Presents the Company’s
Next Growth Phase, Including Its Ambition for Smoke-Free Products
to Account for Over Two-Thirds of Its Total Net Revenues by
2030; Revises, for Currency Only, 2023
Full-Year Reported and Adjusted Diluted EPS Forecasts, While
Reaffirming Currency-Neutral Adjusted Diluted EPS Growth Forecast
of 8.0% to 9.5%
Regulatory News:
Philip Morris International Inc.’s (NYSE: PM) senior management
presents the company’s business strategies and growth outlook today
at its 2023 Investor Day, held at the company’s Operations Center
in Lausanne, Switzerland. Further explanation of PMI's use of
non-GAAP measures cited in this document and reconciliations to the
most directly comparable U.S. GAAP measures can be found in Exhibit
99.3 to the company's Form 8-K dated September 28, 2023, and at
www.pmi.com/2023InvestorDay. A glossary of key terms, definitions
and explanatory notes is available in the aforementioned Exhibit
99.3 and on the same webpage.
Investor Day Highlights
The company:
- Provides 2024 to 2026 compound annual growth targets of:
- 6% to 8% for net revenues, on an organic basis, including
growing total shipment volumes;
- 8% to 10% for adjusted operating income (OI), on an organic
basis; and
- 9% to 11% for adjusted diluted EPS, excluding currency,
assuming current corporate income tax rates;
- Provides 2026 heated tobacco unit shipment volume target of 180
to 200 billion units and nicotine pouch shipment volume target of
800 million to 1 billion cans;
- Expects ZYN to drive double-digit net revenue and adjusted OI
compound annual growth for the company’s overall U.S. operations
over the 2024 to 2026 period, including the impact of IQOS
investments; and
- Announces its ambition to have more than two-thirds of its
total net revenues come from smoke-free products in 2030.
“We have made significant and unparalleled progress on our
smoke-free transformation, developing a more sustainable growth
model while making important contributions to tobacco harm
reduction, as more smokers switch to our smoke-free products and
leave cigarettes behind," said Jacek Olczak, Chief Executive
Officer.
“Our ambitious 2024 to 2026 targets reflect our confidence in
the future, underpinned by our two leading smoke-free brands – IQOS
and ZYN – as well as continued innovation, with significant
opportunities for further growth over the coming years – both in
the U.S. and internationally.”
“By 2030, our ambition is to be a substantially smoke-free
company, with over two-thirds of our total net revenues coming from
smoke-free products. We see a realistic path to becoming a
smoke-free company over time, and this will be achieved
market-by-market – as we are already demonstrating today.”
Webcast Details
The presentations and Q&A session will be webcast live from
approximately 9:55 a.m. CET to approximately 5:00 p.m. CET, and may
be accessed at www.pmi.com/2023InvestorDay. A copy of the slides
will be made available on the same webpage, where a full transcript
will also be posted following the event. The webcast may also be
accessed on iOS or Android devices by downloading PMI’s Investor
Relations App at www.pmi.com/irapp. An archive of the webcast will
be available until 5:00 p.m. ET on Friday, October 27, 2023.
2023 Full-Year and Third-Quarter Forecast &
Assumptions
Full-Year
2023 Forecast
2022
Growth
Reported Diluted EPS
$5.19
-
$5.28
$5.81
Adjustments
Asset impairment and exit costs
0.06
—
Termination of distr. arrangement in
Middle East
0.04
—
Tax benefit assoc. with Swedish Match AB
financing
(0.06)
(0.13)
Impairment of goodwill and other
intangibles
0.44
0.06
Amortization of intangibles
0.16
0.09
Costs associated with Swedish Match AB
offer
—
0.06
Charges related to the war in Ukraine
—
0.08
Swedish Match AB acq. accounting related
item
0.01
0.06
South Korea indirect tax charge
0.11
—
Fair value adj. for equity security
investments
0.01
(0.02)
Tax Items
—
(0.03)
Total Adjustments
0.77
0.17
Adjusted Diluted EPS
$5.96
-
$6.05
$5.98
Less Currency
(0.50)
Adjusted Diluted EPS, excluding
currency
$6.46
-
$6.55
$5.98
8.0%
-
9.5%
PMI revises its 2023 full-year reported diluted EPS forecast –
for currency only – to a range of $5.19 to $5.28, at prevailing
exchange rates. Excluding a total 2023 adjustment of $0.77 per
share and an adverse currency impact, at prevailing exchange rates,
of $0.50 per share, this forecast continues to represent a
projected increase of 8.0% to 9.5% versus adjusted diluted EPS of
$5.98 in 2022, as outlined above.
“Our excellent momentum continues, with further strong IQOS
performance, resilient combustible trends and better-than-expected
growth for ZYN,” said Jacek Olczak, Chief Executive Officer. “We
now expect third-quarter currency-neutral bottom-line growth to
exceed our July forecast – a strong performance that almost fully
offsets the increased currency headwind, allowing us to target the
lower end of our $1.60 to $1.65 prior forecast range for adjusted
diluted EPS.”
The $0.17 increase in the estimated unfavorable currency impact,
at prevailing exchange rates, is due to a general strengthening of
the U.S. dollar against a range of currencies, as well as a
balance-sheet-related currency impact in Argentina, which accounted
for approximately one-third of the increase. While the company’s
affiliate in Argentina remains subject to highly inflationary
accounting treatment, with the U.S. dollar treated as the
functional currency, the impact reflects the depreciation of
Argentine peso-denominated monetary net assets, which are subject
to capital controls.
The assumptions underlying this forecast remain unchanged versus
those communicated by PMI in its earnings release of July 20, 2023,
with the exception of the following revisions:
- Full-year HTU shipment volume around the middle of the
company’s 125-to-130-billion-unit range, including the impact of a
later-than-expected market launch in Taiwan and very limited growth
in Russia and Ukraine. The range also reflects some uncertainty
related to inventory levels in the Europe Region, as trade partners
adjust to the upcoming HTU flavor ban in the EU;
- Full-year nicotine pouch shipment volume of 370 to 400 million
cans;
- Operating cash flow of around $10 billion at prevailing
exchange rates, subject to year-end working capital requirements,
with the change versus the prior range of $10 to $11 billion
primarily reflecting the unfavorable estimated currency impact on
net earnings;
- A third-quarter unfavorable currency impact on adjusted diluted
EPS of $0.17 per share, at prevailing exchange rates;
- Adjusted diluted EPS toward the lower end of the $1.60 to $1.65
prior forecast range, reflecting the incremental currency impact
almost fully offset by better-than-anticipated business
performance;
- Third-quarter HTU shipment volume around the middle of the
company’s 31-to-33-billion-unit range, including typical
seasonality in IQOS user and market share growth trends; and
- Third-quarter adjusted OI margin that is broadly stable
organically versus the prior year period and up sequentially versus
the second quarter.
Third-Quarter
2023 Forecast
2022
Currency
Var. excl. Curr.
Reported Diluted EPS
$ 1.56
–
$ 1.61
$ 1.34
$ (0.17)
29%-33%
Amort. and impairment of intangibles
(a)
0.04
0.08
Costs assoc. w/ Swedish Match AB offer
--
0.11
Adjusted Diluted EPS
$ 1.60
–
$ 1.65
$ 1.53
$ (0.17)
16%-19%
(a) Includes a non-cash impairment charge
of $0.06 per share in 2022
Factors described in the Forward-Looking and Cautionary
Statements section of this release represent continuing risks to
these projections.
2024-2026 Targets & Assumptions
The company communicates the following key targets related to
the three-year period from 2024 to 2026:
- Positive total shipment volume compound annual growth;
- Annual HTU shipment volume of 180 to 200 billion units in
2026;
- Annual nicotine pouch shipment volume of 800 million to 1
billion cans in 2026;
- Net revenue compound annual growth of 6% to 8% on an organic
basis;
- Adjusted OI compound annual growth of 8% to 10% on an organic
basis;
- Adjusted diluted EPS compound annual growth of 9% to 11%,
excluding currency;
- Gross manufacturing productivities of $1 billion and SG&A
efficiencies of $1 billion;
- $36 to $39 billion in total operating cash flow over the
three-year period at prevailing exchange rates; and
- Adjusted net debt to EBITDA of around 2-times by the end of
2026 at prevailing exchange rates.
The company communicates the following key assumptions related
to the three-year period from 2024 to 2026:
- Excise tax developments consistent with recent trends and
current multi-year tax plans;
- Mid-single-digit annual combustible tobacco pricing variance as
a percentage of prior year net revenues and moderate net pricing on
HTUs;
- Double-digit compound annual growth in net revenues and
adjusted OI for the company’s U.S. operations, including the impact
of IQOS investments;
- Limited growth in Wellness and Healthcare segment net revenues
and no increase in investment levels in the segment;
- No contribution from any potential favorable court ruling
related to the legality of a supplemental tax surcharge on HTUs in
Germany;
- Higher net financing costs;
- Current corporate income tax rates, excluding any potential
impact of the OECD Pillar One and Pillar Two international tax
proposals;
- $3.5 to $3.7 billion in total capital expenditures over the
three-year period, with ~75% related to smoke-free products;
- No share repurchases reflected in the growth targets for the
period.
Capital Allocation
Subject to the discretion of the Board of Directors:
- The company will maintain its progressive dividend policy while
targeting a long-term dividend payout ratio of around 75% of
adjusted diluted EPS;
- The company could consider share repurchases once confirmed
that it is fully on-track for 2-times net debt to adjusted EBITDA
leverage target.
Forward-Looking and Cautionary Statements
This press release contains projections of future results and
goals and other forward-looking statements, including statements
regarding business and regulatory plans, expectations,
opportunities, ambitions, targets, and strategies. These
forward-looking statements and anticipated results reflect the
current views and assumptions of management and are inherently
subject to significant risks, uncertainties and inaccurate
assumptions. In the event that risks or uncertainties materialize,
or underlying assumptions prove inaccurate, actual results could
vary materially from those contained in such forward-looking
statements. Pursuant to the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995, PMI is identifying
important factors that, individually or in the aggregate, could
cause actual results and outcomes to differ materially from those
contained in any forward-looking statements made by PMI.
PMI’s business risks include: excise tax increases and
discriminatory tax structures; increasing marketing and regulatory
restrictions that could reduce our competitiveness, eliminate our
ability to communicate with adult consumers, or ban certain of our
products in certain markets or countries; health concerns relating
to the use of tobacco and other nicotine-containing products and
exposure to environmental tobacco smoke; litigation related to
tobacco use and intellectual property; intense competition; the
effects of global and individual country economic, regulatory and
political developments, natural disasters and conflicts; the impact
and consequences of Russia’s invasion of Ukraine; changes in adult
smoker behavior; the impact of COVID-19 on PMI’s business; lost
revenues as a result of counterfeiting, contraband and cross-border
purchases; governmental investigations; unfavorable currency
exchange rates and currency devaluations, and limitations on the
ability to repatriate funds; adverse changes in applicable
corporate tax laws; adverse changes in the cost, availability, and
quality of tobacco and other agricultural products and raw
materials, as well as components and materials for our electronic
devices; and the integrity of its information systems and
effectiveness of its data privacy policies. PMI’s future
profitability may also be adversely affected should it be
unsuccessful in its attempts to produce and commercialize
reduced-risk products or if regulation or taxation do not
differentiate between such products and cigarettes; if it is unable
to successfully introduce new products, promote brand equity, enter
new markets or improve its margins through increased prices and
productivity gains; if it is unable to expand its brand portfolio
internally or through acquisitions and the development of strategic
business relationships; if it is unable to attract and retain the
best global talent, including women or diverse candidates; or if it
is unable to successfully integrate and realize the expected
benefits from recent transactions and acquisitions. Future results
are also subject to the lower predictability of our reduced-risk
product category’s performance.
PMI is further subject to other risks detailed from time to time
in its publicly filed documents, including PMI’s Annual Report on
Form 10-K for the fourth quarter and year ended December 31, 2022,
and Quarterly Report on Form 10-Q for the second quarter ended June
30, 2023. PMI cautions that the foregoing list of important factors
is not a complete discussion of all potential risks and
uncertainties. PMI does not undertake to update any forward-looking
statement that it may make from time to time, except in the normal
course of its public disclosure obligations.
Philip Morris International: Delivering a Smoke-Free
Future
Philip Morris International (PMI) is a leading international
tobacco company working to deliver a smoke-free future and evolving
its portfolio for the long term to include products outside of the
tobacco and nicotine sector. The company’s current product
portfolio primarily consists of cigarettes and smoke-free products.
Since 2008, PMI has invested more than USD 10.5 billion to develop,
scientifically substantiate and commercialize innovative smoke-free
products for adults who would otherwise continue to smoke, with the
goal of completely ending the sale of cigarettes. This includes the
building of world-class scientific assessment capabilities, notably
in the areas of pre-clinical systems toxicology, clinical and
behavioral research, as well as post-market studies. In November
2022, PMI acquired Swedish Match – a leader in oral nicotine
delivery – creating a global smoke-free champion led by the
companies’ IQOS and ZYN brands. The U.S. Food and Drug
Administration (FDA) has authorized versions of PMI’s IQOS Platform
1 devices and consumables and Swedish Match’s General snus as
Modified Risk Tobacco Products (MRTPs). As of June 30, 2023, PMI's
smoke-free products were available for sale in 80 markets, and PMI
estimates that approximately 19.4 million adults around the world
had already switched to IQOS and stopped smoking. Smoke-free
products accounted for approximately 35.4% of PMI’s total
second-quarter 2023 net revenues. With a strong foundation and
significant expertise in life sciences, PMI announced in February
2021 its ambition to expand into wellness and healthcare areas and,
through its Vectura Fertin Pharma subsidiary, aims to enhance life
through the delivery of seamless health experiences. For more
information, please visit www.pmi.com and www.pmiscience.com.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230927950525/en/
Philip Morris International Investor Relations: Stamford,
CT: +1 (203) 905 2413 Lausanne: +41 (0)58 242 4666
InvestorRelations@pmi.com
Media: Lausanne: +41 (0)58 242 4500 David.Fraser@pmi.com
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