Philip Morris International Inc. (PMI) Reports 2012 Results; Provides 2013 Earnings Per Share Foreca

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Philip Morris International Inc. (PMI) Reports 2012 Results;
Provides 2013 Earnings Per Share Forecast

NEW YORK--(BUSINESS WIRE)-- Regulatory News:

2012 Full-Year

  • Reported diluted earnings per share of $5.17, up by 6.6% versus $4.85 in 2011
  • Adjusted diluted earnings per share of $5.22, up by 7.0% versus $4.88 in 2011, or up by 11.7% excluding currency, as detailed in the attached Schedule 16
  • Cigarette shipment volume, excluding acquisitions, up by 1.3%
  • Reported net revenues, excluding excise taxes, up by 0.9% to $31.4 billion
    • Excluding currency and acquisitions, reported net revenues, excluding excise taxes, up by 5.6%
  • Reported operating companies income up by 4.0% to $14.2 billion
    • Excluding currency and acquisitions, reported operating companies income up by 8.4%
  • Adjusted operating companies income, which reflects the items detailed in the attached Schedule 15, up by 3.7% to $14.2 billion
    • Excluding currency and acquisitions, adjusted operating companies income up by 8.1%
  • Operating income up by 3.9% to $13.8 billion
  • Increased its regular quarterly dividend during the year by 10.4% to an annualized rate of $3.40 per common share
  • Repurchased 74.9 million shares of its common stock for $6.5 billion
  • Commenced a new three-year share repurchase program during the year of $18 billion

2012 Fourth-Quarter

  • Reported diluted earnings per share of $1.25, up by 15.7% versus $1.08 in 2011
  • Adjusted diluted earnings per share of $1.24, up by 12.7% versus $1.10 in 2011, or up by 16.4% excluding currency, as detailed in the attached Schedule 12
  • Cigarette shipment volume, excluding acquisitions, up by 2.9%,
  • Reported net revenues, excluding excise taxes, up by 2.8% to $7.9 billion
    • Excluding currency and acquisitions, reported net revenues, excluding excise taxes, up by 6.4%
  • Reported operating companies income up by 9.5% to $3.3 billion
    • Excluding currency and acquisitions, reported operating companies income up by 13.0%
  • Adjusted operating companies income, which reflects the items detailed in the attached Schedule 11, up by 8.8% to $3.3 billion
    • Excluding currency and acquisitions, adjusted operating companies income up by 12.3%
  • Operating income up by 9.5% to $3.2 billion
  • Repurchased 22.4 million shares of its common stock for $2.0 billion

2013

  • Forecasts 2013 full-year reported diluted earnings per share to be in a range of $5.68 to $5.78, at prevailing exchange rates, versus $5.17 in 2012. Excluding a forecasted total unfavorable currency impact of approximately $0.06 for the full-year 2013, the reported diluted earnings per share range represents a projected increase of 10% to 12% versus adjusted diluted earnings per share of $5.22 in 2012, as detailed in the attached Schedule 16
  • Forecast includes a one-year gross productivity and cost savings target for 2013 of approximately $300 million
  • Forecast includes a share repurchase target amount for 2013 of $6.0 billion

Philip Morris International Inc. (NYSE / Euronext Paris: PM) today announced its 2012 full-year and fourth-quarter results.

"Our robust performance in 2012 across key operational metrics was all the more impressive given the spectacular results in 2011 and the continuing economic woes affecting all southern European nations," said Louis C. Camilleri, Chairman of the Board and Chief Executive Officer.

"We achieved organic volume growth of 1.3%, grew reported net revenues and operating companies income, excluding currency and acquisitions, by 5.6% and 8.4%, respectively, and increased our total international market share as well as that of our flagship brand, Marlboro.

"Every year since our spin-off in 2008, we have met or exceeded our adjusted diluted mid to long-term annual EPS growth target, excluding currency, of 10%-12%. The forecast we issued today for 2013 projects another year of solid performance. This consistency underpins our ability to generously reward our long-term shareholders with superior returns."

Conference Call

A conference call, hosted by Louis C. Camilleri, Chairman of the Board and Chief Executive Officer, and Jacek Olczak, Chief Financial Officer, with members of the investment community and news media, will be webcast at 1:00 p.m., Eastern Time, on February 7, 2013. Access is available at www.pmi.com.

Dividends and Share Repurchase Program

PMI increased its regular quarterly dividend during the year to $0.85, up by 10.4% from $0.77, which represents an annualized rate of $3.40 per common share. Since its spin-off in March 2008, PMI has increased its regular quarterly dividend five times, or by 84.8% from the initial annualized rate of $1.84 per common share.

In July 2012, PMI completed ahead of schedule its three-year share repurchase program of $12 billion that began in May 2010, and, in August 2012, initiated a new three-year share repurchase program of $18 billion. During the fourth quarter, PMI spent $2.0 billion to repurchase 22.4 million shares. For the full-year 2012, PMI spent $6.5 billion to repurchase 74.9 million shares, as shown in the table below.

 

2012 PMI Share Repurchases

     

Value

   

Shares

($ Mio.)

000

$12 billion, three-year program

January - March1,50018,057
April - June1,53517,774
July6126,861

$18 billion, three-year program

August - September8939,825
October-December

1,960

22,380

Total6,50074,897
 

Since May 2008, when PMI began its first share repurchase program of $13 billion, which was completed in April 2010, the company has spent an aggregate of $27.9 billion to repurchase 489.0 million shares at an average price of $56.96 per share, or 23.2% of the shares outstanding at the time of the spin-off in March 2008.

Included in PMI's 2013 EPS forecast is a share repurchase target for the full-year of $6.0 billion.

Productivity and Cost Savings Program

In 2012, PMI exceeded its one-year gross productivity and cost savings target of $300 million primarily through the rationalization of tobacco blends and product specifications and other manufacturing and procurement initiatives.

PMI announces a one-year gross productivity and cost savings target for 2013 of approximately $300 million.

2013 Full-Year Forecast

PMI forecasts 2013 full-year reported diluted earnings per share to be in a range of $5.68 to $5.78, at prevailing exchange rates, versus $5.17 in 2012. Excluding a forecasted total unfavorable currency impact of approximately $0.06 for the full-year 2013, the reported diluted earnings per share range represents a projected increase of 10% to 12% versus adjusted diluted earnings per share of $5.22 in 2012, as detailed in the attached Schedule 16.

The factors described in the Forward-Looking and Cautionary Statements section of this release represent continuing risks to these projections.

This guidance excludes the impact of any potential future acquisitions, unanticipated asset impairment and exit cost charges, and any unusual events.

2012 FULL-YEAR AND FOURTH-QUARTER CONSOLIDATED RESULTS

In this press release, "PMI" refers to Philip Morris International Inc. and its subsidiaries.References to total international cigarette market, defined as worldwide cigarette volume excluding the United States, total cigarette market, total market and market shares are PMI estimates 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.The term "net revenues" refers to operating revenues from the sale of our products, excluding excise taxes and net of sales and promotion incentives.Operating companies income, or "OCI", is defined as operating income before general corporate expenses and the amortization of intangibles.PMI's management evaluates business segment performance and allocates resources based on OCI.Management also reviews OCI, OCI margins 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, discrete tax items and unusual items), earnings before interest, taxes, depreciation, and amortization, or "EBITDA", free cash flow, defined as net cash provided by operating activities less capital expenditures, and net debt.PMI believes it is appropriate to disclose these measures as they improve comparability and help investors analyze business performance and trends.Non-GAAP measures used in this release should be considered neither in isolation nor as a substitute for the financial measures prepared in accordance with U.S. GAAP.Comparisons are to the same prior-year period unless otherwise stated.For a reconciliation of non-GAAP measures to corresponding GAAP measures, see the relevant schedules provided with this release.

NET REVENUES

                 

PMI Net Revenues ($ Millions)

Fourth-Quarter

Full-Year

Excl.Excl.

2012

2011

Change

Curr.

2012

2011

Change

Curr.

European Union$2,063$2,208(6.6)%(0.5)%$8,526$9,212(7.4)%0.3%
Eastern Europe, Middle East & Africa2,1391,9728.5%11.3%8,3327,8815.7%11.6%
Asia2,8052,6476.0%8.1%11,19810,7054.6%5.7%
Latin America & Canada

882

844

4.5%7.3%

3,321

3,299

0.7%6.6%
Total PMI$7,889$7,6712.8%6.4%$31,377$31,0970.9%5.7%
 

2012 Full-Year

Net revenues of $31.4 billion were up by 0.9%, including unfavorable currency of $1.5 billion. Excluding currency and acquisitions, net revenues increased by 5.6%, driven by favorable pricing across all Regions of $1.8 billion. Volume/mix was essentially flat with gains in EEMA and Asia offset by declines in the EU and Latin America & Canada.

2012 Fourth-Quarter

Net revenues of $7.9 billion were up by 2.8%, including unfavorable currency of $270 million. Excluding currency and acquisitions, net revenues increased by 6.4%, driven by favorable pricing across all Regions of $422 million, and favorable volume/mix of $66 million driven by EEMA and Asia, partly offset by the EU.

OPERATING COMPANIES INCOME

 

PMI Reported Operating Companies Income ($ Millions)

   

Fourth-Quarter

  

Full-Year

      Excl.      Excl.

2012

2011

Change

Curr.

2012

2011

Change

Curr.

European Union$955$1,012(5.6)%2.1%$4,187$4,560(8.2)%0.2%
Eastern Europe, Middle East & Africa92174723.3%25.4%3,7263,22915.4%21.6%
Asia1,1291,0369.0%9.7%5,1974,8367.5%6.7%
Latin America & Canada

290

214

35.5%37.4%

1,043

988

5.6%11.9%
Total PMI$3,295$3,0099.5%13.0%$14,153$13,6134.0%8.4%
 

2012 Full-Year

Reported operating companies income was up by 4.0% to $14.2 billion, including unfavorable currency of $607 million. Excluding currency and acquisitions, operating companies income was up by 8.4%, driven by higher pricing, partly offset by unfavorable volume/mix of $233 million, higher manufacturing costs, and increased marketing, sales and distribution investments notably in Germany, Indonesia and Russia. Adjusted operating companies income increased by 3.7% as shown in the table below and detailed on Schedule 15. Adjusted operating companies income, excluding currency and acquisitions, increased by 8.1%. Adjusted operating companies income margin, excluding the impact of currency and acquisitions, was up by 1.1 percentage points to 45.2%, as detailed on Schedule 15.

2012 Fourth-Quarter

Reported operating companies income was up by 9.5% to $3.3 billion, including unfavorable currency of $106 million. Excluding currency, operating companies income was up by 13.0%, driven by higher pricing, marginally offset by unfavorable volume/mix of $12 million. Adjusted operating companies income increased by 8.8% as shown in the table below and detailed on Schedule 11. Adjusted operating companies income, excluding currency and acquisitions, increased by 12.3%. Adjusted operating companies income margin, excluding the impact of currency and acquisitions, was up by 2.2 percentage points to 42.1%, as detailed on Schedule 11.

PMI Operating Companies Income ($ Millions)

               

Fourth-Quarter

Full-Year

2012

2011

Change

2012

2011

Change

Reported OCI$3,295$3,0099.5%$14,153$13,6134.0%
Asset impairment & exit costs

(33

)

(49

)

(83

)

(109

)

Adjusted OCI$3,328$3,0588.8%$14,236$13,7223.7%
Adjusted OCI Margin*42.2%39.9%2.3 p.p.45.4%44.1%1.3 p.p.

*Margins are calculated as adjusted OCI, divided by net revenues, excluding excise taxes.

 

SHIPMENT VOLUME & MARKET SHARE

 

PMI Cigarette Shipment Volume by Segment (Million Units)

               

Fourth-Quarter

Full-Year

2012

2011

Change

2012

2011

Change

European Union46,74449,580(5.7)%197,966211,493(6.4)%
Eastern Europe, Middle East & Africa77,35672,2187.1%303,828290,2504.7%
Asia82,57378,0955.7%326,582313,2824.2%
Latin America & Canada

26,446

26,729

(1.1)%

98,660

100,241

(1.6)%
Total PMI233,119226,6222.9%927,036915,2661.3%
 

2012 Full-Year

PMI's cigarette shipment volume was up by 1.3%, excluding acquisitions. Excluding acquisitions and the Japan hurdle of 6.3 billion units related to additional volume shipped in the second quarter of 2011 following the disruption of PMI's principal competitor's supply chain, PMI's cigarette shipment volume was up by a robust 2.0%.

In the EU, PMI's total cigarette shipment volume decreased by 6.4%, predominantly due to France and southern Europe. In EEMA, PMI's total cigarette shipment volume grew by 4.7%, driven mainly by Egypt, Russia and Turkey. In Asia, PMI's total cigarette shipment volume increased by 4.2%, driven mainly by Indonesia, the Philippines, Thailand and Vietnam, partially offset by Japan and Korea. Excluding the Japan hurdle, PMI's cigarette shipment volume in Asia was up by 6.4%. In Latin America & Canada, PMI's total cigarette shipment volume decreased by 1.6%.

Total cigarette shipment volume of Marlboro of 301.6 billion units was up by 0.5%, or by 1.1% excluding the Japan hurdle, reflecting growth in: EEMA of 3.6%, notably in the Middle East, North Africa and Turkey, partly offset by Romania, Russia and Ukraine; Asia of 3.6%, principally driven by Indonesia, the Philippines and Vietnam, partly offset by Japan and Korea; and Latin America & Canada of 0.7%, notably in Brazil and Colombia, partly offset by Argentina. Cigarette shipments of Marlboro declined in the EU by 4.6%, notably in France, Italy and Spain.

Total cigarette shipment volume of L&M of 93.7 billion units was up by 4.0%, reflecting growth in: EEMA of 8.6%, notably in Egypt, Russia and Turkey; Asia of 14.8%, mainly in Thailand; and Latin America & Canada of 6.9%, mainly in Brazil and Colombia. Cigarette shipment volume of L&M declined in the EU by 4.1%, notably in Greece, Poland and Spain, partly offset by growth in France.

Total cigarette shipment volume of Bond Street of 46.8 billion units increased by 4.1%, led mainly by growth in Kazakhstan and Ukraine, partly offset by a decline in Hungary.

Total cigarette shipment volume of Parliament of 43.4 billion units was up by 10.1%, or by 11.1% excluding the Japan hurdle, fueled by strong growth in EEMA of 16.5%, driven by Kazakhstan, Russia, Turkey and Ukraine. Cigarette shipment volume of Parliament declined in Asia by 4.3%, notably in Japan and Korea.

Total cigarette shipment volume of Philip Morris of 38.0 billion units decreased by 3.2%, or by 1.4% excluding the Japan hurdle, mainly reflecting a decline in Japan and the Philippines, partly offset by growth in Argentina and Portugal.

Total cigarette shipment volume of

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