Revises 2014 Full-Year Reported Diluted EPS
Forecast for Estimated Restructuring Costs in the Netherlands;
Announces Acquisition of U.K.-Based E-Vapor
Reviews Business Outlook and Strategies
NEW YORK--(BUSINESS WIRE)--Jun. 26, 2014--
Philip Morris International Inc.’s (NYSE / Euronext Paris: PM) senior
management will offer its perspective on the company’s business outlook
and long-term growth strategies at a two-day investor meeting starting
today at approximately 9:00 a.m. (Swiss time) at its Operations Center
in Lausanne, Switzerland.
“2014 is proving to be a complex and truly atypical year for PMI,” said
André Calantzopoulos, Chief Executive Officer.
“In addition to our exciting plans for the global roll-out of our Marlboro
Architecture 2.0 and our new commercial approach, we are on the verge of
leading a paradigm shift with the accelerated commercialization of our
“We continue to face significant currency headwinds, an improving but
weak macro-economic environment in the EU and known challenges in Asia,
partly offset by a robust performance in a number of markets and the
contribution of our business development initiatives. Furthermore, we
have recently witnessed significant price discounting at the low end of
the market in Australia which, were it to persist, could lead us to be
at the lower end of our 2014 guidance for full-year currency-neutral
adjusted diluted EPS growth of 6%-8%.”
2014 Full-Year Forecast
The company revises its 2014 full-year reported diluted earnings per
share (“EPS”) forecast to be in a range of $4.87 to $4.97, versus $5.26
in 2013, compared to a range of $5.09 to $5.19 as previously announced
on May 7, 2014.
On an adjusted basis, diluted EPS are projected to increase in the range
of 6% to 8% versus adjusted diluted EPS of $5.40 in 2013, reflecting:
a $0.01 per share charge recorded as asset impairment and exit costs
in the first quarter of 2014 relating to the decision to cease
cigarette production in Australia by the end of 2014;
a pre-tax charge, related to the contemplated decision to discontinue
cigarette production in the Netherlands in 2014, of approximately $495
million, or $0.24 per share, the majority of which is expected to be
recorded in the second quarter of 2014; and
an unfavorable currency impact, at prevailing exchange rates, of
approximately $0.61 for the full-year 2014.
The adjusted diluted EPS of $5.40 in 2013 is calculated as reported
diluted EPS of $5.26, plus a $0.02 per share charge related to discrete
tax items and a $0.12 per share charge related to asset impairment and
This forecast includes a productivity and cost savings target of $300
million and a share repurchase target of $4.0 billion. This forecast
excludes the impact of any future acquisitions, unanticipated asset
impairment and exit cost charges, future changes in currency exchange
rates and any unusual events.
The factors described in the Forward-Looking and Cautionary Statements
section of this release represent continuing risks to these projections.
Global Footprint Optimization
On April 4, 2014, the company announced the initiation by its affiliate,
Philip Morris Holland B.V. (“PMH”), of consultations with employee
representatives on a proposal to discontinue cigarette production at its
factory located in Bergen op Zoom, the Netherlands. PMH has reached an
agreement with the Trade Unions and their members on a social plan and,
subject to the fulfillment of certain other conditions, PMH plans to
cease cigarette production by September 1, 2014.
As a result, PMI expects to incur a pre-tax charge of approximately $495
million, or $0.24 per share, the majority of which is expected to be
recorded in the second quarter of 2014, reflecting approximately $356
million related to employee separation costs and approximately $139
million related to asset impairment costs. Of the $495 million,
approximately $418 million will be paid in cash, of which $181 million
will be paid in 2014.
The company announced its acquisition of 100% of Nicocigs Limited
(“Nicocigs”), a leading U.K.-based e-vapor company whose principal brand
is Nicolites. The transaction is not subject to regulatory
approval and is not material to PMI’s 2014 consolidated financial
position, results of operations or cash flow.
“This acquisition is complementary to our previously announced agreement
for the license and distribution of Altria Group, Inc.’s e-vapor
products. In addition, it provides PMI with immediate access to, and a
significant presence in, the growing e-vapor category in the U.K.
market, as well as a strong retail presence, which further complements
the current restructuring of our distribution arrangements in the U.K.,"
said Drago Azinovic, PMI’s President, European Union Region.
Nicocigs was founded in 2008 and is headquartered in Birmingham, U.K.
The company employs a field force of approximately 40 sales
representatives and distributes to more than 20,000 points of sale
within the UK. Nicocigs’ 2014 April year-to-date retail share, as
measured by Nielsen, was 27.3%.
The U.K.’s e-vapor category has an estimated retail value of
approximately $350 million.
Investor Day Highlights
Presentations, outlining the company’s strategies for growth, will be
made by: André Calantzopoulos, Chief Executive Officer; Bertrand Bonvin,
Senior Vice President, Research & Development; Manuel Peitsch, Vice
President, Biological Systems Research; Frederic de Wilde, Senior Vice
President, Marketing & Sales; Drago Azinovic, President, European Union
Region; Matteo Pellegrini, President Asia Region; Martin King,
President, Latin America & Canada Region; Miroslaw Zielinski, President,
Eastern Europe, Middle East & Africa Region and PMI Duty Free; Antonio
Marques, Senior Vice President, Operations; and Jacek Olczak, Chief
In 2014, the company forecasts a decline in total cigarette industry
volume, excluding China and the USA, in a range of 2%-3%;
As of 2015, the company is cautiously optimistic that such total
cigarette industry volume decreases will be closer to the previous
historical average of 1%-2%;
The company forecasts a moderate decline of the total industry in the
EU Region in 2014 to a range of 5.0%-6.0% and, assuming continued
macro-economic improvement and a continued deceleration in the growth
of the overall e-vapor category, to approximately 5.0%-6.0% in 2015
and to 4.0%-5.0% thereafter; and
As of 2015 and for the near term, the company expects its annual
volume to remain flat to down by 1.0%.
Net Revenues, Operating Companies Income (“OCI”) and Earnings Per
Share (“EPS”) Highlights:
As of 2015 and for the near term, the company aims to return to
currency-neutral, net revenue and adjusted OCI growth within its
annual average 4%-6% and 6%-8% mid- to long-term target ranges,
As of 2015 and for the near term, the company targets ex-currency
adjusted diluted EPS growth in the range of 8%-10%, reflecting share
repurchases in the range of $2 billion to $3 billion per year; and
Within the next three to four years, the company anticipates that its
Reduced-Risk Products will become accretive to its bottom line and
then will represent an upside to all the metrics of its growth
algorithm, including volume.
Reduced-Risk Products Portfolio Highlights:
The company described the brand platform that it has chosen to
commercialize the electronic system of its Platform 1 product;
The company intends to commence a pilot city test of its Platform 1
product in Italy and in Japan in the fourth-quarter of 2014 and to
expand nationally in 2015;
In 2016, the company anticipates launching a proprietary e-cigarette
that it believes will provide adult smoker satisfaction and a nicotine
delivery profile comparable to combustible cigarettes; and
Due to incremental expenses in support of its clinical trials and
commercialization initiatives, the company assumes its Reduced-Risk
Products portfolio will have a negative OCI impact in 2014, 2015 and
2016, which is included in the company’s near-term growth algorithm.
However, the OCI contribution of Reduced-Risk Products should become
neutral or positive thereafter.
Operational, Marketing and Other Financial Highlights:
The company targets Regional annual average adjusted OCI growth,
ex-currency, over the mid to long-term of:
Low single-digit in the EU;
Low double-digits in EEMA;
High single-digit in Asia; and
High single-digit in Latin America & Canada
In the mid-term, reflecting the strength of its brand portfolio, the
company anticipates continued pricing in line with its historical
average increase of approximately $1.8 billion per year;
The company provided an update on its growth strategy for the Marlboro
brand under the Marlboro Architecture 2.0 project and the
progress of the company’s commercial approach global initiative;
During the period 2015-2017, the company aims to limit the growth of
its annual cost of goods sold to a range of 1%-3%, excluding
Reduced-Risk Products, volume/mix and currency; and
The company reaffirms its annual dividend target payout ratio of 65%.
The presentations and Q&A sessions will be webcast live both days at www.pmi.com/2014InvestorDay
in a listen-only mode beginning today, at approximately 9:00 a.m., and
concluding at approximately 6:00 p.m. The webcast will resume tomorrow,
June 27, 2014, at approximately 10:00 a.m. and conclude at approximately
12:45 p.m. Times are local Swiss. A copy of remarks and slides, along
with an archive of the webcast, will be made available at www.pmi.com/2014InvestorDay.
This release may contain projections of future results and other
forward-looking statements that involve a number of risks and
uncertainties and are made pursuant to the Safe Harbor Provisions of the
Private Securities Litigation Reform Act of 1995. 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 March 31, 2014.
PMI cautions that it does not undertake to update any forward-looking
statements that it may make, except in the normal course of its public
Reduced-Risk Products ("RRPs") is the term the company uses to refer to
products in various stages of development for which it is conducting
extensive scientific studies to determine whether it can support claims
of reduced exposure to harmful and potentially harmful constituents in
smoke (also referred to as “HPHCs”), and ultimately claims of reduced
disease risk when compared to smoking combustible cigarettes. Before
making any such claims, the company will need not only rigorous data to
substantiate reduced risk but may also require government review and
approval, as is the case in the USA today.
About Philip Morris International Inc.
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 markets. In 2013, the company
held an estimated 15.7% share of the total international cigarette
market outside of the U.S., or 28.2% excluding the People's Republic of
China and the U.S. For more information, see www.pmi.com.
Source: Philip Morris International Inc.
New York: +1-917-663-2233
(0)58 242 4666
Lausanne: +41 (0)58 242 4500