1Q16 revenue and operating income
Philip Morris’s (PM) 1Q16 revenue for the EEMA (Eastern Europe, the Middle East, and Africa) region decreased 13.1% to $1.6 billion. This compares to $1.8 billion in 1Q15. The decrease was primarily due to the unfavorable currency impact of $0.2 billion. However, excluding the negative impact of currencies, net revenue of the EEMA region increased by 1.2% in 1Q16.
The increase in revenue on a constant currency basis was primarily due to favorable pricing of $0.1 billion. It was driven by Russia and Turkey, partially offset by Ukraine. In Algeria, excess tax-driven retail (XRT) price increases of ~21% last year decreased Marlboro’s market share by 7.4% in North Africa. However, L&M delivered strong results, increasing 3.5% in North Africa.
The reported operating income decreased 28.1% to $0.6 billion. Excluding foreign currency of $0.2 billion, operating income decreased 6.5%. The decline was primarily due to an unfavorable volume mix of $0.1 billion and higher marketing and sales investments behind commercialization of iQOS.
Market share in Russia
In Russia, PM’s cigarette market share declined 0.2 points to 27.8%. This was mainly due to price increases of some products that reached adult smokers sooner than competitors’ price increases. The shipment volume declined by 4.8% due to a decline of mid-priced L&M and Chesterfield.
British American Tobacco’s (BTI) market share continued to grow in Russia, driven by Rothmans. For Japan Tobacco (JAPAY) (JAPAF), total shipment volume declined 1.0% due to industry contraction in Russia. However, GFB (global flagship brands) market share increased in Russia. Imperial Tobacco’s (ITYBY) performance also improved in Russia in the second half due to stronger pricing and gains from Maxim.
Due to competitive price repositioning in the low price segment, Philip Morris’s market share decreased in Ukraine. It was driven by Marlboro, reflecting the impact of widened price gaps.
PM makes up 4.7% of the iShares Core High Dividend ETF (HDV).[1. updated April 20, 2016]