What caused the sharp decline in Philip Morris' net profit in Q4 2024?

The sharp decline in Philip Morris' net profit in Q4 2024 can be attributed to several key factors:

1. 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 $4.52. This item is not directly related to the company's operating performance but significantly affects the net profit figure.
2. 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 terms. This indicates that the company's core business performance was robust.
3. 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 segment. 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 future.

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.