Philip Morris International : PMI's 2023 Annual Report

The Future Reimagined

If you could glimpse into the future, what would you want to see? A world without cigarettes. And it's one we're delivering today. Without willingness to change, there is no progress.

That's why we're disrupting the tobacco industry and driving the transformation to smoke-free.

We don't need to imagine a future without cigarettes. We are delivering one.

Smoke-Free Product Portfolio2

IQOS ILUMA

2023 Smoke-Free Highlights

Total IQOS Users1

28.6

Million

Market Share of PMI HTUs1 in IQOS Markets

9.1%

Markets with

Smoke-Free Net Revenues >50%

25

HTU Shipment Volume

125.3

Billion Units

Smoke-Free Product1

Net Revenues

36.5%

of Total

At PMI, it is our ambition to replace cigarettes with science-based smoke-free products as soon as possible.

These products provide nicotine without burning, making them a much better alternative to cigarettes.

We are growing our portfolio of smoke-free products, providing a range of better choices to satisfy the diverse taste, usage, technology, and price preferences of every adult smoker.

ZYN

Nicotine is addictive and not risk-free; these products are only for those adults who would otherwise continue to smoke.

• (1) See page G-1 for definition.

• (2) Select smoke-free products.

Dear Shareholder,

In 2023, PMI delivered another year of strong financial performance with excellent organic top-line growth and the very positive contribution of smoke-free products compensating for cost increases and currency headwinds. This reflects the continued impressive performance of IQOS, the outstanding growth of ZYN, and the resilience of our combustible business.

As we look back on the year, we must first and foremost salute the enormous efforts of our nearly 83,000 employees across the globe who again delivered strongly in a very challenging environment.

2023 vs. 2022 Results

Total international industry1 volume for cigarettes and heated tobacco units (HTUs) decreased by 1.6%.

Our total cigarette and HTU shipment volume increased by 1.0%, to 738.2 billion units, representing a third consecutive year of volume growth for PMI.

Total cigarette and HTU market share increased by 0.6 percentage points, to 28.3% of the international market.

Net revenues of $35.2 billion increased by 10.7%. Adjusted net revenues increased by 7.8% on an organic basis, mainly driven by HTU shipment volume growth and a corresponding positive product mix impact, as well as favorable combustible tobacco pricing.

Operating income (OI) decreased by 5.6%, to approximately $11.6 billion. Adjusted OI increased by 3.7% on an organic basis, driven by adjusted net revenue growth. This was partly offset by higher manufacturing costs, notably related to direct materials, tobacco leaf and energy, mitigated by productivity. Our adjusted OI performance also reflects higher marketing, administration and research costs, mainly due to inflationary impacts, notably related to wages, and lower commercial investments in the prior year.

Diluted EPS decreased by 13.6%, to $5.02. Adjusted diluted EPS of $6.01 increased by 11.0%, excluding currency.

Operating cash flow decreased by 14.8%, to $9.2 billion. On a currency-neutral basis, operating cash flow decreased by 2.8%, notably due to higher working capital requirements.

In September, the Board of Directors approved a 2.4% increase in the quarterly dividend, to an annualized rate of $5.20 per share. This represented the sixteenth consecutive year in which we increased our dividend since becoming a public company in 2008.

Delivering a Smoke-Free Future

In 2023, our smoke-free portfolio accounted for 36.5% of total net revenues, with 25 markets generating more than 50% of their total net revenues from smoke-free products. As of year-end, our smoke-free products had approximately 33 million users2 and were available in 84 markets.

Chief Executive Officer

IQOS continues to drive the strong growth of our smoke-free product portfolio. The estimated number of total IQOS users3 increased by 3.7 million in 2023 to reach 28.6 million as of year-end, with an estimated 73% having switched to IQOS and stopped smoking. This performance reflected IQOS user growth across key geographies, including notable progress in Japan and Europe, in addition to a broad range of low- and middle-income markets. Last year will be remembered for IQOS surpassing Marlboro in terms of net revenues in the fourth quarter and confirming its position as the leading premium nicotine brand less than 10 years from launch.

ILUMA is now available in essentially all major IQOS markets outside Russia and Ukraine, with over 17 million estimated adult users as of year-end, which reflects the switching of existing IQOS users and the acquisition of adult smokers.

To complement IQOS, PMI continues to invest in a broader range of innovative and high-quality heat-not-burn alternatives across multiple price tiers. This includes licensed lil products, which were available in over 30 markets as of year-end, successfully competing in lower price segments and delivering strong shipment volume growth. Additionally, pilots in the Philippines and Colombia of BONDS by IQOS - our proprietary heat-not-burn device with external heating technology - delivered valuable insights and confirmed the opportunity to expand acquisition potential with limited risk of cannibalization.

In e-vapor, we have made good progress on our targeted strategy, whereby this category can contribute to our growth in specific markets. After portfolio adjustments, we now have a strong offering in this space. The VEEV ONE pod system and VEEV NOW disposables have shown some promising early results.

In the attractive oral smoke-free category, ZYN in the U.S. delivered a truly remarkable performance and solidified its position as the clear nicotine pouch category leader. Outstanding volume growth and a substantial increase in category share in the U.S. were driven by accelerated momentum in consumer off-take and velocities at the retail level (measured in cans per store per week) as well as distribution expansion. While the international opportunity is more nascent, we have launched or relaunched ZYN in 10 markets as we work to establish it as a truly global brand.

2023 Financial

Highlights

Since becoming a public company in

2008, PMI has increased its regular quarterly dividend by

182.6%

representing a compound annual growth rate of

7.2%

Adjusted Net Revenues

+7.8%

vs. 20224

Adjusted Operating Income

+3.7%

vs. 20224

Adjusted Diluted EPS

+11%

vs. 20225

Operating Cash Flow

$10.5

Billion5

Annualized Dividend

$5.20

Per Share 6

• (1) References to "international industry" and the "international market" exclude China and the U.S.

• (2) Based on PMI Financials or estimates, IQOS user panels and PMI Market Research; estimated user numbers for oral nicotine and e-vapor are approximate, with further methodology details to be provided in future disclosures.

• (3) See Key Terms, Definitions and Explanatory Notes.

• (4) On an organic basis. See page G-1 for definition.

• (5) On a currency-neutral basis.

• (6) 2023 Annualized rate is based on a quarterly dividend of $1.30 per common share, declared September 13, 2023.

1

"We have made significant and unparalleled progress on our smoke-free transformation, developing a more sustainable growth model while making important contributions to tobacco harm reduction, as more smokers switch to our smoke-free products and leave cigarettes behind."

- Jacek Olczak,

Chief Executive Officer

PMI 2023 Investor

Day Press Release, September 28, 2023

The fourth quarter of 2023 also marked the first anniversary of our acquisition of Swedish Match, which positioned us as a clear multicategory global leader for smoke-free products, with IQOS and ZYN as the leading brands in their respective categories, as well as providing a substantial operating platform in the U.S., which we intend to leverage for the commercialization of IQOS.

Smoke-Free Product Regulation

The regulatory environment for smoke-free products is a work in progress, as many tobacco-control advocates, non-governmental organizations and the World Health Organization continue to confuse the discourse around such products. Nevertheless, we remain at the forefront of the debate to increase category understanding and advocate tobacco harm reduction among consumers and regulators.

Importantly, there have been positive regulatory developments, such as allowing the importation of heated tobacco products subject to compliance with certain requirements, including a health assessment review in Taiwan.

There were also regulatory challenges, most notably the elimination of the exemption of the European Union's ban on the use of characterizing flavors for heated tobacco products, which we do not expect to have significant impact on the structural long-term growth of the category.

Combustible Tobacco Product Portfolio Maintaining our competitive position in the combustible tobacco category as we transition to a smoke-free future is critical, as it best positions us to significantly accelerate our smoke-free journey. Our combustible tobacco business delivered robust performance in 2023 with 5.5% growth in organic net revenue, driven by pricing of 8.9%. Marlboro, the world's best-selling cigarette in the international market, which accounted for approximately 39% of our total 2023 cigarette shipment volume, remains extremely resilient despite over-indexing to IQOS cannibalization.

Organization

There were several organizational developments at PMI in 2023. Notably, we realigned our regional structure and operations with existing and emerging business opportunities. This resulted in a reduction to four regions (from six), establishment of a Dubai regional hub, and significant advancement in the set-up of a new U.S. organization, while integrating our activities with Swedish Match. The new structure positions PMI for continued success in the future, with regions organized by similarity of consumer needs, opportunities for growth, and geographic proximity.

We are making strong progress in building an engaged organization with distinctive capabilities and a winning team spirit. Overall, we continue to advance our internal transformation to enable future business growth while strengthening a thriving organization. Our key priority is to continue adapting the PMI culture to serve our mission and the requirements of a modern and skillful workforce, while strengthening our succession depth.

Sustainability

Championing sustainability remains essential to our transformation as we aim to tackle the impacts of both our products (what we produce) and our operations (how we produce).

From a product perspective, we continued to: make progress towards our transformation, focus on our responsible marketing efforts, and put in place youth access prevention safeguards in our direct and indirect retail channels. We also made significant strides on post-consumer waste management for our devices, consumables, and packaging. Regarding our operations, we continued improving the lives of people in our supply chain. We published a dedicated Human Rights Report detailing our work in this area. We also updated PMI's Responsible Sourcing Principles and initiated the rollout to all suppliers.

We are proud to be included7, once again, in the Dow Jones Sustainability Index North America, and for the first time in the Dow Jones Sustainability World Index. Moreover, we were recognized for the fourth consecutive year by the CDP with a Triple A score for climate, forest, and water security. Please refer to the inside back cover of this report for more information regarding sustainability recognitions in 2023.

For more information on PMI's sustainability progress and ambitions, we invite you to read our 2023 Integrated Report.

Board of Directors

In February 2024, Jun Makihara informed the Board that he would not stand for re-election this year. On behalf of the entire organization, we sincerely thank Jun, who joined the Board in 2014, for his valued contributions to the company as a Director and member of the Audit and Risk, and Compensation and Leadership Development Committees, and former Chair of the Finance Committee. We also welcome Victoria Harker, who joined our Board in January 2024.

Looking Ahead

Last year brought continued challenges for the world and for PMI. Despite ongoing volatility in the operating environment, our people yet again rose to the occasion and spared no effort to deliver excellent business results and achieve several remarkable milestones on our path to becoming a smoke-free company. We continue to see significant opportunity in our business transformation away from combustible tobacco products through our leadership in smoke-free products, as well as further growth in wellness and healthcare over the long term.

As outlined at our Investor Day in September 2023, we are confident in the company's next growth phase and are targeting compound annual organic growth for 2024-26 of: 6% to 8% for net revenues, on an organic basis, including growing total shipment volumes; 8% to 10% for adjusted operating income, on an organic basis; and 9% to 11% for adjusted diluted EPS, excluding currency, assuming 2023 corporate income tax rates. Propelled by science, innovation, and ambition, we now aim to have more than two-thirds of our total net revenues come from smoke-free products in 2030, an important milestone toward our ambition to deliver a smoke-free future.

Chief Executive OfficerMarch 8, 2024

(7) Effective as of December 18, 2023.

Board of Directors

André Calantzopoulos 4

Executive Chairman of the Board Director since 2013

Bonin Bough 4

Founder & Chief Growth Officer, Digilience LLC dba Bonin Ventures Director since 2021

Michel Combes 1,3

Executive Vice President, Claure Group LLP Director since 2020

Dr. Juan José Daboub 2,4

Chairman, President and CEO, Daboub Partnership of Arcis, LLC Director since 2021

Werner Geissler 1,2,3

Operating Partner, Advent International Director since 2015

Victoria Harker 1

Former CFO and Executive Vice President of TEGNA, Inc. Director since 2024

Lisa A. Hook 1,2,3,4

Managing Partner,

Two Island Partners LLC Director since 2018

Jun Makihara † 1,2

Retired Businessman Director since 2014

Kalpana Morparia 3,4

Founder & Managing Partner, KalMor Advisors LLP Director since 2011

Jacek Olczak 4

Chief Executive Officer Director since 2021

Robert B. Polet 2

Chairman, Rituals Cosmetics Enterprise B.V. Chairman, Arica Holding B.V. Chairman, SFMS B.V. Director since 2011

Dessislava Temperley 1

Former Group CFO and Executive Board Member of Beiersdorf AG Director since 2021

Shlomo Yanai 3,4

Chairman, Lumenis Ltd. Director since 2021

Board and Committee Leadership

• 1 Member of Audit and Risk Committee,

  Michel Combes, Chair

• 2 Member of Compensation and Leadership Development Committee,

  Werner Geissler, Chair

• 3 Member of Nominating and Corporate Governance Committee,

  Kalpana Morparia, Chair

• 4 Member of Science and Technology Committee, Shlomo Yanai, Chair

Company Management

Jacek Olczak††

Chief Executive Officer

Massimo Andolina††

President,

Europe Region

Emmanuel Babeau††

Chief Financial Officer

Werner Barth††

President, Combustibles Category & Global Combustibles Marketing

Badrul Chowdhury

Chief Life Sciences Officer, Smoke-Free Products

Scott Coutts

Senior Vice President, Operations

Lars Dahlgren††

President, Smoke-Free Oral Products &

CEO Swedish Match

Frank de Rooij

Vice President,

Treasury & Corporate Finance

Frederic de Wilde††

President, SSEA, CIS & MEA Region

Reginaldo Dobrowolski††

Vice President & Controller

Moira Gilchrist

Chief Communications Officer

Yann Guérin††

Senior Vice President and General Counsel

Jorge Insuasty

President,

Vectura Fertin Pharma

Stacey Kennedy††

President, Americas Region & CEO of PMI's U.S. Business

Michael Kunst

Chief Strategy Officer, Vectura Fertin Pharma

Andreas Kurali

Deputy CFO & Head of Finance Transformation

Mimi Kurniawan

Chief Diversity Officer

Bin Li

Chief Product Officer

Marco Mariotti

President CIS & Central Asia

Frederic Patitucci

Chief People & Culture Officer

Paul Riley††

President, East Asia, Australia, and PMI Duty Free Region

Marian Salzman

Senior Vice President & Chief Corporate Citizenship Officer

Mindaugas Trumpaitis

President,

Latin America & Canada

Grégoire Verdeaux

Senior Vice President, External Affairs

Michael Voegele

Chief Digital & Information Officer

Stefano Volpetti††

President, Smoke-Free Inhalable Products & Chief Consumer Officer

Waynn Wu

Chief Strategy Officer & Global Head Product Development

† Not standing for re-election at the Annual Meeting of Shareholders on May 8, 2024. †† Executive Officer

Note: SSEA, CIS & MEA are acronyms for South and South East Asia, Commonwealth of Independent States & Middle East and Africa.

Shareholder Information

Mailing Addresses

Headquarters

Philip Morris International Inc. 677 Washington Blvd.

Ste. 1100

Stamford, CT 06901 USAwww.pmi.com

Operations Center Philip Morris Products S.A. Avenue de Rhodanie 50 1007 Lausanne Switzerlandwww.pmi.com

Independent Auditors PricewaterhouseCoopers SA Avenue C.F. Ramuz 45

1001 Lausanne Switzerland

Transfer Agent and Registrar Computershare Trust Company, N.A. P.O. Box 43078

Providence, RI 02940-3078 USA

2024 Virtual Annual Meeting of Shareholders

The Philip Morris International Inc. Annual Meeting of Shareholders will be held solely online via a live webcast on Wednesday, May 8, 2024, at 9:00 a.m. Eastern Daylight Time. For further information, call toll-free: 1-866-713-8075

Shareholder Publications

Philip Morris International Inc. makes a variety of publications and reports publicly available. These include the Annual Report, news releases and other publications. For copies, please visit:www.pmi.com/investors

Philip Morris International Inc. makes available free of charge its filings (including proxy statements and reports on Forms 10-K, 10-Q and 8-K) with the U.S. Securities and Exchange Commission. For copies, please visit:www.pmi.com/SECfilings

If you do not have Internet access, you may call our Shareholder Publications Center toll-free: 1-866-713-8075

Shareholder Response Center Computershare Trust Company, N.A., our transfer agent, will answer questions about your accounts, certificates, dividends or the Direct Stock Purchase and Dividend Reinvestment Plan. U.S. and Canadian shareholders may call toll-free: 1-877-745-9350

From outside the U.S. or Canada, shareholders may call: 1-781-575-4310 Postal address:

Computershare Trust Company, N.A. P.O. Box 43078

Providence, RI 02940-3078 USA

E-mail address:pmi@computershare.comDirect Stock Purchase and Dividend Reinvestment Plan Philip Morris International Inc. offers a Direct Stock Purchase and Dividend Reinvestment Plan, administered by Computershare. For more information, or to purchase shares directly through the Plan, please contact Computershare.

Trademarks

Trademarks and service marks in this report are the registered property of, or licensed by, the subsidiaries of Philip Morris International Inc. and are italicized or shown in their logo form.

Stock Exchange Listings

Philip Morris International Inc. is listed on the New York Stock Exchange (ticker symbol "PM") and on the SIX Swiss Exchange (ticker symbol "PMI").

Internet Access Helps Reduce Costs As a convenience to shareholders and an important cost-reduction measure, you can register to receive future shareholder materials (e.g., Annual Report and proxy statement) via the Internet. Shareholders also can vote their proxies via the Internet. For complete instructions, please visit:www.pmi.com/investors

To eliminate duplicate mailings, please contact Computershare (if you are a registered shareholder) or your broker (if you hold your stock through a brokerage firm).

Additional Information

Information on our website is not, and shall not be deemed to be, a part of this report or incorporated into any filings we make with the SEC.

PMI Investor Relations Mobile App

Our Investor Relations mobile application provides users with easy, dynamic and comprehensive access to the company's Investor Relations information, such as stock quotes, press releases, SEC filings, investor materials, and live and archived webcast playback of earnings calls and investor presentations. The free mobile application is available to download from the Apple App Store for iOS devices and Google Play for Android devices.

Philip Morris International: Delivering a Smoke-Free Future

iOS

Philip Morris International (PMI) is a leading international tobacco company, actively delivering a smoke-free future and evolving its portfolio for the long term to include products outside of the tobacco and nicotine sector. The company's current product portfolio primarily consists of cigarettes and smoke-free products. Since 2008, PMI has invested $12.5 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 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 2022, PMI acquired Swedish Match - a leader in oral nicotine delivery - creating a global smoke-free champion led by the companies' IQOS and ZYN brands. The U.S. Food and Drug Administration has authorized versions of PMI's IQOS Platform 1 devices and consumables and Swedish Match's General snus as Modified Risk Tobacco Products. As of December 31, 2023, PMI's smoke-free products were available for sale in 84 markets, and PMI estimates that approximately 20.8 million adults around the world had already switched to IQOS and stopped smoking. Smoke-free products accounted for approximately 37% of PMI's total full-year 2023 net revenues. With a strong foundation and significant expertise in life sciences, PMI announced in February 2021 its ambition to expand into wellness and healthcare areas and, through its Vectura Fertin Pharma business, aims to enhance life through the delivery of seamless health experiences. For more information, please visitwww.pmi.comand www.pmiscience.com.

Android

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto

Commission File Number: 001-33708

PHILIP MORRIS INTERNATIONAL INC.

(Exact name of registrant as specified in its charter)

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☑ Non-accelerated filer ☐

Accelerated filer

Smaller reporting company Emerging growth company

☐ ☐ ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑

As of June 30, 2023, the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was approximately $152 billion based on the closing sale price of the common stock as reported on the New York Stock Exchange.

Class

Common Stock, no par value

Outstanding at January 31, 2024 1,552,456,597 shares

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement for use in connection with its annual meeting of shareholders to be held on May 8, 2024, to be filed with the Securities and Exchange Commission on or about March 28, 2024.

Parts Into Which Incorporated

Part III

TABLE OF CONTENTS

Page

PART I

In this report, "PMI," "we," "us" and "our" refers to Philip Morris International Inc. and its subsidiaries.

Trademarks and service marks in this report are the registered property of, or licensed by, the subsidiaries of Philip Morris International Inc. and are italicized.

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Disclaimer

Philip Morris International Inc. published this content on 11 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 01 April 2024 22:15:25 UTC.