Rolled 37.5 % 37.8 % (0.3 ) 37.5 % 37.3 % 0.2
Kretek
(SKT)
Machine-Made 30.1 % 29.0 % 1.1 29.4 % 28.9 % 0.5
Kretek (SKM)
Whites (SPM) 63.5 % 76.3 % (12.8 ) 70.2 % 79.5 % (9.3 )
For the full year, the estimated total cigarette market
decreased by 2.6%, reflecting a soft economic environment and the
impact of above-inflation excise tax-driven price increases. The
decrease in PMI's shipments was mainly due to the lower total
market and lower cigarette market share, notably due to a decline
of Sampoerna U , reflecting the impact of price increases, partly
offset by a growth of Dji Sam Soe , driven by the variant Magnum
Mild .
In the quarter, the estimated total cigarette market increased
by 1.3%, reflecting a favorable comparison with the fourth quarter
of 2016, which declined by 3.1%. The increase in PMI's cigarette
shipments was primarily driven by the higher estimated total
cigarette market, partly offset by lower cigarette market share,
largely reflecting the same dynamics as for the full year.
In Japan , PMI shipments reflect cigarette and heated tobacco
unit volume. The estimated total market and PMI's market share
reflect total industry cigarette and heated tobacco unit
volume.
Japan Key Fourth-Quarter Full-Year
Market
Data
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total 43.4 45.3 (4.1 )% 171.5 179.0 (4.2 )%
Market
(billion
units)
PMI
Shipments
(million
units)
Cigarettes 7,683 10,631 (27.7 )% 34,853 43,915 (20.6 )%
Heated 13,134 3,510 +100% 31,291 7,069 +100%
Tobacco
Units
Total 20,816 14,141 47.2 % 66,144 50,985 29.7 %
PMI Market
Share
Marlboro 8.1 % 10.2 % (2.1 ) 9.3 % 10.6 % (1.3 )
HeatSticks 13.9 % 4.9 % 9.0 10.8 % 2.9 % 7.9
Parliament 1.9 % 2.2 % (0.3 ) 2.1 % 2.3 % (0.2 )
Lark 8.0 % 9.3 % (1.3 ) 8.6 % 9.6 % (1.0 )
Others 1.3 % 1.7 % (0.4 ) 1.3 % 1.7 % (0.4 )
Total 33.2 % 28.3 % 4.9 32.1 % 27.1 % 5.0
For the full year, the estimated total market decreased by 4.2%.
PMI's shipment volume increased by 13.1%, excluding the net impact
of estimated cigarette and heated tobacco unit distributor
inventory movements, driven by higher market share of
HeatSticks.
In the quarter, the estimated total market decreased by 4.1%.
PMI's shipment volume increased by 11.9%, excluding the net impact
of estimated cigarette and heated tobacco unit distributor
inventory movements, driven by higher market share of
HeatSticks.
In Korea , PMI shipments reflect cigarette and heated tobacco
unit volume. The estimated total market and PMI's market share
reflect total industry cigarette and heated tobacco unit
volume.
Korea Key Fourth-Quarter Full-Year
Market
Data
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total 16.4 18.0 (9.1 )% 70.6 73.6 (4.1 )%
Market
(billion
units)
PMI
Shipments
(million
units)
Cigarettes 3,079 3,937 (21.8 )% 13,499 15,490 (12.9 )%
Heated 898 - - % 1,438 - - %
Tobacco
Units
Total 3,977 3,937 1.0 % 14,937 15,490 (3.6 )%
PMI Market
Share
Marlboro 8.6 % 10.0 % (1.4 ) 8.7 % 9.6 % (0.9 )
Parliament 7.9 % 8.9 % (1.0 ) 8.0 % 7.9 % 0.1
HEETS 5.5 % - % 5.5 2.0 % - % 2.0
Virginia S. 2.0 % 2.4 % (0.4 ) 2.0 % 3.0 % (1.0 )
Others 0.4 % 0.4 % - 0.5 % 0.5 % -
Total 24.4 % 21.7 % 2.7 21.2 % 21.0 % 0.2
For the full year, the estimated total market decreased by 4.1%,
or by 3.3% excluding the net impact of estimated cigarette trade
inventory movements. The decrease in PMI's shipment volume was due
to the lower total market, partly offset by higher market share
driven by the May 2017 launch of HEETS .
In the quarter, the estimated total market decreased by 9.1%, or
by 3.0% excluding the net impact of estimated cigarette trade
inventory movements notably related to inventory movements in the
fourth quarter of 2016 ahead of the implementation of graphic
health warnings. The increase in PMI's shipment volume mainly
reflected higher market share, mainly driven by the same dynamics
as for the full year, despite PMI's principal competitors' new
product launches.
In the Philippines , estimated cigarette industry size, PMI
cigarette shipment volume and cigarette market share performance
are shown in the table below.
Philippines Fourth-Quarter Full-Year
Key
Market
Data
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total 20.7 19.2 7.8 % 74.9 79.3 (5.6 )%
Cigarette
Market
(billion
units)
PMI 14,315 13,053 9.7 % 50,618 56,611 (10.6 )%
Cigarette
Shipments
(million
units)
PMI
Cigarette
Market
Share
Marlboro 35.6 % 29.9 % 5.7 33.0 % 28.4 % 4.6
Fortune 17.9 % 20.5 % (2.6 ) 18.0 % 23.4 % (5.4 )
Jackpot 5.6 % 6.8 % (1.2 ) 6.1 % 7.9 % (1.8 )
Others 10.2 % 11.0 % (0.8 ) 10.5 % 11.6 % (1.1 )
Total 69.3 % 68.2 % 1.1 67.6 % 71.3 % (3.7 )
For the full year, the decline of the estimated total cigarette
market of 6.7%, excluding the net impact of estimated trade
inventory movements, was mainly due to the impact of excise
tax-driven price increases. The decline in PMI's cigarette shipment
volume was due to the lower total cigarette market, as well as
lower cigarette market share, particularly of PMI's low and
super-low price brands as a result of the timing of competitors'
price increases, which initially widened the price gaps to PMI's
principal competitor's discounted brands, partly offset by Marlboro
, which benefited from in-switching from lower-priced brands.
In the quarter, the estimated total cigarette market increased
by 7.8%, or by 1.1% excluding the net impact of estimated trade
inventory movements regarding an anticipated Marlboro price
increase in January 2018. The increase in PMI's cigarette shipment
volume reflected the higher total cigarette market, as well as
higher cigarette market share, particularly of Marlboro , which
benefited from in-switching from lower-priced brands following
significant competitor price increases in the quarter.
LATIN AMERICA & CANADA REGION
2017 Full-Year
Net revenues, excluding excise taxes, of $2.9 billion increased
by 3.5%. Excluding unfavorable currency of $54 million, net
revenues, excluding excise taxes, increased by 5.4%, primarily
reflecting a favorable pricing variance of $307 million across the
Region, notably Argentina, Canada and Mexico, partly offset by
unfavorable volume/mix of $154 million, notably due to Argentina,
Brazil, Canada and Mexico.
Operating companies income of $1.0 billion increased by 6.8%.
Excluding unfavorable currency of $70 million, operating companies
income increased by 14.3%, primarily reflecting a favorable pricing
variance, partly offset by unfavorable volume/mix of $152 million,
notably due to Argentina, Brazil, Canada and Mexico.
Adjusted operating companies income and margin are shown in the
table below and detailed on Schedule 16. Adjusted operating
companies income, excluding unfavorable currency, increased by
14.3%. Adjusted operating companies income margin, excluding
unfavorable currency, increased by 2.8 points to 35.8%, principally
driven by the factors mentioned above, as detailed on Schedule
16.
2017 Fourth-Quarter
Net revenues, excluding excise taxes, of $831 million increased
by 5.9%. Excluding favorable currency of $2 million, net revenues,
excluding excise taxes, increased by 5.6%, primarily reflecting a
favorable pricing variance of $83 million across the Region,
notably Argentina, Canada and Mexico, partly offset by unfavorable
volume/mix of $39 million, mainly due to Brazil and Canada, partly
offset by Mexico.
Operating companies income of $293 million increased by 12.3%.
Excluding unfavorable currency of $10 million, operating companies
income increased by 16.1%, primarily reflecting a favorable pricing
variance, partly offset by unfavorable volume/mix of $36 million,
mainly due to Brazil and Canada, partly offset by Mexico.
Adjusted operating companies income and margin are shown in the
table below and detailed on Schedule 12. Adjusted operating
companies income, excluding unfavorable currency, increased by
16.1%. Adjusted operating companies income margin, excluding
unfavorable currency, increased by 3.4 points to 36.6%, principally
driven by the factors mentioned above, as detailed on Schedule
12.
Latin Fourth-Quarter Full-Year
America
&
Canada
OCI
(in Excl. Excl.
millions)
2017 2016 Change Curr. 2017 2016 Change Curr.
OCI $ 293 $ 261 12.3 % 16.1 % $ 1,002 $ 938 6.8 % 14.3 %
Asset - - - -
impairment
&
exit
costs
Adjusted $ 293 $ 261 12.3 % 16.1 % $ 1,002 $ 938 6.8 % 14.3 %
OCI
Adjusted 35.3 % 33.2 % 2.1 3.4 34.1 % 33.0 % 1.1 2.8
OCI
Margin*
*Margins are calculated as adjusted OCI, divided by net
revenues, excluding excise taxes.
Latin America & Canada Total Market, PMI Shipment &
Market Share Commentaries
Latin America Fourth-Quarter Full-Year
& Canada PMI
ShipmentVolume
by Brand
(million units)
2017 2016 Change 2017 2016 Change
Cigarettes
Marlboro 9,429 9,632 (2.1 )% 33,711 35,194 (4.2 )%
Philip Morris 3,335 3,912 (14.8 )% 13,320 16,463 (19.1 )%
Chesterfield 3,317 1,565 +100.0% 9,852 2,626 +100.0%
Others 6,841 8,685 (21.2 )% 27,340 33,655 (18.8 )%
Total 22,922 23,794 (3.7 )% 84,223 87,938 (4.2 )%
Cigarettes
Heated Tobacco 15 - - % 27 - - %
Units
Total Latin 22,937 23,794 (3.6 )% 84,250 87,938 (4.2 )%
America
& Canada
2017 Full-Year
The estimated total market in Latin America & Canada
decreased by 3.8% to 213.0 billion units. PMI's Regional market
share decreased by 0.1 point to 39.6%.
PMI's total shipment volume decreased by 4.2% to 84.3 billion
units, mainly due to lower cigarette shipment volume in Argentina,
Brazil, Canada, Colombia and Mexico. The decrease in cigarette
shipment volume of Marlboro was mainly due to Argentina and Brazil.
The decrease in cigarette shipment volume of Philip Morris was
mainly due to Argentina. The increase in cigarette shipment volume
of Chesterfield was driven by Argentina, Brazil, Colombia and
Venezuela, partly offset by Mexico. The decrease in cigarette
shipment volume of "Others" was principally due to mainly local
brands in Argentina, Brazil, Colombia and Venezuela, largely
reflecting successful brand portfolio consolidation, Canada and
Mexico.
2017 Fourth-Quarter
PMI's total shipment volume decreased by 3.6% to 22.9 billion
units, mainly due to Argentina, Brazil and Colombia, partly offset
by Mexico and Venezuela. The decrease in cigarette shipment volume
of Marlboro was mainly due to Argentina and Brazil, partly offset
by Mexico. The decrease in cigarette shipment volume of Philip
Morris was mainly due to Argentina. The increase in cigarette
shipment volume of Chesterfield was mainly driven by Argentina,
Brazil, Colombia and Venezuela. The decrease in cigarette shipment
volume of "Others" was principally due to mainly local brands in
Brazil and Colombia, reflecting successful brand portfolio
consolidation.
Key Market Commentaries
In Argentina , estimated cigarette industry size, PMI cigarette
shipment volume and cigarette market share performance are shown in
the table below.
Argentina Fourth-Quarter Full-Year
Key
Market
Data
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total 9.2 9.4 (2.5 )% 36.2 36.1 0.2 %
Cigarette
Market
(billion
units)
PMI 6,859 7,123 (3.7 )% 27,002 27,512 (1.9 )%
Cigarette
Shipments
(million
units)
PMI
Cigarette
Market
Share
Marlboro 19.7 % 20.8 % (1.1 ) 20.0 % 22.4 % (2.4 )
Chesterfield 17.2 % 11.3 % 5.9 15.9 % 5.5 % 10.4
Philip 32.0 % 37.3 % (5.3 ) 33.0 % 41.6 % (8.6 )
Morris
Others 5.7 % 6.1 % (0.4 ) 5.8 % 6.8 % (1.0 )
Total 74.6 % 75.5 % (0.9 ) 74.7 % 76.3 % (1.6 )
For the full year, the estimated total cigarette market
increased by 0.2%, reflecting higher tax declarations by local
manufacturers, as well as a favorable comparison to the full year
2016, which declined by 11.6% mainly due to the impact of
tax-driven price increases. The decrease in PMI's cigarette
shipment volume was mainly due to lower cigarette market share,
reflecting the growth of the low price segment, where local
manufacturers are exempt from paying minimum excise tax, resulting
in widened price gaps with premium Marlboro and mid-price Philip
Morris , partly offset by low-price Chesterfield that benefited
from successful brand portfolio consolidation of a low-price brand
in "Others."
In the quarter, the estimated total cigarette market decreased
by 2.5%, mainly due to the impact of excise-tax driven price
increases. The decrease in PMI's cigarette shipment volume was
mainly due to the lower total market and lower cigarette market
share, largely reflecting the same dynamics as for the full
year.
In Canada , estimated industry size, PMI shipment volume and
market share performance, shown in the table below, include
cigarettes and PMI's heated tobacco units.
Canada Key Fourth-Quarter Full-Year
Market
Data
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total Market 6.6 6.8 (2.6 )% 24.6 26.3 (6.3 )%
(billion
units)
PMI 2,477 2,584 (4.1 )% 9,259 10,049 (7.9 )%
Shipments
(million
units)
PMI Market
Share
Belmont 4.3 % 3.8 % 0.5 4.1 % 3.7 % 0.4
Canadian 9.5 % 10.3 % (0.8 ) 9.5 % 10.2 % (0.7 )
Classics
Next 11.6 % 11.6 % - 11.5 % 11.3 % 0.2
Others* 12.0 % 13.1 % (1.1 ) 12.2 % 13.2 % (1.0 )
Total 37.4 % 38.8 % (1.4 ) 37.3 % 38.4 % (1.1 )
*Includes heated tobacco units.
For the full year, the estimated total market decreased by 6.3%,
mainly due to the impact of price increases. The decrease in PMI's
shipment volume mainly reflected the lower total market, as well as
lower cigarette market share, unfavorably impacted by estimated net
trade inventory movements.
In the quarter, the estimated total market decreased by 2.6%,
mainly reflecting the same dynamics as for the full year. The
decrease in PMI's shipment volume and market share reflected the
impact of estimated trade inventory movements.
In Mexico , estimated cigarette industry size, PMI cigarette
shipment volume and cigarette market share performance are shown in
the table below.
Mexico Key Fourth-Quarter Full-Year
Market
Data
Change Change
2017 2016 % / p.p. 2017 2016 % / p.p.
Total 10.2 9.7 4.5 % 35.8 36.2 (1.1 )%
Cigarette
Market
(billion
units)
PMI 7,260 7,066 2.7 % 24,351 25,080 (2.9 )%
Cigarette
Shipments
(million
units)
PMI
Cigarette
Market Share
Marlboro 52.4 % 52.1 % 0.3 49.4 % 49.0 % 0.4
Delicados 8.3 % 9.5 % (1.2 ) 8.3 % 9.7 % (1.4 )
Benson & 5.1 % 5.0 % 0.1 5.0 % 4.7 % 0.3
Hedges
Others 5.5 % 5.9 % (0.4 ) 5.4 % 5.9 % (0.5 )
Total 71.3 % 72.5 % (1.2 ) 68.1 % 69.3 % (1.2 )
For the full year, the estimated total cigarette market
decreased by 1.1%, or increased by 1.2% excluding the net impact of
estimated trade inventory movements. The decrease in PMI's
cigarette shipment volume mainly reflected the lower total
cigarette market, as well as lower cigarette market share. The
decrease of PMI's cigarette market share largely reflected the net
impact of the estimated trade inventory movements, as well as lower
share of Delicados , impacted by competitive pressure in the low
price segment.
In the quarter, the estimated total cigarette market increased
by 4.5%, or by 3.1% excluding the net impact of estimated trade
inventory movements. The increase in PMI's cigarette shipment
volume mainly reflected the higher total cigarette market. The
decrease of PMI's cigarette market share largely reflected the same
dynamics as for the full year.
Philip Morris International: Who We Are
We are a leading international tobacco company engaged in the
manufacture and sale of cigarettes and other nicotine-containing
products in markets outside the United States of America. We're
building our future on smoke-free products that are a much better
consumer choice than continuing to smoke cigarettes. Through
multidisciplinary capabilities in product development,
state-of-the-art facilities and scientific substantiation, we aim
to ensure that our smoke-free products meet adult consumer
preferences and rigorous regulatory requirements. Our vision is
that these products ultimately replace cigarettes to the benefit of
adult smokers, society, our company and our shareholders. For more
information, see 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 products
and exposure to environmental tobacco smoke; litigation related to
tobacco use; 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 and quality of
tobacco and other agricultural products and raw materials; and the
integrity of its information systems. 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.
PMI is further subject to other risks detailed from time to time
in its publicly filed documents, including the Form 10-Q for the
quarter ended September 30, 2017. 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.
Schedule 1
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Condensed Statements of Earnings
For the Quarters Ended December 31,
($ in millions, except per share data)
(Unaudited)
2017 2016 % Change
Net Revenues $ 21,585 $ 19,189 12.5 %
Cost of sales 3,001 2,499 20.1 %
Excise Taxes on products (1) 13,291 12,218 8.8 %
Gross profit 5,293 4,472 18.4 %
Marketing, administration and research costs 1,952 1,842
Asset impairment and exit costs - -
Amortization of intangibles 23 18
Operating Income (2) 3,318 2,612 27.0 %
Interest expense, net 259 201
Earnings before income taxes 3,059 2,411 26.9 %
Provision for income taxes 2,265 658 100+%
Equity (income)/loss in unconsolidated subsidiaries, net (2 ) (22 )
Net Earnings 796 1,775 (55.2 )%
Net Earnings attributable to noncontrolling interests 102 64
Net Earnings attributable to PMI $ 694 $ 1,711 (59.4 )%
Per share data (3):
Basic Earnings Per Share $ 0.44 $ 1.10 (60.0 )%
Diluted Earnings Per Share $ 0.44 $ 1.10 (60.0 )%
(1) The segment detail of Excise Taxes on products sold for the quarters ended December 31, 2017 and 2016 is shown on Schedule 2.
(2) PMI's management evaluates segment performance and allocates resources based on operating companies income, which PMI defines as operating income, excluding general corporate expenses and amortization of intangibles, plus equity (income)/loss in unconsolidated subsidiaries, net. The reconciliation from operating income to operating companies income is as follows:
2017 2016 % Change
Operating Income $ 3,318 $ 2,612 27.0 %
Excluding:
- Amortization of intangibles 23 18
- General corporate expenses (included in marketing, administration and research costs above) 38 42
Plus: Equity (income)/loss in unconsolidated subsidiaries, net (2 ) (22 )
Operating Companies Income $ 3,381 $ 2,694 25.5 %
(3) Net Earnings and weighted-average shares used in the basic and diluted earnings per share computations for the quarters ended December 31, 2017 and 2016 are shown on Schedule 4, Footnote 1.
Schedule 2
PHILIP MORRIS INTERNATIONAL
INC.
and
Subsidiaries
Selected Financial Data
by Business Segment
For the Quarters Ended
December 31,
($
in millions)
(Unaudited)
Net Revenues excluding Excise Taxes
EuropeanUnion EEMA Asia LatinAmerica &Canada Total
2017 Net Revenues (1) $ 7,424 $ 4,868 $ 6,584 $ 2,709 $ 21,585
Excise Taxes on products (5,160 ) (3,104 ) (3,149 ) (1,878 ) (13,291 )
Net Revenues excluding Excise Taxes 2,264 1,764 3,435 831 8,294
2016 Net Revenues $ 6,465 $ 4,636 $ 5,517 $ 2,571 $ 19,189
Excise Taxes on products (4,521 ) (2,838 ) (3,073 ) (1,786 ) (12,218 )
Net Revenues excluding Excise Taxes 1,944 1,798 2,444 785 6,971
Variance Currency 139 (23 ) (104 ) 2 14
Acquisitions - - - - -
Operations 181 (11 ) 1,095 44 1,309
Variance Total 320 (34 ) 991 46 1,323
Variance Total (%) 16.5 % (1.9 )% 40.5 % 5.9 % 19.0 %
Variance excluding Currency 181 (11 ) 1,095 44 1,309
Variance excluding Currency (%) 9.3 % (0.6 )% 44.8 % 5.6 % 18.8 %
Variance excluding Currency & Acquisitions 181 (11 ) 1,095 44 1,309
Variance excluding Currency & Acquisitions (%) 9.3 % (0.6 )% 44.8 % 5.6 % 18.8 %
(1) 2017 Currency increased / (decreased)
Net Revenues as follows:
European Union $ 455
EEMA (293 )
Asia (141 )
Latin America & Canada (78 )
$ (57 )
Schedule 3
PHILIP MORRIS INTERNATIONAL
INC.
and
Subsidiaries
Selected Financial Data
by Business Segment
For the Quarters Ended
December 31,
($
in millions)
(Unaudited)
Operating Companies Income
EuropeanUnion EEMA Asia LatinAmerica& Canada Total
2017 Operating Companies Income $ 992 $ 700 $ 1,396 $ 293 $ 3,381
2016 Operating Companies Income 898 627 908 261 2,694
Variance
2016 Asset impairment and exit costs - - - - -
2017 Asset impairment and exit costs - - - - -
Currency 39 264 (97 ) (10 ) 196
Acquisitions - - - - -
Operations 55 (191 ) 585 42 491
Variance Total 94 73 488 32 687
Variance Total (%) 10.5 % 11.6 % 53.7 % 12.3 % 25.5 %
Variance excluding Currency 55 (191 ) 585 42 491
Variance excluding Currency (%) 6.1 % (30.5 )% 64.4 % 16.1 % 18.2 %
Variance excluding Currency & Acquisitions 55 (191 ) 585 42 491
Variance excluding Currency & Acquisitions (%) 6.1 % (30.5 )% 64.4 % 16.1 % 18.2 %
Schedule 4
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Diluted Earnings Per Share
For the Quarters Ended December 31,
($ in millions, except per share data)
(Unaudited)
Diluted
E.P.S.
2017 Diluted Earnings Per Share $ 0.44 (1)
2016 Diluted Earnings Per Share $ 1.10 (1)
Change $ (0.66 )
% Change (60.0 )%
Reconciliation:
2016 Diluted Earnings Per Share $ 1.10 (1)
Special Items:
2016 Asset impairment and exit costs -
2016 Tax items -
2017 Asset impairment and exit costs -
2017 Tax items (0.88 )
Currency 0.01
Interest (0.02 )
Change in tax rate (0.04 )
Operations 0.27 (2)
2017 Diluted Earnings Per Share $ 0.44 (1)
(1) Basic and diluted EPS were calculated
using the following (in millions):
Q4 Q4
2017 2016
Net Earnings attributable to PMI $ 694 $ 1,711
Less distributed and undistributed
earnings attributable
to share-based payment awards 4 5
Net Earnings for basic and diluted EPS $ 690 $ 1,706
Weighted-average shares for basic EPS 1,553 1,552
Plus Contingently Issuable Performance 1 -
Stock Units (PSUs)
Weighted-average shares for diluted EPS 1,554 1,552
(2) Includes the impact of shares outstanding
and share-based payments
Schedule 5
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Condensed Statements of Earnings
For the Years Ended December 31,
($ in millions, except per share data)
(Unaudited)
2017 2016 % Change
Net Revenues $ 78,098 $ 74,953 4.2 %
Cost of sales 10,432 9,391 11.1 %
Excise Taxes on products (1) 49,350 48,268 2.2 %
Gross profit 18,316 17,294 5.9 %
Marketing, administration and research costs 6,725 6,405
Asset impairment and exit costs - -
Amortization of intangibles 88 74
Operating Income (2) 11,503 10,815 6.4 %
Interest expense, net 914 891
Earnings before income taxes 10,589 9,924 6.7 %
Provision for income taxes 4,307 2,768 55.6 %
Equity (income)/loss in unconsolidated subsidiaries, net (59 ) (94 )
Net Earnings 6,341 7,250 (12.5 )%
Net Earnings attributable to noncontrolling interests 306 283
Net Earnings attributable to PMI $ 6,035 $ 6,967 (13.4 )%
Per share data (3):
Basic Earnings Per Share $ 3.88 $ 4.48 (13.4 )%
Diluted Earnings Per Share $ 3.88 $ 4.48 (13.4 )%
(1) The segment detail of Excise Taxes on products sold for the year ended December 31, 2017 and 2016 is shown on Schedule 6.
(2) PMI's management evaluates segment performance and allocates resources based on operating companies income, which PMI defines as operating income, excluding general corporate expenses and amortization of intangibles, plus equity (income)/loss in unconsolidated subsidiaries, net. The reconciliation from operating income to operating companies income is as follows:
2017 2016 % Change
Operating Income $ 11,503 $ 10,815 6.4 %
Excluding:
- Amortization of intangibles 88 74
- General corporate expenses (included in marketing, administration and research costs above) 164 161
Plus: Equity (income)/loss in unconsolidated subsidiaries, net (59 ) (94 )
Operating Companies Income $ 11,814 $ 11,144 6.0 %
(3) Net Earnings and weighted-average shares used in the basic and diluted Earnings Per Share computations for the year ended December 31, 2017 and 2016 are shown on Schedule 8, Footnote 1.
Schedule 6
PHILIP MORRIS INTERNATIONAL
INC.
and
Subsidiaries
Selected Financial Data
by Business Segment
For the Years Ended
December 31,
($
in millions)
(Unaudited)
Net Revenues excluding Excise Taxes
EuropeanUnion EEMA Asia LatinAmerica &Canada Total
2017 Net Revenues (1) $ 27,580 $ 18,045 $ 22,635 $ 9,838 $ 78,098
Excise Taxes on products (19,262 ) (11,346 ) (11,845 ) (6,897 ) (49,350 )
Net Revenues excluding Excise Taxes 8,318 6,699 10,790 2,941 28,748
2016 Net Revenues $ 27,129 $ 18,286 $ 20,531 $ 9,007 $ 74,953
Excise Taxes on products (18,967 ) (11,286 ) (11,850 ) (6,165 ) (48,268 )
Net Revenues excluding Excise Taxes 8,162 7,000 8,681 2,842 26,685
Variance Currency 45 (291 ) (137 ) (54 ) (437 )
Acquisitions - - - - -
Operations 111 (10 ) 2,246 153 2,500
Variance Total 156 (301 ) 2,109 99 2,063
Variance Total (%) 1.9 % (4.3 )% 24.3 % 3.5 % 7.7 %
Variance excluding Currency 111 (10 ) 2,246 153 2,500
Variance excluding Currency (%) 1.4 % (0.1 )% 25.9 % 5.4 % 9.4 %
Variance excluding Currency & Acquisitions 111 (10 ) 2,246 153 2,500
Variance excluding Currency & Acquisitions (%) 1.4 % (0.1 )% 25.9 % 5.4 % 9.4 %
(1) 2017 Currency increased / (decreased)
Net Revenues as follows:
European Union $ 139
EEMA (1,925 )
Asia (165 )
Latin America & Canada (404 )
$ (2,355 )
Schedule 7
PHILIP MORRIS INTERNATIONAL
INC.
and
Subsidiaries
Selected Financial Data
by Business Segment
For the Years Ended
December 31,
($
in millions)
(Unaudited)
Operating Companies Income
EuropeanUnion EEMA Asia LatinAmerica& Canada Total
2017 Operating Companies Income $ 3,775 $ 2,888 $ 4,149 $ 1,002 $ 11,814
2016 Operating Companies Income 3,994 3,016 3,196 938 11,144
Variance
2016 Asset impairment and exit costs - - - - -
2017 Asset impairment and exit costs - - - - -
Currency (43 ) 81 (123 ) (70 ) (155 )
Acquisitions - - - - -
Operations (176 ) (209 ) 1,076 134 825
Variance Total (219 ) (128 ) 953 64 670
Variance Total (%) (5.5 )% (4.2 )% 29.8 % 6.8 % 6.0 %
Variance excluding Currency (176 ) (209 ) 1,076 134 825
Variance excluding Currency (%) (4.4 )% (6.9 )% 33.7 % 14.3 % 7.4 %
Variance excluding Currency & Acquisitions (176 ) (209 ) 1,076 134 825
Variance excluding Currency & Acquisitions (%) (4.4 )% (6.9 )% 33.7 % 14.3 % 7.4 %
Schedule 8
PHILIP MORRIS INTERNATIONAL
INC.
and Subsidiaries
Diluted Earnings Per Share
For the Years Ended
December 31,
($ in millions, except
per share data)
(Unaudited)
Diluted
E.P.S.
2017 Diluted Earnings $ 3.88 (1)
Per Share
2016 Diluted Earnings $ 4.48 (1)
Per Share
Change $ (0.60 )
% Change (13.4 )%
Reconciliation:
2016 Diluted Earnings $ 4.48 (1)
Per Share
Special Items:
2016 Asset impairment -
and exit costs
2016 Tax items -
2017 Asset impairment -
and exit costs
2017 Tax items (0.84 )
Currency (0.21 )
Interest 0.01
Change in tax rate (0.03 )
Operations 0.47 (2)
2017 Diluted Earnings $ 3.88 (1)
Per Share
(1) Basic and diluted
EPS were calculated
using the following
(in millions):
YTDDecember2017 YTDDecember2016
Net Earnings attributable $ 6,035 $ 6,967
to PMI
Less distributed and
undistributed
earnings attributable
to share-based payment awards 14 19
Net Earnings for basic $ 6,021 $ 6,948
and diluted EPS
Weighted-average shares 1,552 1,551
for basic EPS
Plus Contingently Issuable 1 -
Performance
Stock Units (PSUs)
Weighted-average shares 1,553 1,551
for diluted EPS
(2) Includes the impact
of shares outstanding
and share-based payments
Schedule 9
PHILIP MORRIS INTERNATIONAL
INC.
and Subsidiaries
Condensed Balance Sheets
($ in millions, except ratios)
(Unaudited)
December 31, December 31,
2017 2016
Assets
Cash and cash equivalents $ 8,447 $ 4,239
All other current assets 13,147 13,369
Property, plant and 7,271 6,064
equipment, net
Goodwill 7,666 7,324
Other intangible assets, net 2,432 2,470
Investments in unconsolidated 1,074 1,011
subsidiaries
Other assets 2,931 2,374
Total assets $ 42,968 $ 36,851
Liabilities and Stockholders'
(Deficit) Equity
Short-term borrowings $ 499 $ 643
Current portion of 2,506 2,573
long-term debt
All other current liabilities 12,957 13,251
Long-term debt 31,334 25,851
Deferred income taxes 799 1,897
Other long-term liabilities 5,103 3,536
Total liabilities 53,198 47,751
Total PMI stockholders' (12,086 ) (12,688 )
deficit
Noncontrolling interests 1,856 1,788
Total stockholders' deficit (10,230 ) (10,900 )
Total liabilities and $ 42,968 $ 36,851
stockholders'
(deficit) equity
Total debt $ 34,339 $ 29,067
Total debt to Adjusted EBITDA 2.77 (1) 2.51 (1)
Net debt to Adjusted EBITDA 2.09 (1) 2.15 (1)
(1) For the calculation
of Total
Debt to Adjusted
EBITDA and Net
Debt to Adjusted
EBITDA ratios,
refer to Schedule 18.
Schedule 10
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP Measures
Adjustments for the Impact of Currency and Acquisitions
For the Quarters Ended December 31,
($ in millions)
(Unaudited)
2017 2016 % Change in Net Revenues
excluding Excise Taxes
NetRevenues LessExciseTaxes NetRevenuesexcludingExciseTaxes LessCurrency NetRevenuesexcludingExciseTaxes &Currency LessAcquisitions NetRevenuesexcludingExciseTaxes,Currency &Acquisitions NetRevenues LessExciseTaxes NetRevenuesexcludingExciseTaxes Total ExcludingCurrency ExcludingCurrency &Acquisitions
$ 7,424 $ 5,160 $ 2,264 $ 139 $ 2,125 $ - $ 2,125 European Union $ 6,465 $ 4,521 $ 1,944 16.5 % 9.3 % 9.3 %
4,868 3,104 1,764 (23 ) 1,787 - 1,787 EEMA 4,636 2,838 1,798 (1.9 )% (0.6 )% (0.6 )%
6,584 3,149 3,435 (104 ) 3,539 - 3,539 Asia 5,517 3,073 2,444 40.5 % 44.8 % 44.8 %
2,709 1,878 831 2 829 - 829 Latin America & Canada 2,571 1,786 785 5.9 % 5.6 % 5.6 %
$ 21,585 $ 13,291 $ 8,294 $ 14 $ 8,280 $ - $ 8,280 PMI Total $ 19,189 $ 12,218 $ 6,971 19.0 % 18.8 % 18.8 %
2017 2016 % Change in
Operating Companies Income
OperatingCompaniesIncome LessCurrency OperatingCompaniesIncomeexcludingCurrency LessAcquisitions OperatingCompaniesIncomeexcludingCurrency &Acquisitions OperatingCompaniesIncome Total ExcludingCurrency ExcludingCurrency &Acquisitions
$ 992 $ 39 $ 953 $ - $ 953 European Union $ 898 10.5 % 6.1 % 6.1 %
700 264 436 - 436 EEMA 627 11.6 % (30.5 )% (30.5 )%
1,396 (97 ) 1,493 - 1,493 Asia 908 53.7 % 64.4 % 64.4 %
293 (10 ) 303 - 303 Latin America & Canada 261 12.3 % 16.1 % 16.1 %
$ 3,381 $ 196 $ 3,185 $ - $ 3,185 PMI Total $ 2,694 25.5 % 18.2 % 18.2 %
Schedule 11
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Selected Financial Data by Product Category
For the Quarters Ended December 31,
($ in millions) / (Unaudited)
2017 2016 % Change in Combustible ProductsNet Revenues excluding ExciseTaxes
NetRevenues (1) LessExciseTaxes (3) NetRevenuesexcludingExciseTaxes LessCurrency NetRevenuesexcludingExciseTaxes &Currency LessAcquisitions NetRevenuesexcludingExciseTaxes,Currency &Acquisitions Combustible Products NetRevenues (1) LessExciseTaxes (3) NetRevenuesexcludingExciseTaxes Total ExcludingCurrency ExcludingCurrency &Acquisitions
$ 7,278 $ 5,138 $ 2,140 $ 130 $ 2,009 $ - $ 2,009 European Union $ 6,437 $ 4,518 $ 1,919 11.5 % 4.7 % 4.7 %
4,778 3,098 1,680 (22 ) 1,702 - 1,702 EEMA 4,630 2,838 1,792 (6.3 )% (5.1 )% (5.1 )%
5,093 3,089 2,003 (36 ) 2,039 - 2,039 Asia 5,205 3,072 2,133 (6.1 )% (4.4 )% (4.4 )%
2,706 1,878 828 2 826 - 826 Latin America & Canada 2,571 1,786 785 5.5 % 5.3 % 5.3 %
$ 19,855 $ 13,204 $ 6,651 $ 75 $ 6,576 $ - $ 6,576 Total CombustibleProducts $ 18,843 $ 12,215 $ 6,628 0.3 % (0.8 )% (0.8 )%
2017 2016 % Change in Reduced-RiskProducts Net Revenues excludingExcise Taxes
NetRevenues (2) LessExciseTaxes (3) NetRevenuesexcludingExciseTaxes LessCurrency NetRevenuesexcludingExciseTaxes &Currency LessAcquisitions NetRevenuesexcludingExciseTaxes,Currency &Acquisitions Reduced-RiskProducts NetRevenues (2) LessExciseTaxes (3) NetRevenuesexcludingExciseTaxes Total ExcludingCurrency ExcludingCurrency &Acquisitions
$ 147 $ 23 $ 124 $ 7 $ 116 $ - $ 116 European Union $ 27 3 $ 25 +100% +100% +100%
90 5 85 - 85 - 85 EEMA 6 - 6 +100% +100% +100%
1,491 59 1,432 (68 ) 1,500 - 1,500 Asia 312 - 312 +100% +100% +100%
3 - 3 - 3 - 3 Latin America & Canada - - - +100% +100% +100%
$ 1,730 $ 87 $ 1,643 $ (60 ) $ 1,704 $ - $ 1,704 Total Reduced-RiskProducts $ 345 $ 3 $ 343 +100% +100% +100%
$ 21,585 $ 13,291 $ 8,294 $ 14 $ 8,280 $ - $ 8,280 PMI Total $ 19,189 $ 12,218 $ 6,971 19.0 % 18.8% 18.8%
(1) Net revenue amounts for our combustible products refer to the operating revenues generated from the sale of these products, net of sales and promotion incentives. These net revenue amounts consist of the sale of our cigarettes and other tobacco products combined. Other tobacco products primarily include tobacco for roll-your-own and make-your-own cigarettes, pipe tobacco, cigars and cigarillos and do not include reduced-risk products.
(2) Net revenue amounts for our reduced-risk products refer to the operating revenues generated from the sale of these products, net of sales and promotion incentives. These net revenue amounts consist of the sale of our heated tobacco units, our IQOS devices and related accessories, and other nicotine-containing products, which primarily include our e-vapor products. Reduced-risk products is the term we use 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 continued smoking. We have a range of reduced- risk products in various stages of development, scientific assessment and commercialization. Because our reduced-risk products do not burn tobacco, they produce far lower quantities of harmful and potentially harmful compounds than found in cigarette smoke.
(3) PMI often collects excise taxes from its customers and then remits them to governments, and, in those circumstances, PMI includes the excise taxes in its net revenues and in excise taxes on products. In some jurisdictions, including Japan, PMI is not responsible for collecting excise taxes.
Note: Sum of product categories or Regions might not foot to PMI total due to rounding.
Schedule 12
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Operating Companies Income to Adjusted Operating Companies Income &
Reconciliation of Adjusted Operating Companies Income Margin, excluding Currency and Acquisitions
For the Quarters Ended December 31,
($ in millions)
(Unaudited)
2017 2016 % Change in AdjustedOperating Companies Income
OperatingCompaniesIncome LessAssetImpairment& ExitCosts AdjustedOperatingCompaniesIncome LessCurrency AdjustedOperatingCompaniesIncomeexcludingCurrency LessAcquisitions AdjustedOperatingCompaniesIncomeexcludingCurrency &Acquisitions OperatingCompaniesIncome LessAssetImpairment& ExitCosts AdjustedOperatingCompaniesIncome Adjusted AdjustedexcludingCurrency AdjustedexcludingCurrency &Acquisitions
$ 992 $ - $ 992 $ 39 $ 953 $ - $ 953 European Union $ 898 $ - $ 898 10.5 % 6.1 % 6.1 %
700 - 700 264 436 - 436 EEMA 627 - 627 11.6 % (30.5 )% (30.5 )%
1,396 - 1,396 (97 ) 1,493 - 1,493 Asia 908 - 908 53.7 % 64.4 % 64.4 %
293 - 293 (10 ) 303 - 303 Latin America & Canada 261 - 261 12.3 % 16.1 % 16.1 %
$ 3,381 $ - $ 3,381 $ 196 $ 3,185 $ - $ 3,185 PMI Total $ 2,694 $ - $ 2,694 25.5 % 18.2 % 18.2 %
2017 2016 % Points Change
AdjustedOperatingCompaniesIncomeexcludingCurrency NetRevenuesexcludingExciseTaxes &Currency(1) AdjustedOperatingCompaniesIncomeMarginexcludingCurrency AdjustedOperatingCompaniesIncomeexcludingCurrency &Acquisitions Net RevenuesexcludingExcise Taxes,Currency &Acquisitions(1) AdjustedOperatingCompaniesIncomeMarginexcludingCurrency &Acquisitions AdjustedOperatingCompaniesIncome NetRevenuesexcludingExciseTaxes(1) AdjustedOperatingCompaniesIncomeMargin AdjustedOperatingCompaniesIncomeMarginexcludingCurrency AdjustedOperatingCompaniesIncomeMarginexcludingCurrency &Acquisitions
$ 953 $ 2,125 44.8 % $ 953 $ 2,125 44.8 % European Union $ 898 $ 1,944 46.2 % (1.4 ) (1.4 )
436 1,787 24.4 % 436 1,787 24.4 % EEMA 627 1,798 34.9 % (10.5 ) (10.5 )
1,493 3,539 42.2 % 1,493 3,539 42.2 % Asia 908 2,444 37.2 % 5.0 5.0
303 829 36.6 % 303 829 36.6 % Latin America & Canada 261 785 33.2 % 3.4 3.4
$ 3,185 $ 8,280 38.5 % $ 3,185 $ 8,280 38.5 % PMI Total $ 2,694 $ 6,971 38.6 % (0.1 ) (0.1 )
(1) For the calculation of Net Revenues excluding Excise Taxes, currency and acquisitions, refer to Schedule 10.
Schedule 13
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 and Adjusted Diluted EPS, excluding Currency
For the Quarters Ended December 31,
(Unaudited)
2017 2016 % Change
Reported Diluted EPS $ 0.44 $ 1.10 (60.0 )%
Less:
Currency impact 0.01
Reported Diluted EPS, excluding Currency $ 0.43 $ 1.10 (60.9 )%
2017 2016 % Change
Reported Diluted EPS $ 0.44 $ 1.10 (60.0 )%
Adjustments:
Asset impairment and exit costs - -
Tax items 0.88 -
Adjusted Diluted EPS $ 1.32 $ 1.10 20.0 %
Less:
Currency impact 0.01
Adjusted Diluted EPS, excluding Currency $ 1.31 $ 1.10 19.1 %
Schedule 14
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP Measures
Adjustments for the Impact of Currency and Acquisitions
For the Years Ended December 31,
($ in millions)
(Unaudited)
2017 2016 % Change in Net Revenuesexcluding Excise Taxes
NetRevenues LessExciseTaxes NetRevenuesexcludingExciseTaxes LessCurrency NetRevenuesexcludingExciseTaxes &Currency LessAcquisitions NetRevenuesexcludingExciseTaxes,Currency &Acquisitions NetRevenues LessExciseTaxes NetRevenuesexcludingExciseTaxes Total ExcludingCurrency ExcludingCurrency &Acquisitions
$ 27,580 $ 19,262 $ 8,318 $ 45 $ 8,273 $ - $ 8,273 European Union $ 27,129 $ 18,967 $ 8,162 1.9 % 1.4 % 1.4 %
18,045 11,346 6,699 (291 ) 6,990 - 6,990 EEMA 18,286 11,286 7,000 (4.3 )% (0.1 )% (0.1 )%
22,635 11,845 10,790 (137 ) 10,927 - 10,927 Asia 20,531 11,850 8,681 24.3 % 25.9 % 25.9 %
9,838 6,897 2,941 (54 ) 2,995 - 2,995 Latin America & Canada 9,007 6,165 2,842 3.5 % 5.4 % 5.4 %
$ 78,098 $ 49,350 $ 28,748 $ (437 ) $ 29,185 $ - $ 29,185 PMI Total $ 74,953 $ 48,268 $ 26,685 7.7 % 9.4 % 9.4 %
2017 2016 % Change inOperating Companies Income
OperatingCompaniesIncome LessCurrency OperatingCompaniesIncomeexcludingCurrency Less OperatingCompaniesIncomeexcludingCurrency &Acquisitions OperatingCompaniesIncome Total ExcludingCurrency ExcludingCurrency &Acquisitions
Acquisitions
$ 3,775 $ (43 ) $ 3,818 $ - $ 3,818 European Union $ 3,994 (5.5 )% (4.4 )% (4.4 )%
2,888 81 2,807 - 2,807 EEMA 3,016 (4.2 )% (6.9 )% (6.9 )%
4,149 (123 ) 4,272 - 4,272 Asia 3,196 29.8 % 33.7 % 33.7 %
1,002 (70 ) 1,072 - 1,072 Latin America & Canada 938 6.8 % 14.3 % 14.3 %
$ 11,814 $ (155 ) $ 11,969 $ - $ 11,969 PMI Total $ 11,144 6.0 % 7.4 % 7.4 %
Schedule 15
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries
Reconciliation of Non-GAAP Measures
Selected Financial Data by Product Category
For the Years Ended December 31,
($ in millions) / (Unaudited)
2017 2016 % Change in Combustible ProductsNet Revenues excluding ExciseTaxes
NetRevenues (1) LessExciseTaxes (3) NetRevenuesexcludingExciseTaxes LessCurrency NetRevenuesexcludingExciseTaxes &Currency LessAcquisitions NetRevenuesexcludingExciseTaxes,Currency &Acquisitions Combustible Products NetRevenues (1) LessExciseTaxes (3) NetRevenuesexcludingExciseTaxes Total ExcludingCurrency ExcludingCurrency &Acquisitions
$ 27,261 $ 19,213 $ 8,048 $ 39 $ 8,009 $ - $ 8,009 European Union $ 27,067 $ 18,962 $ 8,105 (0.7 )% (1.2 )% (1.2 )%
17,886 11,336 6,550 (290 ) 6,840 - 6,840 EEMA 18,276 11,286 6,991 (6.3 )% (2.1 )% (2.1 )%
19,325 11,753 7,572 (43 ) 7,615 - 7,615 Asia 19,865 11,850 8,015 (5.5 )% (5.0 )% (5.0 )%
9,833 6,896 2,937 (54 ) 2,991 - 2,991 Latin America & Canada 9,006 6,164 2,841 3.4 % 5.3 % 5.3 %
$ 74,305 $ 49,198 $ 25,107 $ (348 ) $ 25,456 $ - $ 25,456 Total Combustible Products $ 74,214 $ 48,262 $ 25,952 (3.3 )% (1.9 )% (1.9 )%
2017 2016 % Change in Reduced-RiskProducts Net Revenues excludingExcise Taxes
NetRevenues (2) LessExciseTaxes (3) NetRevenuesexcludingExciseTaxes LessCurrency NetRevenuesexcludingExciseTaxes &Currency LessAcquisitions NetRevenuesexcludingExciseTaxes,Currency &Acquisitions Reduced-Risk Products NetRevenues (2) LessExciseTaxes (3) NetRevenuesexcludingExciseTaxes Total ExcludingCurrency ExcludingCurrency &Acquisitions
$ 320 $ 51 $ 269 $ 5 $ 264 $ - $ 264 European Union $ 62 5 $ 57 +100% +100% +100%
158 10 149 - 149 - 149 EEMA 9 - 9 +100% +100% +100%
3,310 92 3,218 (94 ) 3,312 - 3,312 Asia 666 - 666 +100% +100% +100%
5 - 4 - 4 - 4 Latin America & Canada 2 1 1 +100% +100% +100%
$ 3,793 $ 153 $ 3,640 $ (89 ) $ 3,729 $ - $ 3,729 Total Reduced-RiskProducts $ 739 $ 6 $ 733 +100% +100% +100%
$ 78,098 $ 49,350 $ 28,748 $ (437 ) $ 29,185 $ - $ 29,185 PMI Total $ 74,953 $ 48,268 $ 26,685 7.7 % 9.4 % 9.4 %
(1) Net revenue amounts for our combustible products refer to the operating revenues generated from the sale of these products, net of sales and promotion incentives. These net revenue amounts consist of the sale of our cigarettes and other tobacco products combined. Other tobacco products primarily include tobacco for roll-your-own and make-your-own cigarettes, pipe tobacco, cigars and cigarillos and do not include reduced-risk products.
(2) Net revenue amounts for our reduced-risk products refer to the operating revenues generated from the sale of these products, net of sales and promotion incentives. These net revenue amounts consist of the sale of our heated tobacco units, our IQOS devices and related accessories, and other nicotine-containing products, which primarily include our e-vapor products. Reduced-risk products is the term we use 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 continued smoking. We have a range of reduced- risk products in various stages of development, scientific assessment and commercialization. Because our reduced-risk products do not burn tobacco, they produce far lower quantities of harmful and potentially harmful compounds than found in cigarette smoke.
(3) PMI often collects excise taxes from its customers and then remits them to governments, and, in those circumstances, PMI includes the excise taxes in its net revenues and in excise taxes on products. In some jurisdictions, including Japan, PMI is not responsible for collecting excise taxes.
Note: Sum of product categories or Regions might not foot to PMI total due to rounding.
Schedule 16
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Operating Companies Income to Adjusted Operating Companies Income &
Reconciliation of Adjusted Operating Companies Income Margin, excluding Currency and Acquisitions
For the Years Ended December 31,
($ in millions)
(Unaudited)
2017 2016 % Change in Adjusted
Operating Companies Income
OperatingCompaniesIncome LessAssetImpairment &Exit Costs AdjustedOperatingCompaniesIncome LessCurrency AdjustedOperatingCompaniesIncomeexcludingCurrency LessAcquisitions AdjustedOperatingCompaniesIncomeexcludingCurrency &Acquisitions OperatingCompaniesIncome LessAssetImpairment& ExitCosts AdjustedOperatingCompaniesIncome Adjusted AdjustedexcludingCurrency AdjustedexcludingCurrency &Acquisitions
$ 3,775 $ - $ 3,775 $ (43 ) $ 3,818 $ - $ 3,818 European Union $ 3,994 $ - $ 3,994 (5.5 )% (4.4 )% (4.4 )%
2,888 - 2,888 81 2,807 - 2,807 EEMA 3,016 - 3,016 (4.2 )% (6.9 )% (6.9 )%
4,149 - 4,149 (123 ) 4,272 - 4,272 Asia 3,196 - 3,196 29.8 % 33.7 % 33.7 %
1,002 - 1,002 (70 ) 1,072 - 1,072 Latin America & Canada 938 - 938 6.8 % 14.3 % 14.3 %
$ 11,814 $ - $ 11,814 $ (155 ) $ 11,969 $ - $ 11,969 PMI Total $ 11,144 $ - $ 11,144 6.0 % 7.4 % 7.4 %
2017 2016 % Points Change
AdjustedOperatingCompaniesIncomeexcludingCurrency Net RevenuesexcludingExcise Taxes& Currency(1) AdjustedOperatingCompaniesIncomeMarginexcludingCurrency AdjustedOperatingCompaniesIncomeexcludingCurrency &Acquisitions Net RevenuesexcludingExcise Taxes,Currency &Acquisitions(1) AdjustedOperatingCompaniesIncomeMarginexcludingCurrency &Acquisitions AdjustedOperatingCompaniesIncome NetRevenuesexcludingExciseTaxes(1) AdjustedOperatingCompaniesIncomeMargin AdjustedOperatingCompaniesIncomeMarginexcludingCurrency AdjustedOperatingCompaniesIncomeMarginexcludingCurrency &Acquisitions
$ 3,818 $ 8,273 46.2 % $ 3,818 $ 8,273 46.2 % European Union $ 3,994 $ 8,162 48.9 % (2.7 ) (2.7 )
2,807 6,990 40.2 % 2,807 6,990 40.2 % EEMA 3,016 7,000 43.1 % (2.9 ) (2.9 )
4,272 10,927 39.1 % 4,272 10,927 39.1 % Asia 3,196 8,681 36.8 % 2.3 2.3
1,072 2,995 35.8 % 1,072 2,995 35.8 % Latin America & Canada 938 2,842 33.0 % 2.8 2.8
$ 11,969 $ 29,185 41.0 % $ 11,969 $ 29,185 41.0 % PMI Total $ 11,144 $ 26,685 41.8 % (0.8 ) (0.8 )
(1) For the calculation of Net Revenues excluding Excise Taxes, currency and acquisitions, refer to Schedule 14.
Schedule 17
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 and Adjusted Diluted EPS, excluding Currency
For the Years Ended December 31,
(Unaudited)
2017 2016 % Change
Reported Diluted EPS $ 3.88 $ 4.48 (13.4 )%
Less:
Currency impact (0.21 )
Reported Diluted EPS, excluding Currency $ 4.09 $ 4.48 (8.7 )%
2017 2016 % Change
Reported Diluted EPS $ 3.88 $ 4.48 (13.4 )%
Adjustments:
Asset impairment and exit costs - -
Tax items 0.84 -
Adjusted Diluted EPS $ 4.72 $ 4.48 5.4 %
Less:
Currency impact (0.21 )
Adjusted Diluted EPS, excluding Currency $ 4.93 $ 4.48 10.0 %
Schedule 18
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)
For the Year Ended For the Year Ended
December 31, December 31,
2017 2016
Net Earnings $ 6,341 $ 7,250
Equity (income)/loss (59 ) (94 )
in unconsolidated
subsidiaries, net
Provision for Income Taxes 4,307 2,768
Interest expense, net 914 891
Depreciation and 875 743
amortization
Asset impairment - -
and exit costs
Adjusted EBITDA $ 12,378 $ 11,558
December 31, December 31,
2017 2016
Short-term borrowings $ 499 $ 643
Current portion of 2,506 2,573
long-term debt
Long-term debt 31,334 25,851
Total Debt $ 34,339 $ 29,067
Less: Cash and cash 8,447 4,239
equivalents
Net Debt $ 25,892 $ 24,828
Ratios:
Total Debt to Adjusted 2.77 2.51
EBITDA
Net Debt to Adjusted EBITDA 2.09 2.15
Schedule 19
PHILIP
MORRIS
INTERNATIONAL
INC.
and
Subsidiaries
Reconciliation
of
Non-GAAP
Measures
Reconciliation
of
Operating
Cash Flow
to
Operating
Cash
Flow,
excluding
Currency
For the
Years
Ended
December
31,
($
in
millions)
(Unaudited)
For the Quarters Ended For the Years Ended
December 31, December 31,
2017 2016 % Change 2017 2016 % Change
Net cash $ 2,921 $ 2,149 35.9 % $ 8,912 $ 8,077 10.3 %
provided
by
operating
activities
(1)
Less:
Currency 194 392
impact
Net cash $ 2,727 $ 2,149 26.9 % $ 8,520 $ 8,077 5.5 %
provided
by
operating
activities,
excluding
currency
(1)
Operating
cash
flow.
Philip Morris International Inc. Investor Relations: New York:
+1 (917) 663 2233 Lausanne: +41 (0)58 242 4666
InvestorRelations@pmi.com or Media: Lausanne: +41 (0)58 242 4500
Media@pmi.com
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(END) Dow Jones Newswires
February 08, 2018 06:59 ET (11:59 GMT)
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