The sharp decline in Philip Morris' net profit in Q4 2024 can be attributed to several key factors:
- Non-Cash Impairment Charge: Philip Morris faced a non-cash impairment charge of $1.49 per share related to its Canadian affiliate, Rothmans, Benson & Hedges Inc. This charge impacted the reported diluted EPS, which stood at $4.521. This item is not directly related to the company's operating performance but significantly affects the net profit figure.
- Organic Net Revenue Growth: Despite the decline in net profit, the company achieved strong organic net revenue growth of 9.8% for the year, with adjusted operating income growth of 14.9% organically. Currency-neutral adjusted diluted EPS grew by 15.6%, and adjusted diluted EPS grew by 9.3% in dollar terms2. This indicates that the company's core business performance was robust.
- Smoke-Free Business Expansion: The smoke-free business contributed 40% of total PMI net revenues in Q4, driven by strong performance in IQOS and ZYN. Gross margin expansion of 330 basis points organically for smoke-free products highlights the profitability of this segment2. The continued growth of IQOS and ZYN products, including the recent FDA authorization of all ZYN nicotine pouches in the U.S., is a positive sign for the future3.
In conclusion, while Philip Morris experienced a decline in net profit due to non-cash impairment charges, the company's overall financial performance and growth in the smoke-free segment indicate a resilient business model.