Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
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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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
= – × =
The financial data reveals several notable trends over the five-year period under review. The net operating profit after taxes (NOPAT) demonstrates an initial increase from 8,950 million US dollars in 2020 to a peak of 10,188 million US dollars in 2021, followed by a steady decline through 2024, ending at 8,281 million US dollars. This pattern indicates that profitability after taxes improved in the early part of the period but faced downward pressure in subsequent years.
The cost of capital shows some variability, starting at 8.46% in 2020, rising to 8.95% in 2021, then slightly declining to 8.37% by 2023, before increasing again to 9.01% in 2024. This fluctuation suggests changing market or company-specific risks and financing costs over the years, with the highest cost perceived in the most recent fiscal year.
Invested capital exhibits a strong upward trajectory from 31,958 million US dollars in 2020 to 51,440 million by 2023, before retracting to 48,390 million in 2024. This pattern reflects significant capital expansion activities up to 2023, potentially for growth or investment purposes, followed by a slight reduction in the subsequent year.
Economic profit, which reflects value creation beyond the cost of capital, rises from 6,246 million US dollars in 2020 to 7,570 million in 2021, but then declines consistently to 3,922 million in 2024. This decline, despite substantial invested capital, indicates diminishing returns relative to the cost of capital, signaling potential challenges in maintaining economic value generation.
Overall, the period is characterized by initial strength in profitability and economic profit, accompanied by investments in capital, but later years show decreasing profitability, higher cost of capital, and reduced economic profit. These trends may warrant closer attention to capital efficiency and cost management to sustain long-term value creation.
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 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.
- Economic Profit
- The economic profit exhibited a fluctuating downward trend over the analyzed period. Starting from a high of 6,246 million US dollars in 2020, it increased to 7,570 million in 2021, representing a peak. Following this, there was a consistent decline each year, with economic profit falling to 5,549 million in 2022, 4,498 million in 2023, and further to 3,922 million in 2024. This represents an approximate 48% decrease from its peak in 2021 to 2024.
- Net Revenues
- Net revenues displayed a steady upward trajectory over the five-year span. Beginning at 28,694 million US dollars in 2020, revenues increased annually to 31,405 million in 2021, then to 31,762 million in 2022, followed by more significant growth to 35,174 million in 2023, and reaching 37,878 million in 2024. This consistent increase indicates a positive trend in sales or service income over the period, with total growth approximating 32% from 2020 to 2024.
- Economic Profit Margin
- The economic profit margin experienced a marked decline across the timeline. From a margin of 21.77% in 2020, it improved slightly to 24.1% in 2021, corresponding with the peak in economic profit. However, after 2021, the margin consistently declined, dropping to 17.47% in 2022, then further to 12.79% in 2023, and 10.35% by 2024. This trend indicates decreasing profitability relative to net revenues, suggesting increased costs, reduced efficiency, or other factors impacting net returns.
- Overall Analysis
- The data reveals an inverse relationship between net revenues and economic profit after 2021. Despite continuous revenue growth, the economic profit and its margin have substantially decreased. This suggests the company may be experiencing rising costs or diminishing returns on additional revenue, which could impact long-term economic value creation. Careful analysis of expense management and operational efficiency might be warranted to address the declining profitability margins.