Smoke-free gains momentum

Philip Morris International (PMI) sold 706.71 billion cigarettes and 59.65 billion heated tobacco units in 2019, down 4.5 percent and up 44.2 percent, respectively, over 2018. In the fourth quarter of 2019, PMI shipped 175.09 billion cigarettes and 17.11 billion heated tobacco units. Those figures were down by 8 percent and up by 40.7 percent, respectively, over the prior year quarter.

PMI reported net revenues of $29.81 billion in 2019, up from $29.63 billion in 2018. Its operating income was $10.53 billion, compared with $11.38 billion in the previous year. Adjusted operating income was $11.76 billion, up from $11.38 billion in 2018.

“2019 marked a year of strong underlying business performance for PMI, driven by broad-based growth for IQOS and solid pricing for our combustible tobacco portfolio, with like-for-like adjusted diluted EPS up by 9.9 percent, excluding currency,” said André Calantzopoulos, chief executive officer of PMI.

“We continue to make significant progress in the transformation of our business, with smoke-free products now accounting for 8 percent of shipment volume and nearly one-fifth of net revenues, while further demonstrating our ability to maintain combustible tobacco leadership internationally, as evidenced by Marlboro’s full-year cigarette share of 10 percent—an all-time high.”

Morgan Stanley noted that the strong heated tobacco volumes reinforce the improving momentum of PMI’s IQOS device over the past quarters. “We expect today’s in-line results and solid FY2020 guidance to offer relief given lower expectations heading into the quarter and concerns around 2020 guidance due to anticipated headwinds in Indonesia,” wrote Morgan Stanley analyst Pamela Kaufman, referring to an above-inflation tobacco tax hike in that country.