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Item 2. Management’s Discussion and Analysis

2024-10-24 compared with 2024-07-25 · 433 added, 373 removed, 1507 unchanged (35% of the section changed)

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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.

Now, with a strong foundation and significant expertise in life sciences, we aim to expand into wellness and healthcare in areas such as inhalable drugs, nicotine-replacement therapy, consumer wellness products, medical and pharmaceutical cannabinoids, and non-recreational cannabinoid products (including CBD), in line with applicable regulatory requirements.

As of September 30, 2024, our smoke-free products were available for sale in 92 markets.

Our Wellness and Healthcare business strategy focuses on developing and commercializing oral and inhaled consumer health and wellness offerings and inhaled prescription products for therapy areas that include pain management and cardiovascular emergencies.

This includes medical and pharmaceutical cannabinoids, and non-recreational cannabinoid products (including CBD), in line with applicable regulatory requirements, though any revenue related to cannabinoids is expected to be negligible in the near to medium term.

In 2022, we acquired Swedish Match AB, a market leader in oral nicotine delivery with a significant presence in the United States market.

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For further details, see Note 18.

Acquisitions .

Acquisitions and Divestitures .

We use the term net revenues to refer to our operating revenues from the sale of our products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes.

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

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.

Sale of Vectura Group

In September 2024, PMI announced the sale of its subsidiary, Vectura Group Ltd.

(formerly, Vectura Group plc, and hereinafter referred to as “Vectura” or "Vectura Group"), to Molex Asia Holdings Ltd., and the establishment of master service agreements to develop Vectura Fertin Pharma’s inhaled therapeutics proprietary pipeline.

The transaction is expected to close by the end of 2024, subject to regulatory approval, which may impact the timing, and other customary closing conditions.

In the third quarter of 2024, PMI recorded an impairment charge of $198 million related to Vectura's classification as held for sale.

For further details, see Note 18.

Acquisitions and Divestitures .

The remaining units of Vectura Fertin Pharma will continue to operate as a separate company under PMI’s ownership and will be given a new corporate identity.

This business will focus on developing and commercializing oral consumer health and wellness offerings and inhaled prescription products for therapy areas that include pain management and cardiovascular emergencies.

Consolidated Operating Results for the Nine Months Ended September 30, 2024

• Net Revenues - Net revenues of $28.2 billion for the nine months ended September 30, 2024, increased by $2.0 billion, or 7.8%, 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%.

For the nine months ended September 30, 2024, net revenues increased by 7.8%.

Net revenues, excluding currency and acquisitions, increased by 11.0%, mainly reflecting:

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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:

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

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

Diluted EPS % Change

For the six months ended June 30, 2023 $ 2.29

For the nine months ended September 30, 2023 $ 3.61

2023 Charges related to the war in Ukraine 0.01

2023 Asset impairment and exit costs 0.06

2023 South Korea indirect tax charge 0.11

2023 Termination of agreement with Foundation for a Smoke-Free World 0.07

2023 Fair value adjustment for equity security investments (0.02)

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2024 Fair value adjustment for equity security investments 0.39

2024 Impairment related to Vectura Group's expected sale (0.13)

2024 Egypt sales tax charge (0.03)

2024 Income tax impact associated with Swedish Match AB financing 0.01

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Currency (0.44)

Interest (0.04)

Change in tax rate (0.03)

Operations 0.83

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 the nine months ended September 30, 2024 $ 4.89 35.5 %

Charges related to the war in Ukraine – During the nine months ended September 30, 2023, we recorded a pre-tax charge of $19 million (representing $15 million net of income tax and a diluted EPS charge of $0.01 per share), related to circumstances driven by the war, including the cost of PMI’s humanitarian efforts.

Asset impairment and exit costs – During the nine months ended September 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 nine months ended September 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.

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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).

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.

Termination of agreement with Foundation for a Smoke-Free World – On September 29, 2023, PMI and the Foundation for a Smoke-Free World (the "Foundation") entered into the Final Grant Agreement and Termination of the Second Amended and Restated Pledge Agreement ("Agreement").

Under the terms of the Agreement, PMI paid $140 million in the third quarter of 2023 in return for the termination of the pledge agreement between the parties.

As a result, in the third quarter of 2023, PMI recorded a pre-tax charge of $140 million (representing $111 million net of income tax or $0.07 per share decrease in diluted EPS) commensurate with the early termination of the pledge agreement.

The pre-tax charge was recorded in marketing, administration and research costs in the condensed consolidated statements of earnings during the nine months ended September 30, 2023.

For further details, see "Other Developments" within the Business Environment section of this MD&A.

Fair value adjustment for equity security investments – During the nine months ended September 30, 2023, we recorded a favorable fair value adjustment for our equity security investments in India and Sri Lanka of $41 million after tax (or $0.02 per share increase in diluted EPS).

During the nine months ended September 30, 2024, we recorded a favorable fair value adjustment for our equity security investments in India and Sri Lanka of $614 million after tax (or $0.39 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.

Amortization of intangibles – During the nine months ended September 30, 2023 and 2024, we recorded amortization of intangible expense of $368 million (representing $285 million net of income tax or $0.18 per share decrease in diluted EPS) and $588 million (representing $459 million net of income tax or $0.29 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.

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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.

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 nine months ended September 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.

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

For further details, see Note 4.

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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 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.

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

Impairment related to Vectura Group's expected sale – In September 2024, we announced the execution of a definitive agreement to sell Vectura to Molex Asia Holdings Ltd.

As a result, we recorded in the third quarter of 2024 an impairment charge of $198 million (representing a diluted EPS charge of $0.13 per share) related to Vectura's classification as held for sale.

The impairment charge was recorded in marketing, administration and research costs in PMI’s condensed consolidated statements of earnings for the nine months ended September 30, 2024, and was included in the Wellness and Healthcare segment results.

For further details, see Note 18.

Acquisitions and Divestitures .

Egypt sales tax charge – In the third quarter of 2024, following a ruling issued by the Higher Administrative Court in Egypt and subsequent evaluation of available remedies, we concluded that an adverse outcome was probable and recorded a pre-tax charge of $45 million (representing $39 million net of income tax and a diluted EPS charge of $0.03 per share) in relation to tax assessments for general sales tax deducted on imported cutfiller for the years 2014 to 2016.

This pre-tax charge was recorded in marketing, administration and research costs in the condensed consolidated statement of earnings for the nine months ended September 30, 2024, and was included in the SSEA, CIS & MEA segment results.

Income taxes – The Income tax impact associated with Swedish Match financing that decreased our 2023 diluted EPS by $0.03 per share and increased our 2024 diluted EPS by $0.01 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 2023 tax items that decreased our 2023 diluted EPS by $0.11 per share in the table above were due to an increase in deferred tax liabilities related to the unremitted earnings of PMI's Russian subsidiaries due to the unilateral suspension of certain Russian double tax treaties by the Russian authorities on August 8, 2023, with respect to certain payments including dividends.

The 2024 tax items that increased our 2024 diluted EPS by $0.03 per share in the table above were due to a U.S.

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

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 $0.83 from our operations in the table above was due primarily to the following segments:

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

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

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

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

• Net Revenues - Net revenues of $9.9 billion for the three months ended September 30, 2024, increased by $0.8 billion, or 8.4%, 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):

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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:

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

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

• Diluted Earnings Per Share - The changes in our reported diluted EPS for the three months ended September 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

For the three months ended September 30, 2023 $ 1.32

2023 Charges related to the war in Ukraine 0.01

2023 Fair value adjustment for equity security investments (0.03)

2023 Amortization of intangibles 0.10

2023 Impairment of goodwill and other intangibles 0.44

2023 Termination of agreement with Foundation for a Smoke-Free World 0.07

2023 Income tax impact associated with Swedish Match AB financing 0.09

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2024 Fair value adjustment for equity security investments 0.24

2024 Impairment related to Vectura Group's expected sale (0.13)

2024 Egypt sales tax charge (0.03)

2024 Income tax impact associated with Swedish Match AB financing 0.10

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Operations 0.22

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

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.

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 the three months ended September 30, 2024 $ 1.97 49.2 %

Charges related to the war in Ukraine – During the third quarter of 2023, we recorded a pre-tax charge of $19 million (representing $15 million net of income tax and a diluted EPS charge of $0.01 per share), related to circumstances driven by the war, including the cost of PMI’s humanitarian efforts.

Fair value adjustment for equity security investments – During the third quarter of 2023, we recorded a favorable fair value adjustment for our equity security investments in India and Sri Lanka of $51 million after tax (or $0.03 per share increase in diluted EPS).

During the third quarter of 2024, we recorded a favorable fair value adjustment for our equity security investments in India and Sri Lanka of $372 million after tax (or $0.24 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.

Amortization of intangibles – During the third quarter of 2023 and 2024, we recorded amortization of intangible expense of $205 million (representing $157 million net of income tax or $0.10 per share decrease in diluted EPS) and $256 million (representing $199 million net of income tax or $0.12 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.

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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.

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.

Under the terms of the Agreement, PMI paid $140 million in the third quarter of 2023 in return for the termination of the pledge agreement between the parties.

The pre-tax charge was recorded in marketing, administration and research costs in the condensed consolidated statements of earnings during the three months ended September 30, 2023.

For further details, see "Other Developments" within the Business Environment section of this MD&A.

Impairment related to Vectura Group's expected sale – In September 2024, we announced the execution of a definitive agreement to sell Vectura to Molex Asia Holdings Ltd.

As a result, we recorded in the third quarter of 2024 an impairment charge of $198 million (representing a diluted EPS charge of $0.13 per share) related to Vectura's classification as held for sale.

The impairment charge was recorded in marketing, administration and research costs in PMI’s condensed consolidated statements of earnings for the three months ended September 30, 2024, and was included in the Wellness and Healthcare segment results.

For further details, see Note 18.

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.

Acquisitions and Divestitures .

This pre-tax charge was recorded in marketing, administration and research costs in the condensed consolidated statement of earnings for the three months ended September 30, 2024, and was included in the SSEA, CIS & MEA segment results.

Income taxes – The Income tax impact associated with Swedish Match financing that decreased our 2023 diluted EPS by $0.09 per share and increased our 2024 diluted EPS by $0.10 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 increased our diluted EPS by $0.04 per share in the table above was primarily due to changes in earnings mix by taxing jurisdiction.

Currency – The unfavorable impact of $0.06 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.

dollar, especially against the Egyptian pound.

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

Interest – The favorable impact of $0.04 per share from interest in the table above was primarily due to a favorable mark-to-market adjustment related to derivative financial instruments.

Operations – The increase in diluted EPS of $0.22 from our operations in the table above was due primarily to the following segments:

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

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

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

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

Favorable pricing, partly offset by unfavorable volume/mix and higher marketing, administration and research 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 103 - 116 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 Six Months Ended June 30, For the Three Months Ended June 30,

(in millions) For the Nine Months Ended September 30, For the Three Months Ended September 30,

2024 2023 2024 2023

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PMI Net Revenues by Product Category

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

(in millions) For the Nine Months Ended September 30, For the Three Months Ended September 30,

2024 2023 Change 2024 2023 Change

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Total PMI net revenues $ 28,172 $ 26,127 7.8 % $ 9,911 $ 9,141 8.4 %

Sum of product categories or Regions might not foot to total PMI due to roundings.

Sum of product categories or Regions might not foot to total PMI due to rounding

Items affecting the comparability of results from operations were as follows:

• Egypt sales tax charge – In the third quarter of 2024, following a ruling issued by the Higher Administrative Court in Egypt and subsequent evaluation of available remedies, PMI concluded that an adverse outcome was probable and recorded a pre-tax charge of $45 million in relation to tax assessments for general sales tax deducted on imported cutfiller for the years 2014 to 2016.

This pre-tax charge was recorded in marketing, administration and research costs in the condensed consolidated statement of earnings for the nine months and three months ended September 30, 2024, and was included in the SSEA, CIS & MEA segment results.

• Impairment related to Vectura Group's expected sale – In September 2024, PMI announced the execution of a definitive agreement to sell Vectura to Molex Asia Holdings Ltd.

As a result, PMI recorded in the third quarter of 2024 an impairment charge of $198 million related to Vectura's classification as held for sale.

For further details, see Note 18.

Acquisitions and Divestitures .

• Asset impairment and exit costs – See Note 15.

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

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

• Impairment of goodwill and other intangibles – For the nine months ended September 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.

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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.

• Termination of agreement with Foundation for a Smoke-Free World – On September 29, 2023, PMI and the Foundation for a Smoke-Free World (the "Foundation") entered into the Final Grant Agreement and Termination of the Second Amended and Restated Pledge Agreement ("Agreement").

Under the terms of the agreement, PMI paid $140 million in the third quarter of 2023 in return for the termination of the pledge agreement between the parties.

As a result, in the third quarter of 2023, PMI recorded a pre-tax charge of $140 million commensurate with the early termination of the pledge agreement.

The pre-tax charge was recorded in marketing, administration and research costs in the consolidated statements of earnings for the nine months and three months ended September 30, 2023 and was included in the operating results of the following segments:

Europe ($60 million);

SSEA, CIS & MEA ($41 million);

EA, AU & PMI DF ($24 million);

and Americas ($15 million).

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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Consolidated Shipment Volume

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

For the Nine Months Ended September 30, For the Three Months Ended September 30,

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

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(2) Includes chew bags and tobacco bits

Sum may not foot due to roundings

Sum may not foot due to rounding

Following the deconsolidation of our Canadian subsidiary, we continue to report the volume and corresponding royalty revenues of brands sold by RBH for which other PMI subsidiaries are the trademark owners.

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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,

For the Nine Months Ended September 30,

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

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

For the Three Months Ended June 30,

Total Market is based on reported IMS

For the Three Months Ended September 30,

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

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(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.

Total Market is based on reported IMS

Consolidated Operating Results for the Nine Months Ended September 30, 2024

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

Estimated international industry volume (excluding China and the U.S.) for cigarettes and HTUs increased by 1.2%, reflecting an increase in the SSEA, CIS & MEA Region, partly offset by a decrease in the Americas Region, and broad stability in the EA, AU & PMI DF and Europe Regions, as described in the Regional sections of this MD&A.

For the full year 2024, we currently expect an estimated total international industry volume growth of up to 1% for cigarettes and HTUs, excluding China and the U.S.

Shipment Volume

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

Our total cigarette and HTU shipment volume increased by 2.7% (HTU shipments increased by 13.9%, while cigarette shipments were broadly stable).

Our total oral product shipment volume in cans increased by 28.9%, primarily reflecting growth in nicotine pouches.

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Adjusted in-market sales for HTUs increased by 12.6%, including growth in Japan of 13.4% and Europe of 9.2%.

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)

Six Months Year-to-Date

Nine Months Year-to-Date

2024 2023 Change (pp)

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(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

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

Financial Summary

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

Fav./(Unfav.) Variance

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(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 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.

(2) Cost/Other variance includes charges in 2024 of $168 million related to asset impairment and exit costs, $27 million related to impairment of other intangibles, $542 million related to amortization of intangibles, $198 million related to impairment of Vectura Group's expect sale and $45 million related to the Egypt sales tax charge, 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, $140 million related to the termination of a pledge agreement with the Foundation for a Smoke-Free World, $325 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 , Note 7.

Segment Reporting and Note 15.

Asset Impairment and Exit Costs .

Segment Reporting, Note 15.

Asset Impairment and Exit Costs and Note 18.

Acquisitions and Divestitures .

(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%.

For the nine months ended September 30, 2024, net revenues increased by 7.8%.

Net revenues, excluding currency and acquisitions, increased by 11.0%, mainly reflecting:

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

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.

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 (recognized as a reduction of net 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, Indonesian rupiah, Japanese yen and Russian ruble.

Net revenues include $10.8 billion in 2024 and $9.3 billion in 2023 related to smoke-free.

Operating income increased by 17.0%.

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).

Operating income, excluding currency and acquisitions, increased by 25.6%, mainly reflecting:

the same factors as for net revenues, 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 and the termination of a pledge agreement with the Foundation for a Smoke-Free World of $140 million.

The increase was partly offset by higher amortization of intangibles in 2024, higher asset impairment and exit costs in 2024, a charge of $198 million related to impairment of Vectura Group's expect sale in 2024 and the Egypt sales tax charge of $45 million in 2024, as well as higher marketing, administration and research costs (primarily due to inflationary impacts, notably related to wages, and higher commercial investments), and higher manufacturing costs (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.

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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.

Our effective tax rate increased by 3.4 percentage points to 24.2%.

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

Interest expense, net, of $817 million increased by $29 million or 3.7%.

Our effective tax rate decreased by 2.6 percentage points to 23.1%.

For further details, see Note 9.

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Significant judgment is required in determining income tax provisions and in evaluating tax positions.

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.

Income from equity investments and securities, net, increased by $721 million or over 100%, primarily driven by a favorable fair value adjustment for our equity security investments in India and Sri Lanka.

For further details, see Note 12.

Related Parties - Equity Investments and Other .

Net earnings attributable to PMI of $7.6 billion increased by $2.0 billion or 35.9%.

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%.

This increase was due primarily to higher operating income and higher income from equity investments and securities, as discussed above.

Basic and diluted EPS of $4.90 and $4.89 increased by 35.7% and 35.5%, respectively.

Excluding an unfavorable currency impact of $0.44, diluted EPS increased by 47.6%.

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.

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

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

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

During the quarter, estimated international industry volume (excluding China and the U.S.) for cigarettes and HTUs increased by 1.3%, reflecting increases in the SSEA, CIS & MEA and Europe Regions, partly offset by decreases in the EA, AU & PMI DF and Americas Regions, as described in the Regional sections of this MD&A.

Shipment Volume

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

Second-Quarter

Third-Quarter

2024 2023 Change (pp)

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(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

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

Financial Summary

Financial Summary - Quarters Ended June 30, Change

Quarters Ended September 30, Change

Fav./(Unfav.) Variance

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(2,891) (2,606) (10.9) % (15.1) % (285) 108 — — — (393)

Impairment of Goodwill (2)

— (665) +100% +100% 665 — — — — 665

Operating Income $ 3,654 $ 3,370 8.4 % 11.3 % $ 284 $ (118) $ 21 $ 689 $ 163 $ (471)

(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.

(1) Cost/Other variance includes charges in 2024 of $242 million related to amortization of intangibles, $198 million related to impairment of Vectura Group's expect sale and $45 million related to the Egypt sales tax charge, partly offset by charges in 2023 of $206 million related to amortization of intangibles and $140 million related to the termination of a pledge agreement with the Foundation for a Smoke-Free World.

For more details, see Note 7.

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 .

Segment Reporting and Note 18.

Acquisitions and Divestitures .

During the quarter, net revenues increased by 8.4%.

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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.

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

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

Net revenues include $3.8 billion in 2024 and $3.3 billion in 2023 related to smoke-free.

Operating income increased by 8.4%.

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 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%.

Operating income, excluding currency and acquisitions, increased by 11.3%, mainly reflecting:

the same factors as for net revenues, notwithstanding unfavorable cigarette mix, as well as a favorable comparison to 2023 reflecting the termination of a pledge agreement with the Foundation for a Smoke-Free World of $140 million.

The increase was partly offset by higher amortization of intangibles in 2024, a charge of $198 million related to impairment of Vectura Group's expect sale in 2024 and the Egypt sales tax charge of $45 million in 2024, as well as higher manufacturing costs, notably related to tobacco leaf, and higher marketing, administration and research costs.

Interest expense, net, of $189 million decreased by $72 million or 27.6%, primarily due to a favorable mark-to-market adjustment related to derivative financial instruments.

Our effective tax rate decreased by 11.9 percentage points to 21.3%.

The effective tax rate for the three months ended September 30, 2023 was unfavorably impacted by an increase in deferred tax liabilities related to the unremitted earnings of PMI's Russian subsidiaries ($173 million) and a deferred tax cost for unrealized foreign currency gains on intercompany loans related to the Swedish Match acquisition financing reflected in the condensed consolidated statements of earnings ($138 million).

For further details, see Note 9.

Income Taxes .

Income from equity investments and securities, net, increased by $399 million or over 100%, primarily driven by a favorable fair value adjustment for our equity security investments in India and Sri Lanka.

For further details, see Note 12.

Related Parties - Equity Investments and Other .

Net earnings attributable to PMI of $3.1 billion increased by $1.0 billion or 50.0%.

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

Basic and diluted EPS of $1.98 and $1.97 increased by 50.0% and 49.2%, respectively.

Excluding an unfavorable currency impact of $0.06, diluted EPS increased by 53.8%.

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• fiscal challenges, such as excessive excise tax increases and discriminatory tax structures;

• illicit trade in cigarettes and other tobacco and nicotine-containing products, including counterfeit, contraband and so-called “illicit whites”;

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

• illicit trade in cigarettes and other tobacco and nicotine-containing products, including counterfeit, contraband and other non-compliant or otherwise illicit products;

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

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

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The main objective of the FCTC is to establish a global agenda for tobacco regulation, with the purpose of reducing tobacco use.

To date, 182 countries and the European Union ("EU") are Parties to the FCTC.

countries and the European Union ("EU") are Parties to the FCTC.

The treaty requires Parties to have in place various tobacco control measures and recommends others.

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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We also support regulatory measures that help reduce illicit trade.

At the same time, we oppose excessive or prohibitive regulations that may prevent adult smokers, who would otherwise continue smoking, from accessing and switching to SFPs or trigger unintended consequences such as illicit trade.

Certain measures are discussed in more detail below and in the Smoke-Free Products (SFPs) section.

Fiscal Challenges:

Excessive and disruptive excise, sales and other tax increases and discriminatory tax structures are expected to continue to have an adverse impact on our profitability, due to lower consumption and consumer down-trading to non-premium, discount, other low-price or low-taxed combustible tobacco products such as fine cut tobacco and illicit cigarettes.

In addition, in certain jurisdictions, some of our combustible tobacco products are subject to tax structures that discriminate against premium-price products and manufactured cigarettes.

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Other jurisdictions have imposed, or are seeking to impose, levies or other taxes specifically on tobacco companies, such as taxes on revenues and/or profits.

World Customs Organization Developments :

In 2020, the World Customs Organization (the “WCO”) amended the Harmonized System ("HS") nomenclature to introduce dedicated custom codes for novel tobacco and nicotine products, including heated tobacco products, e-cigarettes and other nicotine-containing products.

The amendments became effective as of January 1, 2022.

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 ("TPD"):

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According to the updated Plan, the evaluation of the current TPD is expected to be finalized in 2024.

In May 2024, the EU-wide systems of traceability and security features for tobacco products were extended to include tobacco products other than cigarettes.

As such, all tobacco products are covered by the traceability system.

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.

The timeline for the revision has not been announced.

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The EU banned cigarettes and roll-your-own tobacco products with characterizing flavors.

Other tobacco products, including heated tobacco products, are currently exempted from this characterizing flavor ban.

However, on November 23, 2022, the EU Commission published a delegated directive that will eliminate this exemption.

All EU Member States are required to apply the delegated directive as of October 23, 2023, which bans the use of characterizing flavors in heated tobacco products, impacting a significant proportion of our SFP products currently sold in the EU.

Based on high consumer switching to non-flavored products in reaction to past bans on flavors in other categories and markets, we anticipate that, while short-term volatility is possible, including in year-end trade inventories, the ban’s impact on our shipment volumes in the EU will be relatively limited in the near term.

Our fundamental view remains that we do not expect a meaningful change in the structural growth of the category with consumers switching to non-flavored products partially mitigating the effect of the ban.

A majority of EU Member States have transposed this directive, or are in the final stages of transposing it, withdrawing the heated tobacco product exemption from the characterizing flavor ban into national law.

The remaining markets are expected to adopt this directive in 2024, and we will continue to actively monitor relevant developments in the EU market.

Other tobacco products, are currently exempted under EU TPD from this characterizing flavor ban.

This was also the case for heated tobacco products until November 23, 2022, when the EU Commission published a delegated directive that eliminates this exemption.

All EU Member States were required to apply the delegated directive as of October 23, 2023, which bans the use of characterizing flavors in heated tobacco products, impacting a significant proportion of our SFP products currently sold in the EU.

Currently a majority of EU Member States have transposed this directive, or are in the final stages of transposing it, withdrawing the heated tobacco product exemption from the characterizing flavor ban into national law.

Based on high consumer switching to non-flavored products in reaction to past bans on flavors in other categories and markets, we anticipated that, while short-term volatility would be possible, the ban’s impact on our shipment volumes in the EU would be relatively limited in the near term.

To date, our experience is consistent with this expectation.

There has been some short-term volatility in countries that have implemented the ban, but the impact has generally been limited in time and magnitude.

Nevertheless, it remains possible that the impact in countries that have yet to implement the ban could be more significant in duration or magnitude.

But our fundamental view remains that we do not expect a meaningful change in the structural growth of the category.

We will continue to actively monitor relevant developments in the EU market, including from an illicit trade standpoint.

Other countries may follow the EU’s approach toward tobacco product ingredients.

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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.

This ban will be limited to the jurisdiction of Belgium.

In March 2024, the EU Commission, in line with the procedure established by TPD, approved a decree banning disposable e-cigarettes, limited to the jurisdiction of Belgium.

Few other countries are also considering bans of disposable e-cigarettes.

Restrictions on Public Smoking and Use of Nicotine-Containing Products in Public:

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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.

In Mexico, since February 2020, the federal government has issued a series of decrees banning the importation and commercialization of HTPs, vaping devices and consumables.

In June 2022, the Senate approved an amendment to the Imports and Exports Tax Law, aligning its content with the existing bans.

Despite these restrictions, PMI has been able to import and commercialize SFPs in Mexico due to injunctive relief and favorable court decisions, including findings of unconstitutionality regarding the bans.

Specifically, in October 2021, the Mexican Supreme Court found that the interpretation of Article 16-VI of the tobacco control law, which was interpreted to restrict the commercialization of SFPs, was unconstitutional.

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;

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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.

We have filed an authorization request to commercialize IQOS in Taiwan 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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Travelers are also forbidden from bringing ESDs into the country.

On August 28, 2024, the Ministry of Health in Canada approved a ban on all flavors of nicotine pouches except mint and menthol.

They also imposed new restrictions on where nicotine pouches can be sold, allowing sales only behind pharmacy counters by pharmacists (no prescription required).

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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Illicit Trade:

Illicit tobacco trade creates a cheap and unregulated supply of tobacco products, undermines efforts to reduce smoking prevalence, especially among youth, damages legitimate businesses and intellectual property rights, stimulates organized crime, increases corruption and reduces government tax revenue.

Illicit trade creates a cheap and unregulated supply of tobacco and nicotine-containing products, undermines efforts to reduce smoking prevalence, especially among youth, damages legitimate businesses and intellectual property rights, stimulates organized crime, increases corruption and reduces government tax revenue.

We generally estimate that, excluding China and the U.S., illicit trade may account for as much as 14% of global cigarette consumption;

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Currently, we estimate that illicit trade in the EU accounted for approximately 8% of total cigarette consumption in 2023.

Illicit trade also increasingly targets SFPs.

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

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

Where effective and appropriate, we pursue legal remedies to protect our intellectual property rights from counterfeiting or to counter the illicit diversion of our products.

We also cooperate with governmental authorities to combat fraudulent imports of non-compliant or unauthorized tobacco and nicotine-containing products.

As an example, the recent commercial success of the nicotine pouch category makes it more prone to be affected by illicit trade.

Our ongoing anti-illicit initiatives for nicotine pouches include PMI’s ‘know-your-customer’ and ‘anti-diversion’ governance

and other measures, such as volume monitoring, tracking and tracing, product security, as well as internal and external awareness training and communications.

We are also expanding our market monitoring -both online and offline- and illicit trade research program to nicotine pouches.

PMI affiliates and Swedish Match affiliates, are taking appropriate actions to address the illicit resale of certain of our oral products including nicotine pouches outside their initial intended market of retail, such as Scandinavia, the U.S.

and other markets.

Such actions include awareness communications to trade partners, cease-and-desist letters to those involved in illicit trade of products bearing our brands and limiting and/or terminating sales to certain customers in both the online and traditional trade.

A number of jurisdictions are considering actions to prevent illicit trade.

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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.

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, 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 with, 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.

The tracking and tracing regulations for cigarettes and roll-your-own products manufactured or destined for the EU were extended to include tobacco products other than cigarettes, including some of our SFPs, as of May 20, 2024.

Smoke-Free Products (SFPs)

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Our SFP Platforms:

Our product development is based on the elimination of combustion via tobacco heating and other innovative systems, as well as through oral tobacco and nicotine products, which we believe are the most promising path to providing a better consumer choice for those who would otherwise continue to smoke cigarettes.

Our product development is based on the elimination of combustion via tobacco heating and other innovative systems, as well as through oral tobacco and nicotine products, which we believe are the most promising paths to providing a better consumer choice for those who would otherwise continue to smoke cigarettes.

We recognize that no single product will appeal to all adult smokers.

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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.

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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.

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 by IQOS brand.

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

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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.

In the first quarter of 2023, we initiated a project to fully outsource and restructure the manufacturing of e-vapor devices and consumables.

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

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.

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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.

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.

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

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.

The pouches contain pharmaceutical-grade tobacco-derived 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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Since then, we have continuously expanded our commercialization activities.

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.

As of September 30, 2024, PMI's smoke-free products were available for sale in 92 markets.

Data show 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.

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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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SFP Regulation and Taxation:

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 with respect to tobacco and other nicotine-containing products.

SFPs contain nicotine and are addictive and not risk-free.

nicotine-containing products.

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

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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.

We submitted these applications at the same time in order to allow the FDA to evaluate the PMTAs and MRTPAs concurrently.

We submitted these applications at the same time in order for the FDA to evaluate the PMTAs and MRTPAs concurrently.

In March 2024, the FDA formally accepted our bundled PMTAs and MRTPAs.

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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.

Public comments on these applications were due by August 14, 2024, and comments are no longer being accepted by the FDA.

The FDA did not issue a decision on the MRTP renewal applications prior to the stated October 22, 2024 expiration date of the original modified risk 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 risk claim with respect to those products that received modified risk orders until the FDA decides on the MRTP renewal applications.

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

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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.

In April 2024, we submitted MRTPAs for ZYN products currently marketed in the U.S.

and requested authorization of the modified risk claim.

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

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

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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.

We believe that many of those restrictions on FDA-authorized products are unlikely to advance public health and instead are likely to 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.

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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.

to remove the Surgeon General’s health warning for carbon monoxide from its packaging and advertising, and to use a nicotine addiction health warning instead.

Philip Morris Products S.A.

is committed to providing adult consumers with complete, accurate, and non-misleading information about possible health risks associated with its products.

This approach would be consistent with the original marketing order granted for Heatsticks where the FDA required us to remove the Surgeon General’s health warning for carbon monoxide from our packaging and advertising, and to use a nicotine addiction health warning instead.

We are committed to providing adult consumers with complete, accurate, and non-misleading information about possible health risks associated with our products.

We shared our views with the FDA on the application of the new warnings to our HTPs.

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Proceedings remain ongoing.

Philip Morris Products S.A.

is not a party to this litigation.

We are not a party to this litigation.

On March 8, 2023, the FDA proposed new requirements for tobacco product manufacturers regarding the manufacture, design, packing and storage of their products.

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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, 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.

These standards are mandatory in Armenia, Bahrain, Egypt, Jordan, Lebanon, 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.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.

These standards are mandatory in Armenia, Bahrain, China, Egypt, Jordan, New Zealand, the Philippines, Russia, 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.

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Norway partially transposed the EU TPD under the European Free Trade Association agreement and introduced an authorization system for novel tobacco products following Article 19 of TPD.

To date, Norway has not granted authorization of any novel tobacco product, and e-cigarettes and tobacco free nicotine pouches have not been granted access, either.

On October 31, 2019, our Australian subsidiary, Philip Morris Limited (“PML”), submitted an application to the Scheduling Committee of the Therapeutic Goods Administration of Australia (“TGA”) seeking to exempt HTPs from being prohibited in Australia.

In August 2020, the TGA issued its decision denying the application and stating that the application did not present compelling evidence to establish a public health benefit from greater access to nicotine in HTPs.

To date, Norway has not granted authorization of any novel tobacco product, including e-cigarettes and tobacco free nicotine pouches.

To date, several governmental agencies have published their scientific findings that analyze the harm-reduction potential of certain SFPs versus continuing to smoke cigarettes, including:

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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.

As part of its sales and supply chain review, SMNA has discontinued sales through the e-commerce shop associated with ZYN.com and direct sales to dedicated online retailers in the United States indefinitely.

e-commerce has represented a small fraction of sales of SMNA in the United States, and the current network of approximately 170,000 brick-and-mortar retailers will remain SMNA’s focus.

Our SFP Business Development Initiatives:

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Financial Statements— Note 18.

Contingencies and Note 18.

Acquisitions to our condensed consolidated financial statements in this report.

Acquisitions and Divestitures 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.

On January 30, 2023, we announced a renewal and extension of this arrangement.

For more information, see Acquisitions and Other Business Arrangements below.

For more information, see Acquisitions, Divestitures and Other Business Arrangements below.

Other Developments:

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

As of September 30, 2024, our Ukrainian operations had approximately $0.6 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 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.

As of September 30, 2024, our Russian operations had approximately $2.9 billion in total assets, excluding intercompany balances, of which approximately $1.0 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), pursuant to Dutch law, 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.

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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 half of 2024, including:

Like many other global companies, we have experienced inflationary pressures in 2022, 2023 and the first nine months 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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This impact of currency fluctuations could negatively impact our financial condition and results of operations.

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.

For the nine months ended September 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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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

We discuss our acquisitions in Note 18.

Acquisitions to our condensed consolidated financial statements.

Acquisitions, Divestitures and Other Business Arrangements

We discuss our acquisitions and divestitures in Note 18.

Acquisitions and Divestitures to our condensed consolidated financial statements.

On January 30, 2023, PMI announced a long-term collaboration with KT&G, South Korea’s leading tobacco and nicotine manufacturer, to continue to commercialize KT&G’s innovative smoke-free devices and consumables on an exclusive, worldwide basis (excluding South Korea).

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PMI and KT&G will seek any necessary regulatory approvals that may be required on a market-by-market basis.

On July 30, 2024, PMI announced a memorandum of understanding with KT&G.

This non-binding memorandum establishes the parties’ intent to collaborate on regulatory submissions for those new KT&G heat-not-burn products that PMI selects to commercialize in the U.S.

KT&G’s new platform products are expected to be launched first outside the U.S.

Thereafter, the partners plan to work on a PMTA submission for review by the U.S.

FDA, in accordance with the memorandum.

Equity Investments

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Following the start of the conflict in Ukraine on February 24, 2022, the U.S., the EU, the U.K., Switzerland, Canada, Australia, New Zealand, Singapore, South Korea, Japan and other countries introduced extensive economic sanctions and export controls in relation to Russia.

While the introduced sanctions slightly vary from jurisdiction to jurisdiction, they are largely aligned.

While the introduced sanctions vary from jurisdiction to jurisdiction, they are largely aligned.

The restrictions target, among others, the Russian financial, banking, oil, military, aviation and marine sectors.

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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 September 30, 2024.

banned the export of electronic cigarettes and similar personal electric vaporizing devices, including IQOS devices.

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

technology consultancy services, accounting and business and management consulting services, or require licenses to continue delivering these services to Russian persons or entities.

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 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.

Segment Operating Results – Three Months and Nine Months Ended September 30, 2024

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

Financial Summary

Financial Summary - Quarters Ended June 30, Change

Quarters Ended September 30, Change

Fav./(Unfav.) Variance

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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.

and favorable volume/mix, primarily driven by higher HTU volume, partly offset by adverse cigarette mix.

Operating income increased by 17.6%.

Operating income, excluding currency and acquisitions, increased by 15.5%, 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

the same factors as for net revenues, as well as a favorable comparison to 2023 reflecting the 2023 charge related to the termination of a pledge agreement with the Foundation for a Smoke-Free World of $60 million;

partly offset by higher marketing, administration and research costs.

Financial Summary

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

Fav./(Unfav.) Variance

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Operating Income $ 5,136 $ 4,551 12.9 % 12.7 % $ 585 $ 6 $ — $ 596 $ 113 $ (130)

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

For the nine months ended September 30, 2024, net revenues increased by 8.0%.

Net revenues, excluding currency and acquisitions, increased by 7.7%, 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.

The pricing variance for the full year 2023 and the first nine 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.

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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.

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.

PMI currently accounts for the surcharge as a reduction in net revenues and in accrued liabilities in its results, with amounts withdrawn before May 15, 2024, currently under a payment suspension.

The accrued liability balance of $0.8 billion (excluding interest), existing as of September 30, 2024, 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.

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Operating income, excluding currency and acquisitions, increased by 12.7%, 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;

a favorable comparison to 2023 reflecting the 2023 charge related to the termination of a pledge agreement with the Foundation for a Smoke-Free World of $60 million and $47 million related to asset impairment and exit costs in 2023, as well as 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;

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

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

In the third quarter, the estimated total market for cigarettes and HTUs in the Region increased by 1.8% to 148.6 billion units, reflecting a 0.6% increase for cigarettes and continued HTU growth.

The increase in the estimated total market was predominantly due to Ukraine (up by 9.4%), Italy (up by 3.5%) and Spain (up by 3.8%), partly offset by France (down by 10.9%), the Netherlands (down by 25.6%), and Belgium (down by 16.2%).

For the nine months year-to-date, the estimated total market for cigarettes and HTUs in the Region was broadly stable, reflecting a 1.5% decrease for cigarettes, largely offset by an increase for HTUs.

The decrease in the estimated total market was predominantly due to France (down by 12.8%), the United Kingdom (down by 11.0%), and the Netherlands (down by 18.7%), partly offset by Bulgaria (up by 7.9%), Greece (up by 8.2%), and Poland (up by 1.9%).

Europe Key Data Third-Quarter Nine Months Year-to-Date

Change Change

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Total Europe 39.6 % 39.1 % 0.5 39.8 % 39.1 % 0.7

Sum may not foot due to roundings.

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 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.

Sum may not foot due to rounding.

In the third quarter, our total cigarette and HTU shipment volume in the Region increased by 2.5% to 57.9 billion units.

Total cigarette and HTU shipment volume increased notably in Ukraine (up by 12.3%) and Poland (up by 5.7%), and decreased notably in Belgium (down by 25.8%), as well as the Netherlands (down by 24.9%).

Our estimated HTU adjusted in-market sales volume in the Region increased by 11.3% in the quarter, reflecting continued growth momentum for IQOS .

In the third quarter, our HTU share of the total cigarette and HTU market in the Region increased by 0.8 pp on an adjusted basis.

For the nine months year-to-date, our total cigarette and HTU shipment volume in the Region increased by 1.0% to 162.8 billion units.

Total cigarette and HTU shipment volume increased notably in Poland (up by 7.1%) and Ukraine (up by 8.7%), and decreased notably in France (down by 18.4%), as well as the Netherlands (down by 18.2%).

For the nine months year-to-date, our estimated HTU adjusted in-market sales volume in the Region increased by 9.2%, reflecting continued growth momentum for IQOS , partly offset by the impact from the EU characterizing flavor ban.

For the nine months year-to-date, our HTU share of the total cigarette and HTU market in the Region increased by 0.9 pp on an adjusted basis.

Other Oral SFP includes chew bags and tobacco bits

Sum may not foot due to roundings.

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%).

Sum may not foot due to rounding.

In the third quarter, oral SFP shipments increased by 4.2%, primarily driven by nicotine pouches (up by 23.5%).

For the nine months year-to-date, oral SFP shipments increased by 6.0%, driven by growth of nicotine pouches (up by 34.4%).

SSEA, CIS & MEA:

Financial Summary

Financial Summary - Quarters Ended June 30, Change

Quarters Ended September 30, Change

Fav./(Unfav.) Variance

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Net revenues, excluding currency and acquisitions, increased by 12.1%, 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.

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

and favorable volume/mix, driven by HTU performance.

Operating income increased by 16.6%.

Operating income, excluding currency and acquisitions, increased by 29.8%, primarily reflecting:

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

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

partly offset by higher manufacturing costs (primarily due to higher cost of tobacco leaf) and the Egypt sales tax charge of $45 million in 2024.

Financial Summary

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

Fav./(Unfav.) Variance

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Operating Income $ 2,623 $ 2,437 7.6 % 30.9 % $ 186 $ (600) $ 33 $ 680 $ 117 $ (44)

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

For the nine months ended September 30, 2024, net revenues increased by 5.9%.

Net revenues, excluding currency and acquisitions, increased by 13.4%, 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.

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

favorable volume/mix, driven by higher cigarette and HTU volume, as well as favorable mix, and a favorable comparison to 2023 due to the charge of $80 million following the termination of a distribution arrangement in the Middle East (recognized as a reduction of net revenues in 2023).

Operating income increased by 7.6%.

Operating income, excluding currency and acquisitions, increased by 30.9%, 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).

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

favorable volume/mix, driven by higher cigarette and HTU volume, notwithstanding unfavorable cigarette mix, a favorable comparison to 2023 reflecting a 2023 charge of $80 million following the termination of a distribution arrangement in the Middle East, a 2023 charge related to the termination of a pledge agreement with the Foundation for a Smoke-Free World of $41 million and $32 million related to asset impairment and exit costs in 2023.

These increases were partly offset by higher manufacturing costs (primarily due to higher cost of tobacco leaf), and the Egypt sales tax charge of $45 million in 2024.

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

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%).

In the third quarter, the estimated total market for cigarettes and HTUs in the Region increased by 2.0% to 399.4 billion units.

The increase in the estimated total market was mainly due to Egypt (up by 32.4%), Russia (up by 8.3%), and Turkey (up by 9.4%), partly offset by Bangladesh (down by 30.8%), Indonesia (down by 3.3%), and Thailand (down by 17.0%).

For the nine months year-to-date, the estimated total market for cigarettes and HTUs in the Region increased by 2.4% to 1,167.0 billion units.

The increase in the estimated total market was mainly due to Turkey (up by 10.4%), Russia (up by 6.4%), and Egypt (up by 9.4%), partly offset by Bangladesh (down by 4.9%), Thailand (down by 15.4%), and the Philippines (down by 5.4%).

In the third quarter, our total cigarette and HTU shipment volume in the Region increased by 3.2% to 98.6 billion units, mainly driven by Turkey (up by 13.1%), partly offset by Indonesia (down by 8.9%).

Our estimated HTU adjusted in-market sales volume increased by 20.9%, with 17.1% 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%).

For the nine months year-to-date, our total cigarette and HTU shipment volume in the Region increased by 4.3% to 279.2 billion units, mainly driven by Turkey (up by 14.9%), partly offset by Indonesia (down by 4.6%).

Our estimated HTU adjusted in-market sales volume increased by 15.5%, with 15.8% HTU shipment volume growth.

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Financial Summary

Financial Summary - Quarters Ended June 30, Change

Quarters Ended September 30, Change

Fav./(Unfav.) Variance

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Operating Income $ 788 $ 769 2.5 % 7.8 % $ 19 $ (41) $ — $ 71 $ (21) $ 10

During the quarter, net revenues decreased by 0.4%.

During the quarter, net revenues increased by 2.0%.

Net revenues, excluding currency and acquisitions, increased by 7.4%, reflecting:

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Operating income increased by 2.5%.

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

Operating income, excluding currency and acquisitions, increased by 7.8%, primarily reflecting:

a favorable pricing variance and a favorable comparison to 2023 for a 2023 charge related to the termination of a pledge agreement with the Foundation for a Smoke-Free World of $24 million.

This increase was partly offset by unfavorable volume/mix, driven by cigarettes, and higher marketing, administration and research costs.

Financial Summary

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

Fav./(Unfav.) Variance

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Operating Income $ 2,304 $ 1,963 17.4 % 30.5 % $ 341 $ (257) $ — $ 289 $ 53 $ 256

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

For the nine months ended September 30, 2024, net revenues increased by 3.9%.

Net revenues, excluding currency and acquisitions, increased by 10.5%, reflecting:

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

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%).

In the third quarter, the estimated total market for cigarettes and HTUs in the Region, excluding China, decreased by 1.4% to 82.2 billion units, with a decrease in cigarettes, partly offset by HTU growth.

The decrease in the estimated total market was mainly driven by Taiwan (down by 10.0%) and Korea (down by 3.2%), partly offset by International Duty Free (up by 7.2%) and Japan (up by 0.9%).

For the nine months year-to-date, the estimated total market for cigarettes and HTUs in the Region, excluding China was broadly stable, with a decrease in cigarettes, largely offset by HTU growth.

The decrease in the estimated total market was mainly driven by Australia (down by 29.0%) and Korea (down by 2.5%), partly offset by International Duty Free (up by 10.9%) and Japan (up by 1.0%).

In the third quarter, our total cigarette and HTU shipment volume in the Region increased by 2.4% to 26.7 billion units, driven by Japan (up by 1.5%), partly offset by Australia (down by 30.0%).

Our estimated HTU adjusted in-market sales volume in the Region increased by 15.5% in the quarter, including growth in Japan of 14.3%.

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%.

For the nine months year-to-date, our total cigarette and HTU shipment volume in the Region increased by 4.1% to 81.2 billion units, driven by Japan (up by 8.9%), partly offset by Australia (down by 28.2%).

For the nine months year-to-date, our estimated HTU adjusted in-market sales volume in the Region increased by 14.7%, including growth in Japan of 13.4%.

Financial Summary

Financial Summary - Quarters Ended June 30, Change

Quarters Ended September 30, Change

Fav./(Unfav.) Variance

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Net revenues, excluding currency and acquisitions, increased by 30.5%, 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 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

a favorable pricing variance and favorable volume/mix, both predominantly driven by nicotine pouches in the U.S., partly offset by lower cigarette volume and unfavorable cigarette mix outside of the U.S.

Operating income increased by 39.8%.

Operating income, excluding currency and acquisitions, increased by 20.4%, mainly reflecting:

favorable volume/mix and price variance, mainly due to the same factors as for net revenues;

partly offset by higher marketing, administration and research costs, including incremental investment in the U.S., as well as higher amortization of intangibles in 2024.

Financial Summary

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

Fav./(Unfav.) Variance

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Operating Income $ 419 $ 524 (20.0) % (34.5) % $ (105) $ 76 $ — $ 146 $ 333 $ (660)

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

For the nine months ended September 30, 2024, net revenues increased by 19.8%.

Net revenues, excluding currency and acquisitions, increased by 18.7%, primarily reflecting:

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Operating income, excluding currency and acquisitions, decreased by 34.5%, 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 favorable volume/mix, mainly due to the same factors as for net revenues;

and favorable cigarette pricing.

higher marketing, administration and research costs, including incremental investment in the U.S, higher asset impairment and exit costs and higher amortization of intangibles, partly offset by favorable price variance and favorable volume/mix, mainly due to the same factors as for net revenues.

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

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.

In the third quarter, the estimated total market for cigarettes and HTUs in the Region, excluding the U.S., decreased by 0.7% to 46.5 billion units, primarily reflecting a decline in the cigarette market.

The decrease in the estimated total market was mainly due to Canada (down by 15.4%) and Mexico (down by 5.8%), partly offset by Brazil (up by 12.3%).

For the nine months year-to-date, the estimated total market for cigarettes and HTUs in the Region, excluding the U.S., decreased by 2.1% to 136.1 billion units, primarily reflecting a decline for cigarettes.

The decrease in the estimated total market was mainly due to Argentina (down by 11.5%) and Canada (down by 13.1%), partly offset by Brazil (up by 8.5%).

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.

In the third quarter, our total cigarette and HTU shipment volume in the Region decreased by 1.1% to 15.4 billion units, mainly due to Mexico (down by 5.9% ) and Argentina (down by 4.3%), partly offset by Brazil (up by 13.6%).

For the nine months year-to-date, our total cigarette and HTU shipment volume in the Region decreased by 2.8% to 44.9 billion units, mainly due to Argentina (down by 11.6%), partly offset by Brazil (up by 10.8%).

For the nine months year-to-date, our cigar shipment volume decreased by 14.6%, predominantly due 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.

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.

Volumes of other oral SFP introduced in Q3 2024 are not material.

Sum may not foot due to rounding.

In the third quarter, oral products shipments increased by 32.3%, predominantly driven by ZYN nicotine pouches in the U.S.

For the nine months year-to-date, oral products shipments increased by 39.3%, predominantly driven by ZYN nicotine pouches in the U.S.

Wellness and Healthcare:

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Financial Summary

Financial Summary - Quarters Ended June 30, Change

Quarters Ended September 30, Change

Fav./(Unfav.) Variance

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During the quarter, net revenues increased by 1.3%.

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

Net revenues, excluding currency and acquisitions, increased by 2.7%.

The operating loss of $251 million in 2024 was primarily due to a charge of $198 million related to the impairment of Vectura Group's expected sale in 2024, as well as research and development, and administration costs.

For further details, see Note 18.

Acquisitions and Divestitures.

Financial Summary

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

Fav./(Unfav.) Variance

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Operating Income / (Loss) $ (339) $ (808) 58.0 % 58.3 % $ 469 $ (2) $ — $ 10 $ — $ 461

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

For the nine months ended September 30, 2024, net revenues increased by 3.8%.

Net revenues, excluding currency and acquisitions, increased by 3.4%.

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 .

The operating loss of $339 million in 2024 was primarily due to a charge of $198 million related to the impairment of Vectura Group's expected sale in 2024, as well as 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, see Note 4.

Goodwill and Other Intangible Assets, net and Note 18.

Acquisitions and Divestitures.

Financial Review

Cash Flow Highlights

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

(in millions) 2024 2023

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Net Cash Provided by (Used in) Operating Activities

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.

During the first nine months of 2024, net cash provided by operating activities was $8.2 billion as compared to $5.9 billion in the first nine months of 2023.

Excluding unfavorable currency movements of $1.1 billion, the favorable variance of $3.4 billion was due primarily to lower working capital requirements of $1.5 billion and higher currency-neutral net earnings, excluding non-cash depreciation and amortization expense and impairment charges of goodwill and other intangibles, as well as impairment related to Vectura Group's expected sale.

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 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 lower working capital requirements in 2024 as compared with 2023 were primarily due to more cash provided by inventories, coupled with less cash used in accrued liabilities and other current assets, 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.

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Net Cash Provided by (Used in) Investing Activities

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

During the first nine months of 2024, net cash used in investing activities was $1.5 billion as compared to $3.0 billion in the first nine months of 2023.

This decrease in net cash used was primarily due to the remaining cash payment (including interest) to Altria Group, Inc.

in July 2023 of $1.8 billion for PMI to reacquire the IQOS commercialization rights in the U.S., partially offset by higher capital expenditures.

Capital expenditures of $1.2 billion during the first nine months of 2024 increased by $0.2 billion as compared with the first nine 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 $1.3 billion to $1.4 billion, including further investments in ZYN capacity in the U.S.

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

Net Cash Provided by (Used in) Financing Activities

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).

During the first nine months of 2024, net cash used in financing activities was $5.4 billion as compared to $2.7 billion in the first nine 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 higher repayments on 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.

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Our cash and cash equivalents are predominantly held with institutions that have investment-grade long-term credit rating.

In a number of jurisdictions, including Argentina, Egypt and Russia, we are impacted by various capital controls and/or foreign currency exchange constraints that affect the ability of our subsidiaries in these jurisdictions to settle foreign currency denominated imports of goods and services and/or to pay dividends.

In a number of jurisdictions, including Argentina and Russia, we are impacted by various capital controls and/or foreign currency exchange constraints that affect the ability of our subsidiaries in these jurisdictions to settle foreign currency denominated imports of goods and services and/or to pay dividends.

These factors increase foreign currency devaluation risks, which may have a negative impact on our financial condition, net assets and results of operations in these jurisdictions.

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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 June 30, 2024, our credit ratings and outlook by major credit rating agencies were as follows:

At September 30, 2024, our credit ratings and outlook by major credit rating agencies were as follows:

Short-term Long-term Outlook

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Revolving Credit Facilities

At June 30, 2024, our committed revolving credit facilities were as follows:

At September 30, 2024, our committed revolving credit facilities were as follows:

Type (in billions) Committed

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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 June 30, 2024, there were no borrowings under the committed revolving credit facilities, and the entire committed amounts were available for borrowing.

At September 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 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.

These credit arrangements amounted to approximately $2.2 billion at September 30, 2024, and approximately $2.7 billion at December 31, 2023.

Borrowings under these arrangements and other bank loans amounted to $152 million at September 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 June 30, 2024 and December 31, 2023, the €5.5 billion (approximately $6 billion) term loan facility was fully drawn and remained outstanding.

As of September 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 June 30, 2024, we had no commercial paper outstanding.

At September 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 six months of 2024 was $1.9 billion.

The average commercial paper balance outstanding during the first nine months of 2024 was $1.5 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 $49.1 billion at June 30, 2024 and $47.9 billion at December 31, 2023.

Debt – Our total debt was $49.2 billion at September 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 six months of 2024 were as follows:

PMI's debt issuances in the first nine months of 2024 were as follows:

(in millions)

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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 June 30, 2024, we have guarantees of our own performance, which are primarily related to excise taxes on the shipment of our products.

Guarantees – At September 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.

These guarantees have not had, and are not expected to have, a significant impact on PMI’s liquidity.

In August 2024, PMI entered into a guarantee agreement for an equity investee.

For further details, see Note 12.

Related Parties – Equity Investments and Other .

Swedish Match Notes Consent Solicitation and PMI Guarantee

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Equity and Dividends

We discuss our stock awards as of June 30, 2024 in Note 2.

We discuss our stock awards as of September 30, 2024 in Note 2.

Stock Plans to our condensed consolidated financial statements.

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Our three-year share repurchase program expired on July 21, 2024.

Dividends paid in the first six months of 2024 were $4.1 billion.

Dividends paid in the first nine months of 2024 were $6.1 billion.

During the third quarter of 2024, our Board of Directors approved a 3.8% increase in the quarterly dividend to $1.35 per common share.

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We also submitted additional premarket tobacco applications for other ZYN products after the deadline, and we are unable to market these products until the FDA authorizes such applications.

In April 2024, we submitted MRTPAs for ZYN products currently marketed in the U.S.

and requested authorization of the modified risk claim.

There is no guarantee that the ZYN products will receive the necessary authorizations from the FDA or that the FDA will allow us to continue to sell the ZYN products currently in the market, pending its review of the applications.

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Our SFPs are novel products in a relatively new category, and the pace at which adult smokers adopt them may vary, depending on the competitive, regulatory, fiscal and cultural environment, and other factors in a specific market.

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.

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.

We may be unsuccessful in our efforts to differentiate smoke-free products and cigarettes with respect to taxation.

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Furthermore, our volume and profitability may be adversely affected in these markets.

In addition, increases in cigarette taxes are expected to continue to have an adverse impact on our sales of cigarettes, due to resulting lower consumption levels, a shift in sales from manufactured cigarettes to other combustible tobacco products and from the premium-price to the mid-price or low-price cigarette categories, where we may be under-represented, from local sales to cross-border purchases of lower price products, or to illicit products such as contraband, counterfeit and "illicit whites."

Each of these risks could have a material adverse effect on our business, operations, results of operations, revenues, cash flow and profitability.

Our business faces significant governmental action aimed at increasing regulatory requirements with the goal of reducing or preventing the use of tobacco or nicotine-containing products.

Governmental actions, combined with the diminishing social acceptance of smoking and private actions to restrict smoking, have resulted in reduced industry volumes for our products in many of our markets, and we expect that such factors will continue to reduce consumption levels and will increase down-trading and the risk of counterfeiting, contraband, "illicit whites" and cross-border purchases.

Significant regulatory developments will continue to take place over the next few years in most of our markets, driven principally by the Framework Convention on Tobacco Control (the "FCTC").

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We currently generate significant cash flows from ongoing operations and have access to global credit markets through our various short- and long- term financing activities.

Our financial performance, credit ratings, interest rates, the stability of

financial institutions with which we partner, geopolitical or national developments, the stability and liquidity of the credit markets and the state of the global economy could affect the availability and cost of financing.

Our financial performance, credit ratings, interest rates, the stability of financial institutions with which we partner, geopolitical or national developments, the stability and liquidity of the credit markets and the state of the global economy could affect the availability and cost of financing.

Disruption in the credit markets, limitations on our ability to borrow, slower than anticipated debt deleveraging, or a downgrade of our current credit rating could increase our future borrowing costs which could materially and adversely affect our financial condition and results of operations.

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We may be required to write down assets due to impairment, which could have a material adverse effect on our results of operations or financial position.

We continuously monitor the values of our long-lived assets, reporting units, intangible assets, as well as investments in equity securities, including our continuing investment in Rothmans, Benson & Hedges ("RBH"), to determine whether events or changes in circumstances indicate that an impairment exists.

We continuously monitor the values of our long-lived assets, reporting units, intangible assets, as well as investments in equity securities, to determine whether events or changes in circumstances indicate that an impairment exists.

In particular, developments in connection with the resolution of Canadian tobacco claims and related litigation could have a material adverse impact on the fair value of PMI’s continuing investment in Rothmans, Benson & Hedges ("RBH") and may result in non-cash impairment charges, which could be material to PMI.

Related Parties - Equity Investments and Other for additional information concerning the risk of impairment to our RBH investment and our other equity securities and investments.

Additionally, we test goodwill and non-amortizable intangible assets for impairment annually.

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or nationalization of foreign businesses or assets (including cash reserves held in Russia and intangible assets such as trademarks), is impossible to predict.

We are continuously assessing the evolving situation in Russia, including regulatory constraints in the market entailing very complex terms and conditions that must be met for any divestment transaction to be granted approval by the authorities, and restrictions resulting from international regulations.

We are continuously assessing the evolving situation in Russia, including regulatory constraints in the market entailing very

complex terms and conditions that must be met for any divestment transaction to be granted approval by the authorities, and restrictions resulting from international regulations.

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

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While we seek to mitigate our business risks associated with environmental issues, such as climate change, by establishing environmental goals and standards and seeking business partners, including within our supply chain, that are committed to operating in ways that protect the environment or mitigate environmental impacts, we recognize that there are inherent environmental-related risks, including climate change-related risks, wherever business is conducted.

Among other potential impacts, climate change could influence the quality and volume of the agricultural products we rely on, including tobacco, due to several factors beyond our control, including more frequent variations in weather patterns, extreme weather events causing unexpected downtime and inventory losses, other adverse weather conditions, and governmental restrictions on trade, all of which may lead to disruption of operations at factories, warehouses and other premises.

exacerbated by climate change, may negatively impact the resilience of, or otherwise disrupt, our business operations or those of our suppliers and business partners.

Among other potential

impacts, climate change could influence the quality and volume of the agricultural products we rely on, including tobacco, due to several factors beyond our control, including more frequent variations in weather patterns, extreme weather events causing unexpected downtime and inventory losses, other adverse weather conditions, and governmental restrictions on trade, all of which may lead to disruption of operations at factories, warehouses and other premises.

Furthermore, nature-related risks, including those related to natural ecosystems degradation, decreased agricultural productivity in certain regions of the world, biodiversity loss, water resource depletion and deforestation, which are partially driven or exacerbated by climate change, may negatively impact the resilience of, or otherwise disrupt, our business operations or those of our suppliers and business partners.

There is an increased focus by foreign, federal, state and local regulatory and legislative bodies on environmental policies, including those relating to climate change.

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A sustained period of elevated inflation across the markets in which we operate could result in higher operating and financing costs and lead to reduced demand for our products.

Increasing inflationary pressures has and may continue to result in significant increases to our expenses, including direct materials, wages, energy, and transportation costs.

Increasing inflationary pressures have and may continue to result in significant increases to our expenses, including direct materials, wages, energy, and transportation costs.

While we take actions, wherever possible, to reduce the impact of the effects of inflation, in cases of sustained and elevated inflation across several of our major markets, it may be difficult to effectively control the increases to our costs.

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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 or distribution, 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.

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.

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Any such claims, regardless of merit, could divert management’s attention, be costly, disruptive, time-consuming and unpredictable and expose us to significant litigation costs and damages, and may impede our ability to develop, manufacture and/or commercialize new or existing SFPs and improve our products, and thus have a material adverse effect on our revenue and our profitability.

In addition, if, as a result, we are unable to manufacture or sell our SFPs or improve their quality in one or more markets, our ability to convert adult smokers to our SFPs in such markets would be adversely affected.

In addition, if, as a result, we are unable to manufacture or

sell our SFPs or improve their quality in one or more markets, our ability to convert adult smokers to our SFPs in such markets would be adversely affected.

Contingencies— Other Litigation to our condensed consolidated financial statements for a description of certain intellectual property proceedings.

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higher absolute prices and larger gaps between retail price categories;

unfair competition;

and product regulation that diminishes the ability to differentiate tobacco products, restricts adult consumer access to truthful and non-misleading information about our SFPs, or disproportionately impacts the commercialization of our products in relation to our competitors.

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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.

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.

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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.

Risks Related to Illicit Trade

We lose revenues as a result of counterfeiting, contraband, cross-border purchases, "illicit whites," non-tax-paid volume produced by local manufacturers, and counterfeiting of our smoke-free products' devices and consumables.

Our revenues may be materially adversely affected as a result of counterfeiting, contraband, cross-border purchases, illicit products, and non-tax-paid volume produced by local manufacturers, and counterfeiting of our smoke-free products' devices and consumables.

Large quantities of counterfeit cigarettes are sold in the international market.

We believe that Marlboro is the most heavily counterfeited international cigarette brand, although we cannot quantify the revenues we lose as a result of this activity.

In addition, our revenues are reduced by contraband, cross-border purchases, "illicit whites" and non-tax-paid volume produced by local manufacturers.

Our revenues and consumer satisfaction with our smoke-free products' devices and consumables may be materially adversely affected by counterfeit products that do not meet our product quality standards and scientific validation procedures.

Counterfeits of our smoke-free products are not subject to our scientific validation procedures, are unlikely to meet our product quality standards, and may materially adversely affect the reputation of our smoke-free products with consumers, regulators, and other stakeholders.

In addition, our revenues may be materially adversely affected by counterfeiting, contraband, cross-border purchases, illicit products and non-tax-paid volume produced by local manufacturers of cigarettes and/or smoke-free products.

Risks Related to Cybersecurity and Data Governance

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The failure or disruption of our information technology networks and systems, or those managed by third-party service providers or owned by our business partners and used in furtherance of PMI’s business, due to cybersecurity attacks;

unauthorized attempts to corrupt or extract data;

unauthorized attempts to access, corrupt or extract data;

security vulnerabilities;

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Such laws and regulations across the jurisdictions in which PMI operates may vary, resulting in inconsistent or conflicting legal obligations.

Risks Related to Swedish Match and Vectura Fertin Pharma

We may be unable to fully realize the expected benefits from the acquisitions of Swedish Match or Vectura Fertin Pharma.

Since 2021, we have acquired Swedish Match, OtiTopic, Fertin Pharma and Vectura (collectively, the "Acquisitions"), and subsequently launched Vectura Fertin Pharma, our new Wellness and Healthcare business, consolidating OtiTopic, Fertin Pharma and Vectura.

The anticipated benefits of the Acquisitions may not be realized fully, or at all, or may take longer to realize than expected.

Furthermore, the success of the Acquisitions also depends on the continued successful commercialization and growth of Swedish Match's products in highly competitive markets and on the success of the research and development efforts of Vectura Fertin Pharma, including the ability to obtain regulatory approval for new products, and the ability to commercialize or license these new products developed by them.

Moreover, our combustible product portfolio may stand in the way of introducing and growing new Wellness and Healthcare product categories and may prevent our business from developing a long-term sustainable ecosystem of products in the wellness, therapeutic, and healthcare categories.

Swedish Match and Vectura Fertin Pharma may have liabilities that are not known to us.

The businesses that we have acquired may have liabilities that we were unable to identify, or were unable to discover, in the course of performing our due diligence investigations during the acquisitions thereof.

There is no assurance that the indemnification available to us under the respective acquisition agreements, will be sufficient in amount, scope or duration to fully offset the possible liabilities associated with the respective business or property that we assumed upon consummation of each Acquisition.

Furthermore, the acquisition of Swedish Match was structured as a direct purchase of shares from Swedish Match shareholders and therefore did not include an acquisition agreement or indemnification rights.

Any such liabilities, individually or in the aggregate, could have a material adverse effect on our business, financial condition and results of operations.

Accounting adjustments related to the Acquisitions could adversely affect our financial results.

We accounted for the completion of the Acquisitions using the acquisition method of accounting.

Given the nature of the assets acquired in the Acquisitions, we may not be able to avoid future impairments of those assets, which may also have a material impact on our future results of operation and financial position.

PMI, Swedish Match and Vectura Fertin Pharma may be subject to uncertainties that could adversely affect our respective businesses, and adversely affect the financial results of our combined businesses.

Our success following these Acquisitions depends in part upon our ability and the ability of each of Swedish Match and Vectura Fertin Pharma to maintain business relationships.

The effect of the Acquisitions on customers, suppliers, employees and other constituencies of each of Swedish Match, Fertin Pharma and Vectura, may have a material adverse effect on us and/or the businesses that we have acquired through the Acquisitions.

Customers, suppliers and others who do business with Swedish Match or Vectura Fertin Pharma may delay or defer business decisions, decide to terminate, modify or renegotiate their relationships, or take other actions, which could negatively affect the revenues, earnings and cash flows of our company or the businesses that we have acquired.

Regulatory changes may have an impact on the development and/or commercialization of products which originate from the Swedish Match or Vectura Fertin Pharma value chains, as well as our revenues, earnings and cash flow.

If we are unable to maintain the business and operational relationships of Swedish Match, or of Vectura Fertin Pharma, our financial position, results of operations or cash flows upon combining with these companies could be adversely affected.

Risks Related to Acquisitions and Divestitures

We may not successfully identify, complete, or realize the benefits from strategic acquisitions, divestitures, joint ventures, or investments.

From time to time, we evaluate acquisition candidates, joint ventures, or investments that may strategically fit our business objectives.

As a result of some of these evaluations, we have acquired and may acquire in the future certain businesses (or parts of businesses) or assets.

We have also divested and may divest businesses from time to time.

These activities may present financial, managerial, and operational risks including, but not limited to, diversion of management’s attention from existing core businesses;

difficulties in integrating, or inability to successfully integrate, acquired businesses, including integrating or separating personnel, information technology, financial and other systems;

inability to effectively and immediately implement control environment processes across a diverse employee population;

adverse effects on existing or acquired customer and supplier business relationships;

potential disputes with buyers, sellers, or partners, as well as other unanticipated problems or liabilities, such as contingent liabilities and litigation.

Activities in such areas are regulated by numerous antitrust and competition laws in the United States, the European Union, the United Kingdom, and elsewhere.

We have in the past and may in the future be required to obtain approval of these transactions by competition or other regulatory authorities or to satisfy certain legal requirements, and we may be unable to obtain such approvals or satisfy such requirements, each of which may result in additional costs, delays, or our inability to complete such transactions.

Any of these factors could prevent us from realizing the anticipated benefits of any such transaction and/or could materially and adversely affect our financial condition and operating results.

We may face additional risks related to divestitures.

For example, risks related to our ability to find appropriate buyers, execute transactions on favorable terms, separate divested business operations with minimal impact to our remaining operations, and effectively manage any transitional or long-term service arrangements.

Further, our divestiture activities may require us to recognize impairment charges.

Any of these factors could materially and adversely affect our financial condition and operating results.

Accounting adjustments related to acquisitions could adversely affect our financial results.

Given the nature of assets acquired through acquisitions, we may not be able to avoid future impairments of those assets, which may also have a material adverse impact on our future operating results and financial position.

We may fail to complete the sale of Vectura Group Ltd.

and its affiliates (“Vectura Group”) to Molex Asia Holdings Ltd.

(the “Vectura Divestiture”), and a completed Vectura Divestiture may disrupt our remaining business or not achieve its intended benefits.

On September 17, 2024, Vectura Fertin Pharma, Inc.

and Molex Asia Holdings Ltd.

entered into the Sale and Purchase Agreement in respect of the Vectura Divestiture.

The transaction is anticipated to close in the fourth quarter of 2024, subject to regulatory approval, which may impact the timing.

A number of risks and challenges may arise in consummating the Vectura Divestiture, including, among others:

• the ability to obtain required regulatory approval for the Vectura Divestiture and the timing and conditions for such approval;

• the failure to satisfy customary closing conditions and consummate the Vectura Divestiture;

• the occurrence of any event, change or other circumstance that could give rise to the termination of the Sale and Purchase Agreement.

In addition, the Vectura Divestiture could cause disruption in our remaining Wellness and Healthcare business, including potential adverse changes in relationships with customers, employees, suppliers or other parties resulting from the Vectura Divestiture.

Even if the Vectura Divestiture is successfully consummated, we may not realize some or all of the anticipated benefits from the Vectura Divestiture, including with respect to the anticipated performance of our remaining Wellness and Healthcare business.

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