PM gave a relatively short 1/2 hour presentation this morning at the Barclays consumer staples conference. In addition, they issued a press release updating their financial guidance.
While they now expect to hit the high end of their adjusted EPS guidance of $5.97 to $6.07 for the full year 2021, the underlying news was not as good.
Due to the ongoing semiconductor shortage, PM will no longer launch IQOS ILUMA in any markets other than Japan in 2021. They now expect the other markets they intended to launch in, most notably Russia, will happen now in early 2022 instead.
That in turn means that HEETS sales for 2021 will likely be at the low end of their 95-100 billion unit guidance (due to less inventory production of ILUMA sticks and fewer new customer acquisitions). If that short 3-6 month delay is all there is, it's a small negative, but not significant in the longer run. However, in the presentation, PM also noted that in Russia there has been a big increase in heat not burn price competition (presumably from BAT and/or JTI) which they haven't matched due to the semiconductor shortage. That could be a bigger issue over time. However, as happened in Japan previously, with a superior product in IQOS, longer term PM has prevailed in the heat not burn competition.
PM also commented much further on the HEET's excise taxation issue. In the EU up until now, HEETS have been taxed at about 1/3 of the rate of cigarettes (or a 66% tax advantage). The German taxes that start to phase in next year would lower the tax advantage in Germany to just 20%. While PM is encouraged that Germany has recognized in law that a lower rate for HEETS versus cigarettes is warranted, they believe that an excise tax advantage should remain above 50%. Germany has countered by saying that the advantage for HEETS in Japan is also just 20%, and has still met with success there. PM counters that by saying that a smaller advantage will mean more people keep smoking than switching to better products for their health. Hard to say where this all leads and how other countries in the EU will look at it, but it obviously is a significant issue for the growth rate of IQOS.