Philip Morris International Faces Drop in Q1 Revenue

Published on July 25th, 2014 00:00

Philip Morris International’s (PMI) Q1 revenue has decreased as a result of unfavorable foreign currency imbalances and reduced sales volume. The company sold around 196 billion cigarettes in the course of the quarter, lower by 4.4% year-on-year. Its diluted profits per share altered for one-time items dropped by $0.10 or 7.8% year over year. For the whole year, PMI is expecting adverse currency and regulatory headwinds to result in a 1.3-3.2% drop in diluted profits per share.

PMI sells cigarettes in over 180 countries. Now that the company runs mainly in regional currency in these markets, an unwinding U.S. Dollar adversely affects its financial outcomes.
Solid currency headwinds pulled down PMI's adjusted diluted profits per share by around $0.16 in the course of the Q1. The maker also forced for its 2014 full year diluted profits per share to constitute 1.3-3.2% lower, in comparison to previous year, as it is expecting the fortifying U.S. dollar to move down its full year revenue by $0.61 per share. The fall of a regional currency in opposition to the U.S. dollar could also lead to increased relative prices of Philip Morris International’s cigarette brands in the regional market, thus declining its competing positioning furthermore.
Regulatory headwinds remain to aggravate operating disorders for Marlboro maker. The company marketed 4.4% fewer cigarettes in the course of the Q1. Much of the drop in sales volume originated from the European Union (EU) and Russia. In the EU, cigarette producers keep to struggle the rising epidemic of excise tax boosts amongst fragile macroeconomic conditions. Owing to these factors, Philip Morris International’s sales volume dropped by 10.6% and 8.9% in Poland and France. The company’s cigarette deliveries to Germany and Spain also have fallen by 3% and 3.6% year over year. Industry experts estimate its sales volume in the EU to keep on pressurized during the coming the year, as we they do not see the fundamental trends improving in the in the near future.
Operating factors in Russia, PMI's major market in the Eastern Europe, the Middle East and Africa region, have also been declining due to abrupt increases in indirect taxes and stronger anti-tobacco rules. In the Q1, the company’s sales volume in the country decreased by practically 9% year over year due to the execution of excise tax boosts in June, 2013 and January this year. Moreover, a new anti-tobacco regulation that was adopted on February 25, 2013, also became effective on June 1, 2013.