Release Date: October 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Philip Morris International Inc (PM, Financial) reported strong double-digit organic top and bottom-line growth in Q3 2024.
- IQOS and ZYN products showed significant volume growth, with IQOS achieving a 14.8% year-on-year increase in adjusted in-market sales.
- The company raised its full-year guidance for organic revenue growth to around 9.5%, driven by strong performance across its product categories.
- Philip Morris International Inc (PM) achieved a record adjusted diluted earnings per share of $1.91, reflecting a 14.4% growth in dollar terms.
- The company continues to expand its smoke-free product offerings, with IQOS now available in 92 markets and plans to reach 100 by 2025.
Negative Points
- Philip Morris International Inc (PM) faced unfavorable currency impacts, notably due to the weakness in the Egyptian pound and Argentine peso.
- The company is dealing with supply constraints for ZYN in the US, which may not be fully resolved until 2025.
- There are ongoing challenges with illicit trade and patent infringements in the nicotine pouch market.
- The combustible business, while showing growth, faces potential regulatory challenges and excise tax hikes in various markets.
- Philip Morris International Inc (PM) is still navigating the long-standing cigarette-related litigation claims in Canada, which could impact financials.
Q & A Highlights
Q: Can you comment on the expected volume trajectory for IQOS, given the deceleration in shipment volume growth in Q3? Also, provide insights on IQOS volume in East Asia.
A: Emmanuel Babeau, CFO: The deceleration in shipment volume growth was due to timing impacts and seasonality. However, the adjusted in-market sales, which reflect consumer offtake, showed a reacceleration, with almost 15% growth. In East Asia, Japan delivered around 14% growth in adjusted in-market sales, indicating strong market dynamics. We expect continued momentum in Q4, with shipments aligning more closely with consumer offtake.
Q: Regarding ZYN, are you on track to fully restore supply levels this quarter, and how quickly do you expect to recapture lost market share?
A: Emmanuel Babeau, CFO: We anticipate meeting consumer demand in Q4, but full inventory replenishment will likely extend into 2025. We have seen some sequential improvement in market share in Q3, and as availability improves, we expect positive market share recovery.
Q: With international cigarette volumes being positive and pricing guidance increased, do you expect strong cigarette volumes and pricing in FY25? Are there any disruptive excise tax hikes expected?
A: Emmanuel Babeau, CFO: While we can't comment specifically on 2025, the factors driving strong volumes in 2024, such as lack of NGPs in certain markets, may continue. We expect continued price increases, but the 8% to 9% guidance is not indicative of future trends. Currently, there are no significant excise tax hikes to report.
Q: Are you seeing greater success in converting smokers to vapor products compared to heated tobacco, and is there an acceleration in vapor adoption with VEEV's rollout?
A: Emmanuel Babeau, CFO: We do not see greater success in converting smokers to vapor compared to heated tobacco. IQOS continues to show higher conversion rates. The vaping market faces regulatory challenges, and we do not observe a significant acceleration in vapor adoption.
Q: Regarding the Canadian litigation settlement, will the payments be tax-deductible, and when do you expect a final resolution?
A: Emmanuel Babeau, CFO: It's too early to determine if the payments will be tax-deductible. The proposed settlement is still being finalized, and we will provide updates once more information is available.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
