Philip Morris International Inc PM
Q2 2013 Earnings Call Transcript

Transcript Call Date 07/18/2013

Operator: Good day, and welcome to the Philip Morris International Second Quarter 2013 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. 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, Vice President of Investor Relations and Financial Communications. Please go ahead, Sir.

Nicholas Rolli - VP, IR and Financial Communications: Welcome. Thank you for joining us. Earlier today, we issued a press release containing detailed information on our 2013 second quarter results. You may access the release on our website at

During our call, we will be talking about results for the second quarter of 2013 and comparing them to the same period in 2012 unless otherwise stated. References to volumes are to PMI shipments, industry volume, and market shares are the latest data available from a number of internal and external sources. Organic volume refers to volume excluding acquisitions; net revenues exclude excise taxes.

Operating companies income or OCI is defined as operating income before general corporate expenses and the amortization of intangibles. You'll find data tables showing adjustments to net revenues and OCI for currency, acquisitions, asset impairment, exit, and other costs, free cash flow calculations and adjustments to earnings per share or EPS, as well as reconciliations to U.S. GAAP measures at the back of this presentation, which is also posted on our website.

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 Jacek Olczak, our Chief Financial Officer.

Jacek Olczak - CFO: Thank you, Nick, and welcome ladies and gentlemen. As previously foreseen, we had a challenging second quarter. Our adjusted diluted EPS was up slightly, excluding currency. Cigarette volume declined by 3.9%, due principally to lower industry volume in the EU region, Russia, Turkey and the Philippines, as well as inventory movements in Japan and Russia.

Pricing remained strong and we had solid share gains, particularly in the EU region. However, these were not sufficient to offset the impact of unfavorable volume/mix, additional investments, notably in Indonesia, the Philippines and Russia, and higher clove and tobacco costs in Indonesia.

Our business fundamentals remain solid and we are confident in our ability to achieve the ex-currency guidance that we established in February and re-affirmed in May. However, the evolution of tax-paid cigarette industry volume will remain a key variable and our main challenge for the remainder of the year, notably due to the growth of illicit trade.

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