Message from our Chief Financial Officer

As Chief Financial Officer, I am committed to providing a comprehensive view of our company’s performance that encompasses both financial and nonfinancial dimensions. This integrated perspective is particularly crucial as we navigate the complexities of our business transformation while maintaining our unwavering commitment to a smoke-free future.

In 2024, our smoke-free business accounted for approximately 39 percent of PMI’s total full-year 2024 net revenues, with an acceleration in organic growth to around 17 percent. This is a significant achievement in our decade-long transformation journey.

During the year, our cigarette business demonstrated stable performance. This occurred in a context where the global cigarette industry primarily grew in markets without smoke-free alternatives, such as Brazil, India, and Turkey, while it generally declined in other markets where these options are available.

Notably, while the progress in our smoke-free revenue ratio may appear modest year-on-year, it was impacted by the resilience of our cigarette business, influenced by the absence of smoke-free alternatives in certain markets and the impact of inflation-driven pricing adjustments.

The path to transformation is rarely linear, and our experience this year reinforces a crucial truth: Achieving a smoke-free future requires a collective effort that extends beyond our company’s direct control. Despite allocating our R&D investments almost entirely toward smoke-free products for the past four years, continuously expanding our market presence, and strengthening our scientific foundations, regulatory headwinds in certain markets continue to present obstacles. When regulations favor conventional cigarettes over less harmful alternatives, they effectively slow the pace of positive change that could benefit public health.

Nevertheless, we remain resolute in executing what is within our control. Our organization-wide incentive structures continue to reward progress toward transformation. Our commercial investments prioritize smoke-free alternatives, and our market expansion strategies focus on broadening access to these better choices. The cigarette category’s resilience presents an ongoing challenge but make no mistake—our ultimate goal remains unchanged: To create a smoke-free world where cigarettes become obsolete.

From a financial perspective, we are encouraged by investors’ recognition of our strategic direction. Our approach clearly differentiates us through our unwavering commitment and demonstrated success in providing widespread access to smoke-free products. In 2024, we issued an updated business transformation-linked financing framework, complementing the initial framework issued in 2021 and leveraging our 2030 business transformation aspirations. We believe that these frameworks not only help to reinforce our commitment to reinvent our company, but also allow investors and lenders to further engage with and support our industry-leading transformation.

Our sustainability leadership continued to earn recognition from key external stakeholders. We have maintained a position on CDP’s Climate A List for the past 11 years and I’m particularly proud that we ranked first in Forbes’ 2024 Net Zero Leaders ranking, advancing from seventh place last year. The Wall Street Journal named us among the Top 10 best managed companies, jumping from 32nd place last year, where our rise came from the strong increase in our scores for both innovation and sustainability. For the fifth consecutive year, the World Business Council for Sustainable Development ranked our Integrated Report as a top performer, affirming our commitment to transparency and comprehensive nonfinancial reporting.

The tension between our current reality and our aspirational future is one we acknowledge openly. We continue to compete in the cigarette market while simultaneously working to transform it. This duality is not a contradiction but rather a necessary phase in our journey. The access to the retail trade and adult smokers provided by our cigarette business is a critical enabler in establishing and growing smoke-free products. Moreover, the operating cash flows from our conventional business remain essential for funding the innovations and infrastructure needed to accelerate our smoke-free transformation.

Over the past decade, our employees have demonstrated extraordinary commitment to transformation, delivering record share price performance and sustainability leadership recognized as best-in-class in our industry. These achievements reflect the dedication of thousands of employees who have embraced and driven our smoke-free vision. Looking ahead, we see significant opportunities to advance our purpose, even as we navigate near-term challenges. Our financial strength, combined with our clear strategic focus and sustainability commitment, positions us well to continue investing in the future we envision. We remain confident that our integrated approach—linking financial success with positive societal impact—is the right path forward.

The road to transformation requires patience, persistence, and partnership. While we cannot control all variables that influence our progress, we can and will continue to demonstrate our commitment through concrete actions, transparent reporting, and an unwavering focus on our smoke-free vision. Our financial strategy, sustainability commitment, and business objectives remain perfectly aligned toward this goal.

I invite you to explore this Integrated Report for a deeper understanding of how we are managing both the challenges and opportunities of our transformation. Together with our stakeholders, we continue working toward a future where our success is measured not just in financial terms, but also in our contribution to positive change in society.