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What Drove Philip Morris’s Revenue in the Fourth Quarter?

Rajiv  Nanjapla - Author
By

Aug. 18 2020, Updated 5:18 a.m. ET

Fourth-quarter performance

In the fourth quarter, Philip Morris International (PM) posted revenue of $7.50 billion, outperforming analysts’ expectation of $7.39 billion. However, year-over-year, the company’s revenue declined by 9.6% from $8.29 billion in the fourth-quarter of 2017. The decline of 4.6% in cigarette shipment volume and heated tobacco units and unfavorable currency translation lowered the company’s revenue during the quarter. Excluding currency, the company’s revenue fell by 4.1%.

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European Union

During the quarter, the revenue from the segment increased by 3.4% to $2.26 billion. Excluding unfavorable currency exchange, the segment’s revenue increased by 6.2% driven by favorable pricing variance in Germany and Italy, and growth in shipment volume of heated tobacco units. However, the decline in cigarette shipment volume of 0.7% partially offset some of the growth in the segment’s revenue.

Eastern Europe

The revenue from the segment increased by 2.9% to $793 million. Excluding unfavorable currency, the company’s revenue increased by 14.5% driven by favorable pricing in Russia and Ukraine, and growth in sales of heated tobacco units. However, the decline of 8.2% in cigarette shipment volume offset some of the increase in revenue.

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The Middle East & Africa region

The segment has posted revenues of $988 million, which represents growth of 1.8% from $971 million in the fourth quarter of 2017. However, removing unfavorable currency, the segment’s revenue increased by 13.1% driven by favorable pricing variance in Egypt and Turkey, and favorable volume and mix from GCC (Gulf Cooperation Council) countries. During the quarter, the shipment volume of cigarettes increased by 1.2%, while the shipment volume of heated tobacco units increased by 14.9%.

South & Southeast Asia

The revenue from the segment increased by 0.9% to $1.22 billion. However, excluding unfavorable currency, the company’s revenue increased by 10.3% driven by favorable pricing variance in Indonesia and the Philippines.

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East Asia & Australia

The segment has posted a revenue of $1.35 billion, which represents a fall of 39.5% from $2.22 billion in the corresponding quarter of 2018. The decline of 29.8% in shipment volumes of cigarette and heated tobacco units lowered the segment’s revenue. The decline in shipment volume was largely due to unfavorable heated tobacco unit inventory movements in Japan.

Latin America & Canada

The segment has posted a revenue of $788 million, which represents a fall of 5.2% from $831 million in the corresponding quarter of 2017. However, excluding unfavorable currency, the company’s revenue fell by 0.7% due to a decline of 4.4% in cigarette shipment volume partially offset by favorable pricing variance.

Peer comparisons

During the fourth quarter, Altria Group (MO) posted revenue of $4.79 billion, which represents an increase of 1.5% from $4.71 billion in the fourth quarter of 2017.

Next, we will look at Philip Morris’s fourth-quarter EPS.

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