Philip Morris’s Revenue Missed due to Lower Volumes in 4Q15



4Q15 revenue results

As we discussed earlier, Philip Morris International’s (PM) reported revenue, excluding excise taxes, fell 11.2% to $6.4 billion in 4Q15 compared to $7.2 billion in 4Q14. PM missed Wall Street analysts’ consensus estimate on sales in 4Q15 after beating it six times in a row.

PM’s reported revenue was negatively impacted by $1.1 billion due to adverse foreign currency impact from the US dollar. However, excluding the impact of unfavorable currency movements and the impact of acquisitions, its net revenue rose by 4% in 4Q15.

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Increase in revenue

The increase in net revenue, excluding the adverse impact of foreign currencies, was primarily due to the stronger pricing impact of $0.5 billion from across all regions. Partially offsetting revenue growth was the impact of lower volume and product mix of $0.2 billion, mainly in EEMA (Eastern Europe, Middle East, and Africa) and Latin America and Canada, partially offset by Asia.

André Calantzopoulos, PM’s CEO and director, announced that the total pricing variance of $2.1 billion was supported by strong contributions from all four regions for in 2015. This variance includes gains in Korea related to inventories built ahead of the January 2015 excise tax increase. The company expects a pricing variance of around 6% of its 2015 net revenues for the next year.

Expansion of iQOS

PM develops its e-cigarette iQOS under its reduced-risk products (or RRPs) segment. The company expanded the geographic presence of iQOS, with the first wave of expansion in Japan reaching over 60% of the adult smoker population and the initial retail (XRT) expansion in Italy beyond Milan to Modena, Rome, and Turin. In the coming parts, we’ll focus on PM’s key operating regional segments and understand which segments helped in growth.

Peers in the e-cigarette market

Competitors such as British American Tobacco (BTI), Reynolds American (RAI), and Vector Group (VGR) also produce innovative e-cigarettes to meet consumer expectations. Vype, Vuse, and Zoom are the respective e-cigarettes produced by these companies.


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