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Philip Morris International Inc. (PMI) Reports 2012 Results; Provides 2013 Earnings Per Share Forecast

Excluding the impact of currency and acquisitions, adjusted operating companies income margin was up by 3.5 percentage points to 44.8%, as detailed on Schedule 15.

PMI’s cigarette shipment volume in EEMA increased by 4.7%, mainly reflecting improved market conditions and higher share in Egypt, a higher market share in Russia, and a higher total market and share in Turkey.

PMI’s cigarette shipment volume of premium brands grew by 6.7%, driven by record volumes for Marlboro, up by 3.6%, and Parliament, up by 16.5%.

2012 Fourth-Quarter

In EEMA, net revenues increased by 8.5% to $2.1 billion, including unfavorable currency of $56 million. Excluding the impact of currency, net revenues increased by 11.3%, primarily due to both favorable pricing and volume/mix of $101 million and $122 million, respectively.

Operating companies income increased by 23.3% to $921 million, including unfavorable currency of $16 million. Excluding the impact of currency and acquisitions, operating companies income increased by 25.4%, due primarily to higher pricing, and favorable volume/mix of $84 million.

Adjusted operating companies income increased by 22.8%, as shown in the table above and detailed on Schedule 11. Adjusted operating companies income, excluding currency, increased by 24.9%.

Excluding the impact of currency, adjusted operating companies income margin was up by 4.7 percentage points to 42.9%, as detailed on Schedule 11.

PMI’s cigarette shipment volume in EEMA increased by 7.1%, mainly reflecting improved market conditions and higher share in Egypt and a higher total market and share in Turkey.

PMI’s cigarette shipment volume of premium brands grew by 7.7%, driven by Marlboro, up by 3.2%, and by Parliament, up by 22.4%.

EEMA Key Market Commentaries

In Russia, the total cigarette market declined by an estimated 1.3% to 370 billion units. PMI’s shipment volume increased by 3.8% in 2012, mainly reflecting a higher market share, and by 0.6% in the fourth quarter. Shipment volume of PMI’s premium portfolio in 2012 was up by 7.0%, driven by Parliament, up by 15.0%. In the mid-price segment, shipment volume was up by 4.8%, mainly due to L&M, up by 20.4%. In the low-price segment, shipment volume was up by 2.3%, driven by Apollo Soyuz, Bond Street and Next, up by 3.7%, 0.5% and 11.7%, respectively. PMI’s market share of 26.3%, as measured by Nielsen, was up by 0.5 points. Market share of Parliament was up by 0.3 points to 3.2%; Marlboro was essentially flat at 1.9%; L&M was up by 0.2 points to 2.6% and Chesterfield was flat at 3.4%; Bond Street was up by 0.3 points to 6.5%; Next was up by 0.2 points to 2.9%; and Apollo Soyuz and Optima were flat at 1.4% and 3.2%, respectively. PMI’s 2012 fourth-quarter market share of 26.4%, as measured by Nielsen, was up by 0.2 points.

In Turkey, the total cigarette market increased by an estimated 8.8% to 99.2 billion units in 2012, reflecting: the favorable impact of trade inventory movements in the fourth quarter of 2012 ahead of the January 2013 excise tax increase; a decrease in illicit trade; and a favorable comparison with 2011 which experienced a 10.6% total cigarette market decline in the last three months of the year resulting from excise tax-driven price increases in the fourth quarter. In the fourth quarter of 2012, the total cigarette market increased by an estimated 24.8% to 26.7 billion units, reflecting the favorable impact of the aforementioned factors. PMI’s shipment volume increased by 12.7% in 2012, across each of the premium, mid-price and low price segments, up by 15.0%, 16.6% and 9.8%, respectively, and by 33.8% in the fourth quarter. PMI’s market share, as measured by Nielsen, grew by 0.9 points to 45.7% in 2012, driven by premium Parliament, mid-price Muratti and low-price Lark, up by 0.9, 0.4 and 0.3 share points to 9.0%, 6.6% and 12.2%, respectively, partly offset by a decline in low-price L&M, down by 0.3 points to 8.4%. Market share of Marlboro was down by 0.1 point to 9.2%. PMI’s 2012 fourth-quarter market share, as measured by Nielsen, grew by 1.7 points to 46.5%.

In Ukraine, the total cigarette market declined by an estimated 2.6% to 83.4 billion units in 2012. In the fourth quarter of 2012, the total cigarette market was up by 0.7% to 18.6 billion units. PMI’s shipment volume decreased by 0.6% in 2012 and increased by 3.8% in the fourth quarter. PMI’s market share, as measured by Nielsen, was up by 0.2 points to 32.4%. Share for premium Parliament was up by 0.4 points to 3.2%. Share of Marlboro was flat at 5.8%, Chesterfield was down by 0.5 points to 7.0% and Bond Street was up by 1.2 points to 8.4%. PMI’s 2012 fourth-quarter market share, as measured by Nielsen, was up by 0.3 points to 32.8%.

ASIA REGION

2012 Full-Year

In Asia, net revenues increased by 4.6% to $11.2 billion, including unfavorable currency of $116 million. Excluding the impact of currency, net revenues increased by 5.7%, reflecting the favorable impact of pricing of $551 million, principally in Australia, Indonesia, Korea and the Philippines, and favorable volume/mix of $57 million.

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