Philip Morris International cut its annual profit forecast on Wednesday amid regulatory uncertainty over its Zyn nicotine pouches and rising competition in tobacco products.
The company, which sells Marlboro outside the U.S., has stepped up efforts to diversify beyond cigarettes, but faces growing competition from products such as British American Tobacco’s BATS.L Velo, and regulatory delays in authorizing new versions of Zyn.
A complex regulatory environment continues to slow innovation and the shift of adult smokers to smoke-free products, CFO Emmanuel Babeau said.
Popular nicotine pouch products, including new variants such as Zyn Ultra, have yet to be cleared for sale in the U.S. despite a fast-track Food and Drug Administration scheme, as the agency remains cautious about potential risks to new users, including children, Reuters reported earlier this month.
But Babeau said Philip Morris aims to maintain Zyn’s premium positioning despite increasingly aggressive pricing from rivals.
Philip Morris expects full-year adjusted earnings per share of $8.36 to $8.51, down from its previous forecast of $8.38 to $8.53. The midpoint is about four cents above analysts’ expectations, according to data compiled by LSEG.
The company said it has factored in a small impact from the Middle East conflict in its forecast, but does not expect a prolonged effect.
Shares of the company, however, rose about 6 per cent after strength in its international smoke-free business drove a first-quarter beat.
Quarterly revenue of $10.15 billion surpassed estimates of $9.91 billion, while adjusted profit per share of $1.96 topped expectations of $1.83.
U.S. Zyn shipments fell 23.5 per cent, which the company attributed mainly to distributor and retailer inventory adjustments, while those for the international smoke-free unit rose 11.9 per cent.
Jefferies analyst Andrei Andon-Ionita said the pressure on Zyn volumes suggests a continued momentum loss, running contrary to consensus expectations of a brand re-acceleration in the back half of the year. Velo will be the likely beneficiary of the declines, he said.
(Reporting by Neil J Kanatt in Bengaluru; Editing by Shilpi Majumdar and Sriraj Kalluvila)
