Philip Morris International Inc. Q1 FY2026 earnings call

Key managerial messages include strong financial performance in Q1, international smoke-free business outstanding with high growth, combustible business resilient despite volume declines, U.S. ZYN expecting improvement with innovation launch, continued investment in growth, and progress in sustainability with value plan 2030.

International smoke-free delivered double-digit volume growth, mid-teens organic top line progression and high teens organic gross profit growth, with IQOS having close to plus 11% adjusted in-market sales growth and ZYN reaching estimated joint #1 position in Europe. Combustible business had low single-digit organic top line growth and low to mid-single-digit organic gross profit growth. U.S. segment was challenging due to various factors but expected to improve. Overall, net revenues over $10 billion, plus 9% reported increase and plus 2.7% organic. Adjusted gross profit grew by plus 10% to $6.9 billion, adjusted operating income grew plus 10% to $4.2 billion, adjusted diluted earnings per share grew plus 16% to $1.96.

Reconfirm currency-neutral growth outlook with broadly stable shipment volumes, organic net revenue growth of plus 5% to plus 7%, organic operating income growth of plus 7% to plus 9%, and currency-neutral adjusted diluted earnings per share growth of plus 7.5% to plus 9.5%. Forecast adjusted diluted EPS of $8.36 to $8.51 for full year, and $2.02 to $2.07 for Q2.

Macro-economic uncertainty, Middle East conflict impact on business, potential impact of excise tax changes in various markets, and regulatory uncertainties related to product approvals.

Q: Starting with smoke-free or international smoke-free, profit performance of gross margins over 70%, how much of a priority is optimizing supply chain and margins with growth potential ahead, and on U.S. ZYN, price gaps widened, any strategic change in trade-off between pricing and market share?

A: On smoke-free International margin, maximizing volume is big objective, IQOS is big driver, on U.S. ZYN, objective is to keep as leading premium brand, monitor pricing parameters.

Q: Follow-up on ZYN in the U.S., expect performance to improve, what gives confidence, how much willing to sacrifice short-term profitability to drive volume growth, and on FDA's failure to fast-track reviews of nic pouch applications, curious if consider rolling out innovation without approval?

A: Expect positive dynamic in second half due to comparison normalization and innovation, not elaborate on innovation timing, objective is to have leading brand with premium and profitable positioning.

Q: On IQOS, Q1 results better than expectations, key drivers of strength, any timing benefits in Q1 reversing, key drivers of profitability growth moving forward?

A: IQOS success due to great product, unique brand franchise, innovation, margin improvement due to price increase and supply chain efficiency.

Q: On nicotine pouches in the U.S., excise tax environment, proposals from states, industry response, and on ZYN volume trend and innovation timing and control?

A: Excise tax discussion in states, but regulator should treat nicotine pouches well, ZYN Ultra expected to bring renewed momentum, innovation follows processes.

Q: On IQOS growth in Europe, 5.5% growth, plan to accelerate?

A: Growth in Europe good, exclude some markets, expect remaining markets to stay dynamic.

Q: On heated tobacco in Japan, early trends after excise tax increase, combustible in Germany volume decline reason, corporate expenses decline attributable and persistence?

A: Too early to comment on Japan post-excise tax increase, combustible in Germany due to market and industry weakness, corporate expenses decline largely technical.

Q: Follow-up on IQOS by bonds in Italy, incrementality, profitability evolution?

A: Bonds by IQOS incrementality, profitability at least at combustible level.

Q: Follow-up on Japan IQOS inventories, impact of second excise tax-driven price increase?

A: Too early to comment on October excise tax increase.

Q: On U.S. nicotine pouch category, recent volume growth moderation factors, regulatory concerns around ZYN Ultra?

A: NYTS survey shows underage usage stable, some softening may be due to new consumers with lower ADC, regulatory concerns not significant as FDA has authorized other products with higher nicotine content.

Q: Follow-up on U.S. ZYN and nicotine pouch consumer dynamics, evidence of higher per capita consumers graduating to higher nicotine content pouches?

A: Higher nicotine strength development could be people trading up, but no clear study support.