PMI Reports 2012 Results: Europe, Middle East & Africa Region (EEMA) and Asia

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

EASTERN EUROPE, MIDDLE EAST & AFRICA REGION (EEMA)

2012 Full-Year

In EEMA, net revenues increased by 5.7% to $8.3 billion, including unfavorable currency of $467 million. Excluding the impact of currency and acquisitions, net revenues increased by 11.3%, primarily due to both favorable pricing and volume/mix of $466 million and $425 million, respectively.

Operating companies income increased by 15.4% to $3.7 billion, despite unfavorable currency of $199 million. Excluding the impact of currency and acquisitions, operating companies income increased by a strong 21.4%, due primarily to higher pricing, and favorable volume/mix of $317 million, partly offset by higher costs, principally related to investments in marketing and business infrastructure mainly in Russia.

Adjusted operating companies income increased by 14.7%, as shown in the table below and detailed on Schedule 15. Adjusted operating companies income, excluding currency and acquisitions, increased by 20.7%.

Excluding the impact of currency and acquisitions, adjusted operating companies income margin was up by 3.5 percentage points to 44.8%, as detailed on Schedule 15.

PMI’s cigarette shipment volume in EEMA increased by 4.7%, mainly reflecting improved market conditions and higher share in Egypt, a higher market share in Russia, and a higher total market and share in Turkey.

PMI’s cigarette shipment volume of premium brands grew by 6.7%, driven by record volumes for Marlboro, up by 3.6%, and Parliament, up by 16.5%.

2012 Fourth-Quarter

In EEMA, net revenues increased by 8.5% to $2.1 billion, including unfavorable currency of $56 million. Excluding the impact of currency, net revenues increased by 11.3%, primarily due to both favorable pricing and volume/mix of $101 million and $122 million, respectively.

Operating companies income increased by 23.3% to $921 million, including unfavorable currency of $16 million. Excluding the impact of currency and acquisitions, operating companies income increased by 25.4%, due primarily to higher pricing, and favorable volume/mix of $84 million.

Adjusted operating companies income increased by 22.8%, as shown in the table above and detailed on Schedule 11. Adjusted operating companies income, excluding currency, increased by 24.9%.

Excluding the impact of currency, adjusted operating companies income margin was up by 4.7 percentage points to 42.9%, as detailed on Schedule 11.

PMI’s cigarette shipment volume in EEMA increased by 7.1%, mainly reflecting improved market conditions and higher share in Egypt and a higher total market and share in Turkey.

PMI’s cigarette shipment volume of premium brands grew by 7.7%, driven by Marlboro, up by 3.2%, and by Parliament, up by 22.4%.

EEMA Key Market Commentaries

In Russia, the total cigarette market declined by an estimated 1.3% to 370 billion units. PMI’s shipment volume increased by 3.8% in 2012, mainly reflecting a higher market share, and by 0.6% in the fourth quarter. Shipment volume of PMI’s premium portfolio in 2012 was up by 7.0%, driven by Parliament, up by 15.0%. In the mid-price segment, shipment volume was up by 4.8%, mainly due to L&M, up by 20.4%. In the low-price segment, shipment volume was up by 2.3%, driven by Apollo Soyuz, Bond Street and Next, up by 3.7%, 0.5% and 11.7%, respectively. PMI’s market share of 26.3%, as measured by Nielsen, was up by 0.5 points. Market share of Parliament was up by 0.3 points to 3.2%; Marlboro was essentially flat at 1.9%; L&M was up by 0.2 points to 2.6% and Chesterfield was flat at 3.4%; Bond Street was up by 0.3 points to 6.5%; Next was up by 0.2 points to 2.9%; and Apollo Soyuz and Optima were flat at 1.4% and 3.2%, respectively. PMI’s 2012 fourth-quarter market share of 26.4%, as measured by Nielsen, was up by 0.2 points.

In Turkey, the total cigarette market increased by an estimated 8.8% to 99.2 billion units in 2012, reflecting: the favorable impact of trade inventory movements in the fourth quarter of 2012 ahead of the January 2013 excise tax increase; a decrease in illicit trade; and a favorable comparison with 2011 which experienced a 10.6% total cigarette market decline in the last three months of the year resulting from excise tax-driven price increases in the fourth quarter. In the fourth quarter of 2012, the total cigarette market increased by an estimated 24.8% to 26.7 billion units, reflecting the favorable impact of the aforementioned factors. PMI’s shipment volume increased by 12.7% in 2012, across each of the premium, mid-price and low price segments, up by 15.0%, 16.6% and 9.8%, respectively, and by 33.8% in the fourth quarter. PMI’s market share, as measured by Nielsen, grew by 0.9 points to 45.7% in 2012, driven by premium Parliament, mid-price Muratti and low-price Lark, up by 0.9, 0.4 and 0.3 share points to 9.0%, 6.6% and 12.2%, respectively, partly offset by a decline in low-price L&M, down by 0.3 points to 8.4%. Market share of Marlboro was down by 0.1 point to 9.2%. PMI’s 2012 fourth-quarter market share, as measured by Nielsen, grew by 1.7 points to 46.5%.

In Ukraine, the total cigarette market declined by an estimated 2.6% to 83.4 billion units in 2012. In the fourth quarter of 2012, the total cigarette market was up by 0.7% to 18.6 billion units. PMI’s shipment volume decreased by 0.6% in 2012 and increased by 3.8% in the fourth quarter. PMI’s market share, as measured by Nielsen, was up by 0.2 points to 32.4%. Share for premium Parliament was up by 0.4 points to 3.2%. Share of Marlboro was flat at 5.8%, Chesterfield was down by 0.5 points to 7.0% and Bond Street was up by 1.2 points to 8.4%. PMI’s 2012 fourth-quarter market share, as measured by Nielsen, was up by 0.3 points to 32.8%.

ASIA REGION

2012 Full-Year

In Asia, net revenues increased by 4.6% to $11.2 billion, including unfavorable currency of $116 million. Excluding the impact of currency, net revenues increased by 5.7%, reflecting the favorable impact of pricing of $551 million, principally in Australia, Indonesia, Korea and the Philippines, and favorable volume/mix of $57 million.

Operating companies income increased by 7.5% to $5.2 billion. Excluding the favorable impact of currency of $39 million, operating companies income increased by 6.7%, primarily reflecting higher pricing, and favorable shipping costs related to the Japan hurdle, partly offset by unfavorable volume/mix of $99 million, mainly in Japan. Excluding Japan, volume/mix was favorable, driven by Indonesia.

Adjusted operating companies income increased by 7.9% as shown in the table below and detailed on Schedule 15. Adjusted operating companies income, excluding currency, increased by 7.1%.

Excluding the impact of currency, adjusted operating companies income margin was up by 0.6 percentage points to 45.9%, as detailed on Schedule 15.

PMI’s cigarette shipment volume in Asia increased by 4.2%, driven by growth in Indonesia, the Philippines, Thailand and Vietnam, partly offset by a decline in Japan and Korea. PMI’s cigarette shipment volume in Asia increased by 6.4% excluding the 6.3 billion units associated with the 2011 Japan hurdle.

Shipment volume of Marlboro was up by 3.6%, driven by Indonesia, the Philippines and Vietnam, partly offset by Japan and Korea. Shipment volume of Marlboro was up by 6.0% excluding the related Japan hurdle volume.

2012 Fourth-Quarter

In Asia, net revenues increased by 6.0% to $2.8 billion, including unfavorable currency of $57 million. Excluding the impact of currency, net revenues increased by 8.1%, reflecting the favorable impact of pricing of $158 million, principally in Australia, Indonesia, Korea and the Philippines, and favorable volume/mix of $57 million.

Operating companies income increased by 9.0% to $1.1 billion. Excluding the unfavorable impact of currency of $8 million, operating companies income increased by 9.7%, reflecting higher pricing and slightly favorable volume/mix of $8 million, partly offset by higher costs, mainly related to manufacturing in Indonesia.

Adjusted operating companies income increased by 9.6% as shown in the table above and detailed on Schedule 11. Adjusted operating companies income, excluding currency, increased by 10.3%.

Excluding the impact of currency, adjusted operating companies income margin was up by 0.9 percentage points to 40.3%, as detailed on Schedule 11.

PMI’s cigarette shipment volume in Asia increased by 5.7%, driven by growth notably in Indonesia and the Philippines, partly offset by a decline in Japan and Korea.

Shipment volume of Marlboro was up by 5.6%, driven by Indonesia, the Philippines and Vietnam, largely offset by Japan and Korea.

Asia Key Market Commentaries

In Indonesia, the total cigarette market was up by 8.2% to 302.5 billion units in 2012, driven by growth in the premium and mid-price segments, and up by 9.4% in the fourth quarter to 79.2 billion units. PMI’s shipment volume grew by 17.5% in 2012 and by 15.4% in the fourth quarter. PMI’s market share was up by 2.8 points to 35.6% in 2012, driven notably by Sampoerna A in the premium segment, up by 1.1 points to 13.8%, and mid-price U Mild, up by 1.2 points to 3.3%. Marlboro’s market share was up by 0.3 points to 4.8% and its share of the “white” cigarettes segment increased by 4.9 points to 71.2%. Market share of Dji Sam Soe was essentially flat at 7.8%. PMI’s 2012 fourth-quarter market share was up by 1.9 points to 36.2%.

In Japan, the total cigarette market increased by 0.7% to 196.6 billion units in 2012, reflecting a favorable comparison with 2011 driven by trade inventory de-loading in the first quarter following the October 2010 excise tax-driven price increase. The estimated underlying decline of the total cigarette market in 2012 was approximately 1%. In the fourth quarter of 2012, the total cigarette market decreased by 2.0% to 50.1 billion units, mainly due to an unfavorable comparison with the fourth quarter of 2011 which marked the first full quarter of product supply by PMI’s principal competitor following the March earthquake. PMI’s shipment volume was down by 9.7% in 2012, or up by 0.6% excluding the additional hurdle volume of 6.3 billion units associated with 2011. PMI’s 2012 fourth-quarter shipment volume decreased by 6.7%, reflecting an unfavorable quarter-on-quarter comparison in respect of distributor inventory movements, and lower market share. PMI’s market share was down by 3.0 points to 27.7% in 2012, or down by 0.5 points compared to the 2011 exit share of 28.2%. While share of Marlboro was down by 0.7 points to 12.4%, it was essentially flat compared to its 2011 exit share, supported by the introduction of new Marlboro menthol variants during the year, and up by 1.0 point compared to its pre-earthquake level. Share of Lark was down by 1.3 points to 8.4%, or by 0.2 points compared to its 2011 exit share of 8.6%. Share of Philip Morris was down by 0.5 points to 2.3%, or by 0.2 points compared to its 2011 exit share of 2.5%. While PMI’s 2012 fourth-quarter market share was down by 0.5 points to 27.7%, it grew by 0.2 points versus the third quarter of 2012.

In Korea, the total cigarette market was down by 0.9% to 89.3 billion units in 2012. In the fourth quarter of 2012, the total cigarette market decreased by 4.6% to 21.8 billion units. PMI’s shipment volume decreased by 4.0% in 2012 and by 10.9% in the fourth quarter, reflecting the impact of PMI’s price increases in February 2012. PMI’s market share in 2012 of 19.2% was down by 0.6 points. Market share of Marlboro and Parliament was down by 0.8 points and 0.1 point to 7.8% and 6.6%, respectively, partly offset by Virginia Slims, up by 0.7 points to 4.1%. PMI’s 2012 fourth-quarter market share of 18.9% was down by 1.3 points.

In the Philippines, the total cigarette market increased by 5.0% to 102.2 billion units in 2012, reflecting the growth in the low price segment and trade loading of competitive products ahead of the excise tax-driven price increase in January 2013. In the fourth quarter of 2012, the total cigarette market increased by 12.1% to 27.5 billion units, reflecting the impact of the aforementioned factors. PMI’s shipment volume increased by 1.3% in 2012 and was up by 5.0% in the fourth quarter. PMI’s market share was down by 3.3 points to 90.7% in 2012, due primarily to share declines of Champion and Hope. Marlboro’s market share was down by 0.2 points to 20.9%. Market share of Fortune was up by 2.4 points to 49.4%. PMI’s 2012 fourth-quarter market share of 87.2% was down by 5.9 points, reflecting the impact of the aforementioned trade inventory movements. Enditem