Philip Morris International (PM) Q4 FY25 earnings call: guidance and Q&A

What drives the expected acceleration in smoke-free volume growth beyond 2026, and how are new market opportunities factored in?

The reacceleration is primarily due to the normalization of excise tax impacts in Japan (symmetry with cigarettes post-2027) and addressing the ZYN portfolio asymmetry in the U.S. with pending FDA authorizations for higher nicotine strength products. Other factors include innovation and the non-recurring nature of outsized excise increases in India and Mexico.

“The acceleration in -- or beyond '26 is, at this stage, we mainly see coming from all the implementations of the tax changes, which are price -- or excise-driven price changes in Japan.”

asked by Matt Smith · answered by Jacek Olczak

How does PMI view IQOS HTU volumes in 2026 given Japan's excise taxes, and how is the competitive landscape evolving in Japan?

PMI is pleased with IQOS growth, with strong Q4 FY25 IMS growth (>12%) and reacceleration in markets like Italy, Germany, and Spain. New market launches like Taiwan are also performing well. While Japan's growth moderated, IQOS's global share of heat-not-burn remains resilient at 76%. The 2026 guidance for total smoke-free products already bakes in Japan's factors.

“We're very pleased with the growth of IQOS. I mean we finished '25 very strongly, more than 12% adjusted in-market sales growth. Yes, Japan has been slowing down a bit, as we mentioned. But the number of markets reaccelerated, Italy is one of them.”

asked by Eric Serotta · answered by Emmanuel Babeau

Is the IQOS ILUMA U.S. launch included in the 2026 guidance, or only in the 2027-2028 timeframe?

IQOS ILUMA in the U.S. is included in the 2026-2028 algorithm, both for investment and some expected volumes. The algorithm is not heavily dependent on the precise timing of the FDA authorization, but assumptions for its entry have been made.

“We have a number of discussions over the last years with regards to the estimated or expected timing of this long overdue authorization from the FDA, but we have somehow make the assumptions for IQOS entering the U.S. market in a planned period.”

asked by Eric Serotta · answered by Jacek Olczak

What are the expected elasticities and volume impacts from Japan's excise tax increases, and will pricing be sufficient for margin expansion?

Consumers will see price impacts from April 1, with two steps of excise increases for heated tobacco products in 2026. While there might be short-term IMS/shipment distortions, PMI's approach to pricing and margin expansion will aim to achieve desired results over a longer period, but specific strategies cannot be disclosed.

“The amount or the size of the excise increase may not immediately warrant that will -- and I don't want to now talk about the pricing strategy, et cetera, may not immediately warrant depends on which strategies at play on the margin expansion, but I do believe you know what is our approach to passing on prices and continuously working on the margin expansion.”

asked by Bonnie Herzog · answered by Jacek Olczak

What are the main drivers for achieving and potentially exceeding 2026 guidance, and how does planned investment spend compare to last year?

The core drivers remain the powerful smoke-free portfolio and resilient combustibles. While Japan's excise and U.S. ZYN comparisons are one-offs, the underlying dynamism persists. Investments are balanced, leveraging existing IQOS infrastructure for ZYN/VEEV internationally, and ZYN infrastructure for future IQOS in the U.S. There's no rupture in strategy, just overcoming specific events.

“The fundamental drivers remain exactly the same. You have a powerful smoke-free portfolio which has continued to be dynamic. Yes, you have this Japanese situation, which is a one-off. You have the high base of comparison in the U.S., which will have an impact in terms of growth versus what is real underlying growth.”

asked by Bonnie Herzog · answered by Emmanuel Babeau

Is the recent absence of ZYN promotions in the U.S. deliberate while awaiting ZYN Ultra, and what is the innovation strategy for consumer conversion in emerging markets?

The absence of promotions was due to specific scheme decisions, not a long-term shift. ZYN's U.S. success relies on brand support, a portfolio addressing current trends (e.g., higher nicotine strength with ZYN Ultra pending FDA), and premium pricing. Innovation for emerging markets is ongoing but cannot be detailed for competitive reasons.

“But the fact is that ZYN is doing okay within a day group of 3, 6 milligram, but clearly is missing a higher nicotine strength. Okay, particularly maybe 9, may be others, okay? So that's the thing which we'll have to address and here, we need to deal or work with FDA.”

asked by Mirza Faham Baig · answered by Jacek Olczak

Why is 2026 currency guidance better than Street estimates, and what are the key hedging rates?

The better currency guidance for 2026 is due to not repeating significant negative transactional impacts from 2025 (e.g., Russian ruble, Swiss franc). About 2/3 of the $0.27 benefit is translation, 1/3 transaction. Hedging continues to help, notably on the yen, which still has a negative impact but is slightly better than spot rates.

“So probably the -- I mean the reason why is that we are going to benefit from some significant negative transactional impact in 2025 which are not going to repeat based on the current ForEx in 2026.”

asked by Mirza Faham Baig · answered by Emmanuel Babeau

What are PMI's thoughts on New York's proposed excise tax on nicotine pouches, its potential for broader adoption, and impact on the promotional/competitive environment?

PMI views such proposals as counterproductive to public health objectives, as they undermine the health benefits these products offer over cigarettes. While states act independently, this is seen as a 'wrong idea' that shortsightedly taxes vastly better products.

“I mean the comment I can make at this stage that is counterproductive to the health benefit for nicotine or smokers these products provide. So I think the legislator there is taking everything into consideration.”

asked by Gerald Pascarelli · answered by Jacek Olczak