Philip Morris International Inc. Q4 FY2024 earnings call

• 2024 was an outstanding year with best-in-class organic and bottom-line growth. IQOS, USIN, and Veeve contributed to growth, and combustible business performed well.
• Milestones in smoke-free journey including ten-year anniversary of IQOS and ZYN. Smoke-free business reached 40% of total net revenues in Q4 2024.
• Volume performance: Fourth consecutive year of shipment growth, smoke-free volume growth accelerated, IQOS had adjusted in market sales growth, ZYN saw significant growth, cigarette shipments had mixed growth.
• Margins: Adjusted operating margins expanded, gross margin improved for smoke-free business due to scale and pricing, with smoke-free gross margin 270 basis points higher than combustible for the year overall at 66.6%.

Smoke-Free Business: Total smoke-free net revenues reached almost $15 billion in 2024. In Q4, smoke-free net revenues contributed 40% of total PMI net revenues and around 42% of adjusted gross profit. IQOS had strong growth in Japan, Europe, and globally. ZYN had significant growth in the US and internationally, with US growth of 51% to 581 million cans in 2024. Oral smoke-free business grew 24.6% in 2024. Combustible Business: Performed well with double-digit gross profit growth in Q4 2024 and around 7% organically for the year. Cigarette shipments grew ~0.6%, with growth in markets where smoke-free products are not permitted such as Turkey, Brazil, and India.

• 2025 outlook: Expect strong growth from all categories, fifth consecutive year of positive volumes, smoke-free products expected to grow ~12%-14%. HTU adjusted in market sales growth expected similar to 2024. US oral pouch volume forecast 780-820 million cans.
• Adjusted operating income growth double-digit, currency neutral adjusted diluted EPS growth ~10.5%-12.5%, dollar terms growth ~7%-9%.

• Resistance in many markets to smoke-free products driven by ideology not fact.
• Supply chain challenges, especially with ZYN's supply constraints.
• Currency volatility and potential tariff impacts.

Q: Speaking to Emmanuel. The 2025 outlook calls for HTU shipments in numbers or in market sales growth fairly in line with what you saw in 2024. But could you talk about the composition of the growth? If it's overall in line, a different contribution by geography in in your outlook and can you remind us on if there has been any progress in new markets contributing to growth in 2025 or if you've made any progress in those markets as you look out to your 2026 goals.

A: Now so in the guidance, our financials continue seeing good growth in Japan. And in the you know, number of parts in Europe, I mean, a manual man about the Italy, Czech, Poland, right, when the group is a a bit below what would expect at this stage, especially Italy and Czech following the the flavored ban But we also see that there is some recovery coming in, so I think you know, hopefully, in the second part of the year, we should bring Italy another geography that part to what the rest of the euro Europe is going through. And we have not, in the guidance, assume any significant new market opening in terms of the volume. As you know, we've you know, we're gonna head into my remarks. Mean, we're dealing with this rational world, fighting with the irrational world. I hope that, you know, the most recent authorizations of FDA following the authorizations of Kid Not Birth, now the vouchers. Will be a good incentive or encouragement by other governments which to be very frank, to be stupidly oppose smoke free products while allowing cigarettes. But in the guidance, we have not put any significant volume coming from the new geography. So this is all organic growth, and as you could saw it in the for the quarters of this year, Despite the fact even if you look at Japan when almost half of the market is already on a on a smoke free products, the growth continues there.

Q: Good morning, guys. Thank you for for the questions. Hi, guys. Firstly, on on on ZYN again in the US, We we noticed a couple of your peers have have launched synthetic moist nicotine products. And according to the scanner data, have seen some initial uptake. How how do you see the moist versus dry dynamic in the US and where do you think the consumer may end up in in the future recognizing that in Europe, most products are are moist.

A: Yeah. So maybe the second part, I take it. I think the total price grows despite the fact that, you know, the the movements between the categories within a smoke free you know, there is some dynamics, right, between a heat not burn and an e vape. And the pouch is now depends how market is organized and regulated. We also know that know, the most difficult actually to read category due to the way the the market is organized currently is the eBay category. Right? Because you have a a a disposables, you have parts. You have open tank systems still, and some products Okay. You know, under the regulations and properly authorized depends on a jurisdiction. Some products are just popping up in the market, so you could call it the different forms of illicit trade, but I think, you know, you see this in the US, but also in Europe, in the UK, and a few other places. The regulators, governments, taking more a serious look into properly organizing that market. I can't tell you whether this will be completed in the twenty five, but definitely, there is a the moves the movements the moves are in the right direction. So I believe twenty five, twenty six, the category should be normalized by the five that it's gonna be properly regulated. And then we take it from the I'm not the one to talk about the youth exposure, etcetera, because, you know, we know, follow-up is you know, our policy, you know, with our reviews on this one. But, definitely, it's difficult to control of the discipline in the market. If you're dealing with You know, all of the different emanations of the product coming essentially legal to the marketplace that obviously also enjoys the less distantly in trade channels. So completely, you know, invisible trade channels, if you like, etcetera. When it comes to your questions about the synthetic vent versus dry, So just to take it from a perspective, the way we look at the data in the US, for example, this whole new things which are coming into the market, there is a quite a long list of different SKUs and you know, the moist flowers and know, This whole market, the debt part of the market, if I'm not miss mistaking, move year on year by barely twenty basis points. In a scheme of these things, there's presumably a lot of dynamic on the on the weekly basis, but doesn't seem that it's, you know, has any any major attractions, etcetera. The insights which we'll have when we talk over consumers, we see and obviously, you know, when you read that consumer insight, it's not a pure mathematical accuracy and the exact number, but I think that the moist products moist pouch products is more appealing to the moist snuff. Type of a users. Right? Like snows, etcetera. While what we see in the marketplace that the dry product has a more appeal towards the smokers and evapor. Or evapist. That is what I can tell you at this stage.