Philip Morris lowers FY19 reported EPS view to at least $4.53 on restructuring
Philip Morris International revises its 2019 full-year reported diluted earnings per share forecast for restructuring charges in Germany. On a "like-for-like" basis the company's results reflect pro forma 2018 results, which have been adjusted for the deconsolidation of PMI's Canadian subsidiary, Rothmans, Benson & Hedges, effective March 22, the date of deconsolidation. On November 4, PMI announced that, as part of its global manufacturing infrastructure optimization, its German affiliate, Philip Morris Manufacturing GmbH reached an agreement with employee representatives to end cigarette production in its factory in Berlin, Germany, by January 1, 2020. In connection with the agreement, PMI expects to record estimated pre-tax charges of approximately $355M. This estimated amount includes pension and employee separation costs of approximately $265M, which will be paid in cash, and asset impairment costs of approximately $90M, primarily related to machinery and equipment, which are non-cash charges. The final amount of the charges, as well as the timing of payments, will depend on the separation options selected by impacted employees under the agreement and the final evaluation of the potential future use of assets. PMI expects that most of the pre-tax charges will be recorded in the fourth quarter of 2019 and most of the cash expenditures will occur in 2020. The Berlin factory has a projected 2019 production capacity of approximately 40 billion units. Approximately 950 employees are impacted under the agreement. PMMG will continue the production of expanded tobacco in Berlin. Cost savings anticipated from this initiative are included in PMI's previously communicated annualized cost efficiencies target of over $1B for the period 2019-2021. As a result, PMI revises its full-year 2019 reported diluted EPS forecast to be at least $4.53 at prevailing exchange rates, compared to the previously communicated forecast of at least $4.73, versus $5.08 in 2018. PMI sees FY19 adjusted diluted EPS, excluding currency, of greater than $5.28. Consensus $5.21.