Q2 2024 Earnings Summary
- Improved financial costs due to better debt levels and strong cash flow generation, placing estimated interest expenses at the low end of prior ranges.
- Successful price increases in combustible products, achieving an 8.7% price increase in H1, demonstrating strong pricing power and optimization strategies across markets.
- Significant international growth potential for nicotine pouches, with expansion of ZYN into new markets such as Austria, the UK, Switzerland, Pakistan, South Africa, Indonesia, the Philippines, and Mexico, aiming to capture a fair share of this growing category.
- Legal uncertainties surrounding ZYN in the U.S. could impact sales, as the company closed zyn.com sales due to a subpoena in the District of Columbia, with no clear timeline for resolution.
- Delays in regulatory approvals, such as the ongoing delay in approval for IQOS commercialization in Taiwan, and slower recovery from the flavor ban in Europe, are causing headwinds, including an expected reduction of around 2 billion units in the full-year adjusted IMS forecast.
- Competition from unauthorized modern oral products in the U.S. market poses risks to market share and growth for PM's ZYN, as new brands without PMTA submissions are appearing, potentially leading to a scenario similar to the vape market's issues with illegal products.
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HTU Shipment Guidance Adjusted
Q: Why did you lower your HTU shipment volume outlook?
A: We revised our adjusted in-market sales by around 2 billion units due to delays in Taiwan, now assuming zero volume there this year. Additionally, the EU flavor ban impacted volumes more than expected, particularly in Italy where growth was affected quicker than anticipated. -
ZYN Capacity and U.S. Growth
Q: How will increased ZYN capacity affect U.S. volumes?
A: We're targeting around 900 million cans of ZYN production capacity for next year. This expanded capacity will meet consumer demand and create headroom for growth in the coming quarters. -
IQOS ILUMA Performance
Q: How is IQOS ILUMA performing in Japan?
A: IQOS ILUMA i has driven new user acquisitions and increased consumer satisfaction in Japan. We've seen positive impacts on growth and plan to launch in additional countries in the second half. -
Illicit Nicotine Pouch Sales
Q: Are illicit nicotine pouches affecting the U.S. market?
A: We haven't observed any material impact from illicit nicotine pouch sales in the U.S.. We're monitoring closely and expect authorities to act proactively if it becomes an issue. -
International Nicotine Pouch Growth
Q: How is the growth of nicotine pouches internationally?
A: Nicotine pouches are gaining interest globally, especially in the Nordics, parts of Europe like Austria, the U.K., and Switzerland, and markets like Pakistan, South Africa, Indonesia, the Philippines, and Mexico. We're aiming to capture our fair share of this growing category. -
Vaping Category Development
Q: How is your VEEV product performing in the vaping category?
A: VEEV ONE is performing well, achieving the #1 position in five countries for closed pods. The vaping category attracts different users than heated tobacco, and we're growing responsibly with strong commercial partnerships. -
IQOS ILUMA Testing in U.S.
Q: What are your plans for IQOS ILUMA in the U.S.?
A: We'll pursue a scaled launch after receiving PMTA approval, targeted for the second half of 2025. Until then, we'll focus on learning and adapting successful strategies from other markets to resonate with U.S. smokers. -
Interest Expense Guidance
Q: Any updates on interest expense and financing?
A: We're at the low end of our prior interest expense range, about $1.3 billion. This reflects better debt levels due to cash flow generation and effective financing; no significant changes in financing strategy are planned.