Better-than-expected results
Organic revenues grew 10.5% in the quarter, driven by a 3% growth in cigarette and HTU shipment volume, favorable product mix associated with more smoke-free products in the portfolio, and pricing.
Business performance
In Q2, IQOS continued to perform well, driven mainly by IQOS ILUMA, which makes up about two-thirds of the IQOS business by volume. As stated on PMI’s quarterly conference call, there were an estimated 27.2 million IQOS users as of June 30, reflecting a growth of 1.4 million adult users in the second quarter. In Europe, IQOS users are nearing 12 million, with the further roll-out of ILUMA, which is available to about 70% of users in the region.
Another growth driver is ZYN nicotine pouches, which grew volumes in the US by over 50% during Q2. This growth was driven by increases in distribution and a rise in store velocities. These two products are playing a meaningful role in driving Philip Morris’ smoke-free transformation.
During Q2, HTU shipment volumes totaled 31.4 billion units, reflecting a growth of 26.6% YoY, fueled by strong performance in Europe and Japan. Cigarette volumes declined 0.4% in the quarter.
Revised outlook
PMI increased its full-year 2023 guidance for organic revenue growth to 7.5-8.5% based on strength in IQOS and ZYN and the resilience of its combustible business. It also revised its outlook for adjusted EPS to a range of $6.13-6.22 from the previous range of $6.10-6.22.
For the third quarter of 2023, the company expects high single-digit organic top line growth. Adjusted EPS is expected to be $1.60-1.65.