Philip Morris International Inc. (PMI) Reports 2013 Third-Quarter Results; Revises 2013 Full-Year Re

Philip Morris International Inc. (PMI) Reports 2013 Third-Quarter Results;
Revises 2013 Full-Year Reported Diluted EPS Forecast to a Range of $5.35 to $5.40

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


Third-Quarter 2013

  • Reported diluted earnings per share of $1.44, up by $0.12 or 9.1% versus $1.32 in 2012
    • Excluding unfavorable currency of $0.09, reported diluted earnings per share up by $0.21 or 15.9% versus $1.32 in 2012 as detailed in the attached Schedule 13
  • Adjusted diluted earnings per share of $1.44, up by $0.06 or 4.3% versus $1.38 in 2012
    • Excluding unfavorable currency of $0.09, adjusted diluted earnings per share up by $0.15 or 10.9% versus $1.38 in 2012 as detailed in the attached Schedule 12
  • Cigarette shipment volume of 223.1 billion units, down by 5.7%
    • Cigarette shipment volume decrease of 4.1%, excluding the Philippines
  • Reported net revenues, excluding excise taxes, of $7.9 billion, up by 0.1%
    • Excluding unfavorable currency, reported net revenues, excluding excise taxes, up by 1.6%
  • Reported operating companies income of $3.7 billion, down by 1.0%
    • Excluding unfavorable currency, reported operating companies income up by 3.3%
  • Adjusted operating companies income of $3.7 billion, down by 1.9%
    • Excluding unfavorable currency, adjusted operating companies income up by 2.4%
  • Reported operating income of $3.6 billion, down by 0.8%
  • Increased its regular quarterly dividend by 10.6% to an annualized rate of $3.76 per common share
  • Repurchased 16.7 million shares of the company's common stock for $1.5 billion

Nine Months Year-to-Date 2013

  • Reported diluted earnings per share of $4.02, up by $0.10 or 2.6% versus $3.92 in 2012
    • Excluding unfavorable currency of $0.23, reported diluted earnings per share up by $0.33 or 8.4% versus $3.92 in 2012 as detailed in the attached Schedule 17
  • Adjusted diluted earnings per share of $4.03, up by $0.04 or 1.0% versus $3.99 in 2012
    • Excluding unfavorable currency of $0.23, adjusted diluted earnings per share up by $0.27 or 6.8% versus $3.99 in 2012 as detailed in the attached Schedule 16
  • Cigarette shipment volume of 657.0 billion units, down by 5.3%
    • Cigarette shipment volume decrease of 3.0%, excluding the Philippines
  • Reported net revenues, excluding excise taxes, of $23.4 billion, down by 0.3%
    • Excluding unfavorable currency, reported net revenues, excluding excise taxes, up by 1.7%
  • Reported operating companies income of $10.5 billion, down by 2.9%
    • Excluding unfavorable currency, reported operating companies income up by 1.0%
  • Adjusted operating companies income, reflecting the items detailed in the attached Schedule 15, of $10.5 billion, down by 3.3%
    • Excluding unfavorable currency, adjusted operating companies income up by 0.6%
  • Reported operating income of $10.3 billion, down by 3.0%
  • Repurchased 50.1 million shares of the company's common stock for $4.5 billion

Full-Year 2013

  • PMI revises its 2013 full-year reported diluted earnings per share forecast to be in a range of $5.35 to $5.40, versus $5.17 in 2012
    • This forecast includes the unfavorable special tax item of $0.01 per share associated with the enactment of the American Taxpayer Relief Act of 2012 reported in the first quarter of 2013, an anticipated 2013 fourth-quarter charge, related to a previously announced organizational restructuring, of approximately $0.03 per share, and reflects a cautious outlook regarding certain markets
    • Excluding an unfavorable currency impact, at prevailing exchange rates, of approximately $0.33 for the full-year 2013, and the aforementioned tax item and restructuring charge, reported diluted earnings per share are projected to increase by approximately 10% versus adjusted diluted earnings per share of $5.22 in 2012 as detailed in the attached Schedule 20

Philip Morris International Inc. (NYSE / Euronext Paris: PM) today announced its 2013 third-quarter results.

"Our strong EPS and cash flow performance this quarter primarily reflected robust pricing. Our share momentum, particularly in the EU, partially offset weaker industry volumes," said André Calantzopoulos, Chief Executive Officer.

"While the evolution of the macro-economic environment and tax-paid cigarette industry volume remain a challenge, our business fundamentals are solid and we continue to anticipate a strong final quarter.

"Our confidence in these fundamentals was further reflected in our announcement during the quarter of an increase in our regular quarterly dividend of 10.6%. Since the spin-off, we have increased the dividend every year by an accumulated 104.3% to reach an annualized rate of $3.76 per common share."

Conference Call

A conference call, hosted by Jacek Olczak, Chief Financial Officer, with members of the investor community and news media, will be webcast at 9:00 a.m., Eastern Time, on October 17, 2013. Access is available at www.pmi.com/webcasts.

Dividends and Share Repurchase Program

During the quarter, PMI declared a regular quarterly dividend of $0.94, representing an annualized rate of $3.76 per common share, and spent $1.5 billion to repurchase 16.7 million shares, as shown in the table below.

 

Current $18 Billion, Three-Year Program

    

Value

  

Shares

($ Mio.)

000

 
August - December 2012$2,85332,206
January - March 20131,50016,685
April - June 20131,54516,665
July - September 2013 1,45516,717
Total Under Program$7,35382,273
 

Since May 2008, when PMI began its first share repurchase program, the company has spent an aggregate of $32.4 billion to repurchase 539.0 million shares at an average price of $60.02 per share, or 25.6% of the shares outstanding at the time of the spin-off in March 2008.

Acquisitions and Agreements

The previously announced sale by Grupo Carso, S.A.B. de C. V. to PMI of its 20% interest in PMI's Mexican tobacco business was completed on September 30, 2013, with the approval of the Mexican antitrust authority, for $703 million. The transaction, which resulted in PMI owning 100% of its Mexican business, is projected to be marginally accretive to PMI's earnings per share as of the fourth quarter of 2013.

On September 30, 2013, PMI announced its entry into a definitive agreement to acquire 49% of the shares of United Arab Emirates-based Arab Investors-TA (FZC) ("AITA") for $625 million. Through its acquisition of 49% of the shares of AITA, PMI will secure an almost 25% economic interest in the Société des Tabacs Algéro-Emiratie, a joint venture which is 51% owned by AITA and 49% by the Algerian state-owned Société Nationale des Tabacs et Allumettes SpA. This equity investment in AITA will provide PMI with enhanced earnings from Algeria and is projected to be accretive to PMI's earnings per share as of 2014.

2013 Full-Year Forecast

PMI revises its 2013 full-year reported diluted earnings per share forecast to be in a range of $5.35 to $5.40, versus $5.17 in 2012. This forecast includes the unfavorable special tax item of $0.01 per share associated with the enactment of the American Taxpayer Relief Act of 2012 reported in the first quarter of 2013, an anticipated 2013 fourth-quarter charge, related to a previously announced organizational restructuring, of approximately $0.03 per share, and reflects a cautious outlook regarding certain markets.

Excluding an unfavorable currency impact, at prevailing exchange rates, of approximately $0.33 for the full-year 2013, and the aforementioned tax item and restructuring charge, reported diluted earnings per share are projected to increase by approximately 10% versus adjusted diluted earnings per share of $5.22 in 2012 as detailed in the attached Schedule 20.

This forecast includes a one-year gross productivity and cost savings target for 2013 of approximately $300 million and a share repurchase target for 2013 of $6.0 billion.

This forecast excludes the impact of any potential future acquisitions, unanticipated asset impairment and exit cost charges, future changes in currency exchange rates and any unusual events.

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

2013 THIRD-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)

  

Third-Quarter

  

Nine Months Year-to-Date

 
  Excl.  Excl.

2013

2012

Change

Curr.

2013

2012

Change

Curr.

European Union$2,281$2,1257.3%1.8%$6,457$6,463(0.1)%(1.9)%

Eastern Europe, Middle East
  & Africa

2,2852,2073.5%3.9%6,5096,1935.1%5.9%
Asia2,5432,761(7.9)%(0.8)%8,0258,393(4.4)%1.1%
Latin America & Canada 818 827(1.1)%2.9% 2,437 2,439(0.1)%3.2%
Total PMI$7,927$7,9200.1%1.6%$23,428$23,488(0.3)%1.7%
 

Net revenues of $7.9 billion were up by 0.1%, including unfavorable currency of $120 million. Excluding currency, net revenues increased by 1.6%, driven by favorable pricing of $488 million across all Regions, partially offset by unfavorable volume/mix of $361 million.

 

OPERATING COMPANIES INCOME

 

PMI Operating Companies Income ($ Millions)

  

Third-Quarter

  

Nine Months Year-to-Date

 
  Excl.  Excl.

2013

2012

Change

Curr.

2013

2012

Change

Curr.

European Union$1,207$1,08511.2%5.4%$3,227$3,232

(0.2)

%

(1.8)

%

Eastern Europe, Middle East
 & Africa

1,0881,0473.9%7.0%2,9682,8055.8%8.1%
Asia1,0971,297

(15.4)

%

(1.7)

%

3,5674,068

(12.3)

%

(2.7)

%

Latin America & Canada 267 267%4.9% 776 7533.1%6.4%
Total PMI$3,659$3,696

(1.0)

%

3.3%$10,538$10,858

(2.9)

%

1.0%
 

Reported operating companies income of $3.7 billion was down by 1.0%, including unfavorable currency of $160 million. Excluding currency, operating companies income increased by 3.3%, reflecting favorable pricing, partly offset by unfavorable volume/mix of $289 million, primarily in the Philippines and Russia.

Adjusted operating companies income decreased by 1.9% as shown in the table below and detailed in Schedule 11. Adjusted operating companies income, excluding unfavorable currency, increased by 2.4%.

 

PMI Operating Companies Income ($ Millions)

       

Third-Quarter

Nine Months Year-to-Date

2013

2012

Change

2013

2012

Change

Reported OCI$3,659$3,696(1.0)%$10,538$10,858(2.9)%
Asset impairment & exit costs   (34) (8) (50)
Adjusted OCI$3,659$3,730(1.9)%$10,546$10,908(3.3)%
Adjusted OCI Margin*46.2%47.1%(0.9)p.p.45.0%46.4%(1.4)p.p.

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

Adjusted operating companies income margin, excluding unfavorable currency, increased by 0.4 points to 47.5%, as detailed in Schedule 11.

 

SHIPMENT VOLUME & MARKET SHARE

 

PMI Cigarette Shipment Volume (Million Units)

       

Third-Quarter

Nine Months Year-to-Date

2013

2012

Change

2013

2012

Change

European Union48,96951,629(5.2)%140,659151,222(7.0)%
Eastern Europe, Middle East & Africa76,90281,388(5.5)%220,034226,472(2.8)%
Asia73,29679,507(7.8)%226,503244,009(7.2)%
Latin America & Canada23,95724,007(0.2)%69,77472,214(3.4)%
Total PMI223,124236,531(5.7)%656,970693,917(5.3)%
 

2013 Third-Quarter

PMI's cigarette shipment volume of 223.1 billion units decreased by 5.7%, or 13.4 billion units, due principally to a total industry volume decline. The decrease in PMI's cigarette shipment volume mainly reflected: in the EU, the unfavorable impact of excise tax-driven price increases, the weak economic and employment environment, the shar

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