Regulatory News:
-
Reported diluted earnings per share of $0.93 versus $1.01 in 2008,
principally due to a $0.08 tax benefit recorded in 2008, as detailed
on Schedules 4 and 13
-
Excluding currency, reported diluted earnings per share up 8.9%
-
Adjusted diluted earnings per share of $0.93 versus the same amount in
2008, including the items detailed on Schedule 12
-
Excluding currency, adjusted diluted earnings per share up 18.3%
-
Increases its forecast for 2009 full-year reported diluted earnings
per share to a range of $3.20 to $3.25, from $3.10 to $3.20. Excluding
currency, diluted earnings per share are projected to increase by
approximately 12%-14%
-
Increased its regular quarterly dividend during the quarter to $0.58
per common share, up by 7.4% from $0.54
-
Spent a total of $1.5 billion to repurchase 31.5 million shares of its
common stock in the quarter
-
Completed the purchase of the South African affiliate of Swedish Match
for ZAR 1.98 billion (approximately $262 million)
Philip Morris International Inc. (NYSE / Euronext Paris: PM) today
announced reported diluted earnings per share of $0.93 in the third
quarter of 2009, down by 7.9% from $1.01 in the third quarter of 2008,
principally due to a $0.08 tax benefit recorded in 2008 as detailed on
the attached Schedules 4 and 13. Excluding currency, reported diluted
earnings per share were up by 8.9%. Adjusted diluted earnings per share
in the third quarter of 2009 and 2008 were $0.93, including the items
detailed on the attached Schedule 12. Excluding currency, adjusted
diluted earnings per share were up by 18.3%.
?The third quarter underscored our proven ability to deliver excellent
results and improve our operating margins, with net revenues, adjusted
operating companies income and earnings per share up, on a constant
currency basis, by a strong 6.9%, 13.7% and 18.3%, respectively,? said
Louis Camilleri, Chairman and Chief Executive Officer.
?While we experienced lower organic volume in the quarter, this was
largely anticipated given our pricing actions and the on-going impact of
the economic crisis on total consumption levels, notably in Spain and
Ukraine. Our year-to-date volume decline of 2.1% better reflects our
estimated full-year organic volume performance.?
?Our strong operating cash flow of $6.4 billion year-to-date enabled us
to reward shareholders with a 7.4% increase in the dividend and our
robust share repurchase program has remained uninterrupted since its
inception.?
Conference Call
A conference call, hosted by Hermann Waldemer, Chief Financial Officer,
with members of the investment community and news media will be webcast
at 9:00 a.m. Eastern Time on October 22, 2009. Access is available at www.pmintl.com.
2009 Full-Year Forecast
PMI increases its forecast for 2009 full-year reported diluted earnings
per share to a range of $3.20 to $3.25, from $3.10 to $3.20, which
includes, at current exchange rates, an unfavorable currency impact of
approximately $0.52 per share. Excluding currency, diluted earnings per
share are projected to increase by approximately 12%-14%. This guidance
includes a pre-tax charge of $135 million ($93 million after-tax),
equivalent to $0.04 per share, relating to the Colombian Investment and
Cooperation Agreement announced during the second quarter of 2009, and
excludes the impact of any potential future acquisitions, asset
impairment and exit cost charges, and any unusual events.
The factors described in the Forward-Looking and Cautionary Statements
section of this release represent continuing risks to these projections.
Dividends and Share Repurchase Program
PMI increased its regular quarterly dividend during the quarter to
$0.58, up 7.4% from $0.54, which represents an annualized rate of $2.32
per common share.
During the third quarter, PMI spent $1.5 billion to repurchase 31.5
million shares of its common stock. Since May 2008, when PMI began its
previously-announced $13 billion, two-year share repurchase program, the
company has spent a total of $9.6 billion to repurchase 209.6 million
shares.
Acquisitions and Agreements
On September 14, 2009, PMI completed the purchase of Swedish Match South
Africa (Proprietary) Limited (SMSA) for ZAR 1.98 billion (approximately
$262 million), including acquired cash and working capital. While this
acquisition did not impact third quarter results, it is anticipated to
be immediately marginally accretive to PMI's earnings per share.
2009 THIRD-QUARTER CONSOLIDATED RESULTS
Management reviews operating companies income (OCI), which is defined
as operating income before corporate expenses and amortization of
intangibles, to evaluate segment performance and to allocate resources.
In the following discussion, the term ?net revenues? refers to net
revenues, excluding excise taxes, unless otherwise stated. Management
also reviews OCI, operating margins and EPS on an adjusted basis (which
may exclude the impact of currency and other items such as acquisitions
or asset impairment and exit charges), EBITDA and net debt. Management
believes it is appropriate to disclose these measures to help investors
analyze business performance and trends. For a reconciliation of
operating companies income to operating income, see the Condensed
Statements of Earnings contained in this release. Reconciliations
of adjusted measures to corresponding GAAP measures are also provided in
this release. References to total international cigarette market,
total cigarette market, total market and market shares are PMI estimates
based on a number of sources. Comparisons are to the same
prior-year period unless otherwise stated.
NET REVENUES
|
PMI Net Revenues* ($ Millions)
|
|
|
|
Third Quarter
|
|
|
|
|
|
|
|
|
|
Excl.
|
|
|
|
2009
|
|
2008
|
|
Change
|
|
Currency
|
|
European Union
|
|
$2,408
|
|
$2,671
|
|
(9.8)%
|
|
1.5%
|
|
Eastern Europe, Middle East & Africa
|
|
1,830
|
|
2,109
|
|
(13.2)%
|
|
6.9%
|
|
Asia
|
|
1,651
|
|
1,610
|
|
2.5%
|
|
3.0%
|
|
Latin America & Canada
|
|
698
|
|
563
|
|
24.0%
|
|
43.5%
|
|
Total PMI
|
|
$6,587
|
|
$6,953
|
|
(5.3)%
|
|
6.9%
|
* Net revenues, excluding excise taxes.
Net revenues of $6.6 billion were down by 5.3% due to unfavorable
currency of $846 million. Excluding currency, net revenues increased by
6.9%, primarily driven by favorable pricing of $590 million across all
business segments, and the favorable impact of the 2008 Rothmans Inc.,
Canada acquisition, partly offset by unfavorable volume/mix, primarily
in the EU and EEMA Regions. Excluding currency and acquisitions, net
revenues increased by 4.1%.
OPERATING COMPANIES INCOME
|
PMI Operating Companies Income
($ Millions)
|
|
|
|
Third Quarter
|
|
|
|
|
|
|
|
|
|
Excl.
|
|
|
|
2009
|
|
2008
|
|
Change
|
|
Currency
|
|
European Union
|
|
$1,267
|
|
$1,325
|
|
(4.4)%
|
|
6.7%
|
|
Eastern Europe, Middle East & Africa
|
|
761
|
|
946
|
|
(19.6)%
|
|
11.1%
|
|
Asia
|
|
653
|
|
558
|
|
17.0%
|
|
9.1%
|
|
Latin America & Canada
|
|
226
|
|
110
|
|
+100.0%
|
|
+100.0%
|
|
Total PMI
|
|
$2,907
|
|
$2,939
|
|
(1.1)%
|
|
14.2%
|
Operating income declined 1.4% to $2.9 billion as shown on Schedule 1.
Reported operating companies income declined 1.1% to $2.9 billion, due
to unfavorable currency of $449 million. Excluding currency and the
favorable impact of acquisitions of 3.1 percentage points of growth,
operating companies income was up by 11.1%, driven by higher pricing,
partly offset by unfavorable volume/mix.
Adjusted operating companies income declined 1.5% as shown in the table
below and detailed on Schedule 11.
|
PMI Operating Companies Income
($ Millions)
|
|
|
|
Third Quarter
|
|
|
|
2009
|
|
2008
|
|
Change
|
|
Reported Operating Companies Income
|
|
$2,907
|
|
$2,939
|
|
(1.1)%
|
|
Asset impairment and exit costs
|
|
1
|
|
13
|
|
|
|
Adjusted Operating Companies Income
|
|
$2,908
|
|
$2,952
|
|
(1.5)%
|
|
Adjusted OCI Margin*
|
|
44.1%
|
|
42.5%
|
|
1.6 p.p.
|
*Margins are calculated as adjusted operating companies income,
divided by net revenues, excluding excise taxes.
Excluding the unfavorable impact of currency, adjusted operating
companies income margin was up by 2.7 percentage points to 45.2% as
detailed on Schedule 11.
SHIPMENT VOLUME & MARKET SHARE
|
PMI Cigarette Shipment Volume by
Segment (Million Units)
|
|
|
|
Third Quarter
|
|
|
|
2009
|
|
2008
|
|
Change
|
|
European Union
|
|
61,047
|
|
64,063
|
|
(4.7)%
|
|
Eastern Europe, Middle East & Africa
|
|
77,769
|
|
81,405
|
|
(4.5)%
|
|
Asia
|
|
54,484
|
|
55,946
|
|
(2.6)%
|
|
Latin America & Canada
|
|
25,978
|
|
24,500
|
|
6.0%
|
|
Total PMI
|
|
219,278
|
|
225,914
|
|
(2.9)%
|
PMI's cigarette shipment volume of 219.3 billion units was down by 2.9%,
reflecting: gains in Latin America & Canada, from the acquisition of
Rothmans Inc., offset by declines in the EU and EEMA due to the impact
of the economic crisis, primarily in Spain and Ukraine; unfavorable
comparisons due to a strong third quarter in 2008, mainly in EEMA; and
declines in Asia due to trade inventory movements in Pakistan subsequent
to the excise tax increase of June 2009. On an organic basis, which
excludes acquisitions, PMI's cigarette shipment volume was down by 4.0%.
However, on a year-to-date basis through September 2009, organic volume
was down by 2.1%, which is more in line with PMI's expectations for the
full year 2009.
Despite strong growth in Asia, total cigarette shipments of Marlboro
of 76.9 billion units were down by 4.3%, primarily due to market
declines in the EU and EEMA, largely due to the effects of the economic
crisis in Spain and a softening of the premium segment in Russia and
Ukraine. Total cigarette shipments of L&M of 23.4 billion
units were down by 2.8%, with double-digit growth in the EU, offset
primarily by a decline in Russia. Driven by a decrease in shipments in
Russia and Ukraine, total cigarette shipments of Chesterfield
declined 15.1%. Total cigarette shipments of Parliament were down
by 4.1%, driven by declines in EEMA, partly offset by double-digit
growth in Asia. Total cigarette shipments of Virginia Slims
declined 5.5%, reflecting a decline in EEMA, partly offset by growth in
all other regions. Total cigarette shipments of Lark increased by
9.1%, driven by strong growth in Turkey, and Bond Street increased
by 4.3%, primarily in Russia.
Total shipment volume of other tobacco products (OTP), in cigarette
equivalent units, grew by 4.7%, primarily fueled by Canada and the
Nordics. Excluding acquisitions, shipment volume of OTP was down by
9.8%, primarily due to lower volume in Poland, reflecting the impact of
the excise tax alignment of pipe tobacco to roll-your-own in the first
quarter of 2009. Total shipment volume for cigarettes and OTP was down
by 2.8%, and down by 4.1% excluding acquisitions.
PMI's market share performance improved in a number of markets,
including Algeria, Argentina, Belgium, Brazil, Bulgaria, Canada, the
Dominican Republic, Egypt, Hungary, Korea, Mexico, Pakistan, the
Philippines, Portugal, Russia, Slovakia, Switzerland, Turkey and Ukraine.
EUROPEAN UNION (EU)
2009 Third-Quarter Results
In the EU, net revenues declined by 9.8% to $2.4 billion, mainly due to
unfavorable currency of $304 million. Excluding the impact of currency
and acquisitions, net revenues increased by 1.1%, primarily reflecting
higher pricing of $173 million across most markets, including a
favorable comparison with 2008 in the Czech Republic, which more than
offset unfavorable volume/mix of $144 million, largely due to total
market declines and unfavorable distributor inventory movements.
Operating companies income declined by 4.4% to $1.3 billion, primarily
due to unfavorable currency of $147 million. Excluding the impact of
currency and acquisitions, operating companies income grew by 6.0%,
primarily reflecting favorable pricing that more than offset unfavorable
volume/mix.
Adjusted operating companies income declined by 5.0% as shown in the
table below and detailed on Schedule 11.
|
EU Operating Companies Income ($
Millions)
|
|
|
|
Third Quarter
|
|
|
|
2009
|
|
2008
|
|
Change
|
|
Reported Operating Companies Income
|
|
$1,267
|
|
$1,325
|
|
(4.4)%
|
|
Asset impairment and exit costs
|
|
1
|
|
10
|
|
|
|
Adjusted Operating Companies Income
|
|
$1,268
|
|
$1,335
|
|
(5.0)%
|
|
Adjusted OCI Margin*
|
|
52.7%
|
|
50.0%
|
|
2.7 p.p.
|
*Margins are calculated as adjusted operating companies income,
divided by net revenues, excluding excise taxes.
Excluding the unfavorable impact of currency, adjusted operating
companies income margin was up by 2.2 percentage points to 52.2% as
detailed on Schedule 11.
The total cigarette market in the EU declined by 1.6%. Adjusted for the
favorable impact of the trade inventory distortion in the Czech Republic
in anticipation of the January 2008 excise tax increase, the total
cigarette market declined by 2.3%. The decline primarily reflects the
impact of worsening economic conditions in Spain that were compounded by
tax-driven price increases in June 2009.
PMI's cigarette shipment volume in the EU declined by 4.7%, primarily
reflecting a lower total market as described above, and unfavorable
distributor inventory movements, mainly in Spain.
PMI's market share in the EU was down by 0.2 share points to 38.9%.
Adjusted for the trade inventory movements in the Czech Republic, PMI's
market share was flat, as gains, primarily in Austria, Belgium and the
Czech Republic, were offset by share declines in France, Poland, Spain
and the U.K. Marlboro's share in the EU was down by 0.4 share
points, reflecting a lower share in France, Germany and Spain, partially
offset by a higher share in Italy, Poland and Portugal. The continuing
roll-out of brand initiatives included, during the quarter, the Marlboro
Red pack upgrade in Austria, France and Italy, the nationwide
launch of Marlboro Gold Original in Belgium and the Netherlands, Marlboro
Gold Advance in Norway and Portugal and Marlboro Gold Touch in
Hungary. L&M continued to perform well in the EU, with market
share up by 0.9 points to 5.7%, primarily driven by gains in Germany,
Slovakia and Spain.
In the Czech Republic, the total cigarette market was up 10.3%,
reflecting a favorable comparison to 2008, which was adversely affected
by trade inventory movements related to the January 2008 excise tax
increase. Adjusted for this distortion, the total market is estimated to
have declined by 10.8%, due mainly to tax-driven price increases in the
third quarter of 2008 and industry price increases in 2009. PMI's
shipments were flat and adjusted market share increased by an estimated
3.6 points to 50.5%.
In France, the total cigarette market was up by 4.7%, primarily due to
reduced travel abroad as a result of the economic crisis. PMI's
shipments were up by 2.9%. Market share decreased by 0.5 points to
40.1%, driven by a lower share for Marlboro, down by 0.9 points
to 26.2%, reflecting an overall decline in the premium segment. However,
PMI's share of the premium segment was stable due to a higher share for
the Philip Morris brand, up by 0.5 market share points.
In Germany, the total cigarette market was down by 2.8%, primarily
reflecting the impact of the June 2009 price increase. PMI's shipments
were down by 3.1%, whilst market share was essentially flat at 35.3%,
despite the extended availability of certain competitor products at old
retail prices and in the 17 cigarettes per pack format. PMI's share
performance reflected a higher share for L&M, up 1.4 share
points, largely offset by a lower Marlboro share, down by 1.2
share points to 21.8%.
In Italy, the total cigarette market was down by 1.9%, mainly reflecting
the impact of price increases in February 2009. Although PMI's shipments
were down by 3.4%, mainly due to the total market decline and adverse
distributor inventory movements, market share was flat at 54.5%,
primarily reflecting a 0.5 share point growth by Marlboro to
23.1%, fueled by the recent successful launch of Marlboro Gold Touch, offset
by a share decline for Diana.
In Poland, the total cigarette market was up by 8.3%, primarily
reflecting the favorable impact of trade inventory movements following
the depletion of old tax sticker inventories, during the second quarter
of 2009, in compliance with anti-forestalling regulation. Although PMI's
shipments were up by 5.5%, market share was down by 0.9 points to 36.1%,
primarily reflecting lower share in the super low price segment, partly
offset by higher Marlboro share, up by 1.7 share points to 9.5%.
In Spain, the total cigarette market was down by 10.2%, due primarily to
the adverse economic environment, the price increases of January and
June 2009 and a decline in tourism. PMI's shipments were down by 23.5%,
reflecting the lower total market and the impact of unfavorable
distributor inventory movements. Although PMI's market share was down by
0.2 points to 32.1%, share was up 0.3 points compared to the second
quarter 2009. Marlboro share, whilst down by 1.5 points to 15.3%,
was essentially flat compared to the second quarter 2009. Market share
of L&M was up by 2.3 share points.
EASTERN EUROPE, MIDDLE EAST & AFRICA
(EEMA)
2009 Third-Quarter Results
In EEMA, net revenues decreased by 13.2% to $1.8 billion, due to
unfavorable currency of $425 million. Excluding the impact of currency
and acquisitions, net revenues grew by 6.7%, driven by favorable pricing
of $263 million, primarily in Russia, Turkey and Ukraine, which more
than offset unfavorable volume/mix of $121 million.
Operating companies income decreased by 19.6% to $761 million, due to
unfavorable currency of $290 million. Excluding the impact of currency
and acquisitions, operating companies income was up by a robust 10.6%,
driven by strong growth in profitability in Russia, Turkey and Ukraine,
mainly due to higher pricing.
|
EEMA Operating Companies Income
($ Millions)
|
|
|
|
Third Quarter
|
|
|
|
2009
|
|
2008
|
|
Change
|
|
Reported Operating Companies Income
|
|
$761
|
|
$946
|
|
(19.6)%
|
|
Asset impairment and exit costs
|
|
0
|
|
0
|
|
|
|
Adjusted Operating Companies Income
|
|
$761
|
|
$946
|
|
(19.6)%
|
|
Adjusted OCI Margin*
|
|
41.6%
|
|
44.9%
|
|
(3.3) p.p.
|
*Margins are calculated as adjusted operating companies income,
divided by net revenues, excluding excise taxes.
Excluding the impact of unfavorable currency, adjusted operating
companies income margin was up by 1.7 percentage points to 46.6% as
detailed on Schedule 11.
PMI's cigarette shipment volume decreased by 4.5%, principally due to:
Ukraine, which suffered from the unfavorable impact of a series of
tax-driven price increases, the largest of which was implemented in May
of this year that raised PMI's prices by 22% to 50%, and worsening
economic conditions; Romania, reflecting a double-digit total cigarette
market decline following tax-driven price increases in 2009; and Turkey,
reflecting unfavorable trade inventory movements following price
increases in 2009. This decline was partially offset by increased
cigarette shipment volume in Algeria, Egypt and several markets in the
Middle East.
In Russia, PMI's shipment volume decreased by 0.8%. Shipment volume of
PMI's premium portfolio was down by 15.2%, primarily due to declines in Marlboro
and Parliament of 20.8% and 8.0%, respectively, reflecting
down-trading from the premium segment. In the mid-price segment,
shipment volume of Chesterfield was down by 10.7%, partially
offset by Muratti, up by 1.5%. In the low-price segment, shipment
volume of Bond Street and Optima was up by 32.4% and
22.7%, respectively. According to a new retail audit panel implemented
with AC Nielsen this year, which more accurately reflects the coverage
of the market, PMI's market share of 25.6% was up by 0.6 points. Parliament,
in the super-premium segment, was up by 0.1 share point and Marlboro,
in the premium segment, was down 0.2 share points, but stable compared
to the second quarter 2009.
In Turkey, PMI's shipment volume was down by 4.1%, driven by trade
inventory movements following the price increase in early July 2009.
Total PMI's market share of 43.2% grew by 1.6 points, driven by Parliament,
up by 0.6 share points, and Lark Recess Blue, launched in
the fourth-quarter of 2008, with a share of 4.2%.
In Ukraine, PMI's shipment volume declined 23.0%, broadly in line with
the total market contraction, reflecting a worsening economy and the
impact of significant tax-driven price increases. Total PMI's market
share was up by 0.1 share point to 35.6%, with share gains for both
premium Parliament and mid-price Chesterfield offset by
lower Marlboro share.
ASIA
2009 Third-Quarter Results
In Asia, net revenues increased by 2.5% to $1.7 billion. Excluding the
impact of unfavorable currency of $7 million, net revenues grew by 3.0%,
driven by favorable pricing of $72 million, which more than offset
unfavorable volume/mix of $24 million.
Operating companies income grew by 17.0% to reach $653 million,
primarily fueled by higher pricing and favorable currency. Excluding the
impact of currency, driven by the Japanese Yen, operating companies
income grew by 9.1%.
|
Asia Operating Companies Income
($ Millions)
|
|
|
|
Third Quarter
|
|
|
|
2009
|
|
2008
|
|
Change
|
|
Reported Operating Companies Income
|
|
$653
|
|
$558
|
|
17.0%
|
|
Asset impairment and exit costs
|
|
0
|
|
0
|
|
|
|
Adjusted Operating Companies Income
|
|
$653
|
|
$558
|
|
17.0%
|
|
Adjusted OCI Margin*
|
|
39.6%
|
|
34.7%
|
|
4.9 p.p.
|
*Margins are calculated as adjusted operating companies income,
divided by net revenues, excluding excise taxes.
Excluding the impact of favorable currency, adjusted operating companies
income margin was up by 2.0 percentage points to 36.7% as detailed on
Schedule 11.
PMI's cigarette shipment volume decreased by 2.6%, mainly due to
declines in Indonesia, reflecting the timing of the Ramadan holiday,
Japan, reflecting a lower total market, and Pakistan, resulting from a
trade inventory correction subsequent to the June 2009 excise tax
increase, partially offset by growth in Korea. Shipment volume of Marlboro
grew by 5.9%, reflecting a strong performance across the region,
particularly in Indonesia, Japan, Korea and the Philippines.
In Indonesia, PMI's shipment volume declined by 1.1%, reflecting the
timing of the Ramadan holiday, partly offset by growth from Marlboro,
up by 2.9%, benefiting from the launch of Marlboro Black Menthol in
March, and A Mild, which has established itself as Indonesia's
leading cigarette brand franchise in terms of market share with shipment
volume up by 9.4%.
In Japan, the total cigarette market declined by 3.0%. Adjusting for
various factors, including the impact of the nationwide implementation
of vending machine age verification in July 2008 and trade inventory
movements, the total market is estimated to have declined by
approximately 3.9%. PMI's shipments were down by 3.2%, broadly in line
with the total market decline. PMI's market share of 24.0% was flat and
share of Marlboro increased by 0.4 points to 10.6%, driven by the
August 2008 launch of Marlboro Black Menthol, the November 2008
launch of Marlboro Filter Plus One and the June 2009 launch of Marlboro
Black Menthol One. Market share of Lark was flat at 6.6%, but
up versus the second quarter 2009, benefiting from the March 2009
national roll-out of Lark Classic Milds, and the introduction of Lark
Mint Splash which
