The European Union (+ the U.K.).
France 🇫🇷, Germany 🇩🇪, Italy 🇮🇹, Poland 🇵🇱, Romania 🇷🇴, and the U.K. 🇬🇧 are some of many countries that make up PMI’s E.U. + U.K. market. The E.U. + U.K. market’s population is over half a billion — larger than the U.S. 🇺🇸 but smaller than China 🇨🇳. This market accounts for 38% of PMI’s revenue and 47% of its operating income.
Revenue and operating income in the E.U. + U.K. are each up 48% from 2016-2022. Smoke-free revenue now accounts for 40% of all revenue in this market. And heated tobacco accounts for 19% of volumes there. Total volumes are growing again in the E.U. + U.K. thanks to the popularity of PMI’s heated tobacco products.
Eastern Europe.
Russia 🇷🇺 and Ukraine 🇺🇦 account for 70% of PMI’s revenue in Eastern Europe. This market accounts for 12% of PMI’s revenue and 9.5% of its operating income.
Revenue and operating income in Eastern Europe are up 50% and 31%, respectively, from 2016-2022. Smoke-free revenue now accounts for 35% of all revenue in this market. And heated tobacco accounts for 23% of volumes.
The Russia-Ukraine conflict has been a material problem for PMI. Ukraine accounts for 2% of the company’s global volumes and 1% of its global revenues. PMI still sells its products in Ukraine, but it suspended its manufacturing activities there.
Russia accounts for 9% of PMI’s global volumes and 7% of its global revenues. PMI has discontinued many of its products in Russia, suspended marketing campaigns, cancelled product launches, and scaled down manufacturing there. The company is contemplating divesting its Russia business, but management says regulatory hurdles would make exiting very hard to do. PMI is likely hoping the conflict resolves sooner rather than later so that the company can continue doing business there.
In the meantime, PMI has stepped up to support Ukrainians:
“Since the onset of the war in Ukraine, our main priority has been the safety and security of our more than 1,300 employees and their families in the country. PMI has helped to evacuate more than 1,000 people from Ukraine and relocate over 2,700 others from conflict zones to locations in the country away from the heaviest fighting; provided critical aid to employees who cannot leave or who decide to remain in Ukraine; and provided those who have left the country with a range of support in neighboring countries. We are continuing to pay salaries to all our Ukrainian employees and are also providing substantial in-kind support to them and their families. In addition, we have contributed approximately $10 million in funds and donated essential items across the country.”
(PMI’s 2022 10-K).
Management noted that the company may face punishment from the Russian government for its decision to suspend aspects of its business in Russia. The company has continued to keep its employees in Russia on its payroll.
Europe as a whole.
In aggregate, PMI’s business in Europe accounts for almost half of the company’s revenue and about 57% of the company’s operating income.
Revenue and operating income across Europe are up 49% and 45%, respectively, from 2016-2022. Smoke-free revenue now accounts for 39% of all revenue in Europe. And heated tobacco accounts for 20% of volumes on the continent.
Volumes have been virtually flat from 2018-2022 as heated tobacco has made up for the decline in combustibles. In 2022, volumes in Russia and Ukraine dropped 3.6% and 18%, respectively, causing a very slight dip in total volumes for PMI’s Europe business that year. Aside from the negative effects of the Russia-Ukraine conflict, PMI’s business in Europe looks strong.
Thanks for reading.