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Summary
Philip Morris' total expenses have trended steadily higher from around $67.7 billion in 2016 to about $71.5 billion in 2018.As a percentage of revenues, expenses have remained around 90% during the same period.
Total Expenses were $71.5 Billion in 2018
Total expenses
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Breakdown of Philip Morris' Total Expenses in 2018 :
Total = $71.5 Bil
Excise Duty = $50.2 Bil
Cost of Sales = $10.6 Bil
Operating Expenses = $7.5 Bil
Non-operating (income)/expense = $646 Mil
Provision for income taxes = $2.4 Bil
Philip Morris' Total Expenses Have Increased From $67.7 Billion in 2016 to $71.5 Billion in 2018
Total expenses
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Total expenses
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Philip Morris' total expenses have grown from $67.7 billion in 2016 to about $71.5 billion in 2018.
For 2019, we expect total expenses to stand at $72.2 billion, which comprises of
1) Excise Duty: $50.1 billion
2) Cost of Sales: $11 billion
3) Operating Expenses: $8.0 billion
4) Non-Operating Expense (Income): $0.6 billion
5) Income Taxes: $2.5 billion
Below, we take a look at how the company's key expense components have trended and the key reasons for the change.
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2) Cost of sales has increased from $9.4 Bil in 2016 to $10.8 Bil in 2018, driven by unfavorable volume mix and foreign exchange headwinds, along with a sharp rise in heated tobacco volume sold. It is expected to move up to $11.3 billion by 2020. As a % of revenue, cost of sales increased from 12.5% in 2016 to 13.5% in 2018, as the company continued to offer incentives/discounts on heated tobacco products, due to which revenue growth did not match up to volume growth. The metric is expected to remain flat at 13.5% in the near term with the gradual phasing out of discounts, and cost of sales and revenues, both seeing an upswing.
Cost of Sales
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Cost of Sales as % of Revenue
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3. Operating Expenses Have Increased From $6.4 billion in 2016 to $7.5 Billion in 2018, Driven By a correspoding rise in Marketing, Administrative & Research Cost
Operating Expenses
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Marketing, Admin & Research
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A) Marketing, Administration & Research (MAR) cost has continuously increased from $6.4 Bil in 2016 to $7.5 Bil in 2018, driven by increased investment behind heated tobacco products across all regions, predominantly the European Union and East Asia & Australia. This cost is expected to move further up to $8.3 billion by 2020, as the company is expected to push its heated tobacco offerings more aggressively, on the back of dropping cigarette demand and regulatory crackdown on e-cigarettes. As a % of revenue, MAR cost has increased from 8.5% in 2016 to 9.4% in 2018, and is expected to reach about 10% by 2020.
Marketing, Administration & Research
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Marketing, Administration & Research as % of Revenue
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5. Philip Morris' effective tax rate increased sharply from 28% in 2016 to 41% in 2017 due to the one-time transition tax recorded prior to the implementation of the TCJ Act. The rate dropped to about 23% in 2018 and in the near term it is expected to be around the same level, which would be slightly more than the US statutory tax rate, as it operates in various geographies
Tax expense
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Effective tax rate
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DISAGREE WITH OUR FORECASTS? CREATE YOUR OWN
1. How to save your forecasts:
Click on the blue "Try Trefis" button in the header to create an account, then navigate back to this dashboard. Now, any changes you make to these inputs will be auto-saved as a scenario (see left panel of dashboard).
2. How to monitor your scenario vs. actual results
Once you've saved your forecast, you can "rename" your scenario by clicking on the gear icon next to the scenario (on the left panel). For more info, see this quick, 30-sec video (look at the 9 sec mark)
With your forecast saved and named, you can see how well you forecast the company's performance at the end of each period and compare your forecasts to hundreds of other Trefis users who came up with their own forecasts. Lastly, you can share with friends and colleagues to show them how you fared and compare your forecasts to theirs.
