Philip Morris International (PM) Q2 2023 Earnings Call Transcript

For the period ending June 30, 2023

July 20, 2023 9:00 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Good day, everyone, and welcome to the Philip Morris International Second Quarter 2023 Earnings Conference Call. Today's call is scheduled to last about one hour, including remarks by Philip Morris International management and a question-and-answer session. [Operator Instructions]

I will now turn the call over to Mr. James Bushnell, Vice President of Investor Relations and Financial Communications. Please go ahead, sir.

James Bushnell

Welcome. Thank you for joining us. Earlier today, we issued a press release containing detailed information on our 2023 second-quarter results. The press release is available on our website at www.pmi.com.

A glossary of terms, including the definition for smoke-free products, as well as adjustments, other calculations, and reconciliations to the most directly comparable US GAAP measures for non-GAAP financial measures cited in this presentation, and additional net revenue data, are available in Exhibit 99.2 to the company's Form 8-K dated July 20, 2023, and on our Investor Relations website. Growth rates presented on an organic basis reflect currency-neutral adjusted results, excluding acquisitions and disposals. As such, figures and comparisons presented on an organic basis exclude Swedish Match up until November 11, 2023.

Today’s remarks contain forward-looking statements and projections of future results. I direct your attention to the Forward-Looking and Cautionary Statements disclosure in today’s presentation and press release for a review of the various factors that could cause actual results to differ materially from projections or forward-looking statements.

It is now my pleasure to introduce Emmanuel Babeau, our Chief Financial Officer. Over to you, Emmanuel.

Emmanuel Babeau

Thank you, James, and welcome everyone. Our business delivered outstanding performance in the second quarter of 2023, exceeding our expectations to reach a record high quarterly adjusted diluted EPS of $1.60. This was driven by impressive ZYN and IQOS growth, coupled with strong combustible results. We delivered total cigarette and HTU shipment volume growth of 3.3%, putting us well on track for our third consecutive year of positive volumes. This excellent result underpinned double-digit organic topline growth and high-teens currency-neutral adjusted diluted EPS growth. We also expanded our leadership in smoke-free products in the period. Firstly, IQOS’ strong momentum continued, with adjusted in-market sales volumes, led by plus 16%, and shipments up by plus 27%. This reflects very good user growth of plus 1.4 million in the quarter and continued strong traction across the world. This is increasingly driven by IQOS ILUMA, which is now available in 23 markets, representing around two thirds of our IQOS business by volume. Secondly, and now two full quarters after the Swedish Match acquisition, ZYN is delivering an exceptional acceleration to our smoke-free business. US volumes grew by over plus 50%, including a notable step-up in June. We are delighted with this performance. Our combustible business also delivered better-than-expected results with over plus 7% organic net revenue growth after a very robust quarter for pricing and resilient volumes. This was a key contributor to the strong plus 7% organic operating income growth, with a plus 210 basis points sequential improvement in our adjusted operating income margin.