This is not deceptive in the way most folks would think, that they are hiding something, but deceptive in that if you do not read it close, you will not have an accurate picture.
Phillip Morris International (PM) Reported:
2008 Full-Year
Full-year diluted earnings per share of $3.32, up 16.1% from $2.86 in 2007,
Adjusted 2008 full-year diluted earnings per share of $3.32, up 18.6% from the 2007 pro-forma adjusted earnings per share of $2.80. Excluding currency, adjusted 2008 full-year diluted earnings per share were up 13.2%
2008 Fourth-Quarter
Fourth-quarter diluted earnings per share of $0.71, down 4.1% from $0.74 for the same period in 2007, including the items detailed on Schedule 7
Adjusted fourth-quarter diluted earnings per share of $0.71, down 1.4% for the same period in 2007 from the pro-forma adjusted earnings per share of $0.72. Excluding currency, adjusted fourth-quarter diluted earnings per share were up 12.5%
Spent a total of $5.4 billion to repurchase 106.8 million shares of its common stock in 2008; increased the dividend by 17.4% in 2008 to an annualized rate of $2.16 per share
During 2008, acquired Rothmans Inc. of Canada and the fine cut trademark Interval
Forecasts 2009 full-year diluted earnings per share to a range of $2.85 to $3.00, at current exchange rates, versus $3.32 in 2008. Excluding an adverse currency impact of $0.80 per share, 2009 guidance is projected to increase by 10%-14%
As announced on February 3, 2009, PMI entered into an exclusive 50:50 joint venture agreement with Swedish Match AB to commercialize smoke-free tobacco products worldwide, excluding Scandinavia and the USA
Announces an agreement to acquire the rights to the Petteroes trademark, the leading fine cut brand in Norway
“Our operating performance in 2008 was exceptionally strong and our results exceeded our constant currency growth targets for both the full year and the fourth quarter. Our first year as an independent company was also marked by significant progress on numerous strategic fronts and specifically behind our efforts to improve our speed to market and enhance the vibrancy and equity of our strong brand portfolio,” said Louis Camilleri, Chairman and Chief Executive Officer.
“The global economic crisis obviously results in uncertainty, particularly on the currency front, and at current exchange rates we face a steep hurdle. Nevertheless, we enter 2009 with solid momentum and confident in our ability to meet our constant currency income growth targets. Our commitment to judiciously invest in the growth of our business and deliver superior returns to our shareholders over the long term remains as steadfast as ever.”
Dividends and Share Repurchase Program
During the fourth quarter, PMI announced a regular quarterly dividend of $0.54. PMI increased its dividend by 17.4% in August 2008 to an annualized rate of $2.16 per share.
In the fourth-quarter, PMI spent $888 million to repurchase 20.6 million shares of its common stock. Since May 2008, when PMI began its previously-announced $13 billion, two-year share repurchase program, the company has spent a total of $5.4 billion to repurchase 106.8 million shares.
Acquisitions
In 2008, PMI acquired all of the outstanding common shares of Rothmans Inc. of Canada for CAD $30.00 per share in cash, representing an aggregate transaction value of approximately CAD $2.0 billion. The Canadian business’ results were incorporated into the renamed Latin America & Canada segment as of September 19, 2008. These results were not material to PMI’s operating results for the fourth quarter 2008 or for the full-year 2008.
During the year, PMI also acquired the fine cut trademark Interval for 254 million euros.
PMI Enters into Agreement with Swedish Match AB
As separately announced on February 3, 2009, PMI has entered into an agreement with Swedish Match AB (SWMA) to establish an exclusive 50:50 joint venture to commercialize Swedish style snus and other smoke-free tobacco products worldwide, outside of Scandinavia and the USA. PMI and SWMA will license exclusively to the joint venture an agreed list of trademarks and intellectual property.
PMI has further licensed to SWMA certain PMI trademarks in Sweden and Norway, including 1847 by Philip Morris, PMI’s first product in the Swedish snus category launched in June 2008.
Acquisition of Petteroes
PMI has reached an agreement to acquire the rights to the Petteroes fine cut tobacco trademark worldwide and other cigarette trademarks sold primarily in Norway and Sweden.
In 2008, Petteroes had a 58% share of the Norwegian roll-your-own segment and a 7% share of the cigarette category. The brand recorded net revenues, excluding excise taxes, of approximately NOK 370 million (USD 54 million), and operating companies income of approximately NOK 260 million (USD 38 million), in the fiscal year ending June 30, 2008.
The transaction is subject to approval by the European Commission and certain individual country regulatory agencies and is expected to be completed during the first quarter of 2009. The transaction is projected be modestly accretive to net earnings in 2009.
2009 Full-Year Forecast
PMI forecasts 2009 full-year diluted earnings per share to a range of $2.85 to $3.00, at current exchange rates, versus $3.32 in 2008. Excluding an adverse currency impact of $0.80 per share, 2009 guidance is projected to increase by 10%-14%. This guidance excludes the impact of any potential future acquisition.
So, we know the dollar has had a nice rally of 12% in Q4 2008. PM sells tobacco in local currencies and then converts them into dollars, a strong dollar means that the $$ they take in from foreign currencies converts to fewer dollars, a weaker dollar mean the opposite.
Now, the dollar since then has fallen 7%. Now the exact timing of the transactions and the exchange rates determine the $$ amounts gain or loss but the trend is down. If you believe the trend will continue to fall, then the guidance that PM gave for profits is low, perhaps very much so
It will be interesting to watch unfolds but I am going on record saying that PM will blow past the $2.85 to $3 a share on 2009 they forecast…easily…
Oh, and we will be able to thank Ben Bernanke and Tim Geithner for running the dollar printing presses at full speed and debasing the value of the dollar…
Disclosure (“none” means no position):Long PM
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