PM reported first quarter adjusted EPS of $1.60, which was up from $1.48 in last years second quarter. That increase came despite a negative currency impact of $0.13, mostly from Japanese Yen weakness. The quarter results were stronger than previously expected due to some additional strength in Swedish Match, some stronger cigarette sales, plus some delay and movement of anticipated investment spending into the third quarter.
The adjusted results exclude two special charges that were taken in the 2nd quarter. The first was $204 million, or $0.11 per share, due to an adverse excise tax ruling in the supreme court of Korea. PM had previously won rulings on this matter in lower courts there, but will now be assessed that amount for excise taxes from 2015. The second item was a noncash write-down of $680 million in goodwill for their Wellness division, due to a failed scientific trial for its inhaled aspirin technology, as well as slower anticipated development of other products going forward. Due to those setbacks in Wellness, PM no longer believes it will reach its previous goal of $1 billion in Wellness sales by 2025.
PM increased their full year outlook slightly, now expecting 8% to 9.5% adjusted EPS growth, excluding currency, as compared to 7% to 9% previously. The negative currency outlook increased slightly to $0.33 for the full year versus $0.30 previously, with most of that already incurred in the first two quarters of the year ($0.26 per share thus far). After the currency impact, the adjusted EPS guidance remained largely unchanged at $6.13 to $6.22 (versus $6.10 to $6.22 previously).
Operationally, PM largely held to their 2023 forecast. Heated Tobacco Unit (HTU) sales were up 16% at retail in the second quarter, which matched the first quarter increase. The number of IQOS users at the end of the second quarter was 27.2 million, an increase of 1.4 million users from the end of the first quarter. That user growth gives PM confidence for their forecast of stronger HTU growth in the second half of the year. ILUMA sales now represent 2/3 of all IQOS sales, and is now available in 23 countries.
Sales of Zyn continued their very strong growth in the US, with shipments of 90 million cans in the quarter, versus 73 million in the first quarter, and double digit increases in revenues and earnings. Cigarette pricing remained strong and PM recaptured some market share in that segment during the quarter.
Overall, a good quarter, with no major warning signs. PM still anticipates applying for a PMTA & MRTP from the FDA for ILUMA in the USA later this year. I doubt they will receive either before the PM takeover and re-launch in the US in April next year, but the 2.4 and 3.0 blade devices already have both approvals.