What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-04-24 compared with 2024-10-24 · 674 added, 1183 removed, 757 unchanged (71% of the section changed)

2 unchanged sentences

Description of Our Company

We are a leading international tobacco company, actively delivering a smoke-free future.

We are a leading international consumer goods company, actively delivering a smoke-free future.

We are evolving our portfolio for the long term to include products outside of the tobacco and nicotine sector.

Our current product portfolio primarily consists of cigarettes and smoke-free products.

Our current product portfolio primarily consists of cigarettes and smoke-free products, including heat-not-burn, nicotine pouch and e-vapor products.

Since 2008, we have invested over $14 billion to develop, scientifically substantiate and commercialize innovative smoke-free products for adults who would otherwise continue to smoke, with the goal of completely ending the sale of cigarettes.

This investment includes the building of world-class scientific assessment capabilities, notably in the areas of pre-clinical systems toxicology, clinical and behavioral research, as well as post-market studies.

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

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

Following a robust science-based review, the U.S.

Food and Drug Administration (the "FDA") has authorized the marketing of Swedish Match’s General snus and ZYN nicotine pouches and versions of PMI’s IQOS devices and consumables - the first-ever such authorizations in their respective categories.

Versions of IQOS devices and consumables and General snus also obtained the first-ever Modified Risk Tobacco Product ("MRTP") authorizations from the FDA.

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

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A").

Following the combination and the progress in 2023 toward the integration of the Swedish Match business into PMI's existing regional structure, PMI updated in January 2024 its segment reporting by including the former Swedish Match segment results into the four existing geographical segments.

Following the sale of Vectura Group Ltd.

on December 31, 2024, we updated our segment reporting in January 2025 by including the ongoing Wellness & Healthcare results in the Europe segment.

In addition, we renamed our “PMI Duty Free” business to “PMI Global Travel Retail” effective in the first quarter of 2025.

As a result of this change, our segment that includes our duty free business was renamed East Asia, Australia & PMI Global Travel Retail (“EA, AU & PMI GTR”).

Our four geographical segments are as follows:

1 unchanged sentence

• South and Southeast Asia, Commonwealth of Independent States, Middle East and Africa Region ("SSEA, CIS & MEA");

• East Asia, Australia, and PMI Duty Free Region ("EA, AU & PMI DF");

• East Asia, Australia, and PMI Global Travel Retail (“EA, AU & PMI GTR”);

• Americas Region.

The Wellness and Healthcare segment ("W&H"), which includes the operating results of our Vectura Fertin Pharma business, remains unchanged.

Our cigarettes are sold in approximately 170 markets, and in many of these markets they hold the number one or number two market share position.

5 unchanged sentences

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

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

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

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

As of December 31, 2024, our smoke-free products were available for sale in 95 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.

1 unchanged sentence

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

The Swedish Match acquisition is a key milestone in PMI’s transformation to becoming a smoke-free company.

Swedish Match has a leading nicotine pouch franchise in the U.S.

under the ZYN brand name.

The Swedish Match product portfolio is complementary to our existing portfolio, permitting us to bring together a leading oral nicotine product with the leading heat-not-burn product.

By joining forces with Swedish Match, we expect to accelerate the achievement of our joint

smoke-free ambitions, switching more adults who would otherwise continue to smoke cigarettes to better alternatives faster than either company could achieve separately.

In 2022, we also completed an agreement with Altria Group, Inc.

The Swedish Match acquisition was a key milestone in PMI’s transformation to becoming a smoke-free company.

The Swedish Match product portfolio is complementary to our portfolio, permitting us to bring together a leading oral nicotine product with the leading heat-not-burn product.

In 2022, we reached an agreement with Altria Group, Inc.

to end our commercial relationship in the U.S.

1 unchanged sentence

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

For further details, see Note 18.

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.

13 unchanged sentences

As a holding company, our principal sources of funds, including funds to make payment on our debt securities, are from the receipt of dividends and repayment of debt from our subsidiaries.

Our principal wholly owned and majority-owned subsidiaries currently are not limited by long-term debt or other agreements in their ability to pay cash dividends or to make other distributions that are otherwise compliant with law.

Executive Summary

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

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 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;

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 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 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)

2023 Amortization of intangibles 0.18

2023 Impairment of goodwill and other intangibles 0.44

2023 Termination of distribution arrangement in the Middle East 0.04

2023 Swedish Match AB acquisition accounting related items 0.01

2023 Income tax impact associated with Swedish Match AB financing 0.03

2023 Tax items 0.11

Subtotal of 2023 items 1.04

2024 Asset impairment and exit costs (0.09)

2024 Impairment of other intangibles (0.01)

2024 Amortization of intangibles (0.29)

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

2024 Tax items 0.03

Subtotal of 2024 items (0.12)

Currency (0.44)

Change in tax rate (0.03)

Operations 0.83

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.

Asset Impairment and Exit Costs .

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

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

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

Consequently, we recorded a non-cash pre-tax charge of $204 million (representing $174 million net of

income tax or $0.11 per share decrease in diluted EPS) in the second quarter results of 2023, reflecting the full amount previously paid by PM Korea.

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 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.

from Altria Group, Inc.

For further details, see Note 4.

Goodwill and Other Intangible Assets, net .

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

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

The impairment charge was recorded in impairment of goodwill ($665 million) and marketing, administration and research costs ($15 million) in the condensed consolidated statements of earnings during the 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 nine months ended September 30, 2024.

For further details, see Note 4.

Goodwill and Other Intangible Assets, net .

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

The 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.

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 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.

tax benefit for a worthless stock deduction under section 165(g) of the Internal Revenue Code related to PMI’s investment in C.A.

Tabacalera Nacional, a wholly owned foreign corporation incorporated in Venezuela.

The change in the tax rate that decreased our diluted EPS by $0.03 per share in the table above was primarily due to increases in U.S.

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

Currency – The unfavorable impact of $0.44 per share during the reporting period primarily results from the fluctuations of the U.S.

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

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

Operations – The increase in diluted EPS of $0.83 from our operations in the table above was due primarily to the following segments:

• SSEA, CIS & MEA:

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

Favorable 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 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.

Consolidated Operating Results for the Three Months Ended March 31, 2025

• Net Revenues - Net revenues of $9.3 billion for the three months ended March 31, 2025, increased by $0.5 billion, or 5.8%, from the comparable 2024 amount.

The change in our net revenues from the comparable 2024 amount was driven by the following (variances not to scale with quarterly results):

During the quarter, net revenues increased by 5.8%.

Net revenues, excluding currency and acquisitions, increased by 11.6%, mainly reflecting:

Net revenues, excluding currency and acquisitions/divestitures, increased by 10.2%, mainly reflecting:

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

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:

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

Net revenues by product category for the three months ended March 31, 2025 and 2024, are shown below:

• Diluted Earnings Per Share - The changes in our reported diluted earnings per share (“diluted EPS”) for the three months ended March 31, 2025, from the comparable 2024 amounts, were as follows:

Diluted EPS % Change

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)

For the three months ended March 31, 2024 $ 1.38

2024 Restructuring charges 0.09

2024 Amortization of intangibles 0.06

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

2024 Impairment of other intangibles 0.01

2024 Fair value adjustment for equity security investments (0.08)

2024 Income tax impact associated with Swedish Match AB financing 0.07

3 unchanged sentences

2025 Fair value adjustment for equity security investments 0.09

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

2024 Egypt sales tax charge (0.03)

2025 Income tax impact associated with Swedish Match AB financing 0.06

2024 Tax items —

Subtotal of 2025 items 0.03

3 unchanged sentences

Operations 0.26

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 the three months ended March 31, 2025 $ 1.72 24.6 %

Restructuring charges – During the first quarter of 2024, we recorded pre-tax restructuring charges 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 16.

Related Parties - Equity Investments and Other .

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.

Restructuring Activities .

Amortization of intangibles – During the first quarter of 2024 and 2025, we recorded amortization of intangible expense of $120 million (representing $95 million net of income tax or $0.06 per share decrease in diluted EPS) and $246 million (representing $191 million net of income tax or $0.12 per share decrease in diluted EPS), respectively.

The higher 2025 amount includes the reacquired rights recorded as other intangible assets, net following the reacquisition of IQOS commercialization rights in the U.S.

from Altria Group, Inc.

from Altria Group, Inc., effective in May 2024.

For further details, see Note 5.

Goodwill and Other Intangible Assets, net .

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.

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

Fair value adjustment for equity security investments – During the first quarter of 2024 and 2025, we recorded fair value adjustments for our equity security investments in India and Sri Lanka of $126 million after tax gain (or $0.08 per share increase in diluted EPS) and $143 million after tax gain (or $0.09 per share increase in diluted EPS), respectively.

For further details, see Note 13.

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.

Related Parties - Equity Investments and Other .

Income taxes – The Income tax impact associated with Swedish Match financing that decreased our 2024 diluted EPS by $0.07 per share and increased our 2025 diluted EPS by $0.06 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.

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.

tax benefit for a worthless stock deduction under section 165(g) of the Internal Revenue Code related to PMI’s investment in C.A.

Tabacalera Nacional, a wholly owned foreign corporation incorporated in Venezuela.

The change in the tax rate that decreased our diluted EPS by $0.03 per share in the table above was primarily due to increases in foreign statutory tax rates and repatriation cost differences, partially offset by a decrease in U.S.

state income tax expense.

Currency – The unfavorable impact of $0.07 per share during the reporting period primarily results from the fluctuations of the U.S.

dollar, especially against the Egyptian pound.

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

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.

Interest – The favorable impact of $0.03 per share from interest in the table above was primarily due to a favorable mark-to-market adjustment related to derivative financial instruments and a lower average debt level.

Operations – The increase in diluted EPS of $0.26 from our operations in the table above was due primarily to the following segments:

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

• EA, AU & PMI GTR:

Favorable volume/mix;

• SSEA, CIS & MEA:

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

Favorable pricing and higher cigarette volume and HTU volume, partly offset by higher manufacturing costs and higher marketing, administration and research 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, 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.”

Discussion and Analysis

2 unchanged sentences

Consolidated Operating Results

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

2024 2023 2024 2023

See pages 79 - 91 for a discussion of our " Cautionary Factors That May Affect Future Results ." Net revenues, significant expenses, and operating income by segment were as follows:

(in millions) Europe SSEA, CIS & MEA EA, AU & PMI GTR Americas Total

For the Three Months Ended March 31, 2025

Net revenues $ 3,560 $ 2,743 $ 1,731 $ 1,267 $ 9,301

Europe $ 11,301 $ 10,465 $ 4,121 $ 3,823

SSEA, CIS & MEA

8,393 7,922 2,964 2,777

EA, AU & PMI DF

4,959 4,771 1,602 1,571

Americas 3,273 2,732 1,148 895

Wellness and Healthcare 246 237 76 75

Cost of sales 982 1,200 488 370 3,040

Marketing, administration and research costs 1,141 623 330 623 2,717

Operating income $ 1,437 $ 920 $ 913 $ 274 $ 3,544

For the Three Months Ended March 31, 2024

Net revenues $ 3,455 $ 2,658 $ 1,684 $ 996 $ 8,793

Operating income (loss):

Europe $ 5,136 $ 4,551 $ 2,020 $ 1,717

SSEA, CIS & MEA

2,623 2,437 960 823

EA, AU & PMI DF

2,304 1,963 788 769

Americas 419 524 137 98

Wellness and Healthcare (339) (808) (251) (37)

Cost of sales 1,027 1,237 577 354 3,195

Marketing, administration and research costs 1,017 649 344 543 2,553

Operating income $ 1,411 $ 772 $ 763 $ 99 $ 3,045

1 unchanged sentence

PMI Net Revenues by Product Category

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

2024 2023 Change 2024 2023 Change

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

2025 2024 Change

Combustible tobacco:

2 unchanged sentences

2,413 2,346 2.9 %

EA, AU & PMI DF

EA, AU & PMI GTR

603 597 1.0 %

1 unchanged sentence

Total Combustible tobacco 5,406 5,407 — %

Smoke-free excluding Wellness and Healthcare:

Europe 1,653 1,524 8.5 %

of which, Wellness & Healthcare 51 90 (42.8) %

SSEA, CIS & MEA

330 312 5.8 %

EA, AU & PMI DF

EA, AU & PMI GTR

1,128 1,087 3.8 %

Americas 783 462 69.4 %

Total Smoke-free excluding Wellness and Healthcare 10,527 9,045 16.4 % 3,701 3,234 14.5 %

Wellness and Healthcare 246 237 3.8 % 76 75 1.3 %

Total Smoke-free 3,895 3,386 15.0 %

2 unchanged sentences

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 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 nine months ended September 30, 2023.

• 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.

Goodwill and Other Intangible Assets, net .

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

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

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

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

• Restructuring charges - See Note 16.

Restructuring Activities for a breakdown of these costs by segment for the three months ended March 31, 2024.

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.

3 unchanged sentences

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

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

Net revenues related to wellness and healthcare refer to the operating revenues generated from the sale of products, primarily associated with inhaled therapeutics, and oral and intra-oral delivery systems.

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

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

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

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

marketing, administration and research costs (including asset impairment and exit costs);

marketing, administration and research costs (including restructuring charges);

and amortization and impairment of intangibles.

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

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

Our consolidated shipment volume is shown in the table below:

Consolidated Shipment Volume

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

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

fees for certain distribution rights billed to customers in certain markets in the SSEA, CIS & MEA Region.

Our shipment volume for cigarettes, HTUs and Oral SFP is shown in the table below:

Shipment Volume

For the Three Months Ended March 31,

Cigarettes and Heated Tobacco Units (million units) 2025 2024 Change

Cigarettes 144,753 143,191 1.1 %

9 unchanged sentences

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

chewing tobacco

(2) Includes chew bags and tobacco bits

1 unchanged sentence

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.

These include HEETS , Next , Philip Morris and Rooftop .

These include Next, TEREA and VEEV .

The volume and corresponding royalty revenues of these brands sold by RBH were not material to PMI for all periods presented.

Heated tobacco units ("HTUs") is the term we use to refer to heated tobacco consumables, which include our BLENDS , DELIA , HEETS , HEETS Creations, HEETS Dimensions (defined collectively as HEETS ), SENTIA , TEREA, TEREA CRAFTED and TEREA Dimensions, as well as the KT&G-licensed brands, Fiit and Miix (outside of South Korea).

Total shipment volume is defined as the combined total of cigarette, heated tobacco, oral smoke-free products (excluding snuff, snuff leaf and U.S.

chew) and e-vapor shipment volume in equivalent units, unless otherwise stated.

Heated tobacco units ("HTUs") is the term we use to refer to heated tobacco consumables, which include our BLENDS , DELIA , HEETS , HEETS Creations (defined collectively as HEETS ), SENTIA , TEREA, TEREA CRAFTED and TEREA Dimensions, as well as the KT&G-licensed brands, Fiit and Miix (outside of South Korea).

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

1 unchanged sentence

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

Oral smoke-free products conversion:

(i) nicotine pouches:

15 pouches per can in the U.S.

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

(ii) snus products:

weighted average 21 pouches equivalent per can;

(iii) moist snuff products:

weighted average 17 pouches equivalent per can;

(iv) tobacco bits products:

weighted average 30 pouches equivalent per can;

(v) chew bags products:

weighted average 20 pouches per can.

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

1 unchanged sentence

Total industry volume, PMI in-market sales volume and PMI market share for the following geographies include the cigarillo category in Japan:

the total international market, EA, AU & PMI DF Region, and Japanese domestic market.

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

the total international market, EA, AU & PMI GTR Region, and Japanese domestic market.

In-market sales ("IMS") is defined as sales to the trade channels, which serve the end legal age nicotine users.

Depending on the market and distribution model, IMS may represent an estimate.

Consequently, past reported periods may be updated to ensure comparability and to incorporate the most current information.

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

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

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

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

Past reported periods may be updated to ensure comparability and to incorporate the most current information for industry and market share reporting.

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

Such factors may include changes to the manufacturing supply chain, shipment methods, consumer demand, timing of excise tax increases or other influences that may affect the timing of sales to customers.

In such instances, in addition to reviewing PMI shipment volumes and certain estimated total industry/market volumes on a reported basis, management reviews these measures on an adjusted basis that excludes the impact of distributor and/or estimated trade inventory movements.

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

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

For the Nine Months Ended September 30,

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

Market Total Market

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

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

Total (1) (2)

1,952.0 1,929.4 568.1 553.1 464.0 461.9 104.0 91.3 28.7 28.3 5.2 4.6

France 19.8 22.7 8.3 10.2 8.2 10.0 0.1 0.2 40.9 42.3 0.6 0.7

53.0 53.0 20.1 19.8 17.0 17.7 3.1 2.2 38.8 39.0 6.1 5.2

55.7 55.1 29.0 29.1 20.9 20.8 8.1 8.4 53.7 53.6 17.0 16.6

44.5 43.7 19.4 18.1 15.4 14.3 4.0 3.8 43.5 41.3 8.9 8.8

Spain 33.3 33.0 9.9 9.9 9.0 9.2 0.9 0.8 29.2 29.4 2.7 2.2

SSEA, CIS & MEA

Egypt 59.9 54.8 18.5 18.1 17.4 17.4 1.1 0.7 30.6 33.3 1.9 1.6

Indonesia 221.4 219.5 60.5 63.5 59.7 63.1 0.8 0.4 27.3 28.9 0.4 0.2

Philippines 30.4 32.2 15.8 18.0 15.6 17.8 0.2 0.2 52.0 56.0 0.7 0.5

Russia 160.7 151.0 51.9 48.3 38.9 36.5 13.0 11.8 32.3 31.9 8.5 7.9

Turkey 111.7 101.2 57.8 50.3 57.8 50.3 — — 51.7 49.7 — —

EA, AU & PMI DF

Australia 4.0 5.6 1.4 2.0 1.4 2.0 — — 35.8 35.4 — —

112.2 111.1 51.1 47.0 12.6 13.9 38.5 33.0 41.1 39.5 29.6 26.4

South Korea 52.9 54.3 10.6 10.6 6.3 6.8 4.3 3.8 20.0 19.5 8.0 7.0

Argentina 19.1 21.6 11.8 13.4 11.8 13.4 — — 61.9 62.0 — —

Mexico 21.0 21.3 12.9 13.2 12.8 13.1 0.2 0.1 61.6 62.1 0.8 0.5

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

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

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

Total Market is based on reported IMS

For the Three Months Ended September 30,

In such instances, in addition to reviewing PMI shipment volumes, IMS, certain estimated total industry/market volumes and estimated market shares on a reported basis, management reviews these measures on an adjusted basis that excludes the impact of distributor and/or estimated trade inventory movements.

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

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

For the Three Months Ended March 31,

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

11 unchanged sentences

Indonesia (4)

75.9 73.9 20.4 20.2 20.1 20.0 0.3 0.2 26.8 27.4 0.4 0.3

Philippines 11.9 11.9 5.6 5.5 5.5 5.4 0.1 0.1 46.8 45.9 0.9 0.6

1 unchanged sentence

Turkey 33.9 31.2 17.1 16.0 17.1 16.0 — — 50.3 51.3 — —

EA, AU & PMI DF

EA, AU & PMI GTR

Australia 1.1 1.4 0.5 0.5 0.5 0.5 — — 44.4 37.6 — —

4 unchanged sentences

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

Depending on the market and distribution model, IMS may represent an estimate.

Consequently, past reported periods may be updated to ensure comparability and to incorporate the most current information.

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

1 unchanged sentence

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 2.7% (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.

For the full year 2024, we currently expect the total cigarette, HTU and oral smoke-free product shipment volume growth for PMI of 2% to 3% driven by smoke-free products.

(4) 2025 includes 1.9 billion units of cigarettes shipment volume under an arrangement where PMI acts as brand management and fulfillment services agent

Consolidated Operating Results for the Three Months Ended March 31, 2025

The following discussion compares our consolidated operating results for the three months ended March 31, 2025, with the three months ended March 31, 2024.

During the quarter, estimated international industry volume (excluding China and the U.S.) for cigarettes and HTUs decreased by 0.6%.

For the full year 2025, we currently expect an estimated total international industry volume decline of around 1% for cigarettes and HTUs, excluding China and the U.S.

Total Shipment Volume

Total PMI SFP HTU Oral SFP E-vapor Cigarettes

Total Shipment Volume

(equivalent units in billions)

187.8 43.0 37.1 5.3 0.6 144.8

Q1 2024 3.9% 14.4% 11.9% 27.2% +100% 1.1%

Oral smoke-free products conversion:

(i) nicotine pouches:

15 pouches per can in the U.S.

and approximately 20 pouches per can outside the U.S.;

(ii) snus products:

weighted average 21 pouches equivalent per can;

(iii) moist snuff products:

weighted average 17 pouches equivalent per can;

(iv) tobacco bits products:

weighted average 30 pouches equivalent per can;

(v) chew bags products:

weighted average 20 pouches per can.

E-vapor products conversion:

one milliliter of e-vapor liquid equivalent to 10 units.

Our total shipment volume, including cigarettes and smoke-free products (in equivalent units), increased by 3.9% with smoke-free volumes up by 14.4%, with all SFP categories growing strongly, and cigarette volumes up by 1.1% driven by SSEA, CIS & MEA region.

For the full year 2025, we currently expect total cigarette and smoke-free product shipment volume growth for PMI of up to 2% driven by smoke-free products volume growth of 12% to 14%.

For the full year 2025, we also expect nicotine pouch shipment volume in the U.S.

of 800 to 840 million cans.

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

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

Nine Months Year-to-Date

First-Quarter

2025 2024 Change (pp)

9 unchanged sentences

Financial Summary

Nine Months Ended September 30, Change

Quarters Ended March 31, Change

Fav./(Unfav.) Variance

1 unchanged sentence

2025 2024 Total Excl.

rency Acqui-sitions Price Vol/

rency Acqui-sitions / Dives-titures Price Vol/

(in millions)

Net Revenues (1)

$ 9,301 $ 8,793 5.8 % 10.2 % $ 508 $ (340) $ (49) $ 526 $ 377 $ (6)

2 unchanged sentences

(2,717) (2,553) (6.4) % (12.8) % (164) 121 43 — — (328)

Impairment of Goodwill (3)

— (665) +100% +100% 665 — — — — 665

Operating Income $ 3,544 $ 3,045 16.4 % 18.7 % $ 499 $ (113) $ 43 $ 526 $ 450 $ (407)

(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, $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.

(1) Cost/Other variance includes higher amortization of intangibles in 2025 , partly offset by charges in 2024 of $168 million related to restructuring charges and the 2024 impairment of other intangibles of $27 million.

For more details, see Note 5.

Goodwill and Other Intangible Assets, net , Note 7.

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 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;

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.

Goodwill and Other Intangible Assets, net and Note 16.

Restructuring Activities .

During the quarter, net revenues increased by 5.8%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 10.2%, mainly reflecting:

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

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

The unfavorable currency impact in net revenues was due primarily to the Euro, Indonesian rupiah, Japanese yen, Mexican peso and Russian ruble.

Net revenues include $3.9 billion in 2025 and $3.4 billion in 2024 related to smoke-free.

Operating income increased by 16.4%.

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.

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

from Altria Group, Inc.

Goodwill and Other Intangible Assets, net , Note 18.

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%.

Operating income, excluding currency and acquisitions/divestitures, increased by 18.7%, mainly reflecting:

the same factors as for net revenues and a favorable comparison to 2024 reflecting restructuring charge in 2024;

partly offset by higher marketing, administration and research costs and higher amortization of intangibles in 2025.

Interest expense, net, of $241 million decreased by $58 million or 19.4%, primarily due to a favorable mark-to-market adjustment related to derivative financial instruments and a lower average debt level.

Our effective tax rate decreased by 4.8 percentage points to 20.0%.

We estimate that our 2025 effective tax rate will be approximately 22.5% to 23.5%, excluding discrete tax events.

For further details, see Note 10.

Income Taxes .

PMI estimates that its full-year 2024 effective tax rate will be approximately 21% to 22%, excluding discrete tax events.

Changes in currency exchange rates, earnings mix by taxing jurisdiction or future legislative or regulatory developments may have an impact on the effective tax rates, which PMI monitors each quarter.

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

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 $2.7 billion increased by $0.5 billion or 25.2%.

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.

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

Basic and diluted EPS of $1.72 increased by 24.6%.

Excluding an unfavorable currency impact of $0.07, diluted EPS increased by 29.7%.

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 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

Our total cigarette and HTU shipment volume increased by 2.6% (HTU shipments increased by 8.9%, and cigarette shipments increased by 1.3%), with increases across all regions except the Americas Region.

Our total oral product shipment volume in cans increased by 24.7%, predominantly reflecting growth in nicotine pouches.

Adjusted in-market sales for HTUs increased by 14.8%, including growth in Japan of 14.3% and Europe of 11.3%.

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

Third-Quarter

2024 2023 Change (pp)

Total International Market Share (1)

29.5 % 28.9 % 0.6

Cigarettes 24.2 % 24.3 % (0.1)

HTU 5.3 % 4.6 % 0.7

Cigarette over Cigarette Market Share (2)

26.0 % 25.9 % 0.1

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

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

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

Operating Results by Business Segment

Segment Operating Results – Three Months Ended March 31, 2025

The following discussion compares operating results within each of our segments for the three months ended March 31, 2025, with the three months ended March 31, 2024.

Financial Summary

Quarters Ended September 30, Change

Quarters Ended March 31, Change

Fav./(Unfav.) Variance

1 unchanged sentence

2025 2024 Total Excl.

rency Acqui-sitions Price Vol/

rency Acqui-sitions / Dives-titures Price Vol/

(in millions)

$ 9,911 $ 9,141 8.4 % 11.6 % $ 770 $ (289) $ — $ 689 $ 322 $ 48

Cost of Sales (3,366) (3,165) (6.4) % (9.0) % (201) 63 21 — (159) (126)

Marketing, Administration and Research Costs (1)

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

Net Revenues $ 3,560 $ 3,455 3.0 % 8.6 % $ 105 $ (142) $ (49) $ 216 $ 80 $ —

Operating Income $ 1,437 $ 1,411 1.8 % 5.2 % $ 26 $ (71) $ 24 $ 216 $ 46 $ (189)

(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.

Segment Reporting and Note 18.

Acquisitions and Divestitures .

During the quarter, net revenues increased by 3.0%.

Net revenues, excluding currency and acquisitions, increased by 11.6%, mainly reflecting:

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

Net revenues, excluding currency and acquisitions/divestitures, increased by 8.6%, reflecting a favorable pricing variance, mainly driven by higher combustible tobacco pricing;

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.

The pricing variance for 2024 and 2025 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.

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

The FCD admitted an appeal to the Federal Tax Court.

On June 19, 2024, PMI submitted an appeal.

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

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

Despite this payment suspension and, in

order to avoid the future addition of interest, PMI elected, on January 14, 2025, to pay the amount outstanding of EUR 721 million (approximately $751 million), excluding accrued interest.

An unfavorable outcome to the appeal would negatively impact PMI’s future cash provided by operating activities for the amounts of unpaid interest.

A favorable outcome to the appeal would positively impact future PMI’s operating results and future cash provided by operating activities for the amounts paid in January 2025.

Operating income increased by 1.8%.

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%.

Operating Results by Business Segment

Operating income, excluding currency and acquisitions/divestitures, increased by 5.2%, primarily reflecting the same factors as for net revenues;

largely offset by higher marketing, administration and research costs.

Europe - Total Market and PMI Shipment Volume

In the first quarter, the estimated total market for cigarettes and HTUs decreased by 4.8% to 118.3 billion units, with a 6.6% decrease for cigarettes and continued HTU growth.

Notable decreases in the estimated total market in Poland (down by 16.0%) and France (down by 12.8%) were partly offset by Bulgaria (up by 7.2%) and Luxembourg (up by 20.3%).

In the first quarter, our total cigarette and HTU shipment volume was stable (48.4 billion units), with decreases in Poland (down by 14.4%) and Sweden (down by 66.9%, driven by prior year inventory movements) offset by increases in Italy (up by 8.5%) and Spain (up by 13.9%).

In the first quarter, our HTU share of the total cigarette and HTU market increased by 1.2 points on an adjusted basis.

Other Oral SFP includes chew bags and tobacco bits

Sum may not foot due to rounding.

In the first quarter, oral SFP shipment volume decreased by 2.5% to 72.2 million cans mainly due to snus, partly offset by nicotine pouches.

SSEA, CIS & MEA:

Financial Summary

Quarters Ended March 31, Change

Fav./(Unfav.) Variance

Fav./(Unfav.)

2025 2024 Total Excl.

rency Acqui-sitions / Dives-titures Price Vol/

(in millions)

Net Revenues $ 2,743 $ 2,658 3.2 % 6.5 % $ 85 $ (88) $ — $ 168 $ 4 $ 1

Operating Income $ 920 $ 772 19.2 % 14.1 % $ 148 $ 20 $ 19 $ 168 $ 77 $ (136)

During the quarter, net revenues increased by 3.2%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 6.5%, primarily reflecting:

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

while higher cigarette and HTU volume was offset by unfavorable cigarette mix due to the below mentioned commercial model change in Indonesia.

A change in our commercial model for the below tier-one cigarette segment in Indonesia in the fourth quarter of 2024 resulted in lower net revenue and cost of sales, with no meaningful impact on operating income.

Operating income increased by 19.2%.

Operating income, excluding currency and acquisitions/divestitures, increased by 14.1%, primarily reflecting:

a favorable pricing variance, predominantly driven by higher combustible tobacco pricing, as well as higher cigarette and HTU volume, partly offset by higher manufacturing costs (notably tobacco leaf) as well as marketing, administration and research costs.

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

In the first quarter, the estimated total market for cigarettes and HTUs increased by 0.9% to 377.3 billion units.

The increase in the estimated total market was mainly due to Turkey (up by 8.5%), India (up by 8.7%), and Indonesia (up by 2.6%), partly offset by Bangladesh (down by 16.2%).

In the first quarter, our total cigarette and HTU shipment volume increased by 4.6% to 90.2 billion units, with increases in Turkey (up by 6.5%) and India (up 47.4%), partly offset by Saudi Arabia (down by 10.4%) and Tunisia (down by 31.7%).

PMI's estimated HTU adjusted in-market sales volume increased by an estimated 11.1% .

EA, AU & PMI GTR:

Financial Summary

Quarters Ended March 31, Change

Fav./(Unfav.) Variance

Fav./(Unfav.)

2025 2024 Total Excl.

rency Acqui-sitions / Dives-titures Price Vol/

(in millions)

Net Revenues $ 1,731 $ 1,684 2.8 % 6.5 % $ 47 $ (62) $ — $ 22 $ 87 $ —

Operating Income $ 913 $ 763 19.7 % 22.8 % $ 150 $ (24) $ — $ 22 $ 135 $ 17

During the quarter, net revenues increased by 2.8%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 6.5%, primarily reflecting a favorable volume/mix, driven by higher smoke-free products volume.

Operating income increased by 19.7%.

Operating income, excluding currency and acquisitions/divestitures, increased by 22.8%, driven by the same main factor as for net revenues and a comparison benefit from higher device shipments in the prior year, when ILUMA i was launched in Japan.

EA, AU & PMI GTR - Total Market and PMI Shipment Volume

In the first quarter, the estimated total market for cigarettes and HTUs, excluding China, decreased by 2.0% to 74.4 billion units, with a decrease in cigarettes partly offset by HTU growth.

The decrease in the estimated total market was mainly driven by South Korea (down by 6.4%) and Japan (down by 1.0%), partly offset by Global Travel Retail (up by 5.4%).

In the first quarter, our total cigarette and HTU shipment volume increased by 5.9% to 28.8 billion units with growth in Japan (up by 5.3%) and Global Travel Retail (up by 25.7%), partly offset by Taiwan (down by 18.3%).

Our estimated HTU adjusted in-market sales volume increased by an estimated 10.7%.

Financial Summary

Quarters Ended March 31, Change

Fav./(Unfav.) Variance

Fav./(Unfav.)

2025 2024 Total Excl.

rency Acqui-sitions / Dives-titures Price Vol/

(in millions)

Net Revenues $ 1,267 $ 996 27.2 % 32.0 % $ 271 $ (48) $ — $ 120 $ 206 $ (7)

Operating Income $ 274 $ 99 +100% +100% $ 175 $ (38) $ — $ 120 $ 192 $ (99)

During the quarter, net revenues increased by 27.2%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 32.0%, primarily reflecting:

favorable volume/mix, predominantly driven by U.S.

nicotine pouches, as well as a favorable pricing variance, driven by U.S.

smoke-free products and cigarettes outside of the U.S.

Operating income increased by +100%.

Operating income, excluding currency and acquisitions/divestitures, increased by +100%, mainly reflecting:

the same factors as for net revenues, and a favorable comparison to 2024 reflecting the restructuring charges of $168 million in 2024;

partly offset by higher marketing, administration and research costs, including incremental U.S.

investments, as well as higher amortization of intangibles.

Americas - Total Market and PMI Shipment Volume

In the first quarter, the estimated total market for cigarettes and HTUs, excluding the U.S., increased by 1.3% to 45.2 billion units, predominantly reflecting an increase in the cigarette market.

The increase in the estimated total market was mainly due to Brazil (up by 12.7%), partly offset by Mexico (down by 9.9%) and Canada (down by 19.3%).

In the first quarter, our total cigarette and HTU shipment volume was flat (14.4 billion units), with decreases in Mexico (down by 10.9%) and Colombia (down by 12.3%), offset by increases in Brazil (up by 7.4%) and Argentina (up by 1.8%).

(1) Excluding U.S.

In the first quarter, oral SFP shipments increased by 42.0% to 237 million cans, predominantly driven by ZYN nicotine pouches in the U.S.

Business Environment

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

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

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

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

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

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

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

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

1 unchanged sentence

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

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

• legal challenges, including the pending and threatened litigation discussed in Part I, Item 1.

Financial Statements — Note 9.

Contingencies in this report.

• governmental investigations.

Regulatory Restrictions:

Smoke-Free Products (SFPs)

Our Approach to SFPs

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

Nevertheless, according to WHO estimates, there are approximately 1 billion smokers globally.

This number has not meaningfully changed in decades and, based on current trends, is not expected to significantly change in the near future.

Cigarettes burn tobacco, which produces smoke.

As a result of the combustion process, the smoker inhales high levels of various toxic substances.

In contrast, while SFPs contain nicotine, which is addictive and not risk-free, SFPs do not burn tobacco and therefore contain significantly lower levels of harmful and potentially harmful constituents ("HPHCs") than found in cigarette smoke.

Our SFPs and commercial activities for these products are designed for, and directed toward, current adult smokers and adult users of nicotine-containing products.

We put in significant effort to restrict access to our products from non-nicotine users and youth.

For adult smokers who would otherwise continue to smoke cigarettes, we believe that SFPs, while not risk-free, offer a much better choice.

Accordingly, our key strategic priorities are to:

(i) continue developing and commercializing products that have the potential to present less risk of harm to adult smokers who switch to such products versus continued cigarette smoking;

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

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

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

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

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

We are judiciously reallocating resources from cigarettes to SFPs and are streamlining our cigarette portfolio.

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

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

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

Our efforts are guided by the following key objectives:

• to develop SFPs as satisfying alternatives to smoking for adult smokers who would otherwise continue to smoke cigarettes;

• for those adult smokers, our goal is to develop and offer SFPs with a scientifically substantiated risk-reduction profile that approaches as closely as possible the risk-reduction profile associated with smoking cessation;

• to substantiate the reduction of risk for the individual adult smoker and the reduction of harm to the population as a whole, based on scientific evidence of the highest standard that is made available for scrutiny and review by external independent scientists and relevant regulatory bodies;

• to advocate for the development of science-based regulatory frameworks for the development and commercialization of SFPs, including the communication of scientifically substantiated information to enable adult smokers to make better choices.

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.

Therefore, we are developing and commercializing a portfolio of products intended to appeal to a variety of distinct adult consumer preferences and achieve population harm reduction, including:

• Heat-not-burn products, which use a precisely controlled heating device incorporating our IQOS HeatControl technology, into which a specially designed and proprietary tobacco unit is inserted in a holder and heated to generate an aerosol.

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”).

In addition to the original version of IQOS , which relies on a heating technology using a blade, a newer version of IQOS uses induction heating.

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

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 IQOS remain valid and applicable to the newer and adjacent versions of IQOS .

We also produce a heat-not-burn product that utilizes external resistive heating technology, which is commercialized under the BONDS by IQOS brand, and has been launched in certain initial markets.

• Oral tobacco and nicotine products, which include snus and modern oral nicotine pouches.

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

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

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

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

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

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

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 2022, we significantly expanded our oral smokeless products portfolio with the acquisition of Swedish Match.

Swedish Match's ZYN is the leading nicotine pouch brand in the U.S.

• e-Vapor products, which are battery-powered devices that produce an aerosol by vaporizing a tobacco-free liquid solution.

We have developed e-liquids for our e-Vapor products designed to deliver an authentic tobacco taste.

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

Data show that, in a stable regulatory environment, only a very small percentage of adult smokers who convert to IQOS switch back to cigarettes.

We aim to continue to develop and expand our SFP brand portfolio and market positions.

In addition, we continue to use our expertise, technology and capabilities to explore new growth opportunities beyond our current business, including products that do not contain nicotine or tobacco.

Commercialization of SFPs

We are continuing to develop a multiplatform approach and tailoring our commercialization strategy to the characteristics of each specific market.

We focus our commercialization efforts on consumer retail experience, guided consumer trials and customer care, and increasingly, digital communication programs and e-commerce.

In order to accelerate switching to our SFPs, our initial market introductions typically entail one-on-one consumer engagement (in person or by digital means) and device discounts.

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

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

In 2014, we introduced IQOS in pilot city launches in Nagoya, Japan, and in Milan, Italy.

Since then, we have continuously expanded our commercialization activities.

As of December 31, 2024, PMI's smoke-free products were available for sale in 95 markets.

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 SFPs, and continue to optimize our manufacturing infrastructure and expand our commercialization activities for new products and markets.

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

We discuss product warranties in more detail in Note 15.

Product Warranty in this report.

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

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

(the “Altria Agreement”).

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

The Altria Agreement provides a clear path to expanding IQOS ’s international success in a market where over 30 million adults continue to smoke cigarettes.

On March 27, 2025, we began selling IQOS 3.0, the blade version of IQOS , in Austin, Texas.

We are pursuing a limited U.S.

roll-out of the IQOS device while waiting for authorization to market IQOS ILUMA , the induction version, in the United States.

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, Divestitures and Other Business Arrangements below.

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

• Since 2022, we began commercializing our BONDS product in 5 markets.

• Since August 2020, we have launched and expanded our portfolio of vaping products (branded VEEV ) in 41 markets.

• Following our acquisition of Swedish Match, we have access to a strong portfolio of Swedish Match brands in both the snus and nicotine pouch categories.

Nicotine pouches are currently available in 38 markets.

Legislation, Regulation, Taxation and Other Matters Regarding the Manufacture, Marketing, Sale and Use of Tobacco and Other Nicotine-Containing Products

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 products such as fine cut tobacco, illicit cigarettes or illicit SFPs.

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

We believe that such tax policies undermine public health by encouraging consumers to turn to illicit trade or negatively impact the transition of adult smokers to SFPs, and ultimately undercut government revenue objectives, disrupt the competitive environment, and encourage criminal activity.

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.

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

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

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

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

To avoid further accumulation of interest, in January 2025, PM Germany provisionally paid the additional HTP excise tax relating to 2022, 2023 and 2024 (pending the outcome of the FCD decision).

An oral hearing is expected in or after September 2025.

In March 2025, Japan adopted a multi-year tax plan that included changes to its excise tax structure and rates for tobacco products.

Under the plan, the excise tax for heated tobacco products ("HTPs") will be harmonized with cigarettes in two steps;

one on April 1, 2026 and the second on October 1, 2026.

The first increase in the harmonized HTP and cigarette excise tax will occur in April 2027, and the plan provides predictability on the future excise rate increases for all tobacco product categories until April 2029.

Legislative and Regulatory Environment

The tobacco industry operates in a highly regulated environment.

The well-known risks of smoking have led regulators to impose significant restrictions and high excise taxes on cigarettes.

The regulatory landscape for novel nicotine-containing products is inconsistent and evolving but is, in some instances, even more restrictive.

Much of the regulation that shapes the business environment in which we operate is driven by the World Health Organization's (the "WHO") Framework Convention on Tobacco Control (the "FCTC"), which entered into force in 2005.

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

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

To date, 182 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.

2 unchanged sentences

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.

The Tenth Session of the CoP to the FCTC took place in February 2024.

According to reports and decisions published, neither new decisions nor new policy recommendations on novel and emerging tobacco products were adopted.

The WHO study group on tobacco product regulation published their ninth report on the scientific basis of tobacco product regulation in August 2023.

The report is based on a review of scientific evidence related to novel and emerging nicotine and tobacco products, such as electronic nicotine delivery systems ("ENDS"), electronic non-nicotine delivery systems and HTPs.

The report concludes by making a number of policy recommendations on HTPs and ENDS that, if implemented, could restrict both the availability of these products and the access to accurate information about them.

The Tenth Session of the CoP took place in February 2024.

No new decisions or policy recommendations on novel and emerging tobacco products were adopted.

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

1 unchanged sentence

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

We believe that when better alternatives to cigarettes exist, the discussion should not be whether these alternatives should be made available to the more than one billion people who smoke cigarettes today, but how fast, and within what regulatory framework to maximize their adoption while minimizing unintended use.

Therefore, we advocate for regulatory frameworks that are based on a continuum of risk where non-combustible products fall below combustible cigarettes.

Product regulation should include measures that encourage and accelerate switching to non-combustible products, for example, by allowing adult consumers who would not otherwise quit smoking cigarettes to receive truthful and non-misleading information about such alternatives to enable them to make informed decisions and by applying uniform product standards to enable manufacturers to demonstrate the reduction in harmful and potentially harmful constituents, as well as the absence of combustion.

Therefore, we advocate for

regulatory frameworks that are based on a continuum of risk where non-combustible products fall below combustible cigarettes.

And we 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.

Product regulation should include measures that encourage and accelerate switching to non-combustible products, for example, by allowing adult consumers who would otherwise continue smoking cigarettes to receive truthful and non-misleading information about such alternatives to enable them to make informed decisions and by applying uniform product standards to enable manufacturers to demonstrate the reduction in HPHCs, as well as the absence of combustion.

Regulation should also include specific rules for ingredients, labeling and consumer communication, and should ensure that the public is informed about the health risks of all combustible and non-combustible tobacco and nicotine-containing products.

Importantly, regulation must include measures designed to prevent initiation by youth and non-smokers.

We support mandated health warnings, minimum age laws, restrictions on advertising, and smoking restrictions in public spaces.

Importantly, regulation must include measures designed to prevent initiation by youth and non-nicotine users.

We support mandated accurate and factual health warnings on packaging, minimum age laws, restrictions on advertising, and smoking restrictions in public spaces.

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, illicit cigarettes or illicit SFPs.

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.

We believe that such tax policies undermine public health by encouraging consumers to turn to illicit trade, and ultimately undercut government revenue objectives, disrupt the competitive environment, and encourage criminal activity.

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.

Regulatory Restrictions

SFP Sales Prohibitions :

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

Significant markets that have prohibited or severely restricted the sale of one or more category of SFP include Argentina, Brazil, Canada, India, Mexico, Turkey, Australia, Thailand, and Vietnam.

In the U.S., some states and municipalities have introduced stringent restrictions on the sale of certain SFPs, including those authorized by the FDA.

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

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

By contrast, we support regulation that sets clear standards for all SFP categories and propels innovation to benefit adult smokers who would otherwise continue to smoke cigarettes.

EU Tobacco Products Directive ("TPD") :

3 unchanged sentences

• health warnings covering 65% of the front and back panels of cigarette packs, with an option for Member States to further standardize tobacco packaging, including the introduction of plain packaging;

• a ban on characterizing flavors in some tobacco products, with a transition period for menthol that expired in May 2020;

• security features and tracking and tracing measures that became effective in May 2019;

• a ban on characterizing flavors in some tobacco products;

• security features and tracking and tracing measures;

• a framework for the regulation of novel tobacco products and e-cigarettes, including requirements for health warnings and information leaflets, a prohibition on product packaging text related to reduced risk, and the introduction of notification requirements or authorization procedures in advance of commercialization.

In May 2021, the European Commission published its first report on the application of the TPD.

The report identifies significant progress made due to the implementation of the TPD and where there is still room for improvement.

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

The TPD reportedly achieved the

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

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

In February 2024, the European Commission published an updated implementation roadmap to Europe's Beating Cancer Plan (the "Plan").

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.

Further developments concerning a revision of the TPD are expected during the mandate of the European Commission that took office in December 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 and roll-your-own tobacco products.

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

3 unchanged sentences

Any final amendments to TED require unanimous agreement by all EU Member States, followed by transposition of TED into national legislation.

A potential enforcement date for any changes to TED, after the transposition in Member States' national legislation, could be 2027.

Plain Packaging and Other Packaging Restrictions :

6 unchanged sentences

Restrictions and Bans on the Use of Ingredients :

The WHO and others in the public health community have recommended restrictions or total bans on the use of some or all ingredients in tobacco products, including menthol.

Broad restrictions and ingredient bans would require us to reformulate our American blend tobacco products and could reduce our ability to differentiate these products in the market in the long term.

In many countries, menthol bans would eliminate the entire category of mentholated tobacco products.

The WHO and others in the public health community have recommended restrictions or total bans on the use of some or all ingredients in both combustible and SFPs, including menthol.

Broad restrictions and ingredient bans would require us to reformulate our American blend tobacco products, which could reduce our ability to differentiate these products in the market in the long term.

In many countries, menthol or flavor bans would eliminate entire product categories.

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

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.

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

Currently, all but five EU Member States have transposed this directive, 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.

To date, our experience is generally consistent with this expectation.

There has been some short-term disruption in countries that have implemented the ban, most notably in Italy, 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, including Poland, could be more significant in duration or magnitude.

But our fundamental view remains that we do not expect a meaningful long-term 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.

1 unchanged sentence

Turkey banned menthol as of May 2020.

Broader ingredient bans have been adopted by Brazil and Canada.

Broader ingredient bans have been adopted by Brazil (pending a court decision) and Canada.

In the U.S., certain states and localities have adopted, or are considering adopting, flavor bans that apply to SFPs.

Bans on Display of Tobacco Products at Retail :

In a number of our markets, including, but not limited to, Australia and Russia, governments have banned the display of tobacco products at the point of sale.

In a number of our markets, including, but not limited to, Australia, Canada and Russia, governments have banned the display of tobacco products at the point of sale.

Other countries are considering similar bans.

2 unchanged sentences

The FCTC's non-binding guidelines recommend that governments prohibit all forms of communication with adult smokers.

Restrictions on Product Design:

Product Standards and Restrictions on Product Design :

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.

Some members of the public health community are calling for the further standardization of tobacco products by requiring, for example, that cigarettes have a certain minimum diameter, which would result in a ban on slim cigarettes, or requiring the use of standardized filter and cigarette paper designs.

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, 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.

In the Netherlands, an anti-smoking organization has brought a lawsuit to force the government to require a different test method for measuring cigarette emissions than what is currently required under EU law, which, if allowed, could lead to a de facto ban on manufactured cigarettes in the Netherlands and, potentially, in other EU countries.

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.

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, Lebanon, the Philippines, Saudi Arabia, Tajikistan, Tunisia, the United Arab Emirates ("UAE") and Uzbekistan, and voluntary in Algeria, Azerbaijan, Colombia, Costa Rica, Dominican Republic, Indonesia, Kazakhstan, Kyrgyzstan, Morocco, Russia, South Africa, Vietnam, the U.K.

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

For e-Vapor products, 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, the Philippines, Russia, the UAE, and Saudi Arabia and Tajikistan, and voluntary in Azerbaijan, Costa Rica, Dominican Republic, France, Indonesia, Kazakhstan, the Philippines, Russia, the U.K., and Ukraine.

Currently, industry standards setting minimum quality and safety requirements for modern oral nicotine pouches have been adopted in Angola, Armenia, Bahrain, Costa Rica, Malawi, Mexico, Pakistan, Sweden, the UAE, the U.K., and Ukraine.

These standards are voluntary, except for the UAE, where they are mandatory.

We expect other governments to consider similar product standards for all novel tobacco and nicotine-containing products and encourage making them mandatory.

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

The pace and scope of restrictions on the use of our products have increased significantly in most of our markets.

Many countries around the world have adopted, or are likely to adopt, regulations that restrict or ban smoking and use of nicotine-containing products in public and/or work places, restaurants, bars and nightclubs.

Many countries around the world have adopted, or are likely to adopt, regulations that restrict or ban smoking and use of certain nicotine-containing products in public and/or workplaces, restaurants, bars and nightclubs.

Some public health groups have called for, and some countries, regional governments and municipalities have adopted or proposed, bans on smoking in outdoor places, as well as bans on smoking in cars (typically, when minors are present) and private homes.

On December 3, 2024, the EU Council adopted its legally non-binding recommendation on smoke- and aerosol-free environments.

While the recommendations recognize scientifically proven differences between smoke-free and combustible products, they nevertheless encourage EU member states to restrict usage of both conventional and novel tobacco products in indoor public spaces and some outdoor areas.

Each member state is to decide whether or not to implement these recommendations.

Generation Bans :

Certain regulators are considering generation sales bans, which prohibit the sale of certain tobacco or nicotine products to people born after a certain year.

In December 2022, New Zealand adopted regulatory measures restricting the sale and supply of smoked tobacco products, including prohibiting the sale of smoked tobacco products to anyone born on or after January 1, 2009.

These measures were limited to smoked tobacco products and did not apply to heated tobacco products and e-cigarettes.

The New Zealand parliament repealed the measures in February 2024, before they were implemented.

On November 5, 2024, the UK government introduced a bill to the parliament, which if adopted, would ban the sale of tobacco products, including HTPs, herbal smoking products and cigarette papers to those born on or after January 1, 2009.

Other Regulatory Issues :

1 unchanged sentence

These include regulations intended to reduce the number of retailers selling tobacco products by, for example, reducing the overall number of tobacco retail licenses available or banning the sale of tobacco products within specified distances of certain public facilities.

Other regulators are also considering generation sales bans, which prohibit the sale of certain tobacco or nicotine products to people born after a certain year.

On December 13, 2022, the New Zealand parliament passed a bill introducing regulatory measures restricting the sale and supply of smoked tobacco products, including reducing the number of retail outlets licensed to sell smoked tobacco products, imposing a maximum limit of nicotine content for smoked tobacco products and prohibiting the sale of smoked tobacco products to anyone born on or after January 1, 2009.

These measures are limited to smoked tobacco products and do not apply to heated tobacco products and e-cigarettes.

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

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

The changes took effect on July 1, 2024.

In Mexico, 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;

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

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

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

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

The regulatory framework contains a minimum legal age (18 years) to purchase, a nicotine limit, and a labelling requirement.

In Belgium, a Royal Decree banning nicotine pouches entered into force on July 1, 2023, with a sell-off period from retail to consumer as of October 1, 2023.

On March 22, 2023, a bill amending the Tobacco Hazards Prevention and Control Act in Taiwan went into effect.

It regulates heated tobacco products and bans e-cigarettes.

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 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.

The country had previously banned the use of e-cigarettes in 2011.

In a limited number of markets, most notably Japan, we are dependent on governmental approvals that may limit our pricing flexibility.

The EU Single-Use Plastics Directive, which will require tobacco manufacturers and importers to cover the costs of public collection systems for tobacco product filters, under Extended Producer Responsibility ("EPR") schemes, came into force on July 2, 2019.

To date, some member states transposed the Directive into national legislation.

By the end of 2024, most EU Member States are expected to bring into force national legislation for mandatory EPR schemes and related EPR costs for tobacco manufacturers and importers.

As of December 31, 2024, the majority of EU Member States transposed the directive into national legislation and brought into force mandatory EPR schemes and related EPR costs for tobacco manufacturers and importers.

We currently expect further adoption of similar laws in other jurisdictions, and we are monitoring developments in this area.

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

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

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

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

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

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

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

Travelers are also forbidden from bringing ESDs into the country.

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.

In the Netherlands, several public health organizations have requested that the Dutch enforcement body enforce the requirements for maximum tar, nicotine, and carbon monoxide ("TNCO") emissions levels for cigarettes using a test method other than the method currently set forth in the EU TPD and transposed into national legislation.

This request followed publication of a report by the Dutch State Institute for Public Health & Environment, which found that all cigarette brands sold in the Netherlands exceeded the maximum TNCO levels when measured under an alternative method.

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

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

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

Illicit Trade:

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;

this includes counterfeit, contraband and the persistent problem of “illicit whites,” which are cigarettes legally purchased in one jurisdiction for the sole purpose of being exported and illegally sold in another jurisdiction where they have no legitimate market.

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.

In November 2012, the FCTC adopted the Protocol to Eliminate Illicit Trade in Tobacco Products (the “Protocol”), which includes supply chain control measures, such as licensing of manufacturers and distributors, enforcement of these control measures in free trade zones, controls on duty free and Internet channels and the implementation of tracking and tracing technologies.

To date, 68 Parties, including the EU, have ratified it.

The Protocol came into force in September 2018.

Since then, implementation in national legislations has been ongoing.

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

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

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)

Our Approach to SFPs:

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

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

Cigarettes burn tobacco, which produces smoke.

As a result of the combustion process, the smoker inhales various toxic substances.

In contrast, SFPs do not burn tobacco and therefore contain significantly lower levels of harmful and potentially harmful constituents ("HPHCs") than found in cigarette smoke.

Our SFPs and commercial activities for these products are designed for, and directed toward, current adult smokers and users of nicotine-containing products.

We put significant effort to restrict access to our products from non-smokers and youth.

For adult smokers who would otherwise continue to smoke cigarettes, we believe that SFPs, while not risk-free, offer a much better choice.

Accordingly, our key strategic priorities are to:

(i) continue developing and commercializing products that have the potential to present less risk of harm to adult smokers who switch to such products versus continued cigarette smoking;

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

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

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

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

We are judiciously reallocating resources from cigarettes to SFPs and are streamlining our cigarette portfolio.

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

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

Our efforts are guided by the following key objectives:

• to develop SFPs that adult smokers who would otherwise continue to smoke cigarettes find to be satisfying alternatives to smoking;

• for those adult smokers, our goal is to offer SFPs with a scientifically substantiated risk-reduction profile that approaches as closely as possible the risk-reduction profile associated with smoking cessation;

Our SFP Platforms:

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

Therefore, we are developing a portfolio of products intended to appeal to a variety of distinct adult consumer preferences and achieve population harm reduction.

Five PMI-developed or improved SFP platforms are in various stages of development and commercialization readiness:

Platform 1 uses a precisely controlled heating device incorporating our IQOS HeatControl technology, into which a specially designed and proprietary tobacco unit is inserted in a holder and heated to generate an aerosol.

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”).

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

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

We believe that there is full comparability between the 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 by IQOS brand.

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

As a result of consumer testing feedback, the design of our current Platform 2 technology has been discontinued.

We are assessing alternative designs for this consumer segment.

Platform 3 uses a nicotine salt and is composed of two parts:

(1) a consumable that contains a highly soluble encapsulated nicotine salt powder and (2) a non-electric device that activates it.

Once a consumable is inserted into the mechanical device, the nicotine salt powder is aerosolized upon inhalation.

The results of our pharmacokinetic and pharmacodynamic studies related to this version indicate that, subject to a period of adaptation to the product, the product has potential as an acceptable alternative to continued cigarette smoking in terms of product satisfaction.

We are working on product modifications to enable adult smokers, who are looking for better alternatives to cigarettes, to switch to a Platform 3 product.

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

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

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

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

as the BIDI® Stick.

The agreement grants PMI certain intellectual property rights relating to the premium e-vapor devices and, potentially, other newly developed devices, to permit PMI to manufacture, promote, sell, and distribute the e-vapor device and, to the extent included, other newly developed devices in international markets outside of the U.S.

Platform 5 covers snus and modern oral nicotine pouches.

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

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

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

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

and cellulose substrate.

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

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

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

In 2022, we significantly expanded our Platform 5 products portfolio with the acquisition of Swedish Match.

The acquisition also represents an expansion of our SFP presence in the U.S.

market, where Swedish Match's ZYN brand is the leading nicotine pouch franchise.

We aim to expand our brand portfolio and market positions with additional SFPs.

In addition, we continue to use our expertise, technology and capabilities to explore new growth opportunities beyond our current business, including products that do not contain nicotine or tobacco.

Commercialization of SFPs:

We are continuing to develop a multiplatform approach and tailoring our commercialization strategy to the characteristics of each specific market.

We focus our commercialization efforts on consumer retail experience, guided consumer trials and customer care, and increasingly, digital communication programs and e-commerce.

In order to accelerate switching to our Platform 1 products, our initial market introductions typically entail one-on-one consumer engagement (in person or by digital means) and device discounts.

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

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

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

Since then, we have continuously expanded our commercialization activities.

As of 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.

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

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

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

Product Warranty in this report.

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

(the “Altria Agreement”).

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

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

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

• In late 2022, we began commercializing our BONDS product in the Philippines and Colombia.

• Since August 2020, we have launched and expanded our portfolio of vaping products (branded VEEV ) in 42 markets.

• Following our acquisition of Swedish Match, we have access to a strong portfolio of Swedish Match brands in both the snus and nicotine pouch categories.

Nicotine pouches are currently available in 32 markets.

SFP Regulation and Taxation:

SFPs contain nicotine and are addictive and 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.

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

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

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

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

By contrast, we support regulation that sets clear standards for all SFP categories and propels innovation to benefit adult smokers who would otherwise continue to smoke cigarettes.

In the United States, an established regulatory framework for assessing “Modified Risk Tobacco Products” ("MRTP") and “New Tobacco Products” exists under the jurisdiction of the FDA.

We submitted to the FDA a Modified Risk Tobacco Product Application (“MRTPA”) for our Platform 1 product in December 2016, and a Premarket Tobacco Product Application (“PMTA”) for our Platform 1 product in March 2017.

On April 30, 2019, the FDA determined that a version of our Platform 1 product, namely, IQOS 2.4 and three related consumables, is appropriate for the protection of public health and authorized it for sale in the United States.

SFP Commercialization and Risk Statement Authorizations

Certain markets have instituted regulatory authorization processes that govern the commercialization of SFPs or the use of statements addressing SFP harm-reduction.

FDA Authorization Process and Status of PMI SFPs :

In the United States, an established regulatory framework for assessing “New Tobacco Products” and “Modified Risk Tobacco Products” ("MRTP") exists under the jurisdiction of the FDA.

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

FDA Review of IQOS :

We submitted to the FDA a Modified Risk Tobacco Product Application (“MRTPA”) for IQOS in December 2016, and a Premarket Tobacco Product Application (“PMTA”) for IQOS in March 2017.

On April 30, 2019, the FDA determined that a version of IQOS , namely, IQOS 2.4 and three related consumables, is appropriate for the protection of public health and authorized it for sale in the United States.

The FDA’s decision followed its comprehensive assessment of our PMTA.

On December 7, 2020, the FDA reached the same determination for the IQOS 3 device and authorized that version of our Platform 1 product for sale in the United States.

On July 7, 2020, the FDA determined that the available scientific evidence demonstrates that the issuance of an exposure modification order would be appropriate for the promotion of public health and authorized the marketing of a version of our Platform 1 product, namely IQOS 2.4 and three related consumables, as an MRTP.

On December 7, 2020, the FDA reached the same determination for the IQOS 3 device and authorized that version of IQOS for sale in the United States.

On July 7, 2020, the FDA determined that the available scientific evidence demonstrates that the issuance of an exposure modification order would be appropriate for the promotion of public health and authorized the marketing of a version of IQOS , namely IQOS 2.4 and three related consumables, as an MRTP with reduced exposure claims.

On March 11, 2022, the FDA reached the same determination for the IQOS 3 device.

The FDA authorized the marketing of this product in the U.S.

9 unchanged sentences

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

We also received an exposure modification order for IQOS 3.

We look forward to working with the FDA to provide any additional information they may require to market Platform 1 products with reduced risk claims.

The FDA’s PMTA and MRTP orders do not mean that the agency “approved” our Platform 1 product.

We also received an exposure modification order for IQOS 3 in March 2022.

The FDA’s PMTA and MRTP orders do not mean that the agency “approved” IQOS .

These authorizations are subject to strict marketing, reporting, and other requirements, and are not a guarantee that the product will remain authorized, particularly if there is a significant uptake in youth or non-smoker initiation.

The FDA will monitor the marketing of the product.

On March 18, 2021, we submitted to the FDA a supplemental MRTPA ("sMRTPA") for IQOS 3 requesting authorization to market this version of the device as a MRTP with reduced exposure information like IQOS 2.4.

In June 2021, the FDA formally accepted and filed our sMRTPA for substantive scientific review, following a period for the public to provide comments on our application.

The FDA authorized our sMRTPA for IQOS 3 by issuing a Modified Risk Granted Order – Exposure Modification on March 11, 2022.

On January 26, 2023, the FDA authorized the marketing of two new tobacco-flavored consumables ( Marlboro Sienna HeatSticks and Marlboro Bronze HeatSticks ) and a modified version of the authorized Marlboro Amber HeatSticks .

4 unchanged sentences

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

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

As our applications proceed through the review process, we have responded to FDA requests for additional information.

The FDA may make further information requests or conduct subsequent inspections to verify the information we submitted.

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

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

The MRTP renewal applications were timely filed in accordance with FDA direction, and we believe that

we should be permitted to continue to use the modified exposure claim with respect to those products that received exposure modification orders until the FDA decides on our MRTP renewal applications.

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

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

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

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

2 unchanged sentences

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

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

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

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

Swedish Match USA, Inc.

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

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

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

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

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

Public comments on these applications 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.

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

addressed in September 2020.

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

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

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.

2 unchanged sentences

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

Some states and municipalities in the U.S.

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

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.

HTPs are technically covered by this rule;

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

This approach would be consistent with the original marketing order granted for Heatsticks where the FDA required 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.

The final rule is the subject of litigation in the U.S.

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

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

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

Proceedings remain ongoing.

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.

The FDA stated that these proposed requirements would help protect public health by, among other things, minimizing or preventing contamination and limiting additional risks by ensuring product consistency.

The FDA held a public hearing on April 12, 2023, to gather additional comments from stakeholders, including the industry, the scientific community, advocacy groups, and the public.

The proposed rule was also made available for public comment for 180 days.

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

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

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

and (b) prohibit characterizing flavors in cigars.

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

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

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

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

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

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

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, 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.

These standards are voluntary.

We expect other governments to consider similar product standards for all novel tobacco and nicotine-containing products and encourage making them mandatory.

All EU member states have transposed the EU TPD, including the provisions on novel tobacco products, such as heated tobacco units, and e-cigarettes.

Most of the EU member states require a notification submitted six months before the intended placing on the market of such products, while some require pre-market authorizations for the introduction of such products.

To date, we have filed a comprehensive dossier summarizing our scientific assessment of our Platform 1 product in over 20 member states.

FDA Review of Swedish Match Products :

Premarket tobacco applications for 20 varieties of ZYN nicotine pouches were submitted in March 2020.

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

addressed in September 2020.

On January 16, 2025, the FDA determined that all 20 ZYN nicotine pouch varieties currently marketed in the U.S.

met the applicable public health standard and were appropriate for the protection of public health and, therefore, authorized them for sale in the United States.

In its assessment, the FDA concluded that “among several key considerations, the agency’s evaluation showed that, due to substantially lower amounts of harmful constituents than cigarettes and most smokeless tobacco products, such as moist snuff and snus, the authorized products pose lower risk of cancer and other serious health conditions than such products.” Prior to the authorization, these 20 varieties of ZYN pouches were marketed in the United States consistent with the FDA's practice not to take enforcement action to prevent products with respect to which applications were filed prior to a September 9, 2020 deadline from being marketed.

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

The FDA has not issued a decision on these applications, and these ZYN products are not marketed in the United States.

In April 2024, we submitted MRTPAs for ZYN products currently marketed in the United States and requested authorization of the modified risk claim.

In February 2025, the FDA formally accepted our MRTPAs.

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

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

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

Swedish Match USA, Inc.

was authorized to market these products with the claim, “Using General snus instead of cigarettes puts you at a lower risk of mouth cancer, heart disease, lung cancer, stroke, emphysema, and chronic bronchitis.” On November 7, 2024, the FDA renewed the General snus modified risk orders, with a stated expiration date in November 2032.

Other Commercialization and Risk Statement Authorization Frameworks :

On March 22, 2023, a bill amending the Tobacco Hazards Prevention and Control Act in Taiwan went into effect.

It regulates heated tobacco products and bans e-cigarettes.

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

On March 23, 2023, the Greek Ministry of Health authorized a claim for IQOS with HEETS AMBER to inform Greek IQOS users about reduction in emissions of toxicants when using such product compared to cigarette smoking.

2 unchanged sentences

A reduction in the concentration of chemical substances with recognized toxicity does not mean a corresponding reduction in risk for health.

The aerosol of this tobacco product contains nicotine and other hazardous chemicals.

The aerosol of this tobacco

product contains nicotine and other hazardous chemicals.

This tobacco product harms your health and is addictive.

The best choice is to quit tobacco and nicotine use altogether.” With this authorization, Greece is the second country officially recognizing the reduction in level of toxicants in the IQOS aerosol compared to cigarette smoke.

On September 12, 2022, Norway rejected a submission for authorization of HEETS as a novel tobacco product.

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, including e-cigarettes and tobacco free nicotine pouches.

In February of 2025, the Greek Ministry of Health authorized a substantially similar claim and disclaimer for IQOS ILUMA devices with seven TEREA variants (Amber, Bronze, Russet, Sienna, Silver, Teak and Yellow).

SFP Scientific Findings

We make our scientific findings publicly available for scrutiny and peer review through several channels, including our websites.

From time to time, adult consumers, competitors, members of the scientific community, and others inquire into our scientific methodologies, challenge our scientific conclusions or request further study of certain aspects of our SFPs and their health effects.

We are committed to a robust and open scientific debate and believe that such debate should be based on accurate and reliable scientific information.

We seek to provide accurate and reliable scientific information about our SFPs;

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

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

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

Although we believe that this is sensible from the public health perspective, there is no guarantee regulators will continue this approach.

Further, there can be no assurance that we will succeed in our efforts to replace cigarettes with SFPs or that regulation will allow us to commercialize SFPs in all markets, to communicate about our SFPs, including making scientifically substantiated risk-reduction claims, or to treat SFPs differently from cigarettes.

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:

2 unchanged sentences

Committee on Toxicity published its assessment of the risk of heat-not-burn products relative to cigarette smoking.

This assessment included analysis of scientific data for two heat-not-burn products, one of which was our Platform 1 product.

This assessment included analysis of scientific data for two heat-not-burn products, one of which was IQOS .

The assessment concluded that, while still harmful to health, compared with the known risks from cigarettes, heat-not-burn products are probably less harmful.

Subsequently, in February 2018, Public Health England published a report stating that the available evidence suggests that heat-not-burn products may be considerably less harmful than cigarettes but more harmful than e-cigarettes.

In May 2018, the German Federal Institute for Risk Assessment (“BfR”) published a study on the Platform 1 aerosol relative to cigarette smoke using the Health Canada Intense Smoking Regimen.

In May 2018, the German Federal Institute for Risk Assessment (“BfR”) published a study on IQOS aerosol relative to cigarette smoke using the Health Canada Intense Smoking Regimen.

BfR found reductions in selected HPHCs in a range of 80-99%.

This publication indicates that significant reductions in the levels of selected toxicants are likely to reduce toxicant exposure, which BfR stated might be regarded as a discrete benefit compared to combustible cigarettes.

In May 2018, the Dutch National Institute for Public Health and Environment (“RIVM”) published a factsheet on novel tobacco products that heat rather than burn tobacco, focusing on our Platform 1 product.

RIVM analyzed the aerosol generated by our Platform 1 product and concluded that the use of this product, while still harmful to health, is probably less harmful than continuing to smoke cigarettes.

In May 2018, the Dutch National Institute for Public Health and Environment (“RIVM”) published a factsheet on novel tobacco products that heat rather than burn tobacco, focusing on IQOS .

RIVM analyzed the aerosol generated by our IQOS product and concluded that the use of this product, while still harmful to health, is probably less harmful than continuing to smoke cigarettes.

In June 2018, the Korean Food and Drug Administration (“KFDA”) issued a statement on products that heat rather than burn tobacco.

The KFDA tested three heat-not-burn products, one of which was our Platform 1 product.

The KFDA tested three heat-not-burn products, one of which was IQOS .

The KFDA confirmed that the levels of the nine HPHCs tested in the aerosol of these products were on average approximately 90% lower compared to those measured in the cigarette smoke of the top five cigarette brands in South Korea.

5 unchanged sentences

House of Commons published a report of its inquiry into e-cigarettes and heat-not-burn products.

The report concluded that e-cigarettes are significantly less harmful to health than smoking tobacco.

The report concluded that e-cigarettes are significantly less harmful to health than

smoking tobacco.

The report also observed that for those smokers who do not accept e-cigarettes, heat-not-burn products may offer a public health benefit despite their relative risk.

1 unchanged sentence

Committee on Advertising Practice announced the removal of a prohibition of health claims in the advertising of e-cigarettes in the U.K., effective November 2018.

In November 2018, the Eurasian Economic Commission (regulatory body of the Eurasian Union consisting of Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia) published the results of its commissioned study on novel nicotine-containing

products, including our Platform 1 product.

The study confirms significantly lower levels of HPHCs in the aerosol generated by this product compared to cigarette smoke.

In January 2019, scientific media published the results of the study of the China National Tobacco Quality Supervision and Test Centre (“CNTQST”) comparing the aerosol generated by our Platform 1 product with cigarette smoke.

The CNTQST found that the former contained fewer, and lower levels of, harmful constituents than the latter and concluded that the lower temperature of heating tobacco in our Platform 1 product contributed to the difference.

The CNTQST found that the former contained fewer, and lower levels of, harmful constituents than the latter and concluded that the lower temperature of heating tobacco in IQOS contributed to the difference.

The CNTQST stated that the reduction in emissions of harmful constituents cannot be interpreted as a harm/risk reduction for cigarette smokers in the same proportion.

6 unchanged sentences

The foregoing scientific findings of government agencies may not be indicative of the measures that the relevant government authorities could take in regulating our products.

We make our scientific findings publicly available for scrutiny and peer review through several channels, including our websites.

We are committed to a robust and open scientific debate and believe that such debate should be based on accurate and reliable scientific information.

We seek to provide accurate and reliable scientific information about our SFPs;

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

Although we believe that this is sensible from the public health perspective, we cannot guarantee that regulators will continue this approach.

There can be no assurance that we will succeed in our efforts to replace cigarettes with SFPs or that regulation will allow us to commercialize SFPs in all markets, to communicate about our SFPs, including making scientifically substantiated risk-reduction claims, or to treat SFPs differently from cigarettes.

Legal Challenges to SFPs

8 unchanged sentences

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

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

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

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

and other U.S.

localities where flavor bans may apply.

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:

In December 2013, we established a strategic framework with Altria Group, Inc.

(“Altria”) setting out terms on how the parties would collaborate to develop and commercialize e-vapor products and commercialize two of our SFPs in the U.S.

In late 2018, Altria announced that it will participate in the e-vapor category only through another e-vapor company in which Altria acquired a minority interest.

In September 2019, Altria's subsidiary, Philip Morris USA Inc.

(“PM USA”), began commercialization of a version of our Platform 1 product in the U.S.

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

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

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

For more details, see Part I, Item 1.

Financial Statements— Note 18.

Acquisitions and Divestitures to our condensed consolidated financial statements in this report.

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

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

Other Developments:

In September 2017, we announced our support of the Foundation for a Smoke-Free World (the "Foundation").

The Foundation is an independent, nonprofit organization dedicated to reducing the health impacts of smoking as set out in its Articles of Incorporation and its Bylaws.

In September 2020, our pledge agreement with the Foundation was amended.

We contributed $45 million in 2020, $40 million in 2021, $17.5 million in 2022, and had expected to contribute up to $35 million annually from 2023 through 2029, as specified in the amended pledge agreement.

In 2023, the Foundation and PMI agreed to terminate the existing pledge agreement and PMI has made final grant payments totaling $140 million, commensurate with the early termination of the pledge agreement.

As part of a previously announced 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 previously 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.

Illicit Trade

We generally estimate that, excluding China and the U.S., illicit trade may account for as much as 15% of global cigarette consumption;

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.

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

To date, 70 Parties, including the EU, have ratified it.

The Protocol came into force in September 2018.

Since then, implementation in national legislations has been ongoing.

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

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

Governmental Investigations

2 unchanged sentences

Contingencies .

In November 2010, a World Trade Organization ("WTO") panel issued its decision in a dispute between the Philippines and Thailand, concerning a series of Thai customs and tax measures affecting cigarettes imported by Philip Morris (Thailand) Limited ("PM Thailand") into Thailand.

The decision concluded that Thailand had no basis to find that PM Thailand's declared customs values and taxes paid were too low, as alleged by the Thai government and created obligations for Thailand to revise its laws, regulations, or practices affecting the customs valuation and tax treatment of future cigarette imports.

Thailand agreed to fully comply with the decision, but the Philippines asserts that to date Thailand has not fully complied with the WTO panel decision and commenced challenges at the WTO Appellate Body.

The WTO Appellate Body is not operational, and the appeals by Thailand are suspended indefinitely.

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

War in Ukraine

In Ukraine, our main priority remains the safety and security of our employees and their families in the country.

We continue commercial activities in select locations where safety allows, in order to provide product availability and service to adult consumers, and supplies the market from production centers outside Ukraine, as well as through a contract manufacturing arrangement.

Production at our factory in Kharkiv remains suspended.

On June 20, 2023, we announced the investment of $30 million in a new production facility in the Lviv region, in Western Ukraine.

Preparatory work for the facility began in July 2023.

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

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.

This includes 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.

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.

For further details, see Note 8.

Contingencies and Note 12.

Related Parties – Equity Investments and Other .

These developments above have and will continue to have a material adverse impact on our business, results of operations, cash flows and financial position, and may result in impairment charges.

For further details, see " Trade Policy " and " Cautionary Factors That May Affect Future Results" sections of this MD&A.

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 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.

For the year ended December 31, 2023, the impact on cost of sales was approximately $580 million and while tobacco leaf costs remain a headwind we expect certain inflationary elements to ease, with a more moderate overall increase in 2024.

This impact has been, and we expect it to continue to be, significantly offset by the positive elements of pricing, productivities and the mitigating factors as we progress through the year.

The net result of the inflationary impacts and our efforts to mitigate these impacts were not material to PMI during these periods.

Inflationary impacts driven by higher wages have resulted from merit increases that reflect local inflation as we continuously evaluate our compensation and benefit offerings to be competitive with the current market.

Increased transportation costs resulted from increased shipping rates for all modes of transportation (air, ocean and inland) due to ocean and air capacity constraints.

Increases in cost of sales resulted from higher cost of direct materials due to the pass on of energy, transportation, labor and commodity price increases from suppliers as well as increases in utility costs, including gas and electricity prices, primarily in Europe resulting from the war in Ukraine.

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

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

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

We expect certain of these inflationary elements to ease in 2024 as noted above.

We have taken several actions to mitigate these inflationary pressures.

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

Asset Impairment and Exit Costs

We discuss asset impairment and exit costs related to restructuring activities in Note 15.

Asset Impairment and Exit Costs to our condensed consolidated financial statements.

GAAP Treatment of Highly Inflationary Economies

We apply highly inflationary accounting to the results of operations of our subsidiaries in Argentina, Turkey and Lebanon as the cumulative inflation rate in these economies for a three-year period meets or exceeds 100%, in accordance with U.S.

As a result, monetary assets and liabilities denominated in local currencies are remeasured to the U.S.

Dollar at each balance sheet date, with remeasurement gains and losses recognized in consolidated statement of earnings.

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

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

While, to date, the effect of climate-related laws and regulations on PMI has not been material to our business, results of operations or financial condition, consideration of environmental and climate-related laws and regulations is an integral aspect of PMI’s climate-related risk assessment process.

To this end, we actively monitor the existing and potential impact on PMI of significant pending or existing climate change-related legislation, regulations, international accords, reporting frameworks, standards, principles, and other forms of guidance.

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

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

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).

The agreement covers fifteen years, to January 29, 2038, with performance-review cycles and associated commitments, based on volume, to be confirmed for each three-year period, to allow flexibility for evolving market conditions.

The agreement gives PMI continued exclusive access to KT&G’s smoke-free brands and product-innovation pipeline, including offerings for low- and middle-income markets, that will enhance PMI’s existing portfolio of smoke-free products.

Products sold under the agreement will be subject to assessment to ensure they meet the regulatory requirements in the markets where they are launched, as well as PMI’s high standards of quality and scientific substantiation.

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

We discuss our equity investments in Note 12.

Related Parties - Equity Investments and Other to our condensed consolidated financial statements.

PMI complies with all applicable trade restrictions and requirements, including sanctions, in the markets in which it operates.

5 unchanged sentences

Pursuant to specific exemptions or licenses, or where sanctions do not apply to our business, PMI may make sales in countries subject to Trade Sanctions.

We do not do business or sell products in Iran, North Korea or Syria.

We sell cigarettes in Cuba under a distribution agreement.

These sales are permitted by U.S.

law under a License Exception for Agricultural Commodities, issued by the U.S.

Department of Commerce (Bureau of Industry and Security), and specifically granted to our distributor.

We do not do business or sell products in Belarus, Iran, North Korea or Syria.

The distribution agreement for the sale of our products in Cuba, under which we previously sold cigarettes in that market, has been terminated, effective February 1, 2025.

We no longer maintain an active distribution agreement for the sale of our products in Cuba.

Certain states within the U.S.

2 unchanged sentences

We do not believe such legislation has had a material effect on the price of our shares.

On June 24, 2021, the EU introduced sanctions in relation to Belarus aimed at specific sectors of the Belarus economy, including the tobacco sector.

Subsequently, seven non-EU countries (Norway, Iceland, Liechtenstein, North Macedonia, Bosnia and Herzegovina, Montenegro, and Albania) announced that they “aligned themselves” with the majority of the EU sanctions.

Switzerland and the U.K.

have also imposed sanctions similar in scope to the EU sanctions.

On August 9, 2021, the U.S.

imposed blocking sanctions on certain Belarusian individuals and entities pursuant to an Executive Order, which expanded the bases for the imposition of sanctions, including, among others, by authorizing the imposition by OFAC of blocking sanctions on persons operating in the tobacco sector of the Belarus economy.

From 2021 to 2023, the U.S., the EU, the U.K., Switzerland and several other jurisdictions supplemented their respective sanctions lists by including additional Belarusian sanctions targets.

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.

14 unchanged sentences

Igor Kesaev, a non-majority shareholder of Megapolis Distribution B.V.

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

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

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.

The U.S., the U.K., Switzerland and the EU banned the export of electric accumulators, static converters and electronic cigarettes and similar personal electric vaporizing devices, including IQOS devices, to Russia.

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.

1 unchanged sentence

Countermeasures include restrictions on export of certain goods from Russia, including tobacco-related production equipment, restrictions on lending to foreign borrowers, repatriation of dividends and transactions with securities and real estate involving companies from “hostile” countries (i.e., those which introduced sanctions in relation to Russia).

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

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

Quarters Ended September 30, Change

Fav./(Unfav.) Variance

Fav./(Unfav.)

2024 2023 Total Excl.

rency Acqui-sitions Price Vol/

(in millions)

Net Revenues $ 4,121 $ 3,823 7.8 % 8.7 % $ 298 $ (35) $ — $ 228 $ 105 $ —

Operating Income $ 2,020 $ 1,717 17.6 % 15.5 % $ 303 $ 37 $ — $ 228 $ 47 $ (9)

During the quarter, net revenues increased by 7.8%.

Net revenues, excluding currency and acquisitions, increased by 8.7%, reflecting:

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

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

Operating income increased by 17.6%.

Operating income, excluding currency and acquisitions, increased by 15.5%, primarily reflecting:

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

Nine Months Ended September 30, Change

Fav./(Unfav.) Variance

Fav./(Unfav.)

2024 2023 Total Excl.

rency Acqui-sitions Price Vol/

(in millions)

Net Revenues $ 11,301 $ 10,465 8.0 % 7.7 % $ 836 $ 34 $ — $ 596 $ 206 $ —

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

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 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.

The FCD admitted an appeal to the Federal Tax Court.

On June 19, 2024, PMI submitted an appeal.

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

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

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

Operating income increased by 12.9%.

Operating income, excluding currency and acquisitions, increased by 12.7%, primarily reflecting:

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;

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

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

In the 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

2024 2023 % / pp 2024 2023 % / pp

PMI Market Share

Cigarettes 30.1 % 30.5 % (0.4) 30.1 % 30.4 % (0.3)

Heated Tobacco Units 9.5 % 8.6 % 0.9 9.7 % 8.8 % 0.9

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

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 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

Quarters Ended September 30, Change

Fav./(Unfav.) Variance

Fav./(Unfav.)

2024 2023 Total Excl.

rency Acqui-sitions Price Vol/

(in millions)

Net Revenues $ 2,964 $ 2,777 6.7 % 12.1 % $ 187 $ (148) $ — $ 296 $ 39 $ —

Operating Income $ 960 $ 823 16.6 % 29.8 % $ 137 $ (129) $ 21 $ 296 $ 21 $ (72)

During the quarter, net revenues increased by 6.7%.

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

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:

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

Nine Months Ended September 30, Change

Fav./(Unfav.) Variance

Fav./(Unfav.)

2024 2023 Total Excl.

rency Acqui-sitions Price Vol/

(in millions)

Net Revenues $ 8,393 $ 7,922 5.9 % 13.4 % $ 471 $ (593) $ — $ 680 $ 306 $ 78

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

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 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 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 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.

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.

EA, AU & PMI DF:

Financial Summary

Quarters Ended September 30, Change

Fav./(Unfav.) Variance

Fav./(Unfav.)

2024 2023 Total Excl.

rency Acqui-sitions Price Vol/

(in millions)

Net Revenues $ 1,602 $ 1,571 2.0 % 7.4 % $ 31 $ (85) $ — $ 71 $ 45 $ —

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

During the quarter, net revenues increased by 2.0%.

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

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

Operating income increased by 2.5%.

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

Nine Months Ended September 30, Change

Fav./(Unfav.) Variance

Fav./(Unfav.)

2024 2023 Total Excl.

rency Acqui-sitions Price Vol/

(in millions)

Net Revenues $ 4,959 $ 4,771 3.9 % 10.5 % $ 188 $ (314) $ — $ 289 $ 213 $ —

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

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:

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

Operating income increased by 17.4%.

Operating income, excluding currency and acquisitions, increased by 30.5%, 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.

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

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 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

Quarters Ended September 30, Change

Fav./(Unfav.) Variance

Fav./(Unfav.)

2024 2023 Total Excl.

rency Acqui-sitions Price Vol/

(in millions)

Net Revenues $ 1,148 $ 895 28.3 % 30.5 % $ 253 $ (20) $ — $ 92 $ 133 $ 48

Operating Income $ 137 $ 98 39.8 % 20.4 % $ 39 $ 19 $ — $ 92 $ 116 $ (188)

During the quarter, net revenues increased by 28.3%.

Net revenues, excluding currency and acquisitions, increased by 30.5%, primarily reflecting:

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

Nine Months Ended September 30, Change

Fav./(Unfav.) Variance

Fav./(Unfav.)

2024 2023 Total Excl.

rency Acqui-sitions Price Vol/

(in millions)

Net Revenues $ 3,273 $ 2,732 19.8 % 18.7 % $ 541 $ 31 $ — $ 146 $ 364 $ —

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

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:

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

and favorable cigarette pricing.

Operating income decreased by 20.0%.

Operating income, excluding currency and acquisitions, decreased by 34.5%, mainly reflecting:

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 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 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.

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:

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

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

Financial Summary

Quarters Ended September 30, Change

Fav./(Unfav.) Variance

Fav./(Unfav.)

2024 2023 Total Excl.

rency Acqui-sitions Price Vol/

(in millions)

Net Revenues $ 76 $ 75 1.3 % 2.7 % $ 1 $ (1) $ — $ 2 $ — $ —

Operating Income / (Loss) $ (251) $ (37) -(100)% -(100)% $ (214) $ (4) $ — $ 2 $ — $ (212)

During the quarter, net revenues increased by 1.3%.

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

Nine Months Ended September 30, Change

Fav./(Unfav.) Variance

Fav./(Unfav.)

2024 2023 Total Excl.

rency Acqui-sitions Price Vol/

(in millions)

Net Revenues $ 246 $ 237 3.8 % 3.4 % $ 9 $ 1 $ — $ 10 $ — $ (2)

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

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 $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.

has adopted new and increased tariffs on countries and specific goods, subject to evolving exemptions, with additional tariff increases proposed but currently on pause.

Those changes, along with retaliatory actions by some trading partners, non-tariff restrictions or requirements being considered in connection with trade dispute negotiations, and the likelihood of additional developments, have created a volatile environment for global trade.

We expect the global tariff environment to remain volatile throughout 2025.

PMI is actively monitoring developments, evaluating all changes and adapting operations and compliance practices accordingly.

For further details, see the " Impact of Tariffs on Our Business " section of this MD&A.

PMI continues to monitor the development of new sanctions and other trade laws in order to ensure full compliance.

Acquisitions, Divestitures and Other Business Arrangements

We discuss our acquisitions and divestitures in Note 2.

Acquisitions and Divestitures to our condensed consolidated financial statements.

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

We discuss our equity investments in Note 13.

Related Parties - Equity Investments and Other to our condensed consolidated financial statements.

Climate Change Laws and Regulations

GAAP Treatment of Highly Inflationary Economies

We apply highly inflationary accounting to the results of operations of our subsidiaries in Argentina, Egypt, Turkey and Lebanon as the cumulative inflation rate in these economies for a three-year period meets or exceeds 100%, in accordance with U.S.

As a result, monetary assets and liabilities denominated in local currencies are remeasured to the U.S.

Dollar at each balance sheet date, with remeasurement gains and losses recognized in consolidated statement of earnings.

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

For the three months ended March 31, 2025 and 2024, exchange gains (losses) recognized resulting from remeasurement adjustments related to highly inflationary accounting, were not material.

Restructuring Activities

We discuss restructuring activities in Note 16.

Restructuring Activities to our condensed consolidated financial statements.

Impact of Inflation on Our Business

Like many other global companies, we have experienced inflationary pressures in 2022, 2023, 2024, including:

In 2025, we expect certain inflationary elements such as direct materials and utilities to stabilize, with a moderate overall increase in inflationary pressures driven by tobacco leaf costs.

The impact of inflation on cost of sales during the first quarter of 2025 was not material to our condensed consolidated financial statements.

Impact of Tariffs on Our Business

The current U.S.

and international political environment, including existing and potential changes to U.S.

policies related to global trade and tariffs, have resulted in uncertainty surrounding the future state of the global economy.

While the global tariff environment is volatile, as a global company with a broadly diversified production, a worldwide supplier network, including an established U.S.

manufacturing base for nicotine pouches, and existing supply chains that are largely self-contained within their respective trade regions, we currently believe we are well-positioned to mitigate potential supply chain challenges and that the changing tariff environment will not have a material impact on our business.

During the first quarter of 2025, the impact of new tariffs on our business was not material to our condensed consolidated financial statements.

We expect the global tariff environment to remain volatile throughout 2025.

We are actively monitoring developments in the global tariff environment and will continue to evaluate the potential impact of the announced tariffs and related developments on our business and financial condition, as well as on our suppliers, and the actions we may take to mitigate any impact.

For our risk factors related to the impact of tariffs, see our " Cautionary Factors That May Affect Future Results ” section of this Form 10-Q.

War in Ukraine

In Ukraine, our main priority remains the safety and security of our employees and their families in the country.

Production at our factory in Kharkiv remains suspended.

On June 20, 2023, we announced the investment of $30 million in a new production facility in the Lviv region, in Western Ukraine.

Preparatory work for the facility began in July 2023.

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

As of March 31, 2025, 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.

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

As of March 31, 2025, our Russian operations had approximately $3.7 billion in total assets, excluding intercompany balances, of which approximately $1.3 billion consisted of cash and cash equivalents held mostly in local currency (Russian rubles).

Additionally, PMI holds a 23% equity interest in JSC TK Megapolis, PMI's distributor in Russia (SSEA, CIS & MEA segment), which as of March 31, 2025 had a carrying value of $353 million.

For further details, see Note 13.

Goodwill and Other Intangible Assets, net and Note 18.

Acquisitions and Divestitures.

Related Parties – Equity Investments and Other.

These developments above have or may have a material adverse impact on our business, results of operations, cash flows and financial position, and may result in impairment charges.

For further details, see " Trade Policy " and " Cautionary Factors That May Affect Future Results " sections of this MD&A.

Financial Review

Cash Flow Highlights

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

(in millions) 2025 2024

3 unchanged sentences

Net Cash Provided by (Used in) Operating Activities

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 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.

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

For further detail on our factoring arrangements, see Note 13.

Sale of Accounts Receivable .

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

During the first three months of 2025, net cash used in operating activities was $350 million as compared to net cash provided by operating activities of $241 million in the first three months of 2024.

Excluding favorable currency movements, the unfavorable variance of $0.7 billion was due primarily to higher working capital requirements of $1.3 billion, partly offset by higher currency-neutral net earnings, excluding non-cash depreciation and amortization expense.

The higher working capital requirements in 2025 as compared with 2024 were primarily due to more cash used in inventories, coupled with more 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.

Excise tax payments included the disputed supplemental tax surcharge on heated tobacco products in Germany of approximately $0.8 billion as PMI elected to pay the supplemental tax surcharge in January 2025 to avoid the future addition of interest (for further details see – please refer to the MD&A segments Europe section where we describe the case in details).

For the full year 2025, we currently expect net cash provided by operating activities of more than $11 billion at prevailing exchange rates, subject to year-end working capital requirements.

This takes into account certain payments relating to the German tax surcharge and the U.S.

Tax Cuts and Jobs Act, which amount to approximately $1 billion.

Net Cash Provided by (Used in) Investing Activities

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.

During the first three months of 2025, net cash used in investing activities was $434 million as compared to $193 million in the first three months of 2024.

This increase in net cash used was primarily due to changes in the cash collateral posted for derivative instruments, reflecting the appreciation of the Euro and Swiss franc versus U.S.

Capital expenditures of $404 million during the first three months of 2025 decreased by $13 million as compared with the first three months of 2024.

The 2025 capital expenditures were primarily related to our ongoing investments in smoke-free product manufacturing capacity.

1 unchanged sentence

Net Cash Provided by (Used in) Financing Activities

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.

During the first three months of 2025, net cash provided by financing activities was $0.7 billion as compared to $1.1 billion in the first three months of 2024.

The decrease in net cash provided was primarily due to changes in the cash collateral received for derivative instruments, reflecting the appreciation of the Euro and Swiss franc versus U.S.

The decrease was partially offset by higher net borrowings in 2025 (primarily higher commercial paper outstanding in 2025, partly offset by long-term debt repayments in 2025 and long-term debt proceeds in 2024).

Debt and Liquidity

1 unchanged sentence

As a policy, we do not hold any investments in structured or equity-linked products.

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

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

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.

3 unchanged sentences

We expect that the combination of our long-term and short-term debt financing, the commercial paper program and the committed credit facilities, coupled with our operating cash flows, will enable us to meet our liquidity requirements.

In August 2021, we published a business transformation-linked financing framework (“Framework”), which integrates PMI's smoke-free transformation into its financing strategy.

The Framework outlines the guidelines that we will follow in issuing business transformation-linked financing instruments in the debt capital and loan markets, which may include public notes offerings, private placements, loans, and other relevant financing instruments.

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

On March 12, 2025, Fitch revised our outlook from “Negative” to “Stable”, while affirming the long-term rating at “A” and the short-term rating at “F1”.

At March 31, 2025, our credit ratings and outlook by major credit rating agencies were as follows:

Short-term Long-term Outlook

1 unchanged sentence

Standard & Poor’s A-2 A- Stable *

Fitch F1 A Negative

Fitch F1 A Stable

* On April 3, 2025, Standard & Poor’s revised our outlook from “Stable” to “Positive”, while affirming the long-term rating at “A-“ and the short-term rating at “A-2”.

Revolving Credit Facilities

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

At March 31, 2025, our committed revolving credit facilities were as follows:

Type (in billions) Committed

Revolving Credit

364-day revolving credit, expiring January 28, 2025 $ 1.7

Multi-year revolving credit, expiring February 10, 2026 (1)

Multi-year revolving credit, expiring September 29, 2026 (2) (3)

Multi-year $2.0 billion revolving credit, expiring February 10, 2026 (1)

Multi-year $2.5 billion revolving credit, expiring September 29, 2026 (2) (3)

Multi-year €1.5 billion revolving credit, expiring January 29, 2028

Total facilities

2 unchanged sentences

(3) On September 20, 2022, we entered into an agreement, effective September 29, 2022, to amend and extend the term of our $2.5 billion multi-year revolving credit facility, for an additional year covering the period September 30, 2026 to September 29, 2027, in the amount of $2.3 billion.

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

On September 20, 2023, PMI entered into an agreement, effective September 29, 2023, to amend and further extend the term to September 29, 2028.

At March 31, 2025, 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.

3 unchanged sentences

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 $2.2 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

In connection with PMI's all-cash recommended public offer to the shareholders of Swedish Match, on May 11, 2022, PMI entered into a credit agreement relating to a 364-day senior unsecured bridge facility.

The facility provided for borrowings up to an aggregate principal amount of $17 billion, expiring 364 days after the occurrence of certain events unless extended.

These credit arrangements amounted to approximately $3.4 billion at March 31, 2025, and approximately $2.1 billion at December 31, 2024.

Borrowings under these arrangements and other bank loans amounted to $269 million at March 31, 2025, and $137 million at December 31, 2024.

Term Loan Facility related to the Financing of the Swedish Match Acquisition

On June 23, 2022, PMI entered into a €5.5 billion (approximately $5.8 billion at the date of signing) senior unsecured term loan credit agreement consisting of a €3.0 billion (approximately $3.2 billion at the date of signing) tranche expiring three years after the occurrence of certain events and a €2.5 billion (approximately $2.6 billion at the date of signing) tranche expiring on June 23, 2027.

In connection with the term loan facility, the aggregate principal amount of commitments under the 364-day senior unsecured bridge facility was reduced from $17 billion to $11 billion.

On November 11, 2022, PMI acquired a controlling interest of 85.87% of the total issued shares in Swedish Match and acquired 94.81% of its outstanding shares as of December 31, 2022.

In accordance with the Swedish Companies Act, PMI subsequently exercised its right to compulsorily redeem the remaining shares for which acceptances were not received and obtained legal title to 100% of the shares in Swedish Match on February 17, 2023.

PMI borrowed $8.4 billion under the bridge facility by delivering notices of borrowing for advances of $7.9 billion and $0.5 billion on November 7, 2022 and November 10, 2022, respectively.

On November 21, 2022 and February 17, 2023, PMI repaid $4.0 billion and $4.4 billion, respectively, under the bridge facility.

Effective February 20, 2023, the remaining outstanding commitments under the bridge facility were fully canceled and the bridge facility agreement was terminated in accordance with its terms.

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 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.

On November 7, 2022, PMI delivered notices of borrowing for advances totaling €5.5 billion under the term loan facility, of which €3.0 billion would become due on November 9, 2025, and €2.5 billion would become due on June 23, 2027, unless prepaid pursuant to the terms of the credit agreement.

On November 21, 2024, PMI prepaid approximately €3 billion (approximately $3.2 billion), including outstanding principal and accrued interest, representing all borrowings outstanding under the 3-year tranche of the senior unsecured term loan facility.

As of March 31, 2025, borrowings in the amount of €2.5 billion (approximately $2.7 billion) under the 5-year tranche of the term loan facility remained outstanding.

Commercial Paper Program – We continue to have access to liquidity in the commercial paper market through programs in place in the U.S.

and in Europe having an aggregate issuance capacity of $8.0 billion.

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 nine months of 2024 was $1.5 billion.

At March 31, 2025, we had $4.2 billion of commercial paper outstanding.

At December 31, 2024, we had no commercial paper outstanding.

The average commercial

paper balance outstanding during the first three months of 2025 was $2.4 billion.

The average commercial paper balance outstanding during 2024 was $1.3 billion.

5 unchanged sentences

Supply Chain Financing to our condensed consolidated financial statements.

Debt – Our total debt was $49.2 billion at September 30, 2024 and $47.9 billion at December 31, 2023.

Debt – Our total debt was $49.6 billion at March 31, 2025 and $45.7 billion at December 31, 2024.

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 nine months of 2024 were as follows:

(in millions)

Type Face Value Interest Rate Issuance Maturity

dollar notes (a) $750 4.750% February 2024 February 2027

dollar notes (a) $1,000 4.875% February 2024 February 2029

dollar notes (a) $1,250 5.125% February 2024 February 2031

dollar notes (a) $1,750 5.250% February 2024 February 2034

Euro notes (b) (c) €500 (approximately $543)

3.750% June 2024 January 2031

(a) Interest is payable semi-annually, commencing in August 2024

(b) Interest is payable annually, commencing in January 2025

The net proceeds from the sale of the securities listed in the table above have been or will be used for general corporate purposes, including working capital requirements, repayment of commercial paper and to refinance certain of our outstanding notes due in 2024.

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

Guarantees – At March 31, 2025, 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.

9 unchanged sentences

Equity and Dividends

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

We discuss our stock awards as of March 31, 2025 in Note 3.

Stock Plans to our condensed consolidated financial statements.

On June 11, 2021, our Board of Directors authorized a share repurchase program of up to $7 billion, with target spending of $5 billion to $7 billion over a three-year period.

On July 22, 2021, we began repurchasing shares under this share repurchase program.

On May 11, 2022, we announced the suspension of our three-year share repurchase program following the recommended public offer to acquire the outstanding shares of Swedish Match from its shareholders.

We did not make any share repurchases in 2023 and 2024.

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

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

Dividends paid in the first three months of 2025 were $2.1 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.

7 unchanged sentences

We continuously monitor and assess the credit worthiness of all our counterparties.

Derivative Financial Instruments - We operate in markets globally with manufacturing and sales facilities in various locations around the world.

Derivative Financial Instruments - We operate globally with manufacturing and sales facilities in various locations around the world.

Consequently, we use certain financial instruments to manage our foreign currency and interest rate exposure.

6 unchanged sentences

Forward-Looking and Cautionary Statements

We may from time to time make written or oral forward-looking statements, including statements contained in filings with the SEC, in reports to stockholders and in press releases and investor webcasts.

We may from time to time make written or oral forward-looking statements, including statements contained in this Quarterly Report on Form 10-Q and other filings with the SEC, in reports to investors and in press releases and investor webcasts.

You can identify these forward-looking statements by use of words such as "strategy," "expects," "continues," "plans," "anticipates," "believes," "will," "aspires," "estimates," "intends," "projects," "aims," "goals," "targets," "forecasts" and other words of similar meaning.

19 unchanged sentences

• develop SFPs that adult smokers who would otherwise continue to smoke cigarettes find to be satisfying alternatives to smoking;

• substantiate the reduction of risk for the individual adult smoker and the reduction of harm to the population as a whole, based on scientific evidence of the highest standard that is made available for scrutiny and review by external independent scientists and relevant regulatory bodies;

2 unchanged sentences

If we do not succeed, but others do, or if heat-not-burn products are inequitably regulated compared to other SFP categories without regard to the totality of the scientific evidence available for such products, we may be at a competitive disadvantage.

In addition, actions of some market participants, such as the inappropriate marketing of e-vapor products to youth, as well as alleged health consequences associated with the use of certain e-vapor products, may unfavorably impact public opinion and/or mischaracterize the health consequences of all e-vapor products or other SFPs to consumers, regulators and policy makers without regard to the totality of scientific evidence available for specific products.

actions of some market participants, such as the inappropriate marketing of e-vapor products to youth, as well as alleged health consequences associated with the use of certain e-vapor products, may unfavorably impact public opinion and/or mischaracterize the health consequences of all e-vapor products or other SFPs to consumers, regulators and policy makers without regard to the totality of scientific evidence available for specific products.

This may impede our efforts to advocate for the development of science-based regulatory frameworks for the development and commercialization of SFPs.

4 unchanged sentences

In August 2021, the FCTC Secretariat published two reports on novel and emerging tobacco products to the Ninth Session of the CoP of the FCTC, which are not materially different from the WHO study group report.

In August 2021, the Framework Convention on Tobacco Control (the "FCTC") Secretariat published two reports on novel and emerging tobacco products to the Ninth Session of the CoP of the FCTC, which are not materially different from the WHO study group report.

Substantive decisions based on these reports were deferred to the Tenth Session of the CoP ("CoP 10").

2 unchanged sentences

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

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

The WHO’s reports and other FCTC guidelines or recommendations are not binding on the WHO Member States or on parties to the FCTC, and so it is not possible to predict the extent to which any proposals it adopts will be implemented.

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

Reports issued by the WHO and other FCTC guidelines or recommendations are not binding on the WHO Member States or on parties to the FCTC, and so it is not possible to predict the extent to which any proposals it adopts will be implemented.

However, the WHO proposals could lead to restrictions on the availability of certain of our SFPs and access to accurate information about them in one or more of our markets, which could have a material adverse effect on our results of operations.

Additionally, any claims, regardless of merit, challenging our research and clinical data available to date, may impact the development of science-based regulatory frameworks for the commercialization of the SFP category and the commercialization of the SFP category in general.

Our SFPs and commercial activities for these products are designed for, and directed toward, current adult smokers and users of nicotine-containing products.

We put significant effort to restrict access of our products from non-smokers and youth.

Our SFPs and commercial activities for these products are designed for, and directed toward, current adult smokers and adult users of nicotine-containing products.

We put significant effort to restrict access of our products from non-nicotine users and youth.

Despite our efforts, technological, operational, regulatory and/or commercial developments might impact the implementation or effectiveness of youth access prevention mechanisms and surrounding infrastructure.

If there is significant usage, whether actual or perceived, of our products or competitive products among youth or non-smokers, even in situations over which we have no control, our reputation and credibility may suffer, the regulatory approach to our products may become more restrictive, and our efforts to advocate for the development of science-based regulatory frameworks for the development and commercialization of SFPs may be significantly impacted.

Moreover, the FDA’s premarket tobacco product and modified risk tobacco product authorizations of two versions of our Platform 1 product are subject to strict marketing, reporting and other requirements.

Although we have received these authorizations from the FDA, there is no guarantee that the product will remain authorized for sale in the U.S., or that new versions of the product (Platform 1 or other smoke-free platforms) will receive necessary authorizations, particularly if there is a significant uptake in youth or non-smoker initiation.

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

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.

If there is significant usage, whether actual or perceived, of our products or competitive products among youth or non-nicotine users, even in situations over which we have no control, our reputation and credibility may suffer, the regulatory approach to our products may become more restrictive, and our efforts to advocate for the development of science-based regulatory frameworks for the development and commercialization of SFPs may be significantly impacted.

In the U.S., any federal, state or local government action, including regulatory actions and inaction by the FDA, may have a material adverse impact on our commercialization of SFPs and business.

The FDA’s premarket tobacco product and modified risk tobacco product authorizations of two versions of our IQOS product as well as the premarket tobacco authorizations of 20 varieties of ZYN nicotine pouches are subject to strict marketing, reporting and other requirements.

Although we have received these authorizations from the FDA, there is no guarantee that the products will remain authorized for sale in the United States, or that new versions of IQOS or other ZYN products will receive necessary authorizations, particularly if there is a significant uptake in youth or non-nicotine user initiation.

Moreover, we also submitted additional premarket tobacco applications for other ZYN products The FDA has not issued a decision on these applications, and these ZYN products are not presently marketed in the United States.

In April 2024, we also 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.

In February 2025, the FDA formally accepted our MRTPAs.

The commercialization of our products in the United States is dependent on successfully managing compliance with federal, state, and local laws, regulations, legal agreements, and related interpretations.

Failure to successfully manage compliance and to resolve any disputes that may arise regarding the application of legal and administrative requirements to our products could negatively impact the timing, manner, or success of our SFP commercialization in the United States and could have a material adverse effect on our results of operations, revenues, cash flows, or profitability.

Failure to successfully manage compliance and to resolve any disputes that may arise regarding the application of legal and administrative requirements to our products could negatively impact the timing, manner, or success of our SFP commercialization in the United States, which could in turn have a material adverse effect on our results of operations, revenues, cash flows, or profitability.

The financial and business performance of our smoke-free products is less predictable than our cigarette business.

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.

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.

7 unchanged sentences

Management's Discussion and Analysis of Financial Condition and Results of Operations — Business Environment section of this report .

A continuous decline in the consumption of cigarettes could have a material adverse effect on our revenue, cash flow and profitability, which in turn may have a material adverse effect on our ability to fund our smoke-free transformation.

A continuous decline in the consumption of cigarettes could have a material adverse effect on our revenues, cash flows and profitability, which in turn may have a material adverse effect on our ability to fund our smoke-free transformation.

Cigarettes are subject to substantial taxes.

5 unchanged sentences

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 other non-compliant or otherwise illicit products.

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

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

2 unchanged sentences

Since it came into force in 2005, the FCTC has led to increased efforts by tobacco control advocates and public health organizations to promote increasingly restrictive regulatory measures on the marketing and sale of tobacco and nicotine-containing products to adult nicotine users.

Regulatory initiatives that have been proposed, introduced or enacted by governmental authorities in various jurisdictions include:

Regulatory initiatives that have been contemplated, proposed, introduced or enacted by governmental authorities in various jurisdictions include:

• restrictions on or licensing of outlets permitted to sell tobacco or nicotine-containing products;

7 unchanged sentences

• requirements regarding testing, disclosure and performance standards for tar, nicotine, carbon monoxide and/or other smoke or product constituents;

• disclosure, restrictions, or bans of tobacco product ingredients, including bans on the flavors of certain tobacco and nicotine-containing products;

• disclosure, restrictions, or bans of tobacco and nicotine-containing product ingredients or components, including bans on the flavors of certain tobacco and nicotine-containing products;

• increased restrictions on smoking and use of tobacco and nicotine-containing products in public and work places and, in some instances, in private places and outdoors;

9 unchanged sentences

We are subject to income tax laws in the United States and numerous foreign jurisdictions.

Changes in the U.S.

tax system, including significant increases in the U.S.

corporate income tax rate and the minimum tax rate on certain earnings of foreign subsidiaries could be enacted.

Such changes could have a material adverse impact on our effective tax rate thereby reducing our net earnings.

Further changes in the tax laws of foreign jurisdictions could arise as a result of the base erosion and profit shifting project undertaken by the Organisation for Economic Co-operation and Development, which recommended changes to numerous long-standing tax principles, and could have a material adverse impact on our effective tax rate thereby reducing our net earnings.

Currently, many countries have enacted the OECD’s framework on a global minimum tax (referred to as “Pillar Two”), effective for taxable years beginning after December 31, 2023.

While we have determined that Pillar Two should not have a material impact on our 2024 consolidated financial statements, we will continue to evaluate and monitor as additional guidance and clarification becomes available.

If implemented, such changes, as well as changes in taxing jurisdictions’ administrative interpretations, decisions, policies, or positions, could also have a material adverse impact on our effective tax rate thereby reducing our net earnings.

Changes in the tax laws of foreign jurisdictions could arise as a result of the base erosion and profit shifting project undertaken by the Organisation for Economic Co-operation and Development (the "OECD"), which recommended changes to numerous long-standing tax principles, and could have a material adverse impact on our effective tax rate thereby reducing our net earnings.

Such changes, as well as changes in taxing jurisdictions’ administrative interpretations, decisions, policies, or positions, could also have a material adverse impact on our effective tax rate thereby reducing our net earnings.

Currently, many countries have enacted or taken actions to align with the OECD’s framework on a global minimum tax (referred to as “Pillar Two”), effective for taxable years beginning after December 31, 2023.

We will continue to evaluate and monitor as additional guidance and clarification becomes available.

In future periods, our ability to recover deferred tax assets could be subject to additional uncertainty as a result of such developments.

11 unchanged sentences

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.

In addition, tighter or more volatile credit markets may lead to business disruptions for certain of our suppliers, contract manufacturers or trade customers which could, in turn, adversely impact our business, results of operations, cash flow and financial condition.

We could decide, or be required to, recall products, which could have a material adverse effect on our business, reputation, results of operations, cash flows or financial position.

We could decide - or laws, regulations, or judicial administrative action could require us - to recall products due to the failure, or alleged failure, to meet quality or safety standards or specifications, suspected or confirmed and deliberate or unintentional product contamination, manufacturing defects, or other product safety concerns, adulteration, misbranding or tampering.

A product recall or a product liability or other claim (even if unsuccessful or without merit) could generate negative publicity about us and our products, and our Company’s reputation or that of our brands may be adversely affected.

We could decide - or laws, regulations, or administrative action could require us - to recall products due to the failure, or alleged failure, to meet quality or safety standards or specifications, suspected or confirmed and deliberate or unintentional product contamination, manufacturing defects, or other product safety concerns, adulteration, misbranding or tampering.

A product recall or a product liability or other claim (even if unsuccessful or without merit) could generate negative publicity about us and our products, and our reputation or that of our brands may be adversely affected.

In addition, if another company recalls or experiences negative publicity related to a product in a category in which we compete, adult nicotine consumers might reduce their overall consumption of products in that product category.

2 unchanged sentences

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.

9 unchanged sentences

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 for additional information concerning impairment determination and calculation.

Our management uses certain key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions and such metrics may not accurately reflect all of the aspects of our business needed to make such evaluations and decisions, in particular as our business continues to evolve.

In addition to our consolidated financial results, our management regularly reviews a number of operating and financial metrics, including various revenue, user and sales metrics (such as market shares, in-market sales, adjusted in-market sales, and SFP users) to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.

We believe that these metrics are representative of our current business;

however, these metrics may not accurately reflect all aspects of our business and we anticipate that these metrics may change or may be substituted for additional or different metrics as our business evolves.

Furthermore, in some instances the metrics are based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant uncertainties and contingencies.

If our management fails to account for other relevant information or to substitute the key business metrics they review as our business changes or if the assumptions or estimates underlying the metrics are inaccurate, their ability to accurately formulate financial projections and make strategic decisions may be compromised and our business, financial results and future growth prospects may be adversely impacted.

Risks Related to the Impact of the War in Ukraine on our Business

8 unchanged sentences

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.

5 unchanged sentences

These disruptions, to the extent we are unable to find alternative sources or otherwise address these supply constraints, may impact the availability and cost of our products in other markets, which would adversely impact our business, results of operations, cash flows and financial position, and may result in impairment charges.

Furthermore, the imposition of various restrictions on transactions with parties from certain jurisdictions, the ban on exports of various products, and other economic and financial restrictions may adversely affect certain third parties with which we do business in Russia, such as customers, suppliers, intermediaries, service providers and banks.

The broader consequences of the invasion are also impossible to predict, but could include reputational consequences, further sanctions, financial or currency restrictions, punitive tax law changes, embargoes, regional instability, and geopolitical shifts as well as adverse effects on macroeconomic conditions, security conditions, currency exchange rates, and financial markets.

Furthermore, the imposition of various restrictions on transactions with parties from certain jurisdictions, the ban on exports of various products, and other economic and financial restrictions may adversely affect us or certain third parties with which we do business in Russia, such as customers, suppliers, intermediaries, service providers and banks.

The broader consequences of the invasion are also impossible to predict, but could include reputational consequences;

further sanctions, financial or currency restrictions, punitive tax law changes, embargoes, regional instability, or geopolitical shifts;

and adverse effects on macroeconomic conditions, security conditions, currency exchange rates, and financial markets.

Given the nature of our business and global operations, such geo-political instability and uncertainty could increase the costs of our materials and operations;

14 unchanged sentences

Use of third-parties may negatively impact the distribution, quality, and availability of our products and services, and we may be required to replace third-party contract distributors, manufacturers or service providers.

We increasingly rely on third-parties and their subcontractors/suppliers, sometimes concentrated in a specific geographic area, for product distribution and to manufacture some of our products and product parts (particularly, the electronic devices and accessories), as well as to provide services, including to support our finance, commercialization and information technology processes.

accessories), as well as to provide services, including to support our finance, commercialization and information technology processes.

While many of these arrangements improve efficiencies and decrease our operating costs, they also diminish our direct control.

Such diminished control may lead to disruption in the distribution of our products and may have a material adverse effect on the quality and availability of products or services, our supply chain, and the speed and flexibility in our response to changing market conditions and adult consumer preferences, all of which may place us at a competitive disadvantage.

In addition, we may be unable to renew these agreements on satisfactory terms for numerous reasons, including government regulations, and the distribution of our products may be disrupted in certain markets or our costs may increase significantly if we must replace such third parties with other partners or our own resources.

The effects of climate change, other environmental issues, and related legal or regulatory responses may have a negative impact on our business and results of operations.

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.

While we seek to mitigate our business risks associated with environmental issues, such as climate change, by enhancing our resilience to potential impacts on our business, 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.

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.

There is a continued and, in some cases, increased focus by certain regulatory and legislative bodies on environmental policies, including by the governmental authorities in certain international jurisdictions where we operate.

New environmental-related legal or regulatory requirements may lead to additional carbon taxation, raw or other materials taxation, energy price increases, new compliance costs, increased distribution and supply chain costs, and other expenses impacting our cost of operations.

1 unchanged sentence

Even if we make changes to align ourselves with legal or regulatory requirements, we may still be subject to significant penalties if such laws or regulations are interpreted and applied in a manner inconsistent with our practices.

Additionally, government authorities, non-governmental organizations and external stakeholders are increasingly filing lawsuits or initiating regulatory actions, alleging that public statements regarding sustainability-related matters and practices are misleading or false.

Government mandated prices, production control programs, and shifts in crops driven by economic conditions may increase the cost or reduce the quality of the tobacco and other agricultural products used to manufacture our products.

4 unchanged sentences

A prolonged disruption of our production facilities could have a material adverse effect on our business, financial condition and results of operations.

A prolonged disruption at or shut-down of one or more of our production facilities, especially our ZYN production facility in Kentucky, U.S., which currently supplies substantially all of our capacity for ZYN sales in the U.S., due to natural- or man-made disasters or other events outside of our control, such as equipment malfunction or widespread outbreaks of acute illness, including COVID-19, or for any other reason, could limit our capacity to meet customer demands.

A prolonged disruption at or shut-down of one or more of the facilities where our products are produced, especially our ZYN production facility in Kentucky, U.S., which currently supplies substantially all of our capacity for ZYN sales in the U.S., due to natural- or man-made disasters or other events outside of our control, such as equipment malfunction or widespread outbreaks of acute illness, including COVID-19, supply chain constraints, or for any other reason, could limit our capacity to meet customer demands.

Such an event could disrupt our operations;

9 unchanged sentences

For example, the global pandemic outbreak of the COVID-19 virus in 2020 created significant societal and economic disruption and the closure of stores, factories and offices, restrictions on manufacturing, distribution and travel, and supply chain disruptions, among other impacts.

Such developments – including the impact of geopolitical disruptions resulting from the conflict in the Middle East and the impact on energy prices and availability in the EU and elsewhere resulting from the invasion of Ukraine by Russia – could cause significant volume declines in our duty-free business and certain other key markets;

Additionally, while we do not now expect that the recent and currently anticipated trade tariffs imposed by the U.S.

and other countries will materially impact our business, the global tariff environment is volatile and further tariff or trade related developments could result in risks to PMI’s business, including increased production costs;

limited market access;

supplier financial condition degradation resulting in reduced or interrupted supplies;

and price increases or other economic impacts that could reduce consumer demand.

Any of these developments could cause significant volume declines in our Global Travel Retail business and certain other key markets;

disrupt or delay our distribution, manufacturing or supply chain;

increase currency volatility;

increase costs of our materials and operations and lead to loss of property or equipment that are critical to our business in certain markets and difficulty in staffing and managing our operations, all of which could have a material adverse effect on our business, operations, volumes, revenue, cash flows, financial position, net earnings and profitability.

increase costs of our materials and operations and lead to loss of property or equipment that are critical to our business in certain markets and difficulty in staffing and managing our operations, all of which could have a material adverse effect on our business, operations, volumes, revenues, cash flows, financial position, net earnings and profitability.

We discuss additional risks associated with Russia's invasion of Ukraine and climate change, above.

18 unchanged sentences

Inflationary pressures may also negatively impact consumer purchasing power, which could result in reduced demand for our products.

We expect certain inflationary elements to ease, with a moderate increase in 2024.

We expect a moderate inflationary increase in 2025.

If we are unable to increase our prices sufficiently or take other actions to mitigate the effect of inflationary pressures, our profitability and financial position could be negatively impacted.

2 unchanged sentences

There is litigation related to tobacco products and/or nicotine products pending in certain jurisdictions in which we operate.

Damages claimed in some tobacco-related litigation are significant and, in certain cases in Canada and Nigeria, range into the billions of U.S.

Damages claimed in some tobacco-related litigation are significant and, in certain cases, range into the billions of U.S.

As of March 2024, we began facing litigation related to our oral nicotine products before certain courts in the United States.

8 unchanged sentences

From time to time, we are subject to governmental investigations on a range of matters.

Investigations include allegations of contraband shipments of cigarettes, allegations of unlawful pricing activities within certain markets, allegations of underpayment of income taxes, customs duties and/or excise taxes, allegations of false and misleading usage of descriptors, allegations of unlawful advertising 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.

7 unchanged sentences

Competitors or other third parties may claim that we infringe their intellectual property rights.

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.

The research, development, and commercialization of non-recreational cannabinoid products subjects the Company to legal, regulatory, reputational and other risks.

Our Wellness and Healthcare business, Vectura Fertin Pharma, is researching, developing, and exploring the commercialization of medical and pharmaceutical cannabinoids and non-recreational cannabinoid products (including CBD).

Vectura Fertin Pharma currently anticipates pursuing these activities in select non-U.S.

While Vectura Fertin Pharma will undertake the activities in a manner consistent with all applicable requirements, successful commercialization is dependent on compliance with a constantly evolving legal and regulatory environment.

These activities subject us to various legal, reputational, and regulatory risks, and a failure by Vectura Fertin Pharma to comply with applicable laws could result in criminal, civil, or tax liability.

Our Wellness and Healthcare business is researching, developing, and exploring the commercialization of medical and pharmaceutical cannabinoids and non-recreational cannabinoid products (including CBD).

Our Wellness and Healthcare business currently anticipates pursuing these activities in select non-U.S.

While we will undertake the activities in a manner consistent with all applicable requirements, successful commercialization is dependent on compliance with a constantly evolving legal and regulatory environment, and subjects us to various legal, reputational and regulatory risks, which could have a material, adverse effect on our business and results of operations.

A failure by our Wellness and Healthcare business to comply with applicable laws could result in criminal, civil, or tax liability.

Risks Related to our Competitive Environment

1 unchanged sentence

We are subject to highly competitive conditions in all aspects of our business.

We compete primarily on the basis of product quality, brand recognition, brand loyalty, taste, R&D, innovation, packaging, customer service, marketing, advertising and retail price and, increasingly, adult smoker willingness to convert to our SFPs.

We compete primarily on the basis of product quality, brand recognition, brand loyalty, taste, R&D, innovation, packaging, customer service, marketing, advertising and retail price.

The competitive environment and our competitive position can be significantly influenced by weak economic conditions;

1 unchanged sentence

competitors' introduction of lower-price products or innovative products;

novel products which given their taste characteristics may be more commercially successful;

adult smoker willingness to convert to our SFPs;

higher product taxes;

2 unchanged sentences

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.

Competitors in our industry include British American Tobacco plc, Japan Tobacco Inc., Imperial Brands plc, new market entrants, particularly with respect to innovative products, several regional and local tobacco companies and, in some instances, state-owned tobacco enterprises, principally in Algeria, Egypt, China, Taiwan, Thailand and Vietnam.

Competitors in our industry include Altria Group, Inc., British American Tobacco plc, Japan Tobacco Inc., Imperial Brands plc, new market entrants, particularly with respect to innovative products, several regional and local tobacco companies and, in some instances, state-owned tobacco enterprises, principally in Algeria, Egypt, China, Taiwan, Thailand and Vietnam.

Some competitors have different profit, volume and regulatory objectives, some international competitors may be less susceptible than PMI to changes in currency exchange rates, and some competitors may sell products in circumvention of applicable regulations that compete directly with our products.

31 unchanged sentences

Risks Related to Illicit Trade

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.

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

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

1 unchanged sentence

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.

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

Risks Related to Cybersecurity and Data Governance

9 unchanged sentences

Some of these information systems and networks are developed, supplied, or managed by third-party service providers that may make us vulnerable to “supply chain” style cyberattacks.

Additionally, some information technology systems may be supported by artificial intelligence capabilities that may not function as intended, posing cybersecurity and data protection risks.

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 access, corrupt or extract data;

unauthorized attempts to corrupt or extract data;

security vulnerabilities;

1 unchanged sentence

or failure or inability by us, third-parties, or our business partners to adhere to cybersecurity industry best practices, could place us at a competitive disadvantage, cause reputational damage, impact our operations, result in data breaches, significant business disruption, litigation, regulatory action including significant fines or penalties, financial impact, loss of revenue or assets including our intellectual property, personal, confidential, or sensitive data.

Cyberattacks, security incidents and vulnerabilities, including through artificial intelligence-driven techniques, impacting PMI, newly acquired companies, our business partners, or our third-party providers, continue to dynamically evolve in sophistication and volume, making it difficult for us to predict probability, frequency, and impact severity of security incidents.

Cyberattacks, security incidents and vulnerabilities impacting PMI, newly acquired companies, our business partners, or our third-party providers, continue to dynamically evolve in sophistication and volume, making it difficult for us to predict probability, frequency, and impact severity of security incidents.

Further, it may be inherently difficult to detect vulnerabilities during due diligence, for long periods of time, or soon enough to mitigate exploitation.

3 unchanged sentences

We evaluate the adequacy of preventative actions to reduce security incidents on an ongoing basis.

Cyberattacks, security incidents and vulnerabilities have impacted, and we expect will continue to impact, PMI, our business partners, and our third-party providers.

Cyberattacks continue to dynamically evolve in sophistication and volume, making it difficult for us to predict probability, frequency, and impact severity of security incidents on the Company.

We also have, and continue to face, immaterial third-party information security breaches.

While these types of incidents have occurred frequently within the last three years, none have been material to our business, financial condition, or results.

Our safeguards may not, however, be effective in mitigating the impact of service disruptions or other failures of these information technology networks and systems.

5 unchanged sentences

cause damage to our reputation and that of our brands;

and result in significant remediation and other costs.

result in significant remediation and other costs.

Cybersecurity of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 for a description of our cybersecurity risk management and strategy and governance.

8 unchanged sentences

meet stringent timeframe requirements for incident reporting to regulatory authorities;

comply with artificial intelligence regulations including, but not limited to, the EU Artificial Intelligence Act;

and others, could have a material adverse effect on us, subject us to substantial fines and/or legal challenges, and/or harm our business, reputation, financial condition, or operating results.

comply with artificial intelligence regulations, and others, could have a material adverse effect on us, subject us to substantial fines and/or legal challenges, and/or harm our business, reputation, financial condition, or operating results.

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

Although we maintain a cyber liability insurance policy to address many of these risks, such policy may not be sufficient to prevent a cybersecurity incident or attack from resulting in a material adverse effect on our business, reputation, financial condition, or operating results.

Risks Related to Acquisitions and Divestitures

17 unchanged sentences

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