The tobacco giant beat third-quarter profit forecasts but warned that Middle East-related inflation and disruptions in Ukraine are increasing costs and could weigh on operating income, reports Asianlite News Desk.
Philip Morris International has warned that global conflicts are increasingly affecting its business, with energy-driven inflation linked to the war in the Middle East raising costs and strikes disrupting its supply chain operations in Ukraine.
The Stamford, Connecticut-based tobacco company reported better-than-expected third-quarter sales and profits on Wednesday, supported by strong cigarette demand in markets including Turkey and Indonesia, as well as higher tobacco prices. However, it cautioned that the financial impact of geopolitical tensions could intensify in the coming months.
The company said energy-related inflation had an increasing impact on its cost base during the third quarter and expected the pressure to grow further in the final three months of the year.
“The long-term situation remains unpredictable, and it is difficult to assess the broader implications for consumers or the global cost environment,” Philip Morris said, adding that the situation remained manageable for now.
The company also reported operational disruptions in Ukraine caused by the ongoing war, including impacts linked to strikes on infrastructure. It expects these pressures to continue affecting operating income this year.
Despite the challenges, Philip Morris delivered what it described as an exceptional quarter for its cigarette business. Strong sales in some international markets and further price increases helped offset longer-term declines in cigarette consumption elsewhere.
The company’s Zyn nicotine pouch business in the United States also recorded another quarter of growth. However, growth slowed to 4.2%, significantly below the rates seen previously, as competition intensified from rival products, including Velo, owned by British American Tobacco.
In response, Philip Morris said it would increase investment in Zyn to support the brand and strengthen its competitive position. One planned change will increase the number of pouches in most Zyn cans from 15 to 20.
The company reported adjusted earnings of $2.36 per share for the third quarter, beating the average analyst estimate of $2.29, according to data compiled by LSEG.
Despite rising costs and geopolitical uncertainty, Philip Morris maintained its full-year adjusted earnings forecast of $8.11 to $8.26 per share, excluding currency effects, the Reuters reported.
Investors reacted cautiously to the outlook, with the company’s shares falling around 3% in premarket trading.
The results highlight the competing pressures facing the tobacco group: resilient demand and pricing power in key markets on one hand, and inflation, supply chain disruptions and intensifying competition in alternative nicotine products on the other.
Philip Morris said the broader impact of global conflicts remained difficult to predict as it continued to monitor costs and operational risks.
