Tobacco Asia

16 tobaccoasia FRONT PAGE NEWS 卷首新闻 Completion is expected before the end of 2026, subject to regulatory approvals and customary closing conditions. Until the transaction is finalized, the businesses will continue to operate independently. The deal represents another example of large tobacco groups using selective brand acquisitions to reinforce profitable combustible categories while investing heavily in heated tobacco and other reduced-risk products. Smoke-Free Growth Lifts PMI to Record Revenue Philip Morris International (PMI) reached a major milestone in the second quarter of 2026, reporting more than US$11 billion in quarterly net revenue for the first time. The achievement was driven by continued growth in the company's smoke-free portfolio and a stronger-than-expected performance in its combustible cigarette business. PMI reported US$11.2 billion in net revenue for the quarter, a 10.4% increase from the prior year, while adjusted diluted earnings per share rose 15.2% to $2.20. Total shipment volume increased 2.5%, led by a 7.5% increase in smoke-free products and a 1.1% gain in cigarette shipments. "We delivered outstanding results in the second quarter, driving net revenues to over $11 billion for the first time with excellent growth across all headline metrics," PMI c.e.o. Jacek Olczak said during a conference call. "With a robust first half under our belt, including continued momentum and strong results in our smoke-free business, we are well positioned to deliver on our full-year targets while investing for future growth." Smoke-free products continued to reshape PMI's business, accounting for about 42% of total net revenue in the quarter. The company's smoke-free portfolio is now available in 109 markets, underscoring its expanding global footprint. IQOS remained the company's primary growth engine, with heated tobacco unit shipments up 7.6%, despite temporary headwinds in Japan following an excise tax increase and in Poland after a flavor-characterization ban. Excluding those two markets, IQOS adjusted in-market sales grew about 10%, supported by strong demand across Europe and emerging markets. PMI also continued to expand its nicotine pouch and e-vapor businesses. Modern oral pouch volumes grew 14.7% excluding the Nordic region, with Zyn now available in 60 markets and posting strong growth in countries including Pakistan, Poland, and the United Kingdom. Meanwhile, VEEV shipments surged 55.1%, and the company said the brand now holds the leading position in Europe's closed pod category. In the US, PMI highlighted the US Food and Drug Administration's recent modified risk tobacco product (MRTP) authorization of 20 Zyn nicotine pouch variants, the first such authorization for a nicotine pouch. The company said it plans to accelerate US investments in Zyn while preparing for the future launch of IQOS Iluma. During the quarter, Zyn shipments increased by 1.8% to 2.9 billion pouches. PMI also launched Zyn Ultra and expanded its flavor lineup, with additional product introductions planned for later this year. While smoke-free products remain central to PMI's long-term strategy, the company's combustible cigarette business posted an unexpectedly strong quarter. International cigarette shipments rose 1.1%, led by Turkey, Indonesia, and Egypt. Combustible net revenues rose 9.8%, supported by strong pricing. Marlboro increased its category share to 11%, matching its record high. Looking ahead, PMI raised its full-year adjusted diluted earnings guidance to US$8.26-US$8.41 per share, reflecting projected growth of 9.5% to 11.5% in 2025. The company also said the conflict in the Middle East has had only a limited effect on operations so far, primarily through higher transpor- tation and energy costs, and that it does not expect a prolonged impact on consumer demand. The quarter reinforces PMI's evolving business model, as smoke-free products approach half of total revenue and traditional cigarettes continue to generate strong cash flow. – Timothy S. Donahue JTI Challenges UK Tobacco Tax Gap Data Japan Tobacco International (JTI) disputed new UK govern- ment estimates of tobacco tax losses, arguing that HM Revenue & Customs (HMRC) significantly understates the scale of the illicit tobacco market. HMRC's latest Measuring Tax Gaps report estimated that the UK lost £1.3 billion (US$1.75 billion) in unpaid tobacco duty during the 2024-25 financial year, with a further £0.4 billion (US$540 million) in unpaid value-added tax, bringing total lost tax revenue from illicit tobacco to about £1.7 billion (US$2.29 billion). HMRC attributed the losses to illegal tobacco products that escaped duty and VAT. JTI described the estimate as "deeply flawed," saying it does not reflect conditions observed through the company's market data, test purchasing program, and local investigations. The company argued that illegal tobacco remains widely available across the UK and that the government's estimate conflicts with its own efforts to strengthen enforcement against illicit trade. According to JTI, its annual pack swap survey indicates that non-UK duty-paid products account for an estimated 42% of cigarette consumption and 61% of hand-rolling tobacco consumption in the UK. The company also cited test purchas- ing conducted in 2026, which found illegal tobacco on sale in a substantial proportion of independent retail outlets visited in several parts of the country. JTI called for HMRC to overhaul the methodology used to calculate the annual tobacco tax gap, arguing that the current approach masks the true scale of illicit trade. The dispute comes as the UK government increases its focus on illegal tobacco sales. Recent measures include plans to establish a dedicated High Streets Organised Crime Unit, expand the use of shop closure orders against businesses involved in illicit trade and strengthen enforcement resources targeting illegal retail activity. HMRC calculates the tobacco tax gap by estimating total tobacco consumption, subtracting legal duty-paid sales and applying the associated duty and VAT to the remaining volume assumed to be illicit. The agency reported that tobacco duty losses represented about 14.2% of total theoretical tobacco duty liabilities in 2024-25.

• Cover