PMI(US:PM)2025-04-23 17:14Financial Data and Key Metrics Changes - In Q1 2025, the company reported double-digit increases in organic net revenue, operating income, and adjusted diluted EPS in both constant currency and dollar terms [6][11][12] - Organic net revenue growth was plus 10.2%, reaching $9.3 billion, with volume growth of plus 3.9% [12][14] - Adjusted diluted EPS grew by plus 17.3% in constant currency and by plus 12.7% in dollar terms to $1.69, despite a $0.07 unfavorable currency variance [14][59] Business Line Data and Key Metrics Changes - The smoke-free business saw shipment volumes increase by plus 14.4% year-on-year, with organic net revenue growth of plus 20% and organic gross profit growth of plus 33% [6][16] - IQOS delivered close to plus 10% HTU-adjusted IMS growth, with strong performance in Japan and Europe [7][11] - ZYN shipments increased by plus 53% to reach 202 million cans, exceeding initial expectations [8][43] Market Data and Key Metrics Changes - The international nicotine pouch can volumes grew by plus 53%, or plus 182% excluding the Nordics, indicating strong global demand [9][50] - In Europe, total shipments of IQOS advanced by plus 17.5% in Q1, with significant growth in markets like Spain, Germany, and Bulgaria [30][32] - The cigarette industry declined by 1.3% in Q1, with growth in markets where smoke-free products are not present, such as Turkey and India [54] Company Strategy and Development Direction - The company continues to deploy a multi-category strategy across markets, with smoke-free products now accounting for 44% of total gross profit [6][7] - The focus remains on expanding the smoke-free portfolio, with significant investments in brand building and product innovation [29][30] - The company aims to achieve double-digit growth for the rest of the year and has raised its shipment forecast for ZYN to 800 million to 840 million cans per year [12][58] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving another year of super growth despite uncertainties in the global economic outlook [11][59] - The company anticipates continued strong momentum from its smoke-free business and expects to mitigate potential supply chain challenges [57][65] - Management highlighted the importance of maintaining a progressive dividend policy while focusing on sustainable growth [65][66] Other Important Information - The company delivered over $180 million in gross cost savings in Q1, placing it on track to achieve a $2 billion target over 2024-2026 [27] - The company is committed to investing in U.S. manufacturing, with significant job creation expected as a result [49] Q&A Session Summary Question: ZYN out-of-stock issues and inventory rebuilding timeline - Management acknowledged ongoing out-of-stock issues and indicated that replenishment would occur gradually, with normalization expected by Q3 2025 [68][73] Question: Drivers of continued margin expansion - Management highlighted that smoke-free products are driving margin expansion, with a significant organic gross margin increase in Q1 [75][78] Question: Guidance outlook for the second half of the year - Management indicated that traditional differences between H1 and H2 could affect growth rates, but overall strong momentum is expected [85][89] Question: Unconstrained growth for ZYN - Management noted that while they cannot provide precise estimates for unconstrained demand, they expect consumer offtake to accelerate as supply constraints are lifted [100][102] Question: Net interest cost guidance for the year - Management did not provide specific guidance for net interest costs but indicated a positive start to the year [116][119]