Philip Morris Cuts Forecast Again After Canadian Lawsuits

(Bloomberg) -- Philip Morris International Inc. cut its forecast for this year for a second time, saying the impact from judgments in Canadian lawsuits will take a bigger toll on profit.

• Excluding its Canadian unit from company earnings following judgments tied to smoking health effects will cost the company 12 cents a share, up from a previous estimate of a 10-cent impact. That’s in addition to previously disclosed litigation expenses of 9 cents.

Key Insights

• On a positive note, cigarette volumes, which have been broadly declining for years across the industry, were flat for Philip Morris in the first quarter. Volumes for its IQOS device, which heats tobacco without burning it, jumped 20 percent.
• With so much of its future reliant on IQOS, the results were encouraging. The device showed “notable” growth in Japan, which has been a key testing ground for the product. Chief Executive Officer Andre Calantzopoulos said the number of IQOS users worldwide has topped 10 million.
• That may not be the end of the impact from Canadian legal issues. While full-year guidance and operating cash flow for the year were lower as a result, Philip Morris said that forecast excludes the potential for future developments in two class actions and the Canadian proceedings for creditors.
• The company is trying a new strategy with its “Unsmoke” campaign, which encourages people to quit smoking -- or better yet, not to start. But at the same time, the company saw shipment volume growth from each of its top-five international cigarette brands as a highlight of the quarter.

Market Reaction

• Philip Morris shares rose slightly in premarket trading, climbing 0.7 percent to $86.10. The stock, which a majority of analysts recommend buying, had advanced 28 percent this year through Wednesday’s close, outpacing the S&P 500.

Get More

• For more on the results, click here.
• For the company statement, click here.

--With assistance from Jonathan Roeder and Connor Corvino.

To contact the reporter on this story: Tiffany Kary in New York at tkary@bloomberg.net

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Lisa Wolfson, John J. Edwards III

©2019 Bloomberg L.P.