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Item 2. Management’s Discussion and Analysis

2024-07-25 compared with 2024-04-26 · 662 added, 351 removed, 1218 unchanged (45% of the section changed)

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In November 2022, we acquired Swedish Match AB ("Swedish Match") – a leader in oral nicotine delivery – creating a global smoke-free combination led by the companies’ IQOS and ZYN brands.

Food and Drug Administration (the "FDA") has authorized versions of our IQOS devices and consumables, and Swedish Match's General snus, as Modified Risk Tobacco Products ("MRTPs").

Food and Drug Administration (the "FDA") has authorized versions of our IQOS devices and consumables and Swedish Match's General snus as Modified Risk Tobacco Products ("MRTPs") and renewal applications for these products are presently pending before the FDA.

We describe the MRTP orders in more detail in the "Business Environment" section of this Item 2.

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As such, these products have the potential to present less risk of harm versus continued smoking.

IQOS is the leading brand in our SFPs portfolio.

As of December 31, 2023, our smoke-free products were available for sale in 84 markets.

IQOS and ZYN are the leading brands in our SFPs portfolio.

As of June 30, 2024, our smoke-free products were available for sale in 90 markets.

In 2021, we laid the foundation for our long-term growth ambitions beyond nicotine in wellness and healthcare, including through acquisitions of Vectura Group plc ("Vectura") and Fertin Pharma A/S ("Fertin Pharma"), which provide essential capabilities for future product development.

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covering IQOS as of April 30, 2024.

Thereafter, PMI will hold the full rights to commercialize IQOS in the U.S.

On July, 14, 2023, we made the final payment to Altria under the terms of the agreement.

PMI now holds the full rights to commercialize IQOS in the U.S.

For further details, see Note 18.

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The following executive summary provides the business update and significant highlights from the " Discussion and Analysis " that follows.

Impairment and Exit Costs

On February 2, 2024, PMI announced that it reached a global settlement with British American Tobacco p.l.c.

The settlement led to the rescission of International Trade Commission orders prohibiting the importation of IQOS products to the U.S.

As a result, PMI has restructured the sourcing of IQOS products to be commercialized in the U.S., and recorded pre-tax asset impairment and exit costs of $121 million related to this restructuring during the first quarter of 2024.

In the first quarter of 2024, PMI ceased its operations in Venezuela and as a result, recorded pre-tax asset impairment and exit costs of $47 million.

Consolidated Operating Results for the Three Months Ended March 31, 2024

• Net Revenues - Net revenues of $8.8 billion for the three months ended March 31, 2024 increased by $0.8 billion, or 9.7%, from the comparable 2023 amount.

The change in our net revenues from the comparable 2023 amount was driven by the following (variances not to scale with quarterly results):

During the quarter, net revenues increased by 9.7%.

Net revenues, excluding currency, increased by 12.1%, mainly reflecting:

Consolidated Operating Results for the Six Months Ended June 30, 2024

• Net Revenues - Net revenues of $18.3 billion for the six months ended June 30, 2024, increased by $1.3 billion, or 7.5%, from the comparable 2023 amount.

The change in our net revenues from the comparable 2023 amount was driven by the following (variances not to scale with year-to-date results):

For the six months ended June 30, 2024, net revenues increased by 7.5%.

Net revenues, excluding currency and acquisitions, increased by 10.8%, mainly reflecting:

a favorable pricing variance, primarily driven by higher combustible tobacco pricing;

and favorable volume/mix, mainly driven by higher HTU and ZYN volume, partially offset by lower cigarette volume, as well as a favorable comparison to 2023 reflecting a charge in the first quarter of 2023 of $80 million following the termination of a distribution arrangement in the Middle East, shown in "Other." The termination of a distribution arrangement in the Middle East is further described in the following " Diluted Earnings Per Share " discussion.

Net revenues by product category for the three months ended March 31, 2024 and 2023, are shown below:

• Diluted Earnings Per Share - The changes in our reported diluted earnings per share (“diluted EPS”) for the three months ended March 31, 2024, from the comparable 2023 amounts, were as follows:

and favorable volume/mix, driven by higher smoke-free products volume, partly offset by unfavorable cigarette mix, as well as a favorable comparison to 2023 reflecting a charge in the first quarter of 2023 of $80 million following the termination of a distribution arrangement in the Middle East, shown in "Other." The termination of a distribution arrangement in the Middle East is further described in the following " Diluted Earnings Per Share " discussion.

Net revenues by product category for the six months ended June 30, 2024 and 2023 are shown below:

• Diluted Earnings Per Share - The changes in our reported diluted earnings per share (“diluted EPS”) for the six months ended June 30, 2024, from the comparable 2023 amounts, were as follows:

Diluted EPS % Change

For the three months ended March 31, 2023 $ 1.28

For the six months ended June 30, 2023 $ 2.29

2023 Asset impairment and exit costs 0.06

2023 South Korea indirect tax charge 0.11

2023 Fair value adjustment for equity security investments 0.01

2023 Amortization of intangibles 0.08

2023 Impairment of goodwill and other intangibles 0.44

2023 Termination of distribution arrangement in the Middle East 0.04

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2023 Income tax impact associated with Swedish Match AB financing (0.06)

2023 Tax items —

Subtotal of 2023 items 0.69

2024 Asset impairment and exit costs (0.09)

2024 Amortization of intangibles (0.06)

2024 Impairment of other intangibles (0.01)

2024 Amortization of intangibles (0.17)

2024 Fair value adjustment for equity security investments 0.15

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Operations 0.60

For the three months ended March 31, 2024 $ 1.38 7.8 %

Asset impairment and exit costs – During the three months ended March 31, 2023, we recorded pre-tax asset impairment and exit costs of $109 million , representing $96 million net of income tax and a diluted EPS charge of $0.06 per share, related to a project to fully outsource and restructure the manufacturing of e-vapor devices and consumables.

During the three months ended March 31, 2024, we recorded pre-tax asset impairment and exit costs of $168 million, representing $141 million net of income tax and a diluted EPS charge of $0.09 per share, related to the restructuring of the sourcing of IQOS products to be commercialized in the U.S., and the cessation of our operations in Venezuela.

For the six months ended June 30, 2024 $ 2.92 27.5 %

Asset impairment and exit costs – During the six months ended June 30, 2023, we recorded pre-tax asset impairment and exit costs of $109 million , representing $96 million net of income tax and a diluted EPS charge of $0.06 per share, related to a project to fully outsource and restructure the manufacturing of e-vapor devices and consumables.

During the six months ended June 30, 2024, we recorded pre-tax asset impairment and exit costs of $168 million, representing $141 million net of income tax and a diluted EPS charge of $0.09 per share, related to the restructuring of the sourcing of IQOS products to be commercialized in the U.S., and the cessation of our operations in Venezuela.

For further details, see Note 15.

Asset Impairment and Exit Costs .

Amortization of intangibles – During the first quarter of 2023 and 2024, we recorded amortization of intangible expense of $81 million (representing $64 million net of income tax or $0.04 per share decrease in diluted EPS) and $120 million (representing $95 million net of income tax or $0.06 per share decrease in diluted EPS), respectively.

South Korea indirect tax charge – On July 13, 2023, our South Korean subsidiary, PM Korea, received an adverse ruling from the Supreme Court of South Korea related to cases alleging underpayment of excise taxes in connection with a 2015 excise tax increase and subsequent audit by the South Korean Board of Audit and Inspection.

The Supreme Court ruling reversed previous decisions that were in PM Korea’s favor at the trial and appellate levels.

As a result of the ruling, we concluded that an adverse outcome was probable.

Consequently, we recorded a non-cash pre-tax charge of $204 million (representing $174 million net of income tax or $0.11 per share decrease in diluted EPS) in the second quarter results of 2023, reflecting the full amount previously paid by PM Korea.

Fair value adjustment for equity security investments – During the six months ended June 30, 2023, we recorded an unfavorable fair value adjustment for our equity security investments in India and Sri Lanka of $10 million after tax (or $0.01 per share decrease in diluted EPS).

During the six months ended June 30, 2024, we recorded a favorable fair value adjustment for our equity security investments in India and Sri Lanka of $242 million after tax (or $0.15 per share increase in diluted EPS).

For further details, see Note 12.

Related Parties - Equity Investments and Other .

Amortization of intangibles – During the six months ended June 30, 2023 and 2024, we recorded amortization of intangible expense of $163 million (representing $128 million net of income tax or $0.08 per share decrease in diluted EPS) and $332 million (representing $260 million net of income tax or $0.17 per share decrease in diluted EPS), respectively.

The higher 2024 amount includes the reacquired rights recorded as other intangible assets, net following the reacquisition of IQOS commercialization rights in the U.S.

from Altria Group, Inc.

For further details, see Note 4.

Goodwill and Other Intangible Assets, net .

Impairment of goodwill and other intangibles – During the second quarter of 2023, as a result of the completion of our annual review of goodwill and non-amortizable intangible assets for potential impairment, it was determined that the estimated fair value of the Wellness and Healthcare reporting unit was lower than its carrying value.

Consequently, we recorded a total non-cash impairment charge of $680 million (representing a $0.44 per share decrease in diluted EPS) consisting of a goodwill impairment charge of $665 million and a non-amortizable intangible asset pre-tax impairment charge of $15 million for an in-process research and development project related to one of our 2021 acquisitions.

The impairment charge was recorded in impairment of goodwill ($665 million) and marketing, administration and research costs ($15 million) in the condensed consolidated statements of earnings during the six months ended June 30, 2023 and was included in the Wellness and Healthcare segment results.

During the first quarter of 2024, we recorded an impairment charge of $27 million (representing $20 million net of income tax or $0.01 per share decrease in diluted EPS), primarily reflecting the impairment of non-amortizable intangible assets related to an in-process research and development project in the Wellness and Healthcare segment.

The impairment charge of $27 million was recorded in marketing, administration and research costs in the condensed consolidated statements of earnings during the six months ended June 30, 2024.

For further details, see Note 4.

Goodwill and Other Intangible Assets, net .

Termination of distribution arrangement in the Middle East – Following the termination of a distribution arrangement in the Middle East, we recorded a pre-tax charge of $80 million in the first quarter of 2023 (representing $70 million net of income tax and a diluted EPS charge of $0.04 per share).

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Swedish Match AB acquisition accounting related items – During the first quarter of 2023, we recorded pre-tax purchase accounting adjustments of $18 million related to the sale of acquired inventories stepped up to fair value (representing $13 million net of income tax and a diluted EPS charge of $0.01 per share).

These pre-tax adjustments were recorded in cost of sales in the condensed consolidated statements of earnings for the three months ended March 31, 2023.

Impairment of other intangibles – During the first quarter of 2024, we recorded an impairment charge of $27 million (representing $20 million net of income tax or $0.01 per share decrease in diluted EPS), primarily reflecting the impairment of non-amortizable intangible assets related to an in-process research and development project in the Wellness and Healthcare segment.

For further details, see Note 4.

Goodwill and Other Intangible Assets, net .

Fair value adjustment for equity security investments – During the first quarter of 2024, we recorded a favorable fair value adjustment for our equity security investments in India and Sri Lanka ($0.08 per share increase in diluted EPS).

For further details, see Note 12.

Related Parties - Equity Investments and Other .

These pre-tax adjustments were recorded in cost of sales in the condensed consolidated statements of earnings for the six months ended June 30, 2023.

Income taxes – The Income tax impact associated with Swedish Match financing that increased our 2023 diluted EPS by $0.06 per share and decreased our 2024 diluted EPS by $0.09 per share in the table above was due to a deferred tax impact for unrealized foreign currency gains and losses on intercompany loans related to the Swedish Match acquisition financing reflected in the condensed consolidated statements of earnings, while the underlying pre-tax foreign currency movements fully offset in the condensed consolidated statements of earnings and were reflected as currency translation adjustments in the condensed consolidated statements of stockholders' (deficit) equity.

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The change in the tax rate that decreased our diluted EPS by $0.06 per share in the table above was primarily due to increases in U.S.

state tax expense and repatriation cost differences, partially offset by changes in earnings mix by taxing jurisdiction.

As of March 31, 2024, many countries have enacted the OECD’s framework on a global minimum tax (referred to as “Pillar Two”).

PMI has determined that Pillar Two should not have a material impact on its 2024 consolidated financial statements.

For further details, see Note 9.

Income Taxes .

state tax expense, repatriation cost differences, and changes in earnings mix by taxing jurisdiction.

Currency – The unfavorable impact of $0.38 per share during the reporting period primarily results from the fluctuations of the U.S.

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This unfavorable currency movement has impacted our profitability across our primary revenue markets and local currency cost bases.

The unfavorable currency impact in the first quarter of 2024 included a $0.09 impact from the devaluation of the Egyptian pound, including a transactional impact of approximately $0.06 primarily related to the balance sheet remeasurement of foreign currency payables.

Interest – The unfavorable impact of $0.03 per share from interest in the table above was due primarily to higher average debt levels and higher average interest rates on debt.

Interest – The unfavorable impact of $0.04 per share from interest in the table above was primarily due to higher average debt levels and higher average interest rates on debt.

Operations – The increase in diluted EPS of $0.60 from our operations in the table above was due primarily to the following segments:

• EA, AU & PMI DF:

Favorable pricing, favorable volume/mix and lower shipping costs;

• SSEA, CIS & MEA:

Favorable pricing and favorable volume/mix, partly offset by higher manufacturing costs;

• EA, AU & PMI DF:

Favorable pricing and favorable volume/mix;

Favorable pricing and favorable volume/mix, partly offset by higher marketing, administration and research costs

and manufacturing costs;

Favorable volume/mix and favorable pricing, partly offset by higher marketing and administration costs.

Consolidated Operating Results for the Three Months Ended June 30, 2024

• Net Revenues - Net revenues of $9.5 billion for the three months ended June 30, 2024, increased by $0.5 billion, or 5.6%, from the comparable 2023 amount.

The change in our net revenues from the comparable 2023 amount was driven by the following (variances not to scale with quarterly results):

During the quarter, net revenues increased by 5.6%.

Net revenues, excluding currency and acquisitions, increased by 9.6%, mainly reflecting:

a favorable pricing variance, primarily due to higher combustible tobacco pricing;

and favorable volume/mix, driven by higher smoke-free products volume.

Net revenues by product category for the three months ended June 30, 2024 and 2023, are shown below:

• Diluted Earnings Per Share - The changes in our reported diluted EPS for the three months ended June 30, 2024, from the comparable 2023 amounts, were as follows:

Diluted EPS % Change

For the three months ended June 30, 2023 $ 1.01

2023 South Korea indirect tax charge 0.11

2023 Fair value adjustment for equity security investments 0.01

2023 Amortization of intangibles 0.04

2023 Impairment of goodwill and other intangibles 0.44

2023 Income tax impact associated with Swedish Match AB financing (0.01)

2023 Tax items —

Subtotal of 2023 items 0.59

2024 Amortization of intangibles (0.11)

2024 Fair value adjustment for equity security investments 0.08

2024 Income tax impact associated with Swedish Match AB financing (0.02)

2024 Tax items —

Subtotal of 2024 items (0.05)

Currency (0.18)

Interest (0.01)

Change in tax rate (0.05)

Operations 0.23

For the three months ended June 30, 2024 $ 1.54 52.5 %

The Supreme Court ruling reversed previous decisions that were in PM Korea’s favor at the trial and appellate levels.

As a result of the ruling, we concluded that an adverse outcome was probable.

Fair value adjustment for equity security investments – During the second quarter of 2023, we recorded an unfavorable fair value adjustment for our equity security investments in India and Sri Lanka of $15 million after tax (or $0.01 per share decrease in diluted EPS).

During the second quarter of 2024, we recorded a favorable fair value adjustment for our equity security investments in India and Sri Lanka of $116 million after tax (or $0.08 per share increase in diluted EPS).

For further details, see Note 12.

Related Parties - Equity Investments and Other .

Amortization of intangibles – During the second quarter of 2023 and 2024, we recorded amortization of intangible expense of $82 million (representing $64 million net of income tax or $0.04 per share decrease in diluted EPS) and $212 million (representing $165 million net of income tax or $0.11 per share decrease in diluted EPS), respectively.

The higher 2024 amount includes the reacquired rights recorded as other intangible assets, net following the reacquisition of IQOS commercialization rights in the U.S.

from Altria Group, Inc.

For further details, see Note 4.

Goodwill and Other Intangible Assets, net .

The impairment charge was recorded in impairment of goodwill ($665 million) and marketing, administration and research costs ($15 million) in the condensed consolidated statements of earnings during the three months ended June 30, 2023 and was included in the Wellness and Healthcare segment results.

For further details, see Note 4.

Goodwill and Other Intangible Assets, net .

Income taxes – The Income tax impact associated with Swedish Match financing that increased our 2023 diluted EPS by $0.01 per share and decreased our 2024 diluted EPS by $0.02 per share in the table above was due to a deferred tax impact for unrealized foreign currency gains and losses on intercompany loans related to the Swedish Match acquisition financing reflected in the condensed consolidated statements of earnings, while the underlying pre-tax foreign currency movements fully offset in the condensed consolidated statements of earnings and were reflected as currency translation adjustments in the condensed consolidated statements of stockholders' (deficit) equity.

The change in the tax rate that decreased our diluted EPS by $0.05 per share in the table above was primarily due to increases in U.S.

state tax expense, repatriation cost differences, and changes in earnings mix by taxing jurisdiction.

Currency – The unfavorable impact of $0.18 per share during the reporting period primarily results from the fluctuations of the U.S.

dollar, especially against the Egyptian pound, Japanese yen, Russian ruble and Turkish lira.

This unfavorable currency movement has impacted our profitability across our primary revenue markets and local currency cost bases.

Operations – The increase in diluted EPS of $0.23 from our operations in the table above was due primarily to the following segments:

• SSEA, CIS & MEA:

Favorable pricing and favorable volume/mix, partly offset by higher manufacturing costs;

Favorable volume/mix, partly offset by higher marketing and administration costs.

Favorable pricing, partly offset by higher marketing, administration and research costs and manufacturing costs;

• EA, AU & PMI DF:

Favorable pricing and favorable volume/mix;

Favorable volume/mix and favorable pricing, partly offset by higher marketing and administration costs.

For further details, see the “Consolidated Operating Results” and “Operating Results by Business Segment” sections of the following “Discussion and Analysis.”

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See pages 100 - 111 for a discussion of our " Cautionary Factors That May Affect Future Results ." Our net revenues and operating income by segment are shown in the table below:

(in millions) For the Three Months Ended March 31,

(in millions) For the Six Months Ended June 30, For the Three Months Ended June 30,

2024 2023 2024 2023

Net revenues:

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SSEA, CIS & MEA

5,429 5,145 2,771 2,668

EA, AU & PMI DF

3,357 3,200 1,673 1,680

Americas 2,125 1,837 1,129 969

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SSEA, CIS & MEA

1,663 1,614 891 880

EA, AU & PMI DF

1,516 1,194 753 557

Americas 282 426 183 243

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PMI Net Revenues by Product Category

(in millions) For the Three Months Ended March 31,

2024 2023 Change

(in millions) For the Six Months Ended June 30, For the Three Months Ended June 30,

2024 2023 Change 2024 2023 Change

Combustible tobacco:

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• Asset impairment and exit costs – See Note 15.

Asset Impairment and Exit Costs for a breakdown of these costs by segment for the three months ended March 31, 2024 and 2023.

Asset Impairment and Exit Costs for a breakdown of these costs by segment for the six months ended June 30, 2024 and 2023.

• Termination of distribution arrangement in the Middle East – In the first quarter of 2023, PMI recorded a pre-tax charge of $80 million following the termination of a distribution arrangement in the Middle East.

This pre-tax charge was recorded as a reduction of net revenues in the condensed consolidated statements of earnings, and was included in the SSEA, CIS & MEA segment results for the three months ended March 31, 2023.

• Swedish Match AB acquisition accounting related items – In the first quarter of 2023, PMI recorded $18 million pre-tax purchase accounting adjustments related to the sale of acquired inventories stepped up to fair value included in the Americas segment.

• Impairment of goodwill and other intangibles – For the six months and three months ended June 30, 2023, PMI recorded $680 million of goodwill and non-amortizable intangible assets impairment charges that was included in the Wellness and Healthcare segment.

For further details, see Note 4.

Goodwill and Other Intangible Assets, net .

• South Korea indirect tax charge – On July 13, 2023, PMI's South Korean subsidiary, PM Korea, received an adverse ruling from the Supreme Court of South Korea related to cases alleging underpayment of excise taxes in connection with a 2015 excise tax increase and subsequent audit by the South Korean Board of Audit and Inspection.

The Supreme Court ruling reversed previous decisions that were in PM Korea’s favor at the trial and appellate levels.

As a result of the ruling, we concluded that an adverse outcome was probable.

Consequently, we recorded a non-cash pre-tax charge of $204 million in marketing, administration and research costs in the condensed consolidated statements of earning, reflecting the full amount previously paid by PM Korea, which was included in the EA, AU & PMI DF segment for the six months and three months ended June 30, 2023.

Net revenues related to combustible tobacco refer to the operating revenues generated from the sale of these products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes.

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These net revenue amounts consist of the sale of our products that are not combustible tobacco products, such as heat-not-burn, e-vapor, and oral products, as well as consumer accessories.

Net revenues related to wellness and healthcare consist of operating revenues generated from the sale of products primarily associated with inhaled therapeutics, and oral and intra-oral delivery systems that are included in the operating results of our

Wellness and Healthcare business, Vectura Fertin Pharma.

PMI's heat-not-burn products include licensed KT&G heat-not-burn products.

References to "Cost/Other" in the Consolidated Financial Summary table of total PMI and the five segments throughout this "Discussion and Analysis" reflects the currency-neutral variances of:

References to "Cost/Other" in the Consolidated Financial Summary table of total PMI and the five segments throughout this "Discussion and Analysis" reflects the currency and acquisition-neutral variances of:

cost of sales (excluding the volume/mix cost component);

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and amortization and impairment of intangibles.

“Cost/Other” also includes the currency-neutral net revenue variance, unrelated to volume/mix and price components, attributable to:

“Cost/Other” also includes the currency and acquisition-neutral net revenue variance, unrelated to volume/mix and price components, attributable to:

fees for certain distribution rights billed to customers in certain markets in the SSEA, CIS & MEA Region and the revenue adjustment for the termination of a distribution arrangement in the Middle East.

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Consolidated Shipment Volume

For the Three Months Ended March 31,

Cigarettes and Heated Tobacco Units (million units) 2024 2023 Change

For the Six Months Ended June 30, For the Three Months Ended June 30,

Cigarettes and Heated Tobacco Units (million units) 2024 2023 Change 2024 2023 Change

Cigarettes 300,809 300,718 — % 157,618 157,010 0.4 %

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Other Oral SFP (2)

2.0 2.5 (16.8) % 1.0 1.2 (17.0) %

Total Oral Products 486.4 370.7 31.2 % 243.8 197.4 23.5 %

(1) Excluding snuff, snuff leaf and U.S.

(2) Includes chew bags and tobacco bits

Sum may not foot due to roundings

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HTUs also include zero tobacco heat-not-burn consumables ( LEVIA ).

Oral smoke-free product volume excludes snuff, snuff leaf and U.S.

chew and is measured in cans or, for the purposes of total shipment volumes, in pouches or pouch equivalents.

Oral smoke-free products conversion:

(i) nicotine pouches:

15 pouches per can in the U.S.

and weighted average 21 pouches per can outside the U.S.;

(ii) snus products:

weighted average 21 pouches equivalent per can;

(iii) moist snuff products:

weighted average 17 pouches equivalent per can;

(iv) tobacco bits products:

weighted average 30 pouches equivalent per can;

(v) chew bags products:

weighted average 20 pouches per can.

Unless otherwise stated, market share for HTUs is defined as the in-market sales volume for HTUs as a percentage of the total estimated industry sales volume for cigarettes and HTUs.

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In-market sales ("IMS") is defined as sales to the retail channel, depending on the market and distribution model.

paid products based on the latest available data from a number of internal and external sources and may, in defined instances, exclude China and/or our duty free business.

Adjusted market share for HTUs is defined as the total in-market sales volume for PMI HTUs as a percentage of the total estimated sales volume for cigarettes and HTUs, excluding the impact of estimated distributor and wholesaler inventory movements.

References to total international market, defined as worldwide cigarette and heated tobacco unit volume excluding the United States, total industry (or total market) and market shares throughout this "Discussion and Analysis" are our estimates for tax-paid products based on the latest available data from a number of internal and external sources and may, in defined instances, exclude China and/or our duty free business.

From time to time, PMI’s shipment volumes are subject to the impact of distributor inventory movements (or wholesaler inventory movements in certain markets where PMI does not sell to distributors), and estimated total industry/market volumes are subject to the impact of inventory movements in various trade channels that include estimated trade inventory movements of PMI’s competitors arising from market-specific factors that significantly distort reported volume disclosures.

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Management also believes that disclosing PMI shipment volumes and estimated total industry/market volumes in such circumstances on a basis that excludes the impact of distributor and/or estimated trade inventory movements improves the comparability of performance and trends for these measures over different reporting periods.

Key market data regarding total market size, our shipments and market share of cigarettes and heated tobacco units are shown in the table below:

For the Three Months Ended March 31,

Key market data regarding total market size, our shipments and market share of cigarettes and heated tobacco units are shown in the tables below:

For the Six Months Ended June 30,

PMI Shipments (billion units) PMI Market Share (2) , (%)

Market Total Market

(billion units) Total Cigarette Heated Tobacco Unit Total Heated Tobacco Unit

2024 2023 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023

Total (1) (2)

1,274.9 1,261.5 369.5 359.5 300.8 300.7 68.7 58.8 28.3 27.9 5.1 4.6

France 13.0 15.1 5.9 7.5 5.8 7.4 0.1 0.1 40.9 42.3 0.6 0.8

33.3 33.7 13.2 12.9 11.1 11.6 2.1 1.3 39.4 39.3 6.2 5.4

35.6 35.6 18.5 18.7 13.7 13.9 4.8 4.8 53.1 53.7 17.2 17.0

29.1 28.5 12.5 11.6 9.9 9.2 2.7 2.5 43.1 41.0 9.1 9.0

Spain 20.9 21.2 6.3 6.5 5.8 6.0 0.5 0.4 29.1 29.1 2.7 2.2

SSEA, CIS & MEA

Egypt 38.4 38.5 12.0 11.7 11.3 11.3 0.6 0.5 30.7 30.4 1.9 1.4

Indonesia 145.8 141.4 39.4 40.5 39.4 40.5 0.5 0.2 27.3 28.8 0.3 0.2

Philippines 20.0 21.7 10.6 12.3 10.4 12.2 0.1 0.1 52.8 56.7 0.7 0.5

Russia 101.9 96.7 32.9 31.2 24.4 23.5 8.5 7.7 32.0 32.0 8.8 8.1

Turkey 70.1 63.5 36.3 31.3 36.3 31.3 — — 51.9 49.3 — —

EA, AU & PMI DF

Australia 2.7 3.8 1.0 1.3 1.0 1.3 — — 35.2 34.2 — —

73.7 72.9 35.4 31.5 8.4 9.6 27.0 21.9 41.0 39.4 29.4 26.3

South Korea 34.7 35.4 6.9 6.9 4.2 4.4 2.8 2.5 20.0 19.5 7.9 6.9

Argentina 13.0 15.1 8.0 9.4 8.0 9.4 — — 61.6 62.2 — —

Mexico 13.7 13.5 8.3 8.3 8.2 8.3 0.1 0.1 61.1 61.9 0.8 0.4

(1) Market share estimates are calculated using IMS data, unless otherwise stated

(2) Total market and market share estimates include cigarillos in Japan

(3) PMI market share reflects estimated adjusted IMS volume share

For the Three Months Ended June 30,

PMI Shipments (billion units) PMI Market Share (2) , (%)

Market Total Market (billion units) Total Cigarette Heated Tobacco Unit Total Heated Tobacco Unit

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(2) Total market and market share estimates include cigarillos in Japan

(3) PMI market share reflects estimated adjusted IMS volume share, with historical total/HTU results:

Italy Q2 53.6%/17.1%, Q3 53.4%/16.0%, Q4 53.7%/17.2%;

Poland Q2 41.1%/8.6%, Q3 42.0%/8.4%, Q4 43.8%/9.9%

Consolidated Operating Results for the Three Months Ended March 31, 2024

The following discussion compares our consolidated operating results for the three months ended March 31, 2024, with the three months ended March 31, 2023.

During the quarter, estimated international industry volume (excluding China and the U.S.) for cigarettes and HTUs increased by 0.3%, reflecting increases in the SSEA, CIS & MEA Region and the EA, AU & PMI DF Region, partly offset by a decrease in the Americas Region and the Europe Region, as described in the Regional sections of this MD&A.

For the full year 2024, we currently expect an estimated total international industry volume decline for cigarettes and HTUs, excluding China and the U.S., of -2% to flat.

(3) PMI market share reflects estimated adjusted IMS volume share

Consolidated Operating Results for the Six Months Ended June 30, 2024

The following discussion compares our consolidated operating results for the six months ended June 30, 2024, with the six months ended June 30, 2023.

Estimated international industry volume (excluding China and the U.S.) for cigarettes and HTUs increased by 1.1%, reflecting increase in the SSEA, CIS & MEA Region, partly offset by decreases in the Europe and Americas Regions, and broadly stable in the EA, AU & PMI DF Region, as described in the Regional sections of this MD&A.

For the full year 2024, we currently expect a broadly stable total international industry volume for cigarettes and HTUs, excluding China and the U.S.

Shipment Volume

Our total cigarette and HTU shipment volume increased by 3.1%, reflecting a 20.9% increase in HTU shipments across all regions, partly offset by a 0.4% decline in cigarette shipments, with declines across all regions except the SSEA, CIS & MEA Region.

Cigarette shipment volume for Marlboro increased by 1.7% to 56.9 billion units.

Our total oral product shipment volume in cans increased by 40.0%, primarily reflecting growth in nicotine pouches (primarily in the U.S.) and snus (mainly in Scandinavia).

For the full year 2024, we currently expect the total cigarette, HTU and oral smoke-free product shipment volume growth for PMI of flat to +1% driven by smoke-free products.

Our total cigarette and HTU shipment volume increased by 2.8% (HTU shipments increased by 16.8%, while cigarette shipments were stable).

Our total oral product shipment volume in cans increased by 31.2%, primarily reflecting growth in nicotine pouches.

For the full year 2024, we currently expect the total cigarette, HTU and oral smoke-free product shipment volume growth for PMI of 1% to 2% driven by smoke-free products.

For the full year 2024, we also expect nicotine pouch shipment volume in the U.S.

of approximately 560 million cans.

Nicotine pouch products reflect 15 pouches per can in the U.S.

and 21 pouches per can outside the U.S.

Oral smoke-free product volume excludes snuff, snuff leaf and U.S.

chew and is measured in cans or, for the purposes of total shipment volumes, in pouches or pouch equivalents.

of 560 to 580 million cans.

Adjusted in-market sales for HTUs increased by 11.4%, including growth in Japan of 12.9% and Europe of 8.0%.

A net favorable impact of estimated distributor inventory movements for HTUs shipments was driven most significantly by additional shipments to Japan in light of disruption to Red Sea shipping routes.

A net favorable impact of estimated distributor inventory movements for HTU shipments was driven most significantly by additional shipments to Japan in light of disruption to Red Sea shipping routes.

International Share of Market - Cigarette and HTUs (Excluding China and the United States)

First-Quarter

Six Months Year-to-Date

2024 2023 Change (pp)

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Financial Summary -

Quarters Ended March 31, Change

Six Months Ended June 30, Change

Fav./(Unfav.) Variance

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2024 2023 Total Excl.

Cur-rency Total Cur-

rency Acqui-sitions Price Vol/

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Cost of Sales (6,540) (6,266) (4.4) % (5.7) % (274) 71 12 — (314) (43)

(3,195) (3,038) (5.2) % (5.4) % (157) 8 — — (169) 4

Marketing, Administration and Research Costs (2)

(5,232) (4,758) (10.0) % (6.2) % (474) (178) — — — (296)

Impairment of Goodwill (3)

— (665) +100% +100% 665 — — — — 665

Operating Income $ 6,489 $ 5,297 22.5 % 34.7 % $ 1,192 $ (659) $ 12 $ 1,032 $ 453 $ 354

(1) Cost/Other variance includes charges in 2023 of $80 million following the termination of a distribution arrangement in the Middle East.

(2) Cost/Other variance includes charges in 2023 of $18 million related to a Swedish Match AB acquisition accounting related items.

(3) Cost/Other variance includes charges in 2024 and 2023 of $168 million and $109 million related to asset impairment and exit costs, respectively, as well as the 2024 impairment of other intangibles of $27 million.

(2) Cost/Other variance includes charges in 2024 of $168 million related to asset impairment and exit costs, $300 million related to amortization of intangibles and $27 million related to impairment of other intangibles, partly offset by charges in 2023 of $109 million related to asset impairment and exit costs, $204 million related to the South Korea indirect tax charge, $119 million related to amortization of intangibles and $15 million related to the impairment of other intangibles.

For more details, see Note 4.

Goodwill and Other Intangible Assets, net and Note 15.

Goodwill and Other Intangible Assets, net , Note 7.

Segment Reporting and Note 15.

Asset Impairment and Exit Costs .

During the quarter, net revenues increased by 9.7%.

Net revenues, excluding currency, increased by 12.1%, mainly reflecting:

(3) For details on the impairment of goodwill recorded in the second quarter of 2023, see Note 4.

Goodwill and Other Intangible Assets, net .

For the six months ended June 30, 2024, net revenues increased by 7.5%.

Net revenues, excluding currency and acquisitions, increased by 10.8%, mainly reflecting:

a favorable pricing variance, primarily driven by higher combustible tobacco pricing;

The unfavorable currency in net revenues was due primarily to the Egyptian pound, Japanese yen and Russian ruble, partially offset by the Euro.

revenues in 2023) following the termination of a distribution arrangement in the Middle East, shown in "Other."

The unfavorable currency impact in net revenues was due primarily to the Egyptian pound, Japanese yen and Russian ruble.

Net revenues include $7.0 billion in 2024 and $6.0 billion in 2023 related to smoke-free.

Operating income increased by 22.5%.

Operating income, excluding currency, increased by 23.5%, primarily reflecting:

a favorable pricing variance and favorable volume/mix, mainly driven by higher HTU and ZYN volume, partly offset by lower cigarette volume and unfavorable cigarette mix, as well as a favorable comparison to 2023 reflecting a charge in 2023 of $80 million following the termination of a distribution arrangement in the Middle East and charges in 2023 of $18 million related to a Swedish Match AB acquisition accounting related item.

Amortization expense on a pre-tax basis for each of the next five years is estimated to be approximately $479 million or less, assuming no additional transactions occur that require the amortization of intangible assets.

Additionally, the estimated future amortization expense could significantly increase following the reacquisition of IQOS commercialization rights in the U.S.

Operating income, excluding currency and acquisitions, increased by 34.7%, primarily reflecting:

the favorable pricing variance, predominantly driven by higher combustible tobacco pricing;

and favorable volume/mix, mainly driven by higher smoke-free products volume, as well as a favorable comparison to 2023 reflecting the impairment of goodwill recorded in the second quarter of 2023, the South Korea indirect tax charge of $204 million in 2023, a charge in 2023 of $80 million following the termination of a distribution arrangement in the Middle East and charges in 2023 of $18 million related to Swedish Match AB acquisition accounting related items.

The increase was partly offset by higher amortization of intangibles in 2024, higher asset impairment and exit costs in 2024, higher marketing, administration and research costs (primarily due to inflationary impacts, notably related to wages, and higher commercial investments) as well as higher manufacturing costs (primarily due to inflationary impacts, notably related to tobacco leaf and the impact of the EU single-use plastics directive, partly offset by productivity).

Amortization expense on a pre-tax basis for each of the next five years is estimated to be approximately $1.0 billion or less, assuming no additional transactions occur that require the amortization of intangible assets.

This amount includes the reacquired rights recorded as other intangible assets, net, in May 2024 following the reacquisition of IQOS commercialization rights in the U.S.

from Altria Group, Inc.

(see Note 18.

Acquisitions and the "Business Environment" section of this MD&A), the accounting for which will depend on the facts and circumstances effective May 1, 2024, when PMI will hold the full rights.

We currently estimate that the incremental increase in amortization expense in 2024, as a result of the reacquisition of IQOS commercialization rights in the U.S., will be approximately $370 million on a pre-tax basis for the remaining 8 months of the year.

For full year 2025 through 2028, we currently estimate that this incremental increase will be approximately $555 million on a pre-tax basis.

Goodwill and Other Intangible Assets, net , Note 18.

Acquisitions and the "Business Environment" section of this MD&A for details).

Interest expense, net, of $628 million increased by $101 million or 19.2%, primarily due to higher average debt levels and higher average interest rates on debt.

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Income from equity investments and securities increased by $322 million or over 100%, primarily driven by a favorable fair value adjustment for our equity security investments in India and Sri Lanka.

Net earnings attributable to PMI of $4.6 billion increased by $1.0 billion or 27.8%.

This increase was due primarily to higher operating income and higher income from equity investments and securities, partly offset by a higher effective tax rate and higher interest expense, net, as discussed above.

Basic and diluted EPS of $2.92 increased by 27.5%.

Excluding an unfavorable currency impact of $0.38, diluted EPS increased by 44.1%.

We continue to expect our 2024 performance to be favorably impacted by accelerated total volume growth and pricing despite currency headwinds in the first half of 2024.

This reflects the strong outlook for ZYN , despite short-term supply constraints;

and the increasing profitability of IQOS due to operating leverage, manufacturing efficiencies, as well as a robust combustibles performance.

Consolidated Operating Results for the Three Months Ended June 30, 2024

The following discussion compares our consolidated operating results for the three months ended June 30, 2024, with the three months ended June 30, 2023.

During the quarter, estimated international industry volume (excluding China and the U.S.) for cigarettes and HTUs increased by 1.5%, reflecting increases in the SSEA, CIS & MEA Region, partly offset by decreases in the Europe, Americas and EA, AU & PMI DF Regions, as described in the Regional sections of this MD&A.

Shipment Volume

Our total cigarette and HTU shipment volume increased by 2.5% (HTU shipments increased by 13.1%, and cigarette shipments increased by 0.4%), with increases across all regions except the Americas Region.

Our total oral product shipment volume in cans increased by 23.5%, predominantly reflecting growth in nicotine pouches.

Adjusted in-market sales for HTUs increased by 10.2%, including growth in Japan of 12.5% and Europe of 6.8%.

International Share of Market - Cigarette and HTUs (Excluding China and the United States)

Second-Quarter

2024 2023 Change (pp)

Total International Market Share (1)

28.7 % 28.6 % 0.1

Cigarettes 23.6 % 24.0 % (0.4)

HTU 5.1 % 4.7 % 0.4

Cigarette over Cigarette Market Share (2)

25.3 % 25.5 % (0.2)

(1) Defined as PMI's cigarette and heated tobacco unit in-market sales volume as a percentage of total industry cigarette and heated tobacco unit sales volume, excluding China and the U.S., including cigarillos in Japan

(2) Defined as PMI's cigarette in-market sales volume as a percentage of total industry cigarette sales volume, excluding China and the U.S., including cigarillos in Japan

Sum of share of market by product categories might not foot to total due to roundings

Financial Summary

Financial Summary - Quarters Ended June 30, Change

Fav./(Unfav.) Variance

Fav./(Unfav.)

2024 2023 Total Excl.

rency Acqui-sitions Price Vol/

(in millions)

$ 9,468 $ 8,967 5.6 % 9.6 % $ 501 $ (358) $ — $ 583 $ 303 $ (27)

Cost of Sales (3,345) (3,228) (3.6) % (5.9) % (117) 63 12 — (145) (47)

Marketing, Administration and Research Costs (1)

(2,679) (2,508) (6.8) % (5.4) % (171) (36) — — — (135)

Impairment of Goodwill (2)

— (665) +100% +100% 665 — — — — 665

Operating Income $ 3,444 $ 2,566 34.2 % 46.6 % $ 878 $ (331) $ 12 $ 583 $ 158 $ 456

(1) Cost/Other variance includes charges in 2024 of $196 million related to amortization of intangibles, partly offset by charges in 2023 of $204 million related to the South Korea indirect tax charge, $60 million related to amortization of intangibles and $15 million related to the impairment of other intangibles.

For more details, see Note 4.

Goodwill and Other Intangible Assets, net , and Note 7.

Segment Reporting .

(2) For details on the impairment of goodwill recorded in the second quarter of 2023, see Note 4.

Goodwill and Other Intangible Assets , net .

During the quarter, net revenues increased by 5.6%.

Net revenues, excluding currency and acquisitions, increased by 9.6%, mainly reflecting:

a favorable pricing variance, primarily due to higher combustible tobacco pricing;

and favorable volume/mix, driven by higher smoke-free products volume.

The unfavorable currency impact in net revenues was due primarily to the Egyptian pound, Japanese yen and Russian ruble.

Net revenues include $3.6 billion in 2024 and $3.2 billion in 2023 related to smoke-free.

Operating income increased by 34.2%.

Operating income, excluding currency and acquisitions, increased by 46.6%, primarily reflecting:

the favorable pricing variance;

and favorable volume/mix (mainly driven by smoke-free products volume, notwithstanding unfavorable cigarette mix), as well as a favorable comparison to 2023 reflecting the impairment of goodwill recorded in the second quarter of 2023 of $665 million and the South Korea indirect tax charge of $204 million in 2023.

The increase was partly offset by higher amortization of intangibles in 2024 and higher costs, predominantly marketing, administration and research costs.

Interest expense, net, of $329 million increased by $32 million or 10.8%.

Our effective tax rate decreased by 1.0 percentage point to 23.7%.

Income from equity investments and securities increased by $182 million or over 100%, primarily driven by a favorable fair value adjustment for our equity security investments in India and Sri Lanka.

Net earnings attributable to PMI of $2.4 billion increased by $838 million or 53.4%.

This increase was due primarily to a higher operating income and higher income from equity investments and securities, partly offset by a higher effective tax rate and higher interest expense, net, as discussed above.

This increase was due primarily to higher operating income and higher income from equity investments and securities, partly offset by higher interest expense, net, as discussed above.

Basic and diluted EPS of $1.54 increased by 52.5%.

Excluding an unfavorable currency impact of $0.18, diluted EPS increased by 70.3%.

Overall, our results of operations in the first quarter of 2024 were favorably impacted by three main factors.

The first is the net revenue and profit impact of better volumes following the industry-leading performance of ZYN , the strong shipment growth of IQOS HTUs, and a resilient combustible delivery.

Second is the benefit of our pricing actions to mitigate currency headwinds and third is on cost including a stepped-up focus on manufacturing and back-office efficiencies to prioritize growth investments.

These factors are expected to continue to impact performance for the remainder of the year.

Operating Results by Business Segment

Business Environment

Taxes, Legislation, Regulation and Other Matters Regarding the Manufacture, Marketing, Sale and Use of Tobacco Products

The tobacco industry and our company face a number of challenges that may adversely affect our business, volume, results of operations, cash flows and financial position.

These challenges, which are discussed below and in “ Cautionary Factors That May Affect Future Results ,” include:

Taxes, Legislation, Regulation and Other Matters Regarding the Manufacture, Marketing, Sale and Use of Tobacco and Non-Tobacco Products

The tobacco industry and our company face a number of challenges that may adversely affect our business, product sales volume, results of operations, cash flows and financial position.

These challenges, which are discussed below and in Part II, Item 1A.

Risk Factors — Cautionary Factors That May Affect Future Results in this report include:

• regulatory restrictions on our products, including restrictions on the packaging, marketing, and sale of tobacco or other nicotine-containing products or related devices that could reduce our competitiveness, eliminate our ability to communicate with adult consumers, or even ban certain of our products;

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• intense competition, including from non-tax paid volume by certain local manufacturers;

• pending and threatened litigation as discussed in Note 8.

Contingencies ;

• pending and threatened litigation as discussed in Part I, Item 1.

Financial Statements — Note 8.

Contingencies in this report;

• governmental investigations.

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The FCTC governing body, the Conference of the Parties (“CoP”), has also adopted non-binding guidelines and policy recommendations related to certain articles of the FCTC that go beyond the text of the treaty.

In October 2018, the CoP recognized the need for more scientific assessment and improved reporting to define policy on heated tobacco products.

In October 2018, the CoP recognized the need for more scientific assessment and improved reporting to define policy on heated

tobacco products.

Similar to its previous policy recommendations on e-cigarettes, the CoP invited countries to regulate, restrict or prohibit heated tobacco products, as appropriate under their national laws.

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Specific Guidelines were adopted to address cross-border Tobacco Advertising, Promotion, and Sponsorship (“TAPS”) and the depiction of tobacco in entertainment media.

The Eleventh session of the CoP is currently scheduled to take place in 2025.

The Eleventh session of the CoP is currently scheduled to take place in November 2025.

The WHO’s reports and other FCTC guidelines or recommendations are not binding on the WHO Member States or on parties to the FCTC.

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The vast majority of countries where our SFPs are commercialized have adopted the amended HS, creating new dedicated customs codes for novel tobacco and nicotine products.

EU Tobacco Products Directive:

EU Tobacco Products Directive ("TPD"):

In April 2014, the EU adopted a significantly revised TPD, which came into force in May 2016.

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Most notably, it finds that the EU legislation has enhanced tobacco control, which contributed to protecting the health of EU citizens by providing Member States with strong rules to address the use of tobacco products in the EU.

The TPD reportedly achieved the 2% reduction target of the impact assessment with decreased smoking prevalence among youth.

The TPD reportedly achieved the

2% reduction target of the impact assessment with decreased smoking prevalence among youth.

The report also concludes that there is scope for improvement in certain areas, such as enforcement at national level, assessment of ingredients, and a better consideration for novel and emerging products.

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EU Tobacco Excise Directive ("TED"):

The EU Commission is preparing a legislative proposal for the revision of the 2011 EU Tobacco Excise Directive that may include definitions and tax treatment for novel tobacco and nicotine-containing products,

including heated tobacco products, e-cigarettes and nicotine pouches.

The proposal, after several delays, could be adopted by the new College of Commissioners after the 2024 EU elections.

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In addition, at its meeting in November 2016, the CoP adopted non-binding guidelines recommending that countries regulate product design features that increase the attractiveness of tobacco products, such as the diameter of cigarettes and the use of flavor capsules.

In March 2024, the EU Commission approved a draft national decree submitted by Belgium banning disposable e-cigarettes in Belgium as required by TPD.

In March 2024, the EU

Commission approved a draft national decree submitted by Belgium banning disposable e-cigarettes in Belgium as required by TPD.

This ban will be limited to the jurisdiction of Belgium.

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On February 28, 2024, the New Zealand parliament passed a law repealing the three above-mentioned measures.

On June 27, 2024, the New Zealand government published the Excise and Excise-equivalent Duties Table (Reductions for Specified Tobacco Products) Amendment Order 2024, reducing the excise on HTPs by 50%.

The changes took effect on July 1, 2024.

In Mexico, a new law came into force on December 12, 2022, prohibiting imports and exports of certain nicotine and non-nicotine delivery and consumption systems, as well as the consumables used in those systems, including much of our SFP portfolio.

On December 16, 2022, the Mexican Federal Government enacted an implementation regulation for the tobacco control law, which includes (i) a point of sale display ban of tobacco products;

(ii) restrictions on where tobacco products can be consumed, and (iii) prohibition to communicate corporate social responsibility programs funded by the tobacco industry.

On December 16, 2022, the Mexican Federal Government enacted an implementation regulation for the tobacco control law, which included (i) a point-of-sale display ban of tobacco products;

(ii) restrictions on where tobacco products can be consumed;

and (iii) prohibition to communicate corporate social responsibility programs funded by the tobacco industry.

In a legal proceeding initiated by our local affiliate, the Federal Court of Appeals of Mexico City found that these restrictions are unconstitutional.

On January 1, 2023, a law regulating the marketing of nicotine pouches went into effect in Slovakia.

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The amendment particularly specifies that designated tobacco products (including heated tobacco products) that are not cigarettes, cut tobacco, cigars, snuff nor chewing tobacco, must undergo a health risk assessment as part of an authorization system.

We have filed an authorization request pursuant to this Act, but this authorization is currently still pending approval by the Ministry of Health of Taiwan.

On March 28, 2023, the Argentinian Ministry of Health prohibited the import, distribution, commercialization and advertisement of heated tobacco products, including related devices.

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We do not estimate a material impact to our business in the EU as a result of compliance with these mandatory EPR schemes.

On March 14th, 2024 the Court of Justice of the European Union (the "CJEU") ruled that the German fiscal regulation imposing an additional excise tax on HTPs does not contravene EU law.

On March 14, 2024 the Court of Justice of the European Union (the "CJEU") ruled that the German fiscal regulation imposing an additional excise tax on HTPs does not contravene EU law.

Fiscal Court in Dusseldorf (the "FCD") had previously referred that question to the CJEU.

The decision on the matter lies with the FCD and we expect a judgement in the coming months.

On May 21, 2024, the FCD delivered its judgement and dismissed our local affiliate's, f6 Cigarettenfabrik GmbH & Co.KG, ("PM Germany") claim.

PM Germany filed a notice of appeal to the Federal Fiscal Court on June 19, 2024.

On April 16, 2024, Brazil’s Health Control Agency enacted Resolution 855, imposing strict regulations on electronic smoking devices, including heat-not-burn devices and vaping devices (“ESDs”).

The resolution prohibits their manufacture, importation, sale, distribution, storage, transportation, advertising, and use in enclosed public spaces.

Travelers are also forbidden from bringing ESDs into the country.

In some countries, including in the EU, cigarettes are subject to testing, disclosure and mandatory emissions limits for tar, nicotine, carbon monoxide and other smoke constituents.

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The Dutch enforcement body declined the request, and the applicants have challenged such decision in pending legal proceedings.

The case is currently pending before the Trade and Industry Appeals Tribunal in the Netherlands.

In February 2024, the Dutch court submitted preliminary questions to the Court of Justice of the European Union.

While we cannot predict the outcome, a decision to enforce the existing TNCO ceilings using the alternative test method could impact a

significant portion of the manufactured cigarettes available on the market in the Netherlands and could lead to similar actions in other EU countries.

The case is currently pending before the Court of Justice of the European Union following a referral from the Trade and Industry Appeals Tribunal in the Netherlands.

While we cannot predict the outcome, a decision to enforce the existing TNCO ceilings using the alternative test method could impact a significant portion of the manufactured cigarettes available on the market in the Netherlands and could lead to similar actions in other EU countries.

Illicit Trade:

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In February 2024, the third Meeting of the Parties to the Protocol took place.

No additional restrictive measures were adopted, and a mandate to conduct further work will be considered at the next session, currently scheduled to take place in 2025.

No additional restrictive measures were adopted, and a mandate to conduct further work will be considered at the next session, currently scheduled to take place in November 2025.

We devote substantial resources to help prevent illicit trade in combustible tobacco products and SFPs.

For example, we engage with governments, our business partners and other stakeholders to implement effective measures to combat illicit trade and, in some instances, pursue legal remedies to protect our intellectual property rights.

We engage with governments, our business partners and other stakeholders to implement effective measures to combat illicit trade.

In some instances, we pursue legal remedies to protect our intellectual property rights or counter the illicit diversion of our genuine products.

Among other actions, we are taking legal actions to address the illicit resale of certain of our oral products outside of Scandinavia, including the US and other markets where ZYN products are sold.

The tracking and tracing regulations for cigarettes and roll-your-own products manufactured or destined for the EU became effective on May 20, 2019.

The effective date for other tobacco-containing products, including some of our SFPs such as heated tobacco units, is May 20, 2024.

The effective date for other tobacco-containing products, including some of our SFPs such as heated tobacco units, was May 20, 2024.

While we expect that this regulation will increase our operating expenses, we do not expect this increase to be significant.

In 2009, our Colombian subsidiaries entered into an Investment and Cooperation Agreement with the national and regional governments of Colombia to promote investment in, and cooperation on, anti-contraband and anti-counterfeit efforts.

The agreement provides $200 million in funding over a 20-year period to address issues such as combating illegal cigarette trade and increasing the quality and quantity of locally grown tobacco.

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We recognize that smoking cigarettes causes serious diseases and that the best way to avoid the harm of smoking is to never start or to quit.

Nevertheless, it is predicted that by 2025, the number of smokers will remain largely unchanged from the current estimate of 1.1 billion, despite considerable efforts to discourage smoking.

Nevertheless, it is predicted that by 2025, the number of smokers will remain largely unchanged from the current estimate of over one billion, despite considerable efforts to discourage smoking.

Cigarettes burn tobacco, which produces smoke.

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and (ii) educate and encourage current adult smokers who would otherwise continue to smoke cigarettes to switch to those products.

We recognize that this transformation from cigarettes to SFPs will take time and that the speed of transformation will depend in part upon factors beyond our control, such as the willingness of governments, regulators and other policy groups to embrace SFPs as a desired alternative to continued cigarette smoking.

We recognize that this transformation from cigarettes to SFPs will take time and that the rate of transformation will depend in part upon factors beyond our control, such as the willingness of governments, regulators and other policy groups to embrace SFPs as a desirable alternative to continued cigarette smoking.

As a leading international cigarette manufacturer, we will continue to accelerate this transformation by using our extensive commercial and distribution infrastructure as an effective platform for the commercialization of our SFPs and communication with adult smokers and trade partners about the substantiated benefits of switching to our SFPs.

As long as a significant number of adult smokers continue to smoke cigarettes, responsible leadership of

the category is critical.

As long as a significant number of adult smokers continue to smoke cigarettes, responsible leadership of the category is critical.

We aim to maintain our competitive position in the cigarette market through selective investment.

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We have a range of SFPs in various stages of development, scientific assessment, and commercialization.

We are committed to conducting rigorous scientific assessments of our SFP platforms to substantiate that they reduce exposure to HPHCs and, ultimately, that these products present, are likely to present, or have the potential to present less risk of harm to adult smokers who switch to them versus continued cigarette smoking.

We draw upon a team of expert scientists and engineers from a broad spectrum of scientific disciplines and our extensive learnings of adult consumer preferences to further develop and assess our SFPs.

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We have conducted a series of clinical studies for this platform, the results of which were included in our submissions to the U.S.

Food and Drug Administration (“FDA”).

Food and Drug

Administration (“FDA”).

In addition to the original version of Platform 1 which relies on a heating technology using a blade, a newer version of Platform 1 is now available using induction.

Most of the studies referenced above were conducted with the blade version of Platform 1 and additional research was conducted with the induction technology.

We believe that there is full comparability between the subsequent Platform 1 versions, and that the data from the studies conducted with the blade version of Platform 1 remain valid and applicable to the newer and adjacent versions of Platform 1.

In 2022, we also began the initial launch of a heated tobacco product, which utilizes external resistive heating technology and that is commercialized under the BONDS brand.

We believe that there is full comparability between the bladed versions of IQOS and the subsequent induction versions of IQOS , and that the data from the studies conducted with the blade version of Platform 1 remain valid and applicable to the newer and adjacent versions of Platform 1.

In 2022, we also began the initial launch of a heated tobacco product, which utilizes external resistive heating technology and is commercialized under the BONDS brand.

Platform 2 used a pressed carbon heat source which, when ignited, generated a nicotine-containing aerosol by heating tobacco.

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Platform 4 covers e-vapor products, which are battery-powered devices that produce an aerosol by vaporizing a tobacco-free liquid solution.

We developed new e-liquids for our e-vapor products to deliver real tobacco taste satisfaction.

We developed new e-liquids for our e-vapor products to deliver an authentic tobacco taste.

Using patented technology, flavors and nicotine are extracted directly from the tobacco leaves and captured in a tobacco-free liquid solution, without having to add flavoring ingredients.

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As a result, PMI recorded pre-tax asset impairment and exit costs of $109 million.

We intend to focus on commercializing these products in select markets, with an emphasis on profitability.

We also entered into a licensing agreement with Kaival Brands International, LLC, in June 2022 to distribute an e-vapor product, known in the U.S.

We are commercializing these products in select markets, with an emphasis on profitability.

We entered into a licensing agreement with Kaival Brands International, LLC, in June 2022 to distribute an e-vapor product, known in the U.S.

as the BIDI® Stick.

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Platform 5 covers snus and modern oral nicotine pouches.

Snus refers to dried loose tobacco, or snuff, which is consumed by sniffing the product through the nose, moist loose tobacco which is put in the mouth between the lower or upper lip and gum, and snus pouches which contain ground tobacco, water, salt and flavors.

Modern oral nicotine pouches consist of white pre-conditioned pouches containing nicotine derived from tobacco.

Snus refers to (a) dried loose tobacco, or snuff, which is consumed by sniffing the product through the nose;

(b) moist loose tobacco which is put in the mouth between the lower or upper lip and gum;

and (c) snus pouches which contain ground tobacco, water, salt and flavors.

Modern oral nicotine pouches consist of white pre-conditioned pouches containing nicotine derived from tobacco, and they primarily contain nicotine, flavors, and cellulose substrate.

Users place a pouch between the upper lip and gum and leave it there while the nicotine and flavor are being released.

At the end of the use, the user can dispose of the pouch.

Nicotine pouches are inherently smoke-free as they are consumed orally, and no combustion process occurs during use.

They contain primarily nicotine, flavors, and cellulose substrate.

The nicotine used in the pouches is of pharmaceutical-grade like the nicotine used in medicinal products, such as gums and inhalers, while the flavors are approved for use in food in accordance with the product quality standards for nicotine pouches developed by the Swedish Institute for Standards and the British Standards Institute.

The pouches contain pharmaceutical-grade nicotine like the nicotine used in medicinal products, such as nicotine-containing gums and inhalers, and flavors approved for use in food in accordance with the product quality standards for nicotine pouches developed by the Swedish Institute for Standards and the British Standards Institute.

In 2021, PMI acquired AG Snus Aktieselskab ("AG Snus"), as well as Fertin Pharma A/S, two companies manufacturing and/or marketing nicotine pouches.

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These initial commercialization efforts require substantial investment, which we believe will moderate over time and further benefit from the increased use of digital engagement capabilities.

PMI has, and continues to, accelerate its investments in digital consumer engagement.

PMI has, and continues to, invest in digital consumer engagement.

In 2014, we introduced our Platform 1 product in pilot city launches in Nagoya, Japan, and in Milan, Italy.

Since then, we have continuously expanded our commercialization activities.

As of December 31, 2023, PMI's smoke-free products were available for sale in 84 markets.

Data shows that only a very small percentage of adult smokers who convert to our Platform 1 product switch back to cigarettes.

As of June 30, 2024, PMI's smoke-free products were available for sale in 90 markets.

Data shows that only a very small percentage of adult smokers who convert to IQOS switch back to cigarettes.

We have integrated the production of our heated tobacco units into several of our existing manufacturing facilities, are progressing with our plans to build manufacturing capacity for our other SFP platforms, and continue to optimize our manufacturing infrastructure and expand our commercialization activities for new products and markets.

We discuss certain risks related to the commercialization and supply of our SFP portfolio in “ Cautionary Factors That May Affect Future Results ”.

We discuss product warranties in more detail in Note 14.

Product Warranty .

We discuss certain risks related to the commercialization and supply of our SFP portfolio in Part II, Item 1A.

Risk Factors—Cautionary Factors That May Affect Future Results in this report.

We discuss product warranties in more detail in Part I, Item 1, Financial Statements— Note 14.

Product Warranty in this report.

The significance of warranty claims depends on a number of factors, including device version mix, product failure rates, logistics and service delivery costs, and warranty policies, and may increase with the number of devices sold.

On October 20, 2022, PMI announced that it had reached an agreement with Altria Group, Inc., ("Altria") to end the companies' commercial relationship with respect to Platform 1 in the U.S.

as of April 30, 2024 (the “2022 Agreement”).

Thereafter, under the 2022 Agreement, PMI will hold the full rights to commercialize Platform 1 in the United States - the world’s largest smoke-free market.

The 2022 Agreement provides a clear path to expanding Platform 1's international success in a market where approximately 30 million adults continue to smoke cigarettes.

government contacted Altria and its affiliate, Philip Morris USA, Inc.

(“PM USA”) in connection with the 2022 Agreement.

Altria and its subsidiary PM USA are parties to a 2006 order (“2006 Order”) in the United States District Court for the District of Columbia holding that they violated the Racketeer Influenced and Corrupt Organizations Act (“RICO”).

The 2006 Order imposes restrictions on defendants from selling or transferring their cigarette brands, brand names, cigarette product formulas or cigarette businesses without the transferee submitting to the jurisdiction of the court and subjecting itself to the 2006 Order as of the date of sale or transfer.

government informed Altria that it believed the transaction contemplated by the 2022 Agreement (the “Transaction”) falls within the scope of this provision and that before the Transaction could be effectuated, PMI must submit to the 2006 Order.

To date, the U.S.

government has not pursued the matter with or sought any relief from the court.

We believe that there are strong arguments as to why the provision cited by the U.S.

government is inapplicable to the Transaction and we also believe that there would be paths available to minimize or eliminate potential impact on the timing or effectuation of the Transaction were the U.S.

government to pursue the matter in court.

On October 20, 2022, PMI announced that it had reached an agreement with Altria Group, Inc., ("Altria") to end the companies' commercial relationship as of April 30, 2024 with respect to Platform 1 in the U.S.

(the “Altria Agreement”).

Under the Altria Agreement, PMI now holds the full rights to commercialize Platform 1 in the United States - the world’s largest smoke-free market.

The Altria Agreement provides a clear path to expanding Platform 1's international success in a market where approximately 30 million adults continue to smoke cigarettes.

government had contacted Altria and its affiliate, Philip Morris USA, Inc.

(“PM USA”) in connection with the Altria Agreement.

Altria and its subsidiary PM USA are parties, as defendants, to a 2006 order (“2006 Order”) issued by the United States District Court for the District of Columbia holding that they violated the Racketeer Influenced and Corrupt Organizations Act (“RICO”).

The 2006 Order imposes restrictions on the defendants from selling or transferring their cigarette brands, brand names, cigarette product formulas or cigarette businesses without the transferee submitting to the jurisdiction of the court and subjecting itself to the 2006 Order as of the date of sale or transfer.

government informed Altria that it believed the transaction contemplated by the Altria Agreement (the “Transaction”) falls within the scope of this provision and that before the Transaction could be effectuated, PMI must submit to the 2006 Order.

On April 30, 2024, the Transaction was effectuated without the U.S.

government having pursued the matter or having sought any relief from the court.

Our commercialization efforts for the other PMI-developed SFP platforms are as follows:

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SFPs contain nicotine and are not risk-free.

As we describe in more detail above, we support science-based regulation and taxation of SFPs, and believe that regulation and taxation should differentiate between cigarettes and products that present, are likely to present, or have the potential to present less risk of harm to adult smokers who switch to these products versus continued smoking and should recognize a continuum of risk for tobacco and other nicotine-containing products.

As we describe in more detail above, we support science-based regulation and taxation of SFPs, and believe that regulation and taxation should differentiate between cigarettes and products that present, are likely to present, or have the potential to present less risk of harm to adult smokers who switch to these products versus continued smoking and should recognize a continuum of risk with respect to tobacco and other nicotine-containing products.

Regulation, as well as industry practices, should reflect the fact that youth should not consume nicotine in any form.

Some governments have banned or are seeking to ban or severely restrict emerging tobacco and nicotine-containing products such as our SFPs and communication of truthful and non-misleading information about such products.

These regulations might foreclose or unreasonably restrict adult consumer access even to products that might be shown to be a better consumer choice than continuing to smoke cigarettes.

Some governments have banned, are seeking to ban, or severely restrict emerging tobacco and nicotine-containing products such as our SFPs, and communication of truthful and non-misleading information about such products.

These regulations might foreclose or unreasonably restrict adult consumer access to products that might be a better consumer choice than continuing to smoke cigarettes.

We oppose blanket bans and unreasonable restrictions of products that have the potential to present less risk of harm compared to continued cigarette smoking.

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a “risk modification” order or an “exposure modification” order.

We had requested both types of orders for IQOS 2.4 and an initial selection of 3 consumables' variants.

After review, the FDA determined that the evidence did not support issuing a "risk modification" order at this time but that it did support issuing an "exposure modification" order for the product.

We had requested both types of orders for IQOS 2.4 and an initial selection of three related consumables' variants.

After review, the FDA determined that the evidence did not support issuing a "risk modification" order at that time, but that it did support issuing an "exposure modification" order for the product.

This determination included a finding that issuance of the exposure modification order is expected to benefit the health of the population as a whole.

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In its assessment, the FDA determined that the three variants of HeatSticks were comparable to the previously authorized tobacco-flavored consumables.

On April 28, 2023, we submitted the Annual Report for the IQOS Tobacco Heating System ("THS") to the FDA.

The report included a systematic review of the literature covering publications related to the IQOS THS between March 1, 2022 and February 28, 2023.

The report concluded that, although the scientific evidence continues to develop and evolve, the extensive data reviewed confirms that while Heated Tobacco Products (“HTPs”) are not risk-free, the use of HTPs are likely to present less risk of harm for both users and non-users against the well-proven risks of continued cigarette smoking, and therefore continues to support the "appropriate for the promotion of public health" status of IQOS THS.

On July 5, 2023, we submitted a renewal application to the FDA requesting re-authorization to continue to market those IQOS products that previously received a modified exposure order with a modified exposure claim in the U.S.

This renewal request was received by the FDA 360 days prior to the stated July 2024 expiration date of the original modified exposure claim orders.

As our application proceeds through the review process, the FDA may request additional information or conduct subsequent inspections to verify the information we submitted.

We do not believe the FDA will issue a decision on our MRTP renewal application prior to the stated July 2024 expiration date of the original modified exposure claim orders.

In the event that the FDA does not act on our MRTP renewal application before July 2024, we believe that we should be permitted to continue to use the modified exposure claim with respect to those products that received modified exposure orders until the FDA decides on our MRTP renewal application.

On July 5, 2023, we submitted renewal applications to the FDA requesting re-authorization to continue to market those IQOS products that previously received an exposure modification order with a modified exposure claim in the United States.

These renewal requests were received by the FDA 360 days prior to the stated July 2024 expiration date of the original exposure modification orders, as requested by the FDA in the original orders.

On May 9, 2024, the FDA filed for scientific review of our MRTP renewal applications for IQOS products and posted materials from these applications.

As our applications proceed through the review process, the FDA may request additional information or conduct subsequent inspections to verify the information we submitted.

The FDA did not issue a decision on our MRTP renewal applications prior to the stated July 7, 2024 expiration date of the original exposure modification orders.

The MRTP renewal applications were timely filed in accordance with FDA direction, and we believe that we should be permitted to continue to use the modified exposure claim with respect to those products that received exposure modification orders until the FDA decides on our MRTP renewal applications.

On October 20, 2023, we submitted bundled PMTAs for our IQOS ILUMA THS products together with MRTPAs requesting authorization of the exposure reduction marketing order previously granted for IQOS blade versions.

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These submissions were made in November 2022 (for the three initial IQOS consumables) and February 2023 (for the two new IQOS consumables) to enable domestic manufacturing of IQOS consumables utilizing materials purchased from vendors operating in the United States.

On July 17, 2023, Swedish Match USA, Inc.

submitted a renewal application to the FDA requesting re-authorization to continue to market its eight snus smokeless tobacco products (sold under the General snus brand name) with a modified risk claim.

General snus products received modified risk orders on October 22, 2019.

Swedish Match USA, Inc.

was authorized to market these products with the claim, “Using General snus instead of cigarettes puts you at a lower risk of mouth cancer, heart disease, lung cancer, stroke, emphysema, and chronic bronchitis.” This renewal request was received by the FDA 360 days prior to the stated October 22, 2024 expiration date of the original modified risk claim orders, as requested by the FDA in the original orders.

On November 30, 2023, the FDA filed for scientific review of the MRTP renewal applications for General snus products and posted materials from these applications.

The FDA held a Tobacco Products Scientific Advisory Committee meeting to discuss the MRTP renewal applications on June 26, 2024.

On July 3, 2024, the FDA extended the comment period on the MRTP renewal applications to provide time for the public to review application materials that were recently made available.

Subsequently, on July 15, 2024, the FDA reposted application documents related to the MRTP renewal and announced a deadline for public comments.

Public comments on these applications must be submitted by August 14, 2024.

Premarket tobacco applications for certain ZYN products, which are currently marketed in the U.S., were submitted in March 2020.

In the same month, these applications were filed for scientific review and in July 2020 the FDA issued a deficiency letter which Swedish Match USA, Inc.

addressed in September 2020.

The FDA has not completed its review of such applications but, consistent with its practice concerning products with respect to which applications were filed prior to a September 9, 2020 deadline, the FDA has not taken enforcement action to prevent these ZYN products from being marketed or indicated that it intends to do so.

After the September 9, 2020 deadline, we also submitted additional applications for authorization to market other ZYN products.

As these applications proceed through the review process, the FDA may request additional information or conduct subsequent inspections to verify the submitted information.

We are unable to market these products until the FDA authorizes such applications.

On April 29, 2024, we submitted the Annual Report for the IQOS Tobacco Heating System ("THS") to the FDA.

The report included a systematic review of the literature covering publications related to the IQOS THS between March 1, 2023 and February 29, 2024.

The report included publications in various scientific fields including aerosol chemistry and physics, standard and systems toxicology, clinical studies on exposure reduction to HPHCs, and observational studies.

Overall, the review continues to support the finding that IQOS THS is "appropriate for the promotion of public health."

Some states and municipalities in the U.S.

have introduced stringent restrictions on the sale of certain e-cigarettes and other smoke-free products, including those authorized by the FDA.

We believe that such restrictions on FDA-authorized products

will not advance public health and will unreasonably limit adult consumer access to products that are shown to be a better alternative to continued cigarette smoking.

have introduced stringent restrictions on the sale of certain SFPs, including those authorized by the FDA.

We believe that such restrictions on FDA-authorized products will not advance public health and will unreasonably limit adult consumer access to products that are shown to be a better alternative to continued cigarette smoking.

In March 2020, the FDA issued a final rule to require new text and graphic health warnings on cigarette packs and advertisements.

HTPs are technically covered by this rule, however the FDA stated that it would make product-specific decisions about health warnings when issuing or revising individual product or marketing orders.

HTPs are technically covered by this rule;

however, the FDA stated that it would make product-specific decisions about health warnings when issuing or revising individual product or marketing orders.

This approach would be consistent with the original marketing order granted for Heatsticks where the FDA required Philip Morris Products S.A.

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and was previously vacated nationwide by a federal court in December 2022.

In March 2024, the decision to vacate was reversed and a lower court was directed to consider additional issues.

In March 2024, the decision to vacate was reversed by a U.S.

appellate court and the lower court was directed to consider additional issues.

Proceedings remain ongoing.

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The FDA will review all comments as part of the rulemaking process for this rule.

PMI welcomes the FDA’s rule under section 906(e) of the Federal Food, Drug, and Cosmetic Act and plans to share its views with the FDA on this important foundational rule.

In April 2022, the FDA issued a proposed product standard that would prohibit menthol as a characterizing flavor in cigarettes.

In doing so, the FDA specifically requested comments as to whether the rule should contain an exemption process for certain tobacco products, including heated tobacco products, that meet the definition of cigarette and thus fall within the scope of the proposed rule.

PMI welcomes the FDA’s rule under section 906(e) of the Federal Food, Drug, and Cosmetic Act and shared its views with the FDA in September 2023 on this important foundational rule.

In April 2022, the FDA issued two proposed product standards that would (a) prohibit menthol as a characterizing flavor in cigarettes;

and (b) prohibit characterizing flavors in cigars.

In doing so, the FDA specifically requested comments as to whether the rule addressing menthol in cigarettes should contain an exemption process for certain tobacco products, including heated tobacco products, that meet the definition of cigarette and thus fall within the scope of the proposed rule.

We submitted comments to the FDA in August 2022, explained why we believe any prohibition should not extend to FDA-authorized smoke-free products, and otherwise advocated for an automatic exemption for smoke-free products authorized through the PMTA or MRTP review pathways.

The FDA has not completed rulemaking with respect to this proposed product standard.

In October 2023, the FDA submitted the proposed product standard to the White House Office of Management and Budget for review.

The FDA has not completed rulemaking with respect to either of these two proposed product standards, and it is uncertain whether these product standards will be finalized and, if so, when.

In October 2023, the FDA submitted the proposed product standards to the White House Office of Management and Budget for review.

It is possible that the FDA will not accept our comments to the proposed product standard and that the menthol product standard, if finalized, will encompass menthol heated tobacco consumables.

FDA actions may influence the regulatory approach of other governments and regulatory agencies.

FDA actions may influence the regulatory approach of other governments and international regulatory agencies.

Currently, national standards in certain countries set minimum quality and safety requirements for heat-not-burn products with technical heat-not-burn specifications and/or methods for demonstrating the absence of combustion.

These standards are mandatory in Armenia, Bahrain, Egypt, Jordan, Saudi Arabia, Tajikistan, Tunisia, the UAE and Uzbekistan, and voluntary in Algeria, Colombia, Costa Rica, Dominican Republic, Indonesia, Kazakhstan, Kyrgyzstan, Morocco, the Philippines, Russia, Vietnam, the U.K.

These standards are mandatory in Armenia, Bahrain, Egypt, Jordan, the Philippines, Saudi Arabia, Tajikistan, Tunisia, the UAE and Uzbekistan, and voluntary in Algeria, Colombia, Costa Rica, Dominican Republic, Indonesia, Kazakhstan, Kyrgyzstan, Morocco, Russia, Vietnam, the U.K.

In Japan, a voluntary standard sets minimum safety requirements for tobacco heating devices.

For e-vapor products (e-cigarettes) national standards setting minimum quality and safety requirements have been adopted in several markets.

These standards are mandatory in Armenia, Bahrain, China, Egypt, Jordan, New Zealand, United Arab Emirates, and Saudi Arabia and Tajikistan, and voluntary in Azerbaijan, Costa Rica, France, Indonesia, Kazakhstan, the Philippines, Russia, the U.K.

Currently, industry standards setting minimum quality and safety requirements for tobacco-free oral nicotine products (nicotine pouches) have been adopted in Pakistan, Sweden, the U.K., and Ukraine.

For e-vapor products (e.g., e-cigarettes), national standards setting minimum quality and safety requirements have been adopted in several markets.

These standards are mandatory in Armenia, Bahrain, China, Egypt, Jordan, New Zealand, United Arab Emirates, and Saudi Arabia and Tajikistan, and voluntary in Azerbaijan, Costa Rica, Dominican Republic, France, Indonesia, Kazakhstan, the Philippines, Russia, the U.K.

Currently, industry standards setting minimum quality and safety requirements for tobacco-free oral nicotine products (e.g., nicotine pouches) have been adopted in Armenia, Pakistan, Sweden, the U.K., and Ukraine.

These standards are voluntary.

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nonetheless, we may not be able to prevent third-party dissemination of false, misleading or unsubstantiated information about these products.

The dissemination of scientifically unsubstantiated information or studies with a strong confirmation bias by third parties may cause confusion among adult smokers and affect their decision to switch to better alternatives to continued smoking, such as our SFPs.

The dissemination of scientifically unsubstantiated information or studies with a strong confirmation bias by third parties may cause confusion among adult smokers and affect their decision to switch from continued smoking to better alternatives, such as our SFPs.

To date, we have been largely successful in demonstrating to regulators that our heated tobacco units are not cigarettes due to the absence of combustion, and as such, they are generally taxed either as a separate category or as other tobacco products, which typically yields more favorable tax rates than cigarettes.

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Legal Challenges to SFPs:

We face various administrative and legal challenges related to certain SFP activities, including allegations concerning product classification, advertising restrictions, corporate communications, product coach activities, scientific substantiation, product liability, and unfair competition.

We face various administrative and legal challenges related to certain SFP activities, including allegations concerning product classification;

advertising, distribution and sales restrictions;

corporate communications;

product coach activities;

scientific substantiation;

product liability;

and unfair competition.

While we design our programs to comply with relevant regulations, we expect these or similar challenges to continue as we expand our efforts to commercialize SFPs and to communicate with the public.

The outcomes of these matters may affect our SFP commercialization and public communication activities and performance in one or more markets.

In April 2020, affiliates of British American Tobacco p.l.c.

("BAT") filed a complaint against PMI, Philip Morris Products S.A., Altria Group, Inc., and its subsidiaries b efore the International Trade Commission ("ITC").

On September 29, 2021, the ITC issued its Final Determination ("FD"), Limited Exclusion Order ("LEO") and Cease and Desist Order ("CDO").

The ITC upheld the finding of infringement in the FD and found a subsequent violation.

The ITC issued a LEO against Philip Morris Products S.A., prohibiting the importation of infringing tobacco heating articles and components thereof, and CDOs against Altria Client Services, LLC, and certain of its affiliates, which went into effect at the end of the 60-day Presidential review period on November 28, 2021.

We appealed the patent issues.

Furthermore, lawsuits based on the same patent families were

repeatedly and universally rejected in European courts and the European Patent Office.

The decision has no bearing outside the United States.

On February 1, 2024 we entered into a global settlement with BAT that resolves all ongoing patent infringement litigation between the parties related to heated tobacco and vapor products.

Among other matters, under the settlement PMI and BAT requested rescission of the LEO and CDO, which was granted on March 11, 2024.

For further details, see Note 8.

Contingencies to our condensed consolidated financial statements.

On June 11, 2024, Swedish Match North America LLC ("SMNA") received a subpoena from the office of the Attorney General of the District of Columbia (“D.C.”).

The subpoena requests, among other things, information concerning SMNA’s compliance with D.C.’s licensing regulations, age-verification requirements, and prohibition on the sale of flavored tobacco products, including with respect to ZYN nicotine pouches.

SMNA is cooperating with the investigation and is conducting a full review of its sales and supply chain arrangements in D.C.

and other U.S.

localities where flavor bans may apply.

Following receipt of the subpoena, SMNA took steps to suspend online sales on the e-commerce shop associated with ZYN.com.

Sales through the e-commerce portion of ZYN.com have represented less than 2% of nationwide sale volumes historically.

By contrast, sales through brick-and-mortar retailers have long been the foundation of Swedish Match’s business in the United States, with ZYN distributed in over 160,000 stores.

Swedish Match is presently assessing whether it makes sense from a business and financial standpoint to resume sales through an e-commerce shop on ZYN.com.

Our SFP Business Development Initiatives:

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Under the agreement, PM USA was required to achieve certain milestones in order to maintain its exclusive distribution right and additional milestones in order to extend the agreement after the initial 5-year term.

On October 20, 2022, PMI announced that it had reached an agreement with Altria to terminate the companies' commercial relationship covering IQOS in the U.S., as of April 30, 2024.

Thereafter, PMI will hold the full rights to commercialize IQOS in the U.S.

For more details, see Note 8.

On October 20, 2022, PMI announced that it had reached an agreement with Altria to terminate the companies' commercial relationship covering IQOS in the U.S.

As of April 30, 2024, PMI holds the full rights to commercialize IQOS in the U.S.

For more details, see Part I, Item 1.

Financial Statements— Note 8.

Contingencies and Note 18.

Acquisitions to our condensed consolidated financial statements.

Acquisitions to our condensed consolidated financial statements in this report.

In January 2020, we announced an agreement with KT&G, a leading tobacco and nicotine company in South Korea, for the commercialization of KT&G’s smoke-free products outside of South Korea on an exclusive basis.

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From time to time, we are subject to governmental investigations on a range of matters, including tax, customs, antitrust, advertising, and labor practices.

We describe certain matters pending in Thailand in Note 8.

We describe certain pending matters in Note 8.

Contingencies .

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In December 2020, the Philippines and Thailand agreed to pursue facilitator-assisted discussions aimed at progressing and resolving outstanding issues and the countries have since agreed to seek the establishment of a bilateral consultative mechanism, with the goal of reaching a comprehensive settlement of their dispute, consistent with their rights and obligations under the WTO Agreements, as well as the recommendations and rulings of the WTO Dispute Settlement Body.

In July 2020, the Public Prosecutor’s office of Rome, Italy, notified our Italian subsidiary, Philip Morris Italia S.r.l.

(“PM Italia”), as well as three former or current employees and a former external consultant of PM Italia in March 2020, that it concluded a preliminary investigation against them for alleged contravention of anti-corruption laws and related disruption of trade freedom.

The Public Prosecutor alleges that the individuals involved promised certain personal favors to government officials from January to July of 2018 in exchange for favorable treatment for PM Italia, and that PM Italia lacked appropriate organizational controls to prevent the alleged actions by the individuals.

In September 2020, the Prosecutor issued his indictment and referred the matter to the court.

At the preliminary hearing held on May 11, 2021, the judge decided to refer all charges/defendants (including our affiliate) to trial.

The first trial hearing took place on September 22, 2021.

BAT has filed a civil claim against PM Italia claiming vicarious liability for any wrongdoing of its former or current employees and seeking

EUR 50 million (approximately $55.2 million) in damages.

The court admitted the claim and issued summons for PM Italia to appear in the case.

The court proceeded with the examination of witnesses beginning in September 2023.

PM Italia believes the charges brought against it by the Public Prosecutor are without merit and will defend them vigorously.

War in Ukraine

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The new production facility was completed at the end of the first quarter of 2024 and local production commenced in April 2024.

As of March 31, 2024, our Ukrainian operations had approximately $0.5 billion in total assets, excluding intercompany balances.

As of June 30, 2024, our Ukrainian operations had approximately $0.5 billion in total assets, excluding intercompany balances.

In Russia, we are continuously assessing the evolving situation in the country.

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In the event of a divestment, our ability to fully realize the value of the business would likely be subject to material impairment.

As of March 31, 2024, our Russian operations had approximately $2.6 billion in total assets, excluding intercompany balances, of which approximately $0.6 billion consisted of cash and equivalents held mostly in local currency (Russian rubles).

Additionally, we hold a 23% equity interest in Megapolis Distribution BV, the holding company of CJSC TK Megapolis, PMI's distributor in Russia.

As of June 30, 2024, our Russian operations had approximately $2.8 billion in total assets, excluding intercompany balances, of which approximately $0.7 billion consisted of cash and cash equivalents held mostly in local currency (Russian rubles).

Additionally, we hold a 23% equity interest in Megapolis Distribution B.V., the holding company of JSC TK Megapolis (formerly CJSC TK Megapolis), PMI's distributor in Russia.

On July 18, 2024, the Ministry of Industry and Trade filed a petition before the Arbitrazh Court of Moscow seeking the forced localization of JSC TK Megapolis.

For further details, see Note 8.

Contingencies and Note 12.

Related Parties – Equity Investments and Other .

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Impact of Inflation on Our Business and Mitigation Efforts

Like many other global companies, we have experienced inflationary pressures in 2022, 2023 and the first quarter of 2024, including:

Like many other global companies, we have experienced inflationary pressures in 2022, 2023 and the first half of 2024, including:

growing pressures on the cost of certain direct materials, wages, energy, transportation, and logistics as well as an increased cost of capital due to interest rate increases driven by the response to increased inflation.

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Raw materials such as tobacco leaf have longer inventory durations which resulted in insignificant inflationary impacts to our cost of sales in 2022;

however tobacco leaf purchases in both 2022 and 2023 have been at higher prices due to inflationary impacts on fertilizer prices and labor costs, thus resulting in increases in the cost of inventory with corresponding impacts on our financial results in 2023 and continuation in 2024.

however tobacco leaf purchases in both 2022 and 2023 were at higher prices due to inflationary impacts on fertilizer prices and labor costs, thus resulting in increases in the cost of inventory with corresponding impacts on our financial results in 2023 and continuation in 2024.

In addition, our cash flow from operating activities in 2023 was impacted by the net working capital investment related to the procurement of tobacco leaf inventory and higher cost of direct materials.

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We have taken several actions to mitigate these inflationary pressures.

additional volumes at favorable prices, (v) optimizing the mix of tobacco leaf origins and suppliers, (vi) continuous evaluation of shipping routes and methods of shipment, (vii) supplier negotiations, (viii) variable contract durations for energy costs, (ix) hedging strategies, and (x) other pricing, productivity and procurement initiatives.

Mitigation efforts have included (i) indexation clauses related to commodity costs and energy pricing within contracts, (ii) tactical inventory purchases, (iii) identification of new suppliers in different geographical locations for incremental sourcing, (iv) increasing tobacco leaf inventory durations to secure additional volumes at favorable prices, (v) optimizing the mix of tobacco leaf origins and suppliers, (vi) continuous evaluation of shipping routes and methods of shipment, (vii) supplier negotiations, (viii) variable contract durations for energy costs, (ix) hedging strategies, and (x) other pricing, productivity and procurement initiatives.

Asset Impairment and Exit Costs

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This impact of currency fluctuations could negatively impact our financial condition and results of operations.

For the three months ended March 31, 2024 and 2023, we recognized exchange gains (losses) of $15 million and $(14) million, respectively, resulting from remeasurement adjustments related to highly inflationary accounting.

For the six months ended June 30, 2024 and 2023, exchange gains (losses) recognized resulting from remeasurement adjustments related to highly inflationary accounting, were not material.

Climate Change Laws and Regulations

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Examples include, but are not limited to, the EU Emissions Trading System, the 2015 Paris Climate Agreement, the work of the International Financial Reporting Standards Foundation, including the International Sustainability Standards Board proposed climate standard and the recommendations of the Task Force on Climate-related Financial Disclosures, the SEC’s rules regarding climate-related disclosures, the California Climate Corporate Accountability Act, the California Greenhouse Gases:

Climate-Related Financial Risk Act, the Task Force on Nature-related Financial Disclosures, the EU Corporate Sustainability Reporting Directive, the EU Taxonomy Regulation, the EU Deforestation Regulation, the EU Proposal for a Corporate Sustainability Due Diligence Directive, CDP, the GHG Protocol, and carbon tax programs in Europe and Canada.

Climate-Related Financial Risk Act, the Task Force on Nature-related Financial Disclosures, the EU Corporate Sustainability Reporting Directive, the EU Taxonomy Regulation, the EU Deforestation Regulation, the EU Corporate Sustainability Due Diligence Directive, CDP, the GHG Protocol, and carbon tax programs in Europe and Canada.

Acquisitions and Other Business Arrangements

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prohibited import into their territories of certain goods, including cigarettes, among others, which might generate significant revenues for Russia if they originate in Russia or are exported from Russia.

The EU and Switzerland prohibited

transfer and licensing of intellectual property rights in relation to restricted goods.

The EU and Switzerland prohibited transfer and licensing of intellectual property rights in relation to restricted goods.

Additionally, the EU, the U.S., the U.K., Switzerland, Canada, Australia, New Zealand and Ukraine imposed sanctions on Mr.

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The U.S., the U.K., Switzerland and the EU banned the export of electric accumulators and static converters to Russia.

In addition, the U.S.

In addition, the U.S., the EU and the U.K.

banned the export of electronic cigarettes and similar personal electric vaporizing devices to Russia.

Certain countries also banned the delivery of services to Russia, such as information technology consultancy services, accounting and business and management consulting services, or required licenses to continue delivering these services to Russian persons or entities after June 20, 2024.

Certain countries also banned the delivery of services to Russia, such as information technology consultancy

services, accounting and business and management consulting services, or required licenses to continue delivering these services to Russian persons or entities after September 30, 2024.

We are working to mitigate any potential impacts from these restrictions.

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PMI continues to monitor the development of new sanctions and ensure full compliance.

Segment Operating Results – Three Months Ended March 31, 2024

The following discussion compares operating results within each of our segments for the three months ended March 31, 2024, with the three months ended March 31, 2023.

Financial Summary

Segment Operating Results – Three Months and Six Months Ended June 30, 2024

The following discussion compares operating results within each of our segments for the three months and six months ended June 30, 2024, with the three months and six months ended June 30, 2023.

Financial Summary

Quarters Ended March 31, Change

Financial Summary - Quarters Ended June 30, Change

Fav./(Unfav.) Variance

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2024 2023 Total Excl.

Cur-rency Total Cur-

rency Acqui-sitions Price Vol/

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During the quarter, net revenues increased by 6.7%.

Net revenues, excluding currency, increased by 7.1%, reflecting:

Net revenues, excluding currency and acquisitions, increased by 7.0%, reflecting:

a favorable pricing variance, mainly driven by higher combustible tobacco pricing;

and favorable volume/mix, primarily driven by higher HTU volume, partly offset by lower cigarettes volume.

The pricing variance for the full year 2023 and the first three months of 2024 was negatively impacted by the supplemental tax surcharge on heated tobacco units in Germany, which went into effect in 2022.

The negative impact will continue until a ruling on the legality of the surcharge is issued.

Operating income increased by 2.5%.

Operating income, excluding currency and acquisitions, increased by 5.3%, primarily reflecting:

a favorable pricing variance, mainly driven by higher combustible tobacco pricing;

partly offset by higher marketing, administration and research costs as well as manufacturing costs, including the impact of the EU single-use plastics directive.

Financial Summary

Financial Summary -

Six Months Ended June 30, Change

Fav./(Unfav.) Variance

Fav./(Unfav.)

2024 2023 Total Excl.

rency Acqui-sitions Price Vol/

(in millions)

Net Revenues $ 7,180 $ 6,642 8.1 % 7.1 % $ 538 $ 69 $ — $ 368 $ 101 $ —

Operating Income $ 3,116 $ 2,834 10.0 % 11.0 % $ 282 $ (31) $ — $ 368 $ 66 $ (121)

For the six months ended June 30, 2024, net revenues increased by 8.1%.

Net revenues, excluding currency and acquisitions, increased by 7.1%, primarily driven by the same factors as for the quarter.

The pricing variance for the full year 2023 and the first six months of 2024 was negatively impacted by the supplemental tax surcharge on heated tobacco products ("HTPs") in Germany, which went into effect in 2022.

On March 14, 2024, the Court of Justice of the European Union (the "CJEU") ruled that the German fiscal regulation imposing an additional excise tax on HTPs does not contravene EU law.

Fiscal Court in Dusseldorf (the "FCD") had previously referred that question to the CJEU.

The decision on the matter lies with the FCD and we expect a judgement in the coming months.

On May 15, 2024, following the decision issued by CJEU, the Fiscal Court in Dusseldorf (the "FCD") also ruled that the German fiscal regulation imposing an additional excise tax on HTPs does not contravene EU law.

The FCD admitted an appeal to the Federal Tax Court.

On June 19, 2024, PMI submitted an appeal.

The negative impact will continue, at least until the appeal ruling on the legality of the surcharge is concluded.

PMI currently accounts for the surcharge as a reduction in net revenues and in accrued liabilities in its results.

The accrued liability balance will continue to increase with the continuation of the HTU selling activities and in the case of an unfavorable ruling would negatively impact PMI’s future cash provided by operating activities.

A favorable ruling would positively impact future PMI’s operating results.

Any future tax stamps withdrawals and those withdrawn without an approved payment suspension in place at the date of the FCD decision, will be paid in the normal course of business and the accrued liability balance of $0.8 billion existing as of that date may remain until the outcome of the appeal is known.

An unfavorable outcome to the appeal would negatively impact PMI’s future cash provided by operating activities.

A favorable outcome to the appeal would positively impact future PMI’s operating results.

Operating income increased by 10.0%.

Operating income, excluding currency, increased by 18.7%, primarily reflecting:

a favorable comparison to 2023 of $47 million related to asset impairment and exit costs, a favorable pricing variance, mainly driven by higher combustible tobacco pricing;

and favorable volume/mix, primarily driven by higher HTU volume and favorable HTU mix, partly offset by lower cigarette volume, as well as unfavorable cigarette mix;

partly offset by higher manufacturing costs, including the impact of the EU single-use plastics directive.

Operating income, excluding currency and acquisitions, increased by 11.0%, primarily reflecting:

a favorable comparison of $47 million related to asset impairment and exit costs in 2023, a favorable pricing variance, mainly driven by higher combustible tobacco pricing;

and favorable volume/mix, primarily driven by higher HTU volume, notwithstanding lower cigarette volume;

partly offset by higher marketing, administration and research costs, as well as manufacturing costs, including the impact of the EU single-use plastics directive.

Europe - Total Market, PMI Shipment Volume and Market Share Commentaries

In the first quarter, the estimated total market for cigarettes and HTUs in the Region decreased by 0.4% to 124.5 billion units, reflecting a 2.1% decline for cigarettes, largely offset by an increase for HTUs.

The decrease in the estimated total market was predominantly due to France (down by 16.1%) and the UK (down by 11.1%), largely offset by Poland (up by 4.7%) and Bulgaria (up by 9.7%).

Europe Key Data First-Quarter

2024 2023 % / pp

In the second quarter, the estimated total market for cigarettes and HTUs in the Region decreased by 1.7% to 138.0 billion units, reflecting a 2.8% decline for cigarettes, partly offset by an increase for HTUs.

The decrease in the estimated total market was predominantly due to France (down by 11.4%), the UK (down by 15.4%), Germany (down by 3.3%), and the Netherlands (down by 20.7%), partly offset by Bulgaria (up by 10.6%), Romania (up by 5.0%), and Greece (up by 8.3%).

For the six months year-to-date, the estimated total market for cigarettes and HTUs in the Region decreased by 1.2% to 262.1 billion units, reflecting a 2.6% decline for cigarettes, partly offset by an increase for HTUs.

The decrease in the estimated total market was predominantly due to France (down by 13.8%), the UK (down by 13.3%), and the Netherlands (down by 15.5%), partly offset by Bulgaria (up by 9.7%), Poland (up by 2.3%), Romania (up by 3.9%), and Greece (up by 7.1%).

Europe Key Data Second-Quarter Six Months Year-to-Date

Change Change

2024 2023 % / pp 2024 2023 % / pp

PMI Market Share

3 unchanged sentences

Sum may not foot due to roundings.

In the first quarter, our total cigarette and HTU shipment volume in the Region decreased by 1.7% to 48.4 billion units.

Total cigarette and HTU shipment volume decreased notably in France (down by 31.7%) and Italy (down by 10.4%) driven by cigarettes, and increased notably in Poland (up by 10.0%) and Germany (up by 4.8%).

In the second quarter, our total cigarette and HTU shipment volume in the Region increased by 1.7% to 56.4 billion units.

Total cigarette and HTU shipment volume increased notably in Italy (up by 7.6%), mainly driven by cigarettes, and Poland (up by 6.0%), and decreased, notably in France (down by 11.7%) and the Netherlands (down by 19.5%), both driven by cigarettes.

Our estimated HTU adjusted in-market sales volume in the Region increased by 6.8% in the quarter, reflecting continued growth momentum for IQOS , partly offset by the impact from the EU characterizing flavor ban.

Our HTU share of the total cigarette and HTU market in the Region increased by 1.1 points, or by 0.9 points on an adjusted basis.

Our HTU share of the total cigarette and HTU market in the Region increased by 0.8 points on an adjusted basis.

For the six months year-to-date, our total cigarette and HTU shipment volume in the Region increased by 0.1% to 104.8 billion units.

Total cigarette and HTU shipment volume increased notably in Poland (up by 7.9%), Greece (up by 9.6%) and Germany (up by 1.9%), and decreased, notably in France (down by 21.7%) and the Netherlands (down by 15.2%), both driven by cigarettes.

Our estimated HTU adjusted in-market sales volume in the Region increased by 8.0%, reflecting continued growth momentum for IQOS , partly offset by the impact from the EU characterizing flavor ban.

Our HTU share of the total cigarette and HTU market in the Region increased by 0.9 points on an adjusted basis.

Other Oral SFP includes chew bags and tobacco bits

Sum may not foot due to roundings.

Oral SFP shipments increased by 16.5% with growth of snus (up by 11.6%) and nicotine pouches (up by 55.9%), benefiting from timing of shipments and underlying category growth in the Nordics.

In the second quarter, oral SFP shipments decreased by 1.6% with decline of snus (down by 5.6%), partly offset by nicotine pouches (up by 26.9%).

For the six months year-to-date, oral SFP shipments increased by 6.9%, driven by growth of nicotine pouches (up by 40.2%) and snus (up by 2.5%).

SSEA, CIS & MEA:

Financial Summary

Financial Summary -

Quarters Ended March 31, Change

Financial Summary - Quarters Ended June 30, Change

Fav./(Unfav.) Variance

1 unchanged sentence

2024 2023 Total Excl.

Cur-rency Total Cur-

rency Acqui-sitions Price Vol/

3 unchanged sentences

During the quarter, net revenues increased by 3.9%.

Net revenues, excluding currency, increased by 15.1%, primarily reflecting:

a favorable comparison to 2023 reflecting a 2023 charge of $80 million following the termination of a distribution arrangement in the Middle East, a favorable pricing variance, mainly driven by higher combustible tobacco pricing;

and favorable volume/mix, driven by higher HTU and cigarettes volume and favorable HTU and cigarettes mix.

Net revenues, excluding currency and acquisitions, increased by 13.3%, primarily reflecting:

a favorable pricing variance, mainly driven by higher combustible tobacco pricing;

and favorable volume/mix, driven by higher HTU and cigarettes volume, as well as favorable HTU and cigarette mix.

Operating income increased by 1.3%.

Operating income, excluding currency, increased by 38.0%, primarily reflecting:

Operating income, excluding currency and acquisitions, increased by 26.0%, primarily reflecting:

a favorable pricing variance, mainly driven by higher combustible tobacco pricing;

and favorable volume/mix, driven by higher HTU volume, favorable HTU mix and favorable cigarette volume, partly offset by unfavorable cigarette mix;

partly offset by higher manufacturing costs (primarily due to inflationary impacts).

and favorable volume/mix, driven by higher smoke-free products and cigarettes volume, notwithstanding unfavorable cigarette mix;

partly offset by higher manufacturing costs (primarily due to higher cost of tobacco leaf).

Financial Summary

Financial Summary -

Six Months Ended June 30, Change

Fav./(Unfav.) Variance

Fav./(Unfav.)

2024 2023 Total Excl.

rency Acqui-sitions Price Vol/

(in millions)

Net Revenues $ 5,429 $ 5,145 5.5 % 14.2 % $ 284 $ (445) $ — $ 384 $ 267 $ 78

Operating Income $ 1,663 $ 1,614 3.0 % 31.5 % $ 49 $ (471) $ 12 $ 384 $ 96 $ 28

For the six months ended June 30, 2024, net revenues increased by 5.5%.

Net revenues, excluding currency and acquisitions, increased by 14.2%, primarily reflecting:

a favorable comparison to 2023 due to the 2023 charge of $80 million following the termination of a distribution arrangement in the Middle East (recognized as a reduction of net revenues in 2023), a favorable pricing variance, mainly driven by higher combustible tobacco pricing;

and favorable volume/mix, driven by higher cigarette and HTU volume and favorable cigarettes mix.

Operating income increased by 3.0%.

Operating income, excluding currency and acquisitions, increased by 31.5%, primarily reflecting:

a favorable comparison to 2023 due to the 2023 charge of $80 million following the termination of a distribution arrangement in the Middle East as discussed in net revenues above, and $32 million related to asset impairment and exit costs in 2023.

In addition, this increase was due to a favorable pricing variance, mainly driven by higher combustible tobacco pricing;

and favorable volume/mix, driven by higher cigarette and HTU volume, notwithstanding unfavorable cigarette mix;

partly offset by higher manufacturing costs (primarily due to higher cost of tobacco leaf).

SSEA, CIS & MEA - Total Market, PMI Shipment Volume and Market Share Commentaries

In the first quarter, the estimated total market for cigarettes and HTUs in the Region increased by approximately 1% to 371.0 billion units.

The increase in the estimated total market was mainly due to Indonesia (up by 6.4%) and Turkey (up by 14.8%), partly offset by Egypt (down by 14.2%) and Pakistan (down by 20.7%).

In the first quarter, our total cigarette and HTU shipment volume in the Region increased by 5.2% to 86.3 billion units, mainly driven by Turkey (up by 25.0%), partly offset by the Philippines (down by 18.1%).

PMI's estimated HTU adjusted in-market sales volume increased by 14.6%, with 11.6% HTU shipment volume growth.

In the second quarter, the estimated total market for cigarettes and HTUs in the Region increased by 3.7% to 393.9 billion units.

The increase in the estimated total market was mainly due to Russia (up by 6.2%), Pakistan (up by 42.4%), Egypt (up by 18.6%), Bangladesh (up by 8.5%) and Turkey (up by 4.1%), partly offset by Thailand (down by 19.5%) and Kazakhstan (down by 8.8%).

For the six months year-to-date, the estimated total market for cigarettes and HTUs in the Region increased by 2.5% to 767.0 billion units.

The increase in the estimated total market was mainly due to Turkey (up by 10.3%), Russia (up by 5.3%), Indonesia (up by 3.1%) and Bangladesh (up by 6.5%), partly offset by Thailand (down by 14.1%) and Philippines (down by 7.9%).

In the second quarter, our total cigarette and HTU shipment volume in the Region increased by 4.5% to 94.3 billion units, mainly driven by Turkey (up by 9.7%) and Saudi Arabia (up by 68.9% due to inventory movements), partly offset by Indonesia (down by 6.4%), Thailand (down by 24.9%) and the Philippines (down by 9.7%).

Our estimated HTU adjusted in-market sales volume increased by 11.4%, with 18.5% HTU shipment volume growth.

HTU shipment growth in Russia primarily reflects timing and cross-border dynamics, with limited underlying growth.

For the six months year-to-date, our total cigarette and HTU shipment volume in the Region increased by 4.8% to 180.6 billion units, mainly driven by Turkey (up by 16.0%), partly offset by the Philippines (down by 14.2%).

Our estimated HTU adjusted in-market sales volume increased by 13.1%, with 15.2% HTU shipment volume growth.

EA, AU & PMI DF:

Financial Summary

Financial Summary - Quarters Ended March 31, Change

Financial Summary - Quarters Ended June 30, Change

Fav./(Unfav.) Variance

1 unchanged sentence

2024 2023 Total Excl.

Cur-rency Total Cur-

rency Acqui-sitions Price Vol/

2 unchanged sentences

Operating Income $ 753 $ 557 35.2 % 51.5 % $ 196 $ (91) $ — $ 88 $ 2 $ 197

During the quarter, net revenues increased by 10.8%.

Net revenues, excluding currency, increased by 18.0%, reflecting:

a favorable pricing variance and favorable volume/mix, mainly driven by higher HTU volume.

During the quarter, net revenues decreased by 0.4%.

Net revenues, excluding currency and acquisitions, increased by 6.7%, reflecting:

a favorable pricing variance and favorable volume/mix, mainly driven by higher HTU volume, partly offset by lower cigarette volume.

Operating income increased by 35.2%.

Operating income, excluding currency, increased by 39.4%, mainly reflecting:

the same factors as for net revenues, as well as lower shipping costs and a favorable comparison to 2023 of $19 million related to asset impairment and exit costs.

Operating income, excluding currency and acquisitions, increased by 51.5%, mainly driven by the same factors as for net revenues, as well as a favorable comparison to 2023 reflecting the South Korea indirect tax charge of $204 million in 2023.

Financial Summary

Financial Summary -

Six Months Ended June 30, Change

Fav./(Unfav.) Variance

Fav./(Unfav.)

2024 2023 Total Excl.

rency Acqui-sitions Price Vol/

(in millions)

Net Revenues $ 3,357 $ 3,200 4.9 % 12.1 % $ 157 $ (229) $ — $ 218 $ 168 $ —

Operating Income $ 1,516 $ 1,194 27.0 % 45.1 % $ 322 $ (216) $ — $ 218 $ 74 $ 246

For the six months ended June 30, 2024, net revenues increased by 4.9%.

Net revenues, excluding currency and acquisitions, increased by 12.1%, reflecting:

a favorable pricing variance and favorable volume/mix, mainly driven by higher HTU volume, partly offset by lower cigarette volume.

Operating income increased by 27.0%.

Operating income, excluding currency and acquisitions, increased by 45.1%, mainly driven by the same factors as for net revenues, as well as a favorable comparison to 2023 reflecting the South Korea indirect tax charge of $204 million in 2023.

EA, AU & PMI DF - Total Market, PMI Shipment Volume and Market Share Commentaries

In the first quarter, the estimated total market for cigarettes and HTUs in the Region, excluding China, increased by around 1% to 75.9 billion units, with growth for HTUs partly offset by a decline for cigarettes.

The increase in the estimated total market was mainly driven by International Duty Free (up by 17.6%) and Taiwan (up by 15.0%).

In the first quarter, our total cigarette and HTU shipment volume in the Region increased by 9.3% to 27.2 billion units, driven by Japan (up by 21.1%).

In the second quarter, the estimated total market for cigarettes and HTUs in the Region, excluding China, decreased by 0.7% to 80.2 billion units, with a decline in cigarettes, partly offset by HTU growth.

The decrease in the estimated total market was mainly driven by Australia (down by 29.1%), South Korea (down by 1.9%), and Taiwan (down by 4.2%), partly offset by International Duty Free (up by 8.5%) and Japan (up by 0.9%).

For the six months year-to-date, the estimated total market for cigarettes and HTUs in the Region, excluding China, was stable at 156.0 billion units, with HTU growth partly offset by a decline in cigarettes.

The increase in the estimated total market was mainly driven by International Duty Free (up by 12.4%) and Japan (up by 1.0%), partly offset by Australia (down by 29.4%).

In the second quarter, our total cigarette and HTU shipment volume in the Region increased by 1.0% to 27.3 billion units, driven by Japan (up by 5.0%), partly offset by Australia (down by 28.5%).

Our estimated HTU adjusted in-market sales volume in the Region increased by 13.3% in the quarter, including growth in Japan of 12.5%.

Financial Summary

For the six months year-to-date, our total cigarette and HTU shipment volume in the Region increased by 5.0% to 54.5 billion units, driven by Japan (up by 12.6%), partly offset by Australia (down by 27.2%).

Our estimated HTU adjusted in-market sales volume in the Region increased by 14.1%, including growth in Japan of 12.9%.

Financial Summary

Quarters Ended March 31, Change

Financial Summary - Quarters Ended June 30, Change

Fav./(Unfav.) Variance

1 unchanged sentence

2024 2023 Total Excl.

Cur-rency Total Cur-

rency Acqui-sitions Price Vol/

3 unchanged sentences

During the quarter, net revenues increased by 16.5%.

Net revenues, excluding currency, increased by 11.4%, primarily reflecting:

favorable volume/mix, mainly due to growth of ZYN nicotine pouches in the U.S., partly offset by lower cigarette volume and unfavorable cigarette mix outside of the U.S.

Net revenues, excluding currency and acquisitions, increased by 14.2%, primarily reflecting:

favorable volume/mix, mainly due to the growth of ZYN nicotine pouches in the U.S., partly offset by lower cigarette volume and unfavorable cigarette mix outside of the U.S.;

and a favorable pricing variance, predominantly driven by higher combustible tobacco pricing.

Operating income decreased by 24.7%.

Operating income, excluding currency, decreased by 57.9%, mainly reflecting:

Operating income, excluding currency and acquisitions, decreased by 39.1%, mainly reflecting:

higher amortization of intangibles and higher marketing and administration costs, including incremental investment in the U.S.

The decrease was partly offset by a favorable volume/mix and pricing variance, mainly due to the same factors as for net revenues.

Financial Summary

Financial Summary -

Six Months Ended June 30, Change

Fav./(Unfav.) Variance

Fav./(Unfav.)

2024 2023 Total Excl.

rency Acqui-sitions Price Vol/

(in millions)

Net Revenues $ 2,125 $ 1,837 15.7 % 12.9 % $ 288 $ 51 $ — $ 54 $ 231 $ (48)

Operating Income $ 282 $ 426 (33.8) % (47.2) % $ (144) $ 57 $ — $ 54 $ 217 $ (472)

For the six months ended June 30, 2024, net revenues increased by 15.7%.

Net revenues, excluding currency and acquisitions, increased by 12.9%, primarily reflecting:

favorable volume/mix, mainly due to growth of ZYN nicotine pouches in the U.S., partly offset by cigarette volume declines outside of the U.S.;

and favorable cigarette pricing.

Operating income decreased by 33.8%.

Operating income, excluding currency and acquisitions, decreased by 47.2%, mainly reflecting:

higher asset impairment and exit costs, higher amortization of intangibles, and higher marketing and administration costs, including incremental investment in the U.S.

The decrease was partly offset by a favorable volume/mix, mainly due to the same factors as for net revenues, and a favorable comparison to 2023 of $18 million related to Swedish Match AB acquisition accounting related items.

The decrease was partly offset by favorable volume/mix, mainly due to the same factors as for net revenues;

and favorable cigarette pricing.

Americas - Total Market, PMI Shipment Volume and Market Share Commentaries

In the first quarter, the estimated total market for cigarettes and HTUs in the Region, excluding the U.S., decreased by around 3% to 44.7 billion units, primarily reflecting a decline for cigarettes.

The decrease in the estimated total market was mainly due to Argentina (down by 7.8%) and Canada (down by 13.1%), partly offset by Brazil (up by 3.5%) and Mexico (up by 1.8%).

In the first quarter, our total cigarette and HTU shipment volume in the Region decreased by 3.7% to 14.5 billion units, mainly due to Argentina (down by 9.8%).

Cigar shipment volume declined by 23%, versus a difficult comparison due to prior year trade inventory movements.

In the second quarter, the estimated total market for cigarettes and HTUs in the Region, excluding the U.S., decreased by 2.7% to 45.2 billion units, primarily reflecting a decline for cigarettes.

The decrease in the estimated total market was mainly due to Argentina (down by 20.0%) and Canada (down by 12.6%), partly offset by Brazil (up by 9.6%).

For the six months year-to-date, the estimated total market for cigarettes and HTUs in the Region, excluding the U.S., decreased by 2.8% to 89.9 billion units, primarily reflecting a decline for cigarettes.

The decrease in the estimated total market was mainly due to Argentina (down by 13.8%) and Canada (down by 12.9%), partly offset by Brazil (up by 6.5%).

In the second quarter, our total cigarette and HTU shipment volume in the Region decreased by 3.6% to 15.1 billion units, mainly due to Argentina (down by 19.9%), partly offset by Brazil (up by 8.7%).

For the six months year-to-date, our total cigarette and HTU shipment volume in the Region decreased by 3.7% to 29.5 billion units, mainly due to Argentina (down by 14.7%), partly offset by Brazil (up by 9.4%).

For the six months year-to-date, cigar shipment volume declined by 18.3%, predominantly due to a tough comparison related to trade inventory movements in the prior-year around the April 2023 price increase.

(1) Excluding U.S.

Sum may not foot due to roundings.

Oral products shipments increased by 52.1%, driven by ZYN nicotine pouches (up by 79.7%) in the U.S., partly offset by moist snuff (down by 2.3%) driven by a declining category and pricing.

In the second quarter, oral products shipments increased by 35.8%, driven by ZYN nicotine pouches (up by 50.3%) in the U.S.

For the six months year-to-date, oral products shipments increased by 43.4%, driven by ZYN nicotine pouches (up by 63.5%) in the U.S.

Wellness and Healthcare:

The operating results of PMI’s Vectura Fertin Pharma business are reported in the Wellness and Healthcare segment.

The results of PMI’s Vectura Fertin Pharma business are reported in the Wellness and Healthcare segment.

The business operations of our Wellness and Healthcare segment are evaluated separately from the geographical segments.

Financial Summary

Financial Summary -

Quarters Ended March 31, Change

Financial Summary - Quarters Ended June 30, Change

Fav./(Unfav.) Variance

1 unchanged sentence

2024 2023 Total Excl.

Cur-rency Total Cur-

rency Acqui-sitions Price Vol/

3 unchanged sentences

During the quarter, net revenues increased by 5.3%.

Net revenues, excluding currency, increased by 2.3%.

The operating loss of $45 million in 2024 was primarily due to investments in research and development, and administration costs, as well as a charge for impairment of other intangible assets of $26 million and the amortization of acquired intangibles.

The operating loss of $43 million in 2024 was primarily due to research and development, and administration costs.

The operating loss in 2023 included an impairment charge of $680 million consisting of a goodwill impairment of $665 million and a non-amortizable intangible asset impairment charge of $15 million.

For further details on this 2023 impairment charge, see Note 4.

Goodwill and Other Intangible Assets, net .

Financial Summary

Financial Summary -

Six Months Ended June 30, Change

Fav./(Unfav.) Variance

Fav./(Unfav.)

2024 2023 Total Excl.

rency Acqui-sitions Price Vol/

(in millions)

Net Revenues $ 170 $ 162 4.9 % 3.7 % $ 8 $ 2 $ — $ 8 $ — $ (2)

Operating Income / (Loss) $ (88) $ (771) 88.6 % 88.3 % $ 683 $ 2 $ — $ 8 $ — $ 673

For the six months ended June 30, 2024, net revenues increased by 4.9%.

Net revenues, excluding currency and acquisitions, increased by 3.7%.

The operating loss of $88 million in 2024 was primarily due to research and development, and administration costs.

The operating loss in 2023 included the goodwill and non-amortizable intangible asset impairment charge of $680 million as discussed in the quarter results above.

For further details on this 2023 impairment charge, see Note 4.

Goodwill and Other Intangible Assets, net .

Financial Review

Cash Flow Highlights

For the Three Months Ended March 31,

For the Six Months Ended June 30,

(in millions) 2024 2023

3 unchanged sentences

Net Cash Provided by (Used in) Operating Activities

During the first three months of 2024, net cash provided by operating activities was $241 million as compared to $955 million of net cash used in the first three months of 2023.

Excluding unfavorable currency movements of $364 million, the favorable variance of $1.6 billion was due primarily to lower working capital requirements of $1.0 billion and higher currency-neutral net earnings, excluding non-cash depreciation and amortization expense and other intangible impairment charges.

During the first six months of 2024, net cash provided by operating activities was $4.9 billion as compared to $2.5 billion in the first six months of 2023.

Excluding unfavorable currency movements of $0.7 billion, the favorable variance of $3.1 billion was due primarily to lower working capital requirements of $2.0 billion and higher currency-neutral net earnings, excluding non-cash depreciation and amortization expense and impairment charges of goodwill and other intangibles.

The unfavorable currency movements primarily related to the currency impact on net earnings and represented the fluctuations of the U.S.

dollar, especially against the Egyptian pound, Japanese yen and Russian ruble.

The lower working capital requirements in 2024 as compared with 2023 were primarily due to less cash used in accrued liabilities and other current assets, net of more cash provided by inventories, mainly reflecting the timing of excise tax-paid inventory movements primarily related to excise tax increases and the timing of the corresponding excise tax payments, as well as tactical stock increases for certain direct materials in 2023.

The lower working capital requirements in 2024 as compared with 2023 were primarily due to less cash used in accrued liabilities and other current assets, net of more cash provided by inventories, mainly reflecting the timing of excise tax-paid inventory movements primarily related to excise tax increases and the timing of the corresponding excise tax payments and less cash used in accounts payable in 2024 primarily due to comparison with 2023 payment for higher IQOS ILUMA device purchases in the fourth quarter of 2022 to meet the needs of ILUMA launches.

The favorable 2024 working capital comparison to 2023 is also impacted by higher 2023 working capital requirements following the higher cost of tobacco leaf and other direct materials due to inflationary pressures (for further details, see “Impact of Inflation on Our Business and Mitigation Efforts” section of this MD&A), as well as tactical stock increases for certain direct materials.

These changes in the working capital requirements were partly offset by more cash used in accounts receivable mainly reflecting lower usage of our factoring arrangements to sell trade receivables, as well as the timing of sales and cash collections.

1 unchanged sentence

Sale of Accounts Receivable .

For the full year 2024, we currently expect net cash provided by operating activities of $10 billion to $11 billion at prevailing exchange rates, subject to year-end working capital requirements.

For the full year 2024, we currently expect net cash provided by operating activities of approximately $11 billion at prevailing exchange rates, subject to year-end working capital requirements.

Net Cash Provided by (Used in) Investing Activities

During the first three months of 2024, net cash used in investing activities was $193 million as compared to $591 million in the first three months of 2023.

During the first six months of 2024, net cash used in investing activities was $530 million as compared to $1.1 billion in the

first six months of 2023.

This decrease in net cash used was primarily due to changes in the cash collateral posted for derivative instruments, partially offset by higher capital expenditures.

Capital expenditures of $417 million during the first three months of 2024 increased by $138 million as compared with the first

three months of 2023.

Capital expenditures of $787 million during the first six months of 2024 increased by $148 million as compared with the first six months of 2023.

The 2024 capital expenditures were primarily related to our ongoing investments in smoke-free product manufacturing capacity.

We expect total capital expenditures in 2024 to be approximately $1.2 billion, partly reflecting investments in ZYN capacity in the U.S.

We expect total capital expenditures in 2024 to be approximately $1.3 billion to $1.4 billion, including further investments in ZYN capacity in the U.S.

Net Cash Provided by (Used in) Financing Activities

During the first three months of 2024, net cash provided by financing activities was $1.1 billion as compared to $0.9 billion in the first three months of 2023.

The increase in net cash provided was primarily due to favorable comparisons to 2023 reflecting:

repayment on the bridge facility in 2023 related to the Swedish Match acquisition;

payments in 2023 to acquire the remaining issued and outstanding shares in Swedish Match;

and the 2023 repayments of long-term debt.

These increases in net cash provided was partly offset by lower net borrowings in 2024 reflecting lower long-term debt proceeds and lower net short-term borrowings (primarily commercial paper).

During the first six months of 2024, net cash used in financing activities was $2.4 billion as compared to $0.9 billion in the first six months of 2023.

The increase in net cash used was primarily due to lower net borrowings in 2024 reflecting lower long-term debt proceeds and lower net short-term borrowings (primarily commercial paper).

The increase was partly offset by favorable comparisons to 2023 mainly reflecting repayment on the bridge facility in 2023 related to the Swedish Match acquisition, and payments in 2023 to acquire the remaining issued and outstanding shares in Swedish Match.

Debt and Liquidity

10 unchanged sentences

Credit Ratings – The cost and terms of our financing arrangements as well as our access to commercial paper markets may be affected by applicable credit ratings.

At March 31, 2024, our credit ratings and outlook by major credit rating agencies were as follows:

At June 30, 2024, our credit ratings and outlook by major credit rating agencies were as follows:

Short-term Long-term Outlook

3 unchanged sentences

Revolving Credit Facilities

At March 31, 2024, our committed revolving credit facilities were as follows:

At June 30, 2024, our committed revolving credit facilities were as follows:

Type (in billions) Committed

8 unchanged sentences

On September 20, 2023, we entered into an agreement, effective September 29, 2023, to amend and further extend the term to September 29, 2028.

At March 31, 2024, there were no borrowings under the committed revolving credit facilities, and the entire committed amounts were available for borrowing.

At June 30, 2024, there were no borrowings under the committed revolving credit facilities, and the entire committed amounts were available for borrowing.

All banks participating in our committed revolving credit facilities have an investment-grade long-term credit rating from the credit rating agencies.

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In addition to the committed revolving credit facilities discussed above, PMI maintains certain short-term credit arrangements, including uncommitted credit lines, to primarily meet working capital needs.

These credit arrangements amounted to approximately $2.1 billion at March 31, 2024, and approximately $2.7 billion at December 31, 2023.

Borrowings under these arrangements and other bank loans amounted to $130 million at March 31, 2024, and $283 million at December 31, 2023.

These credit arrangements amounted to approximately $2.1 billion at June 30, 2024, and approximately $2.7 billion at December 31, 2023.

Borrowings under these arrangements and other bank loans amounted to $139 million at June 30, 2024, and $283 million at December 31, 2023.

Credit Facilities related to the Financing of the Swedish Match Acquisition

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On November 7, 2022, PMI also delivered notices of borrowing for advances totaling €5.5 billion under the term loan facility, of which €3.0 billion will become due on November 9, 2025 and €2.5 billion will become due on June 23, 2027 unless prepaid pursuant to the terms of the credit agreement.

As of March 31, 2024 and December 31, 2023, the €5.5 billion (approximately $6 billion) term loan facility was fully drawn and remained outstanding.

As of June 30, 2024 and December 31, 2023, the €5.5 billion (approximately $6 billion) term loan facility was fully drawn and remained outstanding.

The proceeds under the bridge facility and the term loan facility were used, directly or indirectly, to finance the acquisition, including, the payment of related fees and expenses.

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and in Europe having an aggregate issuance capacity of $8.0 billion.

At March 31, 2024, we had $149 million of commercial paper outstanding.

At June 30, 2024, we had no commercial paper outstanding.

At December 31, 2023, we had $1.7 billion commercial paper outstanding.

The average commercial paper balance outstanding during the first three months of 2024 was $2.9 billion.

The average commercial paper balance outstanding during the first six months of 2024 was $1.9 billion.

The average commercial paper balance outstanding during 2023 was $3.6 billion.

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Supply Chain Financing to our condensed consolidated financial statements.

Debt – Our total debt was $50.4 billion at March 31, 2024 and $47.9 billion at December 31, 2023.

Debt – Our total debt was $49.1 billion at June 30, 2024 and $47.9 billion at December 31, 2023.

On February 10, 2023, we filed a shelf registration statement with the U.S.

Securities and Exchange Commission, under which we may from time to time sell debt securities and/or warrants to purchase debt securities over a three-year period.

PMI's debt issuances in the first three months of 2024 were as follows:

PMI's debt issuances in the first six months of 2024 were as follows:

(in millions)

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dollar notes (a) $1,750 5.250% February 2024 February 2034

Euro notes (b) (c) €500 (approximately $543)

3.750% June 2024 January 2031

(a) Interest is payable semi-annually, commencing in August 2024

(b) Interest is payable annually, commencing in January 2025

The net proceeds from the sale of the securities listed in the table above have been or will be used for general corporate purposes, including working capital requirements, repayment of commercial paper and to refinance certain of our outstanding notes due in 2024.

Guarantees – At March 31, 2024, we have guarantees of our own performance, which are primarily related to excise taxes on the shipment of our products.

Guarantees – At June 30, 2024, we have guarantees of our own performance, which are primarily related to excise taxes on the shipment of our products.

There is no liability in the condensed consolidated financial statements associated with these guarantees.

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The eligible noteholders provided the requisite irrevocable consent instructions voting in favor of the amendments, which were subsequently passed by way of extraordinary resolution at the noteholders’ meeting held on July 28, 2023.

As a result of the

passage of the extraordinary resolution, Philip Morris International Inc.

As a result of the passage of the extraordinary resolution, Philip Morris International Inc.

entered into a guarantee, which guarantees unconditionally and irrevocably to the noteholders the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of the principal, premium, if any, and interest on the notes.

Equity and Dividends

We discuss our stock awards as of March 31, 2024 in Note 2.

We discuss our stock awards as of June 30, 2024 in Note 2.

Stock Plans to our condensed consolidated financial statements.

On June 11, 2021, our Board of Directors authorized a share repurchase program of up to $7 billion, with target spending of $5 billion to $7 billion over a three-year period.

On July 22, 2021, we began repurchasing shares under this share repurchase program.

On May 11, 2022, we announced the suspension of our three-year share repurchase program following the recommended public offer to acquire the outstanding shares of Swedish Match from its shareholders.

We did not make any share repurchases in 2023 and we do not currently anticipate restarting our share repurchase program during 2024.

Dividends paid in the first three months of 2024 were $2.0 billion.

We did not make any share repurchases in 2023 and 2024.

Our three-year share repurchase program expired on July 21, 2024.

Dividends paid in the first six months of 2024 were $4.1 billion.

During the third quarter of 2023, our Board of Directors approved a 2.4% increase in the quarterly dividend to $1.30 per common share.

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any such statement is qualified by reference to the following cautionary statements.

We elaborate on these and other risks we face throughout this document, particularly in the "Business Environment" section.

We elaborate on these and other risks we face throughout this document, particularly in the Part I, Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations — Business Environment section in this report.

You should understand that it is not possible to predict or identify all risk factors.

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Regulatory restrictions could limit the success of our SFPs.

The World Health Organization (the "WHO") study group on tobacco product regulation published their eighth report on the scientific basis of tobacco product regulation in May 2021.

The World Health Organization (the "WHO") study group on tobacco product regulation published their ninth report on the scientific basis of tobacco product regulation in August 2023.

The report is based on a review of scientific evidence related to novel and emerging nicotine and tobacco products, such as electronic nicotine delivery systems ("ENDS"), electronic non-nicotine delivery systems and HTPs.

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According to reports and decisions published, neither new decisions nor new policy recommendations on novel and emerging tobacco products were adopted.

Specific Guidelines were adopted to address cross-border Tobacco Advertising,

Promotion, and Sponsorship ("TAPS") and the depiction of tobacco in entertainment media.

Specific Guidelines were adopted to address cross-border Tobacco Advertising, Promotion, and Sponsorship ("TAPS") and the depiction of tobacco in entertainment media.

The Eleventh session of the CoP is currently scheduled to take place in 2025.

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The commercialization of our products in the United States is dependent on successfully managing compliance with federal, state, and local laws, regulations, legal agreements, and related interpretations.

Failure to successfully manage compliance and to resolve any disputes that may arise regarding the application of legal and administrative requirements to our products could negatively impact the timing, manner, or success of our SFP commercialization in the United States.

The financial and business performance of our smoke-free products is less predictable than our cigarette business.

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There may be periods of accelerated growth and periods of slower growth for these products, the timing and drivers of which may be more difficult for us to predict versus our mature cigarette business.

The impact of this lower predictability on our projected results for a specific period may be significant, due to geopolitical or macroeconomic events that negatively impact SFP availability or adoption, which in turn may have a material adverse effect on our results of operations.

The impact of this lower predictability on our projected results for a specific

period may be significant, due to geopolitical or macroeconomic events that negatively impact SFP availability or adoption, which in turn may have a material adverse effect on our results of operations.

We may be unsuccessful in our efforts to differentiate smoke-free products and cigarettes with respect to taxation.

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This decline is due to multiple factors, including increased taxes and pricing, governmental actions, the diminishing social acceptance of smoking, health concerns, competition, continuing economic and geopolitical uncertainty, and the continuing prevalence of illicit products.

These factors and their potential consequences are discussed more fully below and in the "Business Environment" section in this Form 10-Q .

These factors and their potential consequences are discussed more fully below and in Part I, Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations — Business Environment section of this report .

A continuous decline in the consumption of cigarettes could have a material adverse effect on our revenue, cash flow and profitability, which in turn may have a material adverse effect on our ability to fund our smoke-free transformation.

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Further changes in the tax laws of foreign jurisdictions could arise as a result of the base erosion and profit shifting project undertaken by the Organisation for Economic Co-operation and Development, which recommended changes to numerous long-standing tax principles, and could have a material adverse impact on our effective tax rate thereby reducing our net earnings.

As of March 31, 2024, many countries have enacted the OECD’s framework on a global minimum tax (referred to as “Pillar Two”), effective for taxable years beginning after December 31, 2023.

Currently, many countries have enacted the OECD’s framework on a global minimum tax (referred to as “Pillar Two”), effective for taxable years beginning after December 31, 2023.

While we have determined that Pillar Two should not have a material impact on our 2024 consolidated financial statements, we will continue to evaluate and monitor as additional guidance and clarification becomes available.

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We could decide, or be required to, recall products, which could have a material adverse effect on our business, reputation, results of operations, cash flows or financial position.

We could decide, or laws or regulations could require us, to recall products due to the failure, or alleged failure, to meet quality standards or specifications, suspected or confirmed and deliberate or unintentional product contamination, manufacturing defects, or other product adulteration, misbranding or tampering.

We could decide - or laws, regulations, or judicial administrative action could require us - to recall products due to the failure, or alleged failure, to meet quality or safety standards or specifications, suspected or confirmed and deliberate or unintentional product contamination, manufacturing defects, or other product safety concerns, adulteration, misbranding or tampering.

A product recall or a product liability or other claim (even if unsuccessful or without merit) could generate negative publicity about us and our products, and our Company’s reputation or that of our brands may be adversely affected.

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If an impairment is determined to exist, we will incur impairment losses, which could have a material adverse effect on our results of operations or financial position.

See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 for additional information concerning impairment determination and calculation.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 for additional information concerning impairment determination and calculation.

Risks Related to the Impact of the War in Ukraine on our Business

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The likelihood of retaliatory action by the Russian government against companies, including PMI, as a result of actions and statements made in response to the Russian invasion or otherwise, including the possibility of legal action against us or our employees;

the deprivation of rights in, or access to, our Russian assets;

the deprivation of rights in, or access to, our Russian or Russia-related assets;

or nationalization of foreign businesses or assets (including cash reserves held in Russia and intangible assets such as trademarks), is impossible to predict.

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In the event of a divestment, our ability to fully realize the value of the business would likely be subject to material impairment.

The deprivation of rights in, or access to, our Russian or Russia-related assets could also result in a material impairment and could cause the deconsolidation of our Russian business.

In Ukraine, there is no way to know when and to what extent we will be able to fully normalize our operations or to what extent our workforce, facilities, inventory, and other assets will remain intact.

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While we will continue to monitor this fluid situation and develop contingency plans as necessary to address any disruptions to our business operations as they develop, the extent of the conflict’s effect on our business and results of operations as well as the global economy, cannot be predicted.

The conflict may also heighten many other risks disclosed in this Form 10-Q, any of which could adversely affect our business, results of operations, cash flows or financial position.

The conflict may also heighten many other risks disclosed in this report, any of which could adversely affect our business, results of operations, cash flows or financial position.

Such risks could affect, without limitation, the achievement of our strategic priorities, including achievement of our smoke-free business growth targets;

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A prolonged disruption of our production facilities could have a material adverse effect on our business, financial condition and results of operations.

A prolonged disruption at or shut-down of one or more of our production facilities, especially our ZYN production facility in Kentucky, which currently supplies substantially all of our capacity for ZYN sales in the U.S., due to natural- or man-made disasters or other events outside of our control, such as equipment malfunction or widespread outbreaks of acute illness, including COVID-19, or for any other reason, could limit our capacity to meet customer demands.

A prolonged disruption at or shut-down of one or more of our production facilities, especially our ZYN production facility in Kentucky, U.S., which currently supplies substantially all of our capacity for ZYN sales in the U.S., due to natural- or man-made disasters or other events outside of our control, such as equipment malfunction or widespread outbreaks of acute illness, including COVID-19, or for any other reason, could limit our capacity to meet customer demands.

Such an event could disrupt our operations;

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Damages claimed in some tobacco-related litigation are significant and, in certain cases in Canada and Nigeria, range into the billions of U.S.

As of March 2024, we also face litigation related to our oral nicotine products before certain courts in the United States.

As of March 2024, we began facing litigation related to our oral nicotine products before certain courts in the United States.

We anticipate that new cases will continue to be filed.

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It is possible that our consolidated results of operations, cash flows or financial position could be materially adversely affected in a particular fiscal quarter or fiscal year by an unfavorable outcome or settlement of certain pending litigation.

We face various administrative and legal challenges related to certain SFP activities, including allegations concerning product classification, advertising and distribution restrictions, corporate communications, product coach activities, scientific substantiation, product liability, antitrust, and unfair competition.

While we design our programs to comply with relevant regulations, we expect these or similar challenges to continue as we expand our efforts to commercialize SFPs and to communicate with the public.

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From time to time, we are subject to governmental investigations on a range of matters.

Investigations include allegations of contraband shipments of cigarettes, allegations of unlawful pricing activities within certain markets, allegations of underpayment of income taxes, customs duties and/or excise taxes, allegations of false and misleading usage of descriptors, allegations of unlawful advertising, and allegations of unlawful labor practices.

We cannot predict the outcome of those investigations or whether additional investigations may be commenced, and it is possible that our business

could be materially adversely affected by an unfavorable outcome of pending or future investigations.

Contingencies—Other Litigation to our condensed consolidated financial statements and the “Management's Discussion and Analysis of Financial Condition and Results of Operations—Operating Results by Business Segment—Business Environment—Governmental Investigations” in this Form 10-Q for a description of certain governmental investigations to which we are subject.

We cannot predict the outcome of those investigations or whether additional investigations may be commenced, and it is possible that our

business could be materially adversely affected by an unfavorable outcome of pending or future investigations.

Contingencies—Other Litigation to our condensed consolidated financial statements and Part I, Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations—Operating Results by Business Segment—Business Environment—Governmental Investigations in this report for a description of certain governmental investigations to which we are subject.

We may be unable to adequately protect our intellectual property rights, and disputes relating to intellectual property rights could harm our business.

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Contingencies— Other Litigation to our condensed consolidated financial statements for a description of certain intellectual property proceedings.

The research, development, and commercialization of non-recreational cannabinoid products subjects the Company to legal, regulatory, reputational and other risks.

Our Wellness and Healthcare business, Vectura Fertin Pharma, is researching, developing, and exploring the commercialization of medical and pharmaceutical cannabinoids and non-recreational cannabinoid products (including CBD).

Vectura Fertin Pharma currently anticipates pursuing these activities in select non-U.S.

While Vectura Fertin Pharma will undertake the activities in a manner consistent with all applicable requirements, successful commercialization is dependent on compliance with a constantly evolving legal and regulatory environment.

These activities subject us to various legal, reputational, and regulatory risks, and a failure by Vectura Fertin Pharma to comply with applicable laws could result in criminal, civil, or tax liability.

Risks Related to our Competitive Environment

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Certain new market entrants in the non-combustible product category may alienate consumers from innovative products through inappropriate marketing campaigns, messaging and inferior product satisfaction, and without scientific substantiation based on appropriate R&D protocols and standards.

The growing use of digital media could increase the speed and extent of the dissemination of inaccurate and misleading information about our SFPs, all of which could have a material adverse effect on our profitability and results of operations.

See Item 1, Business—Competition of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 for a description of the competitive environment in which we operate.

The growing use of digital media could increase

the speed and extent of the dissemination of inaccurate and misleading information about our SFPs, all of which could have a material adverse effect on our profitability and results of operations.

Business—Competition of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 for a description of the competitive environment in which we operate.

We may be unable to anticipate changes in adult consumer preferences.

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To be successful, we must continue transforming our culture and ways of working, align our talent and organizational design with our increasingly complex business needs, and innovate and transform to a consumer-centric business.

We compete for talent, including in areas that are relatively new to us such as digital, information technology, and life sciences, with companies in the consumer products, technology, pharmaceutical and other sectors that enjoy greater societal acceptance.

We compete for talent, including in areas that are relatively new to us such as digital, information technology, and life sciences, with companies

in the consumer products, technology, pharmaceutical and other sectors that enjoy greater societal acceptance.

As a result, we may be unable to attract, motivate and retain the best global talent with the right degree of diversity, experience and skills to achieve our strategic goals.

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or failure or inability by us, third-parties, or our business partners to adhere to cybersecurity industry best practices, could place us at a competitive disadvantage, cause reputational damage, impact our operations, result in data breaches, significant business disruption, litigation, regulatory action including significant fines or penalties, financial impact, loss of revenue or assets including our intellectual property, personal, confidential, or sensitive data.

Cyberattacks, security incidents and vulnerabilities impacting PMI, newly acquired companies, our business partners, or our third-party providers, continue to dynamically evolve in sophistication and volume, making it difficult for us to predict probability, frequency, and impact severity of security incidents.

Cyberattacks, security incidents and vulnerabilities, including through artificial intelligence-driven techniques, impacting PMI, newly acquired companies, our business partners, or our third-party providers, continue to dynamically evolve in sophistication and volume, making it difficult for us to predict probability, frequency, and impact severity of security incidents.

Further, it may be inherently difficult to detect vulnerabilities during due diligence, for long periods of time, or soon enough to mitigate exploitation.

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An actual or alleged failure to comply with complex and changing privacy, data, artificial intelligence and information security laws and regulations under the EU General Data Protection Regulation, various U.S.

state and federal laws, and other similar privacy and information security laws across the jurisdictions in which PMI operates, such as the failure to protect personal

state and federal laws, and other similar privacy and information security laws across the jurisdictions in which PMI operates, such as the failure to protect personal data;

implement appropriate technological and reasonable security measures;

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meet stringent timeframe requirements for incident reporting to regulatory authorities;

comply with artificial intelligence regulations;

comply with artificial intelligence regulations including, but not limited to, the EU Artificial Intelligence Act;

and others, could have a material adverse effect on us, subject us to substantial fines and/or legal challenges, and/or harm our business, reputation, financial condition, or operating results.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis