Total smoke-free product (SFP) shipment volume increased by 13.1% for the six months ended June 30, 2025, reaching 87.9 billion equivalent units. Nicotine pouches saw exceptional growth of 48.2% to 438.1 million cans, and Heated Tobacco Units (HTUs) grew by 10.5% to 75.9 billion units, demonstrating strong progress in PMI's smoke-free future strategy.

PMI completed the sale of Vectura Group Ltd. on December 31, 2024, for an upfront cash consideration of GBP 152 million, updating its segment reporting to include ongoing Wellness & Healthcare results within the Europe segment. This divestiture streamlines the portfolio, allowing greater focus on core smoke-free initiatives.

Effective May 1, 2024, PMI reacquired full commercialization rights for IQOS in the U.S. from Altria Group, Inc., and began selling IQOS 3.0 (blade version) in Austin, Texas, on March 27, 2025. This strategic move provides PMI direct control over its leading heat-not-burn product in a key market.

PMI recorded pre-tax restructuring charges of $243 million for the six months ended June 30, 2025, primarily related to ending combustible tobacco production in two German factories by Q2 2025. These charges include $127 million for separation programs and $92 million for asset impairment, reflecting management's strategic shift away from traditional cigarettes.

Despite an ongoing appeal regarding the German fiscal regulation imposing an additional excise tax on HTPs, PMI provisionally paid EUR 151 million (approximately $176 million) in January 2025 to avoid future interest accumulation. This demonstrates management's proactive approach to mitigating financial risks associated with regulatory challenges.

Capital expenditures for the first six months of 2025 were $760 million, primarily directed towards ongoing investments in smoke-free product manufacturing capacity. PMI expects total capital expenditures in 2025 to be around $1.6 billion, almost entirely supporting the smoke-free business, indicating a clear strategic focus and execution.

Multiple putative class actions (e.g., Kelly, Bates-Ferreira, Palmer, Lendinara, Norris, Friedman, Baltimore City) have been filed against PMI and Swedish Match North America LLC since March 2024, alleging addiction, defective design, and deceptive marketing of ZYN nicotine pouches. These cases are moving into the discovery phase, posing significant legal and reputational risks.

PMI recorded a $41 million goodwill impairment charge in the Europe segment during Q2 2025, following an annual review that determined the estimated fair value of a reporting unit in Europe was lower than its carrying value. This indicates specific challenges or revised projections for parts of the European business.

PMI's Russian operations held approximately $4.3 billion in total assets (including $1.8 billion in cash) as of June 30, 2025, and Ukrainian operations held $0.7 billion. The ongoing conflict and related sanctions, including forced localization of a key distributor (JSC TK Megapolis), pose significant risks of material impairment and operational disruption.

PMI's HTU market share in the total international market (excluding China and the U.S.) increased by 0.6 percentage points to 5.7% for the six months ended June 30, 2025, reflecting continued growth and competitive strength in this key smoke-free category.

Total international market share for cigarettes and HTUs combined (excluding China and the U.S.) improved by 0.6 percentage points to 29.1% for the six months ended June 30, 2025. This gain occurred despite a slight decrease in cigarette shipment volume (down 0.3%), indicating the strength of PMI's diversified portfolio.

ZYN reaccelerated consumer offtake growth in Q2 2025 as in-store availability improved and legal-age consumers regained access to the full portfolio. PMI expects full-year 2025 nicotine pouch shipment volume in the U.S. to be 800-840 million cans, reinforcing ZYN's leading brand status in the oral nicotine market.

PMI is optimizing its manufacturing footprint by ending combustible tobacco production in two German factories by Q2 2025. This initiative, which incurred $243 million in restructuring charges, aims to streamline operations and reallocate resources towards smoke-free products, improving long-term efficiency.

Marketing, administration, and research costs increased by 11.3% to $5.825 billion for the six months ended June 30, 2025, compared to $5.232 billion in the prior year. This rise, partly due to restructuring charges and higher amortization of intangibles, indicates increased investment in commercialization efforts for SFPs.

While direct material and utility costs are stabilizing, PMI expects a moderate overall increase in inflationary pressures in 2025, primarily driven by tobacco leaf costs. This could impact future cost of sales, though the impact on the first six months of 2025 was not material.

The FDA authorized the marketing of 20 varieties of ZYN nicotine pouches in January 2025, and previously granted Modified Risk Tobacco Product (MRTP) authorizations for IQOS 2.4 and 3.0 devices. These authorizations validate PMI's scientific substantiation efforts and enable broader commercialization of its smoke-free portfolio.

PMI's product development is centered on eliminating combustion through heat-not-burn (IQOS, BONDS) and oral tobacco/nicotine products (ZYN, snus), which are deemed the most promising paths for harm reduction. The company continues to invest in scientific assessment and commercialization of these alternatives.

PMI has invested over $14 billion since 2008 in developing and commercializing innovative smoke-free products, building world-class scientific assessment capabilities. The company is actively expanding its SFP brand portfolio and market positions, including the launch of BONDS devices in 5 markets and VEEV vaping products in 42 markets since 2022.

Dividends paid in the first six months of 2025 amounted to $4.222 billion, up from $4.064 billion in the prior year. The Board of Directors approved a 3.8% increase in the quarterly dividend to $1.35 per common share in Q3 2024, signaling confidence in future earnings and cash generation.

Short-term borrowings significantly increased to $2.540 billion at June 30, 2025, from $137 million at December 31, 2024, primarily due to higher commercial paper outstanding. This shift indicates a reliance on short-term financing for liquidity and working capital needs.

PMI prepaid approximately €3 billion ($3.2 billion) of its term loan facility in November 2024, representing all borrowings under the 3-year tranche. New debt issuances in H1 2025, totaling $3.058 billion, were used for general corporate purposes, including working capital and refinancing outstanding notes due in 2025, optimizing the capital structure.

Performance Share Unit (PSU) awards for executives in 2025 include a 30% weighting on PMI’s currency-neutral compound annual adjusted diluted EPS growth rate and a Sustainability Index (20% Product Sustainability, 10% Operational Sustainability). This links executive incentives directly to ESG progress, particularly the smoke-free transformation and climate change efforts.

PMI's strategic priorities include developing and commercializing products with less harm potential and educating adult smokers to switch from cigarettes. The Product Sustainability metric measures progress on phasing out cigarettes and reducing post-consumer waste, underscoring the company's commitment to a smoke-free future as a key ESG initiative.

PMI actively monitors existing and potential climate change-related legislation, regulations, and reporting frameworks, such as the EU Emissions Trading System and various sustainability disclosure acts. This proactive approach aims to assess and mitigate climate-related risks, which are an integral aspect of the company's risk assessment process.

Estimated international industry volume (excluding China and the U.S.) for cigarettes and HTUs was broadly stable for the six months ended June 30, 2025. However, regional variations exist, with Europe seeing a 1.2% decrease in Q2 2025, while SSEA, CIS & MEA experienced a 0.8% increase, indicating diverse market dynamics.

The EU Tobacco Excise Directive proposal in July 2025 aims for differentiated tax treatment for novel products by January 2028, which could be favorable. However, some governments continue to ban or severely restrict SFP sales, and the EU's flavor ban for heated tobacco products, effective October 2023, impacts a significant portion of SFP products.

The ongoing war in Ukraine continues to pose unpredictable risks, including potential supply chain disruptions and adverse macroeconomic effects. PMI also expects the global tariff environment to remain volatile throughout 2025, necessitating continuous monitoring and adaptation of operations to mitigate potential impacts.