October 22, 2010 - Philip Morris International Inc. (PMI) is engaged in the manufacture and sale of cigarettes and other tobacco products through its subsidiaries and affiliates. The Company's products are sold in approximately 160 countries. PMI's portfolio comprises both international and local brands. Its portfolio comprises both international and local brands, which include Marlboro, Merit, Parliament, Virginia Slims, L&M, Chesterfield, Bond Street, Lark, Muratti, Next, Philip Morris and Red & White. The Company divides its markets into four geographic regions: The European Union (EU); The Eastern Europe, Middle East and Africa (EEMA); The Asia Region, and The Latin America and Canada Region.
Hermann Waldemer, Chief Financial Officer. As anticipated, our third quarter results were adversely impacted by various timing issues, in particular relating to Japan. More than half our organic volume decline in the quarter was attributable to the payback for the previously disclosed 3.4 billion unit build up of stocks at our distributor in Japan during the second quarter this year. (Japan - smokers stocking up on cigarettes before October 1st tax hike..) The lower sales to Japan also drove an unfavorable geographic mix in the quarter. We do however remain very competitive in this important market, where Marlboro is growing shares behind innovative line extensions, such as Marlboro Black Menthol and Marlboro Ice Blast, which reached a combined market share of 2% in the quarter.
We continue to face a difficult environment in both Greece and Turkey, resulting from the significant tax increases that occurred earlier this year. Industry volume in these markets was down by 8% and 6% respectively in the third quarter, and the widening of price gaps has led to consumer down-trading and an unfavorable product mix.
In the quarter, PMI’s cigarette shipment volume of 229.2 billion units was up by 4.5%. In the EU, cigarette shipment volume decreased by 4.6%, predominantly due to lower total markets. In EEMA (Eastern Europe, Middle East & Africa)
cigarette shipment volume declined by 3.3%, primarily due to: Turkey, reflecting the continuing unfavorable impact of a significant excise tax increase in January 2010; and Ukraine, reflecting the unfavorable impact of inventory movements and tax-driven price increases in January and July, 2010; partly offset by increases in
Russia and North Africa, mainly in Algeria.
In Asia, PMI’s cigarette shipment volume increased by 28.8%, primarily reflecting growth in Indonesia, Korea and Pakistan, as well as the favorable impact of the PMFTC Inc. business combination in the Philippines of 16.2 billion units. This was partially offset by the timing of shipments in Japan, reflecting the payback of the distributor inventory build-up in the second quarter of 2010 in anticipation of increased trade and consumer purchases ahead of the October 1, 2010, tax increase.
In Latin America & Canada, cigarette shipment volume decreased by 1.7%, due mainly to unfavorable trade inventory movements in Colombia following the tax-driven price increase in July and a decline in the tax-paid market. On an organic basis, which excludes acquisitions, PMI’s cigarette shipment volume was down by
2.9% in the quarter and by 1.6% year-to-date.
Total cigarette shipments of Marlboro of 75.9 billion units were down by 1.2% in the quarter, or by a moderate 0.8% on a year-to-date basis, due primarily to a decrease in the EU, mainly reflecting: a share decline in Germany, lower share in Greece, driven by excise tax and VAT-driven price increases, and unfavorable distributor inventory movements in Italy; a slight decrease in EEMA of 0.2%, primarily due to Turkey, partially offset by robust growth in North Africa; an essentially flat performance in Asia, led by growth in Korea and the Philippines, offset by Japan; and growth in Latin America and Canada of 0.8%, driven by Argentina, Colombia and Mexico.
Total cigarette shipments of L&M of 22.9 billion units were down by 2.0%, with shipment growth in the EU, primarily in Greece, and Asia, more than offset by EEMA, primarily due to declines in Russia, Turkey
and Ukraine. Due mainly to double-digit declines in shipments in Spain and Ukraine, partially offset by growth in Germany, Poland and Russia, total cigarette shipments of Chesterfield of 9.3 billion units declined by 1.4%. Total cigarette shipments of Parliament of 9.1 billion units were down by 5.0%, due primarily to declines in Japan and Turkey, partially offset by growth in Korea and Russia.
Total cigarette shipments of Lark of 6.7 billion units decreased by 10.2%, due primarily to declines in Japan, partially offset by growth in Turkey.
Total cigarette shipments of Bond Street of 11.6 billion units increased by 2.5%, driven by doubledigit growth in Russia, partly offset by Turkey and Ukraine.
Total shipment volume of other tobacco products (OTP), in cigarette equivalent units, grew by 64.0%, benefitting from the acquisition of Swedish Match South Africa (Proprietary) Limited. Excluding acquisitions, shipment volume of OTP was down by 0.9%, 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 up by 5.5%, or down by 2.8% excluding acquisitions. On a year-to-date basis, total shipment volume for cigarettes and OTP was up by 5.4% and down by 1.7% excluding acquisitions.
PMI’s market share performance in the quarter was stable, or registered growth, in a number of markets, including Argentina, Belgium, Egypt, France, Greece, Japan, Korea, Mexico, the Netherlands, the Philippines, Poland, Russia, Singapore, Spain, Switzerland and Ukraine.
Reference: PHILIP MORRIS INTERNATIONAL INC. (PMI) REPORTS 2010 THIRD-QUARTER RESULTS; INCREASES 2010 EPS GUIDANCE; Philip Morris Management Discusses Q3 2010 Results - Earnings Call Transcript transcript;
Philip Morris Management Discusses Q3 2010 Results - Earnings Call Transcript - Q&A. questions and answers