This article presents Philip Morris International (PMI)’s revenue, regional revenue, revenue by segment, revenue by product category, profitability, and margin.
Readers who are interested in PMI’s cigarette and HTUs sales volume may visit this article – Philip Morris International’s Cigarette And HTU Sales By Country.
Let’s start with the following topics.
Net Revenue And Profitability
On a consolidated basis, PMI’s revenue and profitability have been on a steady rise in the last 7 years.
For example, PMI’s net revenue excluding excise taxes has grown by 20% since 2016, or roughly 3.2% per year on average, and reached nearly $32 billion as of 2022.
Similarly, PMI’s profitability also has been steadily increasing in the last 7 years.
For example, PMI’s gross profit has increased by 18% since 2016, or 3% per year on average, and reached $20 billion as of 2022.
While the net revenue has grown by 20%, PMI’s operating income has grown by only 13%, or 2.2% per year on average during the same period.
Therefore, PMI’s operating income has grown at much lower growth rates than its revenue and other profitability measures.
On the contrary, PMI’s adjusted EBITDA reached $13.8 billion as of 2022, representing a total growth rate of 19% since 2016, or 3.2% per year on average.
Despite having a revenue and profitability growth rate of only 3% on average, Philip Morris International is a profitable company and makes tonnes of money irrespective of what happened around the world, be it a COVID-19 pandemic, a supply chain crisis, an inflationary environment or an ongoing war.
The margins shown in the chart above indicate that Philip Morris International is a highly profitable company and its profitability had been intact in the last 7 years.
For example, PMI’s gross margin averaged around 65% between 2016 and 2022 and topped 64% as of 2022.
Similarly, PMI’s operating income margin averaged roughly 39% between 2016 and 2022 and came in at 39% as of 2022, which was in line with the historical average.
PMI’s adjusted EBITDA margin comes slightly higher than the operating margin, averaging around 43% in the last 7 years and topping 44% as of 2022.
Again, PMI had been a highly profitable company with a gross margin measuring above 60% and an operating income margin reported north of 30% in the last 7 years.
While most companies had succumbed to multiple headwinds, including the COVID-19 pandemic, rising costs of materials as well as an ongoing war in Ukraine, and suffered a decline in profitability and margins, it had not been the case for Philip Morris International.
For example, PMI’s margins remained roughly intact between 2020 and 2022, and some of them even grew significantly during the said period, illustrating the resilience of PMI’s businesses in a time of crisis.
In short, PMI runs a high-margin business no matter what is happening around the globe.
PMI’s 2023 Outlook
Philip Morris International guided for an adjusted diluted EPS of between $6.25 and $6.37 for fiscal 2023, representing an average growth rate of 5.5% before currency adjustment.
Assuming a flat diluted share outstanding in 2023, PMI’s adjusted net earnings may come to $9.8 billion USD in fiscal 2023, an increase of 6% over 2022.
Historically, PMI’s adjusted net earnings margin averaged 29% between 2020 and 2022 as shown in the chart above.
Therefore, PMI’s net revenue excluding excise taxes may come to about $33.4 billion for fiscal 2023 based on a net earnings margin of 29%.
The estimated revenue figure for fiscal 2023 represents a year-on-year growth rate of 5% over 2022.
Net Revenue By Region
In terms of revenue breakdown by region, Philip Morris International’s operation spans 6 regions and they are European Union, Eastern Europe, Middle East & Africa, South & Southeast Asia, East Asia & Australia, and the Americas as shown in the chart above.
As seen, PMI derives the biggest sales from the European Union region, at slightly above $12 billion USD as of fiscal 2022.
A trend worth mentioning about the European Union region is the increasing revenue trend since 2017.
As seen, PMI’s European Union revenue has grown from $8.3 billion reported in 2017 to slightly more than $12 billion as of 2022, representing a total growth rate of 46% since 2017, or a growth rate of 9% per year on average.
On the flipped side, PMI’s revenue from the Americas represents the smallest portion among all regions, totaling only $1.9 billion as of 2022.
Also, PMI’s revenue derived from the Americas region has been on a decline since 2017 and the figure reported in 2022 represents one of the lowest figures that has ever been reported.
A similar downtrend was seen for regions such as the Middle East & Africa, South & Southeast Asia, and East Asia & Australia.
While revenue growth has mostly been flat in the Middle East and Asia, it was a different case for Eastern Europe despite the ongoing war between Russia and Ukraine.
For your information, PMI’s biggest market in Eastern Europe is Russia.
Ironically, PMI earned nearly $4 billion USD in revenue in Eastern Europe in fiscal 2022, up a massive 37% over 2017 or 5% over 2021.
In short, PMI’s revenue was seen declining in most parts of the world such as Asia and the Middle East except for European Union and Eastern Europe.
Percentage Of Net Revenue By Region
From the perspective of percentage, PMI’s European Union region contributes to the biggest share, at 38% as of 2022, up roughly 9 ppts from 2017 but down 1 ppts from 2021.
On the other hand, PMI’s Americas region represents only 6% of total revenue as of 2022, down from the 10% revenue share reported in 2017.
Therefore, the Americas region is PMI’s smallest market while the European Union is the company’s biggest market by revenue share.
PMI’s East Asia and Australia region contributes roughly 16% of revenue to the total, making this region the second biggest market for the company after the European Union.
A trend worth mentioning is the declining revenue share in most regions for PMI.
As seen, PMI’s revenue share has been on a decline in most parts of Asia, the Americas, and the Middle East & Africa.
The only regions that are seeing a rise in revenue share are the European Union and Eastern Europe.
For example, PMI’s revenue share in Eastern Europe, particularly in Russia, has increased from 9% reported in 2017 to nearly 12% reported in 2022.
Also, PMI’s European region alone, including Eastern Europe, already represents roughly 50% or half of the company’s total revenue.
Therefore, the European region is the largest and probably one of the most important markets for Philip Morris International.
Profitability By Region
Profitability-wise, PMI’s European Union contributes one of the biggest profits to the company, notably at nearly $6 billion in operating income as of 2022.
This figure also has been on a rise, growing from $3.7 billion reported in 2017 to the massive $5.8 billion reported in 2022, up a total of 57% since 2017.
On the other hand, PMI’s operating income derived from the Americas region totaled only $436 million in 2022, the lowest among all regions, and this figure also had been on a decline since 2017.
The second most profitable region was East Asia and Australia, contributing nearly $2 billion in operating income to Philip Morris International in 2022.
However, PMI’s operating income from the East Asia and Australia region had tumbled by 27% since 2017, and probably the region with the worst decline in terms of profitability.
An interesting trend worth talking about was the higher profitability generated in the Middle East & Africa region despite having a much smaller revenue share compared to the South & Southeast Asia region.
Similar to the revenue trend, PMI’s profitability trend in most regions, particularly Asia, the Middle East & Africa, and the Americas, has been on a decline since 2017.
On the other hand, PMI’s profitability in regions such as European Union and Eastern Europe has grown by leaps and bounds.
That said, PMI’s operating income from the European Union and Eastern Europe alone totaled nearly $7 billion as of 2022, which was more than the profitability of any other regions combined.
Margin By Region
In terms of margin, PMI’s European Union region tops the list at an operating income margin close to 48% as of 2022.
On average, PMI’s operating income margin for the European Union region totaled 46% since 2017, the highest among all regions in the world.
On the other hand, PMI’s Americas region registered the lowest operating income margin compared to other regions, averaging only 27% since 2017.
Far from over, the ratio also has been on a decline since 2017 and reached only 23% as of 2022, which was significantly below the historical average and was down more than 10 ppts from 2017 or 3 ppts from 2021.
While the revenue share in the Middle East & Africa region had been lower than most regions, it had not been the case in terms of operating income margin.
As seen, this region registered an operating income margin of a massive 45% as of 2022, second only to that of the European Union, and was much higher than the margins of most regions.
On average, PMI’s Middle East & Africa region had an operating income margin of 40% between 2017 and 2022, also second only to that of the European Union.
This trend shows the immersed profitability of the Middle East & Africa region for Philip Morris International despite having a revenue share of only 12% as of 2022, which was much lower than most regions.
PMI’s East Asia & Australia also had been a profitable region, with an operating income margin topping 37% as of 2022 while the average figure came in at 39% since 2017, only slightly behind that of the Middle East & Africa region.
Overall, PMI generated a very impressive operating income margin in most regions, with a bare minimum ratio reported at 23% as of 2022.
Swedish Match And W&H
Swedish Match is headquartered in Stockholm, Sweden, and is a leader in oral nicotine products.
Popular brands under the ownership of Swedish Match include ZYN.
While Swedish Match primarily delivers smoke-free products, it also manufactures and sells combustible tobacco products which come mainly from cigars.
In November 2022, Philip Morris International fully acquired Swedish Match and created a new product category called smoke-free to better reflect the characteristics of these products from Swedish Match.
Apart from non-combustible tobacco products such as heat-not-burn, e-vapor, and oral nicotine, the Smoke-Free product category also includes products from Wellness & Healthcare (W&H), as well as consumer accessories such as lighters and matches.
Also, the business operations of the Swedish Match segment are managed and evaluated separately from the geographical segments.
On the other hand, Wellness & Healthcare (W&H) is a new business segment created by PMI to consolidate the operating results of newly acquired business entities which include Fertin Pharma A/S, Vectura Group plc. and OtiTopic, Inc.
The newly created W&H business segment is categorized under the smoke-free product category as mentioned above.
Similarly, the business operations of PMI’s Wellness and Healthcare segment are managed and evaluated separately from the geographical segments.
In terms of revenue figures, the chart above shows that PMI’s Swedish Match earned only $316 million in 2022.
Take note that this 2022 revenue figure reflects only the result when Philip Morris International became the new owner of Swedish Match which was between November and December 2022.
In terms of profitability, Swedish Match incurred an operating loss of -$22 million in the year 2022.
For Wellness & Healthcare segment, PMI earned $101 million and $271 million in 2021 and 2022, respectively, from this newly created business segment.
Profitability-wise, PMI incurred an operating loss of -$52 million and -$258 million in 2021 and 2022, respectively, within the W&H segment.
In short, PMI’s newly created or acquired business entities haven’t been able to deliver any profit to the company as of 2022.
Net Revenue By Product Category
PMI’s revenue by product category can be divided into 2 categories, which are combustible tobacco products such as cigarettes and smoke-free or non-combustible tobacco products such as IQOS.
Over the last 6 years, Philip Morris International’s combustible tobacco products net revenue has been on a decline as seen in the chart above.
As of fiscal 2022, PMI derived only $21.6 billion of sales from combustible products, a decline of 2% over 2021 or 14% over 2017.
On the flipped side, PMI’s smoke-free products net revenue has grown quite significantly since fiscal 2017 according to the chart.
As of fiscal 2022, PMI’s sales from the smoke-free category rose to as much as $10.2 billion, an increase of 10% over 2021 or a massive 183% over 2017.
As a result, you can see that PMI’s smoke-free products such as the IQOS which are usually consumed together with HTUs or heated tobacco units have gained a significant market share over the years based on this article, PMI’s heated tobacco units market share, notably to roughly 3% globally as of fiscal 2020.
In short, PMI’s combustible product revenue has been on the rise while that of the non-combustible products has been declining.
Percentage Of Net Revenue By Product Category
From the perspective of percentage, we can see that PMI’s revenue share for combustible tobacco products reached only 68% as of 2022, the lowest ratio that has ever been reported.
The combustible tobacco product category used to get a massive 87% of revenue share back in fiscal 2017.
On the other hand, PMI’s smoke-free product category revenue share has risen to 32% as of 2022 from the 13% reported for fiscal 2017.
In short, PMI’s revenue share in the non-combustible or smoke-free product category has grown more than twice over the past 7 years.
Therefore, it seems like PMI’s goal of becoming a smoke-free company is slowly evolving into a reality.
To recap, Philip Morris International’s net revenue excluding excise taxes has been rising steadily since fiscal 2017 and has reached $31.8 billion as of 2022.
For the 2023 outlook, PMI’s net revenue is estimated to come in at $33.4 billion by the end of fiscal 2023, a rise of 5% over fiscal 2022 based on the adjusted EPS guidance provided by the company.
PMI is a highly profitable company and runs a high-margin business.
PMI’s revenue from the European Union region tops the chart at more than $12 billion in sales or 38% of total sales in 2022, making this region the biggest revenue source for the company.
On the other hand, PMI’s Americas region has been the smaller market for the company, contributing only $1.9 billion in sales or 6% revenue share as of 2022.
While PMI has been working hard to become a smoke-free company, its main revenue source still comes primarily from the combustible tobacco product category, and this revenue segment accounts for 68% of total sales as of 2022.
On the other hand, PMI’s smoke-free product category accounts for 32% of total sales as of 2022 and this ratio has more than doubled since 2017.
Therefore, PMI’s smoke-free transformation plan seems to be working out for the company, as PMI has been able to successfully reduce the combustible products revenue share from 85% to only 68% as of 2022 while increasing the reduced-risk products revenue share from 13% to 32% in the same period.
References and Credits
1. All financial numbers in this article were obtained and referenced from PMI’s financial statements which are available in PMI’s Reports And Filings.
2. Featured images in this article are obtained free and are used without any attribution from the following links: Pixabay
The content in this article is for informational purposes only and is neither a recommendation nor a piece of financial advice to purchase a stock.
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