Delivers 2023
Third-Quarter Reported Diluted EPS of $1.32 and Adjusted Diluted EPS of $1.67, Representing
Currency-Neutral Growth of 20.3%; Targets 2023 Full-Year Reported Diluted EPS of $4.95 to
$4.98 and Adjusted Diluted EPS of $6.05 to $6.08, Representing
Increased Currency-Neutral Growth Outlook of 10.0% to
10.5%
Regulatory News:
Philip Morris International Inc. (PMI) (NYSE: PM) today
announces its 2023 third-quarter and nine-month year-to-date
results. Further explanation of PMI's use of non-GAAP measures
cited in this document and reconciliations to the most directly
comparable U.S. GAAP measures can be found in the “Non-GAAP
Measures, Glossary and Explanatory Notes” section of this release,
in Exhibit 99.2 to the company's Form 8-K dated October 19, 2023,
and at www.pmi.com/2023Q3earnings.
2023 THIRD-QUARTER HIGHLIGHTS
Third-Quarter
Change vs. Q3 2022
Amount
Reported
Adjusted
Total Cig. & HTU Shipment Volume
(units bn)
193.6
2.2%
HTU Shipment Volume (units bn)
32.5
18.0%
Oral Product Shipment Volume (mn cans)
(1)
209.0
+100%
19.4%
(2)
Net Revenues ($ bn)
$9.1
13.8%
9.3%
(3)
Smoke-Free Product Net Revenues ($ bn)
$3.3
35.6%
16.5%
(3)
- % of Total Net Revenues
36.2%
5.8pp
Operating Income ($ bn)
$3.4
13.5%
11.3%
(3)
Diluted Earnings per Share
$1.32
(1.5)%
Adjusted Diluted Earnings per Share
$1.67
20.3%
(4)
(1) Excludes snuff, snuff leaf and U.S.
chew
(2) On a pro forma basis (including
Swedish Match in all periods)
(3) On an organic basis
(4) Excluding currency
- Reported net revenues up by 16.4%, excluding currency
- Combustible tobacco net revenue growth of 4.3%; growth of 6.2%
on an organic basis, driven by pricing of 9.0%
- Market share for HTUs in IQOS markets up by 1.2 points to
9.0%
- Adjusted in-market sales volume for HTUs, which excludes the
net unfavorable impact of estimated distributor and wholesaler
inventory movements, up by an estimated 14.4%
- Total IQOS users at quarter-end estimated at approximately 27.4
million (up by 0.2 million versus June 2023, reflecting normal
seasonal quarterly trends), of which approximately 19.7 million had
switched to IQOS and stopped smoking
- ZYN nicotine pouch (NP) shipment volume in the U.S. of 105.4
million cans, representing growth of 65.7% versus third-quarter
2022 Swedish Match shipments of 63.6 million cans
- Increased regular quarterly dividend by 2.4% to $1.30 per
share, or an annualized rate of $5.20 per share
"We delivered a very strong performance in the third quarter,
surpassing $9 billion in quarterly net revenues for the first time
and generating record quarterly adjusted diluted EPS of $1.67,
representing currency-neutral growth of 20.3%," said Jacek Olczak,
Chief Executive Officer.
"This reflects continued excellent business momentum, driven by
strong IQOS performance, resilient combustible trends and the
exceptional growth of ZYN -- which has surpassed our expectations
yet again."
"As a result of our strong year-to-date delivery, we are raising
our full-year growth outlook for adjusted diluted EPS to a range of
10.0% to 10.5%, excluding currency."
2023 THIRD-QUARTER SUMMARY
Net revenues increased by 9.3% on an organic basis, driven by
total cigarette and HTU shipment volume growth of 2.2% (reflecting
growth of 18.0% for HTUs and a decline of 0.5% for cigarettes), the
favorable product mix impact of smoke-free products, and
combustible tobacco pricing of 9%.
Adjusted operating income increased by 11.3% on an organic
basis, reflecting a sequential acceleration as supply chain
disruptions and ILUMA-related factors continued to dissipate,
coupled with the favorable underlying dynamics of the company's
shift to smoke-free products. Adjusted operating income margin of
40.8% increased by 1.4 points sequentially versus the second
quarter.
Adjusted diluted EPS of $1.67 increased by 20.3%, excluding
currency, driven primarily by the organic growth in adjusted
operating income, as well as the results of the Swedish Match
business and its strong performance led by ZYN in the U.S.
Third-Quarter
2023
2022
Currency
Var. excl. Currency
Reported Diluted EPS
$
1.32
$
1.34
$
(0.17
)
11.2
%
Income tax impact associated with Swedish
Match AB financing
0.09
—
Impairment of goodwill and other
intangibles
—
0.06
Amortization of intangibles (1)
0.10
0.02
Charges related to the war in Ukraine
0.01
—
Costs associated with Swedish Match AB
offer
—
0.11
Termination of agreement with Foundation
for a Smoke-Free World
0.07
—
Fair value adjustment for equity security
investments
(0.03
)
—
Tax items (2)
0.11
—
Adjusted Diluted EPS
$
1.67
$
1.53
$
(0.17
)
20.3
%
(1) 2023 amount includes $0.06 related to
Swedish Match AB purchase price allocation adjustment
(2) 2023 Tax items relate to the
unilateral suspension of certain Russian double tax treaties by the
Russian government
2023 FULL-YEAR FORECAST
Full-Year
2023 Forecast
2022
Growth
Reported Diluted EPS
$4.95
-
$4.98
$ 5.81
Adjustments:
Asset impairment and exit costs
0.06
—
Termination of distribution arrangement in
the Middle East
0.04
—
Income tax impact associated with Swedish
Match AB financing
0.03
(0.13
)
Amortization of intangibles (1)
0.24
0.09
Impairment of goodwill and other
intangibles
0.44
0.06
Costs associated with Swedish Match AB
offer
—
0.06
Charges related to the war in Ukraine
0.01
0.08
Swedish Match AB acquisition accounting
related item
0.01
0.06
Termination of agreement with Foundation
for a Smoke-Free World
0.07
—
South Korea indirect tax charge
0.11
—
Fair value adj. for equity security
investments
(0.02)
(0.02
)
Tax items (2)
0.11
(0.03
)
Total Adjustments
1.10
0.17
Adjusted Diluted EPS
$6.05
-
$6.08
$ 5.98
Less: Currency
(0.53)
Adjusted Diluted EPS, excluding
currency
$6.58
-
$6.61
$ 5.98
10.0%
-
10.5%
(1) 2023 amount includes $0.08 related to
Swedish Match AB purchase price allocation adjustment
(2) 2023 Tax items relate to the
unilateral suspension of certain Russian double tax treaties by the
Russian government
Reported diluted EPS is forecast to be in a range of $4.95 to
$4.98, at prevailing exchange rates, versus reported diluted EPS of
$5.81 in 2022. The change versus the company's prior forecast of
$5.19 to $5.28 primarily reflects: a tax charge related to the
unilateral suspension of certain Russian double tax treaties by the
Russian government, an income tax impact associated with the
Swedish Match financing, higher amortization of intangibles related
to purchase price allocation adjustments for the Swedish Match
acquisition, and costs related to the termination of the company's
pledge agreement with the Foundation for a Smoke-Free World, partly
offset by better business performance. The above items primarily
relate to the third quarter of 2023.
Excluding a total 2023 adjustment of $1.10 per share and an
adverse currency impact, at prevailing exchange rates, of $0.53 per
share (compared to $0.50 per share previously), this forecast
represents a projected increase of 10.0% to 10.5% versus adjusted
diluted EPS of $5.98 in 2022, as outlined in the above table. This
compares to a projected increase of 8.0% to 9.5% on the same basis
per the company's prior full-year 2023 forecast provided on
September 28, 2023.
2023 Full-Year Forecast Assumptions
This forecast assumes:
- An estimated total international industry volume decline for
cigarettes and HTUs, excluding China and the U.S., of 1.5% to 2.0%,
compared to 0.5% to 1.5% previously;
- Total cigarette and HTU shipment volume growth for PMI of 1.0%
to 1.5%, compared to 'up to +1%' previously;
- HTU shipment volume within the lower half of the company's
previous 125-to-130-billion-unit range (compared to around the
middle of the range previously), reflecting the impact of a further
delayed market launch in Taiwan, very limited growth in Russia and
Ukraine, as well as some uncertainty related to inventory levels in
the Europe Region, as trade partners adjust to the upcoming HTU
flavor ban in the EU;
- Nicotine pouch shipment volume of 390 to 410 million cans
(compared to 370 to 400 million cans previously), reflecting the
continued outstanding growth of ZYN in the U.S.;
- A cigarette shipment volume decline of approximately 1.0% to
2.0%, compared to 1.5% to 2.5% previously;
- Net revenue growth of around 8.0% on an organic basis, compared
to approximately 7.5% to 8.5% previously;
- An adjusted operating income margin decline of 50 to 150 basis
points on an organic basis, with the decline likely toward the
upper (150 basis point) end of the range, notably due to the
factors outlined in PMI's second-quarter 2023 results on July 20,
2023;
- Incremental investments to drive future growth, including the
commercialization of ILUMA and around $150 million with a broadly
even split between the U.S. and the Wellness and Healthcare
segment;
- Wellness and Healthcare segment net revenues of around $300
million (including smoking cessation products), with an adjusted
operating loss of around $150 million, primarily due to investments
in research and development;
- No contribution from any potential favorable court ruling
related to the legality of a supplemental tax surcharge on HTUs in
Germany, which went into effect in 2022 (see PMI's first-quarter
2023 press release from April 20, 2023, for additional detail). PMI
currently expects to have greater visibility on the outcome around
the end of the year;
- The contribution of the company's operations in Russia and
Ukraine for the entire year;
- Full-year amortization and impairment of acquired intangibles
of $0.68 per share, which includes amortization related to the
Swedish Match acquisition based on preliminary purchase price
allocation that may be subject to change;
- A full year’s net positive earnings contribution from Swedish
Match including related interest expense, with Swedish Match
included in PMI's organic performance as of November 11, 2023;
- Net financing costs of around $1.1 billion, compared to $1.2
billion previously;
- An effective tax rate, excluding discrete tax events, of
approximately 20.5% to 21.5%;
- Operating cash flow of around $10 billion at prevailing
exchange rates, subject to year-end working capital
requirements;
- Capital expenditures of approximately $1.3 billion, partly
reflecting increased investments behind smoke-free product
manufacturing capacity, including for ILUMA consumables and Swedish
Match's portfolio; and
- No share repurchases in 2023.
Factors described in the Forward-Looking and Cautionary
Statements section of this release represent continuing risks to
these projections.
War in Ukraine
In Ukraine, PMI's main priority remains the safety and security
of its employees and their families in the country. The company
continues commercial activities in select locations where safety
allows, in order to provide product availability and service to
adult consumers, and supplies the market from production centers
outside Ukraine, as well as through a contract manufacturing
arrangement. Production at the company's factory in Kharkiv remains
suspended. On June 20, 2023, PMI announced the investment of $30
million in a new production facility in the Lviv region, in Western
Ukraine. Preparatory work for the facility began in July 2023 and
production is expected to commence in the first quarter of 2024. As
of September 30, 2023, PMI's Ukrainian operations had approximately
$0.5 billion in total assets, excluding intercompany balances.
PMI is continuously assessing the evolving situation in Russia.
This includes recent regulatory constraints in the market entailing
very complex terms and conditions that must be met for any
divestment transaction to be granted approval by the authorities,
and restrictions resulting from international regulations. As of
September 30, 2023, PMI's Russian operations had approximately $2.4
billion in total assets, excluding intercompany balances, of which
approximately $0.7 billion consisted of cash and equivalents held
mostly in local currency (Russian rubles).
Conference Call
A conference call hosted by Emmanuel Babeau, Chief Financial
Officer, will be webcast at 9:00 a.m., Eastern Time, on October 19,
2023. Access the call at www.pmi.com/2023Q3earnings.
TOTAL MARKET, CONSOLIDATED SHIPMENT VOLUME
& MARKET SHARE
Total Market Volume
Third-Quarter
Estimated international industry volume (excluding China and the
U.S.) for cigarettes and HTUs decreased by 2.3% in the third
quarter, reflecting declines in the South & Southeast Asia,
Commonwealth of Independent States, and Middle East & Africa
(SSEA, CIS & MEA) Region, the Europe Region and the Americas
Region, partly offset by an increase in the East Asia, Australia
& PMI Duty Free (EA, AU & PMI DF) Region, as described in
the Regional sections.
Nine Months Year-to-Date
Estimated international industry volume (excluding China and the
U.S.) for cigarettes and HTUs decreased by 1.6% in the first nine
months, reflecting declines in the SSEA, CIS & MEA Region, the
Europe Region and the Americas Region, partly offset by an increase
in the EA, AU & PMI DF Region, as described in the Regional
sections.
Consolidated Shipment Volume
PMI Cigarettes and HTUs
Third-Quarter
Nine Months
Year-to-Date
(million units)
2023
2022
Change
2023
2022
Change
Cigarettes
161,137
161,966
(0.5)%
461,855
467,882
(1.3)%
Heated Tobacco Units
32,471
27,508
18.0%
91,291
77,148
18.3%
Total Cigarettes and HTUs
193,608
189,474
2.2%
553,146
545,030
1.5%
PMI Oral Products (1)
Third-Quarter
Nine Months
Year-to-Date
(million cans)
2023
2022
Change
2023
2022
Change
Nicotine Pouches
114.6
0.8
+100%
295.4
2.7
+100%
Snus
60.3
4.4
+100%
178.5
12.0
+100%
Moist Snuff
33.2
—
—%
102.5
—
—%
Other
0.9
—
—%
3.3
—
—%
Total Oral Products
209.0
5.2
+100%
579.8
14.7
+100%
(1) Excluding snuff, snuff leaf and U.S.
chew
Note: Sum may not foot due to
roundings.
Third-Quarter
PMI's total cigarette and HTU shipment volume increased by 2.2%,
reflecting an 18.0% increase in HTU shipments across all regions,
partly offset by a 0.5% decline in cigarette shipments (due to the
Europe Region, the EA, AU & PMI DF Region and the Americas
Region, partially offset by the SSEA, CIS & MEA Region).
Cigarette shipment volume for Marlboro decreased by 1.6% to 63.0
billion units, due primarily to the Philippines.
PMI’s total oral product shipment volume increased by +100%,
driven by the Swedish Match acquisition. On a pro forma basis
(including Swedish Match in all periods), it increased by 19.4%,
primarily reflecting growth in nicotine pouches (particularly in
the U.S.), partly offset by a decline for snus (mainly in
Scandinavia). Swedish Match's total oral product shipment volume
increased by 20.5% versus its corresponding shipments in the third
quarter of 2022.
Impact of Inventory Movements
Excluding the net favorable impact of estimated distributor
inventory movements (primarily driven by HTUs), PMI’s total
in-market sales for cigarettes and HTUs increased by 0.8%,
reflecting 10.2% growth for HTUs, partly offset by a decline of
0.7% for cigarettes. The net favorable impact of estimated
distributor inventory movements for HTUs was driven primarily by
Japan (primarily reflecting the shift from air to sea freight).
Adjusted in-market sales for HTUs increased by 14.4%, including
growth in Europe of 16.1%, Japan of 11.7% and limited growth in
Russia and Ukraine; excluding these two markets, adjusted in-market
sales for HTUs increased by 15.7%.
Nine Months Year-to-Date
PMI's total cigarette and HTU shipment volume increased by 1.5%,
reflecting an 18.3% increase in HTU shipments across all regions,
partly offset by a 1.3% decline in cigarette shipments (due to the
Europe, EA, AU & PMI DF, and Americas Regions, partly offset by
the SSEA, CIS & MEA Region). Cigarette shipment volume for
Marlboro decreased by 2.3% to 179.8 billion units, due primarily to
the Philippines.
PMI’s total oral product shipment volume increased by +100%,
driven by the Swedish Match acquisition. On a pro forma basis
(including Swedish Match in all periods), it increased by 14.4%,
primarily reflecting the same factors as in the quarter. Swedish
Match's total oral product shipment volume increased by 15.4%
versus its corresponding shipments in the first nine months of
2022.
Impact of Inventory Movements
Excluding the net favorable impact of estimated distributor
inventory movements (primarily driven by HTUs), PMI’s total
in-market sales for cigarettes and HTUs increased by 0.9%,
reflecting 12.8% growth for HTUs, partly offset by a decline of
1.1% for cigarettes. The net favorable impact of estimated
distributor inventory movements for HTUs was driven primarily by
Japan (partly reflecting a favorable comparison due to HTU capacity
constraints in the prior year period), partially offset by
Italy.
Adjusted in-market sales for HTUs increased by 15.2%, including
growth in Europe of 19.3% and Japan of 14.9%. Excluding Russia and
Ukraine, adjusted in market sales for HTUs increased by 17.9%.
International Share of Market - Cigarettes and HTUs
Third-Quarter
Nine Months
Year-to-Date
2023
2022
Change (pp)
2023
2022
Change (pp)
Total International Market Share
(1)
28.9%
28.0%
0.9
28.3%
27.6%
0.7
Cigarettes
24.3%
23.9%
0.4
23.7%
23.6%
0.1
HTU
4.6%
4.1%
0.5
4.6%
4.0%
0.6
Cigarette over Cigarette Market Share
(2)
25.9%
25.3%
0.6
25.2%
24.9%
0.3
(1) Defined as PMI's cigarette and heated
tobacco unit in-market sales volume as a percentage of total
industry cigarette and heated tobacco unit sales volume, excluding
China and the U.S., including cigarillos in Japan
(2) Defined as PMI's cigarette in-market
sales volume as a percentage of total industry cigarette sales
volume, excluding China and the U.S., including cigarillos in
Japan
CONSOLIDATED FINANCIAL SUMMARY
Third-Quarter
Quarters Ended
September 30,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2023
2022
Total
Excl. Curr. &
Acquis.
Total
Cur-
rency
Acqui- sitions
Price
Vol/
Mix
Cost/
Other
(in millions)
Net Revenues
$
9,141
$
8,032
13.8
%
9.3
%
1,109
(209
)
568
513
265
(28
)
Cost of Sales (1)
(3,165
)
(2,935
)
(7.8
)%
(3.6
)%
(230
)
5
(129
)
—
(199
)
93
Marketing, Administration and Research
Costs (2)
(2,606
)
(2,129
)
(22.4
)%
(4.5
)%
(477
)
(83
)
(299
)
—
—
(95
)
Operating Income
$
3,370
$
2,968
13.5
%
18.5
%
402
(287
)
140
513
66
(30
)
Impairment of Goodwill and Other
Intangibles
—
(112
)
+100
%
+100
%
112
—
—
—
—
112
Amortization of Intangibles
(205
)
(27
)
-(100
)%
(11.1
)%
(178
)
—
(175
)
—
—
(3
)
Charges related to the war in Ukraine
(19
)
(6
)
-(100
)%
-(100
)%
(13
)
—
—
—
—
(13
)
Costs associated with Swedish Match AB
offer
—
(217
)
+100
%
+100
%
217
—
—
—
—
217
Termination of agreement with Foundation
for a Smoke-Free World
(140
)
—
—
%
—
%
(140
)
—
—
—
—
(140
)
Adjusted Operating Income
$
3,734
$
3,330
12.1
%
11.3
%
404
(287
)
315
513
66
(203
)
Adjusted Operating Income
Margin
40.8
%
41.5
%
(0.7
)pp
0.7
pp
(1) Includes $10 million in 2023 and $153
million in 2022 related to the special items below.
(2) Includes $354 million in 2023 and $209
million in 2022 related to the special items below.
Net revenues increased by 9.3% on an organic basis, mainly
reflecting: a favorable pricing variance, primarily driven by
higher combustible tobacco pricing; and favorable volume/mix,
mainly driven by higher HTU volume and favorable cigarette mix,
partially offset by lower cigarette volume.
Adjusted operating income increased by 11.3% on an organic
basis, mainly reflecting: the favorable pricing variance; and
favorable volume/mix, mainly driven by higher HTU volume, partly
offset by lower cigarette volume and unfavorable cigarette mix;
partially offset by higher marketing, administration and research
costs (primarily due to inflationary impacts, notably related to
wages).
Nine Months Year-to-Date
Nine Months Ended
September 30,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2023
2022
Total
Excl. Curr. &
Acquis
Total
Cur-
rency
Acqui- sitions
Price
Vol/
Mix
Cost/
Other
(in millions)
Net Revenues
$
26,127
$
23,610
10.7
%
7.4
%
2,517
(1,034
)
1,814
1,309
614
(186
)
Termination of distribution arrangement in
the Middle East
(80
)
—
—
%
—
%
(80
)
—
—
—
—
(80
)
Adjusted Net Revenues
$
26,207
$
23,610
11.0
%
7.7
%
2,597
(1,034
)
1,814
1,309
614
(106
)
Net Revenues
$
26,127
$
23,610
10.7
%
7.4
%
2,517
(1,034
)
1,814
1,309
614
(186
)
Cost of Sales (1)
(9,431
)
(8,191
)
(15.1
)%
(10.3
)%
(1,240
)
206
(605
)
—
(652
)
(189
)
Marketing, Administration and Research
Costs (2)
(8,029
)
(6,097
)
(31.7
)%
(22.6
)%
(1,932
)
56
(612
)
—
—
(1,376
)
Operating Income
$
8,667
$
9,322
(7.0
)%
(5.1
)%
(655
)
(772
)
597
1,309
(38
)
(1,751
)
Asset Impairment & Exit Costs
(109
)
—
—
%
—
%
(109
)
—
—
—
—
(109
)
Termination of distribution arrangement in
the Middle East (3)
(80
)
—
—
%
—
%
(80
)
—
—
—
—
(80
)
Impairment of Goodwill and Other
Intangibles
(680
)
(112
)
-(100
)%
-(100
)%
(568
)
—
—
—
—
(568
)
Amortization of Intangibles
(368
)
(101
)
-(100
)%
6.9
%
(267
)
—
(274
)
—
—
7
Charges related to the war in Ukraine
(19
)
(128
)
85.2
%
85.2
%
109
—
—
—
—
109
Costs associated with Swedish Match AB
offer
—
(269
)
+100
%
+100
%
269
—
—
—
—
269
Swedish Match AB acquisition accounting
related items
(18
)
—
—
%
—
%
(18
)
—
(18
)
—
—
—
South Korea Indirect Tax Charge
(204
)
—
—
%
—
%
(204
)
—
—
—
—
(204
)
Termination of agreement with Foundation
for a Smoke-Free World
(140
)
—
—
%
—
%
(140
)
—
—
—
—
(140
)
Adjusted Operating Income
$
10,285
$
9,932
3.6
%
2.4
%
353
(772
)
889
1,309
(38
)
(1,035
)
Adjusted Operating Income
Margin
39.2
%
42.1
%
(2.9
)pp
(2.1
)pp
(1) Includes $72 million in 2023 and $199
million in 2022 related to the special items below.
(2) Includes $1,466 million in 2023 and
$411 million in 2022 related to the special items below.
(3) Included in Net Revenues above.
Adjusted net revenues increased by 7.7% on an organic basis,
mainly reflecting: a favorable pricing variance, primarily driven
by higher combustible tobacco pricing, partly offset by lower HTU
(net) pricing; and favorable volume/mix, mainly driven by higher
HTU volume and favorable cigarette mix, partially offset by lower
cigarette volume and unfavorable HTU mix; partly offset by lower
fees for certain distribution rights billed to customers in certain
markets, shown in "Cost/Other."
Adjusted operating income increased by 2.4% on an organic basis,
mainly reflecting: the favorable pricing variance; partly offset by
higher marketing, administration and research costs (primarily due
to inflationary impacts, notably related to wages, and lower
commercial investments in the prior year period); higher
manufacturing costs (primarily due to inflationary impacts, notably
related to direct materials, tobacco leaf and energy, partly offset
by productivity); and the impact of lower fees for certain
distribution rights, as noted for net revenues. Volume/mix was
slightly unfavorable, mainly reflecting lower cigarette volume, as
well as unfavorable HTU and cigarette mix, largely offset by higher
HTU volume.
EUROPE REGION
Total Market, PMI Shipment & Market Share
Commentaries
Third-Quarter
The estimated total market for cigarettes and HTUs in the Region
decreased by 2.9% to 146.3 billion units, reflecting a 4.5% decline
for cigarettes, partly offset by a 13.9% increase for HTUs. The
decrease in the estimated total market was notably due to France
(down by 10.6%), Germany (down by 4.7%) and the UK (down by
17.6%).
Nine Months Year-to-Date
The estimated total market for cigarettes and HTUs in the Region
decreased by 1.4% to 411.6 billion units, reflecting a 3.2% decline
for cigarettes, partly offset by a 16.6% increase for HTUs. The
decrease in the estimated total market was notably due to the Czech
Republic (down by 9.0%), France (down by 8.4%), Germany (down by
2.3%) and the UK (down by 15.1%).
Europe Key Data
Third-Quarter
Nine Months
Year-to-Date
Change
Change
2023
2022
% / pp
2023
2022
% / pp
PMI Shipment Volume (million
units)
Cigarettes
43,365
45,304
(4.3
)%
126,263
131,319
(3.9
)%
Heated Tobacco Units
13,155
11,685
12.6
%
34,959
32,496
7.6
%
Total Europe
56,520
56,989
(0.8
)%
161,222
163,815
(1.6
)%
PMI Market Share
Cigarettes
30.4
%
30.8
%
(0.4
)
30.4
%
31.3
%
(0.9
)
Heated Tobacco Units
8.6
%
7.5
%
1.1
8.8
%
7.5
%
1.3
Total Europe
39.0
%
38.2
%
0.8
39.1
%
38.8
%
0.3
Note: Sum may not foot due to
roundings.
Third-Quarter
PMI's total cigarette and HTU shipment volume in the Region
decreased by 0.8% to 56.5 billion units, mainly due to France (down
by 22.5%; or by 12.9% excluding the net unfavorable impact of
estimated distributor inventory movements) and Germany (down by
5.4%), partly offset by Italy (up by 4.0%; or down by 0.5%
excluding the net favorable impact of estimated distributor
inventory movements) and Ukraine (up by 16.4%).
PMI's estimated HTU adjusted in-market sales volume in the
Region increased by 16.1% in the quarter, reflecting the strong
continued growth momentum for IQOS (including in Poland, where
adjusted in-market sales volume for HTUs increased by 11.7%).
PMI's HTU share of the total cigarette and HTU market in the
Region increased by 1.1 points, or by 1.3 points on an adjusted
basis.
Nine Months Year-to-Date
PMI's total cigarette and HTU shipment volume in the Region
decreased by 1.6% to 161.2 billion units, mainly due to Germany
(down by 6.0%, or by 1.5% excluding the net unfavorable impact of
estimated wholesaler inventory movements) and Italy (down by 5.1%;
or by 0.5% excluding the net unfavorable impact of estimated
distributor inventory movements), partly offset by Poland (up by
9.0%).
PMI's estimated HTU adjusted in-market sales volume in the
Region increased by 19.3% in the first nine months, including
growth in Germany and Italy of 33.6% and 16.3%, respectively.
PMI's HTU share of the total cigarette and HTU market in the
Region increased by 1.3 points, or by 1.5 points on an adjusted
basis.
Financial Summary
Third-Quarter
Quarters Ended
September 30,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2023
2022
Total
Excl. Curr. &
Acquis.
Total
Cur-
rency
Acqui- sitions
Price
Vol/
Mix
Cost/
Other
(in millions)
Net Revenues
$
3,672
$
3,272
12.2
%
6.1
%
400
202
—
176
22
—
Operating Income
$
1,708
$
1,415
20.7
%
11.9
%
293
124
—
176
11
(18
)
Adjustments (1)
(89
)
(115
)
22.6
%
22.6
%
26
—
—
—
—
26
Adjusted Operating Income
$
1,797
$
1,530
17.5
%
9.3
%
267
124
—
176
11
(44
)
Adjusted Operating Income
Margin
48.9
%
46.8
%
2.1
pp
1.4
pp
(1) See Schedule 8 in Exhibit 99.2 to the
Form 8-K dated October 19, 2023, for additional detail.
Net revenues increased by 6.1% on an organic basis, reflecting:
a favorable pricing variance, mainly driven by higher combustible
tobacco pricing; and favorable volume/mix, primarily driven by
higher HTU volume, partly offset by lower cigarette volume, as well
as unfavorable cigarette and HTU mix.
Adjusted operating income increased by 9.3% on an organic basis,
primarily reflecting: the favorable pricing variance; partly offset
by higher marketing, administration and research costs (primarily
due to inflationary impacts). Volume/mix was slightly favorable,
mainly reflecting higher HTU volume and favorable device mix,
largely offset by lower cigarette volume, as well as unfavorable
HTU and cigarette mix.
Nine Months Year-to-Date
Nine Months Ended
September 30,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2023
2022
Total
Excl. Curr. &
Acquis.
Total
Cur-
rency
Acqui- sitions
Price
Vol/
Mix
Cost/
Other
(in millions)
Net Revenues
$
9,984
$
9,805
1.8
%
1.9
%
179
(6
)
—
353
(168
)
—
Operating Income
$
4,446
$
4,447
—
%
(1.5
)%
(1
)
64
—
353
(225
)
(193
)
Adjustments (1)
(158
)
(280
)
43.6
%
43.6
%
122
—
—
—
—
122
Adjusted Operating Income
$
4,604
$
4,727
(2.6
)%
(4.0
)%
(123
)
64
—
353
(225
)
(315
)
Adjusted Operating Income
Margin
46.1
%
48.2
%
(2.1
)pp
(2.8
)pp
(1) See Schedule 9 in Exhibit 99.2 to the
Form 8-K dated October 19, 2023, for additional detail.
Net revenues increased by 1.9% on an organic basis, reflecting:
a favorable pricing variance, mainly driven by higher combustible
tobacco pricing, partly offset by lower HTU (net) pricing
(primarily in the first-half of 2023 related to the supplemental
tax surcharge in Germany) and lower device pricing; partially
offset by unfavorable volume/mix, mainly due to lower cigarette
volume, as well as unfavorable HTU and cigarette mix, partly offset
by higher HTU volume and favorable device mix.
Adjusted operating income decreased by 4.0% on an organic basis,
primarily reflecting: unfavorable volume/mix, mainly due to the
same factors as for net revenues; higher marketing, administration
and research costs (mainly due to inflationary impacts and lower
commercial investments in the prior year period); and higher
manufacturing costs (primarily due to inflationary impacts); partly
offset by the favorable pricing variance.
SSEA, CIS & MEA REGION
Total Market, PMI Shipment & Market Share
Commentaries
Third-Quarter
The estimated total market for cigarettes and HTUs in the Region
decreased by around 3%, primarily reflecting a decline for
cigarettes. The decrease in the estimated total market was mainly
due to Bangladesh (down by 7.3%), Egypt (down by 29.3%), Indonesia
(down by 3.9%), Pakistan (down by 28.5%) and the Philippines (down
by 19.4%), partly offset by Turkey (up by 24.3%).
Nine Months Year-to-Date
The estimated total market for cigarettes and HTUs in the Region
decreased by around 2%, primarily reflecting a decline for
cigarettes. The decrease in the estimated total market was mainly
due to Egypt (down by 20.6%), Indonesia (down by 5.0%), Pakistan
(down by 37.8%) and the Philippines (down by 20.4%), partly offset
by Turkey (up by 18.0%).
PMI Shipment Volume
Third-Quarter
Nine Months
Year-to-Date
(million units)
2023
2022
Change
2023
2022
Change
Cigarettes
89,398
86,495
3.4%
250,344
247,106
1.3%
Heated Tobacco Units
6,088
5,830
4.4%
17,388
16,485
5.5%
Total SSEA, CIS & MEA
95,486
92,325
3.4%
267,732
263,591
1.6%
Third-Quarter
PMI's total cigarette and HTU shipment volume in the Region
increased by 3.4% to 95.5 billion units, mainly driven by Egypt (up
by 28.0%) and Turkey (up by 27.6%), partly offset by the
Philippines (down by 26.6%).
Nine Months Year-to-Date
PMI's total cigarette and HTU shipment volume in the Region
increased by 1.6% to 267.7 billion units, mainly driven by Algeria
(up by 24.1%), Egypt (up by 19.3%) and Turkey (up by 24.5%), partly
offset by Indonesia (down by 3.9%), Pakistan (down by 44.3%) and
the Philippines (down by 26.4%).
Financial Summary
Third-Quarter
Quarters Ended
September 30,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2023
2022
Total
Excl. Curr. &
Acquis.
Total
Cur-
rency
Acqui- sitions
Price
Vol/
Mix
Cost/
Other
(in millions)
Net Revenues
$
2,777
$
2,822
(1.6
)%
12.6
%
(45
)
(401
)
—
265
118
(27
)
Operating Income
$
801
$
1,086
(26.2
)%
1.9
%
(285
)
(306
)
—
265
(74
)
(170
)
Adjustments (1)
(49
)
(67
)
26.9
%
26.9
%
18
—
—
—
—
18
Adjusted Operating Income
$
850
$
1,153
(26.3
)%
0.3
%
(303
)
(306
)
—
265
(74
)
(188
)
Adjusted Operating Income
Margin
30.6
%
40.9
%
(10.3
)pp
(4.5
)pp
(1) See Schedule 8 in Exhibit 99.2 to the
Form 8-K dated October 19, 2023, for additional detail.
Net revenues increased by 12.6% on an organic basis, primarily
reflecting: a favorable pricing variance, mainly driven by higher
combustible tobacco pricing; and favorable volume/mix, primarily
driven by favorable cigarette mix.
Adjusted operating income increased by 0.3% on an organic basis,
primarily reflecting: the favorable pricing variance, largely
offset by higher marketing, administration and research costs;
higher manufacturing costs (primarily due to inflationary impacts);
and unfavorable volume/mix, mainly due to an unfavorable cigarette
volume impact and unfavorable cigarette mix.
Nine Months Year-to-Date
Nine Months Ended
September 30,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2023
2022
Total
Excl. Curr. &
Acquis.
Total
Cur-
rency
Acqui- sitions
Price
Vol/
Mix
Cost/
Other
(in millions)
Net Revenues
$
7,922
$
7,781
1.8
%
11.2
%
141
(733
)
—
751
303
(180
)
Adjustment (1)
(80
)
—
—
%
—
%
(80
)
—
—
—
—
(80
)
Adjusted Net Revenues
$
8,002
$
7,781
2.8
%
12.3
%
221
(733
)
—
751
303
(100
)
Net Revenues
$
7,922
$
7,781
1.8
%
11.2
%
141
(733
)
—
751
303
(180
)
Operating Income
$
2,371
$
3,009
(21.2
)%
(6.3
)%
(638
)
(448
)
—
751
(188
)
(753
)
Adjustments (2)
(173
)
(94
)
(84.0
)%
(84.0
)%
(79
)
—
—
—
—
(79
)
Adjusted Operating Income
$
2,544
$
3,103
(18.0
)%
(3.6
)%
(559
)
(448
)
—
751
(188
)
(674
)
Adjusted Operating Income
Margin
31.8
%
39.9
%
(8.1
)pp
(5.6
)pp
(1) Termination of distribution
arrangement in the Middle East
(2) See Schedule 9 in Exhibit 99.2 to the
Form 8-K dated October 19, 2023, for additional detail.
Adjusted net revenues increased by 12.3% on an organic basis,
primarily reflecting: a favorable pricing variance, mainly driven
by higher combustible tobacco pricing, with HTU pricing also
higher; and favorable volume/mix, primarily driven by favorable
cigarette mix, as well as higher volume for HTUs and devices,
partly offset by an unfavorable cigarette volume impact; partially
offset by lower fees for certain distribution rights billed to
customers in certain markets, shown in "Cost/Other."
Adjusted operating income decreased by 3.6% on an organic basis,
primarily reflecting: higher marketing, administration and research
costs; higher manufacturing costs (primarily due to inflationary
impacts); unfavorable volume/mix, mainly due to an unfavorable
cigarette volume impact and unfavorable cigarette mix, partly
offset by higher HTU volume; and the impact of lower fees for
certain distribution rights, as noted for net revenues; partially
offset by the favorable pricing variance.
EA, AU AND PMI DF REGION
Total Market, PMI Shipment & Market Share
Commentaries
Third-Quarter
The estimated total market for cigarettes and HTUs in the
Region, excluding China, increased by around 1%, reflecting growth
for HTUs, largely offset by a decline for cigarettes. The increase
in the estimated total market was mainly driven by International
Duty Free (up by 35.7%), partly offset by Japan (down by 1.0%) and
South Korea (down by 3.0%).
Nine Months Year-to-Date
The estimated total market for cigarettes and HTUs in the
Region, excluding China, increased by around 2%, reflecting growth
for HTUs, partly offset by a decline for cigarettes. The increase
in the estimated total market was mainly driven by International
Duty Free (up by 40.0%), partly offset by Australia (down by
14.9%), South Korea (down by 1.3%) and Taiwan (down by 4.2%).
PMI Shipment Volume
Third-Quarter
Nine Months
Year-to-Date
(million units)
2023
2022
Change
2023
2022
Change
Cigarettes
12,941
13,501
(4.1)%
39,402
41,916
(6.0)%
Heated Tobacco Units
13,099
9,868
32.7%
38,561
27,828
38.6%
Total EA, AU & PMI DF
26,040
23,369
11.4%
77,963
69,744
11.8%
Third-Quarter
PMI's total cigarette and HTU shipment volume in the Region
increased by 11.4% to 26.0 billion units, mainly driven by Japan
(up by 17.6%).
PMI's estimated HTU adjusted in-market sales volume in the
Region increased by 14.1% in the quarter, including growth in Japan
of 11.7%.
Nine Months Year-to-Date
PMI's total cigarette and HTU shipment volume in the Region
increased by 11.8% to 78.0 billion units, mainly driven by Japan
(up by 19.0%) and International Duty Free (up by 12.0%).
PMI's estimated HTU adjusted in-market sales volume in the
Region increased by 16.0% in the first nine months, including
growth in Japan of 14.9%.
Financial Summary
Third-Quarter
Quarters Ended
September 30,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2023
2022
Total
Excl. Curr. &
Acquis.
Total
Cur-
rency
Acqui- sitions
Price
Vol/
Mix
Cost/
Other
(in millions)
Net Revenues
$
1,571
$
1,407
11.7
%
15.3
%
164
(51
)
—
36
179
—
Operating Income
$
753
$
533
41.3
%
54.0
%
220
(68
)
—
36
170
82
Adjustments (1)
(28
)
(46
)
39.1
%
39.1
%
18
—
—
—
—
18
Adjusted Operating Income
$
781
$
579
34.9
%
46.6
%
202
(68
)
—
36
170
64
Adjusted Operating Income
Margin
49.7
%
41.2
%
8.5
pp
11.1
pp
(1) See Schedule 8 in Exhibit 99.2 to the
Form 8-K dated October 19, 2023, for additional detail.
Net revenues increased by 15.3% on an organic basis, reflecting:
favorable volume/mix, mainly driven by higher HTU volume, partly
offset by lower cigarette volume; and a favorable pricing variance,
driven by higher combustible tobacco pricing.
Adjusted operating income increased by 46.6% on an organic
basis, mainly reflecting: favorable volume/mix, primarily driven by
the same factors as for net revenues; and lower supply chain costs
(primarily related to Japan).
Nine Months Year-to-Date
Nine Months Ended
September 30,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2023
2022
Total
Excl. Curr. &
Acquis.
Total
Cur-
rency
Acqui- sitions
Price
Vol/
Mix
Cost/
Other
(in millions)
Net Revenues
$
4,771
$
4,458
7.0
%
15.0
%
313
(354
)
—
73
594
—
Operating Income
$
1,920
$
1,746
10.0
%
27.9
%
174
(313
)
—
73
459
(45
)
Adjustments (1)
(254
)
(59
)
-(100
)%
-(100
)%
(195
)
—
—
—
—
(195
)
Adjusted Operating Income
$
2,174
$
1,805
20.4
%
37.8
%
369
(313
)
—
73
459
150
Adjusted Operating Income
Margin
45.6
%
40.5
%
5.1
pp
8.0
pp
(1) See Schedule 9 in Exhibit 99.2 to the
Form 8-K dated October 19, 2023, for additional detail.
Net revenues increased by 15.0% on an organic basis, reflecting:
favorable volume/mix, mainly driven by higher HTU volume, partly
offset by lower cigarette volume and unfavorable smoke-free product
mix (for HTUs and devices); and a favorable pricing variance,
driven by higher combustible tobacco and device pricing, partly
offset by lower HTU (net) pricing (primarily related to Japan).
Adjusted operating income increased by 37.8% on an organic
basis, mainly reflecting favorable volume/mix, primarily driven by
higher HTU volume and the favorable impact on profitability of
lower device volume, partly offset by lower cigarette volume and
unfavorable HTU mix; the favorable pricing variance; and lower
supply chain costs (primarily related to Japan).
AMERICAS REGION
Total Market, PMI Shipment & Market Share
Commentaries
Third-Quarter
The estimated total market for cigarettes and HTUs in the
Region, excluding the U.S., decreased by around 2%, primarily
reflecting a decline for cigarettes. The decrease in the estimated
total market was mainly due to Argentina (down by 13.1%), Canada
(down by 13.9%) and Mexico (down by 4.7%), partly offset by Brazil
(up by 11.3%).
Nine Months Year-to-Date
The estimated total market for cigarettes and HTUs in the
Region, excluding the U.S., decreased by around 1%, primarily
reflecting a decline for cigarettes. The decrease in the estimated
total market was mainly due to Argentina (down by 3.9%), Canada
(down by 12.9%) and Mexico (down by 6.0%), partly offset by Brazil
(up by 9.6%).
PMI Shipment Volume
Third-Quarter
Nine Months
Year-to-Date
(million units)
2023
2022
Change
2023
2022
Change
Cigarettes
15,433
16,666
(7.4)%
45,846
47,541
(3.6)%
Heated Tobacco Units
129
125
3.2%
383
339
13.0%
Total Americas
15,562
16,791
(7.3)%
46,229
47,880
(3.4)%
Third-Quarter
PMI's total cigarette and HTU shipment volume in the Region
decreased by 7.3% to 15.6 billion units, mainly due to Argentina
(down by 15.8%) and Mexico (down by 7.8%), partly offset by Brazil
(up by 7.5%).
Nine Months Year-to-Date
PMI's total cigarette and HTU shipment volume in the Region
decreased by 3.4% to 46.2 billion units, mainly due to Argentina
(down by 6.9%) and Mexico (down by 9.1%), partly offset by Brazil
(up by 12.7%).
Financial Summary
Third-Quarter
Quarters Ended
September 30,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2023
2022
Total
Excl. Curr. &
Acquis.
Total
Cur-
rency
Acqui- sitions
Price
Vol/
Mix
Cost/
Other
(in millions)
Net Revenues
$
478
$
474
0.8
%
(7.2
)%
4
38
—
21
(54
)
(1
)
Operating Income
$
5
$
85
(94.1
)%
(49.4
)%
(80
)
(38
)
—
21
(41
)
(22
)
Adjustments (1)
(9
)
(13
)
30.8
%
30.8
%
4
—
—
—
—
4
Adjusted Operating Income
$
14
$
98
(85.7
)%
(46.9
)%
(84
)
(38
)
—
21
(41
)
(26
)
Adjusted Operating Income
Margin
2.9
%
20.7
%
(17.8
)pp
(8.9
)pp
(1) See Schedule 8 in Exhibit 99.2 to the
Form 8-K dated October 19, 2023, for additional detail.
Net revenues decreased by 7.2% on an organic basis, primarily
reflecting: unfavorable volume/mix, mainly due to lower cigarette
volume and unfavorable cigarette mix; partly offset by a favorable
pricing variance, driven by higher combustible tobacco pricing.
Adjusted operating income decreased by 46.9% on an organic
basis, mainly reflecting: unfavorable volume/mix, mainly due to the
same factors as for net revenues; and higher marketing,
administration and research costs (including incremental
investments in the U.S. in preparation for smoke-free product
commercialization); partly offset by the favorable pricing
variance.
Nine Months Year-to-Date
Nine Months Ended
September 30,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2023
2022
Total
Excl. Curr. &
Acquis.
Total
Cur-
rency
Acqui- sitions
Price
Vol/
Mix
Cost/
Other
(in millions)
Net Revenues
$
1,399
$
1,367
2.3
%
(2.1
)%
32
61
—
94
(115
)
(8
)
Operating Income
$
141
$
336
(58.0
)%
(36.0
)%
(195
)
(74
)
—
94
(84
)
(131
)
Adjustments (1)
(18
)
(19
)
5.3
%
5.3
%
1
—
—
—
—
1
Adjusted Operating Income
$
159
$
355
(55.2
)%
(34.4
)%
(196
)
(74
)
—
94
(84
)
(132
)
Adjusted Operating Income
Margin
11.4
%
26.0
%
(14.6
)pp
(8.6
)pp
(1) See Schedule 9 in Exhibit 99.2 to the
Form 8-K dated October 19, 2023, for additional detail.
Net revenues decreased by 2.1% on an organic basis, primarily
reflecting: unfavorable volume/mix, mainly due to lower cigarette
volume and unfavorable cigarette mix; partly offset by a favorable
pricing variance, driven by higher combustible tobacco pricing.
Adjusted operating income decreased by 34.4% on an organic
basis, mainly reflecting: higher marketing, administration and
research costs (notably reflecting the same factors as in the
quarter); unfavorable volume/mix, mainly due to the same factors as
for net revenues; and higher manufacturing costs; partly offset by
the favorable pricing variance.
SWEDISH MATCH
PMI Shipment Commentary
Swedish Match Oral Product Shipment
Volume (1)
Third-Quarter
Nine Months
Year-to-Date
(million cans)
2023
2022
Change
2023
2022
Change
Nicotine Pouches
U.S.
105.4
—
—%
268.5
—
—%
Scandinavia
7.5
—
—%
21.6
—
—%
Other
1.3
—
—%
3.6
—
—%
Total Nicotine Pouches
114.2
—
—%
293.8
—
—%
Snus
Scandinavia
55.2
—
—%
162.6
—
—%
Other
1.4
—
—%
5.2
—
—%
Total Snus
56.6
—
—%
167.8
—
—%
Moist Snuff
33.2
—
—%
102.5
—
—%
Other
0.9
—
—%
3.3
—
—%
Total Oral Products
204.9
—
—%
567.4
—
—%
(1) Excluding U.S. chew
Volume comparisons versus Swedish Match's 2022
results reflect data sourced from its disclosures, available at
www.swedishmatch.com/investors.
Third-Quarter
Swedish Match's total shipment volume for oral products
increased by 20.5% versus its corresponding shipments of 170.0
million cans in the third quarter of 2022.
Nicotine pouch shipment volume increased by 58.8% compared to
Swedish Match's third-quarter 2022 shipment volume of 71.9 million
cans, mainly driven by 65.7% growth for ZYN in the U.S. -- an
outstanding performance that reflected continued broad strength
across the country. In Scandinavia, shipment volume for nicotine
pouches grew by 2.8%.
Shipment volume for snus declined by 11.6% compared to Swedish
Match's third-quarter 2022 shipment volume of 64.0 million cans.
The decrease was primarily due to Scandinavia, mainly reflecting
the comparison versus a strong total market in the prior year
period.
Nine Months Year-to-Date
Swedish Match's total shipment volume for oral products
increased by 15.4% versus its corresponding shipments of 491.9
million cans in the first nine months of 2022.
Nicotine pouch shipment volume increased by 50.3% compared to
Swedish Match's September year-to-date 2022 shipment volume of
195.4 million cans, reflecting 55.9% growth for ZYN in the U.S. In
Scandinavia, shipment volume for nicotine pouches grew by 7.1%.
Shipment volume for snus declined by 12.4% compared to Swedish
Match's September year-to-date 2022 shipment volume of 191.7
million cans.
Swedish Match's performance in the September year-to-date period
primarily reflected the same factors as in the quarter, coupled
with the impact of excise tax and price increases on snus in
Scandinavia in the first quarter (including related inventory
movements).
Swedish Match Combustible Product
Shipment Volume
Third-Quarter
Nine Months
Year-to-Date
(million units)
2023
2022
Change
2023
2022
Change
Cigars
334.3
—
—%
1,241.4
—
—%
Third-Quarter
Cigar shipment volume declined by 21.3% compared to Swedish
Match's third-quarter 2022 cigar shipment volume of 424.6 million
units, primarily due to the impact of industry pricing effects.
Nine Months Year-to-Date
Cigar shipment volume declined by 7.3% compared to Swedish
Match's September year-to-date 2022 cigar shipment volume of
1,339.7 million units, mainly due to the same factor as in the
quarter.
Financial Summary
The segment's third-quarter results include the impact of
financial statement presentation reclassifications recorded on a
year-to-date basis primarily associated with the alignment of
accounting policies related to the company's post-acquisition
evaluation of sales incentives, excise taxes and acquired
contracts. Net revenues were unfavorably impacted by these
reclassifications, some of which are associated with the first and
second quarter of 2023. These reclassifications are not material to
the condensed consolidated results of the current period or the
period in which they relate.
Third-Quarter
Quarters Ended
September 30,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2023
2022
Total
Excl. Curr. &
Acquis.
Total
Cur-
rency
Acqui- sitions
Price
Vol/
Mix
Cost/
Other
(in millions)
Net Revenues
$
568
$
—
—
%
—
%
568
—
568
—
—
—
Operating Income
$
140
$
—
—
%
—
%
140
—
140
—
—
—
Adjustments (1)
(175
)
—
—
%
—
%
(175
)
—
(175
)
—
—
—
Adjusted Operating Income
$
315
$
—
—
%
—
%
315
—
315
—
—
—
Adjusted Operating Income
Margin
55.5
%
n/a
—
pp
—
pp
(1) See Schedule 8 in Exhibit 99.2 to the
Form 8-K dated October 19, 2023, for additional detail.
PMI recorded net revenues of $568 million in the Swedish Match
segment for the quarter. Compared to Swedish Match's third-quarter
2022 results, net revenues increased by 21.6%, excluding currency
and the impact of accounting reclassifications. This was mainly
driven by the strong growth of smoke-free products, led by nicotine
pouch volume growth in the U.S.
PMI recorded adjusted operating income of $315 million in the
segment, reflecting an adjusted operating income margin of
55.5%.
Nine Months Year-to-Date
Nine Months Ended
September 30,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2023
2022
Total
Excl. Curr. &
Acquis.
Total
Cur-
rency
Acqui- sitions
Price
Vol/
Mix
Cost/
Other
(in millions)
Net Revenues
$
1,814
$
—
—
%
—
%
1,814
—
1,814
—
—
—
Operating Income
$
597
$
—
—
%
—
%
597
—
597
—
—
—
Adjustments (1)
(292
)
—
—
%
—
%
(292
)
—
(292
)
—
—
—
Adjusted Operating Income
$
889
$
—
—
%
—
%
889
—
889
—
—
—
Adjusted Operating Income
Margin
49.0
%
n/a
—
pp
—
pp
(1) See Schedule 9 in Exhibit 99.2 to the
Form 8-K dated October 19, 2023, for additional detail.
PMI recorded net revenues of $1.8 billion in the Swedish Match
segment in the September year-to-date period, with smoke-free
products accounting for over 80% of the segment's total net
revenues. Compared to Swedish Match's 2022 results for the same
period, net revenues increased by 18.1%, excluding currency and the
impact of accounting reclassifications. This was mainly driven by
the strong growth of smoke-free products, led by nicotine pouch
volume growth in the U.S., as well as higher pricing for
cigars.
PMI recorded adjusted operating income of $889 million in the
segment, reflecting an adjusted operating income margin of
49.0%.
WELLNESS AND HEALTHCARE
The operating results of PMI’s Vectura Fertin Pharma business
are reported in the Wellness and Healthcare segment.
Financial Summary
Third-Quarter
Quarters Ended
September 30,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2023
2022
Total
Excl. Curr. &
Acquis.
Total
Cur-
rency
Acqui- sitions
Price
Vol/
Mix
Cost/
Other
(in millions)
Net Revenues
$
75
$
57
31.6
%
26.3
%
18
3
—
15
—
—
Operating Income / (Loss)
$
(37
)
$
(151
)
75.5
%
74.8
%
114
1
—
15
—
98
Adjustments (1)
(14
)
(121
)
88.4
%
88.4
%
107
—
—
—
—
107
Adjusted Operating Income /
(Loss)
$
(23
)
$
(30
)
23.3
%
20.0
%
7
1
—
15
—
(9
)
Adjusted Operating Income / (Loss)
Margin
(30.7
)%
(52.6
)%
21.9
pp
19.3
pp
(1) See Schedule 8 in Exhibit 99.2 to the
Form 8-K dated October 19, 2023, for additional detail.
Net revenues increased by 26.3% on an organic basis, notably
reflecting higher net revenues for smoking cessation products and
select inhalation products.
The adjusted operating loss of $23 million was primarily due to
investments in research and development.
Nine Months Year-to-Date
Nine Months Ended
September 30,
Change
Fav./(Unfav.)
Variance
Fav./(Unfav.)
2023
2022
Total
Excl. Curr. &
Acquis.
Total
Cur-
rency
Acqui- sitions
Price
Vol/
Mix
Cost/
Other
(in millions)
Net Revenues
$
237
$
199
19.1
%
20.1
%
38
(2
)
—
38
—
2
Operating Income / (Loss)
$
(808
)
$
(216
)
-(100
)%
-(100
)%
(592
)
(1
)
—
38
—
(629
)
Adjustments (1)
(723
)
(158
)
-(100
)%
-(100
)%
(565
)
—
—
—
—
(565
)
Adjusted Operating Income /
(Loss)
$
(85
)
$
(58
)
(46.6
)%
(44.8
)%
(27
)
(1
)
—
38
—
(64
)
Adjusted Operating Income / (Loss)
Margin
(35.9
)%
(29.1
)%
(6.8
)pp
(6.0
)pp
(1) See Schedule 9 in Exhibit 99.2 to the
Form 8-K dated October 19, 2023, for additional detail.
Net revenues increased by 20.1% on an organic basis, notably
reflecting the same factors as in the quarter.
The adjusted operating loss of $85 million was primarily due to
investments in research and development.
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 has authorized versions of PMI’s IQOS Platform 1
devices and consumables and Swedish Match’s General snus as
Modified Risk Tobacco Products. As of September 30, 2023, PMI's
smoke-free products were available for sale in 82 markets, and PMI
estimates that approximately 19.7 million adults around the world
had already switched to IQOS and stopped smoking. Smoke-free
products accounted for approximately 36.2% of PMI’s total
third-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 business, aims to enhance life
through the delivery of seamless health experiences. For more
information, please visit www.pmi.com and www.pmiscience.com.
Forward-Looking and Cautionary Statements
This press release contains projections of future results and
goals and other forward-looking statements, including statements
regarding expected financial or operational performance; capital
allocation plans; investment strategies; regulatory outcomes;
market expectations; and business plans and strategies. Achievement
of future results is subject to 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,
Quarterly Report on Form 10-Q for the second quarter ended June 30,
2023 and Quarterly Report on Form 10-Q for the third quarter ended
September 30, 2023, which will be filed in the coming days. 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.
Non-GAAP Measures, Glossary and Explanatory Notes
Reconciliations of non-GAAP measures in this release to the most
directly comparable U.S. GAAP measures can be found in Exhibit 99.2
to the Form 8-K dated October 19, 2023, and at
www.pmi.com/2023Q3earnings. A glossary of key terms, definitions
and explanatory notes is available in the aforementioned Exhibit
99.2 and on the same webpage, where additional financial schedules,
as well as adjustments and other calculations have also been made
available.
Management reviews net revenues, operating income, operating
income margin, operating cash flow and earnings per share, or
"EPS," on an adjusted basis, which may exclude the impact of
currency and other items such as acquisitions, asset impairment and
exit costs, tax items and other special items. Additionally,
starting in 2022 and on a comparative basis, for these measures
other than net revenues and operating cash flow, PMI includes
adjustments to add back amortization expense on acquisition related
intangible assets that are recorded as part of purchase accounting
and contribute to PMI’s revenue generation, as well as impairment
of intangible assets, if any. While amortization expense on
acquisition related intangible assets is excluded in these adjusted
measures, the net revenues generated from these acquired intangible
assets are included in the company's adjusted measures, unless
otherwise stated. Currency-neutral and organic growth rates reflect
the way management views underlying performance for these measures.
PMI believes that such measures provide useful insight into
underlying business trends and results. Management reviews these
measures because they exclude changes in currency exchange rates
and other factors that may distort underlying business trends,
thereby improving the comparability of PMI’s business performance
between reporting periods. Furthermore, PMI uses several of these
measures in its management compensation program to promote internal
fairness and a disciplined assessment of performance against
company targets. PMI discloses these measures to enable investors
to view the business through the eyes of management.
Non-GAAP measures used in this release should neither be
considered in isolation nor as a substitute for the financial
measures prepared in accordance with U.S. GAAP.
Appendix 1
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Key Market Data
Quarters Ended September
30,
Market
Total Market,
bio units
PMI Shipments, bio
units
PMI Market Share, %
(2)
Total
Cigarette
HTU
Total
HTU
2023
2022
% Change
2023
2022
% Change
2023
2022
% Change
2023
2022
% Change
2023
2022
pp Change
2023
2022
pp Change
Total (1) (2)
668.3
684.2
(2.3)
193.6
189.5
2.2
161.1
162.0
(0.5)
32.5
27.5
18.0
28.9
28.0
0.9
4.6
4.1
0.5
Europe
France
7.6
8.5
(10.6)
2.7
3.5
(22.5)
2.6
3.4
(22.3)
—
0.1
(34.7)
42.2
43.3
(1.1)
0.7
0.7
—
Germany (3)
19.3
20.2
(4.7)
6.9
7.3
(5.4)
6.0
6.6
(8.2)
0.9
0.7
19.2
38.4
38.3
0.1
4.9
3.7
1.2
Italy
19.5
19.4
0.3
10.4
10.0
4.0
6.8
7.2
(5.5)
3.6
2.8
28.8
53.4
53.9
(0.5)
16.0
13.7
2.3
Poland
15.2
15.4
(1.3)
6.5
6.2
4.3
5.2
4.7
9.1
1.3
1.5
(10.7)
42.7
40.4
2.3
8.7
9.7
(1.0)
Spain
11.9
12.4
(4.3)
3.5
3.6
(2.5)
3.1
3.3
(4.4)
0.3
0.3
21.4
29.8
30.6
(0.8)
2.3
1.7
0.6
SSEA, CIS & MEA
Egypt
16.2
23.0
(29.3)
6.4
5.0
28.0
6.1
4.8
28.4
0.2
0.2
20.6
40.2
21.7
18.5
2.0
0.9
1.1
Indonesia
77.9
81.1
(3.9)
22.5
23.3
(3.5)
22.5
23.3
(3.5)
—
—
—
28.9
28.8
0.1
—
—
—
Philippines
10.5
13.0
(19.4)
5.7
7.8
(26.6)
5.6
7.7
(26.8)
0.1
0.1
(10.1)
54.5
59.9
(5.4)
0.5
0.5
—
Russia
55.2
56.4
(2.2)
17.1
17.7
(3.5)
12.9
13.7
(5.7)
4.2
4.0
3.9
31.2
31.7
(0.5)
7.5
7.3
0.2
Turkey
37.5
30.2
24.3
18.9
14.9
27.6
18.9
14.9
27.6
—
—
—
50.5
49.1
1.4
—
—
—
EA, AU & PMI DF
Australia
1.8
2.1
(14.8)
0.7
0.7
(7.5)
0.7
0.7
(7.5)
—
—
—
38.1
35.1
3.0
—
—
—
Japan (2)
38.2
38.6
(1.0)
15.5
13.2
17.6
4.3
4.9
(11.7)
11.2
8.3
35.0
39.5
37.9
1.6
26.5
24.1
2.4
South Korea
18.8
19.4
(3.0)
3.7
3.7
(1.1)
2.4
2.6
(8.4)
1.3
1.2
14.9
19.6
19.0
0.6
7.1
5.9
1.2
Americas
Argentina
6.6
7.6
(13.1)
4.0
4.8
(15.8)
4.0
4.8
(15.8)
—
—
—
61.2
63.2
(2.0)
—
—
—
Mexico
7.7
8.1
(4.7)
4.9
5.3
(7.8)
4.8
5.2
(8.0)
—
—
—
62.9
65.1
(2.2)
0.5
0.4
0.1
(1) Market share estimates are calculated
using IMS data, unless otherwise stated
(2) Total market and market share
estimates include cigarillos in Japan
(3) PMI market share reflects estimated
adjusted in-market sales volume share. Historical HTU adjusted
in-market sales volume share: Q4, 2022 (4.7%); Q1, 2023 (5.4%); Q2,
2023 (5.4%). Historical total adjusted in-market sales volume
share: Q4, 2022 (39.7%); Q1, 2023 (39.4%); Q2, 2023 (39.2%)
Note: % change for Total Market and PMI
shipments is computed based on millions of units. "-" indicates
volume below 50 million units and market share below 0.1%
Appendix 2
PHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Key Market Data
Nine Months Ended September
30,
Market
Total Market,
bio units
PMI Shipments, bio
units
PMI Market Share, %
(2)
Total
Cigarette
HTU
Total
HTU
2023
2022
% Change
2023
2022
% Change
2023
2022
% Change
2023
2022
% Change
2023
2022
pp Change
2023
2022
pp Change
Total (1) (2)
1,929.9
1,961.1
(1.6)
553.1
545.0
1.5
461.9
467.9
(1.3)
91.3
77.1
18.3
28.3
27.6
0.7
4.6
4.0
0.6
Europe
France
22.7
24.8
(8.4)
10.2
10.8
(5.3)
10.0
10.6
(5.4)
0.2
0.2
(1.2)
42.3
43.7
(1.4)
0.7
0.7
—
Germany (3)
53.0
54.2
(2.3)
19.8
21.1
(6.0)
17.7
19.0
(6.8)
2.2
2.1
1.2
39.0
38.7
0.3
5.2
3.8
1.4
Italy
55.1
55.0
0.1
29.1
30.7
(5.1)
20.8
22.2
(6.4)
8.4
8.5
(1.7)
53.7
54.0
(0.3)
16.8
14.3
2.5
Poland
43.7
42.9
1.7
18.1
16.6
9.0
14.3
13.0
9.8
3.8
3.6
6.1
41.4
38.7
2.7
8.7
8.3
0.4
Spain
33.0
34.0
(2.9)
9.9
10.6
(6.3)
9.2
9.9
(7.7)
0.8
0.7
13.6
29.4
30.3
(0.9)
2.2
1.6
0.6
SSEA, CIS & MEA
Egypt
54.8
69.0
(20.6)
18.1
15.2
19.3
17.4
14.6
18.8
0.7
0.5
31.4
33.3
22.2
11.1
1.6
0.8
0.8
Indonesia
219.1
230.6
(5.0)
63.1
65.6
(3.9)
63.1
65.6
(3.9)
—
—
—
28.8
28.5
0.3
—
—
—
Philippines
32.2
40.4
(20.4)
18.0
24.5
(26.4)
17.8
24.3
(26.6)
0.2
0.2
6.3
56.0
60.6
(4.6)
0.5
0.4
0.1
Russia
152.0
156.7
(3.0)
48.3
48.6
(0.7)
36.5
37.3
(2.3)
11.8
11.3
4.9
31.7
30.9
0.8
7.9
7.6
0.3
Turkey
101.1
85.6
18.0
50.3
40.4
24.5
50.3
40.4
24.5
—
—
—
49.8
47.2
2.6
—
—
—
EA, AU & PMI DF
Australia
5.6
6.6
(14.9)
2.0
2.2
(10.2)
2.0
2.2
(10.2)
—
—
—
35.4
33.6
1.8
—
—
—
Japan (2)
111.1
110.5
0.6
47.0
39.5
19.0
13.9
16.1
(13.6)
33.0
23.3
41.6
39.5
37.5
2.0
26.4
23.4
3.0
South Korea
54.3
55.0
(1.3)
10.6
10.6
0.3
6.8
7.2
(5.8)
3.8
3.4
13.4
19.5
19.2
0.3
7.0
6.1
0.9
Americas
Argentina
21.6
22.5
(3.9)
13.4
14.4
(6.9)
13.4
14.4
(6.9)
—
—
—
61.9
63.9
(2.0)
—
—
—
Mexico
21.2
22.6
(6.0)
13.2
14.5
(9.1)
13.1
14.4
(9.2)
0.1
0.1
10.6
62.2
64.3
(2.1)
0.5
0.4
0.1
(1) Market share estimates are calculated
using IMS data, unless otherwise stated
(2) Total market and market share
estimates include cigarillos in Japan
(3) PMI market share reflects estimated
adjusted in-market sales volume share
Note: % change for Total Market and PMI
shipments is computed based on millions of units. "-" indicates
volume below 50 million units and market share below 0.1%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231018364450/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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