By Neil J Kanatt and Emma Rumney
July 22 (Reuters) – Philip Morris International said it would increase investment in its Zyn nicotine pouches as competition intensifies in the fast-growing category, after higher cigarette demand helped drive a quarterly results beat on Wednesday.
Its shares rose about 5% in early trading even though the company also cut its annual profit forecast for the third time this year due to negative currency effects.
Philip Morris, which sells Marlboro cigarettes outside the U.S., saw growth in markets including Turkey, Indonesia and Egypt despite a price increase of about 10%, at a time when industry players are investing heavily to diversify beyond traditional tobacco products due to falling sales driven by the negative health effects of smoking.
“In ten years of following tobacco, we struggle to remember such a big beat for a cigarette business,” Bernstein analysts said in a note. Quarterly cigarette volumes rose 1.1% to 156.9 billion units, above a Wall Street consensus of 151.17 billion units cited by Bernstein.
Philip Morris recently received regulatory approval allowing certain Zyn nicotine pouches – which users insert under their lip to get a nicotine buzz – to be marketed as less harmful than cigarettes, but has faced competition and pricing pressure.
The company launched Zyn Ultra, a higher-strength variant, in June at a lower per-pouch price than its flagship Zyn products, seeking to defend market share from rivals such as British American Tobacco’s Velo.
“To support the newly expanded Zyn portfolio, we intend to accelerate U.S. investments in the second half to maximize the long-term value of the brand,” the company said in a statement, adding that it plans to launch 1.5 mg and 8 mg variants of Zyn in the current quarter.
The company expects full-year adjusted earnings per share of $8.26 to $8.41, compared with its previous forecast of $8.31 to $8.46.
Second-quarter revenue rose 10.4% to $11.19 billion, topping analysts’ estimate of $10.63 billion, according to data compiled by LSEG.
Quarterly adjusted profit per share, which included a 3 cent currency hit, rose 15.2% to $2.20. Analysts expected a profit of $2.05 per share.
(Reporting by Neil J Kanatt in Bengaluru and Emma Rumney in London; Editing by Devika Syamnath)
Comments