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Philip Morris International Inc.
CEO : Mr. Jacek Olczak

Quarterly earnings growth(YoY,%)

Period	Revenue	Operating Income	EPS	Release Date
2022 Q4	0.6% YoY	-1.1%	14.1%	2023-02-09

Emmanuel Babeau says,

Strong Organic Net Revenue Growth and Excellent IQOS Momentum

• Full-year net revenues grew organically by plus 7.7% excluding Russia and Ukraine and by plus 7.1% for total PMI.
• IQOS devices accounted for approximately 5% of full-year smoke-free net revenue, both including and excluding Russia and Ukraine.
• Expect to deliver very strong organic net revenue growth of plus 7% to plus 8.5% in 2023, supported by a step-up in combustible pricing and another year of rapid progress from IQOS.
• Forecast between 125 billion and 130 billion HTU shipment volumes, representing plus 15% to plus 19% growth.

Margins Under Pressure, but Long-Term Margin Drivers Continue to Contribute Favorably

• Operating income margin contracted organically by 60 basis-points, excluding Russia and Ukraine, and by 70 basis-points in total.
• Expect adjusted operating income margin to contract between 50 to 150 basis-points organically in 2023.
• Long-term margin drivers of pricing and productivities continue to contribute favorably.
• HTUs remain around 10 percentage points higher than for cigarettes on the higher net revenue per unit.

Front Loaded Investment and Phased Delivery

• Expect shipment timing and ILUMA launch impact to be pronounced with heavily H2 weighted delivery.
• Expect the first quarter to be the most challenging with low-single digit organic topline growth and soft margin.
• Expect adjusted diluted EPS of $1.28 to $1.33 for Q1 2023.
• Expect capital expenditure of around $1.3 billion in 2023, reflecting increased investment behind our smoke-free platform including ILUMA and Swedish Match portfolio.

Strong Cash Flow Generation and Other Assumptions

• Delivered $10.8 billion in 2022 operating cash flows representing plus 3% growth on a currency-neutral basis.
• Expect total international industry volumes of cigarettes and heated tobacco units excluding China and the U.S. to decline by minus 1% to minus 2%.
• Expect full-year capital expenditure of around $1.3 billion as compared to $1.1 billion in 2022.

Update on Ukraine and Russia Businesses

• Continue to support employees in Ukraine.
• In Russia, the environment for divestment has become increasingly challenging and complex, especially given recent December 2022 regulatory developments.
• Will now include both Ukraine and Russia in 2023 outlook and reporting.

Jacek Olczak says,

Net Revenue Growth and Volume

• PMI delivered its second consecutive year of total volume growth in 2022, reflecting continued IQOS progress and broadly stable cigarette volumes.
• Full-year smoke-free net revenues reached almost one third of total PMI and over 50% in 17 markets.
• IQOS ILUMA continues to generate excellent growth in its launch markets with upgrades from existing users and new user acquisition outpacing initial expectations.
• IQOS had over 21% full-year growth in both shipment volumes and in market sales excluding Russia and Ukraine.

Strategic Milestones Achieved

• PMI reached an agreement to take full control of IQOS in the U.S. in 2024 and successfully completed the acquisition of Swedish Match.
• These achievements will accelerate PMI’s smoke-free journey and further position the company to lead the transformation of the wider industry.

Key Strategic Priorities for 2023

• The full global rollout of IQOS ILUMA is a major priority and substantial progress is expected in 2023.
• PMI will broaden its portfolio with new science-backed offerings, including BONDS by IQOS, a latest heat-not-burn device aimed at low and middle-income adult smokers.
• PMI will expand its partnership with KT&G and support the Swedish Match team to accelerate the growth of ZYN, the leading nicotine pouch brand in the U.S.
• PMI will be leveraging the sales and distribution capabilities of Swedish Match and deploying its commercial model digital engine organization and infrastructure for a successful rollout of IQOS in the second-quarter of 2024 in the U.S.
• PMI continues to target a stable category share over time in combustibles while taking judicious pricing actions despite the impact of IQOS cannibalization.

Outlook and Financials

• Logically, the international expansion of pouches, U.S. IQOS preparation, and the replacement of IQOS 3 with ILUMA entail additional investments this year, which combined with inflationary pressures will weigh temporarily on margins.
• PMI expects to file an FDA application for ILUMA in the second half of 2023.
• The strength of PMI’s business provides a robust operating cash flow, which the company intends to maximize to provide reinvestment in its smoke-free business, deleveraging, and growing the dividend.

Tobacco Harm Reduction and Sustainability

• Shaping tobacco harm reduction by providing better alternative to smokers and advocating for science-based regulation is critical to accelerate the end of smoking.
• Harm reduction is also at the core of PMI’s transformation, as it leads on sustainability to achieve a positive impact.

Q & A sessions,

Strong Q4 and Full-Year Performance

• Double-digit currency-neutral adjusted diluted EPS growth and almost $6 of adjusted EPS for total PMI
• Consistent quality and sustainability of organic top and bottomline delivery demonstrated over the last three years

Strong Growth in Smoke-Free Portfolio

• Continued outstanding performance of IQOS, complemented by remarkable growth of ZYN
• Expected landmark year for smoke-free transformation with smoke-free net revenues of around $13.5 billion at constant currency, approaching 40% of the company
• Exciting opportunities for growing nicotine pouches in the U.S. and internationally, along with U.S. commercialization of IQOS next year

Margin Headwinds and Cost Pressures

• Margin headwinds expected to persist in 2023 before improving in 2024
• Inflationary pressure on COGS due to leaf prices rolling through the P&L, energy prices, and cost of IQOS ILUMA roll-out
• Russia and Ukraine contributing to drag on performance in 2022 and expected to continue in 2023

Strong Growth Outlook and Progressive Dividend Policy

• Expectation to comfortably exceed three-year minimum CAGR targets of more than 5% organic net revenue growth, more than 9% in currency-neutral adjusted diluted EPS growth, and broadly stable shipment volumes
• Strong growth outlook and highly cash-generative business enables deleveraging while maintaining steadfast commitment to progressive dividend policy

Expansion of Smoke-Free Portfolio and Strategic Plans

• Expansion of smoke-free portfolio to include BONDS as a complementary proposition in emerging markets and affordable segments
• Early strong results in the Philippines and Colombia for BONDS
• Strategic plans for broader rollout of BONDS in 2024