PMI’s volumes falter

| April 20, 2018

Philip Morris International’s cigarette shipment volume during the first quarter of 2018, at 164,280 million, was down by 5.3 percent on that of the first quarter of last year, 173,552 million. The first-quarter-2017 figure was down by 11.3 percent on that of the first quarter of 2016, 196,041 million.

Volume increased in PMI’s South and Southeast Asia region by 6.1 percent to 40,218 million. But it fell in each of its other five regions (PMI now divides its operations into six regions, rather than the four used previously): by 6.7 percent to 39,671 million in the EU; by 10.4 percent to 22,039 million in Eastern Europe; by 8.5 percent to 29,248 million in the Middle East and Africa; by 18.3 percent to 14,091 million in East Asia and Australia; and by 1.5 percent to 19,013 million in Latin America and Canada.

The company reported an increase in its shipment sales of heated-tobacco units from 4,435 million during the first quarter of 2017 to 9,566 million during the first quarter of 2018. Sales of these products have risen hugely since the first quarter of 2016, when they stood at 4,435 million.

Shipments of heated tobacco products were up from 184 million to 928 million in the EU; from 54 million to 564 million in Easter Europe; from 51 million to 709 million in the Middle East and Africa; from 4,145 million to 7,342 million in East Asia and Australia, and from one million to 23 million in Latin America and Canada.

Overall, shipment volumes of cigarettes and heated tobacco products taken together were down by 2.3 percent. They were down by 5.0 percent in the EU; down by 8.3 percent in Eastern Europe; down by 6.5 percent in the Middle East and Africa; up by 6.1 percent in South and Southeast Asia; up by 0.2 percent in East Asia and Australia; and down by 1.4 percent in Latin America and Canada.

PMI said that its total shipment volume had decreased by 2.3 percent principally due to its performance in the EU, which reflected lower cigarette shipment volume mainly in France, Germany and Poland; in Eastern Europe, which reflected lower cigarette shipment volume mainly in Russia and Ukraine; and in the Middle East and Africa, which reflected lower cigarette shipment volume mainly in the GCC, notably Saudi Arabia, and North Africa, notably Algeria, partly offset by higher cigarette shipment volume mainly in Turkey and PMI Duty Free.

These factors had been partly offset by its performance in South and Southeast Asia, which had reflected higher cigarette shipment volume, driven mainly by volumes in Pakistan and Thailand, partly offset by that in Indonesia; and in East Asia & Australia, which had reflected higher heated tobacco unit shipment volume, driven by volumes in Japan and Korea.

PMI added that, excluding the net unfavorable impact of total estimated distributor inventory movements of about 2.1 billion units, driven mainly by Japan and Saudi Arabia, its total shipment volume had decreased by 1.1 percent.

PMI said that its reported diluted earnings per share, at $1.00, were down by $0.02 or 2.0 percent on those of the first quarter of 2017.

Adjusted diluted earnings per share, at $1.00, were up by $0.02 or 2.0 percent.

Net revenues of $6.9 billion were up by 13.7.

Operating income of $2.4 billion was up by 0.4, while adjusted operating income of $2.4 billion was up by 0.4 percent.

“We began the year with strong, currency-neutral net revenue growth of more than eight percent in the quarter, driven by higher volume for heated tobacco units and IQOS devices coupled with higher pricing from our combustible product portfolio,” said CEO André Calantzopoulos (pictured).

“Our increased full-year EPS guidance reflects the benefit of a lower effective tax rate and incorporates, at this early stage in the year, some caution regarding: on-going volume challenges in the GCC; the pricing environment in Russia; and less-rapid-than-initially-projected growth in sales of devices to consumers in Japan in the first quarter, as we are now reaching more conservative adult smoker segments that may require, at least at first, slightly more time for adoption.  Even if this temporary dynamic in Japan persists, we remain on track to double our worldwide in-market sales of heated tobacco units compared to 2017.”

“We are confident in our ability to deliver strong results this year and remain steadfast in our commitment to generously reward our shareholders.”

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