PMI Q2 Report: ZYN Shipments Surge 50.3% in US, VEEV Take the Lead in 5 European Markets

On July 23rd, Philip Morris International (PMI) (NYSE: PM) announced its financial performance for the second quarter and first half of 2024. In the second quarter, net revenue was $9.5 billion, an increase of 5.6% compared to the same quarter in 2023 which was $8.97 billion. Gross profit was $6.1 billion, a 6.7% increase from the second quarter of 2023. Operating income also saw a year-over-year growth of 34.2% to $3.44 billion. For the first six months of the year, net revenue was $18.261 billion, while operating income increased by 22.5% to $6.489 billion compared to the same period in 2023.

In the second quarter, the PMI's total shipments reached 197.3 billion units, including 157.6 billion units of cigarettes, 35.5 billion units of heated tobacco products, and 4.2 billion units of oral smokeless products (excluding snuff, snuff leaves, and chewing tobacco). The smokeless business accounted for 38.1% of the company's total revenue for the quarter, an increase of 2.7% compared to the same period in 2023. Sales of oral smokeless products saw strong growth, with an increase of over 20% compared to the same period last year. In the first six months of this year, shipments of heated tobacco products reached 68.678 billion, while total shipments of canned oral products reached 486 million, showing a growth of 31.2% compared to the same period in 2023.

Here are the highlights of its performance: 

• In the e-cigarette category, VEEV took the top position in the closed pod segment market in 5 European markets within 12 months after its launch. 
• Smoke-Free Business (SFB): Net revenue increased by 13.6%, gross profit increased by 15.6%, accounting for 38.1% of total net revenue, an increase of 2.7% year-on-year; an estimated 36.5 million adults using these products, available in 90 markets. 
• Smoke-Free Oral Products (SFP2): Can shipments increased by 23.5%, driven mainly by the growth of nicotine pouches in the US, with shipments in the US reaching 135.1 million cans, a 50.3% increase from last year. 
• Nicotine pouch sales increased by over 50% in regions outside the US, especially showing strong performance in new markets like Pakistan. 
• Smoke-Free Inhalable Products (SFP): As of the end of the quarter, the total estimated users of IQOS were 30.8 million, benefiting from the significant progress made with the launch of ILUMA i in Japan, Europe (especially Greece, Hungary, Romania, Bulgaria, and Spain), South Korea, and low- to middle-income markets (especially Indonesia). 
• Combustible products: Net revenue increased by 1.2% (organic growth calculated at 4.8%), thanks to another quarter of stable pricing in the high single digits and industry volume. 
• Dividends: Quarterly dividend of $1.30 per share, annualized at $5.20 per share. Diluted earnings per share in the second quarter increased by 52.5% to $1.54 Adjusted diluted earnings per share decreased by 0.6% to $1.59; an increase of 10.6% excluding exchange rate factors.

In the second quarter, the total shipments of PMI cigarettes and HTU increased by 2.5%, while the total shipments of canned oral products increased by 23.5%, primarily driven by the growth in sales of nicotine pouch products.

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

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

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

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

PMI predicts that the overall international tobacco and tobacco products industry will remain relatively stable in 2024, with strong performance in the second half of the year driven by smoke-free products. PMI's shipments of cigarettes, HTU, and oral smokeless products are expected to increase by 1% to 2%; nicotine pouch shipments are projected to range from 5.6 billion to 5.8 billion cans. Net revenue is forecasted to organically grow by 7.5% to 9%, while organic operating income is anticipated to increase by 11% to 13%. Capital expenditures are estimated to be around $13 to $14 billion, which includes further investment in ZYN to increase production capacity.

The CEO of PMI, Jacek Olczak, stated

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

 

Strong foundational performance combined with proactive measures across all categories have once again surpassed expectations for our business, propelling us towards our ambitious 2024 goals. Despite facing currency headwinds, we have raised our full-year guidance.