Philip Morris Debt Due, Liquidity, And Credit Rating

Cash. Pixabay Image.

This article presents the debt and cash, payments due, and liquidity of Philip Morris International (NYSE: PM). Apart from the debt, we also look at the cash which primarily consist of cash & cash equivalents.

The net debt, calculated as total debt less cash & cash equivalents, is another measure that we will find out. For leverages, we will explore the debt-to-equity ratio.

Philip Morris International’s ability to service its debt is another crucial area that needs to be examined as it may determine if lenders will extend credits and provide liquidity to the company.

In this area, we will dig into Philip Morris International’s debt payments, liquidity, and credit ratings. We will determine if the company has sufficient cash to meet all obligations.

Let’s get into the details!

Investors interested in PMI’s sales statistics may find more resources on these pages: Philip Morris best-selling cigarettes, Philip Morris sales by region, and Philip Morris revenue by product category.

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Definitions

To help readers understand the content better, the following terms and glossaries have been provided.

Cash & Cash Equivalents: Philip Morris International defines its cash & cash equivalents as assets that include demand deposits with banks and all highly liquid investments with original maturities of three months or less.

Investment Grade: Investment grade means a rating equal to or higher than Baa3 (or the equivalent) by Moody’s; a rating equal to or higher than BBB- (or the equivalent) by S&P or Fitch; and the equivalent investment grade credit rating from any replacement rating agency or rating agencies selected by Philip Morris International.

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How Does Philip Morris International Manage Its Debt?

Philip Morris International (PMI) manages its debt through a combination of strategic financial planning and disciplined capital allocation. Here are some key aspects of how PMI handles its debt:

1. Diversified Debt Portfolio: PMI maintains a diversified debt portfolio with bonds issued in multiple currencies, including USD and EUR, to manage currency risks and optimize interest rates.

2. Prudent Financial Management: The company follows a conservative approach to leverage, ensuring that its debt levels are manageable and aligned with its long-term financial goals.

3. Regular Debt Refinancing: PMI regularly refinances its debt to take advantage of favorable market conditions and lower interest rates, reducing overall borrowing costs.

4. Strong Cash Flow Generation: The company generates robust cash flows from its operations, which are used to service its debt obligations and support its growth initiatives.

5. Focus on Smoke-Free Products: PMI is investing heavily in the development and marketing of smoke-free products, which are expected to drive future revenue growth and improve the company’s financial health.

By effectively managing its debt and focusing on growth opportunities, PMI aims to maintain a strong financial position and support its long-term strategic objectives.

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Total Debt

• Debt – Our total debt was $47.9 billion at December 31, 2023, and $43.1 billion at December 31, 2022. Our total debt is primarily fixed rate in nature. The weighted-average all-in financing cost of our total debt was 3.3% in 2023 and 2.5% in 2022.

As of 31 Dec 2023, Philip Morris International’s total indebtedness was $47.9 billion. Of this amount, $2 billion was short-term borrowings, while $45.9 billion was long-term debt.

Philip Morris International’s total debt due within a year from 31 Dec 2023 consists of $2 billion short-term borrowings and $4.7 billion current portion of long-term debt.

Therefore, Philip Morris International had a total debt due of $6.7 billion over the next 12 months from 31 Dec 2023.

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Cash And Cash Equivalents

In terms of cash, Philip Morris International had cash and cash equivalents of $3 billion as of 31 Dec 2023. For the definition of cash & cash equivalents, you may find more information here: cash & cash equivalents.

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Net Debt

The net debt is total debt less cash & cash equivalents. Philip Morris International’s net debt came in at $44.9 billion as of 31 Dec 2023 after accounting for $3 billion in cash & cash equivalents.

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Debt To Equity Ratio

Philip Morris International has been carrying negative stockholders’ equity due to years of massive capital returns to shareholders such as cash dividends and share buybacks.

As of 31 Dec 2023, PMI’s stockholders’ equity totaled -$9.4 billion. Because of the negative stockholders’ equity, Philip Morris International’s debt-to-equity ratio was also negative and measured at -5.1.

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Debt And Other Payments Due

PMI’s debt and other payments due data are obtained from the 2023 annual report dated 31 Dec 2023.

Philip Morris International’s cash payment due includes debt (short-term borrowings and long-term portion), purchase obligations, and dividends to shareholders.

The reason that purchase obligations and dividends are included in the table above is that these payments are non-cancellable. For example, the purchase obligations are for purchasing raw materials while dividends are capital returns to shareholders.

Therefore, PMI’s total amount due in 2024, which comprised of debt, purchase obligations, and dividends, was $18.6 billion. For your information, Philip Morris International paid dividends of $8.0 billion and $7.8 billion to shareholders in fiscal yer 2023 and 2022, respectively.

If we looked at only PMI’s debt, which consisted of short-term borrowings and long-term debt, the total amount due was just $6.7 billion.

Does Philip Morris International have sufficient cash to meet the respective obligations? We will find out in the next section.

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Sources Of Liquidity

PMI’s estimated liquidity as of 31 Dec 2023.

Philip Morris International’s sources of liquidity include cash and cash equivalents, revolving credit facilities, uncommitted credit lines, commercial paper programs, and net cash from operating activities.

The following quotes are extracted from the 2023 annual report regarding PMI’s liquidity.

• “We utilize long-term and short-term debt financing, including a commercial paper program that is regularly used to finance ongoing liquidity requirements, as part of our overall cash management strategy.

  We expect that the combination of our long-term and short-term debt financing, the commercial paper program, and the committed credit facilities, coupled with our operating cash flows, will enable us to meet our liquidity requirements.”

Philip Morris International had approximately $28.6 billion in liquidity, which consisted of cash, credit facilities, operating cash flow, etc.

Comparing this figure with the cash payment due in 2024 (estimated at $18.6 billion), PMI’s cash alone was not sufficient to meet all obligations. Even for the debt alone, the company’s $3 billion cash was not sufficient.

Therefore, Philip Morris International would need to access its credit facilities and rely on its operating cash flow to fund some of these obligations.

Nevertheless, Philip Morris International’s estimated liquidity of $28.6 billion is sufficient to meet all debt obligations and payments in 2024, even with the dividend payment included.

If we looked at only the debt obligation, Philip Morris International should have no issue covering the debt due in 2024, which totaled just $6.7 billion.

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Credit Rating

PMI’s credit ratings as of 28 Feb 2024.

Philip Morris International obtained investment-grade rating for all of its debt, as shown in the table above.

Fitch credit rating definitions can be found here – Fitch.

Moody’s credit rating definitions can be found here – Moody’s.

Standard & Poor’s credit rating definitions can be found here – Understanding Credit Ratings.

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Conclusion

In summary, Philip Morris International had total debt of $47.9 billion as of 31 Dec 2023. Of this figure, around $6.7 billion would be due in 2024.

Philip Morris International had no issue of settling the $6.7 billion debt due in 2024, as liquidity was more than sufficient to meet the debt obligations.

However, the company may need to access its credit facilities to meet not only debt obligations, but also the dividends due which was estimated at $8.2 billion for fiscal year 2024.

Philip Morris International obtained excellent credit ratings, all of which were in the investment-grade category as of 28 Feb 2024.

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References and Credits

1. All financial figures presented in this article were obtained and referenced from PMI’s annual reports which are available in PMI Investor Relations.

2. Pixabay images.

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Disclosure

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