By Juveria Tabassum and Emma Rumney
(Reuters) -Philip Morris International (PMI) on Thursday lowered its full-year forecast for shipment volumes of its heated tobacco products, overshadowing an increase in annual profit expectations and stronger than predicted third-quarter earnings.
The world’s top tobacco company by market value has sought to counter stricter regulations and falling demand for its traditional products in some markets via a shift into smoking alternatives.
Its heated tobacco device IQOS has long been at the core of that plan, consuming the vast majority of the more than $10 billion PMI says it has invested in its transition away from cigarettes since 2008.
Heated tobacco shipment volumes would be lower than previously expected over the full-year, PMI said, citing factors including limited growth in Russia and Ukraine and “uncertainty related to inventory levels” in Europe amid incoming regulations on heated tobacco flavours.
The European Union will later this month implement a ban on flavoured heated tobacco, part of a plan to minimise tobacco use across the bloc by 2040.
PMI’s shares, which are down 9% this year, fell 2% in early trade, but recovered to stand 1% down at 1411 GMT.
Chief Financial Officer Emmanuel Babeau said PMI believed any volatility due to the EU ban would be temporary.
We continue to hold the “view that this ban should not ultimately bring major disruption,” he said.
However, Gaurav Jain, a director of equity research at Barclays, said it would be hard for PMI to know the full impact of the ban until after it is implemented.
PMI continued to see significant growth in its oral nicotine products like ZYN, acquired via the company’s purchase of Swedish Match last year.
ZYN saw a 65.7% increase in shipment volumes to the key U.S. market alone in the quarter, with CEO Jacek Olczak saying the product had “surpassed our expectations yet again”.
PMI’s quarterly performance was also helped by 18% growth in heated tobacco shipment volumes and a 9% increase in cigarette pricing.
It reported third-quarter adjusted profit of $1.67 per share, surpassing its own guidance range, and raised its annual profit guidance to between $6.05 and $6.08 per share.
(Reporting by Juveria Tabassum and Emma Rumney; editing by Chizu Nomiyama, Kirsten Donovan, Jane Merriman and Susan Fenton)