Before the opening bell today, Philip Morris International (PM) released operating results for the second quarter of fiscal 2012. Former international arm Altria (MO), reported that revenue fell to $ 8.12 billion from $ 8.27 billion compared to last year, and decline to compensate for higher prices. Street had expected revenue of $ 8.0 billion, while my forecasts called for revenue of $ 7.97 billion. On the bottom row, Prime Minister said that revenue fell slightly to $ 2.31 billion $ 2.40 billion for the year. However, due to the nearly $ 6 billion in share repurchases made during the past year, earnings per share improved to $ 1.36 per share to $ 1.35 per share. And the streets and I was expecting earnings of $ 1.35 per share.
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Volumes have fallen in four of the five segments in which the Company operates; however, he did not see the price earnings across the board. Slabost continues in Western Europe, with volumes falling by 9.4% compared with the second quarter of 2011. The weak economy, austerity measures, and strict laws smoking continue to exert pressure on the volume.
Asia volumes decreased by 0.7% and the bike segment are very difficult to compare data for the second quarter of 2011. The earthquake and tsunami in March 2011, Prime was able to take market share from the third-largest cigarette manufacturer in the world, Japan Tobacco Inc, due to supply disruptions. In total, excluding acquisitions, organic volumes declined by 1.2%. The following chart shows the change in volume year by year by segment:
Chairman and Chief Executive Officer Louis Camilleri said: “Despite the obstacles in Japan and expected currency headwinds, we had a solid second quarter, which emphasizes the strong momentum of our business. On the same basis as our currency neutral, and is subject to reporting diluted earnings per share grew at a very robust 17.2% and 18.2% respectively. ”
Management has successfully reduced costs in all areas, mainly by reducing the cost of sales and marketing, administration and research costs. As a result, gross profit margin improved to 67.2% from 65.6% a year, and for the fourth consecutive quarterly improvement in gross margin year after year. Sequentially, gross margin remained flat.
However, the segments seen disconcerting tendency to form during the quarter, with four out of five segments saw operating profit decline in comparison with the second quarter of 2011. Only in Eastern Europe, Middle East and Africa (EEMEA) saw improvement in operating income. Strength in EEMEA led a strong 8.7% growth in shipments to Russia (new products). Shipment volume of premiums portfolio of the Prime Minister rose to 12.5%. Asia is difficult to compare bike – Management called it obstruction in Japan. Market share in Japan fell (not surprisingly), but increased in China and Korea. Latin America and Canada (LAC) segment experienced lower than the total market in the first place in Mexico. The following table shows the revenue and operating income by segment.
Since the split from MO back in 2008, Prime Minister held a combined $ 24.4 billion to repurchase 449.9 million shares at an average price of $ 54.21 per share, or 21.3% of the shares at the time of release in March 2008. In the second quarter, Prime has acquired 17800000 shares for $ 1.5 billion and completed his $ 12 billion repurchase authorization. However, there is another $ 18 billion plan to begin August 1, and is expected to last three years.
At 100% of the income of the Prime Minister, adopted from other countries, exchange rates play an important role in profitability. To date, the management expects foreign currency headwinds will be slightly above $ 0.25 per share.
It was not the best quarter I’ve ever seen in the evening, but it was hard not to overcome many obstacles, namely, extremely difficult to compare in a segment of Asia. I hope this is not the beginning of a trend. Nevertheless, I am impressed with how well kept the volume, taking into account the rise in prices, which pushed the world. The volumes were relatively flat for the quarter, however, passes through the rest of the year, I think Asia to see a strong rebound. In addition, I hope, a quarter decline in the segment in Europe, but not as severe as the fall by 9.4% in the second quarter.
Looking at the estimates for the evening, the majority seems to be a little on the expensive side. However (and this is a big however) the rate of revenue growth and efficiency is sufficient to maintain such a high rating. For example, the price of the Prime Minister to-income ratio is 17.87, compared with the industry average of 5.72. With regard to revenue growth rates, sales increased 9.03% PM during the last twelve months, compared with the industry average of 28.08% decline. PM has to PEG (price to earnings growth) of 1.75. However, the yellow flag for the company is 15.5% fall in operating cash flows.
Nevertheless, the prime is still my favorite in the tobacco industry. If a strong increase in dividends and $ 18 billion share buyback, and more than $ 15 billion in current assets, the company has the financial flexibility to grow through expansion, if the opportunity arises. Promotions near historic highs, but at this level, it seems to be more income than growth stocks shares. Thus, I expect another increase in dividends over the next three months.
Disclosure: I have no positions in any stocks mentioned, and does not intend to initiate any positions within the next 72 hours. Enditem
