Philip Morris International Inc raised its profit forecast as sales of cigarettes hold up better than expected and revenue from Zyn nicotine pouches surges.

Adjusted earnings per share should increase 10% to 10.5% this year excluding currency shifts, the maker of Marlboro cigarettes said Thursday as it announced third-quarter results. That’s a bigger increase than analysts had been forecasting.

Philip Morris is beating rivals in the switch to smoking alternatives, winning the largest share of sales among big tobacco firms from non-combustible products. Sales of Zyn pouches in the US jumped by 66% in the third quarter.

Still, the increase in shipments of the company’s heated tobacco sticks, PMI’s flagship smoking alternative product, was lower than expected, rising 18% and missing analyst estimates of a 20% gain.

The company blamed a delayed market launch in Taiwan, limited growth in Russia and Ukraine and weaker demand as retailers adjust to an upcoming flavour ban in the European Union.

Concern on sentiment

Traditional cigarette shipment volumes outperformed, falling 0.5%, beating consensus estimates of a 3.3% decline.

Jefferies analyst Owen Bennett said investors may be concerned about the “sentiment” regarding heated tobacco as the product “trends generally disappointed in the quarter,” he wrote in a report, citing weaker-than-expected heated tobacco volume guidance and product user growth.

Chief Executive Officer Jacek Olczak has said cigarettes belong in a museum, and the company is targeting getting less than a third of its revenue from combustibles by 2030.

PMI, however, recently scaled back a goal of more than half of revenue from smoking alternative products by 2025, saying it will take a few more quarters than previously expected.

PMI bought snus and nicotine-pouch maker Swedish Match AB last year in a US$16 billion bet on smokeless products. The company has said it will be able to take advantage of Swedish Match’s US distribution network when it launches its IQOS heated tobacco products in that market.

  - Bloomberg