PM also conducted their normal earnings call this morning along with their third quarter results. Some items highlighted in the call are as follows:
- IQOS growth remains strong in most of the world. In Japan, heated tobacco units as a whole are now 25% of the market. Despite ever increasing competition, HEETS are roughly 70% of all heated tobacco volume sold, resulting in their overall 17% market share. PM is also rolling out the new IQOS 3 DUO device in Japan & Korea, which allows users two consecutive uses, and also reduces the charging time from nearly 4 minutes to under 2 minutes. In early October, HEETS share actually increased to over 18% of the overall Japanese market.
- IQOS in Korea remains challenged due to the exotic flavors being sold by their competition, the Korean national tobacco company. They have introduced their own competing flavors, but it will time to reestablish growth there.
- IQOS growth in Russia is particularly strong, but has been more lumpy on a reported basis. PM explained this is because of seasonality. In Russia and parts of the EU, during the summer months when people are outdoors more, cigarette sales increase as people are more willing to smoke outdoors. However, heated tobacco units actually perform better in colder/winter months when people stay more indoors and use HEETS to avoid the smoke/odor.
- Fourth quarter EPS is expected to be lower due to the fact that significant pricing gains in Turkey and the Philippines are shared with partners, as PM's subsidiary's in those countries are not wholly owned.
- Regarding the cancelled merger with MO, PM asserts pursuing it had nothing to do with weakness in their underlying business. They point to their just reported results in the quarter and this year as evidence of that. They assert it was largely due to wanting to combine their RRP strategies with MO. However, they confirm the merger is "dead", and they will proceed with their RRP strategies as planned. They also confirmed that the roll-out costs and pricing in the US are the responsibility and decision of Altria.
- PM is on pace to launch their mesh e-vapor product still this year, and are working to expand production of it for more significant roll-outs next year.