PMI: vaping shipment growth below expectations while traditional cigarettes perform strongly

According to a Reuters report on the 19th, Philip Morris International (PMI), the world’s most valuable tobacco company by market capitalization, on Thursday lowered its full-year shipment forecast for heated tobacco products, overshadowing news that it had raised its annual profit outlook and delivered stronger-than-expected third-quarter earnings.

Affected by declining demand for traditional products in some markets and tighter regulation, the world’s largest tobacco company has been trying to address these challenges by shifting toward smoking alternatives.

Its heated tobacco device IQOS has been at the center of that strategy. Since 2008, PMI says it has invested more than $10 billion in a gradual move away from its cigarette business.

PMI said full-year heated tobacco shipments would come in below previous expectations due to limited growth in Russia and Ukraine, as well as “uncertainty over inventory levels” caused by upcoming European regulations on flavored heated tobacco products.

The European Union will later this month implement a ban on flavored heated tobacco products as part of its plan to minimize tobacco use across the bloc by 2040.

PMI’s share price is down 9% this year. It fell 2% in early trading but recovered to a 1% decline as of 1411 GMT.

Chief Financial Officer Emmanuel Babeau said PMI believes any disruption caused by the EU ban will be temporary.

He said, “We believe this ban should not ultimately cause major disruption.”

However, Gaurav Jain, head of equity research at Barclays, said it would be difficult for PMI to know the full impact of the ban until after it takes effect.

PMI also continued to post strong growth in its oral nicotine products, such as ZYN, which it acquired last year through its purchase of Swedish Match.

In this quarter alone, shipments of ZYN in its core U.S. market rose 65.7%, and CEO Jacek Olczak said the product “once again exceeded our expectations.”

PMI’s quarterly results were also helped by an 18% increase in heated tobacco shipments and a 9% increase in cigarette prices.

The company reported adjusted third-quarter earnings per share of $1.67, above its own guidance range, and raised its full-year earnings forecast to between $6.05 and $6.08 per share.