NEW YORK--(BUSINESS WIRE)-- Regulatory News:

Philip Morris International Inc. (NYSE: PM) today announces its 2021 fourth-quarter and full-year results. Growth rates presented in this press release on an organic basis reflect currency-neutral underlying results. A glossary of key terms, definitions and explanatory notes is included at the end of this press release. Adjustments, other calculations and reconciliations to the most directly comparable U.S. GAAP measures are included in the schedules to this press release.

2021 FULL-YEAR & FOURTH-QUARTER HIGHLIGHTS

2021 Full-Year

• Reported diluted EPS of $5.83, up by 13.0%; up by 10.7%, excluding currency
• Adjusted diluted EPS of $6.08, up by 17.6%; up by 15.3% excluding currency
• Cigarette and heated tobacco unit shipment volume up by 2.2% (reflecting cigarette shipment volume down by 0.6%, and heated tobacco unit shipment volume up by 24.8% to 95.0 billion units)
• Market share for heated tobacco units in IQOS markets, excluding the U.S., up by 1.2 points to 6.8%
• Net revenues up by 9.4%; up by 6.7% excluding currency and acquisitions
• Adjusted net revenues up by 7.6% on an organic basis
• Net revenues from smoke-free products accounted for 29.1% of total adjusted net revenues
• Operating income up by 11.2%; up by 8.9%, excluding currency and acquisitions
• Adjusted operating income up by 13.0% on an organic basis
• Operating income margin up by 0.6 points
• Adjusted operating income margin up by 1.8 points; up by 2.0 points on an organic basis
• Total IQOS users at quarter-end estimated at approximately 21.2 million, of which approximately 15.3 million have switched to IQOS and stopped smoking
• Increased regular quarterly dividend by 4.2% to an annualized rate of $5.00 per common share
• Repurchased 8.5 million shares of common stock for $785 million, at an average price of $92.15 per share

2021 Fourth-Quarter

• Reported diluted EPS of $1.34, up by 5.5%; up by 10.2%, excluding currency
• Adjusted diluted EPS of $1.35, up by 7.1%; up by 11.9%, excluding currency
• Cigarette and heated tobacco unit shipment volume up by 4.2% (reflecting cigarette shipment volume up by 2.4%, and heated tobacco unit shipment volume up by 17.0% to 25.4 billion units)
• Market share for heated tobacco units in IQOS markets, excluding the U.S., up by 1.0 points to 7.1%
• Net revenues up by 8.9%; up by 8.4%, on an organic basis
• Net revenues from smoke-free products accounted for 30.7% of total net revenues
• Operating income up by 1.4%; up by 5.2%, excluding currency and acquisitions
• Adjusted operating income up by 8.3% on an organic basis
• Operating income margin down by 2.6 points
• Adjusted operating income margin up by 1.6 points; down by 0.1 point on an organic basis
• Repurchased 7.6 million shares of common stock for $691 million, at an average price of $91.29 per share

"Our business delivered excellent performance in 2021, with strong underlying momentum driving total volume growth, high single-digit organic net revenue growth and double-digit adjusted diluted EPS growth against the pandemic-affected prior year," said Jacek Olczak, Chief Executive Officer.

"We were especially pleased by the reacceleration of our business in the fourth quarter to deliver better-than-expected results. This included a step-up in sequential IQOS user growth, as well as the outstanding initial performance of IQOS ILUMA. We also achieved essentially stable category share for cigarettes in the quarter, as our portfolio initiatives bore fruit and pandemic-linked restrictions receded in many markets."

"We enter 2022 with strong fundamentals, underpinned by IQOS, and exciting innovation to come across our broader smoke-free product portfolio. We are forecasting organic top-line growth of 4% to 6% and currency-neutral adjusted diluted EPS growth of 8% to 11%, which prudently incorporate the continuing uncertainty on full IQOS device availability and the pace of the ongoing pandemic recovery."

2022 FULL-YEAR FORECAST

Reported diluted EPS forecast to be in a range of $6.12 to $6.30, at prevailing exchange rates, versus reported diluted EPS of $5.83 in 2021. Excluding an unfavorable currency impact, at prevailing exchange rates, of around $0.45 per share, this forecast represents a projected increase of around 8% to 11% versus adjusted diluted EPS of $6.08 in 2021, as outlined in the above table.

2022 Full-Year Forecast Assumptions

This forecast assumes:

• Continuing uncertainty over the pace of the ongoing recovery from pandemic-related effects on the operating environment, notably in select geographies in PMI's South & Southeast Asia Region;
• An improving IQOS device supply situation, with a gradual return to an unconstrained IQOS user quarterly growth progression, albeit with a lack of full visibility over the year;
• A continued gradual improvement in PMI's duty-free business outside Asia, with no meaningful recovery in Asia;
• An estimated total international industry volume decline, excluding China and the U.S., of approximately -2% to -1%;
• A total cigarette and heated tobacco unit shipment volume percentage change for PMI of approximately -1% to +1%;
• Heated tobacco unit shipment volume of 113 to 118 billion units, including a carry-over effect from the temporary slowdown in IQOS user growth in the second half of 2021 (particularly the third quarter), which is estimated to be around four to five billion units;
• Adjusted net revenue growth of approximately 4% to 6% on an organic basis;
• An increase in adjusted operating income margin of 50 to 150 basis points on an organic basis, mainly driven by the continued favorable product mix shift from cigarettes to smoke-free products, coupled with the benefit of further operating leverage and accelerated operating efficiencies. The assumed margin increase comes despite:
  • the expectation of a moderately lower gross margin primarily due to temporary factors, such as:
    • the higher initial cost of IQOS ILUMA devices and initial weight and cost of TEREA consumables, which are expected to reduce over time, as with previous innovations;
    • higher logistics costs, including costs related to the use of air freight to support the strong up-take of IQOS ILUMA and TEREA consumables in Japan;
    • investments to grow capacity across PMI's smoke-free platforms; and
    • some inflation for certain supply chain elements;
  • continued commercial reinvestment to support our growing portfolio of smoke-free alternatives;
• Other category net revenues of around $350 million (including smoking cessation products), with an operating loss of around $150 million, primarily due to:
  • the amortization of intangibles related to the acquisitions;
  • investments in research and development; and
  • expenses related to employee retention programs;
• Operating cash flow of around $11 billion at prevailing exchange rates and subject to year-end working capital requirements;
• Capital expenditures of approximately $1 billion, reflecting increased investments behind smoke-free platforms and PMI's digital commercial engine, in addition to certain projects which were delayed to 2022 due to the pandemic;
• An effective tax rate, excluding discrete tax events, of around 22%;
• The impact on diluted EPS of 2021 share repurchases; the impact of assumed 2022 share repurchases is not included in the forecast; and
• First-quarter reported diluted EPS in a range of $1.50 to $1.55, including an unfavorable currency impact, at prevailing exchange rates, of around $0.15 per share, notably reflecting: robust organic net revenue growth, as well as an unfavorable operating margin comparison primarily due to:
  • the phasing of very strong gross productivity savings in 2021; and
  • the factors described above for operating income margin for the full year.

This forecast excludes the impact of any future acquisitions, unanticipated or unquantifiable asset impairment and exit cost charges, future changes in currency exchange rates, further developments pertaining to the judgment in the two Québec Class Action lawsuits and the Companies’ Creditors Arrangement Act (CCAA) protection granted to PMI's Canadian subsidiary, Rothmans, Benson & Hedges, Inc. (RBH), any unusual events, any intensification of the global shortage of semiconductors and the related impact on the supply of our electronic devices, and any COVID-19-related developments different from the assumptions set forth in the company's forecast.

Factors described in the Forward-Looking and Cautionary Statements section of this release represent continuing risks to these projections.

IQOS in the U.S.

On November 29, 2021, an importation ban and cease-and-desist orders imposed by the U.S. International Trade Commission (ITC) relating to IQOS Platform 1 products (including consumables and infringing components) went into effect. As a result, IQOS is not currently available for sale in the U.S. PMI has appealed the patent and statutory issues related to the ITC's Final Determination, and also has contingency plans underway, including domestic production. PMI hopes to be able to resume U.S. supply in the first half of 2023. For more details on the ITC case and related legal matters, please refer to PMI's Form 10-K for 2021, which the company plans to file with the SEC in the coming days.

Note: The ITC decision has no bearing outside the U.S.; competitor lawsuits based on the same patent families have repeatedly and universally failed in European courts and the European Patent Office.

Platform 2

PMI conducted a consumer test of its Platform 2 TEEPS carbon tip product in the last quarter of 2021. As a result of the feedback from this consumer test, the design of the company's current Platform 2 technology has been discontinued. PMI is assessing alternative designs for this consumer segment.

Conference Call

A conference call, hosted by Jacek Olczak, Chief Executive Officer, and Emmanuel Babeau, Chief Financial Officer, will be webcast at 9:00 a.m., Eastern Time, on February 10, 2022. Access is at www.pmi.com/2021Q4earnings.

CONSOLIDATED SHIPMENT VOLUME & MARKET SHARE

Full-Year

Estimated international industry cigarette and heated tobacco unit volume, excluding China and the U.S., of 2.6 trillion, increased by 2.4%, driven by the EU, Middle East & Africa, South & Southeast Asia and Americas Regions, partly offset by the Eastern Europe and East Asia & Australia Regions, as described in the Regional sections.

PMI's total shipment volume increased by 2.2%, driven by:

• the EU, reflecting higher heated tobacco unit shipment volume across the Region, particularly in Germany, Hungary, Italy and Poland, partly offset by lower cigarette shipment volume, notably in the Czech Republic, France and Germany;
• Middle East & Africa, reflecting higher cigarette shipment volume (primarily in PMI Duty Free and Turkey, partly offset by the GCC and North Africa), as well as higher heated tobacco unit shipment volume across the Region;
• East Asia & Australia, reflecting higher heated tobacco unit shipment volume driven by Japan, partly offset by lower cigarette shipment volume, predominantly in South Korea; and
• Americas, mainly reflecting higher cigarette shipment volume, primarily in Brazil and Mexico, partially offset by Argentina;

partly offset by

• South & Southeast Asia, primarily reflecting lower cigarette shipment volume, mainly in the Philippines, partially offset by Indonesia and Pakistan.

Total shipment volume in Eastern Europe was essentially flat, reflecting lower cigarette shipment volume, mainly in Russia and Ukraine, almost fully offset by higher heated tobacco unit shipment volume, primarily in Russia and Ukraine.

Impact of Inventory Movements

Excluding the net favorable impact of estimated distributor inventory movements of approximately 8.4 billion units, PMI’s total in-market sales increased by 1.0%, driven by a 21.1% increase in heated tobacco units, partly offset by a 1.5% decrease in cigarettes.

The net favorable impact of approximately 8.4 billion units reflected:

• A net favorable impact of 5.6 billion cigarettes, mainly driven by 2020 movements in Japan, PMI Duty Free and Russia; and
• A net favorable impact of 2.7 billion heated tobacco units, primarily reflecting the growing category and driven by Japan, Italy, PMI Duty Free and Russia.

PMI's total heated tobacco unit in-market sales volume in the year was 92.5 billion units.

Fourth-Quarter

PMI's total shipment volume increased by 4.2%, driven by:

• the EU, reflecting higher heated tobacco unit shipment volume across the Region (primarily in Italy) and higher cigarette shipment volume, mainly in Italy, partly offset by Germany;
• Middle East & Africa, mainly reflecting higher cigarette shipment volume, primarily in PMI Duty Free and Turkey, partly offset by Saudi Arabia;
• East Asia & Australia, reflecting higher heated tobacco unit and cigarette shipment volume, primarily in Japan; and
• Americas, mainly reflecting higher cigarette shipment volume, mainly in Mexico, partly offset by Argentina;

partly offset by

• Eastern Europe, reflecting lower cigarette shipment volume, mainly in Russia and Ukraine, partly offset by higher heated tobacco unit shipment volume across most of the Region, particularly in Russia, partially offset by Belarus; and
• South & Southeast Asia, primarily reflecting lower cigarette shipment volume, mainly in the Philippines and Thailand, partly offset by Indonesia.

Impact of Inventory Movements

Excluding the net favorable impact of estimated distributor inventory movements of approximately 3.3 billion units, PMI’s total in-market sales increased by 2.3%, driven by a 15.1% increase in heated tobacco units and a 0.6% increase in cigarettes.

The net favorable impact of approximately 3.3 billion units reflected:

• A net favorable impact of 2.7 billion cigarettes, mainly driven by 2020 movements in Italy, Japan and PMI Duty Free; and
• A net favorable impact of 0.6 billion heated tobacco units.

PMI's total heated tobacco unit in-market sales volume in the quarter was 23.6 billion units.

PMI Shipment Volume by Brand

Full-Year

The increase in PMI's heated tobacco unit shipment volume was mainly driven by the EU (notably Italy), Eastern Europe (notably Russia and Ukraine) and Japan.

PMI's cigarette shipment volume of the following brands increased:

• Marlboro, mainly driven by Mexico, PMI Duty Free, Russia and Turkey, partly offset by France, Japan and the Philippines;
• Chesterfield, primarily driven by Brazil, the Philippines and Russia, partly offset by Saudi Arabia;
• Parliament, mainly driven by Russia, Saudi Arabia and Turkey, partly offset by South Korea; and
• Sampoerna A in Indonesia, primarily driven by premium A Mild.

PMI's cigarette shipment volume of the following brands decreased:

• L&M, mainly due to Egypt, Germany, Poland, Russia and Turkey;
• Philip Morris, primarily due to Indonesia, Italy and Russia, partly offset by Japan;
• Dji Sam Soe in Indonesia, mainly due to Dji Sam Soe Magnum Mild;
• Bond Street, primarily due to Kazakhstan, Russia and Ukraine;
• Next, primarily due to Canada and Ukraine, partly offset by Russia; and
• "Others," notably due to: mid-price Fortune (Philippines) and Sampoerna U (Indonesia); and low-price Jackpot (Philippines) and More (Philippines); partly offset by mid-price Sampoerna Hijau (Indonesia) and low-price Morven (Pakistan).

PMI's cigarette shipment volume for Lark was flat.

International Share of Market

PMI's total international market share (excluding China and the U.S.), defined as PMI's cigarette and heated tobacco unit sales volume as a percentage of total industry cigarette and heated tobacco unit sales volume, decreased by 0.4 points to 27.3%, reflecting:

• Total international market share for cigarettes of 23.8%, down by 0.9 points; and
• Total international market share for heated tobacco units of 3.5%, up by 0.5 points.

PMI's total international cigarette sales volume as a percentage of total industry cigarette sales volume was down by 0.8 points to 24.9%, mainly reflecting lower cigarette market share and/or an unfavorable geographic mix impact, notably in Japan, the Philippines and Russia, partly offset by Indonesia and Turkey.

In 2021, PMI owned five of the world's top 15 international cigarette brands, with international cigarette market shares as follows: Marlboro, 9.5%; L&M, 3.4%; Chesterfield, 2.3%; Philip Morris, 1.7%; and Parliament, 1.7%.

Fourth-Quarter

The increase in PMI's heated tobacco unit shipment volume was mainly driven by the EU (notably Italy), Eastern Europe (notably Russia, partly offset by Belarus) and Japan.

PMI's cigarette shipment volume of the following brands increased:

• Marlboro, mainly driven by Indonesia, Italy, Mexico, PMI Duty Free, Russia and Turkey, partly offset by Japan;
• Chesterfield, primarily driven by Italy, the Philippines and Russia, partly offset by Saudi Arabia;
• Parliament, mainly driven by Turkey;
• Sampoerna A in Indonesia, primarily driven by premium A Mild;
• Lark, mainly driven by Japan; and
• Next, primarily driven by Canada.

PMI's cigarette shipment volume of the following brands decreased:

• L&M, primarily due to Germany, Russia and Thailand, partly offset by Algeria;
• Philip Morris, mainly due to Russia, partly offset by Japan and Kazakhstan;
• Dji Sam Soe in Indonesia, primarily due to Dji Sam Soe Magnum Mild;
• Bond Street, mainly due to Russia and Kazakhstan; and
• "Others," primarily due to: mid-price Fortune (Philippines) and Sampoerna U (Indonesia).

International Share of Market

PMI's total international market share (excluding China and the U.S.) increased by 0.1 point to 27.4%, reflecting:

• Total international market share for heated tobacco units of 3.5%, up by 0.4 points; and
• Total international market share for cigarettes of 23.8%, down by 0.3 points.

PMI's total international cigarette sales volume as a percentage of total industry cigarette sales volume down by 0.1 point to 25.0%, mainly reflecting lower cigarette market share and/or an unfavorable geographic mix impact, notably in Egypt, the Philippines, Russia and Thailand, largely offset by Indonesia, PMI Duty-Free and Turkey.

CONSOLIDATED FINANCIAL SUMMARY

Full-Year

Net revenues increased by 6.7%, excluding currency and acquisitions, mainly reflecting: favorable volume/mix, primarily driven by higher heated tobacco unit volume (notably in the EU, particularly Germany, Hungary, Italy and Poland, as well as Japan, Russia and Ukraine) and higher device volume (notably in the EU, primarily Italy, and Japan, partly offset by South Korea), partially offset by lower cigarette volume (mainly in the EU Region, notably the Czech Republic, France and Germany, as well as the GCC, North Africa, the Philippines, Russia and Ukraine, partly offset by India, Indonesia, PMI Duty Free and Turkey) and unfavorable cigarette mix (primarily in Germany, Japan and Russia, partially offset by Indonesia and PMI Duty Free); and a favorable pricing variance (notably driven by the Czech Republic, Germany, Japan, Kazakhstan, the Philippines, Russia and Turkey, partly offset by Australia, Indonesia, Poland and Ukraine); partially offset by the unfavorable impact of the Saudi Arabia customs assessments of $246 million, shown in "Cost/Other". Adjusted net revenues increased by 7.6% on an organic basis.

Operating income increased by 8.9%, excluding currency and acquisitions, primarily reflecting: favorable volume/mix, mainly driven by higher heated tobacco unit volume, partly offset by lower cigarette volume and unfavorable cigarette mix (each mainly reflecting the same geographies as for net revenues noted above); a favorable pricing variance; and lower manufacturing costs (driven by significant productivity gains related to reduced-risk and combustible products); partly offset by higher marketing, administration and research costs, including an unfavorable comparison related to the Brazil indirect tax credit in 2020, higher asset impairment and exit costs (mainly related to organizational design optimization, as well as product distribution restructuring in South Korea) and asset acquisition costs related to OtiTopic; and the unfavorable impact of the Saudi Arabia customs assessments (as noted above for net revenues).

Adjusted operating income increased by 13.0% on an organic basis. Adjusted operating income margin increased by 2.0 points on the same basis.

Fourth-Quarter

Net revenues increased by 8.4% on an organic basis, mainly reflecting: favorable volume/mix, primarily driven by higher heated tobacco unit volume (notably in the EU, particularly Germany and Italy, as well as Japan, PMI Duty Free and Russia) and higher cigarette volume (mainly in Indonesia, Italy, Japan, PMI Duty Free and Turkey, partly offset by Germany, the Philippines and Russia), partially offset by unfavorable cigarette mix (mainly in Japan); and a favorable pricing variance (notably driven by Japan and Turkey, partly offset by Australia, Indonesia and the Philippines).

Operating income increased by 5.2%, excluding currency and acquisitions, primarily reflecting: favorable volume/mix, mainly driven by the same factors and geographies as for net revenues noted above); a favorable pricing variance; and lower manufacturing costs (primarily driven by productivity gains related to reduced-risk products); partly offset by higher marketing, administration and research costs (mainly due to investments behind combustible and reduced-risk products, as well as an unfavorable comparison related to the Brazil indirect tax credit in 2020, partially offset by lower asset impairment and exit costs).

Adjusted operating income increased by 8.3% on an organic basis. Adjusted operating income margin decreased by 0.1 point on the same basis. The slight organic margin decline partly reflected: an unfavorable impact on gross margin of the higher initial cost of IQOS ILUMA devices and initial weight and cost of TEREA consumables, and higher logistics costs, including costs related to the use of air freight to support the strong up-take of IQOS ILUMA and TEREA consumables in Japan; as well as reaccelerated investment in commercial programs, digital infrastructure, research and development, and growth opportunities across product categories and geographies.

EUROPEAN UNION REGION

Full-Year

Net revenues increased by 8.8% on an organic basis, reflecting: favorable volume/mix, mainly driven by higher heated tobacco unit volume (notably in Germany, Hungary, Italy and Poland), as well as higher device volume and favorable device mix (notably in Italy), partly offset by lower cigarette volume (notably in the Czech Republic, France and Germany) and unfavorable cigarette mix (primarily in Germany); and a favorable pricing variance, driven by higher combustible pricing (mainly in Germany and Portugal, partly offset by France and Poland) and higher heated tobacco unit pricing (notably in the Czech Republic and Germany, partially offset by Poland), partly offset by lower device pricing (notably in Germany and Italy).

Operating income increased by 12.5%, excluding currency and acquisitions, primarily reflecting: favorable volume/mix, mainly driven by higher heated tobacco unit volume and favorable device mix, partly offset by lower cigarette volume and unfavorable cigarette mix (each primarily reflecting the same geographies as for net revenues noted above); lower manufacturing costs (driven by combustible and reduced-risk products); and a favorable pricing variance; partly offset by higher marketing, administration and research costs (due to combustible and reduced-risk products).

Adjusted operating income increased by 12.5% on an organic basis. Adjusted operating income margin increased by 1.6 points on the same basis.

Fourth-Quarter

Net revenues increased by 11.3% on an organic basis, reflecting: favorable volume/mix, mainly driven by higher heated tobacco unit volume (notably in Germany and Italy), as well as higher device volume and favorable device mix (notably in Italy), partly offset by unfavorable cigarette volume/mix (mainly due to unfavorable volume/mix in Germany, partly offset by higher volume in Italy). Pricing variance was slightly favorable, primarily reflecting higher combustible pricing (driven by most markets across the Region, partly offset by Poland), partially offset by lower pricing for devices (notably in Italy).

Operating income increased by 13.7%, excluding currency and acquisitions, primarily reflecting: favorable volume/mix, mainly driven by higher heated tobacco unit volume and favorable device mix, partly offset by unfavorable cigarette volume/mix (each primarily reflecting the same geographies as for net revenues noted above); and lower manufacturing costs (driven by reduced-risk products); partly offset by higher marketing, administration and research costs (due to combustible and reduced-risk products).

Adjusted operating income increased by 11.9% on an organic basis. Adjusted operating income margin increased by 0.2 points on the same basis.

Total Market, PMI Shipment & Market Share Commentaries

Full-Year

The estimated total market in the EU increased by 1.0% to 478.2 billion units, primarily driven by:

• Italy, up by 4.4%, mainly reflecting the impact on adult smoker average daily consumption of the easing of pandemic-related measures; and
• Poland, up by 8.1%, primarily reflecting the impact on adult smoker average daily consumption and border sales of the easing of pandemic-related measures, as well as a lower prevalence of illicit trade;

partly offset by

• Czech Republic, down by 7.3%, mainly reflecting the impact of excise tax-driven price increases; and
• France, down by 6.2%, primarily reflecting the impact of excise tax-driven price increases and higher cross-border (non-domestic) purchases due to the easing of pandemic-related measures.

PMI's Regional market share decreased by 0.2 points to 38.6%, with declines in the Czech Republic, France and Germany, partly offset by gains in Greece and Italy.

PMI's total shipment volume increased by 1.5% to 186.1 billion units, primarily driven by:

• Italy, up by 11.5%, or by 6.1% excluding the net favorable impact of estimated distributor inventory movements, mainly reflecting the higher total market and a higher market share driven by heated tobacco units; and
• Poland, up by 3.7%, primarily reflecting the higher total market, partially offset by a lower market share due to cigarettes;

partly offset by

• Czech Republic, down by 9.7%, mainly reflecting the lower total market and a lower market share due to cigarettes; and
• France, down by 6.6%, primarily reflecting the lower total market and a lower market share due to cigarettes.

Fourth-Quarter

The estimated total market in the EU increased by 2.2% to 117.8 billion units, primarily driven by:

• Italy, up by 5.1%, mainly reflecting the same factor as for the full year; and
• Poland, up by 13.7%, notably reflecting the same factors as for the full year;

partly offset by

• France, down by 6.6%, mainly reflecting the same factors as for the full year; and
• Germany, down by 3.5%, notably reflecting the impact of excise tax-driven price increases.

PMI's total shipment volume increased by 5.5% to 45.4 billion units, mainly driven by:

• Italy, up by 23.2%, or by 6.4% excluding the net favorable impact of estimated distributor inventory movements, reflecting the higher total market and a higher market share driven by heated tobacco units; and
• Poland, up by 8.0%, mainly reflecting the higher total market, partly offset by a lower market share due to cigarettes.

Excluding the net favorable impact of estimated distributor inventory movements, PMI's total in-market sales volume increased by 2.1%.

EASTERN EUROPE REGION

Full-Year

Net revenues increased by 5.9% on an organic basis, reflecting: favorable volume/mix, driven by higher heated tobacco unit volume (mainly in Russia and Ukraine), partly offset by lower cigarette volume (primarily in Russia and Ukraine), as well as unfavorable cigarette mix (mainly in Russia); and a favorable pricing variance, primarily driven by higher combustible pricing (mainly in Kazakhstan, Russia and Ukraine), partially offset by lower device pricing (primarily in Russia and Ukraine) and lower heated tobacco unit pricing (mainly in Ukraine, partly offset by Russia).

Operating income increased by 38.5%, excluding currency and acquisitions, primarily reflecting: favorable volume/mix, mainly driven by higher heated tobacco unit volume, partly offset by lower cigarette volume and unfavorable cigarette mix (all primarily reflecting the same geographies as for net revenues noted above); lower manufacturing costs (mainly related to reduced-risk products, primarily in Russia); a favorable pricing variance; and lower marketing, administration and research costs.

Adjusted operating income increased by 37.7% on an organic basis. Adjusted operating income margin increased by 7.9 points on the same basis.

Fourth-Quarter

Net revenues decreased by 4.2% on an organic basis, reflecting: unfavorable volume/mix, mainly due to unfavorable cigarette volume/mix (primarily in Russia), partly offset by higher heated tobacco unit volume (notably in Russia). Pricing variance was flat, mainly reflecting higher combustible pricing (primarily in Kazakhstan and Russia), offset by lower heated tobacco unit pricing (mainly in Ukraine).

Operating income increased by 11.5%, excluding currency and acquisitions, primarily reflecting: lower manufacturing costs; and lower marketing, administration and research costs. Volume/mix was slightly unfavorable, mainly reflecting unfavorable cigarette volume/mix (primarily in Russia), largely offset by higher heated tobacco unit volume (notably in Russia) and the favorable impact of lower device volume (primarily in Russia).

Adjusted operating income increased by 9.3% on an organic basis. Adjusted operating income margin increased by 4.2 points on the same basis.

Total Market, PMI Shipment & Market Share Commentaries

Full-Year

The estimated total market in Eastern Europe decreased by 1.8% to 373.3 billion units, mainly due to:

• Russia, down by 1.0%, or by 2.7% excluding the net favorable impact of estimated trade inventory movements, primarily reflecting the impact of excise tax-driven price increases and a higher prevalence of illicit trade, partly offset by the impact on adult smoker average daily consumption of the easing of pandemic-related measures; and
• Ukraine, down by 9.8%, mainly reflecting the impact of excise tax-driven price increases and a higher prevalence of illicit trade.

PMI's Regional market share increased by 0.1 point to 30.6%.

PMI's total shipment volume was flat at 114.3 billion units, notably reflecting:

• Southeast Europe, up by 6.9%, primarily reflecting a higher total market and a higher market share (driven by heated tobacco units);

partly offset by

• Belarus, down by 43.9%, mainly reflecting the halt of shipments as of the third quarter due to international sanctions;
• Russia, down by 0.5%, or by 3.0% excluding the net favorable impact of estimated distributor inventory movements, mainly reflecting a lower market share (due to cigarettes, partly offset by heated tobacco units) and the lower total market; and
• Ukraine, down by 3.3%, mainly reflecting the lower total market, partly offset by a higher market share driven by heated tobacco units.

Excluding the net favorable impact of estimated distributor inventory movements, PMI's total in-market sales volume decreased by 1.3%.

Fourth-Quarter

The estimated total market in Eastern Europe decreased, mainly due to:

• Russia, down by 5.1%, primarily reflecting the impact of excise tax-driven price increases and a higher prevalence of illicit trade; and
• Ukraine, down by 10.8%, mainly reflecting the same factors as for the full year.

PMI's total shipment volume decreased by 4.3% to 28.0 billion units, primarily due to:

• Belarus, down by 100%, reflecting the same factor as for the full year;
• Russia, down by 4.7%, primarily reflecting the lower total market and a lower market share due to cigarettes; and
• Ukraine, down by 7.4%, mainly reflecting the lower total market, partly offset by a higher market share driven by heated tobacco units.

MIDDLE EAST & AFRICA REGION

Full-Year

Net revenues increased by 10.4%, excluding currency and acquisitions, despite the unfavorable impact of the Saudi Arabia customs assessments of $246 million, shown in "Cost/Other".

Adjusted net revenues increased by 18.3% on an organic basis, as detailed above, reflecting: favorable volume/mix, primarily driven by higher cigarette volume (predominantly in PMI Duty Free and Turkey, partly offset by the GCC and North Africa), higher heated tobacco unit volume (mainly in Egypt, Jordan and PMI Duty Free) and favorable cigarette mix (mainly in the GCC, PMI Duty Free and Turkey); and a favorable pricing variance, mainly driven by combustible pricing (primarily in Egypt and Turkey); partially offset by lower fees for certain distribution rights billed to customers in certain markets, shown in "Cost/Other".

Operating income increased by 23.8%, excluding currency and acquisitions, mainly reflecting: a favorable pricing variance; favorable volume/mix, driven by the same factors and geographies as for net revenues noted above; and lower manufacturing costs (primarily related to combustible products); partly offset by the unfavorable impact of the Saudi Arabia customs assessments, as noted above for net revenues; higher marketing, administration and research costs; and lower fees for certain distribution rights, as noted above for net revenues.

Adjusted operating income increased by 46.7% on an organic basis. Adjusted operating income margin increased by 8.2 points on the same basis.

Fourth-Quarter

Net revenues increased by 40.0% on an organic basis, primarily reflecting: favorable volume/mix, mainly driven by higher cigarette volume (primarily in PMI Duty Free and Turkey, partly offset by Saudi Arabia), higher heated tobacco unit volume (mainly in Egypt and PMI Duty Free) and favorable cigarette mix (primarily in PMI Duty Free); and a favorable pricing variance, driven by combustible pricing (mainly in Turkey).

Operating income increased by +100%, excluding currency and acquisitions, mainly reflecting: favorable volume/mix, mainly driven by the same factors and geographies as for net revenues noted above; and a favorable pricing variance; partly offset by higher marketing, administration and research costs.

Adjusted operating income increased by +100% on an organic basis. Adjusted operating income margin increased by 15.2 points on the same basis.

Total Market, PMI Shipment & Market Share Commentaries

Full-Year

The estimated total market in the Middle East & Africa increased by 2.9% to 560.5 billion units, mainly driven by:

• Algeria, up by 6.2%, primarily reflecting the impact on adult smoker average daily consumption of the easing of pandemic-related measures, partly offset by the impact of price increases;
• Egypt, up by 8.8%, mainly reflecting a favorable comparison due to pandemic-related supply chain shortages for competitors' products in 2020, as well as the favorable impact of adult smoker in-switching to cigarettes (mainly in the low-tax tier) from other combustible tobacco products;
• South Africa, up by 13.2%, primarily reflecting a favorable comparison versus the second and third quarters of 2020, in which the total market was impacted by the pandemic-related ban on all tobacco sales from March 27th through August 17th, partly offset by a higher estimated prevalence of illicit trade stemming from the ban; and
• Turkey, up by 8.2%, mainly reflecting the impact on adult smoker average daily consumption of the easing of pandemic-related measures, coupled with increased in-bound tourism (particularly by Turkish expatriates), partially offset by a higher estimated prevalence of illicit trade;

partly offset by

• International Duty Free, down by 10.6%, primarily reflecting the impact of government travel restrictions and reduced passenger traffic since the start of the pandemic in March 2020; and
• Tunisia, down by 15.6%, mainly reflecting a higher estimated prevalence of illicit trade (primarily due to market disruptions impacting product availability and the impact of price increases in July 2021).

PMI's Regional market share increased by 1.1 points to 23.1%.

PMI's total shipment volume increased by 9.3% to 130.1 billion units, notably driven by:

• PMI Duty Free, up by 56.9%. Excluding the net favorable impact of estimated distributor inventory movements (principally due to cigarettes), PMI in-market sales volume was up by 4.1%, primarily reflecting a higher market share driven by Marlboro, partly offset by the lower total market; and
• Turkey, up by 17.2%, mainly reflecting a higher market share driven by adult smoker up-trading (mainly benefiting Marlboro and Parliament) and the higher total market;

partly offset by

• Egypt, down by 5.2%, mainly reflecting a lower market share (due primarily to adult smoker down-trading to products in the low-tax tier), partly offset by the higher total market; and
• Kuwait, down by 23.4%, or by 12.3% excluding the net unfavorable impact of estimated distributor inventory movements, primarily reflecting a lower total market.

Fourth-Quarter

The estimated total market in the Middle East & Africa increased, mainly driven by:

• Algeria, up by 13.2%, or by 7.8% excluding the net favorable impact of estimated trade inventory movements, primarily reflecting the same factors as for the full year;
• International Duty Free, up by 14.8%, reflecting the impact of reduced government travel restrictions and increased passenger traffic in certain geographies; and
• Turkey, up by 16.1%, mainly reflecting the same factors as for the full year;

partly offset by

• Egypt, down by 5.3%, primarily reflecting an unfavorable comparison due to a recovery in the availability of competitors' products, during the fourth quarter of 2020, following pandemic-related supply chain shortages earlier that year, as well as the impact of price increases, partly offset by the favorable impact of adult smoker in-switching to cigarettes (mainly in the low-tax tier) from other combustible tobacco products;
• Saudi Arabia, down by 15.5%, mainly reflecting the adverse impact of increased cross-border (non-domestic) and duty-free purchases driven by the easing of pandemic-related measures, as well as a higher estimated prevalence of illicit trade; and
• Tunisia, down by 27.8%, primarily reflecting the same factors as for the full year.

PMI's total shipment volume increased by 17.6% to 35.4 billion units, notably driven by:

• PMI Duty Free, up by +100%, or by 34.7% excluding the net favorable impact of estimated distributor inventory movements, reflecting a higher market share and the higher total market; and
• Turkey, up by 24.8%, primarily reflecting the higher total market and a higher market share, driven the same factor as for the full year;

partly offset by

• Saudi Arabia, down by 20.0%, or by 12.2% excluding the net unfavorable impact of estimated distributor inventory movements, primarily reflecting the lower total market, partly offset by a higher market share driven by heated tobacco units and cigarettes.

Excluding the net favorable impact of estimated distributor inventory movements, PMI's total in-market sales volume increased by 13.4%.

SOUTH & SOUTHEAST ASIA REGION

Full-Year