Philip Morris Earnings: Strong Top-Line Growth Driven by Asia

by Trefis Team
Philip Morris International
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Philip Morris International (NYSE:PM) announced strong Q1 earnings on Thursday as revenue grew 9% to $18.0 billion. Revenue, excluding the excise taxes, witnessed a 9.6% growth to $7.4 billion. Net income rose 12.3% to $2.16 billion or $1.25 per share. Philip Morris International competes with British America Tobacco (AMEX:BTI) and Imperial Tobacco Group (LSE:IMT), among others. However, the company lowered its full year guidance by 5 cents to $5.20-$5.30 since it expects a currency headwind of 15 cents.

Asia Continues To be the Star Performer

Net revenues for Asia rose 19.5% to $2.8 billion helped by a cigarette volume growth of 12.4%. Asia is now the biggest revenue generating region for the company after it overtook Europe in 2011. The company reported operating income that surged 28.5% to $1.40 billion helped by stronger pricing in the region.

Total cigarette volume for the region stood at 81 billion units. Volume growth in Asia was driven by strong performances in Indonesia, Japan, South Korea and Philippines. We expect the company to command a market share of 28.4% in Asia by the end of 2012.

EEMA Another Key Region

Although Asia gets most of the limelight, EEMA (East Europe, Middle East and Africa) is another region which has been consistently doing well for the company. Net revenues for the region grew 8.8% to $1.84 billion. Philip Morris International’s reported income for the region rose 12.7% to $810 million helped by strong pricing and moderate volume growth of 3.6%.

Europe Shows Resilience

The decrease in the cigarette shipment volume in Europe slowed as the volume declined by 1.5% to 47.8 billion for the quarter. Cigarette volumes declined by more than 5% in 2011. Lower cigarette volumes could not prevent the net revenues from rising 2.6% to $2.05 billion. The company reported operating income rose 2.4% to $1.03 billion.

The cigarette market is declining in Europe due to increasing health awareness combined with rising excise duties. However, the company continues to generate strong profits by periodically raising the prices of its products.

We have a $96 price estimate for Philip Morris International. We are in the process of revising our estimates to incorporate the Q1 earnings.

See our complete analysis of Philip Morris International

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