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War in Ukraine drags PMI revenues down

February 10, 2023


Philip Morris International (PMI) reported subdued growth in the 2022 fiscal, owing to the impact of the War in Ukraine on the company’s operations in Russia and Ukraine.

Net revenues grew by 1.1 per cent year on year, but excluding the company’s operations in Ukraine and Russia, the revenues increased by 7.7 per cent.

The company attributed the growth to volume growth of 3.2 per cent, marking the second consecutive year of growth, the continued favorable mix shift from cigarettes to smoke-free products, and a favorable total pricing variance.

Heated tobacco units volumes jumped by 21.5 per cent, excluding Russia and Ukraine, whereas on reported basis the growth figures was 14.9 per cent. Smoke-free product net revenues increased by 18 per cent on an organic basis, mainly driven by volume growth, partly offset by lower device revenues.

The full-year reported diluted Earnings per Share (EPS) of $5.81, a decline of 0.1 per cent, but the adjusted diluted EPS excluding Russia and Ukraine of $5.34 meant represented currency-neutral growth of 11.9 per cent.

Net revenues from smoke-free products accounted for 32.1 per cent of total net revenues, or 31.3 per cent excluding Russia and Ukraine.

The IQOS maker, which recently completed the acquisition of Swedish Match, said it now defines ‘smoke-free products’ to include all Swedish Match products other than Swedish Match’s combustible tobacco products, in addition to PMI’s heat-not-burn, e-vapor, oral nicotine, and wellness and healthcare products.

Market share for heated tobacco units in IQOS markets up by 1.1 points to 8 per cent, or by 1.4 points to 7.9 per cent excluding Russia and Ukraine.

Total IQOS users at quarter-end estimated at approximately 24.9 million, of which approximately 17.8 million had switched to IQOS (approximately 20.3 million and 14.2 million, respectively, excluding Russia and Ukraine).

Combustible tobacco product adjusted net revenues increased by 3.7 per cent on an organic basis, excluding Russia and Ukraine, driven by a favorable pricing variance of approximately 4 per cent and a cigarette shipment volume increase of 0.8 per cent.

“Despite the challenging operating environment in 2022, due to the war in Ukraine, as well as supply-chain and global inflationary pressures, we delivered very strong full-year adjusted results led by the continued growth of IQOS and a robust performance in the combustible tobacco category,” said Jacek Olczak, chief executive.

“We are well on our way to becoming a majority smoke-free company, with smoke-free products accounting for almost one-third of our total net revenues for the year. With the acquisition of Swedish Match and the agreement to take full control of IQOS in the US in April 2024, we achieved two important milestones in our smoke-free transformation in 2022 and are well positioned to accelerate this journey.”

For 2023, the company expects approximately flat to 1 per cent volume change and net revenue growth of approximately 7 to 8.5 per cent on an organic basis.

“We enter 2023 as a truly global smoke-free champion, with two of the industry’s leading smoke-free brands, IQOS and ZYN, and continued innovation across our broader smoke-free product portfolio. For the year, we forecast organic top-line growth of 7 to 8.5 per cent and currency-neutral adjusted diluted EPS growth of 7 to 9 per cent, despite inflationary pressures and transitory impacts related to ILUMA deployment,” Olczak said.