Release date: Philip Morris International (PMI) issues its 2024 third-quarter and first nine-months results on Tuesday, October 22, 2024, at 9:00 a.m. ET (13:00 pm CEST) and hosts a live audio
webcast at 9:00 a.m. ET (15:00 p.m. CEST) the same day.
Key Business Metrics1
Adjusted net revenue: up +11.6% to $9.91Bn (vs. $9.68Bn expected; $9.14Bn in Q3 2023) => record quarterly net revenue
Adjusted diluted EPS: up +14.4% to $1.91 (vs. $1.82 expected; $1.67 in Q3 2023) => record quarterly EPS
Adjusted operating income margin: 41.9% (vs. 40.8% in Q3 2023)
Total volume: up +2.9% to 203Bn (heated tobacco volume: +8.9% to 35.3Bn; oral nicotine volume: +22.2% to 4.4Bn; cigarette volume: +1.3% to 163.2Bn)
Smoke-free weight: 38% by revenue and 40% by gross profit (up +1.9pp and +2.2pp vs. Q3 2023, respectively); 19.6% by volume
Smoke-free business (SFB): Available in 92 markets (+2 vs. Q2 2024). 39.7 billion shipment volume. Net SFB revenue up +16.8% and gross profit up +20.2% on an organic basis (vs. +8.6% and +8.7% for the traditional combustible business)
FY24 Guidance – reported EPS: $6.20 – $6.26, vs. $5.02 in 2023 (previously: $5.89 – $6.01)
FY24 Guidance – adjusted EPS: $6.45 – $6.51, vs. $6.01 in 2023, representing 7.3% – 8.3% growth (previously: $6.33 – $6.45, , representing a growth of 5.3% – 7.3%)
FY24 Guidance – core EPS (excluding currency): $6.85 – $6.91, vs. $6.01 in FY23, representing a growth of 14% – 15% (previously: $6.67 – $6.79, representing a growth of 11% – 13%)
Key Highlights
PMI is on track to deliver the 4th consecutive year of volume growth.
Heated tobacco: 77% category share. IQOS as the second largest nicotine brand in markets where present (+1pp share gain).
– Adjusted in-market sales (IMS) volume up by +14.8%: more specifically, +14.3% in Japan and +11.3% in Europe
– IQOS market share up by +3.2pp to ~30% in Japan, driving the overall category to at least 50% of total nicotine offtake share in 8 major cites, including Tokyo and Yokohama
– IQOS market share up +0.8pp to 9.5% in Europe, with Italy recovering and 8 markets growing in excess of 20%, including Greece and Germany. Both DELIA and LEVIA are now available in 9 European markets with further expansion planned in Q4 2024. Mainstream-priced offering DELIA, and tobacco-free LEVIA, jointly accounts for close to 7% of Italy’s heated tobacco offtake only 3 months after launch.
– Accelerated growth in key cities across the globe, including Seoul, Toronto, Mexico City, Cairo, and Jakarta. Strong growth in Indonesia, driven by geographical expansion and enriched consumables portfolio, with premium clove and capsule products
E-vapor: Focused strategy with Europe at the forefront. Volume momentum and unit cost improvements. VEEV continues to lead the closed pod segment in several markets, including Italy, Romania, and Czechia. Total YTD e-vapor shipment volume reaches 1.2 billion sticks equivalent (assumption: 1ml = 10 sticks)
Oral Tobacco: Shipment volume increased by +24.7% in cans (+22.2% in pouches), fueled by ZYN nicotine pouch growth in the US, where shipments reached 149.1 million cans, representing growth of +41.4% versus prior year as the supply constraints start to ease and despite a further ¢15 per can list price increase taken at the start of September. Outside the US, nicotine pouch volume in cans up nearly +70%, with notable contributions from Pakistan and South Africa. ZYN is now present in 30 markets, including recent launches in Greece and Czechia
Combustibles: Net revenues up by +8.6% on an organic basis, driven by high single-digit pricing and resilient industry volumes. Global brands portfolio & Marlboro reached their highest quarterly market shares since the 2008 spin-off from Altria
FY24 Assumptions
– International (ex-China & US) industry volume growth for cigarettes & HTPs: up to +1% (before: broadly stable)
– PMI volume (including oral nicotine): +2% to +3% (before: +1% to +2%)
– HTP volume: around 140Bn sticks (no change)
– HTP IMS growth: +13% (no change)
– ZYN shipment volume in the US: 570-580Mn cans (before: 560-580Mn cans)
– Net organic revenue growth: 9.5% (before: 7% to 9%)
– Organic operating income growth: 14% to 14.5% (before: 11% to 13%)
– An acceleration in organic smoke-free net revenue and gross profit growth compared to FY23
– Broadly unchanged net revenue (~$300Mn) and adjusted operating loss (~$150Mn) in Wellness & Healthcare segment
– Net financing costs: $1.1-1.2Bn (before: $1.3Bn)
– Operating cash flow: $11Bn; CAPEX: $1.4Bn (before: $1.3Bn-$1.4Bn, including further investments in ZYN capacity in the US)
– Net debt to EBITDA ratio improvement of 0.3x to 0.4x (before: 0.3x to 0.5x) in pursuit of a ratio of ~2x by the end of 2026 (unchanged)
– No earnings impact assumed from the German heated tobacco tax appeal and potential impairments related to the Canadian settlement
Sale of Vectura Group: Sold to Molex Asia in September 2024. MSAs put in place to develop Vectura Fertin Pharma’s inhaled therapeutics pipeline. An impairment charge of $198 million (previous estimate: ~$220 million) recorded in Q3 2024. Remaining units of Vectura Fertin Pharma to operate as a separate company under PMI, focusing on the development & commercialization of oral consumer health & wellness offerings and inhaled prescription products for therapy areas (pain management and cardiovascular emergencies)
Summary
As in H1 2024, PMI’s financial delivery remained very strong in Q3 2024. Overall, net revenue growth of +8.4% in Q3 2024 revalidates PMI’s industry-leading operational performance: organic volume growth (+2.9pp) coupled with strong pricing (+7.5pp) and favorable product mix (+1.4pp; shift to smoke-free products with higher net unit revenue), partially held back by the geographical mix (-0.3pp; shift of volume to emerging markets) and unfavorable FX (-3.2pp).
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