Philip Morris shares slide after PMI says iQOS growth in Japan slows

Philip Morris International shares plummeted 16 percent within the company’s worst day since of which spun off through Altria in 2008, after PMI posted mixed first-quarter results in addition to said growth of iQOS, its heat-not-burn tobacco product, slowed in Japan.

iQOS warms tobacco to a temperature of which’s high enough to emit an aerosal yet not high enough to cause combustion, the chemical process of which makes smoking conventional cigarettes so harmful. of which’s crucial to PMI’s strategy of moving beyond cigarettes.

The product will be available in more than 30 markets. PMI has touted Japan as an example of how successful iQOS could be. of which’s become wildly well-liked within the country, though This kind of quarter, device sales were slower than the company’s expectations, Chief Financial Officer Martin King said Thursday on a call with analysts following the Discharge of first-quarter earnings results.

The company posted adjusted earnings of $1 per share, topping the 0 cents per share analysts polled by Thomson Reuters anticipated. PMI missed revenue estimates at $6.0 billion, compared with the $7.03 billion the Street expected.

PMI was anticipating market share growth would likely plateau at some point This kind of year because the company knew of which was close to saturating the early adopters in addition to innovators, he said. yet of which’s coming “a bit earlier within the year than what we had foreseen, in addition to This kind of isn’t unusual.”

“We’ve looked at trends of various other fresh products in addition to fresh successful launches in various other situations, in addition to there’s almost always periods where you get surging adoption, in addition to then of which plateaus a bit as you enter some fresh consumer dynamics in addition to categories,” King said. “in addition to then of which tends to resume some growth rates. in addition to we think we’re at one of those points.”

He said PMI doesn’t know how long This kind of plateau will last. The company will be going to adjust its plans, including speed up some initiatives to earlier within the year in addition to adjust its messaging to consumers.

Since launching in Japan in late 2014, PMI has reached 16 percent of market share, which “will be absolutely phenomenal,” King said.

“of which was just an issue of whether This kind of torrid pace of growth would likely continue uninterrupted or whether we would likely hit some points at which we need to adjust a bit in addition to approach consumers in a little bit different manner,” he said.

Because PMI isn’t seeing a surge in device sales, sales of Heatsticks, tobacco sticks of which go inside the iQOS device, “are likely to be a little bit lower” than of which forecast at the end of last year. If the situation in Japan persists, he said, then the volume of heated tobacco unit sales will be closer to the range of 55 billion to 60 billion instead of the previously estimated 60 billion.

“of which’s hard to say exactly at This kind of point. We don’t know how This kind of trend or the dynamics will be going to develop, yet we’re just calling out kind of a more cautious situation to give us the time in addition to the resources to tackle these different consumer segments within the right way,” he said.

PMI will be currently awaiting decisions through the U.S. Food in addition to Drug Administration on whether of which can sell iQOS in addition to whether of which can promote of which as an option of which’s less risky than conventional cigarettes.

If approved, Altria would likely receive sole distribution rights to market in addition to sell of which within the U.S. Its shares slid nearly 6 percent. British American Tobacco, which sells its own heat-not-burn product, Glo, shares fell nearly 5 percent.

Uncertainty about the long-term outlook for PMI’s iQOS business appears to be weighing on investor sentiment, in addition to the company’s remarks around the issue appear to have not added sufficient clarity, Piper Jaffray analyst Michael Lavery wrote in a note to clients. However, he called Thursday’s sell-off “overdone.”

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