PMI: Strong Quarter Amid Uncertainty
Philip Morris International (PMI) reported net revenues of $7.15 billion in the first quarter of 2020, up from $6.75 billion in the 2019 first quarter. Operating income was $2.79 billion in the 2020 quarter compared to $2.05 billion in the comparable 2019 period.
PMI sold 173.75 billion cigarettes and heated-tobacco units during the 2020 first quarter, down from 175.8 billion during the 2019 first quarter. The number of cigarettes shipped declined from 164.3 billion sticks in the first quarter of 2019 to 157.02 billion sticks in the first quarter of 2020. The number of heated-tobacco units, by contrast, increased from 11.5 billion units to 16.73 billion units between the two quarters.
“We started the year with a very strong first quarter, reflecting continued structural growth momentum driven by our smoke-free portfolio and favorable combustible tobacco pricing,” said Andre Calantzopoulos, chief executive officer. “We experienced a limited impact on our performance from the early stages of the Covid-19 pandemic as the onset of government restrictions related to social distancing and travel were generally only implemented in our key markets over the course of March.
“We expect that the pandemic will have adverse impacts on our full-year 2020 business results. Those already observable relate to a severe reduction of our duty-free sales, slower IQOS user acquisition and delayed minimum price enforcement in Indonesia. We also have to assume that, in certain markets, unemployment and related reductions in disposable income will have a temporary impact on market dynamics or the ability of certain small retailers to operate.”
PMI indicated that it maintains enough inventory of inputs and finished goods and does not expect to see a disruption to its supply. Most of PMI’s manufacturing facilities are operational, including all heated-tobacco unit facilities, but manufacturing facilities representing 20 percent of its cigarette production are closed. However, PMI has over two months’ supply of heated-tobacco units, three months’ supply of IQOS devices and 1.5 months’ supply of cigarettes.