PMI Reports Strong Performance for Q2 and First Half2024

On July 23, Philip Morris International (PMI) (NYSE: PM) announced its financial results for the second quarter and first half of 2024. The company posted a net revenue of $9.5 billion in Q2, a 5.6% increase from the same quarter in 2023, with a gross profit of $6.1 billion, a 6.7% increase from Q2 of 2023. Operating income also saw a year-over-year increase of 34.2% to $3.44 billion. For the first half of the year, net revenue was $18.261 billion, and operating income increased by 22.5% to $6.489 billion compared to the same period in 2023.

In the second quarter, the PMI shipment volume was 197.3 billion units, including 157.6 billion cigarettes, 35.5 billion heated tobacco products, and 4.2 billion orally consumed smokeless products (the sales volume of orally consumed smokeless products does not include snuff, snuff leaves, and chewing tobacco). The smokeless business accounted for 38.1% of the company's total quarterly revenue, an increase of 2.7% from the same period in 2023. Oral smokeless products experienced strong growth, with an increase of over 20% compared to the second quarter of last year. In the six months so far this year, the shipment volume of heated tobacco products was 68.678 billion, and the total shipment volume of canned oral products was 486 million cans, an increase of 31.2% from the same period in 2023.

The performance highlights are as follows: In the e-cigarette category, VEEV has taken the top position in the closed pod segment market in 5 European markets within 12 months of its launch. Smoke-Free Products (SFB): Net revenue increased by 13.6%, gross profit increased by 15.6%, accounting for 38.1% of total net revenue, a year-on-year increase of 2.7%; expected 36.5 million adult users, with these products available in 90 markets. Smoke-Free Oral Products (SFP2): Can shipments increased by 23.5%, mainly driven by the growth of the ZYN nicotine pouch in the U.S., with shipments reaching 135.1 million cans, a 50.3% increase compared to the previous year. Outside the U.S., nicotine pouch sales increased by over 50%, particularly in some new markets like Pakistan. Smoke-Free Nicotine Products (SFP): As of the end of the quarter, the total estimated users of IQOS were 30.8 million, benefiting from significant progress with the launch of ILUMA i in Japan, Europe (especially in Greece, Hungary, Romania, Bulgaria, and Spain), Korea, and middle- to low-income markets (especially Indonesia). Combustible products: Net revenue increased by 1.2% (organic growth of 4.8%), thanks to another high single-digit pricing and stable industry volume quarter. Dividends: Regular quarterly dividend of $1.30 per share, annualized at $5.20 per share. Diluted earnings per share for the second quarter increased by 52.5% to $1.54 adjusted diluted earnings per share decreased by 0.6% to $1.59 per share; excluding exchange rate effects, it increased by 10.6%.

In the second quarter, total shipments of PMI cigarettes and HTU increased by 2.5%, while total shipments of canned oral products grew by 23.5%, mainly due to the increase in sales of nicotine pouch products.

In Japan, the IQOS series has shown impressive performance, with IQOS increasing its market share in the heated tobacco market by 3% to over 29%.

In the European region, the total market volume of cigarettes and HNB products in the second quarter is estimated to have decreased by 1.7%, to 138 billion units; for the first six months of this year, the decrease is 1.2%, to 262.1 billion units.

In the SSEA, CIS, and MEA regions, the total market volume of cigarettes and HNB products is expected to increase by 3.7% to reach 393.9 billion units. In the first six months of this year, the total market volume of this category is expected to increase by 2.5% to reach 767 billion units.

In the Americas, net income organic growth increased by 14.2%, primarily driven by ZYN nicotine pouches. In the second quarter, shipments of oral products grew by 35.8%, with ZYN nicotine pouches increasing by 50.3%. In the first six months of this year, shipments of oral products grew by 43.4%, with ZYN nicotine pouches growing by 63.5%.

According to PMI's forecast, the global industry for tobacco and tobacco products is expected to remain relatively stable in 2024, with a strong performance in the second half of the year driven by smokeless products. PMI's shipments of cigarettes, heated tobacco units (HTU), and oral smokeless products are projected to increase by 1% to 2%. Nicotine pouch shipments are estimated to range from 5.6 billion to 5.8 billion cans. Net revenues are expected to organically grow by 7.5% to 9%, while organic operating income is anticipated to increase by 11% to 13%. Capital expenditures are estimated to be around $1.3 billion to $1.4 billion, including further investments in ZYN to increase production capacity.

The CEO of PMI, Jacek Olczak, stated that...

Our smoke-free business continued to demonstrate strong momentum in the second quarter and first half of the year,

Excellent foundational performance combined with proactive measures in all categories have once again exceeded our expectations, propelling our business towards strong targets for 2024. Despite facing resistance from exchange rates, we have raised our full-year guidance.