Philip Morris International (PM) 18 Apr 192019 Q1 Earnings call transcript

Good day. And welcome to the Philip Morris International First Quarter 2019 Earnings Conference Call. Today’s call is scheduled to last about one hour, including remarks by Philip Morris International management and the question-and-answer session [Operator Instructions]. I will now turn the call over to Mr. Nick Rolli, Vice President of Investor Relations and Financial Communications. sir. ahead, go Please

you release us. our containing quarter thank issued XXXX today, a results. press detailed for and Earlier joining we first Welcome, information on

IQOS Relations references www.pmi.com access definition the other risk as the actual release calculations may for your RRPs, Today’s reduced glossary on contain or attention Martin? a review as projections pleasure You Martin PMI to forward-looking terms, are differ presentation could reconciliations various to statements the for and direct forward-looking from otherwise materially heat-not-burn of the that Officer. today’s Investor well app. today’s products, end are products. at cautionary to the and forward-looking Unless our or to introduce the my including future most are of and website. the Financial slides, statements. factors IQOS now directly statements posted A to of or which disclosure Chief comparable stated, I our release U.S. all results GAAP to remarks adjustments, It’s our measures cause on webcast press King, results. in of and projections

Nick ladies welcome, you, gentlemen. and Thank and

to for financial smoke-free a globally. in We are XX IQOS important over tobacco million and positive product momentum users milestone start off the reflecting our portfolios; XXXX, results, strong promising adjusted and combustible currency-neutral of reaching

factors. XXXX reported XXnd The $X.XX our be per to announced press to at $X.XX on we earnings As revising release two diluted due our guidance to March compared in our guidance morning, prior revision we $X.XX. specific is exchange least at this share least at rates of prevailing are

Canadian plant in per and approximately deconsolidation footprint Benson estimated of part based to the impairment a subsidiary, share Hedges $X.XX of on $X.XX our RBH, approximately quarter-end Pakistan total manufacturing charge exit in closure net First, Incorporated, second, share costs a And asset per of increase a related the representing Rothmans, final figures. $X.XX as global of & impact our optimization. of

at outlined approximately with unfavorable coming forecast projected an amount per year. of our Our slide, share guidance pro half of or impact XXXX. of to per include share represents least currency this first the excluding adjusted exchange per the prevailing rates of $X.XX in continues After on essentially the $X.XX entire a X% our at currency-neutral share reporting in the adjustments forma increase diluted earnings of $X.XX versus $X.XX

cash like-for-like continue of decline currency-neutral full-year X%. we maintained X.X% For of of revenue decline PMI year, of to of to to and industry units billion, operating total operating cigarettes heated X%; income Furthermore, the subject least XXX on total expansion flow basis at for basis adjusted least a points; tobacco X.X% for a approximately a net the growth adjusting requirements; $X.X shipment $X.X of the approximately working volume year-end volume to expenditures of assumptions; capital currency-neutral capital approximately following deconsolidation X%; at margin we anticipate and RBH, billion.

the driven notably by and the a strong of to volume units, the recorded tobacco now quarter. of X.X%, Turning shipment EU first growth total in We heated increase Russia. Region

Our our of brands. each cigarette by stable, cigarette was international growth shipment volume top-five supported from

in-market by nearly sales the up our units impact with distributor unfavorable movements, by Excluding estimated net inventory X.X% tobacco of total grew heated XX%. volume

nearly combustible increased portfolio. from by higher revenues and HTU our units. increased sequentially XX.X% XX quarter, Net by the driven HTU pricing our Importantly, in-market reaching shipment favorable X.X%, tobacco by excluding currency, billion versus volume fourth sales volume

Our growth currency-neutral two comparisons XXXX. challenging despite quarter net versus came revenue first of the

quarter is sales approximately of following RRP devices the last of our XX% in by in shipments the to period of lifting revenues XXXX to relates same This year. of restrictions. compared total to net first first Japan the contribution The device evidenced year device sizable approximately the IQOS XX% last in

XXXX, our July Argentina currency-neutral in an of to least currency-neutral effective percentage and these relates of results. full-year with of represented U.S. would revenue to our the in peso the Combined, now rate. estimated with impact accounting two serving which, functional net in drag shift second devaluation inflationary Argentina, approximately X.X% on our consistent growth X%. points highly The our the dollar the included for items at subsidiaries X.X approximately growth been the Absent now assumption currency X, our as have

shift and underlying pricing Turkey remain our pricing accounting excise tax combustible adversely and variance brand our globally X%, leading the intact, the impacted the environment Argentina. absorption in was portfolio. a was and supporting quarter The notably broadly cigarette fundamentals Our tax nearly in by in aforementioned excise historic partial strong rational

We over increased contribute cigarette markets, recently France, and Italy, as the further a our balance pricing variance the Germany, such prices Turkey, positive should year. Mexico have in to which of

device and currency-neutral Adjusted a impact diluted these their increased For operating points. effective in of from increased operating unit the with margin by lower we XX%, tax dilutive expense. a shipments noted above EPS income by benefited coupled rate variance strong quarter a lower adjusted margins. by pricing performance, of metrics and the driven X.X% interest earlier favorable my given to basis, business our the excluding increased XXX full-year, remarks basis anticipate currency, year, by lower last Compared X%. income first adjusted On the combustible

commercialized. and driven has the of Our U.S., total reach reflecting international increased Half where broad-based to X market share XX.X%. share, heated first tobacco was across percentage in growth quarter by units, excluding gains this by IQOS point the been China markets

of in Germany, share cigarette Turkey. and Thailand out-switching with contributed products, heated such markets the tobacco of Our despite balance higher the to the impact as Egypt, portfolio growth,

cigarette category increased alone XX.X%. Importantly, percentage X.X of share the to our points by

our Australia driven international reflected total decline & six by Korea. share Our of the impact cigarette regions. mainly higher share The lower in Asia share in Japan and in of growth five Region East the was

key we the million users. a reached RRPs, to XX milestone surpassing quarter, now in Moving IQOS

to initiatives the to activity restoring IQOS past-seven-day of have second balance competitive suggest range that use, initially actually that switched various the HTU and and to share total growth the the in we year year, could of by the share, category in trends ownership, this XX% device this category this outlined the of are trends stopped IQOS for serve our anticipate of category starting half moving during we growth. In we encouraging These last while average are May smoking as over course indeed increased heated pay-off. in And of introduced conversion. tobacco off-take seeing IQOS on stages figures presented three-month share and slide. the evidenced with Japan, Importantly, approximately the accelerate

sequential growth the in for quarter, we have the since estimated market. share trade first HEETS reached achieved quarter This in and is our Japan share for after and XXXX, Our adjusting XX.X% marked movements. share first HeatSticks or first of the the in XX.X% highest that inventory quarterly

the Korea, on been driven shown stable innovative HTU its and growth tobacco of share tax On heated we to a as movements, highly adult recently for in government tobacco market which competitive, countries lowered points continued inventory an earnings with and as by category is essentially during was the increasing where sequentially tobacco of sequential has X.X excise HEETS Italy reach It in varying share our category EU was broad percentage full-year The noted frameworks recent the adjusted the slide, growth, at of noting all success February. across an this by primarily the range the such in by estimated impact share initially and basis, HEETS heated Importantly, continues growth sequential distorted brands. the IQOS X.X%. X.X%. call our our worth Japan smoke-free reflects remained regulatory over in In to quarter by quarters heated preferences. Region, the smoker In of that driven e-cigarettes. first the be products, markets

points seasonally its to we The to adjusted by national HEETS impact with result, in cigarette accelerate to smoke-free increase on to sequentially volume. Russia, strong transition We retail of line As lower point the the an the flattered X.X%. price in a reach was future. market €X.XX, also share is up HEETS X.X by a performance with help this industry Xth, the step total percentage effective believe continued cigarettes. price lowest for that the important of April

sequential indicator of realistic we in-market the volume effect, that this more XX% sales brand's over with of in a trajectory. believe growth progression the Given quarter provides first the

our in-market the from omni-channel focused geographic Our positive users; reflects IQOS and strategy; progress number in growth sales mainly of local existing further of our expansion. geographies; IQOS the of growing impact organization word-of-mouth the

We commercializing IQOS volume. are the of an market by estimated XX% cities, XX industry in total representing now

last our As the February, exceeded year, shipments fourth planned by expansion. noted geographic their of driven in call HEETS our during our in-market in sales earnings quarter

no quarter, fundamentals The supporting Favorable HTU share. of conclusion, sales shipment XXXX. on is HTU impact by gains our share and in unfavorable billion remain confidence geographies, tobacco IQOS this in our for material effect approximately to momentum in-market supports on strong promising million In first are volume portfolio shipments While further a had driving units our year. XX our market units intact. combustible the including or XXX XXX Japan across the an contributed start to target to billion our HTU to off of it we volume

least adjusted per growth against least like-for-like currency-neutral a share full-year questions. earnings happy Thank you. X%. on at at your net forecast of we deliver revenue to track on our I to Finally, assumptions are now and am of basis, growth X% diluted take

you. Thank

the will conference of We Instructions]. conduct the portion [Operator question-and-answer now

Judy from the comes question first Our line Sachs. Goldman of Hong of

it's the guess getting Japan IQOS. I track nice on back So for to see growth

observation seems about been and contrast then If share multi-performing IQOS flattish. trends have perhaps in that you and Korea it X where your share that can maybe with like country,

Korea, is first is better my doing why Japan question. So versus

the by Japan. gratified very we're in Yes, performance

IQOS the was playing page very a the role received Japan turn devices is I of plus plus, had been marketplace. to X.X us well on what view Japan, consumers. it's now looking multi It in in helping issue were that. in with though of we was helps previous that. point versions from think in The minds early have the of for X a in part reliability X.X the they with And definitely past perceptions us and this even fixed by is consumers' get reliability

the playing the was roll Japan And price cigarettes. to multi as in our sensitive share due in market X part have to to that's role and consumers increased new in as adding it's in the and Our substantially, adding is successful. the out registrations brings quarter from it there. during It's profitability well. the HEETS a and

And heat-not-burn So new the we're offerings churn issue competition plan doing in is holding Japan. from intense had and in in going working some the but well. In in in but there, also are very through we're on We're activity unlike earlier happened Japan we're some is and well the seeing in the going it's multi the track the received very there's on hoped competitive some that and competition. very marketplace. I right our not think country, that's on working hard, days as X category. Korea, of still we the own And

that's down pricing other in not HEETS. that impact just what other of And looking your for drove decision. to pricing take and elaborate why how there markets helpful. Are Europe the And profitability just the around outlook the drive that then speak to world? on then, some you for changes, IQOS, decision HEETS and to you're offsets that Okay, can then does EU, if

reduced only. was was the government in Well, it Europe, Italy because more actually, even specific the tax. And than it was it

benefit that believe And as intact. that's thing consumers, get The right we in gaps. that so we the when the profitability on remains we so various important it's lower passing governments think do. and that better in differentials something likely sometimes tax And we're a to to to countries, that are retain those tax that we less consumers reflect benefit. price, to get Otherwise, it's

And question. then just my last

actually earnings that talked than came during expectation fourth your quarter better about first earnings. quarter in the So you

underlying any there were is timing expected in quarter? or factors first actually done you the business So the better than

stronger bit There in the both. the is EU we it's better particularly of conventional and business, cigarettes on came so volume than area a anticipated. underlying Yes,

about HTUs, we're $X.XX you about quarters. I coming will timing more is $X.XX, if as far take beat the is half and the that plan that's the better more in coming better, about that right is out underlying which there the $X.XX the and transactional half of -- is in currency is other As think currency. on spending but being Then business flush performance

So but we're we year start early good for it's the rest a see days will and on the of how unfolds. year the

Our Spielman the next of question comes from Adam of line Citi.

a unpredictable, just [Indiscernible] just same large the question to amount. by you bit, in little the you've Can ask times. wondering how given the are just have that, Judy. for I And six like EPS some again is guidance X I'd some we we Or extraordinary And how full-year? guess results the is from quarterly last because because fundamentally there conservative explanation? should I hugely explain a - business think maybe lucky and I quarters, not interpret I'm suppose that, you in row? four being for given other

we Well, reflected, start strong to I in results it's as for you off year are I that a business mean, said, see. the the and

We good margins. have

have We in early the only. days. quarter good it's here But I we're volume. first mean,

well the cigarette end the from both X.X, our is And We're but it's much coming plan. cannibalization For we exactly on that anticipated plan part conventional tobacco it's where the a share expected. welcome turning quite space, that’s heated we the which planned. adjusted and everything up be the in really we on market is on bit last is the It's nice to what of despite share HTUs in right further from in very conventional cigarettes low that so to out But a strong anticipated, share is the nicely. it's very development. growth EU, volume, what range was the year. market, benefit we're as In from well. down we Japan coming put ahead had worldwide basis impacts total it's developing the of total is own which The getting of made investments we

We and have Now, see can trends the if a bit the the to estimates hold performing it's we seeing positive business better. that it's year. really the beginning and these give think of best we'll I a we're

Can questions that two I specific. can you ask perhaps answer

in First organic see growth surprised of EU. income very adjusted XX% I all, I think operating to was the

because Germany, pricing you increase But huge what can the that in stable should by XX% on a was I've any press that’s and release, Italy point As there read mainly Poland. is driven to, that factors other quite be a market?

One the EU pretty in doing down other only our is is EU total a slightly. there're it cigarettes two factors. tobacco then our starting shipments margins And units. And shipments remember tobacco to better get this in both good than quite volume And and heated for significant. units are considerably factor have that for EU better our you well get those market to our are Well, you cigarettes. to has that and for heated share than be while, on very for came

get weighting the to the learned you efficiently We more how tobacco HTUs significant in margin We're units. our at getting better also both get you it of on the do So infrastructure a higher volume investments trends made on cigarettes to tobacco heated IQOS, efficient better and convert both more to spending. for heated and smokers effectively. we've and and and

our this the made cost, look much and the we EU, smaller last before. we're So than benefiting investments controlling as to the we're year step all other in a our pretty to doing areas was scrubbing also up but come it at was company better actually costs, the year, good those so doing from and regions if we're you existing the on give across results. it together all the in committed the job We're some in costs

that I JUUL. the guess impact see they I can perhaps I your discovered talk had there I longer Germany. comments when think from in perhaps a you that risk we I December, no volumes there's no suppose impact in back from in guess, But the thought the with perhaps would you we which in see. can impression that is question about, hit go behind question Canada, we it that guess been international, And JUUL, UK, the was November, which no

That's correct.

We haven't our JUUL impact from on any seen country in any volume…

year rest onlooker? very good is performance it And extrapolate way perhaps should the of that's any informed in cause fall particularly for that the this in you've final EU in Europe in the me we the not from very operating said Is good forward? the as factors maybe highlighted highlight obvious I just the you'd going growth. question to there Or

would you'll don't I year. Well, know quarter think because going of are trajectory in any yes, call that increase EU to to performance this see each And believe I But that out cause I the any have the the other there're good same and forward event falter factors year can't percentage way. trends think I involved. good. a will

Piper of Lavery next Our line question of the Michael from comes Jaffray.

second, color is on with of we economic heated little all of the the sense questions. you Italy touched broadly? And advantages two a does lower taxes to with the would've price. lower they I One, that You Does representative a adjustment couple tobacco compared it the you been in also tax guess Can and a bit somewhat your markets, your on and How have the in have prior that? like then Germany. the units advantage give compared Italy increased EU that of with are at cigarettes. and to adjustment price lower to where or price constant? Europe

and Germany of advantage overall units from countries. Italy most so. slightly a pretty both for tobacco have the Well, tax than probably heated have good particularly Germany margins perspective, other They a higher

increase, before. mean is the advantages passed the far at tax we've those profitability price consumer As it good on as I least and as as our was

at cited. looking pricing the just you variances that And

of part mix, have First, if tobacco that revenue heated -- the the the it how do of the portfolio? benefit growth get bigger is lift right And mix much units? part you a you am example, sense from of that from just for HeatSticks and pricing reflect the I doesn't mix correct, as the that's of

We pricing course tobacco the get conventional grow was as benefit reflecting that script we do revenue. a conventional units. cigarette cigarettes pricing of the mix Yes, over mentioned in was heated

If or differences look margin. mix also higher a companywide, the we volume at have more lower effect little because geographic you it's complicated, that’s of

if that is for we first mentioned quarter this grows lower the year tends EU that before. volume in say volume, margin than at Turkey example, the a to So be what happened in

So that mix as comes factor into the well.

So same not everywhere commercialize as around mix a world, on overall, higher margins so units we heated market. companywide absolutely have cigarettes unit we in tobacco the is the that clear. is the we because But that grow in volumes given benefit there tobacco heated mix

over just And call that again and the for… out above pricing you

pricing to are the it's pricing pricing takeaway main the the you the going vary. still is in for is year, are Well, the that that power Overall, gains. strong, see the the share conditions intact brands there,

So vary. encouraged pricing by the very we It does are environment.

of number this the factors on have quarter. You going in

Argentina instance, we this it pricing recently. now For Russia, tax The be half variance comparison of first significantly pricing was year Russia, tax second being difference. absorbed is tax in timing it the July. Turkey In a out better. whereas in in year reduces the will the there in increase Turkey, quarter. in was the that We've the in taken of January

the close tax the gaps reflected last from before. market brands acquiring and being and year price comparison the the example, that Mighty is issue difficult. year JTI are the And we crude where in the tax, a for year some year, last but of the countries gap the for So nice closing starting like even there the it Philippines, excise in price, was then first so more more pricing half had very fully

pricing returning we pricing that should in the the be more as had catch-up market. occurred, So that very nice

so Germany, last this we nearly as in variance Philippines, continue against was have a not have year, to good as the pricing it's pricing to we still And anticipate and variance good it the we're big while comparison pricing of year, that all Mexico, for pricing the come in just to go as these we play. Turkey. France, Italy, we And into opportunities going looking factors forward. took top keep so On

it's we'll confident be and are environment pricing part to pretty the the we X% So over the of good overall. year,

there's have or there for the tobacco where competitive there the to competitive just you new some a can seen up last way in obviously Japan, heated environment touch any early it been read? then what's year. versus growing dynamics And you're initiatives, still you right were you What too from Or the of even is to now? the characterize on product have competitive launches picking really

driving you growth we're pretty as now almost the related right were IQOS Well, into taking much growth ones we chart. the growing and the that on consumables. showed all category We of

products period Now, time the it’s October launched effects. been so that could accelerate from or new we additional that limited probably going but growth. has from which to category some there some have the in very is how help in it hard One they're it very competitors And launch positive products, do. what so amounts, they're to to later are see is then combined understand year, planning well the

Japan past the as as problems products out and been the heat-not-burn the in cases it. opposed and in they've many products out of space, try One category by staying the with we in called other disappointed of in dropped the is satisfied consumers being to

see has anything know people So based convert best way in there. by today. which out everything launches think these on if still confident rates best the in IQOS conversion we're product But more to readily. we'll We'll the can marketplace products, still have I far that or we a the additional of

Cowen. the from of Azer of comes Vivien question line next Our

South Any theme the activity activity with be around color you Asia. the competitive would a that you in cited elaborate on commercial just of Can price Thank points in competition sticking So you. of relative bit little Korea. helpful.

clustered points X,XXX three the around price per consumables one much the the on and are pack. pretty Well,

In at very clustered devices there's Korea, price. whole pack bigger side. has X,XXX market as -- that consumable The priced slightly devices. little premium differences maybe price are IQOS most the of think But well versus per the though is price. that I driver by and the around the same around same there's clustered larger, tiering, other mostly a one way, cigarettes as is competitor I the think lower on the including X multi on

the your the belief loss. understanding competitive the that's its share variance activity or driving So differences hardware that on consumable, Is given heightened your price sequential limited on larger is flavor it variance? it in your in variance the

stable. all, getting first you're quarter. that year reported in the Well, number had the our the we that health is of fourth and you're graphical shipped I from in back last out the effects first was paying mean called the warning in of volume quarter share it some distortions

effects sales share for adjusted in-market those is at stable Our X.X%.

So see the our broaden tobacco our we're to also unit to cigarette opportunities in as to big we'll recognize side. it flavors there the holding across space broaden that different number to that that SKUs. to but different South availability continue is work on on but of need a we lineup have own we competitive we that lineup, In well. a role news. be and flavors good that's look the And you our Korea, at of heated do for different very We do and see you SKU continue side,

remind on And specific by when of on from resolution with nature of your end will FDA raised? you the application the us be there we've that we'll the just discussion the hear some second last Thanks. agency, IQOS any year. the that just engagement the what question topics was heard in were U.S., Can a

any to continuing to have we gotten a able In be and anytime. decision on Well, the the the answered TMA news. from hopefully, we've insight you application, and always an But or don't that any than answer the on on update year. questions I get we're have right IQOS were running that them to same comments to or sometime expect other we'll them we away past, read U.S., timing continue real probably hear off and various from expect the further with the this the in

Wells Herzog comes Fargo. Bonnie from line of question next Our the of

then remainder IQOS. to to there. and inventory volume down of dynamics about your drill morning, market? was a going circle I that further of And for and your year-over-year A but But walk I inventory And I we this this, on wanted to should build the key hoping what's discussion could us for year I think sequentially. movements. maybe in-market on the really guess distributor you back down important know sales nicely was through and of shipment how shipments due this in the increased lot Japan just was little versus of some and

X.X inventory right. you're which was about impacted Yes, It billion change, sticks. by is

at if in-market sales, was $X.X look it So you about billion.

had price the increase Japan by we've a impacted in remember that. Now, is and market

decline a in plus from coming pricing you the usual occurred impact of the decline, the -- October. have So market market X% that about X.X% the to

So you pure mind back. to keep have that volume in comparing when you're going

So despite experiencing is very you gain as the that nice is as volume we're and sales total as all course, because the actual expect, up share might in-market declining the the brands. as of not much it all market across categories the now, is different

that don't your I question, So know Bonnie. answers if

this invest mentioned maybe But the some in second for a this highlight of how building that. appreciate behind your you're No, you're that things past. focus understand next margins. you at I business expand change how then to you're help had 'XX part as you've I are helps. understand guess, to of that I'm lowering the the the to your On And of then spend you us? these takes and are margins terms plan changing? bps. that And needed you, I could my puts levels. Again, in maybe outlook full versus changed, spend question us and hoping in on is for Thanks. IQOS where will the some business what expect the behind margins year, or this trying XXX doing have cycle to initiatives to or year. in your Maybe question was you on key lowering incremental

else. What from I example, IQOS clear year behind net to million commercial is on up spending spend side doesn't in last million. spending, the for on we by offset spend. we're the about meaning our of versus everything that incremental RRP were be First this in launches be in CC all, shifts, step of $XXX we and and mean just cut, areas you're XXX overall about year, and That think whereas other increment and the reductions incremental RRP, half not it behind would said zeroing

without doing course once spending spending were from is cost down. have And step the our infrastructure et of fact, in last scale like for really there hasn't more much In we organization, up adding we're What a covering also the on to into cetera, base. within can things place slowed of digital our is of money some it factor were it it. existing better volume that the you year

We've but without is, some can be based them. we've in effort place initiative there's a we includes and adding out $X.X so and factors We needing to this of increased cost that's in of one that to of to of focused approach, objectives, us number zero And and with reduced find a a the order Investor volume. at number initiatives initiatives financial big starting behind which to is in with level business up across helped operations, So products place one business to there, efficiencies two be course. the called in much Day the our out not able incrementally. And very identified more budgeting maintain steady of over running. of cost risk put being other apply billion line whole of throughout the manufacturing, to blocks is the investment and ring transformation building we're everywhere significant

your cover yet but what and aspects without it having of that invest mean costs. seeing. on you're coming to RRP. strategy of it deliberate able up investments we're our very other and through step seeing But lower those the benefits It's slowed heavily business, in margins our transformation Did a question be to margins? a behind doesn't that's that affect piece you're So in

Yes.

So is total incremental the the from the margins, the the basis improvement coming in tobacco discussion. while exactly that margin same -- part margins from adding, heated units, slowing points It's of very is especially EU of XXX it are attractive. still costs volumes the where we're increased higher benefiting

being above devices, help point different and So And that us it's lower. because this even we least. of other achieve basis cost cetera, the were there in a see variety factors, at the pieces quarter you that, the of et XXX the

to same we this invest significantly. focused is multiyear margins time a So improve our at effort the

any that if there really your as helpful. about of any the talk want I think about we the rest there I year? the for will headwinds you put sure I all positives? headwinds foresee key just think you mean on to pressure And that are make are was That should margins

see come that anything happen We'd keep always I objective. wild can't think us field, don't from to that this of from would would would making of right that's I prevent from think thing attempt. that anything point XXX likely us some now least that basis at that achieving

question comes Kaufman next the Stanley. from of Pamela Morgan Our of line

within wanted better Europe IQOS' understand I reach to its versus distribution trends. market share

range? in? thinking expand how So individual distribution its to what countries about more I much distribution IQOS opportunity percent of guess IQOS in are And there outlets relevant Europe, is for

not countries truly, I But the more are the maybe in is XX% Europe behind national. we now, in consumer a nationally, focused smokers believe and Europe, is activities, and are available journey even fully are the within reasons toward And bigger if number. older point some and most little we product around probably places in areas an little you truly will, if because still the for the bit efficiency of that's higher population the real converting of other. Europe initiatives still

a a by just about are third occurred, room Korea, of of as to now volume. elsewhere from well. expansion. So for with amount space and last And called grow there the that's strictly we course EU do we expansion us available Russia still is this we substantial of in national. country to out true that is that. simply geographic in And are it's fully Japan

get still just can every So add those in, to geographic about we've that But we'll opportunities continue countries other not expansion. course, purely years, sense. you're launched in still next probably from much the country as we have few of it going country. there's two, we And room over expansion to geographic within makes

is room product. there of with So plenty to this grow

it delay potential just tax influence there Japan, consumption prices increase to doesn't And from a in October. discussion go that of the the your in raise being in able tax would increase preclude thinking market, How then pricing? around on if And through? the you would so is

pricing. about Pamela, can't future really I Well, talk

when is general, or in there in pricing sure of do when particular, countries Japan, and an most some in is easier there it's For to usually tax VAT in increase either sort event, absent impossible we increase Marlboro prices did it a ago. not before to on Mevius, couple have We It it. did increase. those that. we and years done it year of is the independently

be So obviously, to it's tax the event in opportunity able VAT. absent But pricing not Japan, impossible creates do it. to have to and the

expectations just the changes plain other update to your from for heated you where coming Middle packaging, a of impacts months? any in see for And last favorable East regulatory Are an question expect the upcoming there packaging anticipated And in on plain the just tobacco? countries tax treatment developments. to implementation on

And out XXX% products particular if have ideal I lower you far call But governments taxes much, various is of way substantiated that with that lower to much are the don't scientifically that tax have reflected products. think much, than rollbacks that levels measurable to tax, with say of regard product we should then along tax. the continuum. have in of novel tobacco case the risk benefits expected about mean, in to of cigarettes toxicity at make any be know all you I the time and on situation tobacco the

forward, units. actually And improved countries heated couple lines. cases other call to case we and really we'll along So had I we in between do actually can't any the continue that of going make the case those gap tax the but the But improved have where tobacco are EU. out There cigarettes case. in situations make or

have a we with different of As plain in a experience packaging far number countries. packaging, now plain lot as of

volume impact really key of far, so any And on it the significant share had other any or metrics. hasn't

not the important obviously, of products branding we're the I the for forth. be mean, it's packaging. to keep of plain so and premiumness about able So, worried to our and keep implementation us

the then going implement end the it don't it's think But cigarettes, go. is the to if we not that plain way of they're So to on packaging world.

We haven't seen any big impacts from it.

of Our next Vorster Pieter of question comes Credit Suisse. from the line

Pieter afternoon, Suisse. from Vorster Good Credit

house-keeping smoke Is make different we for $XX timing this it year annual made the QX. did contribution you the quarter a in in world question. look free Last quick year? or QX, this million your the same a this for foundation or to quarter it you year should in Just a

same and and the the made it it's same Yes, we and timing the the size last was timing. year the contribution have as with it was

Our of next the question Radhika line comes Swaminathan of Flowering from Tree.

the wanted some upgrading. see market the just on on brands. I comments comments to mean on I qualitative of Yes, your I some get Philippines

out? So panning that how's

mean, but share is in share our the stable versus Philippines, We're I significantly with right. share at we're growing Marlboro flat Fortune. our

So so up traded mighty also Marlboros price we've gaps the forth, those close. as Marlboro from low from and up brands even mid-price in or priced

from six share brands. period has So now. but different Marlboro same it's Fortune year, share it's points -- price gaps is the the XX% by share the not dropped the in a up which five closing function quite almost Whereas and almost amount, share last is same points, part gaps, the market the about of of just between

volume profitability improves share volume in or you or mid-price if it's our market. share the you And overall a up into timing as quarter It's but -- more loading more slightly our forth. in from was the the the is the low less while flat, Philippines also so premium. a down So, really price trade but up trade of in

is Philippines So, pretty good story still.

Jaffray. from Lavery of comes Michael question last line of Piper our the And

one there? two. had you update any quick give on the for on just Thanks status other us Could follow-up. platform I the question

of product the we've It's in source the market won't problems pretty scale well give bit in of a the long sure consumer launch as I billions Dominican in and be before, actually and secured well Republic the us communicated is We big shipping broad is be and that any the country, improving learned product successful can very It's on the we've the units. on mean, you charcoal when making and did think The But test a product Michael. working reliability quite we side. very will billions a we're same in received. much a haul. heat launch. you

bulletproof dropping So a of of be sure it the we small concern and tip is and up rate of so heated absolutely to tested able even high very off in very, stand want to make would example. also right, the the bit up a for new attaching the that's it. taking scale need with And humidity making And manufacturing way and of time. we to little for us sure of it's environments, tip

there It similar nice of be of for more we'll as will believe markets a confidence out number we very a have this the great will have and get it still more because as smokers, deal product, in we we to role. So a is ritual soon conservative it and it play in can.

for of commercialize Do you when that more the sense timing is could what have a broadly? you

an don't really now. I have update right

give it you We can. to when will we

Okay, thanks a lot.

question. management closing final that to the to And remarks. thank additional any you, like was our back turn I'd floor for or over

are just We're very pleased to The We've portfolio, the start the very I couple Yes, volumes think good the going key want to year. tobacco with forward. very of the points, combustible summarize a got good. I momentum.

time. I and doing think intact is this well. strong. is remains The share the in long The best is volume very performance we've very a pricing had

At business IQOS products. is toward the our we're as engine free base the the time, of we So very geography. the feed smoke growth the with that extremely that across same well pleased is doing can move

Russia margin EU. expand approach. We the growing have to financial also seeing across pretty results preference, cost we're a Japan on in grow a And nicely trajectory. deliver and the good have long-term good different our of have with growth And being much consumer type on country scheme. in able pretty billion and track and like We're to and we're and every shared We're regulatory X,XXX very of a units. impressive targets able to really places pleased geography

and very as see good the conscious in that able we're at investments, year continue the investing we're are these results the what fund good to spending. to we have as and we'll cost we without to momentum incremental And to see off be be pleased very unfolds, deliver to we a start. much and costs to scrubbing the being need same While with able but to growth continuing substantial and our invest throughout to time business

Thank away. very take to points you main the that's much. think I So

very you Thank much.

concludes call today. very much. for the Thank you That

a any day. have you great contact again, team. Thank the please you If follow-up IR have questions, and

you, call. gentlemen. today's conclude does Thank ladies That and

disconnect wonderful may and day. You now have a