© Reuters. FILE PHOTO: A woman poses with a cigarette in front of Philip Morris International logo in this illustration taken July 26, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
(Reuters) -Philip Morris International (PMI) on Thursday raised its annual profit forecast as its third quarter earnings beat expectations thanks to higher cigarette prices, demand for its heated tobacco products, and rapid growth of its oral nicotine product ZYN.
While cigarettes still make up the vast majority of PMI’s sales, the world’s top tobacco company by market value has sought to counter stricter regulations and falling demand for its traditional products in some markets via a shift into smoking alternatives. It sees these as its key growth drivers.
Its new oral nicotine products like ZYN, acquired via PMI’s purchase of Swedish Match last year, in particular have been growing rapidly, with shipment volumes more than doubling compared to a year earlier.
ZYN has “surpassed our expectations yet again”, said Chief Executive Jacek Olczak in a statement, adding that PMI’s revenue and adjusted earnings per share were at record levels in the quarter.
The company now expects adjusted annual profit of between $6.05 and $6.08 per share, compared to its earlier forecast of $5.96 to $6.05 per share. It also raised its full-year forecast for oral nicotine pouch shipment volumes.
PMI’s core smoke-free tobacco product, however, is its IQOS heated tobacco device and the tobacco sticks used with it. IQOS consumed the vast majority of the more than $10 billion PMI invested in its transition away from cigarettes between 2008 and 2022.
The company said heated tobacco shipment volumes had increased 18% during the quarter, but its full-year forecast assumed these would be lower than previously expected.
It said this was due to a delayed market launch in Taiwan, limited growth in Russia and Ukraine and inventory uncertainty in Europe amid incoming regulations on heated tobacco flavours.
PMI reported third quarter adjusted profit of $1.67 per share. Analysts on average had expected a profit of $1.61 per share, according to LSEG data.
While this also beat PMI’s own guidance range, the company’s third quarter revenue was slightly behind analyst expectations of $9.17 billion. PMI also tempered its revenue expectations for the full year.
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