Philip Morris International Reports 2024 Fourth-Quarter & Full-Year Results

Delivers 2024 Reported Diluted EPS of $4.52, or $6.01 before Canada non-cash impairment of $1.49, compared to $5.02 in 2023 and Adjusted Diluted EPS of $6.57, Representing Growth of 9.3%, and 15.6% on Currency-Neutral Basis

Regulatory News:

Philip Morris International Inc. (PMI) (NYSE:PM) today announces its 2024 fourth-quarter and full-year results.¹

"2024 was a remarkable year for PMI. We delivered very strong full-year results driven by the continued growth of IQOS and ZYN in addition to a robust combustibles performance," said Jacek Olczak, Chief Executive Officer.

"The long-awaited U.S. FDA authorization of all ZYN nicotine pouches currently marketed in the U.S. is further evidence of the compelling science supporting smoke-free products. We hope our other pending FDA applications will be accelerated. We also hope other countries follow the example of the U.S. and embrace effective tobacco harm reduction measures. This is especially important in places where smoke-free products are banned, resulting in the perpetuation of combustible cigarette consumption."

"With strong momentum across all categories, we are confident that our smoke-free transformation and unparalleled brand portfolio will continue to deliver excellent performance and create value for our shareholders in 2025 and for the long term."

• Smoke-free business (SFB): Quarterly shipments of HTU and oral smoke-free products exceeded 40 billion units for the first time, driving our smoke-free business to a superior performance, with full-year net revenues increasing by 14.2% (16.7% organically) and gross profit increasing by 18.7% (22.7% organically). In the fourth quarter, we delivered 9.2% net revenue growth (9.0% organically) and 15.1% gross profit growth (both reported and organically), despite a tough comparison due to shipment phasing. The smoke-free business accounted for 40% of our total net revenues and around 42% of gross profit (up by 0.7pp and 0.9pp respectively, versus fourth-quarter 2023), with 38.6 million estimated adult users of our smoke-free products (up by 5.3 million versus December 2023), which are now available in 95 markets.
• Inhalable smoke-free products (SFP): IQOS continues to strengthen its overall position as the second largest nicotine ‘brand' in markets where present (gaining 0.7pp of combined cigarette and HTU industry volumes in the fourth quarter) and driving the growth of the heat-not-burn category (over 75% of global category volumes). HTU adjusted in-market sales (IMS) volume, which excludes the net impact of estimated distributor and wholesaler inventory movements, was up for the full year by an estimated 12.6%, with an acceleration, as expected, in the second half to close to 14%, with growth of around 13% in the fourth quarter.
  • In Japan, ILUMA i fueled the growth of IQOS, with adjusted IMS up by around 13% for the full year and the fourth quarter, the 9^th consecutive quarter of double-digit growth. IQOS HTU adjusted market share increased by 3.1pp to 30.6% in the fourth quarter. In December, the overall HTU category exceeded 50% of total nicotine offtake share in 10 major cities and 5 prefectures.
  • In Europe, IQOS HTU adjusted market share increased by 0.9pp in the fourth quarter to 10.6%. Adjusted IMS grew by an estimated 9.4% for the full year with an acceleration in the second half to almost 11%. This includes close to 10% estimated growth in the fourth quarter, with strong double-digit growth in many markets, including Spain, Bulgaria, Romania, Greece, and Germany. IQOS HTU offtake share reached a number of milestones in key cities, crossing 40% in Budapest, 30% in Rome, 15% in Belgrade, and approaching 10% in London and Vienna, with Madrid not far behind.
  • Outside Europe and Japan, strong adjusted IMS growth continued and offtake share increased in key cities across the globe, including Riyadh, Kuala Lumpur, Jakarta, and Mexico City.

In the vaping category, VEEV is an increasingly trusted choice among IQOS legal-age poly-users, and an important part of our smoke-free multi-category strategy, which we continue to deploy across our markets. VEEV is a top 3 pod brand in 13 European markets (holding the #1 position in 5 markets, including Italy, Romania and Czech Republic).

• Oral SFP²: Full-year shipment volume increased by nearly 28% in cans (nearly 25% in pouches or pouch equivalents). Fourth quarter shipment volume increased by 25% in cans (22% in pouches or pouch equivalents), fueled by ZYN nicotine pouch growth in the U.S., where shipments reached nearly 165 million cans, representing growth of nearly 42% versus prior year. Outside the U.S., our nicotine pouch quarterly shipment volume more than doubled, with notable contributions from Pakistan, South Africa, the UK and Mexico. The number of markets where our nicotine pouch products are available increased to 37, including recent launches in Italy, Romania and Thailand.
• Combustibles: Full-year net revenues grew by 4.0% (5.9% organically) predominantly driven by strong pricing. Fourth quarter net revenues grew by 6.0% (6.2% organically), driven by another quarter of high single-digit pricing and growing industry volumes in markets where smoke-free products are not allowed, including Turkey, India, Brazil and Vietnam. Strong pricing and productivity improvements resulted in gross profit growth of 10.7% (10.8% organically). Our global brands portfolio and Marlboro both achieved further market share gains.
• Dividend: Declared regular quarterly dividend of $1.35 per share, or an annualized $5.40 per share.

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¹ 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 February 6, 2025, and at www.pmi.com/2024Q4earnings.

² Oral smoke-free products volume excludes snuff, snuff leaf and U.S. chew

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³ In pouches or pouch equivalents

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⁴ In pouches or pouch equivalents

Reported diluted EPS is forecast to be in a range of $6.55 to $6.68, at prevailing exchange rates, versus reported diluted EPS of $4.52 in 2024. Excluding a total 2025 adjustment of $0.49 per share, this forecast represents a projected increase of 7.2% to 9.1% versus adjusted diluted EPS of $6.57 in 2024. Also excluding an adverse currency impact of $0.22, at prevailing exchange rates, this forecast represents a projected increase of 10.5% to 12.5% versus adjusted diluted EPS of $6.57 in 2024, as outlined in the above table.

2025 Full-Year Forecast Assumptions

This forecast assumes:

• An estimated total international industry volume decline of around 1% for cigarettes and HTUs, excluding China and the U.S.;
• Total cigarette and smoke-free product shipment volume growth for PMI of up to 2% driven by smoke-free products volume growth of 12% to 14%. This factors absolute growth in HTU adjusted IMS volumes at a similar level to 2024, translating into 10% to 12% growth, with the HTU shipment growth rate broadly in line subject to shipment timing and trade inventory movements, and an acceleration in U.S. nicotine pouch shipment volume to reach 780 to 820 million cans, representing growth of 34% to 41%;
• Net revenue growth of around 6% to 8% on an organic basis;
• Organic operating income growth of 10.5% to 12.5%;
• Full-year amortization of acquired intangibles of $0.49 per share, including the amortization of IQOS commercialization rights in the U.S. related to the agreement to end our commercial relationship with Altria Group, Inc. covering IQOS in the U.S.;
• An effective tax rate, excluding discrete tax events, of approximately 22.5% to 23.5%;
• Operating cash flow of around $11 billion at prevailing exchange rates, subject to year-end working capital requirements. This takes into account non-recurring payments relating to the German tax surcharge and the U.S. Tax Cuts and Jobs Act, which amount to approximately $1 billion;
• Capital expenditures of approximately $1.5 billion, including further investments in ZYN capacity in the U.S.;
• Further net debt to adjusted EBITDA ratio improvement as we continue to target a ratio of around 2x by the end of 2026;
• No dividend income from Rothmans, Benson & Hedges Inc. (our deconsolidated Canadian affiliate);
• No share repurchases in 2025; and
• First quarter adjusted diluted EPS of $1.58 to $1.63, including an estimated adverse currency impact of 4 cents at prevailing exchange rates.

Factors described in the Forward-Looking and Cautionary Statements section of this release represent continuing risks to these projections.

In October 2024, PMI was informed by its deconsolidated Canadian affiliate, Rothmans, Benson & Hedges Inc. (RBH), that the court-appointed mediator and monitor in RBH's Companies' Creditors Arrangement Act (CCAA) proceeding filed a proposed plan of compromise and arrangement outlining certain terms of a comprehensive resolution of tobacco product-related claims and litigation in Canada against RBH and its affiliates. See PMI's Form 8-K dated October 18, 2024 for additional details.

On January 24, 2025, RBH filed an objection to approval of the proposed plan with the CCAA court. The positions taken by RBH in this objection, the positions taken by other parties in related filings, and other related developments narrowed the range of possible outcomes with respect to the allocation of the aggregate settlement amount of CAD 32.5 billion, which was determined to be an indicator that PMI's investment in RBH may be impaired. Although there remains some uncertainty as to the final terms of the plan, PMI concluded that, the estimated fair value of its investment in RBH was lower than its carrying value and recorded a non-cash impairment charge of $2.3 billion in the consolidated statement of earnings for the year ended December 31, 2024 as a recognized subsequent event, with an adverse impact on reported diluted EPS of $1.49.

Additionally, PMI has determined that if the CCAA court approves the plan as proposed and it is subsequently implemented, RBH would likely remain deconsolidated under U.S. GAAP. Since the first quarter of 2019, and to date, PMI's reported and adjusted EPS, net debt and other financial results have excluded RBH. However, subject to the terms and requirements of the proposed plan, the payment of certain dividends from RBH to PMI would be permitted going forward, which would be incremental to PMI's cash flow and adjusted diluted EPS.

Following the sale of Vectura Group Ltd. on December 31, 2024, we will update our segment reporting by including the remaining units of Vectura Fertin Pharma in the Europe segment as of the first quarter of 2025. We plan to disclose select historical financial information for the 2022 to 2024 period reflecting this change in the coming weeks.

A conference call hosted by Jacek Olczak, Chief Executive Officer, and Emmanuel Babeau, Chief Financial Officer, will be webcast at 9:00 a.m., Eastern Time, on February 6, 2025. Access the webcast at www.pmi.com/2024Q4earnings.

TOTAL MARKET, CONSOLIDATED SHIPMENT VOLUME & MARKET SHARE

Total Market Volume

Full-Year

Estimated international industry volume (excluding China and the U.S.) for cigarettes and HTUs increased by 1.5% to 2.6 trillion units.

Consolidated Shipment Volume

Fourth-Quarter

PMI's total cigarette and HTU shipment volume increased by 1.9% (HTU shipments increased by 5.1%, and cigarette shipments increased by 1.1%), driven by increases in the SSEA, CIS & MEA Region and the EA, AU & PMI DF Region.

PMI's total oral product shipment volume in cans increased by 25.0%, predominantly reflecting growth in nicotine pouches.

Full-Year

PMI's total cigarette and HTU shipment volume increased by 2.5% (HTU shipments increased by 11.6%, while cigarette shipments increased by 0.6%) with increases across all regions except the Americas.

PMI's total oral product shipment volume in cans increased by 27.8%, primarily reflecting growth in nicotine pouches.

International Share of Market - Cigarettes and HTUs

CONSOLIDATED FINANCIAL SUMMARY

Fourth-Quarter

Net revenues increased by 7.3% on an organic basis, mainly reflecting: a favorable pricing variance, primarily due to higher combustible tobacco pricing; and favorable volume/mix, mainly driven by higher smoke-free products volume, notwithstanding unfavorable cigarette mix.

Adjusted operating income increased by 11.8% on an organic basis, mainly reflecting: the same factors as for net revenues; partly offset by higher marketing, administration and research costs, notwithstanding lower manufacturing costs due to improved productivity.

Full-Year

Adjusted net revenues increased by 9.8% on an organic basis, mainly reflecting: a favorable pricing variance, primarily driven by higher combustible tobacco pricing; and favorable volume/mix, driven by higher smoke-free products volume, partly offset by unfavorable cigarette mix.

Adjusted operating income increased by 14.9% on an organic basis, mainly reflecting: the same factors as for net revenues; partly offset by higher marketing, administration and research costs (primarily due to inflationary impacts, notably related to wages, and higher commercial investments), as well as higher manufacturing costs, notably related to tobacco leaf and the impact of the EU single-use plastics directive, partly offset by productivity.

EUROPE REGION

Total Market, PMI Shipment & Market Share Commentaries

Fourth-Quarter

The estimated total market for cigarettes and HTUs in the Region was broadly stable (130.8 billion units), with a 1.3% decrease for cigarettes and continued HTU growth. Notable decreases in the estimated total market in France (down by 11.7%), and the United Kingdom (down by 17.6%) were offset by Ukraine (up by 8.7%), Poland (up by 3.8%), and Spain (up by 4.1%).

Full-Year

The estimated total market for cigarettes and HTUs in the Region was broadly stable (541.9 billion units), reflecting a 1.4% decrease for cigarettes and continued HTU growth. Similar to the quarter, notable decreases in the estimated total market in France (down by 12.5%), and the United Kingdom (down by 12.6%) were largely offset by Ukraine (up by 4.3%), Bulgaria (up by 7.3%), and Poland (up by 2.3%).

Fourth-Quarter

PMI's total cigarette and HTU shipment volume in the Region was broadly flat (53.6 billion units). Total cigarette and HTU shipment volume decreased notably in Italy (down by 4.6%) and France (down by 13.5%), and increased notably in Poland (up by 10.4%) as well as Ukraine (up by 11.6%).

PMI's estimated HTU adjusted in-market sales volume in the Region increased by close to 10% in the quarter, reflecting continued growth momentum for IQOS. HTU shipments increased by 6.2%.

PMI's HTU share of the total cigarette and HTU market in the Region increased by 0.9pp on an adjusted basis.

Oral SFP shipments increased by 1.7%, driven by nicotine pouches (up by 58.0%).

Full-Year

PMI's total cigarette and HTU shipment volume in the Region increased by 0.7% to 216.3 billion units. Total cigarette and HTU shipment volume increased notably in Poland (up by 7.9%) and Ukraine (up by 9.4%), and decreased notably in France (down by 17.3%) as well as the Netherlands (down by 20.9%).

PMI's estimated HTU adjusted in-market sales volume in the Region increased by 9.4%, reflecting continued growth momentum for IQOS, partly offset by the impact from the EU characterizing flavor ban. HTU shipments increased by 8.9%.

PMI's HTU share of the total cigarette and HTU market in the Region increased by 0.9 pp on an adjusted basis.

Oral SFP shipments increased by 4.9%, driven by growth of nicotine pouches (up by 40.2%).

Financial Summary

Fourth-Quarter

Net revenues increased by 5.5% on an organic basis, reflecting a favorable pricing variance, mainly driven by higher combustible tobacco pricing.

Adjusted operating income increased by 9.1% on an organic basis, primarily reflecting the same factor as for net revenues.

Full-Year

Net revenues increased by 7.1% 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 and adverse cigarette mix.

Adjusted operating income increased by 9.3% on an organic basis, primarily reflecting: the same factors as for net revenues; partly offset by higher marketing, administration and research costs.

SSEA, CIS & MEA REGION

Total Market, PMI Shipment & Market Share Commentaries

Fourth-Quarter

The estimated total market for cigarettes and HTUs in the Region increased by 3.3% to 402.0 billion units. The increase in the estimated total market was mainly due to Vietnam (up by 14.4%), Egypt (up by 16.1%), and Turkey (up by 6.6%), partly offset by Bangladesh (down by 7.8%).

Full-Year

The estimated total market for cigarettes and HTUs in the Region increased by 2.8% to 1,571.9 billion units. The increase in the estimated total market was mainly due to Turkey (up by 9.5%), and Egypt (up by 11.3%), partly offset by Bangladesh (down by 5.0%), and Thailand (down by 13.7%).

Our Regional market share increased by 0.4 points to 23.8%.

Fourth-Quarter

PMI's total cigarette and HTU shipment volume in the Region increased by 4.1% to 94.2 billion units, with notable increases in Turkey (up by 9.3%) and India (up 51.2%), partly offset by Egypt (down by 12.8%) and the Philippines (down by 8.7%) . PMI's estimated HTU adjusted in-market sales volume increased by around 16%, with approximately 12% HTU shipment volume growth.

Full-Year

PMI's total cigarette and HTU shipment volume in the Region increased by 4.2% to 373.4 billion units, mainly driven by Turkey (up by 13.4%), partly offset by Indonesia (down by 3.7%). PMI's estimated HTU adjusted in-market sales volume increased by approximately 15.6%, with about 15% HTU shipment volume growth.

Financial Summary

Fourth-Quarter

Net revenues increased by 6.6% on an organic basis, primarily reflecting: a favorable pricing variance, predominantly driven by higher combustible tobacco pricing; and favorable volume/mix, driven by higher cigarette and HTU volume, partly offset by unfavorable mix.

Adjusted operating income increased by 12.1% on an organic basis, primarily reflecting: the same factors as for net revenues; partly offset by higher marketing, administration and research costs.

Full-Year

Adjusted net revenues increased by 10.9% on an organic basis, primarily reflecting: a favorable pricing variance, predominantly driven by higher combustible tobacco pricing; and favorable volume/mix, driven by higher cigarette and HTU volume coupled with favorable mix.

Adjusted operating income increased by 22.0% on an organic basis, primarily reflecting: a favorable pricing variance, predominantly driven by higher combustible tobacco pricing; and favorable volume/mix, driven by higher cigarette and HTU volume; partly offset by higher manufacturing costs (primarily due to higher cost of tobacco leaf) as well as higher marketing, administration and research costs.

EA, AU AND PMI DF REGION

Total Market, PMI Shipment & Market Share Commentaries

Fourth-Quarter

The estimated total market for cigarettes and HTUs in the Region, excluding China, increased by 0.8% to 81.1 billion units, with a decrease in cigarettes, offset by HTU growth. The increase in the estimated total market was mainly driven by International Duty Free (up by 14.4%) and Japan (up by 2.6%), partly offset by Taiwan (down by 7.4%) and Australia (down by 26.5%).

Full-Year

The estimated total market for cigarettes and HTUs in the Region, excluding China, was broadly stable (318.9 billion units), with a decrease in cigarettes, largely offset by HTU growth. The decrease in the estimated total market in Australia (down by 28.5%) and Korea (down by 2.2%) was offset by International Duty Free (up by 11.3%) and Japan (up by 1.4%).

Our Regional market share increased by 1.3 points to 31.3%.

Fourth-Quarter

PMI's total cigarette and HTU shipment volume in the Region increased by 0.5% to 23.4 billion units with growth in International Duty Free (up by 21.5%), partly offset by Japan (down by 1.9%).

PMI's estimated HTU adjusted in-market sales volume in the Region increased by around 14% and ahead of shipments, which were higher in the first half of the year.

Full-Year

PMI's total cigarette and HTU shipment volume in the Region increased by 3.3% to 104.6 billion units, driven by Japan (up by 6.4%), partly offset by Australia (down by 28.5%).

PMI's estimated HTU adjusted in-market sales volume in the Region increased by 14.5%. HTU shipments increased by 12.6%.

Financial Summary

Fourth-Quarter

Net revenues increased by 2.2% on an organic basis, primarily reflecting a favorable pricing variance.

Adjusted operating income increased by 6.9% on an organic basis, reflecting the same factor as for net revenues.

Full-Year