Philip Morris Q3 Revenues Surge 5.5% to USD 11.4 Billion
Philip Morris International reports a 5.5% rise in Q3 net revenues, driven by growth in smoke-free and combustible products.
Tobacco giant Philip Morris International (PMI) has announced a strong financial performance for the third quarter, with net revenues climbing 5.5 per cent year-on-year to reach USD 11.4 billion. This growth was fueled by a dual surge in both its traditional combustible products and its expanding smoke-free portfolio.
Driving Growth: Smoke-Free and Combustible Segments
The company's total shipments saw a modest increase of 0.6 per cent during the quarter. A significant driver of this was the smoke-free product (SFP) category, which witnessed a 2.7 per cent rise in shipments. This was further bolstered by high single-digit growth in adjusted in-market sales for these products.
While the industry shifts toward alternatives, PMI's combustible products segment proved its resilience. This segment remained strong, particularly in regions where smoke-free alternatives are either banned or have limited market availability.
Breaking down the revenue streams, smoke-free products saw a 4.1 per cent increase, while combustible products grew by 6.4 per cent. Currently available in 110 markets, smoke-free products have become a cornerstone of the company's strategy, contributing approximately 42 per cent of revenues in the year-to-date period.
Financial Highlights and Profitability
PMI reported a 6.7 per cent increase in gross profit, attributed to higher pricing for combustible products, scale benefits, and an optimized product mix. The company's operating income saw a significant jump, rising 14.1 per cent during the quarter.
"We delivered another excellent quarter, with growing total volumes, double-digit organic operating income growth and robust margin expansion," stated Jacek Olczak, Group CEO of PMI.
Earnings and Dividends
The financial results presented a mixed picture regarding earnings per share (EPS):
- Reported Diluted EPS: Declined by 4.9 per cent to USD 2.12, primarily due to non-cash fair value adjustments for equity security investments.
- Adjusted Diluted EPS: Grew by 5.4 per cent to reach USD 2.36, which the company described as another quarterly all-time high. (This figure would have been 5.8 per cent higher if not for a one-cent unfavorable currency impact).
Reflecting its confidence in its financial position, Philip Morris has raised its regular quarterly dividend by 8.8 per cent to USD 1.60 per share, bringing the annualized dividend to USD 6.40 per share.
Deep Dive into Smoke-Free Performance
In the international smoke-free segment, net revenues grew by 0.7 per cent, with organic growth standing at 3.4 per cent, supported by a 2.7 per cent rise in volumes. Adjusted in-market sales growth accelerated to 8 per cent.
The company noted that this growth occurred despite a challenging comparison for heated tobacco units (HTUs), caused by differences in shipment timing, specifically within the Japanese market. Despite these headwinds, gross profit in this segment rose by 0.8 per cent, reflecting an organic growth of 3.3 per cent.