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Philip Morris Int'l Q2 Results Miss Estimates, Slashes 2013 Outlook


Cigarette manufacturer Philip Morris International, Inc. (PM) reported Thursday a profit for the second quarter that decreased 8 percent from last year, hurt by higher excise taxes. Cigarette shipment volumes also declined 3.9 percent.

Both earnings per share and quarterly revenues missed analysts' expectations. The company also slashed its earnings forecast range for the full-year 2013.

Philip Morris International or PMI, manufactures and sells cigarettes and other tobacco products more than 180 countries outside of the U.S.

The company, whose international brands include Philip Morris, Marlboro, L&M, Bond Street, Parliament, and Chesterfield, held an estimated 16.3 percent share of the total international cigarette market outside of the U.S in 2012, or 28.8 percent excluding China and the U.S.

"As expected, despite strong pricing and a robust share performance, our second-quarter results were primarily impacted by lower industry volume in several key markets, as well as the timing of inventory movements in Japan, higher costs, predominantly in Asia, and stiffer currency headwinds," CEO André Calantzopoulos said in a statement.

The New York-based Marlboro brand maker posted net earnings of $2.12 billion or $1.30 per share for the second quarter, lower than $2.32 billion or $1.36 per share in the prior-year quarter.

On average, 13 analysts polled by Thomson Reuters expected earnings of $1.41 per share for the quarter. Analysts' estimates typically exclude special items.

Quarterly net revenues totaled $20.48 billion, up 2.2 percent from $20.04 billion in the year-ago quarter. Net revenues, excluding excise taxes, for the quarter decreased 2.5 percent to $7.92 billion from $8.12 billion in the same quarter last year, and missed ten Wall Street analysts' consensus estimate of $8.17 billion.

Excluding the unfavorable currency impact, net revenues, excluding excise taxes, edged up 0.5 percent.

European Union or EU region net revenues, excluding excise taxes, decreased 3.5 percent or 2.4 percent on constant currency, to $2.21 billion from a year ago. Net revenues for the Eastern Europe, Middle East & Africa or EEMA region, excluding excise taxes, increased 1.4 percent or 3.7 percent on constant currency, to $2.18 billion from last year.

In Asia region, net revenues, excluding excise taxes, declined 5.7 percent or 0.8 percent on constant currency, to reach $2.69 billion from last year. Latin America & Canada region net revenues, excluding excise taxes, grew 1.1 percent or 4.5 percent on constant currency, to $838 million from a year ago.

Philip Morris' total cigarette shipment volume for the quarter declined 3.9 percent to 228.90 billion units from last year, boosted primarily to a total industry volume decline, partially offset by a slight gain in market share excluding China. Cigarette shipment volume decreased 2.6 percent, excluding the Philippines.

Cigarette shipment volume declined 5.9 percent in the EU region, 3.6 percent in the EEMA region, 3.5 percent in Asia, and 2.4 percent in Latin America & Canada.

The company also declared a regular quarterly dividend of $0.85 per share, which represents an annualized rate of $3.40 per common share.

Looking ahead to fiscal 2013, PMI slashed, for prevailing exchange rates only, its reported earnings forecast to a range of $5.43 to $5.53 per share from the prior forecast in the range of $5.55 to $5.65 per share. Street is currently looking for full-year 2013 earnings of $5.55 per share.

Excluding an unfavorable currency impact, at prevailing exchange rates, of about $0.31, 2013 reported earnings per share are still projected to increase by about 10 to 12 percent from last year's $5.22 per share.

"For the second half of the year, we expect volume/mix to improve, pricing to remain strong and our total cost variance, excluding currency, to be flat. While industry volume remains a challenge, our underlying business performance is such that we continue to expect to meet our mid to long-term currency-neutral adjusted diluted EPS growth rate target of 10-12% in 2013," Calantzopoulos added.

PM closed Wednesday's regular trading session at $89.71, down $0.55 on a volume of 4.35 million shares. In the past 52-week period, the stock has been trading in a range of $82.10 to $96.73.

by RTTNews Staff Writer

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