Economic Value Added (EVA)
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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
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Philip Morris International Inc. pages available for free this week:
- Statement of Comprehensive Income
- Common-Size Balance Sheet: Assets
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Geographic Areas
- Capital Asset Pricing Model (CAPM)
- Net Profit Margin since 2008
- Return on Equity (ROE) since 2008
- Debt to Equity since 2008
- Price to Earnings (P/E) since 2008
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Economic Profit
Philip Morris International Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes demonstrated a peak in 2021 at 10,188 million US dollars, followed by a declining trend in the subsequent years. It decreased to 9,635 million in 2022, further to 8,804 million in 2023, and reached 8,281 million by the end of 2024.
- Cost of Capital
- The cost of capital rose from 8.53% in 2020 to a high of 9.08% in 2024, with minor fluctuations in the interim years. It increased in 2021 to 9.02%, slightly decreased in 2022 to 8.68%, then dipped further to 8.44% in 2023 before rising again to 9.08% in 2024.
- Invested Capital
- Invested capital showed significant volatility. It decreased from 31,958 million US dollars in 2020 to 29,268 million in 2021 but then surged sharply to 47,466 million in 2022. This upward trend continued to 51,440 million in 2023 before slightly declining to 48,390 million in 2024.
- Economic Profit
- Economic profit mirrored a downward trajectory after peaking in 2021 at 7,547 million US dollars. It dropped substantially to 5,515 million in 2022, continued declining to 4,463 million in 2023, and further reduced to 3,885 million in 2024.
Net Operating Profit after Taxes (NOPAT)
Philip Morris International Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowances.
3 Addition of increase (decrease) in accrued product warranty.
4 Addition of increase (decrease) in restructuring related liabilities.
5 Addition of increase (decrease) in equity equivalents to net earnings attributable to PMI.
6 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
7 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
8 Addition of after taxes interest expense to net earnings attributable to PMI.
9 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
10 Elimination of after taxes investment income.
The financial data indicates a fluctuating but generally declining trend in the profitability metrics over the analyzed periods. Both net earnings attributable to the company and net operating profit after taxes (NOPAT) show variations that merit close attention.
- Net Earnings Attributable to PMI
- Starting at $8,056 million in 2020, net earnings increased to a peak of $9,109 million in 2021, reflecting a strong growth phase. However, subsequent years show a downward trajectory, with earnings declining to $9,048 million in 2022, then more sharply to $7,813 million in 2023, and further down to $7,057 million in 2024. This sequence suggests a notable slowdown in profitability, especially from 2022 onwards.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT follows a similar pattern, beginning at $8,950 million in 2020 and rising to a high of $10,188 million in 2021. A decline ensues thereafter, decreasing to $9,635 million in 2022, $8,804 million in 2023, and finally $8,281 million in 2024. The reduction in operating profit after tax signals that operational efficiency or operating conditions may have deteriorated during the latter period.
Overall, the data reflects a peak in both earnings and operating profits in 2021, followed by a consistent downward trend through 2024. This pattern could indicate emerging challenges in sustaining profitability, necessitating further analysis of operational factors, market conditions, or cost structures contributing to this decline.
Cash Operating Taxes
Philip Morris International Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
- Provision for income taxes
- The provision for income taxes exhibited fluctuations over the observed periods. Starting at $2,377 million in 2020, the figure increased to $2,671 million in 2021, representing a notable rise. However, it subsequently decreased to $2,244 million in 2022, indicating a reduction in tax provisions that year. Following this dip, provisions increased again in 2023 to $2,339 million and continued the upward trend more sharply in 2024, reaching $3,017 million. Overall, the pattern shows variability with a significant increase in the most recent year.
- Cash operating taxes
- Cash operating taxes displayed an overall upward trend from 2020 to 2024. The amount was $2,656 million in 2020 and increased steadily to $2,825 million in 2021. A slight decline occurred in 2022 to $2,606 million, but this was followed by substantial increases in 2023 and 2024, reaching $2,899 million and $3,381 million respectively. The consistent growth, especially in the final two years, reflects an increasing cash tax burden despite minor fluctuations earlier.
Invested Capital
Philip Morris International Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of allowance for doubtful accounts receivable.
4 Addition of accrued product warranty.
5 Addition of restructuring related liabilities.
6 Addition of equity equivalents to total PMI stockholders’ deficit.
7 Removal of accumulated other comprehensive income.
8 Subtraction of construction in progress.
- Total reported debt & leases
- The total reported debt and leases exhibit a fluctuating trend over the examined periods. Initially, there was a decrease from 32,243 million USD at the end of 2020 to 28,342 million USD in 2021. However, this was followed by a notable increase in 2022, reaching 43,737 million USD, and then a further rise to 48,562 million USD in 2023. In 2024, the figure slightly declined to 46,299 million USD. Overall, the debt levels have increased substantially after the initial drop, reflecting a significant rise in financial obligations in recent years.
- Total PMI stockholders’ deficit
- The stockholders’ deficit showed an improvement from -12,567 million USD in 2020 to -8,957 million USD in 2022, indicating a reduction in the deficit over these years. However, this improvement was reversed in 2023 and 2024, with the deficit increasing to -11,225 million USD and further to -11,750 million USD, respectively. This pattern suggests a temporary recovery in equity position was followed by a deterioration in the latest two years.
- Invested capital
- Invested capital decreased from 31,958 million USD in 2020 to 29,268 million USD in 2021, showing a contraction in invested resources. Subsequently, a sharp increase is observed in 2022, rising to 47,466 million USD, and further to 51,440 million USD in 2023. In 2024, there is a slight decrease to 48,390 million USD. The data indicates an expansion in invested capital after 2021, suggesting increased investment activities or asset base growth during this period, with a minor reduction in the most recent year.
Cost of Capital
Philip Morris International Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt, including finance lease obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt, including finance lease obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt, including finance lease obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt, including finance lease obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt, including finance lease obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt, including finance lease obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt, including finance lease obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt, including finance lease obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt, including finance lease obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt, including finance lease obligations. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Philip Morris International Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Coca-Cola Co. | ||||||
| Mondelēz International Inc. | ||||||
| PepsiCo Inc. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit exhibits a declining trend over the presented periods. Starting at 6,224 million US dollars in 2020, it increased to a peak of 7,547 million in 2021 before decreasing substantially to 5,515 million in 2022. This decline continued through 2023 and 2024, reaching 3,885 million. This suggests a reduction in the company’s ability to generate profit above its cost of capital over time.
- Invested Capital
- The invested capital shows fluctuation with an overall increasing trend. It started at 31,958 million US dollars in 2020, decreased to 29,268 million in 2021, then sharply increased to 47,466 million in 2022 and further increased to 51,440 million in 2023. In 2024, a slight decrease to 48,390 million is observed. This indicates an expansion in the company’s capital base, especially significant growth between 2021 and 2023.
- Economic Spread Ratio
- The economic spread ratio declined markedly over the periods. It was 19.47% in 2020, rose to a peak of 25.79% in 2021, indicative of strong returns relative to cost of capital. However, it decreased sharply to 11.62% in 2022, followed by further declines to 8.68% and 8.03% in 2023 and 2024 respectively. This downward trend suggests decreasing efficiency in generating returns on invested capital over the latter periods.
- Overall Insights
- The company's financial data reflects a period of initial strength followed by a noticeable decline in economic profitability and efficiency. Despite an increasing invested capital base in recent years, the economic profit and spread ratio have both decreased, implying that the additional investments are yielding lower returns relative to their cost. This could point to challenges in capital allocation or market conditions affecting profitability. Continuous monitoring and strategic adjustments may be necessary to improve capital efficiency and enhance economic profits.
Economic Profit Margin
Philip Morris International Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Net revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Coca-Cola Co. | ||||||
| Mondelēz International Inc. | ||||||
| PepsiCo Inc. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Net revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
The financial data reveals several notable trends over the five-year period.
- Net Revenues
- There is a consistent upward trend in net revenues, increasing from $28,694 million in 2020 to $37,878 million in 2024. This growth indicates a steady enhancement in the company's sales or service income across the period.
- Economic Profit
- Economic profit shows a different pattern. Starting at $6,224 million in 2020, it peaked at $7,547 million in 2021 but then declined consecutively each year to $3,885 million by 2024. This signifies diminishing absolute economic profitability despite growing revenues.
- Economic Profit Margin
- The economic profit margin also follows a decreasing trajectory, moving from 21.69% in 2020 and reaching a high of 24.03% in 2021, before dropping steadily to 10.26% in 2024. The decline in margin illustrates reduced efficiency or profitability relative to revenue, corroborating the fall in economic profit despite expanding sales.
In summary, while the company’s revenue base has grown robustly over the analyzed time frame, both economic profit and economic profit margin have exhibited a deteriorating trend after 2021. This divergence suggests rising costs, decreasing profitability of new revenues, or other factors affecting economic returns. Continuous monitoring and further investigation into cost structures and operational efficiency might be warranted to address the declining profitability despite increasing revenue.