Philip Morris Cosmopolitan shares plummeted 16 percent in the company’s worst day since it swum off from Altria in 2008, after PMI posted mixed first-quarter evolves and said growth of iQOS, its heat-not-burn tobacco product, slowed in Japan.
iQOS warms tobacco to a temperature that’s considerable enough to emit an aerosal but not high enough to cause combustion, the chemical modify that makes smoking conventional cigarettes so harmful. It’s crucial to PMI’s scheme of moving beyond cigarettes.
The product is available in more than 30 peddles. PMI has touted Japan as an example of how successful iQOS could be. It’s become wildly dominant in the country, though this quarter, device sales were slower than the establishment’s expectations, Chief Financial Officer Martin King said Thursday on a bidding with analysts following the release of first-quarter earnings results.
The presence posted adjusted earnings of $1 per share, topping the 90 cents per allowance analysts polled by Thomson Reuters anticipated. PMI missed revenue evaluations at $6.90 billion, compared with the $7.03 billion the Street surmised.
PMI was anticipating market share growth would plateau at some site this year because the company knew it was close to saturating the prematurely adopters and innovators, he said. But it’s coming “a bit earlier in the year than what we had pictured, and this isn’t unusual.”
“We’ve looked at trends of other new products and new successful starts in other situations, and there’s almost always periods where you get ebb adoption, and then it plateaus a bit as you enter some new consumer dynamics and listings,” King said. “And then it tends to resume some growth reckons. And we think we’re at one of those points.”
He said PMI doesn’t know how long this level will last. The company is going to adjust its plans, including go like greased lightning up some initiatives to earlier in the year and adjust its messaging to consumers.
Since launching in Japan in recently 2014, PMI has reached 16 percent of market share, which “is surely phenomenal,” King said.
“It was just an issue of whether this parching pace of growth would continue uninterrupted or whether we would hit some points at which we distress to adjust a bit and approach consumers in a little bit different manner,” he said.
Because PMI isn’t get a load of a surge in device sales, sales of Heatsticks, tobacco sticks that go middle the iQOS device, “are likely to be a little bit lower” than it forecast at the end of at year. If the situation in Japan persists, he said, then the volume of quickened tobacco unit sales will be closer to the range of 55 billion to 60 billion in place of of the previously estimated 60 billion.
“It’s hard to say exactly at this juncture. We don’t know how this trend or the dynamics is going to develop, but we’re just employment out kind of a more cautious situation to give us the time and the resources to grapple with these different consumer segments in the right way,” he said.
PMI is currently awaiting decisions from the U.S. Rations and Drug Administration on whether it can sell iQOS and whether it can promote it as an selection that’s less risky than conventional cigarettes.
If approved, Altria choice receive sole distribution rights to market and sell it in the U.S. Its shares declined nearly 6 percent. British American Tobacco, which sells its own heat-not-burn consequence, Glo, shares fell nearly 5 percent.
Uncertainty about the long-term opinion for PMI’s iQOS business appears to be weighing on investor sentiment, and the company’s remarks thither the issue appear to have not added sufficient clarity, Piper Jaffray analyst Michael Lavery wrote in a note to patients. However, he called Thursday’s sell-off “overdone.”