In the EU, net revenues decreased by 6.6% to $2.1 billion, due primarily to unfavorable currency of $133 million, largely reflecting the strengthening of the U.S. dollar to the Euro compared to the fourth quarter of 2011. Excluding currency, net revenues decreased by 0.5%, mainly due to unfavorable volume/mix of $105 million, predominantly reflecting a lower total market and share, and unfavorable trade inventory movements, in France and Italy, and a lower total market and share in Portugal. The decrease was partly offset by favorable pricing of $93 million, driven by France, Germany, the Netherlands, Poland, Switzerland and the United Kingdom.
Operating companies income decreased by 5.6% to $955 million, due primarily to unfavorable currency of $78 million. Excluding the unfavorable impact of currency, operating companies income increased by 2.1%, reflecting higher pricing and favorable asset impairment and exit costs compared to the fourth quarter of 2011, partly offset by higher marketing costs, principally reflecting marketing investment behind the “Be Marlboro” marketing campaign.
Adjusted operating companies income decreased by 7.2%, as shown in the table above and detailed on Schedule 11. Adjusted operating companies income, excluding currency, increased by 0.4%.Excluding the impact of currency, adjusted operating companies income margin was up by 0.5 percentage points to 47.3%, as detailed on Schedule 11. The total cigarette market in the EU declined by 5.7% to 124.3 billion units, due primarily to tax-driven price increases, the unfavorable economic and employment environment, particularly in southern Europe, the growth of the OTP category, and the increased prevalence of illicit trade. PMI’s cigarette shipment volume in the EU declined by 5.7%, due principally to a lower total market across the Region. Shipment volume of Marlboro decreased by 3.2%, mainly due to a lower total market, partially offset by higher share. Shipment volume of L&M was down by 3.4%. Shipment volume of Chesterfield was up by 4.7%. PMI’s market share in the EU was up by 0.4 points to 38.4%. Market share of Marlboro was up by 0.5 points to 18.5%, reflecting gains mainly in Belgium, Greece, Hungary, Italy and Poland, which more than offset lower share mainly in France, the Netherlands and Portugal. L&M’s market share was up by 0.1 point to 6.8%. Chesterfield’s market share was up by 0.4 points to 3.8%, driven notably by gains in Austria, the Czech Republic, France, Portugal, Spain and the United Kingdom. Philip Morris’ market share was up by 0.2 points to 2.1%, with gains, notably in the Czech Republic, France, Italy and Portugal. PMI’s shipments of OTP, in cigarette equivalent units, grew by 4.1%, reflecting a higher total market and share. The decline in the growth rate compared to the 2012 full-year growth rate principally reflects the impact of excise tax-driven price increases, notably in Italy. PMI’s OTP total market share was 12.3%, up by 0.6 points, driven by gains in the fine cut category, notably in Belgium, up by 2.0 points to 16.3%, France, up by 1.1 points to 26.1%, Greece, up by 3.7 points to 13.1%, Italy, up by 6.6 points to 27.8% and Spain, up by 3.0 points to 13.1%.