PMI Reports 2012 Results: Latin America & Canada Region

Source from:  Business Wire (press release)  02/08/2013

LATIN AMERICA & CANADA REGION

2012 Full-Year

In Latin America & Canada, net revenues increased by 0.7% to $3.3 billion, including unfavorable currency of $196 million. Excluding the impact of currency, net revenues increased by 6.6%, reflecting favorable pricing of $267 million, principally in Argentina, Brazil and Canada, partially offset by unfavorable volume/mix of $49 million.

Operating companies income increased by 5.6% to $1.0 billion. Excluding the unfavorable impact of currency of $63 million, operating companies income increased by 11.9%, primarily reflecting favorable pricing, partially offset by unfavorable volume/mix of $71 million and higher costs, mainly related to the restructuring of manufacturing facilities and distribution infrastructure. Adjusted operating companies income increased by 6.4% as shown in the table below and detailed on Schedule 15. Adjusted operating companies income, excluding currency, increased by 12.6%.

Excluding the impact of currency, adjusted operating companies income margin increased by 1.7 percentage points to 32.4%, as detailed on Schedule 15.

PMI’s cigarette shipment volume in Latin America & Canada decreased by 1.6%, mainly due to a lower total market in Argentina, Colombia and Mexico and lower share in Canada. Shipment volume of Marlboro increased by 0.7%, mainly reflecting market share growth in Brazil, Colombia and Mexico.

2012 Fourth-Quarter

In Latin America & Canada, net revenues increased by 4.5% to $882 million, including unfavorable currency of $24 million. Excluding the impact of currency, net revenues increased by 7.3%, reflecting favorable pricing of $70 million, principally in Argentina, Brazil, Canada and Mexico, partially offset by unfavorable volume/mix of $8 million.

Operating companies income increased by 35.5% to $290 million. Excluding the unfavorable impact of currency of $4 million, operating companies income increased by 37.4%, primarily reflecting favorable pricing and lower costs, mainly related to manufacturing and the restructuring of manufacturing facilities, partially offset by unfavorable volume/mix of $19 million. Adjusted operating companies income increased by 31.9% as shown in the table above and detailed on Schedule 11. Adjusted operating companies income, excluding currency, increased by 33.6%.

Excluding the impact of currency, adjusted operating companies income margin increased by 6.5 percentage points to 33.3%, as detailed on Schedule 11.

PMI’s cigarette shipment volume in Latin America & Canada decreased by 1.1%, principally due to a lower total market in Mexico. Shipment volume of Marlboro decreased by 1.0%, mainly reflecting total market declines in Argentina and Mexico, partly offset by market share gains in Brazil and Colombia.

Latin America & Canada Key Market Commentaries

In Argentina, the total cigarette market declined by 0.9% to 43.4 billion units in 2012 and by 1.0% to 11.3 billion units in the fourth quarter. PMI’s cigarette shipment volume in 2012 decreased by 0.3% and by 1.1% in the fourth quarter. PMI’s 2012 market share was up by 0.9 points to 74.9%, reflecting growth of mid-price Philip Morris, up by 1.4 share points to 39.4%, partly offset by low-price Next, down by 0.5 points to 3.1%. Market share of Marlboro was flat at 24.1%. PMI’s 2012 fourth quarter market share was up by 0.4 points to 74.6%.

In Canada, the estimated total tax-paid cigarette market was essentially flat at 32.2 billion units in 2012 and down by 1.2% to 8.1 billion units in the fourth quarter. PMI’s cigarette shipment volume in 2012 declined by 1.5% and was essentially flat in the fourth quarter. PMI’s market share was down in 2012 by 0.6 points to 33.5%, primarily reflecting share losses in the mid-price segment, reflecting fierce price competition. Market share of premium brand Benson & Hedges was essentially flat at 2.1%, premium Belmont was up by 0.2 points to 2.0% and low-price brand Next was up by 0.8 points to 7.7%, offset by mid-price Number 7 and Canadian Classics, and low-price Accord and Quebec Classique, down by 0.2, 0.3, 0.4 and 0.3 share points, to 3.9%, 8.4%, 3.2% and 2.4%, respectively. PMI’s 2012 fourth quarter market share was down by 0.7 points to 33.5%.

In Mexico, the total cigarette market was down by 2.2% to 33.6 billion units in 2012, reflecting the impact of price increases in January 2012 and the continued wide prevalence of illicit products. The total cigarette market was down by 4.5% to 9.0 billion units in the fourth quarter. PMI’s cigarette shipment volume decreased by 0.6% in 2012 and by 4.7% in the fourth quarter. PMI’s market share grew in 2012 by 1.2 points to 73.5%, led by Marlboro, up by 1.3 share points to a record 53.6%. Market share of premium Benson & Hedges, the second-largest brand in the premium segment, was up by 0.1 point at 6.2% while share of low-price Delicados decreased by 0.5 points to 10.4%. PMI’s 2012 fourth quarter market share was essentially flat at 73.0%.

Philip Morris International Inc. Profile

Philip Morris International Inc. (PMI) is the leading international tobacco company, with seven of the world’s top 15 international brands, including Marlboro, the number one cigarette brand worldwide. PMI’s products are sold in more than 180 countries. In 2012, the company held an estimated 16.3% share of the total international cigarette market outside of the U.S., or 28.8% excluding the People’s Republic of China and the U.S. For more information, see www.pmi.com.

Forward-Looking and Cautionary Statements

This press release contains projections of future results and other forward-looking statements. Achievement of projected results is subject to risks, uncertainties and inaccurate assumptions. In the event that risks or uncertainties materialize, or underlying assumptions prove inaccurate, actual results could vary materially from those contained in such forward-looking statements. Pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, PMI is identifying important factors that, individually or in the aggregate, could cause actual results and outcomes to differ materially from those contained in any forward-looking statements made by PMI.

PMI’s business risks include: significant increases in cigarette-related taxes; the imposition of discriminatory excise tax structures; fluctuations in customer inventory levels due to increases in product taxes and prices; increasing marketing and regulatory restrictions, often with the goal of reducing or preventing the use of tobacco products; health concerns relating to the use of tobacco products and exposure to environmental tobacco smoke; litigation related to tobacco use; intense competition; the effects of global and individual country economic, regulatory and political developments; changes in adult smoker behavior; lost revenues as a result of counterfeiting, contraband and cross-border purchases; governmental investigations; unfavorable currency exchange rates and currency devaluations; adverse changes in applicable corporate tax laws; adverse changes in the cost and quality of tobacco and other agricultural products and raw materials; and the integrity of its information systems. PMI’s future profitability may also be adversely affected should it be unsuccessful in its attempts to produce products with the potential to reduce the risk of smoking-related diseases; if it is unable to successfully introduce new products, promote brand equity, enter new markets or improve its margins through increased prices and productivity gains; if it is unable to expand its brand portfolio internally or through acquisitions and the development of strategic business relationships; or if it is unable to attract and retain the best global talent.

PMI is further subject to other risks detailed from time to time in its publicly filed documents, including the Form 10-Q for the quarter ended September 30, 2012. PMI cautions that the foregoing list of important factors is not a complete discussion of all potential risks and uncertainties. PMI does not undertake to update any forward-looking statement that it may make from time to time, except in the normal course of its public disclosure obligations.

(1) The segment detail of excise taxes on products sold for the quarters ended December 31, 2012 and 2011 is shown on Schedule 2. 

(2) Net earnings and weighted-average shares used in the basic and diluted earnings per share computations for the quarters ended December 31, 2012 and 2011 are shown on Schedule 4, Footnote 1.

(1) The segment detail of excise taxes on products sold for the years ended December 31, 2012 and 2011 is shown on Schedule 6. 

(2) Net earnings and weighted-average shares used in the basic and diluted earnings per share computations for the years ended December 31, 2012 and 2011 are shown on Schedule 8, Footnote 1.

(1) For the calculation of Total Debt to EBITDA and Net Debt to EBITDA ratios, refer to Schedule 18.

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