PMI: Q1 2023 Results

Share on facebook
Share on twitter
Share on email
Share on whatsapp
Share on linkedin

Bottom-line results & Volume progression1

Revenue: up +3.2% to $8.02Bn in Q1 2023 (expected $8.11Bn)

Adjusted diluted EPS: down -4.4% to $1.38 in Q1 2023 (expected $1.34)

Total volume: down -1.1% to 171.1Bn units in Q1 2023 (HnB volume: +10.4% to 27.4Bn; +16% adj.)

Smoke-free revenue: $2.8Bn => 34.9% of total revenue (2025 target: 50%)

FY23 Guidance: Re-affirms net revenue growth of 7-8.5% and adj. EPS growth of 7-9%

Key highlights

– ZYN shipment in the US: 73.2 Mn cans (+46.7% reported; well over 30% adj.)

– Total oral tobacco volume: 173.3Mn cans (nicotine pouches: 81.3Mn cans; 47% of the total)

– Initiated a project to fully outsource the e-vapor manufacturing. Adjusting the VEEV e-vapor portfolio/approach with intention to commercialize VEEV in select markets (emphasis on profitability)

– Wellness & Healthcare: $86Mn net revenue and $24Mn adj. operating loss (reflecting R&D investments)

Operating Income: margin pressures

Adj. operating income margin down 5.8% points (on organic basis) due to:

– inflationary cost pressures (notably related to input costs and energy prices)

– transitory supply chain costs impact associated with the ILUMA roll-out

– general inflationary pressures on operating costs

– phasing of certain investments and other costs

Re-iterates that top/bottom-line delivery will improve throughout the year

FY23 Guidance

FY23 Revenue growth: +7%-8.5% (organic)

FY23 Adj. EPS (ex-FX) growth: a projected increase of 7%-9% to to $6.40-$6.52 v.s adj. diluted EPS of $5.98 in 2022

FY23 Adj. EPS: $0.15 lower than before (adverse currency impact now seen as $0.30 due to the weakness of Yen, Ruble and the Egyptian pound)

Q2 2023 Revenue: high single-digit (vs. +3.2% in Q1)

Q2 2023 EPS: $1.42-$1.47, including an unfavorable FX impact of $0.13/share

Total PMI volume: flat to +1%, despite 1-2% industry volume decline (ex-China&US)

HnB volume: 125-130Bn (acceleration in growth vs. 2022); Q2 HnB volume: 30-32Bn

Cigarette volume: a decline of 2.5% to 3.5%

Adj. operating margin: 0.5%-1.5% decline

Wellness & Healthcare revenues of $300Mn with an operating loss of $150Mn

Incremental net interest costs: $200Mn (vs. 2022), reflecting higher borrowing costs on refinanced debt

Operating cash flow: $10-11 Bn (no share repurchases due to the Swedish Match acquisition)

Our takeaway

Top-class management, execution & results vis-a-vis the industry peers. 5.8% points decline in the adj. operating margin decline is a bit of a shocker, but not unexpected. Moreover, PMI re-iterates that top/bottom-line delivery will improve throughout the year. Most importantly, two crown jewels of PMI, IQOS & Zyn, continue to demonstrate a stellar performance.

PMI shares rallied ~13% from the March low leading up to the Q1 2023 release. A short-term pullback won’t be unexpected (- on the basis of operating margin pressures). Nevertheless, we continue to like PM which is on the way to a new all-time high (ATH). The timing of the new ATH could coincide with the IQOS launch in the US. Meanwhile, any major pullback is a buying opportunity for the LT investors.


  1. ↩︎

Call Request:

We will reach out to you within 24 hours to discuss your request. Please note that we only respond to requests with a valid business e-mail address
Disclaimer: The content in our Market Pulse section is/shall not be construed as investment advice. It is for informative purposes only and does not take into account the individual needs, investment objectives and specific financial circumstances. Any action taken upon the information in our Market Pulse section is strictly at the reader’s own risk. We assume no responsibility or liability for the actions taken. Moreover, we also assume no responsibility or liability for any errors or omissions in our content – which is provided on an “as is” basis with no guarantees of completeness, accuracy, usefulness or timeliness even if we only depend on the infromation sources that are believed to be accurate.

Session Request

We will reach out to you within 24 hours to discuss your request. Please note that we only respond to requests with a valid business e-mail address