Philip Morris International, Inc. (NYSE:PM) Q3 2017 Earnings Conference Call - Final Transcript
Oct 19, 2017 • 09:00 am ET
Good day, and welcome to the Philip Morris International Third Quarter 2017 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.
(Operator instructions) 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 2017 third quarter results. You may access the release on www.pmi.com, or the PMI IR app.
During our call today, please note the following unless otherwise stated. First, we'll be talking about results for the third quarter of 2017 and comparing them to the same period in 2016. Second, all references to total industry, PMI volume and PMI market share performance reflects cigarettes and PMI's heated tobacco units for those markets that have commercial sales of IQOS.
(Forward-Looking Cautionary Statements)
Now, it's my pleasure to introduce Jacek Olczak, our CFO for the last time on our quarterly earnings calls. As I'm sure most of you know that he will be assuming the duties of COO on January 1, 2018. Jacek?
Thank you, Nick and welcome ladies and gentlemen. We're pleased by our third quarter performance, notably reflecting very strong currency and financial result, including growth in adjusted diluted EPS of 11.2%, sequential improvement in our total shipment volume performance supported by both cigarettes and heated tobacco units, higher total international market, excluding China and the US, and the continued positive momentum for IQOS in all geographies, particularly Japan and Korea.
However, industry wide dynamics in Saudi Arabia and Russia that we have flagged previously are putting pressure on our results and moderating our growth outlook for the year. In Saudi Arabia, the significant excise tax increase in June, which resulted in the doubling of retail prices, is currently driving higher than anticipated declines in cigarette industry volume, especially in the highly profitable premium segment where Marlboro is the leading brand. In Russia, cigarette industry volume is also softer than expected, while net pricing in the market remains constrained by the competitive environment.
We are therefore revising our 2017 reported continue reported diluted EPS guidance to a range $4.75 to $4.80 at prevailing exchange rates. Our guidance also now includes approximately $0.17 of unfavorable currency compared to $0.14 previously due principally to Egyptian pound. Excluding currency and the favorable $0.04 tax item recorded in the first quarter, our guidance represents a growth rate of approximately 9% to 10% compared to our adjusted diluted EPS of $4.48 in 2016.
Our full year outlook continues to reflect a total shipment volume decline of around 3% at the low end of the 3% to 4% decline range that we expected earlier this year, as well as currency neutral net revenue growth of over 7%. We do however