Philip Morris International, Inc. (NYSE:PM) Q3 2018 Earnings Conference Call - Final Transcript
Oct 18, 2018 • 09:00 am ET
Good day, and welcome to the Philip Morris International Third Quarter 2018 Earnings Conference Call. Today's call is scheduled to last about 1 hour, including remarks by Philip Morris International management and the question-and-answer session. (Operator Instructions)
I will now turn the call over to Mr. Nick Rolli, Vice President of Investor Relations and Financial Communication. Please go ahead, sir.
Welcome, and thank you for joining us. Earlier today, we issued a press release containing detailed information on our 2018 third quarter results. You may access the release on www.pmi.com or the PMI Investor Relations app. A glossary of terms, including the definition for reduced-risk products, or RRPs, as well as adjustments, other calculations and reconciliations to the most directly comparable US GAAP measures are at the end of today's webcast slides, which are posted on our website.
(Forward-Looking Cautionary Statements)
Additionally, following the comprehensive business review that we provided at our recent Investor Day, today, we will summarize our 2018 full year outlook and third quarter results as well as our performance in select geographies.
For reference, the slides and transcripts for the Investor Day presentations are available on our website and our IR app.
It's now my pleasure to introduce Martin King, our Chief Financial Officer. Martin?
Thank you, Nick, and welcome, ladies and gentlemen. As announced this morning, we are reaffirming our 2018 reported diluted earnings per share guidance at prevailing exchange rates to be in a range of $4.97 to $5.02. Our guidance includes $0.12 of unfavorable currency and represents a growth rate, excluding currency, of approximately 8% to 9% compared to our adjusted diluted EPS of $4.72 in 2017.
Our guidance continues to reflect the full year assumptions shown on this slide and detailed in today's press release. Importantly, this includes PMI heated tobacco unit shipment volume of 41 billion to 42 billion units, reflecting a net anticipated distributor inventory reduction of approximately 3 billion units; and PMI heated tobacco unit in-market sales volume of 44 billion to 45 billion units.
Moving to our third quarter results. Total shipment volume decreased by 2.1%, due mainly to the impact of distributor inventory movements, notably related to heated tobacco units in Japan. Excluding inventory movements, total shipment volume increased by 1.1%, driven by higher heated tobacco unit volume in the EU, Japan, Korea, the Middle East and Africa region and Russia; as well as higher cigarette volume in select markets, notably Indonesia, Mexico, Saudi Arabia, Thailand and Turkey. September year-to-date, total shipment volume declined by 1.2%, but increased by 0.3%, excluding inventory movements.
Given the impact of distributor heated tobacco unit inventory movements on our third quarter 2018 results, let me take a moment to put this into perspective vis-à-vis the 3 billion-unit full year distributor inventory reduction assumption that we previously communicated. As seen on this chart, the full year reduction is driven by Japan and concentrated in the third quarter with a decrease of 3.7 billion units. By comparison, there was an inventory increase in the