Philip Morris Sees a Bright Side to Vaping Fears
October 17 2019 - 01:12PM
Dow Jones News
By Jennifer Maloney and Allison Prang
Tobacco giant Philip Morris International Inc. says vaping fears
in U.S. should give a boost to the recent launch of its IQOS
smoking alternative.
IQOS, a device that heats tobacco sticks but doesn't burn them,
is already sold in dozens of other countries. It went on sale in
the U.S. last month. After a review, the Food and Drug
Administration said earlier this year that it would allow Philip
Morris and its partner Altria Group Inc. to market IQOS to adult
smokers.
The U.S. tobacco market has been upended by a surge in vaping
driven in large part by the popularity of e-cigarettes such as
those made by startup Juul Labs Inc. A jump in underage vaping has
prompted the FDA to prepare a crackdown on most flavored products.
At the same time, a deadly lung illness, which has mostly affected
people vaping THC products, has dampened the outlook for
vaping.
"It's early days, but we have heightened expectations given the
news flow that's happened in the U.S. if you're a smoker and
considering alternatives," Philip Morris finance chief Martin King
said on a conference call Thursday with analysts. He noted IQOS is
the only heat-not-burn tobacco product with FDA authorization.
Since IQOS doesn't burn tobacco, the device doesn't produce
smoke when users inhale. It heats tobacco sticks that come in
regular and menthol flavors. It differs from other smoking
alternatives such as e-cigarettes that produce vapor from
nicotine-laced liquid.
Philip Morris and Altria abandoned merger talks last month amid
shareholder opposition to the potential blockbuster deal. Altria
sells Marlboros in the U.S.; Philip Morris sells them elsewhere.
The two companies were split apart in 2008.
"We... got pretty clear feedback from our shareholders with a
lot of questions about whether this would make sense, and
shareholders feeling that they could, if they wanted to be exposed
to the U.S. market, buy Altria separately," Mr. King said. "They
didn't need PMI to do that."
Philip Morris estimates there were about 12.4 million IQOS users
world-wide as of the end of its latest quarter, which as been on
sale for several years in Asia and Europe. The company continues to
expect total industry cigarette volumes this year to decline about
2.5%, excluding China and the U.S.
On Thursday, Philip Morris lowered its profit expectations for
the year and reported lower profit in the third quarter after a
Russian tax authority concluded the company's Russian affiliate
underpaid in taxes.
The company said it now expects earnings for 2019 to be at least
$4.73 a share. It had projected at least $4.94 a share. Analysts
polled by FactSet are expecting $5.04 a share.
Earnings in the third quarter were $1.9 billion, down 16% from
the comparable quarter a year earlier. The latest period included a
$374 million tax charge in Russia.
Net revenue was $7.64 billion, up 1.8%. The company said that
shipment volume of cigarettes and heated tobacco units declined by
a little more than 2%.
Shares of Philip Morris were down 0.2% to $78.98 in early
afternoon trading.
Write to Jennifer Maloney at jennifer.maloney@wsj.com and
Allison Prang at allison.prang@wsj.com
(END) Dow Jones Newswires
October 17, 2019 12:57 ET (16:57 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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