Philip Morris International Inc (NYSE:PM) Q3 2019 Earnings Conference Call - Final Transcript

Oct 17, 2019 • 09:00 am ET


Philip Morris International Inc (NYSE:PM) Q3 2019 Earnings Conference Call - Final Transcript


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Good day and welcome to the Philip Morris International Third Quarter 2019 Earnings Conference Call. [Operator Instructions]

I will now turn the call over to Mr. Nick Rolli, Vice President of Investor Relations and Financial Communications. Please go ahead, sir.

Nicholas Rolli

Welcome and thank you for joining us. Earlier today, we issued a news release containing detailed information on our 2019 third quarter results. You may access the release on 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 U.S. GAAP measures are at the end of today's webcast slides which are posted on our website. Unless otherwise stated, all references to IQOS are to our IQOS heat-not-burn products. Comparisons are presented on a like-for-like basis, reflecting pro forma 2018 results, which have been adjusted for the deconsolidation of our Canadian subsidiary Rothmans Benson & Hedges Inc or RBH effective March 22, 2019.

Today's remarks contain forward-looking statements and projections of future results. I direct your attention to the forward-looking and cautionary statements disclosure in today's presentation and press release for a review of the various factors, that could cause actual results to differ materially from projections or forward-looking statements.

It's now my pleasure to introduce Martin King, our Chief Financial Officer. Martin?

Martin King

Thank you, Nick, and welcome ladies and gentlemen. Our third quarter results continued to reflect strong underlying business performance. The results include the better-than-anticipated timing of pricing and costs compared to our previously communicated assumptions for the quarter. Our reported results in the quarter were impacted by an after-tax charge in Russia of $315 million related to a final assessment by the Moscow Tax Authorities on excise taxes and VAT for the 2015 to 2017 period. Additional detail on this charge is provided in today's press release.

Total shipment volumes in the third quarter declined by 1.4%, excluding the net favorable impact of estimated distributor inventory movements due primarily to the heated tobacco unit inventory reduction in Japan during the third quarter of 2018, our total in-market sales volume declined by 3.6%, reflecting lower cigarette volume, partly offset by strong heated tobacco unit volume growth. Approximately two-thirds of the total in-market sales volume decline was due to three markets, in two of which, the decreases were largely timing related.

In Pakistan, our cigarette volume was down by approximately 50%, broadly in line with the industry decline, reflecting the timing of excise tax increase announcements compared to last year as well as the impact of price increases.

In Turkey, our cigarette volume decline was due mainly to the impact of two price increases this year, totaling five Turkish lira per pack or roughly 44% on a weighted average basis, which disproportionately impacted our share, given the timing of our price increases vis-a-vis the competition.

In Indonesia, our cigarette volume decline, mainly reflected lower share, primarily due to widened price gaps between our brands and the competition's