Here are some of the interesting exchanges during the recent PMI (PM) earnings call.
Filippe Goossens – Credit Suisse: “Okay. The next question, Hermann, if I have my numbers correct using your $0.46 in dividends for the quarter, if I annualize that and I look at the share price, obviously, the share price will be up this morning, but I’m coming out with less than 4% dividend yield, which puts you at the lower end, particularly compared to the U.S. players out there. When can we expect the dividend payouts to go up, particularly if you look at your very strong balance sheet even after the share buybacks?”
Hermann Waldemer (CFO): “Okay, I think there we have to stay with the facts. The facts are that we have an annual rate of 184. We have $0.46 cents for the quarter. The other fact is that we have a payout ratio of 65%. And the rest is entirely up to the Board and it is a Board decision, including the timing.”
At the new earnings level predicted the payout ought to rise to about $2.05 to $2.10 a share. Probably will not be announced until the fall when EPS for the year is more predictable.
China:
Christine Farkas – Merrill Lynch: “Okay, great. And the final question, Hermann, is on China. Can you just update a little bit on the progress there and what you see in the remainder of the year in both the export business as well as Marlboro within China?”
Hermann Waldemer: “Okay. In China we are really absolutely on track, also, compared to what we said during the road show. So we expect on the domestic market the launch of licensed-produced volume Marlboro in China actually the summer of this year. This is going to come. We are on track on this one.”
After another China question:
“Right. On China, I mean, meaningful EPS impact for this year, no. That’s just too small to have an effect.
Look, I mean, the key point really is for China to be [inaudible] partner of the China National Tobacco Company there. That is really the key in there; it is building long-term relationships in China.
And that has really two elements to it, which is the China domestic element – that is Marlboro licensed production for the summer – and that is then on the other side really doing business internationally with them”
The fact that the largest smoking population in the world is “not yet meaningful” ought to underscore for those wondering how much growth there still is for the company the international smoking market.
On Recent Interval Acquisition:
Thomas Russo – Russo, Gardner & Gardner: “You bet. A couple of questions. First, talk about the Interval acquisition and what the market is like in France for leaves. I think that’s where you suggested that it was intended to serve your needs. And then what’s the market like for fine cut in France?”
Hermann Waldemer: “Okay. Interval, actually, I mean, on that acquisition I would say we have said before that we are a tobacco company. There you see we mean that serious. Actually, Interval has a 14.8% share of the fine cut market in France. An estimated operating company’s income of that would be some 25 million Euros. That’s about the size of the business there.
Important is actually this is the leading brand amongst young adults, legal age to 29. So it complements, I would say, our portfolio very nicely. We have been in that market in the entire EU region quite a bit, but we have been in there mostly with our cigarette trademarks and there we really have now a real grow-your-own trademark there, we have acquired there, so that’s another positive of that acquisition.”
Other notes:
* Currency was $.09 of the $.20 earnings beat
* $13 billion, two year stock repurchase begins in May.
Disclosure (“none” means no position):Long PM
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