Wednesday, 28 February 2024


PMI sees robust growth in smoke-free products in 2023 By

Philip Morris earnings missed by $0.09, revenue topped estimates

© Reuters.

Philip Morris International (NYSE:) (PMI) has reported a strong operating performance for the year 2023, with significant contributions from its smoke-free products. The company indicated that nearly 40% of its Q4 net revenues and over 40% of its gross profit were derived from smoke-free products. PMI also highlighted the success of its IQOS and ZYN brands, which have shown impressive growth in user base and sales volumes, respectively. Despite a decline in cigarette shipments, PMI outperformed the international category and is well-positioned for accelerated growth in the smoke-free category in 2024. The company’s financial outlook remains positive with expectations of continued organic revenue and profit growth, and it is committed to achieving sustainable growth and transforming the tobacco harm reduction landscape.

Key Takeaways

  • Smoke-free products significantly contributed to PMI’s revenue and profit in 2023.
  • IQOS became the leading international nicotine brand, reaching 25 markets with over 50% top-line contribution from smoke-free products.
  • ZYN oral smoke-free product experienced over 60% volume growth in the US.
  • PMI expects smoke-free organic growth to accelerate in 2024, with a forecasted increase in adjusted in-market sales growth for heated tobacco units (HTU).
  • The company is aiming for a mid-single digit combustible pricing and continued organic revenue and operating income growth.
  • PMI plans to achieve $2 billion in gross cost efficiencies over the next three years.

Company Outlook

  • PMI forecasts a strong acceleration in smoke-free performance in 2024.
  • The company expects organic net revenue progression of 6.5% to 8% and organic operating income growth of 8% to 9.5%.
  • Adjusted diluted EPS growth is projected to be 7% to 9% on a currency-neutral basis.
  • PMI aims to generate significant operating cash flow and plans to prioritize deleveraging and innovation investments.

Bearish Highlights

  • Cigarette shipments declined by 1.4% in 2023.
  • Adjusted diluted EPS was negatively impacted by greater than expected currency headwinds.
  • The ban in the EU poses challenges for PMI’s margin expansion in key geographies.

Bullish Highlights

  • Smoke-free volume growth rates, excluding oral nicotine, were up by 23% in Q4 and 17% in 2023.
  • Swedish Match, part of PMI, delivered outstanding growth, particularly with ZYN in the US.
  • PMI’s smoke-free gross profit grew organically by 19%, expanding gross margins by 340 basis points.
  • IQOS had an estimated 28.6 million users by…

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