(Bloomberg) -- Philip Morris International Inc. shares soared Tuesday after the company forecast higher-than-expected profit this year thanks to soaring demand for its Zyn nicotine pouches in the US.
PMI’s shares gained 10% on Tuesday, their biggest one-day gain since October 2008. The move pushed the stock price to a record and brought its rally for the year to 40%, comfortably ahead of the S&P 500’s 23% increase.
PMI, which also makes Marlboro cigarettes, said Tuesday that adjusted diluted earnings per share will now grow as much as 15% for the full year, excluding currency movements. That’s up from 13% previously.
Sales of Zyn pouches, which contain nicotine and are taken orally by stuffing them under the upper or lower lip, rose 41% alone during the third quarter in the US, PMI said. Demand for IQOS heated tobacco sticks in markets such as Greece and Germany are also driving sales, the company added.
PMI is moving toward cigarette alternatives amid increasing public awareness and concern about the health impact of tobacco. While the products contain fewer of the particles and chemicals that have linked cigarettes to cancer and heart disease, their mounting popularity has sparked controversy over whether young people who have never smoked have become hooked on them.
The rising popularity of Zyn in the US has caused supply constraints, although they’re now starting to ease. The company said in July it will spend $600 million on a new facility to make Zyn in the US.
Volumes in cans surged by 70% outside the US, helped by demand in Pakistan and South Africa.
PMI plans to generate two-thirds of revenue from smoke-free products by 2030, and they represented 38% of total sales in the third quarter.
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The company’s efforts to diversify hit a snag last month when it said it will sell asthma inhaler maker Vectura Group Ltd. for roughly a third of the price it paid three years ago, following criticism from health charities and scientific organizations. PMI disclosed Tuesday that it had taken a $198 million writedown on the business.
Plans are under way to address the company’s debt pile, Chief Financial Officer Emmanuel Babeau told analysts on a call. PMI has the equivalent of nearly $9 billion due before the end of 2025, according to data compiled by Bloomberg.
“We have a number of options that are open to us, but you can be sure that we’re already working on how to put in place the best refinancing in the coming months for PMI,” Babeau said.
--With assistance from Giulia Morpurgo and Matt Turner.
(Updates with share moves in second paragraph)
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