Philip Morris International, Inc. (NYSE:PM) Q4 2016 Earnings Conference Call - Final Transcript
Feb 02, 2017 • 09:00 am ET
Good day, and welcome to the Philip Morris International 2016 Fourth Quarter and Full Year Earnings Conference Call. Today's call is scheduled to last about one hour including remarks by Philip Morris International management and the question-and-answer session.
Media representatives on the call will also be invited to ask questions at the conclusion of questions from the investment community.
I will now turn the call over to Mr. Nick Rolli, VP of IR and Financial Communications. Please go ahead, sir.
Welcome, and thank you for joining us. Earlier today, we issued a press release containing detailed information on our 2016 fourth quarter and full year results, and you may access the release on our new company website at www.pmi.com or the PMI investor relations app.
During our call today, we will be talking about results for the fourth quarter and full year 2016 and comparing them to the same period in 2015 unless otherwise stated. A glossary of terms, adjustments and other calculations as well as reconciliations to the most directly comparable U.S. GAAP measures are at the end of today's webcast slides which are posted on our website.
Reduced-Risk Products or RRPs is the term we use to refer to products that present, are likely to present or have the potential to present less risk of harm to smokers who switch to these products versus continued smoking.
(Forward-Looking Cautionary Statements)
Please also note that in the first quarter of 2017, we will begin to report our shipment volume on a combined basis including both cigarettes and HeatSticks. We will also report our combined estimated market share in certain markets as we currently do for Japan to the extent that reliable data is available.
It's now my pleasure to introduce Andre Calantzopoulos, our CEO, Jacek Olczak, our CFO, will join Andre for the question-and-answer period. Andre?
Thank you, Nick, and welcome, ladies and gentlemen. 2016 was a pivotal year for PMI, reflecting exciting progress in our transformation from combustible tobacco products to a Reduced-Risk Products focused company. While our combustible tobacco portfolio continue to drive our income growth, we began to see clear signs of the enormous potential of our RRP portfolio.
As expected, we closed 2016 with exceptionally strong quarterly results, driven by the annualization of price increases and the growth of RRPs coupled with a favorable cost comparison. Net revenues increased by 10.5% excluding currency, while adjusted OCI and adjusted diluted EPS increased by over 47% and 51% respectively on the same basis.
Full year net revenues increased by 4.4% excluding currency driven by a favorable pricing variance equivalent to 6% of prior year net revenues and the strong performance of RRPs, notably HeatSticks and IQOS devices. As in any year, we faced some unique challenges in 2016 such as the very large excise tax increase in Argentina, the surge of illicit trade in Pakistan and the cigarette industry volume declines in the Philippines and Thailand. In aggregate, these items had an adverse effect on our volume