Philip Morris International Inc.

Philip Morris International Inc. is a leading international consumer goods company actively delivering a smoke-free future and evolving its portfolio for the long term to include products outside of the tobacco and nicotine sector. Its current product portfolio primarily consists of cigarettes and smoke-free products, including heat-not-burn, nicotine pouch and e-vapor products. Since 2008, the company has invested over $16 billion ¹ to develop, scientifically substantiate and commercialize innovative smoke-free products for adults who would otherwise continue to smoke, with the goal of completely ending the sale of cigarettes. As of December 31, 2025, PMI's smoke-free products were available for sale in 106 ² markets, and with regard to modern oral pouches, the company increased its presence to 56 ³ markets. Cigarettes are sold in approximately 170 ⁴ markets, and in many of these markets they hold the number one or number two market share position. The company's portfolio comprises both international and local brands and is led by Marlboro, the world's best-selling international cigarette, which accounted for approximately 43% ⁵ of total 2025 cigarette shipment volume. Marlboro is complemented in the premium-price category by Parliament, and other leading international cigarette brands are Chesterfield, L&M, and Philip Morris, which together contributed 81% ⁶ of cigarette shipment volume in 2025.

PMI is subject to highly competitive conditions in all aspects of its business and competes primarily on the basis of product quality, brand recognition, brand loyalty, taste, R&D, innovation, packaging, customer service, marketing, advertising and retail price. Competitors named in the filing include Altria Group, Inc., British American Tobacco plc, Japan Tobacco Inc., Imperial Brands plc, new market entrants particularly with respect to innovative products, several regional and local tobacco companies, and in some instances state-owned tobacco enterprises principally in Algeria, Egypt, China, Taiwan, Thailand and Vietnam. The company has a market share of at least 15% in approximately 100 ⁷ markets, including Algeria, Argentina, Australia, Austria, Brazil, the Czech Republic, Egypt, France, Germany, Greece, Hong Kong, Hungary, Indonesia, Italy, Japan, Kazakhstan, Mexico, the Netherlands, the Philippines, Poland, Portugal, Romania, Russia, Saudi Arabia, the Slovak Republic, South Korea, Spain, Switzerland and Turkey. Total International Market Share for cigarettes and heated tobacco units was 29.2% ⁸ in 2025, compared to 29.0% ⁹ in 2024 and 28.6% ¹⁰ in 2023.

PMI generates revenue primarily through the manufacture and sale of cigarettes and smoke-free products, including heat-not-burn, e-vapor and oral nicotine products. Revenue is recognized as performance obligations are satisfied, with the primary performance obligation being the distribution and sales of cigarettes and smoke-free products. The company's main types of distribution and sales are tailored to the characteristics of each market and include direct sales and distribution, distribution through independent distributors, exclusive zonified distribution, distribution through national or regional wholesalers, its own e-commerce infrastructure for product sales to trade partners and to consumers, and its own brand retail infrastructure for SFPs and accessories for sales to consumers. Net revenues are reported net of excise taxes, consumer and trade promotions, sales returns and include shipping and handling charges billed to customers.

PMI's product portfolio is divided into combustible tobacco products and smoke-free products. Combustible tobacco products include cigarettes and other tobacco products that are combusted, such as roll-your-own and make-your-own cigarettes, pipe tobacco, cigars and cigarillos. Smoke-free products include heat-not-burn, e-vapor, and oral smokeless products, as well as wellness products and consumer accessories. For the year ended December 31, 2025, net revenues from combustible tobacco products were $23.794 billion ¹¹, compared to $23.218 billion ¹² in 2024 and $22.334 billion ¹³ in 2023. Net revenues from smoke-free products were $16.854 billion ¹⁴ in 2025, compared to $14.660 billion ¹⁵ in 2024 and $12.840 billion ¹⁶ in 2023. Within smoke-free products, the IQOS, ZYN and VEEV are the leading brands in the SFPs portfolio. Heated tobacco units include BLENDS, DELIA, HEETS, HEETS Creations, SENTIA, TEREA, TEREA CRAFTED and TEREA Dimensions, as well as KT&G-licensed brands Fiit and Miix, and also include zero tobacco heat-not-burn consumables (LEVIA). Oral smoke-free products include nicotine pouches, snus, moist snuff, and other oral SFP such as chew bags and tobacco bits. E-vapor products are battery-powered devices that produce an aerosol by vaporizing a tobacco-free liquid solution.

In November 2022, PMI acquired Swedish Match AB, a leader in oral nicotine delivery, creating a global smoke-free combination led by the companies' IQOS and ZYN brands. As of April 30, 2024, PMI holds the full rights to commercialize IQOS in the U.S. after reaching an agreement to end its U.S. commercial relationship covering IQOS with Altria Group, Inc. in 2022. On December 31, 2024, PMI completed the sale of Vectura Group Ltd. to Molex Asia Holdings Ltd. for an upfront cash consideration of GBP 152 million ¹⁷ (approximately $191 million ¹⁸ at exchange rate on sale completion date) and a short-term receivable of GBP 24 million ¹⁹ (approximately $30 million ²⁰ at exchange rate on sale completion date), with additional deferred payments of up to GBP 101 million ²¹ (approximately $127 million ²² at exchange rate on sale completion date), contingent on achievement of certain milestones. During the fourth quarter of 2025, PMI completed the sale of one business and classified as held-for-sale net assets of certain other businesses, primarily related to its consumer accessories products acquired as part of the Swedish Match AB acquisition, recording a pre-tax loss of $94 million ²³. During 2025, PMI recorded pre-tax restructuring charges of $241 million ²⁴ related to the end of combustible tobacco production in two of its factories in Germany. During 2024, PMI recorded pre-tax restructuring charges of $180 million ²⁵ related to the restructuring of the sourcing of IQOS products to be commercialized in the U.S. and the cessation of operations in Venezuela. Dividends paid in 2025 were $8.624 billion ²⁶, and during the third quarter of 2025, the Board of Directors approved an 8.9% ²⁷ increase in the quarterly dividend to $1.47 ²⁸ per common share, resulting in an annualized dividend rate of $5.88 ²⁹ per common share.

For the year ended December 31, 2025, net revenues were $40.648 billion ³⁰, an increase of 7.3% ³¹ from $37.878 billion ³² in 2024. Net revenues, excluding currency and acquisitions/divestitures, increased by 6.5% ³³. Operating income was $14.892 billion ³⁴ in 2025, compared to $13.402 billion ³⁵ in 2024, an increase of 11.1% ³⁶. Net earnings attributable to PMI were $11.348 billion ³⁷ in 2025, compared to $7.057 billion ³⁸ in 2024, an increase of 60.8% ³⁹. Diluted earnings per share were $7.26 ⁴⁰ in 2025, compared to $4.52 ⁴¹ in 2024, an increase of 60.6% ⁴². Net cash provided by operating activities was $12.233 billion ⁴³ in 2025, essentially flat compared to $12.217 billion ⁴⁴ in 2024.

PMI expects that for the full year 2026, the estimated total international industry volume decline for cigarettes and HTUs, excluding China and the U.S., will be around 2% ⁴⁵. The company expects broadly stable total PMI cigarette and SFP shipment volume for 2026, with high-single digit SFP shipment volume growth ⁴⁶, and a cigarette shipment volume decline of around 3% ⁴⁷, including the impact of weaker industry volume in India and Mexico, and the ongoing recovery of its business in Turkey. PMI estimates that its 2026 effective tax rate will be around 21.5% ⁴⁸, excluding discrete tax events. For the full year 2026, PMI currently expects net cash provided by operating activities of around $13.5 billion ⁴⁹ at prevailing exchange rates, subject to year-end working capital requirements.

PMI's key strategic priority is the continued introduction, commercialization, and growth of its smoke-free products. The company is continuing to develop a multiplatform approach and tailoring its commercialization strategy to the characteristics of each specific market, focusing on consumer retail experience, guided consumer trials and customer care, and increasingly digital communication programs and e-commerce. As of December 31, 2025, PMI's smoke-free products were available for sale in 106 ⁵⁰ markets, and modern oral pouches were available in 56 ⁵¹ markets. PMI has integrated the production of its heated tobacco units into several existing manufacturing facilities, is progressing with plans to build manufacturing capacity for other SFPs, and continues to optimize its manufacturing infrastructure and expand commercialization activities for new products and markets. On March 27, 2025, PMI began selling IQOS 3.0, the blade version of IQOS, in Austin, Texas, pursuing a limited U.S. roll-out while waiting for authorization to market IQOS ILUMA, the induction version, in the United States. In November 2025, PMI and KT&G reached an agreement that will facilitate the continuation of their collaboration with a new and revised volume commitment for the 2026-2028 ⁵² period.

PMI has a long-term ambition to expand into wellness areas, with its wellness unit Aspeya currently focusing on developing and commercializing primarily oral consumer wellness offerings, including medical and non-recreational cannabinoid products (including CBD), though any revenue related to cannabinoids is expected to be negligible in the near to medium term. The company continues to use its expertise, technology and capabilities to explore new growth opportunities beyond its current business, including products that do not contain nicotine or tobacco. PMI is also pursuing regulatory authorizations for its smoke-free products, including the renewal of MRTP authorizations for IQOS products in the U.S. and MRTPAs for ZYN products, for which the FDA formally accepted the applications in February 2025 and issued a filing letter in June 2025 for 20 ZYN nicotine pouch products.

PMI's operating income, excluding currency and acquisitions/divestitures, increased by 9.3% ⁵³ in 2025, reflecting favorable pricing and volume/mix, partly offset by higher marketing, administration and research costs, higher manufacturing costs, higher restructuring charges, impairment of goodwill, higher amortization of intangibles, and charges related to the Germany excise tax classification litigation and loss on expected sale of consumer accessories and other businesses. The company recorded pre-tax restructuring charges of $241 million ⁵⁴ in 2025 related to the end of combustible tobacco production in two factories in Germany. PMI anticipates that assumption changes will decrease 2026 pre-tax pension and postretirement expense to approximately $71 million ⁵⁵ as compared with approximately $172 million ⁵⁶ in 2025, excluding amounts related to employee severance and early retirement programs.

PMI expects total capital expenditures in 2026 to be $1.4 billion to $1.6 billion ⁵⁷, predominantly due to investments supporting the smoke-free business. Capital expenditures were $1.569 billion ⁵⁸ in 2025 and $1.444 billion ⁵⁹ in 2024. The company expects to continue to optimize its manufacturing infrastructure and expand its commercialization activities for new products and markets. PMI's principal source of liquidity is cash generated from operations, and it also utilizes long-term and short-term debt financing, including a commercial paper program with an aggregate issuance capacity of $8.0 billion ⁶⁰. At December 31, 2025, total committed revolving credit facilities were $6.3 billion ⁶¹, with no borrowings outstanding.

PMI's capital allocation priorities include investing in the business, paying dividends, and managing debt. Dividends paid in 2025 were $8.624 billion ⁶². During the third quarter of 2025, the Board of Directors approved an 8.9% ⁶³ increase in the quarterly dividend to $1.47 ⁶⁴ per common share, resulting in an annualized dividend rate of $5.88 ⁶⁵ per common share. The company's total debt was $48.8 billion ⁶⁶ at December 31, 2025, and $45.7 billion ⁶⁷ at December 31, 2024. The weighted-average time to maturity of long-term debt was approximately 7 years ⁶⁸ at the end of 2025 and 2024. At December 31, 2025, borrowings in the amount of €2.5 billion ⁶⁹ (approximately $2.9 billion ⁷⁰) under the 5-year tranche of the term loan facility related to the Swedish Match acquisition remained outstanding.

PMI faces structural headwinds including the continued decline in consumption of tax-paid cigarettes in many of its markets due to increased taxes and pricing, governmental actions, diminishing social acceptance of smoking, health concerns, competition, economic and geopolitical uncertainty, and the prevalence of illicit products. The company also faces significant governmental actions aimed at increasing regulatory requirements with the goal of reducing or preventing the use of tobacco or nicotine-containing products, including restrictions on advertising, marketing and sponsorship, plain packaging, ingredient bans, flavor bans, and generation sales bans. The war in Ukraine continues to pose risks, with Russia accounting for around 9% ⁷¹ of total cigarette and heated tobacco unit shipment volume and around 6% ⁷² of total net revenues in 2025, and Ukraine accounting for around 2% ⁷³ of total cigarette and heated tobacco unit shipment volume and around 1% ⁷⁴ of total net revenues.

PMI faces execution risks related to the commercialization and growth of its smoke-free products, which are less predictable than its cigarette business. The pace at which adult smokers adopt SFPs may vary depending on the competitive, regulatory, fiscal and cultural environment. The company also faces risks related to the evolving legal and regulatory framework in the United States, including FDA actions, and the potential for regulatory restrictions to limit the commercialization of SFPs or the communication of scientifically substantiated information. Additionally, PMI faces risks from intense competition, including from competitors who may have different profit, volume and regulatory objectives, and from illicit trade, including counterfeiting and contraband.

PMI faces material risks from the potential failure to successfully introduce, commercialize, and grow smoke-free products in existing and new markets, as regulators may prohibit or significantly restrict the commercialization of these products or the communication of scientifically substantiated information and claims. The company's business in the United States is dependent on an evolving legal and regulatory framework, and FDA actions, including the premarket tobacco product and modified risk tobacco product authorizations, are subject to strict marketing, reporting and other requirements, with no guarantee that products will remain authorized. The war in Ukraine poses significant risks, as Russia accounted for around 9% ⁷⁵ of total cigarette and heated tobacco unit shipment volume and around 6% ⁷⁶ of total net revenues in 2025, and the company faces potential deprivation of rights in or access to its Russian assets, which could result in material impairment. PMI faces intense competition, and its competitive position can be significantly influenced by weak economic conditions, competitors' introduction of lower-price or innovative products, and product regulation that diminishes the ability to differentiate products. The company also faces risks related to litigation, including tobacco-related litigation pending in certain jurisdictions where damages claimed are significant and, in certain cases, range into the billions of U.S. dollars, and as of March 2024, PMI began facing litigation related to its oral nicotine products before certain courts in the United States.

Management's message emphasizes PMI's transformation to a smoke-free future and the evolution of its portfolio for the long term to include products outside of the tobacco and nicotine sector. The key strategic priorities are to continue developing and commercializing products that have the potential to present less risk of harm to adult smokers who switch to such products versus continued cigarette smoking, and to educate and encourage current adult smokers who would otherwise continue to smoke cigarettes to switch to those products. Management highlights that since 2008, PMI has invested over $16 billion ⁷⁷ to develop, scientifically substantiate and commercialize innovative smoke-free products. The company has implemented an evolved organizational model effective January 1, 2026, with two primary business units: International and U.S., designed to enhance agility and support the journey to become a smoke-free company. For the full year 2026, management expects broadly stable total PMI cigarette and SFP shipment volume, with high-single digit SFP shipment volume growth ⁷⁸, a cigarette shipment volume decline of around 3% ⁷⁹, an estimated total international industry volume decline of around 2% ⁸⁰ for cigarettes and HTUs excluding China and the U.S., net cash provided by operating activities of around $13.5 billion ⁸¹ at prevailing exchange rates, total capital expenditures of $1.4 billion to $1.6 billion ⁸², and an effective tax rate of around 21.5% ⁸³ excluding discrete tax events.