Acquisitions Lift PMI's Volumes Into Growth

Source from:  Tobacco Reporter 04/26/2010

Philip Morris International's shipment volume for the first quarter of this year, at 204.7 billion, was up by 0.7 per cent on that of the first three months of 2009. But excluding the effects of acquisitions, PMI's cigarette volume was down by 2.3 per cent. Volumes were up 11.4 per cent to 63.2 billion in the company's Asia region and by 4.4 per cent to 25.0 billion in Latin America and Canada, but they were down by 4.8 per cent to 52.3 billion in the EU and by 5.2 per cent in the region covering Eastern Europe, the Middle East and Africa (EEMA). In releasing its first quarter results yesterday, PMI said the gains in Asia were primarily driven by "Indonesia, double-digit growth in Korea and incremental volume of 6.1 billion units from the new business combination in the Philippines". Growth in Latin America and Canada, meanwhile, came mainly from growth in Canada, Colombia and Mexico. The declines in the EU were put down primarily to the economic downturn in the Baltic States and Spain, where PMI's cigarette shipment volumes declined by 52.8 per cent and 13.7 per cent respectively. In the EEMA, volume losses were due to the impact of several significant tax-driven price increases in Romania and Turkey, and weak economic conditions in Ukraine, with volumes in these countries falling by 72.2 per cent, 20.6 per cent and 26.5 per cent, respectively. Shipments of Marlboro during the first quarter of this year, at 70.6 billion, were down by 0.6 per cent on those of the first three months of 2009, while shipments of L&M, at 20.1 billion, were down by 6.3 per cent. Shipments of Parliament were down by 11.6 per cent, shipments of Lark decreased by 4.5 per cent, but shipments of Bond Street increased by 6.5 per cent. PMI's shipments of other tobacco products (OTP), in cigarette equivalent units, grew by 43.5 per cent, primarily fueled by the acquisition of Swedish Match South Africa. Excluding acquisitions, shipments of OTP were down by 17.0 per cent. Shipments of cigarettes and OTP were up by 1.5 per cent, but down by 2.6 per cent excluding acquisitions. For the first quarter of 2010, net revenues, at $6.5 billion, were up by 16.1 per cent on those of the first three months of last year. Excluding a favorable currency effect of $453 million, net revenues increased by 8.0 per cent, primarily driven by favorable pricing of $449 million across all business segments that more than offset the effect of unfavorable volumes and product mixes of $107 million, mainly in the EU region and Japan. Excluding the effects of currency and acquisitions, net revenues increased by 6.1 per cent. Operating income increased by 17.0 per cent to $2.7 billion, while reported operating companies' income increased by 17.1 per cent to $2.8 billion, including a $192 million favorable currency effect. Excluding the effects of currency and acquisitions, operating companies' income was up by 8.7 per cent. Adjusted operating companies' income grew by 17.0 per cent. Both reported and adjusted diluted earnings per share (EPS), at $0.90, were up by 21.6 per cent, while, excluding the effect of currency, both reported and adjusted diluted EPS were up by 13.5 per cent. "Our financial performance sustained its strong momentum in the first quarter helped, in part, by a currency benefit," said chairman and CEO, Louis Camilleri. "Despite widespread share growth, across both OECD and non-OECD markets, our organic volume declined by 2.3 per cent. This was attributable to essentially four markets, the Baltics, Romania, Turkey and Ukraine, which all suffered from the compounding adverse effect of steep excise tax increases and weak economies. "We again surpassed our longer term, constant currency annual financial growth targets and remain on track to meet our earnings guidance for the year. The key highlight of the quarter was our robust cash flow performance." Enditem