Operating Profit Margin
since 2005
Calculation
Reynolds American Inc., operating profit margin, long-term trends, calculation
| Operating profit margin | = | 100 | × | Operating income1 | ÷ | Net sales, includes excise taxes1 | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2016 | 62.74% | = | 100 | × | 10,569) | ÷ | 16,846) |
| Dec 31, 2015 | 47.54% | = | 100 | × | 6,953) | ÷ | 14,625) |
| Dec 31, 2014 | 20.92% | = | 100 | × | 2,531) | ÷ | 12,096) |
| Dec 31, 2013 | 26.17% | = | 100 | × | 3,132) | ÷ | 11,966) |
| Dec 31, 2012 | 18.11% | = | 100 | × | 2,214) | ÷ | 12,227) |
| Dec 31, 2011 | 18.97% | = | 100 | × | 2,399) | ÷ | 12,648) |
| Dec 31, 2010 | 18.77% | = | 100 | × | 2,419) | ÷ | 12,891) |
| Dec 31, 2009 | 14.38% | = | 100 | × | 1,775) | ÷ | 12,346) |
| Dec 31, 2008 | 19.12% | = | 100 | × | 2,052) | ÷ | 10,735) |
| Dec 31, 2007 | 20.71% | = | 100 | × | 2,288) | ÷ | 11,049) |
| Dec 31, 2006 | 18.15% | = | 100 | × | 1,930) | ÷ | 10,634) |
| Dec 31, 2005 | 13.99% | = | 100 | × | 1,459) | ÷ | 10,431) |
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31), 10-K (reporting date: 2010-12-31), 10-K (reporting date: 2009-12-31), 10-K (reporting date: 2008-12-31), 10-K (reporting date: 2007-12-31), 10-K (reporting date: 2006-12-31), 10-K (reporting date: 2005-12-31).
1 US$ in millions
The financial performance from 2005 to 2016 is characterized by a dramatic escalation in operational efficiency, shifting from moderate margins to an exponential increase in profitability during the final two years of the period.
- Early Growth and Stabilization (2005–2012)
- Between 2005 and 2012, the operating profit margin exhibited relative stability with a slight upward trajectory. Starting at 13.99% in 2005, the margin peaked early at 20.71% in 2007 before fluctuating within a range of 14.38% to 18.97%. During this period, net sales remained relatively flat, moving from 10,431 million USD to 12,227 million USD, while operating income grew steadily from 1,459 million USD to 2,214 million USD.
- Transitional Phase (2013–2014)
- A period of volatility occurred in 2013 and 2014. In 2013, the operating profit margin reached a then-record high of 26.17%, driven by an increase in operating income to 3,132 million USD despite a slight decline in net sales. This was followed by a correction in 2014, where the margin retreated to 20.92%, aligning more closely with the historical averages of the preceding five years.
- Exponential Profitability Expansion (2015–2016)
- The most significant shift occurred between 2015 and 2016, where the operating profit margin expanded aggressively. The margin rose from 20.92% in 2014 to 47.54% in 2015, and further accelerated to 62.74% by 2016. This growth was fueled by a disproportionate increase in operating income relative to sales; while net sales grew by approximately 39% between 2014 and 2016, operating income increased by over 317%, rising from 2,531 million USD to 10,569 million USD.
Overall, the data indicates a fundamental transformation in the company's cost structure or pricing power. The transition from a sub-21% margin environment to a 62.74% margin suggests a significant shift in operational leverage or a major change in the underlying business model during the 2015-2016 window.
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Comparison to Competitors
Reynolds American Inc., operating profit margin, long-term trends, comparison to competitors
| Reynolds American Inc. | Coca-Cola Co. | Mondelēz International Inc. | PepsiCo Inc. | Philip Morris International Inc. | |
|---|---|---|---|---|---|
| Dec 31, 2016 | 62.74% | 20.61% | 9.91% | 15.58% | 40.53% |
| Dec 31, 2015 | 47.54% | 19.70% | 30.02% | 13.25% | 39.65% |
| Dec 31, 2014 | 20.92% | 21.11% | 9.47% | 14.37% | 39.31% |
| Dec 31, 2013 | 26.17% | 21.83% | 11.25% | 14.61% | 43.29% |
| Dec 31, 2012 | 18.11% | 22.45% | 10.39% | 13.91% | 44.18% |
| Dec 31, 2011 | 18.97% | 21.82% | 12.25% | 14.48% | 42.90% |
| Dec 31, 2010 | 18.77% | 24.06% | 11.51% | 14.41% | 41.16% |
| Dec 31, 2009 | 14.38% | 26.56% | 13.68% | 18.61% | 40.10% |
| Dec 31, 2008 | 19.12% | 26.44% | 9.04% | 16.03% | 39.87% |
| Dec 31, 2007 | 20.71% | 25.13% | 11.63% | 18.16% | — |
| Dec 31, 2006 | 18.15% | 26.19% | 13.17% | 18.33% | — |
| Dec 31, 2005 | 13.99% | 26.34% | 13.93% | 18.19% | — |
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31), 10-K (reporting date: 2010-12-31), 10-K (reporting date: 2009-12-31), 10-K (reporting date: 2008-12-31), 10-K (reporting date: 2007-12-31), 10-K (reporting date: 2006-12-31), 10-K (reporting date: 2005-12-31).