uploads///Q EU Region

Philip Morris’s Favorable Pricing in Germany

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Apr. 26 2016, Updated 6:07 p.m. ET

Geographic presence

Philip Morris International (PM) is divided geographically into the following four business segments:

  1. European Union (or EU)
  2. Eastern Europe, the Middle East, and Africa (or EEMA)
  3. Asia
  4. Latin America and Canada

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Revenue and operating income

The EU region’s reported net revenue decreased 1.5% to $1.9 billion in 1Q16. The decrease was primarily due to unfavorable currency of $0.2 billion and the impact of acquisitions. However, excluding the negative impact of currencies, net revenue for the EU region increased 3.4%, driven by favorable pricing in Germany.

Reported operating income decreased 0.7% to $0.9 billion in 1Q16. Excluding unfavorable currency of $54 million, the EU region’s 1Q16 adjusted operating income increased 3.6%, driven by lower manufacturing costs and favorable pricing. This was partially offset by investments behind the commercialization of reduced-risk products.

Market share

PM’s cigarette market share increased by 0.6 points to 38.7%, with gains notably in France, Germany, Poland, and Spain. It was partially offset by Italy and Portugal. Marlboro, L&M, and Chesterfield shipment volumes increased in the EU region in 1Q16. Southern Europe witnessed a decline in illicit trade, less out-switching for the fine-cut category, and a lower prevalence of e-vapor products in 1Q16.

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For British American Tobacco (BTI), volume and market share were higher in Germany. It was driven by Lucky Strike and Pall Mall. Japan Tobacco’s (JAPAY) (JAPAF) GFB (global flagship brands) shipment volume increased 4.3%, reflecting growth in Germany, France, and Italy. Other companies such as Reynolds American (RAI) and Altria Group (MO) don’t have a presence outside the United States.

New product launch

Philip Morris is focusing on the following new products:

  • Philip Morris 25s and 100s in January 2016
  • Architecture 2.0
  • L&M
  • Chesterfield 100s
  • super-slim variants

These reflected higher market share growth in France and Poland.

PM makes up 0.9% of the iShares S&P Growth ETF (IVW).[1. updated April 19, 2016]

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