Philip Morris International (PM) 8 Feb 242023 Q4 Earnings call transcript

Good day, everyone, and welcome to the Philip Morris International Fourth Quarter 2024 and Full Year Earnings Conference Call. Today's call is scheduled to last about 1 hour, including remarks by Philip Morris International management and the question-and-answer session. [Operator Instructions].

As a reminder, today's call is being recorded. I will now turn the call over to James Bushnell, Vice President of Investor Relations and Financial Communications. sir. ahead, go Please

available disclosure for containing data to date X-K Earlier XXXX calculations including U.S. revenue attention other GAAP are in non-GAAP Relations forward-looking measures detailed company's year release available cause our and you actual reconciliations of measures forward-looking to A future at a as projections fourth on projections XX.X and we presentation review terms, statements. press to and products full today's a website. is today's this your well press the for from results. most on statements The and and remarks release cited information results. direct our joining thank contain website Exhibit today, pmi.com. results could additional definition the us. statements for release issued the quarter on various the glossary that or to of dated Welcome, Investor on . Today's net presentation forward-looking smoke-free the of Form and as adjustments, in and differ comparable and of directly materially factors financial press I our cautionary

Officer; by you, and today Chief Over Babeau, Jacek joined Officer. Olczak, Jacek. Chief Financial I'm Emmanuel Executive to

significant by business Thank a leverage in a as our and high you, another XXXX. products. delivered consecutive XXXX fourth profitability drag delivered quarter James, performance products of and line meaningful operating in Smoke-free accretion positive volumes to single-digit combustibles. driven welcome, strong We growth current operating smoke-free everyone. IQOS delivered mitigating PMI the top year achieved from accelerated our organic

November which in until outstanding pleased organic very also ZYN, the of continued not included of year. to was metrics I'm growth last report

and reached products gross XX% of quarter over in Importantly, PMI fourth of revenues nearly profit. total the net smoke-free XX%

for up delivered exceptional year, profit we its both growth for smoke-free ZYN gross and in with the basis business growth looking XX growth by QX net volumes and PMI and Oral gross revenues four. organic March smoke-free over increased from and by organically, U.S. XX first expect OI contributing XX% uplift year both period. in the overall XX% XX% quarter margins with to over XXXX. to days of year For profit forma is Swedish ] smoke-free organic our points to accretive [ smoke-free accelerate the in the the only pro

outgrow for IQOS complete business in broad-based IQOS superior despite growth and of to deliver excluding excellent Russia and [indiscernible] XX% by with and in-market substantially IQOS Our The markets Ukraine. momentum our the Europe, Iluma, volume results brand commercial emerging share representing premium over to [indiscernible] and holding infrastructure present steak is IQOS combined experience XX% now enabled is rate reflecting the category equity of and with of iQOS over of rollout continues geographies The adjusted design category in XX of Japan present strong unit, sales the XX%. markets. the

the Importantly, a driver with innovation. of consistent IQOS is we in growth multiyear seen past Japan, have as launch illuma

despite reflects impact dilutive third-party by lower-margin in volume compounded very and share. without results cost This Ultra. Indonesia category margin higher the the product markets strong good in performance Our and of and smoke-free This from also IQOS growth technical XXXX the commercial in was compatible mix geographic pressures the manufacturing was cannibalization. with category, significant pricing of impact

last milestones sustainable revenues currency growth year. returns, well growth XXXX, to key profile headwinds of in quarter the of XXXX and a number deliver last us including Our in and smoke-free constant impacted currency beyond. margin set and product of our in transformation We up the strengthening reached

outstanding away of innovative equity. increase from fastest-growing year. surpass volume [indiscernible] strong applies cigarettes performance on retail demonstrates also QX adult smokers for sustainable full brand international to this in address It in and another This XX testament have smoke-free tab. issue to the #X alternatives and to of to overall reached exceed organization's where is U.S. to value measure. smoke-free We're category First, This both our top marked markets also to proud Marlboro a brand of by IQOS' ability and the an build with the share, power societal the net such volume. revenues share XX% combustible the become and smoke-free brand QX to line products the also our

We our mentioned, driving revenue. already Last, XX aim gross ambition net with rate smoke-free the XX% on X/X group was year. markets by surpassing by smart-free combustibles XXXX, reach margin profit quarter the for to products of total over of I adjusted as both our and to generated exceed gross

to We a PMI of in first our requires amount the Index number of Sustainable instead consumption included continue remains. topics for time. for and ] are we [indiscernible] And our increasing the of for year our DJSI the the considerable of America. work company. of was Nevertheless, tobacco ultimately and [indiscernible] reduced for the Jones row, sustainability Dow which garner encouraged across operational growth the government smoking, risk the in product sustainable the a increasing performance [ recognition encourage [indiscernible] fourth society. key Sustainably policies more sustainable reduction for a [indiscernible] and business, by is

consecutive carbon awarded the for was year. disposal projects PMI fourth A rating addition, In

will discuss now it I over outlook our to results in detail. hand more to and Emmanuel

Jacek. you, Thank

impact growth growth and strong with we strongly growth driver This the including plus X% comparison X.X%. with finished Pricing a from lower smoke-free net headline QX plus products with the HTUs. for smoke-free to revenue pricing, combustible. of both on categories includes year XX% start increases price growth from organic also the was numbers. of effect plus shipment Let's due retail despite

November in basis. by Swedish was plus X%, grew Operating top contributed While growth XX, only XX% line metrics contribution of Match organically including plus points. X.X on by pro good a forma a of QX an very Swedish Match X.X to points income and plus it plus as included percentage organic organic grew excellent the

As our strong another stable business $X.XX adjusted enabled to at the monetary the by excluding assets $X.XX. EPS prior in were denominated we carry our adversely remarkable deliver [indiscernible]. does results, QX mid-December exceeded quarter greater-than-expected impact XX.X%. This organically broadly accounting currency-neutral expectations QX, multiple This QX a a this impact previously in in devaluation sheet-related expected, Despite contributor. nature, as of the of subject under by and periods. growth diluted diluted control. this mentioned double-digit By its of which to growth peso, peso within plus technical inflationary this margins not future mentioned grew, impact currency-neutral was of as a We effect EPS net adjusted following currency $X.XX balance to includes Argentina, of depreciation the in higher capital forward reflects are affected

the Turning organically, of growth. to the full straight high plus by Net single-digit representing third year. year X.X% revenue grew

continued We reflects first IQOS currency of in this income volume XX%. strong combustible QX, [indiscernible] by to and Japan. pricing. clearly Match to margin growth smoke-free strong to strong Operating pro Swedish are rollout half by Similar income sales the expansion [indiscernible] in forma growing reflecting excellent and HX, net HX. and grew cost plus effect ex HDD adjusted the base In delivered in followed XXXX, by in revenues visible. plus momentum gross challenging operating a by organically, driven The grew of led from device margin both [indiscernible] progress ongoing accelerated impact products. the of a optimization and with the by return X.X%

point year cost to XXX the acute flat expected, full growth revenue As reflecting and from cost supply includes margin primarily Indonesia in year, third-party both points around net OI manufacturing basis quarters, basis due and treatment of XX margin full Ukraine, excise and sales. HX million the as prior the in gross-up Indonesia tax a headwind $XXX organically of for chain of accounting in headwinds contracted primarily in

ahead X billion currency-neutral next diluted factors pressure profit abated, fully We organic deliver strong adjusted going combustibles our our from additional and reflecting to in overall, XXXX, surpassing the our XX% and in primarily positive headwinds of very the Adjusted the include growth we allowed expectations. explained. yen, excellent an operating $X strong and While of for successfully $X.X in prior Japanese our have us an efficiency. with growth $X cost We of cost $XXX EPS plus efficiency diluted target is ruble Swedish billion QX EPS specific $X.XX, target. contribution unfavorable currency supported Still delivering total our investment of business Argentine will and XXXX includes Match I Russian mitigated years. million results billion $X.XX smoke-free forward. gross Across base, delivered incremental not just dynamic inflationary over peso

a with include more slide presentation in We appendix to the this detail.

plus XX% to combustible for comfortably year in We Focusing of growth consecutive HTUs shipment driven a a achieved a now third by volumes. addition IQOS resilient performance. on increase

made better growth volumes XX% over volumes of up in QX, expected are positioned and we of PMI very well long mid teams over here, and term. Our growing to continued continue the total new smoke-free with

XXXX underlying Arabia targeted at Taiwan, our range in due billion lower launches of HTU XXX.X and to shipment and lower-than-expected volume Russia units end with Ukraine. of the were Saudi delayed growth combined in

as of the indicator adjusted is HTUs consumer the IMS believe IQOS we closest growth underlying [indiscernible] For best offtake.

sales at full line and shipment XX%. volume the in-market growth year, in For adjusted plus were

measure IMS grew the quarter of buildup fourth trade therefore, X% year sales in-market During prior XX% growth HTU more year. by plus XX% than plus growth adjusted reliable the is, reflects Russia excluding of more continued growth momentum, and strong adjusted inventory a plus the shipment quarter, in the and Ukraine, for

our in the These years shipment driven the XXXX volumes shipment growth begun context, with notable margin. on exceeded exclude pro and forma HTU war up For rate by made XXXX. basis. of X in rates volume up ZYN, plus of smoke-free plus and These XX% before a portfolio, growth overall a by XX% by nicotine across the the in volume development QX XX% markets excellent company's

Cigarette shipments in category decline of XXXX, X.X% modest international X.X%. declined outperforming the a by

in the CAGR with XX, Turning in is range of to operating underlying momentum stepped Organic XX to growth up profits. plus this more and plus of of believe representative X% exceptional We XX% headwind our target plus to the HX HX. following of income line our XX%. business

growth costs organic benefit gross bodes also profit. than increasing optimization. less days commercial of already of to Focusing some gross mentioned, year in nicotine IQOS, operating notable the by from of organically XXX full I XX points. an reflects operating the XX%, With part excellent very as over QX clearly expanding with for there only key continue manufacturing contribution marginal grew scale This organic from margin of by plus last gross XXXX overall leverage effects and Swedish convertible Match drivers net revenue. a XX%. in strong pricing, Despite we our Smoke-free on by was smoke-free with now income. operating This profit growth of basis profit well

reflects geographies available, partly negative products markets in are smokers This already higher-margin product smoke-free costs. or small and better and not volume significant direct decline on other with pressures where such inflationary manufacturing I like mix greater in the smoke-free as geographic volume Japan adult were lease, mentioned There also materials [indiscernible] Turkey. as lower-margin trends

cover are on Cost into multiple XXXX carry should Leaf, to and increases years thereafter. over where likely inventory wages ease crop and

as announced delivered Swedish now within we with investment which our performance its return XXXX. cost Match year targeted a Swedish growth forma for in years. PMI part XXXX, of pro excess capital in Match, XX% and in of adjusted of When Moving in plus XX% X our we in outstanding on top line of plus QX to offer first currency-neutral full

our surpassing ZYN of volume U.S. this of now delivered ahead XX% to XXXX. well another growth remarkable growth with the Vin we plus in plus XX% performance achieve expectations, time. expect With and

in offset brand of on brand. plus in Retail and share global grew planned volume focus was driven Impressively, quarter progress a This we pricing third sequentially. which markets and U.S. by decline, relaunched value a as continued sequential volume and Internationally, XX.X%, comparison for shipments. category XX.X%, to results, XX consecutive U.S. also volume quarter premium truly positioning as partially growth in to grew X.X superior by building an months robust share points X net highlighting following competitor increase an and points revenues we XXXX XX launched the effects. strong with or plus year-on-year light ZYN's in excellent Cigars to the and QX equity. have pricing These plus growing reflects posted during profit. increase continue April XX%

expansion nicotine as growth accelerated nationwide its [indiscernible] a gained again reflects users strong traction distribution velocity step-up and in broad store convenience for category pleasurable This gradual experience. and with the

in XX, nice IQOS on of the quarter compared December the it's to growth representing were million million focusing estimate for full XXXX. IQOS, Now user acceleration growth. of X.X starting a with year, We users XX.X X.X there and users as million plus

includes in in to the XX, geographies. of outside Ukraine of estimated a of Russia markets users adult progress XXXX. acquisition ILUMA now IQOS This addition all over This existing range and switching adult smokers. in Japan broad million and the XX of major as Europe available other essentially notable is with and December user reflects

We to in user beyond. continued plan this the drive growth volatility going basis semiannual portable expect user a Considering report Illuma in IQOS and on estimation, metric situation and XXXX to strong seasonal we forward.

of portfolio the but With growing business. addition smaller into the give and e-vapor

a holistic to smoke-free total our more investors. provide of to intend user view also base We

more products Moving now revenues. where region, to than of IQOS made smoke up XX% net in QX the Europe

uptake industry growing by volume. of XX% X during of the the X.X which HTU launches key quarter. share X.X% increased IQOS is further around and is to region user after adjusted available plus illuma, driver total points to the Our A HTU of QX in cigarette

XX the XX% making delegated ban clean into to the markets regional tobacco and IQOS adopted EU, implemented of In shelf policy nearly characterizing on October. up in the directive product implement volumes flavor

Ukraine. only impact projection plus Indeed, XX.X on good This levels. offtake as reached a to small adjust adjusted IMS on volume unit trade in a as the of early as high growth continued the X-quarter QX record days, we inventory still very average. lack and year-on-year well XX% moving While despite consumers exhibit of growth reflects double-digit sequential billion on in estimate

total and XXXX full consumer and less a year characterizing We X than adopt of less of and expect billion shipment the in both market to regional ban on adjustment units impact IMS, estimate the PMI. of around representing flavor remaining EU X% than volume X%

channels remains that past This on is our restrictions Based consistent the market IMS QX, the XX% to the year. meaningful and same. the important represent group this with in initial an rollout and such of brands the launched ban, geography total the fundamental Republic in share industry category progression Czech adult check expect a as broadly have and data million tobacco indeed launches now XX% ban We with this from We initial category innovation. change limited line adjusted In for flavor reaching encouraging mid-October [indiscernible] adjusted our Europe XX.X%, Japan, with in in surpassing in later market an expect offtake IQOS be other to do Europe XXXX. the driving the were view the EU over total broader the a month tobacco increased X.X combustible with also through in its In a XXXX. applied rate structural trajectory user. shares with Tokyo. in of [indiscernible] HTUs plan for response. growth HTU to not growth by close X further X.X [indiscernible] to is points

on XX a XXXX IQOS HTU quarter to shipment testament to state sustainable world. in comparison the as year back tough potential completion prior Adjusted and QX year-over-year penetration billion high volume high for growth almost XX.X% record to clear units around to average. of Such increasing the already QX. the with plus volume a by of in category plus market a a X-quarter returned reaching more the inventory a compared the is following in a alone in IMS increased see XX.X% moving fourth substantial of transition normalized

strong [indiscernible] and across Eastern to city to IQOS see tech in in countries, in city, very region, Europe, up the selection QX also income Morocco Indonesia gain given market. plus as noting also This Lebanon. Latin continue of commercialization. and a to share encouraging to with Africa, capital of progress and continues elsewhere highlights markets developed addition growth In its middle points in share X saw such results in X.X%, promising slide America. offtake shares notable Asia Egypt low we key impress limited especially

right shares of We potential. continue indication offtake this towards exciting across an to dynamic the the see the future city with market. growth volume this of chart, important

very covered on X.X%. margin we already organic have commercial line of our plus XXXX top dynamic growth While robust performance combustible the with was

Germany pricing with international strong both performance contribution within notable resilient Indonesia reflects positive and This category. a from and share

plus our cigarette of and category effect, smoke-free and an increase grew This notable This flatted by maximize with normalize our ] despite the XXXX helps plus in IQOS to leadership [ cigarette share, the and in contribution constrained supplied objective which stable category to of international cannibalization. Turkey, led although switching remains X.X 'XX. X.X points impact for by may of key growth this as share of Poland from HTU full in Our in in year. Egypt, QX with competitor We share achieved again convertible performance, plus Egypt, products. ongoing to X.X IQOS structural combined of share combustibles excluding

formidable superior smoke-free share As of share sustainable products mentioned unit give our platform us superior previously, a with for gains economics.

our outlook, a volumes. to to XXXX performance overall than Before target headwind. compared growing me The more turn top years of was the bottom X% number spite substantial our organic reflect line we clearly briefly strong growth XXXX of over the X let more in supported line past and XXXX, delivery on by of X% than currency-neutral positive

plus EPS in the to costs, period XXXX. a target net For an including CAGR plus a step-up XX% a at of X% an currency X revenue of X% towards CAGR the plus skews plus operating in XX%. volume XXXX We increase strong which years, rate, organic net and X% plus ex tax the organic constant in financing next to growth target X% adjusted plus year to income similar growth to corporate delivery, first we

to outlook ever volumes X IMS percentage increase plus [indiscernible] I growth offtake XX% the inclusion revenue the net in and smoke-free terms for acceleration band across gross IQOS to mentioned around in an me XX% growth to forecast adjustment EU the impact the HTU adjusted profit. billion of XXXX, expect essentially to units performance strong absolute of plus deliver smoke-free We characterizing despite Okay. highest in where no and a consumer from This volume, brings in we estimated Russia. earlier

For units, volatility supply launches situation to inherent as in market shipment and ongoing such the the potential of more volume, subject shipment disruption the billion new target we Sea. timing, than chain Red XXX usual

level adjusted the lower and given growth optimization. capital compared naturally IMS possibility of launches XXXX completion there for is follow rates shipment inventory of working to over While Illuma a opportunities time, some substantial

U.S. continued million excellent around volume growth expect XXX We to tonnes.

accelerated top to growth net billion year consecutive fourth revenue line close We acceleration organic plan further recent growth This reaching have exchange to $XX this at manage to in to deliver a we compared which in X.X% and to PMI are plus prevailing strong total smoke-free a inventory total significant means also a to of our expansion levels, and and level pricing. in including revenue an combustible Such progression, net of support capacity mid-single-digit volume step by of naturally rate. IQOS plus affected X% outlook for forecast growth. supports organic XXXX, up expect [indiscernible] the volume

forecast an in profitability smoke acceleration plus continue. from in as organic XX% also iQOS We gross growth XXXX the profit delivered

manufacturing in We ongoing the expect factoring implies lion's This naturally X% margin enduring mix expansion, organic of even of growth drive forecast of just third-party OI mentioned. Indonesia. plus in and plus cost smoke-free our negative geographic pressure technical in X.X% dilution the share organic impact to again given combustible I the in notably to

in forecast capability market. a currency margin. mentioned U.S. the Day, at we very in This impact overall growth in We limited this and meaningful to organic gross income on margin, double-digit adjusted expect OI strong excluding as investment expect improvement impact deliver notable But Investor includes still technical operating a

expense $X.X $X.X debt net in in to Investor we to Day, XXXX. flagged as increased a an $X.X We year compared billion last As of renewed rates. billion anticipate is this at year forecast at higher financing range as billion

into EPS points. a Russia plus combined impact by earnings and $X.XX, to Accordingly, X%. we X corporate net includes in tax second $X.XX growth unfavorable rates. rate at currency factors the adjustability This suspension several prevailing This balances of percentage of comparison. impact [indiscernible] certain monetary to of translates adjusted diluted We and $X.XX double an also half diluted an EPS interest the around related range treaties of growth economy of currency-neutral plus notably forecast effective our in the revaluation adjusted [indiscernible] to assume tax to mix. due tax including of These XXXX currency-neutral hyperinflationary higher impact skewed $X.XX projection

on Moving volume to million anticipate a from XX% a plus in every to the IMS with of XX billion XX%. We growth strong of year quarter and good the double-digit forecast quarterly shape of supporting forecast We expected volume adjusted to growth shipment strong full plus ZYN. XX FTD performance basis. growth QX overall HTU XXXX continued

currency income line to the and operating from as be X% a project to XX%. currency-neutral with the the comparisons We QX margin of prevailing with full of range expansion adding impact outlook, expect second $X.XX to broadly in adjusted growth year currency $X.XX, we implies This full variance year. the organic as rates, top of to improving growth a with $X.XX lap organic Argentina EPS which consistent XXXX. of half plus plus We negative diluted at translates

business cash-generative. Our highly remains

effect peso operating capital This impact on However, net the than Argentine billion XXXX higher-than-expected earnings currency in lower and was due was devaluation, to flow the needs. year-end expected. currency including $X.X cash working other

between requirements. prevailing exchange billion XXXX, $XX operating and In at we $XX rate flow subject working cash and billion target capital in to

the the of We prioritize as to expect expected, our payment the us. of a growth XXXX, of just tradition priority Xx smoke-free IQOS XXXX for our In final the around billion, investing the was net ratio U.S. XXXX Altria. I to to given and key expenditure remaining capacity and expansion minority Deleveraging adjusted $X.X debt And purchase innovation ZYN portfolio. remains around we in mentioned. including continue capital EBITDA

target continued flow to driven in deleverage better much by of X.X XXXX, progress generation. We cash EBITDA growth X.Xx strong and

on we be track. of considered ratio by end around with a confirmed target buyback are to continue once to Xx We the

our policy unwavering to shareholders. long-term dividend and with to Finally, line in is to return our commitment commitment progressive cash our

Jacek it turn back concluding remarks. I now will to for

you, Thank Emmanuel.

Let key moment cover for me now a take XXXX. our priorities strategic to

This of consumables. supporting is First of further includes the film while growth user the to innovation. sustained rollout leveraging for devices iQOS to and continuous maximize growth momentum innovating

to which support growth at organizational portfolio. were U.S. Outside expansion supported also and U.S., the infrastructure, multi-category investment, intend of integrated rather is ZYN, does will to continue further strong offering continue Second our IQOS. with targeted our capacity e-vapor by than the add of commercial we to a launches Zen long-term developing

in in XXXX course, Of will the be a U.S. landmark IQOS year for

While the test X of experiment this priority, IQOS in our and the success us ILUMA a drive ultimate scaled product prepare launch aspects commercialization to launches IQOS of support first for to the is pilot The commercial the will small-scale continue main authorized. different with allow once we ILUMA is for of QX year. city blade starting

scale, share optimize contribution. drive the and have cost despite expected to Maxim on of while chain. positive both cannibalization week we last products taking blade impact PMTA judicious a and continue update target underwater us allows stable category we combustibles, . In enables flexibility the mitigating the leverage While commercialization the pricing of the disruptions no global while over supply for time time actions patent agreement of announced to of a profit IQOS and to line, risks our settlement

crystal are priorities Our capital allocation clear.

growth We to will commitment smoke-free products and step. the to our dividend invest continue of remains in

sheet to waste. as key those balance such initiatives our including to sustainability related We acquisition progress product impact, aim deleveraging prevention continue the remains [indiscernible] Following excellent and our on objective. post-consumer Swedish Match, of

and alternative to science-based Finally, remain the tobacco smoking to who and advocating providing landscape XXX we for committed regulations. by transforming would adult importantly, superior action otherwise smokers continue

at of expanding We Conference will topics [indiscernible] be Cagney these intricate.

presentation. a by performance Overall, of delivered strengthened performance the unrivaled to and growth XXXX and headwinds IQOS leading now brands notable capabilities, future remarkable as adult phase me The and our strong ZYN driven business their to cost with conclude moment. smokers. of excellent continued of reach in commercial innovative smoke-free today's Let equity, our excellent portfolio as broaden we with combined a expedite we our have platform smoke-free position powerful our structural

accelerated to growth confident for product growth food targets. and remain in XXXX We expect the of year our XXXX-XXXX Smart

dedicated in exciting the capture internationally, have of fully towards our ambition as opportunities smoke-free are by sustainably We we to U.S. we being which progress XXXX. and

answer importantly, highly our to while strong a you. your cash-generative questions. leverage and I'm underpins ability shareholders. and now Finally business cash regarding outlook Emanuele to and growth to Thank our happy

Bonnie [Operator question come Goldman from Instructions] Our with Sachs. Herzog will first

actually a high-level on Hi, everyone. question the I to ask year.

originally FX added growth currency-neutral X%, really you You EPS out of X% XX% lot neutral finish 'XX did EPS a reporting in year growth. yet the stronger to

look versus initial growth as were you key areas of initially So then guiding year, the back you neutral to some And outperformance again. this what your about you're of expectations? as FX think X% EPS

this to So may how conservative especially your just trying growth considering to be, understand X% XX% midterm target?

is despite occupies really of part sizable our which that the we the a category above mean very Japan, So And out. the well well IQOS . I is Bonnie, with segments. momentum syncing have regards to capture XXXX, we the in of and I segment. think fact

growth about in we XX% of Japan. captured think I entire segment the

over [indiscernible] is We're a And Japan the continuously just iQOS on weeks, year Japan. So this is transformation. Japan. in of last category of look how I the in very if the is forefront approaching strong. expansions smoke-free few

in a the I [indiscernible], products think smoke-free the of exceeded about the category. cigarette now size

growing smoking the clearly very entering for obviously and is us of that out. So is very i.e. delivering very our XX% years were the been international. alternative phenomenal that pleased of What this we from after expectations. of continues a a than single all conclude data, pleased ZYN some the their portfolio important [indiscernible] we've conversations and and very IQOS actually Swedish creates designed acquisition the am above and which XX quite hear as much, in adds rightly Match both time CDC going Clearly, of element for growth, opening good IQOS about is and participating well as a XX as the U.S. adult keen pouches and we as could after for, really of about less U.S. in smokers We're [indiscernible] indicated in the with unintended they years. I familiar is product. consequences use the to about very important we time with so market

sustainable a regards we fabulous trying have very my good, we're a to perspective So a with good very a X focused smoke-free have to growing a view we also be -- the rate. from financial is product, propositions and in

potential flavor So from momentum $X Europe. have key But this are clearly Europe this potential XXXX, these billion negative the is of world. we indicated in continue this strongly [indiscernible] that, perspective the I and on on impact headwind think margin And the this maybe very on I ban group well. right going Japan is momentum. really geography now other positive very to They also is important the very the U.S. the geographies is distortion very the [indiscernible] sound [indiscernible] in the from Yes, want don't rest expansion. the than key side.

which conversations We're maybe one you remember the how I trajectory historically, delivering However, to any Investors of the clear. you on. lost and And very some access fabulous around thing years [indiscernible] Russia above up, mean, now in essentially running in during period we pick [indiscernible], and despite that but you have that of growth occasions, of earn Russia. And fact easily which IQOS note growth been X growth alone depends was be on growth, category. there so Day XX might I that, growth IPs the consecutive even

to more makes our confident perspective, at need about this look which So I from trajectory even X-year outlook. me we think this

little was I more did That And ask a on then want helpful. margins. Okay. bit to

in I driver color A Americas, U.S. Just actually hoping key on relaunch in out. ahead of called your you IQOS negative. this bit in QX, the margins this were little is for they of a assuming, your in investments especially I'm the think more where May.

income of should total context it years And the for XX this for in your operating So to in expansion. just Will margin think and revenue we this, income company, year growth full then the operating growth is FX-neutral about does year? guidance how operating Americas growth be imply of continue negative.

your for and in margin So that? maybe on the expectations could touch of gross you context OpEx

impact soon preparing the the the organization down continue segment, the think the U.S. being organizations able of market, growth I about in in handle investment to is the the increased in market, U.S. [indiscernible] Swedish devaluation U.S. [indiscernible] U.S. Americas the Yes. yes, market. where challenges the in also of drove but than obviously to more the Credit which and the Argentina module for is of and up organizations, [indiscernible] and more which to it's supporting have the rather the details, there specifically also expansion, margins International opportunities

start already the commercialization. P&L ahead do of want So which there Emmanuel, ever per the for of IQOS are you investments deploying to... [indiscernible] some are even

very development CIC. strong pleased the we've complement Just on both But average with the IQOS of above as And want. and margin been you the product. if -- very your today what on on for to dimension, margin seeing commercial well a our on smoke-free on we to our the on answer margin clearly, ask, performance are what being X was Jeff Ben complement dynamic behind question, saying described is the higher-than-expected the on volume

progress profitability on of are and increase some overall. we the We in have IQOS price QX product making the

a And be clearly, is is the We if dynamic, but bit U.S. the our also the, of we to that of mean, of the is but continue. we in I a of the all growth product. the mistake, a of that even going we're growth The about and perspective, maybe fantastic level margin we our it described expect and the our nicely the indeed, was planned P&L at WW even talk happening, in revenue no strong evolution and make fact expecting, the going is among to therefore, the that in powerful And than at to super performance. level the of operating fact course, U.S. growth. to better invest that the income, double-digit parameters the that margin to very U.S. we're reflect the accretive market. and of U.S. in is very best-in-class continue portfolio U.S. financial So level consecutive what

Okay. margin op clarify based op year, guidance, expansion expecting then and may on margin something your Emmanuel, gross I for are if it you just margin? possibly this implies

do We Yes. Yes been. absolutely

Barclays. to We'll with Jain go next Gaurav

just peso me. the to questions Two impact. from clarify One Argentinian is

the year, $X.XX benefit equal peso which is sheet any $X.XX there is Isn't is to revaluation further rate, EPS. the there have Argentinian which to you balance a math an using revaluation. balance linked this you means spot shouldn't are sheet down, way the So be rate, on the automatic the slide, And that which impact to that [indiscernible]

last dollar Look, reduced has significantly by The duration been on is the devaluation. reality the amount term further any peso. of course, we that speculate cannot in of the

devaluation So lower a impact to further much amount. would

could in to you we're Now to devaluation had deviation this able kind What of Frankly, anticipate have the been, account has is in the December. thing. don't whether basically know into come. basis take I more that fact, with not

base would So devaluation to further apply peso. lower a Argentinian in any

I can is it separately. And question Maybe second around my in. ask Sure.

We on Chuck that think statements. then concerned, are bad. is We will of get are lot a Schumer investors an flavors had by lot of hearing regulation coming a they

of controversy ZYN. do how that potential this So plan you ahead to around get entire could emerge

Yes.

few over So around media last of a Brazil lot and conversations we have and Internet generally I observed media. the and weeks, social

the think okay? it think and years, age low, data applied. look, for you in Nicotine CDC, [indiscernible] et any the we market on film [indiscernible] where restrictions well are latest major [indiscernible], stays I it's some if XX on also [indiscernible] cetera, no given see other -- I U.S. there's products [indiscernible] And product, arsonist the

were very taking Swedish acquisition we this the think of marketing [indiscernible]. Match the I and we the whatever during practices, seriously know

disciplined responsible on they the international. approach we were are that that alignment was a said as that the have have [indiscernible] and pursuing a smoke-free with vehicles projector, We the marketing to but only very with not [indiscernible] they also

have been reached it to in a being different the is in who also sometimes We the And the people trying have FDA. but think in most these I to are be the vocal positions consumer, the to conversations medium. to out facts an few facts are than

very little adults have the going [indiscernible] is the ambassadors wouldn't the in smokers to conversations we product is and when with not straight age Obviously, helping comes among in using the it paid verification. the So [indiscernible]. the whatever is When adult territories a this media anticipating that's control. going

is taking doing the the based the it what the product best harm we where the position science cigarette. tether reduction nicotine nicotine reduction obviously is potential we're on alternative much from is another risk very to products of product and of So frankly continuum. It's the think the versus

very We [indiscernible] PMTA and have with EBITDA, site. Science very pending is the conclusive on a strong

feel Swedish very the agenda. the always market much So high other put beginning confident transformation, very of the protection team very our our and the Match it's very, of I very we from on

products, growth numbers So confidence I I a said smoker. think fundamental in to me the delivered . question, gives earlier, body's it the have sustainable very which progress that, the are on as adult a we

Pamela Kaufman now go We'll Stanley to . Morgan with

guidance, regions where have that we've seen. well. Can on you're about seems And XX% that as what's particular in any It's seen And question phenomenal about the growth? just stronger I strength ZYN seeing there in shipments, U.S. it about a given in the in you U.S. talk growth the are ZYN driving in the but growth implies U.S. conservative ZYN growth the acceleration

observing. ZYN's anything that we're would So growth outlook relative to is there temper what

Yes.

but from when smoke remember from, vape combustible pouches, from there toward of the Investors coming or profile similar is or comes cigarette, any you the tobacco Day, nicely ZYN then the containing it category. [indiscernible] categories, the also the So from where serves the a overall obviously, are the sourcing adults from products, resourcing very our including

the type to optical and is obviously, looking might maybe not ZYN, the innovation pouches, resistance. we some number some consumer it why protein Brazil. looks looks way is et recognize at some natural which is something [indiscernible] tobacco of usage some tablet, XD constraints, cleaner for as of maybe of know the in is the having adults, It convenience them, the or have another of cetera, doesn't people for is is been might comfortable tobacco of of a growing extension there of the product, So or contain pouch. There hygienic which it be are create were

say. what is this I So can

and the category, combustible good figures category also I other the obviously, with market U.S. still product think market developed is has a sizable a The tobacco trajectory. oral very we're the at many [indiscernible]. very large a in

is it's to comments number to for year. for audiences. appealing next guidance these forecasted avoid So a of accounts [indiscernible] nice our ZYN, regards [indiscernible] which With we

a to of through will which some of I a today. QX. were rear you but are of year is it's and which on not the but year. we guidance mean positive. very in go there be surprise the confidence multi-category well this beginning I business, the of. number a part prudent, us also of assumptions, as and the The the year-end of [indiscernible] I I at the I'm So built are are ready can't the lot headwinds, the something the we whether aware right? it's global sure upside to Yes. amount is U.S. single trends think the there that voice a prudence the to build there's the come we year and tailwinds, mean materialize, are can as some matter --

a in versus [indiscernible] year the clarify total terms a been of and than coming year-on-year. to with growth 'XX Yes. 'XX. growth experiencing be here, volume percentage are That we've similar one we guidance And would the in

growth. are the volume what of It's we to we'll whether rate. sale forecasting the have going in growth a we for are being. than even seen time these So reduction see related higher

Okay. strategy? U.S.? implications on influence U.S. That does with patent import investing your does makes elaborate the to on And into it BAT. for I IQOS. How the manufacturing your Can question sense. And a capabilities been ability in settlement the settlement you manufacturing that change know in you've of the the

iQOS the scale, of et of all allows us the now chain international in day on Well, benefits [indiscernible], which operating to the from economies supply to the actually X, with chain is which U.S. it cetera. is supply

the the we on both as we electric a the and the stand-alone U.S. costs like same is a elevated while the international. volumes. would that We had of in obviously obviously implementing on basis at on but alternative increased benefits cost devices, to for So is voltage strategy level have obviously, close until type of the mitigating [indiscernible] result been manufacturing the or U.S., of in as the parallel in would

us, for path So it's IQOS. for customer

geographical market removing that, and less today We forward. don't of we're we presence of from going pipeline from bringing a international I benefits just which added a Lomas product is lot the said, should its an family or because and of say, X it to like IQOS market. the economic uncertainty as [indiscernible] the cost or to I is And day another any --

which territory gained sizable for So all we uncertainty. And for running have a we patent a business to even very know, we clarity has litigation actually, acceleration us, obviously, high business. more we're this and the sizable is of as agreement. plan degree And

I investors. and U.S. forward of visibility important. also very to now the that clarity going and important believe addition is is You're

next go [indiscernible] We'll to with UBS.

well, I have a couple as please.

guiding for growth. you're of in-market year Firstly, another heated sales impressive mid-teens tobacco

Saudi Arabia, are that, up range. will better. assuming what could mentioned? you growth, any sort be allude to please? You've has U.S. the make if difference help markets should within to highlighted that larger from mid-teens you you Historically, slightly markets. to for still the what And well, Europe within of the we Europe And done get to expect Taiwan, as contribution you the

EBITDA U.S. with U.S., the the on from high X.X will us commercialization. more the us the we call allow blade is PMTA the would and type national IQOS for [indiscernible] mean of product, we with MRTPA start cost in to broader, visibility more to market do we're for get X, which literally IQOS test I to I which what looking forward vehicles maybe accelerate the regards So the

So have the a solution rather product full the [indiscernible] in of treating U.S. the scope. of terms from version [indiscernible] assumed very testing, is seen the what [indiscernible] current of type . it in contribution we than [indiscernible] of commercial, at IQOS consumer XXXX volume

be each markets assumptions rock, speed and we regulatory and that's might opening -- we we hinges made a shown the is the markets have the IQOS deliver of allowed. in assumption assumed of decisions The the look, they some period are or a the going although ante be some fast, is that not the regulations. in to categories that et period on mean different regards have [indiscernible]. with much which the have of obviously that in history of regards the being is We or Taiwan these markets other impact But those today obviously implementing lows I these flavor an that I you, with will cetera. the regulations time, right we're don't -- in different believe places of made over but some type assumptions lease

thinking that I think could they the So some be cautious be distortions. might there

IQOS than the a we cottonseed underlying at this look guideline matter a of we see about I Other for consumer to devices aggressive put have is a base time, pretty growth, I environment market to I of Japan. pricing very both the very in more a on the of will talk fact period should should say also competitive maybe IQOS strong this. materializes that, but where if And and outlook we the competition on is essentially and for share the which that should But the sometimes [indiscernible] the strong have consumer value evolution on gotten price in of over this mean navigate in well. we'll we price European volume Europe, rally transparent also competition. It's Central highly competition, despite participants. take very on IQOS, we there from pricing the not it in materialize other the as strong

Italy continues Germany grows momentum. are. with we growth a [indiscernible] that's very strong So very nicely.

Spain. have -- We progress. start making the driver significant a major in we We the make

from here. it me that's So

And please. one other just then question,

revenue growth Is you're XXXX. So in in you a performance acceleration softer discrepancy? XXXX, group 'XX. in but the into a not expecting that Are expecting in translating combustibles that's smoke-free acceleration

a smaller this at the beginning strong were the like Yes. year very last the not of combustible managed we things. obviously, I that few is outlook or is the mean the variance. moment for time blended year group pricing have to other revenues deliver this in But

I is confidence. of us in obviously of again, for this now. to the growth. a be there baked may the transformation that think revenue is to revenue the -- driver in quality but the and -- years that matter, we top potential, which repeatable what a I about of of started pricing at little assume The pay not quality revenue we included delivered a it's But a fair obviously that now lead Morris when variance think were need what compare the a year. sustainable in pricing I this visibility line, remember to some to what the we growth, leave for is counts Philip our is lot delay when important number [indiscernible] want increasing Look, guidance. the when these attention we more a not only we And times bit of we things, that very well start XX%. need we the

growing, when X-year with above to of to overlaying to pricing not So down you group start but having start this some volumes no focusing a risk and total managing decline, by even avoid was trading, et the flat, cetera.

just there X% would I think I perspective, about is from revenue pivot. that perspective, growth over that X% growth from the is think qualitative the the pretty a nominal not is

when [indiscernible] add saying, mean was increase we to it X% don't to is that. the is And price repeat just on to portfolio. been I taking exceptional indeed, close what account intend that to comes convertible Just to into

XXXX. increase for a to price mid-single-digit guiding are We

on So the our course, an will make of impact that and of a on revenue combustible difference have the growth business.

Elliott Callum with to next Bernstein. go We'll

huge have commutable huge, We've in if in U.K. steeper in the wanted combustible those and success cigarettes start X a with in is cigarette those the just nonexistent, XXXX obviously not volume U.S. the vaping in markets. decline these to obviously, also us products. markets for I seen U.S. driving obviously, a business your products disposable

why equivalent business and success these on my for a huge think And not big So in do are your be for to is the threat a business this But seen impact your we haven't you think particular? the you your that question in in markets XXXX? so products markets EU could far. business do

offering much often type smokers there forget flavors, the terms fantastic being the the experience the very Tabor literally right? exceptions You the of and innovation Look, flavor, not threat one core disposable. is of to right? et we that into So the category our product. product traditional your of a focused mean business but it's that the market-by-market [indiscernible] number think the factors, in disposable, are It's from very coming very the I characterize of of Then would cetera. with is much that I

other a from dual the factors is same of at I and the smelters some then consumption switching triggers experience this at try, time, creates our of the for think but okay? So That's to play. bottleneck know sort it of curiosity of in a consumption. terms But the more occasional full-time factors, IQOS we adoption. triggers one a it actually of And type or obviously,

past guess it in the that U.S. I why impediment hasn't hasn't XX product I the to an the like yes. been these that, -- and over that success understand seems But XX, months? U.K.,

in the by I was underlying attracted Results of the category margins [indiscernible] category. the this for the U.S., forefront remember of historically on Because the I focus, was also CC right? partially, U.K. this guess, if

obviously, underlying going these also places So people the about margin are which the to with with of the creates talk opportunity alternatives freedoms relative some to products.

it here, Europe but we're in international, are also some products you much, countries, let way As not know, welcome. these me that very put

sustainable double-digit check margins with are of months more a late few despite which then category sustainable history or enter XX should the easy the so. our some in from start at say. this aside our perspective. start [indiscernible] to have company opportunities products a we underlying from to less we're leave some know category, let's enter that opinions appeal in enter very and trying relatively too speed we which, copper when product, we but gained and other look, the But of in focus result and also profitability, we're the mean the we So It's And very that We the want the shows much fact principles, pursuing other this path markets, other don't view, and into I to visitors, but market play. than Italy this good profitability. be the or to we a

discipline lot do volumes in there's you tells consumer also lot then and I more is of loyal that in trial the performance there vacate pouching a yes, And or of a see there by how definition, lack a it obligate there lot focused know we I the is the the by So U.S. of should in loyal not of way.

a to consumers. having success smaller of set illegally yourselves all and especially but basically related follow-up of a in us would of standards, to that of disposable set I maybe lots secondary product of businesses And to have that's of -- as and by and as these I formation whatever within rules certain want markets seeing U.S. is we've forming time, great But doing related philosophical same nicotine video slightly we week, more market would Okay. to be a existing the been will this with question. imagine. who who last the forced like but the of only a number also they attracting on at players rating to the and ZYN marketing I have hold and a seen often have play seem new it big been describe are marketplace themselves legacy a some dual-tiered your users such

my [indiscernible] seems on to like this seems just the your when attractiveness impair it your forced markets guess playing you think that do number a dual brands forming to you're of that I be structurally and a which level? being so tier of structure And play question is, business field in

doing ours companies be even expectations. even not I social crossing which line say like about regulations something obviously, or look, the would Well, thinking again would is of

hit dispositions ability our operators around some but created don't market the what speaking, for happening the some a and on happened I view category we underway. participants or years of a is who frankly market, less how it's other that now but on XX as not the there discipline resonated practices, grossly for it's long of So because the this cigarette regulators, live almost and and expense agencies in it's only people fact language, market slow. years other has you, have what some design the I it mean, kind compensation frankly still marketing to and completely creates around And It's reductions to portation things into for the enforcements or of of in we fixed. type asking product lot standards be in sale that is relatively different market, have, outlook, manufacturers, I But of the these be many further of in think but them understand or the years, we market. the easily in will also especially all know which come this U.S., operation. Replica, my places, obviously, a to these And overview think XX also I legitimate . and the in product divert in forms have can the diverted should is illicit by which essentially the are a speaking, market progress of type from

Stifel. come Matt from question will Smith final with Our

year, $XX still you being it explicit investment level expectation like you a embedded expectations we the double-digit organic U.S. seem called If your allow market. levels expansion question that up profit investment a operating XXXX areas step million in consider and ask margin so investments, out you're profit to growth seeing talk Wanted to you $XXX to the up outlook. meaningfully step in would about about where the investment. including would on follow-up while of basis, gross achieve Last the can CIN the million for an or able the in in incremental in

Yes.

if revenue our above So lot of BSI, a growth. adjusted

will we hand, improvement the think growth. in assuming support enough So to of that some revenue on the But we're the other resources I margins. obviously, have

investing, we our not if -- much will is margin we on more what be in completely obviously, would more is expansions the -- it it are stop strategy. significant but were growth So see be to expansion significant, much we

least U.S. revenue, which So And sort that from there scale small we over the I we so revenue scale also the think market generate has combustibles growth we at but once crude in standard. on by the with the is by operate there, the a substantial in and very of at a do rate. international the

Why today's support have to the I room we and for tomorrow's to think allowing investments also margin provide growth. a expansion. BA for the

is [indiscernible].So on I mean some the start of the the COGS pressures. assume extra this every opportunity we here materials. 'XX I incremental for on is provided about And And I [indiscernible] delivering sort obviously especially the in margin. this ICOS have that we combustor, pressure. last going This of the the scale pressure. easy of inflation the with requires seeing the as 'XX other the I also think in every investment We some is should offer of incremental is And supporting words, of of proportionally and inflationary in a think, forward, year original less level other

Sorry, before we closing to you us virtually. presenting either hope be for XX, call, CAGNY be in Thank we remind and able joining will again our today. to join person I'd at that February you you'll like the conference on

follow-up please day. and hope team, If Investor contact have great any you you the Relations a . questions, have

See you soon. Thank you all.

today's participation. concludes for call. That Thank you your

at You may . this time. disconnect