Philip Morris International (PM)

Nick Rolli Vice President of Investor Relations and Financial Communications
Jacek Olczak Chief Executive Officer
Emmanuel Babeau Chief Financial Officer
Bonnie Herzog Goldman Sachs
Chris Growe Stifel
Pamela Kaufman Morgan Stanley
Vivian Azer Cowen
Gaurav Jain Barclays
Jared Dinges JPMorgan
Call transcript
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Good day, and welcome to the Philip Morris International Fourth Quarter 2021 Year-End 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] Media representatives on the call will also be invited to ask questions at the conclusion of questions from the investment community. I will now turn the call over to Mr. Nick Rolli, Vice President of Investor Relations and Financial Communications. sir. ahead, go Please

Nick Rolli

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

the market products, are or additional products posted Growth all products which our GAAP references of as of website. are basis the access stated, You slides, end our reconciliations A rates today's calculations smoke-free otherwise on adjustments, measures references organic an share heated to RRPs, at reflect Unless webcast RRPs. on to directly on to to definition are our reduced-risk the and and the well glossary currency-neutral IQOS presented most may to data underlying for are IQOS terms, release heat-not-burn other all results. including unit and as tobacco www.pmi.com. U.S. comparable

statements Financial Olczak, could introduce a Babeau, Officer. to the to review Emmanuel cautionary press Executive from and Fertin are future for COVID-XX. Chief Vectura release category Business Following OtiTopic results direct pleasure statements category other in various the cause factors in of from remarks and and It's Chief you, segments. my Jacek contain to or disclosure projections your third forward-looking I statements. Today's related Over of PMI additional Jacek. Officer; other Please and today's the operations quarter cautionary the Pharma, acquisitions the our forward-looking of XXXX. forward-looking the that geographical to forward-looking actual now projections evaluated added statements the the presentation attention operating results. materially differ of and separately our for and to also note Group,

Jacek Olczak

and you on everyone. welcome, all Thank say hope Nick, you, well. I

growth of growth, from Full our the impact goal XX% for despite IQOS reach essentially quarter the IQOS The billion in In ongoing so recovered early initial and second growth growing traction visible a we XX.X surpassed category to an commercial the and excellent in in in in of EU. markets. QX, as unit as growth category of cash towards despite combustible especially remains far, XX with investments innovation, two heated across revenue We business an and business the half reacceleration becoming year. volumes organic our based in full smoke-free in performance adjusted deliver our our emerging devices the single-digit This growth result. and the tightness VEEV in shares heated outlook total especially year net strong delivered a EPS better-than-expected and new strength share. record company combustibles, in we IQOS share and reacceleration consumables, QX in positive, diluted XXXX, units, double-digit and of with IQOS, launches geographies, RRP revenues, fourth continued market pleased with total across in EPS organic which launch XX% on nature reached growth overall users, flow unit user QX outstanding stable to net products rebound the IQOS only net XXXX. high and adjusted of to tobacco demonstrated estimated million of by in revenues, delivered innovation reaching This predominantly IQOS supplies sustainable Smoke-free device illustrates of organic key volumes, positive ambition by net by were an of cannibalization. developed reach shipment and results revenues. products our for the XX% in the user growth progress tobacco growth very Switzerland, and for Japan IQOS the growth. year volumes markets, broad-based was grew net ILUMA both in Our revenues with

Wellness Healthcare, milestone we the in product During beyond ambitions laid Vectura, development. ongoing strong nicotine through long-term cash the repurchases. bolstered foundations the X.X% we to for essential by operating our to And acquisitions including for in last, continued which prioritize of the dividend flow, future increase provide growth returns and share capabilities a year, Fertin and shareholders and

Turning to the headline numbers.

Our of many combustible net affected including prior underlying compared X.X% in year. currency. IQOS to organically markets recovery grew the reflects adjusted and This the XX.X% full year the the strength by business revenues positive in terms, continued or ongoing pandemic dollar of

mix was Our net X.X% sales of excluding revenue driven line IQOS around pricing and or unit our per grew in Combustible proportion at X%, with Indonesia. X.X% in by our increasing pricing. the organically expectations

an Our first of half and expansion by HX investment on expansion consumer organic expectations, in strong geographic although higher XXX resumption savings. the of IQOS -- cost the continued half basis, increasing increased category expansion and by adjusted in the a IQOS, initial productivity and was margin profitability unit positive second our with the programs operating pricing of Through effects points line size from of in ILUMA, expected and basis number with tempered markets. income QX

expectations. user of adjusted dollar Illuma XX.X% and well growth, industry growth the in EPS volumes resulting is which $X.XX terms our guidance above currency-neutral growth, exceeded prior represents as total launch Our and our diluted XX.X% IQOS of

underlying business cash operating QX reflecting strong excellent $XX addition certain and conversion Finally, we results to timing in cash generated billion, flow of factors.

organic performance, the unit We acquisition and delivered QX comparison pandemic-related strong on well the in in revenues recovery previously revenue flagged the of by X.X% pricing reflects of reflecting factors achieved business organically. our volumes, per combustibles shift in challenges of and Japan growth due sequential softer Australia. overall ILUMA net again IQOS mix. combustibles. including further This at markets certain Germany Looking continued We despite to effects user improvement robust grew net as success a our initial in in this in of X.X%, X.X% as

again the the on lower primarily organic diluted points more second opportunities as effective grew to opened growth. our XX declined EPS, for investment half and that, by XX.X%, Despite performance strongly basis accelerating basis, business for adjusted reflecting tax operating by an interest a also due QX in currency-neutral cost future rate. Our mentioned factors income margin adjusted same

Turning temporary the guidance. device of XXXX, user situation gradually After in half slowdown to second the IQOS improving. in supply XXXX is growth the now

While the gradually situation remains progression fluid, we us to quarters. of rates to a return user coming now expect limited allowing impact, prior over the more

X planned that cubic We volume. half slower the an in XXX the billion quarter, tobacco growth in markets, we an this to This growth strong, first look success second particularly remarkable HX middle is a promising and around XXXX, our our number XXXX other fundamentals and billion the growth will billion IQOS our ILUMA of in are for innovations low With forward user effect the income in and its growth of in XXXX on of X of note million have exciting year. third estimated to reflected units. expectations shipment carryover of to year XXX market,

HX growth, this to our volumes. of full IMS ahead be year we Given again shipments continued expect

and the rate well We of expect our revenue the continuing pace XXXX, X% -- net X%. availability This ongoing prudently full to incorporates pandemic track annual us deliver range compound than between XXXX XXXX recovery. and of the uncertainty on on more device target growth organic growth deliver to X% keeping

Free, a but other in Duty continued geographies. gradual in recovery assume For we travel, no pickup Asian meaningful

decrease income XXX adjusted to points and over cost product XX initial continues, devices, XX operating higher weight such moderately our we We effects of the the as with experienced of the post-launch lower in basis XX despite expectation factors to the previous positive transformation -- margin expand ILUMA as is of to related and gross margin. of temporary cost attributable consumables between the expect This our a expect and innovations. we essentially months major to as TEREA previous have which

track and increased will billion in margin We account also tremendous of translates smoke-free led an R&D of estimated currency of effects, target Turkish healthcare $XXX in an and income to Accordingly, higher the billion forecast range $X in to and continue share Japanese not reflect in Operating in including be grow the use efficiency where unfavorable XXXX programs. chain currency-neutral expansion has of somewhat over million opportunistic XXXX. growth at adjusted does certain the This around periods. is savings EPS $X reflects XX%. and impact of euro, by EPS around which ILUMA of in This of to gross ongoing our an deliver appreciation investments to uptake and rates. We we It we to continued of opportunities years. restricted were capacity of yen repurchases costs, supply impact across take to to $X.XX, freight billion impact the due versus for of within diluted and into three Japan inflation dollar. the elements. guidance our platforms air includes approach lira growth blackout our wellness to as by $X.XX adjusted repurchases notably diluted by made impact $X remain the supported XXXX, on prevailing this $X.XX X% again translation primarily logistic This between currency

to an operating also come to approximately underlying line acquired EPS, but later. back of operating the which business or guidance X% with we in $XXX which expect income loss adjusted around reflects with businesses, generate impact diluted our Our of plan, million of we'll explain

outlook. are there a outlined number of As other release, underpinning our in assumptions today's

volume industry the cigarettes of between cubic X%. total and excluding U.S. and the to minus minus units, China expect and X% We decline to tobacco

expect half our stable with the combustible first a pricing the pandemic environment growing clearly And but X%. broadly improving above proportion we minus business, X% plus half assume levels. structural year The the pricing ongoing with to a related of X% in We year. to of smoke-free impacts. still PMI and in shipment its challenging and softer central product, our share volumes gain of XXXX Given the to within stronger category X% target leadership markets range total is of growth is a this second full

billion and underlying the XXXX, and rates. we in to expected expect to using operating $XX flow prevailing benefits billion. cash accounting growth cash With reflecting Our strong. $X.X is in delivered robust one-off timing of timing impact exchange addition for generate balance $XX strong conversion flow, in operating capital subject excellent of around to of reversal XXXX, We cash organic further around billion sheet working of and requirements favorable after profit year-end

billion. our at a result, to XXXX billion target operating $XX of the communicated cash $XX to range the $XX billion 'XX XXXX to Investor Day February at raised we flow As

including We delayed of due also which enhancing expect to to addition platforms, full investments capacity projects, $X were our certain in around capital our and smoke-free engine ILUMA digital pandemic. increased commercial behind year expenditures the billion, reflecting

rates. of the adjusted to $X.XX EPS we quarter XXXX, unfavorable Lastly, at to first including expect $X.XX diluted $X.XX, looking prevailing of specifically currency of

operating and investments, above relatively of the benefited low XXXX quarter, comparisons, growth from line top of dynamics QX and which commercial organic some investment savings the of inputs ILUMA and margins which high robust freight. prior expect levels year We costs a increases of and in related as very level strong reflect such productivity

details to more Let in Emmanuel, me will of now who you our performance give hand over XXXX.

Emmanuel Babeau

Jacek. you, Thank

billion XX.X The of volumes of in full Turning the X.X mainly comprised as broad-based year plus quarter. growth our from category back increased units the total in plus reduction in volume to share, sequential compared XX% the our cigarette and cigarettes. stick which continued shipment X.X% shipment increase quarter IQOS, the X% plus the plus X.X year, comfortably XX% X.X% reflects the in for by performance remarkable of for by prior HTUs and recovery decline in favorable of volumes reflect Total of year, fourth XX.X% almost to our results. of or the XXXX units a strong year. the and XX% This industry billion in the in to our tobacco QX inventory exceeding QX XXXX. continued and Due addition XXXX full for inventory in reflects year to X% XXXX, inter total billion movement, X.X%

our of XXXX in a compared IQOS us devices company for of of X% reflecting majority evolving become growth XX%. markets, XX% organic supply revenues on the in constraint made $X.X up on the the of in plus as by shipment delivered total over QX driving of in XXXX. net we outweighing net the revenues versions. We Our putting IQOS launch, plus IQOS line. X.X%, billion HX, the RP step smoke-free Smoke-free a top rapidly, the sales track XX effect year on over to accounted adjusted is up revenues with for X.X% net growth and XXXX. engines have already XX% twin reflecting ILUMA In our XXXX volume to revenue XX% mix surpassed

HTUs. in The on first is pricing on combustible markets and certain

unit, substantial and business increasing increasingly continues at Second HTUs of as deliver powerful revenue our per our in to which driver higher net transformation is mix the growth accelerates.

the our driver now to margin XXXX Let's of turn expansion.

robust with million progress supply around chain XXXX, basis allows reinvest research $X in over deliver line towards points costs Our million cost better progression. margin gross for an mix, $XXX due revenues. savings, in and margin adjusted increased percentage efficiency around our than inflation. adjusted This growth points XXXX to organic while represents while $XXX administration by and XXXX million of XXX cost product pricing basis savings were generated a on as to top marketing, and manufacturing gross in more productivity billion We XX in SG&A of and our strong basis to in $XXX and target net before continuing us

geographies. as sales as was to HX, efficiencies to the the ILUMA below categories to engine normalized investment commenced program, margin number this operating reflects HTU leverage growth device across to investments organic such in opportunities business and lower we dynamic unit to and continue and continue well and year. OI pandemic affected growth. in XXXX. accelerated higher investing and reaccelerated ability of intend positive a with scale, in levels compared increases initial expansion target commercial of We digital cost R&D in our But the and shipments of SG&A our the return While prior rate we benefit opportunities of the with

share. market to now Moving

the initiatives and was portfolio of markets. stable received recovered restrictions combustible essentially basis, in fruit on year-over-year and category as bear a QX share our pandemic-linked in Our many

switching to to category time share leadership in stable we Our products a cannibalization. target over continue IQOS combustible helps maximize the to impact smoke-free despite and of

accelerate, we XXXX. target a growth, we decline first at in consumer Aside slightly

increase by Daily market and Mexico the remains Turkey, of is modest overall, Philippines, reduction includes continued broadly on growth to below consumption. markets from stable category driven sequential market consumption over close QX the In and social and Indonesia, industry segment again the region for our by level The share pre-coded volumes free recoveries was of direction, weighted represents the industry a and in X in excise combustible below the certain XX% year a notable Indonesia, volume of is year. where duty recovery the our sales tax XXXX Tier below a grew the basis plus around in in share the total to stable For XX prior year. outside backdrop slightly improving despite step X% the in X such right in as and influenced the Asia. average excise our EU mobility

between environment field challenging. playing pricing players the the remained remains and However, unequaled industry

tobacco volume. expect as this ongoing In our momentum share for number in terms of we shipment one create the further brand. two in gain present, third our IQOS a largest five into overall now going share, markets, number X.X% portfolio markets in as total markets. positive year, and includes them broadly This position have where well a stable growth to are PMI the overall they resume and HTUs share six the achieving making the

assortment. to us estimate our IQOS adjust there were consumer allowed in of model, XX.X The our growth now of agile users We program approximately and plus XX. million Moving IQOS to reflects which as X.X improved December QX million rapidly commercial performance.

the the by IQOS Switzerland, demonstrated Japan momentum As in brand performance the of strong. and underlying ILUMA of remains

This or estimate X yet run over positive smoking points growth region, QX IQOS to have strong conversion. to reaching that above per quarter. the of and shortages highlight as cigarette XX% want various very total growth included user IMS full stopped the of I visibility adult total million and of X to region, don't ease, X.X prior users In we remain device Italy Poland. and rate million we HTU last in We Germany share smokers growth trends gradually or contribution of expect While performance around the with from million the this shares. the across milestone than XXXX, year X.X% full return give quarter our also Underlying industry year. QX important excellent. and offtake balance the the higher HTU stages share XX%, good users color our where EU have Fourth enriching switched some further of progress latest at with and to XX.X reached the HTU of EU Hungary key shows a slide city on following Lithuania this To region, of selection threshold. Japan national in exceeded of revenue,

While with Vilnius Athens. we pleased Russia an TU further doubling Budapest, traction data the of by across in appendix X.X share region, X%, in growth and by QX London progress share, the Zurich points almost show X%. strong to are up was strong reached the in these level with the and to We ILUMA. reach continued to XX.X% in way slides. the Vienna, share X% the acceleration almost share, Rome Share also to lead With HTU introduction XX% IQOS especially with plus in our at continued

For last sequential commercial on slowed IMS region, two partly quarters, in shortage more both and Russia growth overall adjusted in lead reflecting acute program. device the and the the

discounted Belarus, In have as the region this affected last the mentioned IMF quarter, disposable sales in halting e-vapor products. in QX. sequential context, addition, In of competitor in which by growth offerings seen impacted some was and increased we

the with sequential IMS trends, our interest Japan launch which the pull the This back for tobacco QX; category's to growth increased aim in of and offtake to plus-X.X XX.X% increase. growth. see grow, QX XX%, ILUMA, XX% making We and with heated the points total the innovations of a an consumer category And IQOS QX. by continues shortly. XXXX category uptake brands total of incorporating share the to our of In price exit HTU high into a adjusted majority capturing forward year. in of to IQOS pipeline tobacco come market of record with share up strength of segment approaching adjusted maintaining this including the over launch resume overall QX portfolio plan, continue we tobacco of strong and Japanese I the will exciting in to adjusted reflects the high performance before ILUMA, share a now, the The

back middle of in example low offtake prime to approaching six including despite With encouraging expansion is in income months strong funding and come as by developed IQOS of geographic notable Republic complementary aim launch low the We of heat-not-burn growth year, where retraction A with to new current this potential see despite market towards within in very XXXX. intend successes, X% tailored this bring to products Manila. progress a the Jordan, the we especially addition to. and middle-income in other premium of is Cairo market. position emerging countries, products our Philippines which be end the In Egypt promising this continue This the share we markets and XXX in will I the to we do the smoke-free it of achieved drive range IQOS portfolio. Lebanon, we performance to Dominican mind, is markets in of city key as in

both of in product broaden now in expansion in and regions multiple which markets. and meaningfully total to price add includes XX XX, takes within existing we offer our During number more and are IQOS markets e-vapor and available also our the across We Tunisia. feel markets segmentation low quarter, nicotine This XX of plan we over as of smoke-free and the middle-income are which the expansion geography. for feet, year This and pouches. products this where sale available PMI are market of launched Morocco to

the implementation not Following in IQOS ITC's U.S. the ban, the currently importation is of available

HYPER work patent to the decision U.S. were in patents invalidation recent of included the and this remember BAT we in by We December, second resume subject contingency is asserting and important office ITC's ruling, Separately, ruled manufacturing in be court BAT dual-coil other on infringes been half the U.S. device of the entitled expect including though patent heat-not-burn supply to the decision patents on against by an on continue is in process. that hope a this IQOS against X, BAT's the and German one patent we encouraged that domestic appeal of among are cells device. ITC Europe. that first decision XXXX. outlier. We to families patent an our sales April universally an in unsuccessful two It the plans, to able GLO things are of has the to to two same injunction a

to now Moving ILUMA. IQOS

over and price driving of the and with an three the volume offtake of three TEREA launch main Promoter devices of bodes tax-driven after commercialization. only rate in and months reaching the heat-not-burn one-third fastest-growing category with smokers user legal-adult delighted of of large months Japan, to the switching making over existing experience, retention exceeding and share shares sales growth our reliability increases since Score. Moreover, consistently more high-quality the user Japan within smoker national We no Switzerland IQOS. launch and premium-priced over sales increase. been August HD ILUMA to launch in reaction change the outstanding led observed success conversion to of category to been IQOS for report of and user one-third In sales need growth results Switzerland following been Early since users the remarkable expectation. October of to in even and in free sales new more launch the performance X% consumables convenience are XX% XX% consumables have due uptake age and among the up better its of significant with small than and indeed, have and has consumer well for and two base Net both TEREA rate, cleaning legal the in store enhanced This has the rapid

gradually rollout are the world, from the region around wider EU accordingly to very ILUMA plan and and in X% in December. encouraging HX. in to roll Our has the we of These markets HTU growth out results accelerated September to in share year, more this mostly for X.X%

continue we constraints, supply our While supply device had accelerate and consumable TEREA manage the have using the of growth to Japan also of in we airfreight means the both conversion to support the to IQOS heat-not-burn technologies X different three to umbrella needs line under we segment market launches. IQOS the new DUO market. production serve and have ILUMA, consumer With LIL, and unprecedented now

We pipeline devices on across different of technology have price an exciting and innovation our consumables at tiers.

I we end of to enhance smokers to devices portfolio in income with future this and introduction need new for middle low of growth a affordable mentioned, the test market, our the at As specific also year. plan be local and complementary the consumable targeted technology high-quality, towards will catering of and This performances. simple consumer

terms In expanding continue across platforms, point this year. over to QX, launching we SKUs our in and ILUMA geography portfolio new HTUs, XX of after plan price

range premium We channel nicotine VEEV and very limited in the results test started and in a commercialize a faster of of efficiently allows and our promising continue through to us a levels. a IQOS with variants with of bespoke route-to-market commercial approach. is IQOS own product, IQOS group deploy where the we experience to scale providing first VEEV markets our superior

the Italy we encouraging to to We consumer to quarter, in three shares of markets After to offtake Republic, plan the feedback and Canada positive distribution in consumable see within reaching the of months close launch. rapid availability. competitive points in observed device success we add more uptake and signs Czech in of in product. increased we double-digit expand As offering, clear with and start visible Ukraine launching XXXX to XX timing also fourth with subject Croatia and progress relative

early assume our now the for and the aim the the to player Shiro FDA role in We given from important an PMTA is exciting category, we markets, also And preparatory clarity playing preparation on further midterm while additional over to continued pouch opportunity a a required provide pouches smokers. Shiro we steps. in for readiness nicotine portfolio An still in early coming with filing leading adult U.S. prudently apply XXXX, Nicotine growth years. for where many convenient smoke-free brand. a see smoke-free become alternative in

a acquisition Fertin we development the Pharma, manufacturing AG Following product Snus of expertise. base of have and established and

the coming still promising a a for plan allows learning about we and of quarters. rollout our we Although fast launches category, over are commercial the number IQOS infrastructure

with first major of of month the of and technology presence limited our full commercial following portfolio variance. Platform from Shiro has flavors this the portfolio X revitalized the The Separately, activity is a its discontinued. in re-launch carbon full been and broad from our current design Nordic the test consumer activity more prior feedback strength of the XXXX product,

consumer We alternative this for segment. are design assessing

wellness beyond fast now XXXX Fertin, This the overall molecules to Turning to respiratory expertise. base with critical effective for and existing business in our the capabilities our a tandem and opened care nascent nicotine, up manner. of and acquisitions and of Vectura existing health the OtiTopic development building provide product opportunity in deliver positive effect

The derived showed our being, of reported revenue million marginal $XXX acquired in loss a underlying time number net delivered other operating the business, the the the fourth items with reflecting quarter XX% our and For reported which is nicotine intangible, Around investments. in and planned expectation of operations. in million. Fertin's QX performance segment existing in revenue were $X cessation pouch operating deal-related amortization of from and product our line expenses the with smoking

While from meaningful net the of support to revenue incremental over billion and products starting years to pursue coming PMI wellness ability companies, over acquired two significant to commercialize in and delivering three $X the now and We least revenue the R&D as segment of in the wellness plan to of investment the course aim the products healthcare we this XXXX. our the by years important is time. from develop to healthcare of we continue value CDMO ambition at of most activities intend new

As million, earlier, conference loss on $XXX $XXX I color CAGNY XX. at recognized investor an future these operating million XXXX, our including in presentation of We more around we interest and with provide expect plan smoking line product revenue around products. our February of to cessation areas mentioned in in new

that share we our sustainability impact and Moving maturity with happy sustainability in to completed assessment society, on update our recently to feasibility inputs. recalibrate stakeholder double biggest priorities our accordance new a extensive ESG I'm to and and priorities,

the impact we the addressing identified in focus, evolved by remained importance While which required are product an of or biggest a emerging far health also of our topics, approach. number

results week. important incentives the impact. to management publish will with align next and increasingly sustainability It performance is materiality, We

sustainability this plan strengthen details near more in with index link will the future. XXXX the in provide new We to and

the Generic-Quality Our by repeated to the America continues and both with for recognized running. be stakeholders Index, progress year Bloomberg external score in and Dow AAA on receiving CDP's sustainability inclusion Jones second leading Index North the Sustainability

XX published practices also making issue XXX% we workers. of XX-year child successfully It our -- to outlined labor farmers ambition marking farmers the supplying agricultural as improving eradicated have condition introduction, such farm systemic its targets of tobacco also program. Since XXXX. living most to by years while around labor, as PMI, accelerating am development. an priority report, and We product the impact, the products age I regulatory report of cigarettes our smoke-free smokers income recent grown pleased end alternative. to legal better positive On critical also of making to the is of penetration reach leasing further world the related

report harm published week. measures. product plan, last cancer plan, vote expressly the as from next and recognized government action place Zealand, the its small example, will reduction Parliament plenary European of for its beating New proposed excluding featured which special For committee take the more part free the In its in

such Russia smoke-free of smoking. announced products have excise plans. of with reduction potential countries, plan substantial new markets multiyear making of Poland of growing body with cigarettes, smoke-free addition, evidence from differentiated compared There a is In clearly and including globally with scientific XX of tax taxation product the and the real-world number

be to markets this I some in harm framework regulatory to reduction for opportunity. remarks. will expected, back now challenges and Jacek fiscal we support are that critical continue recognize some While turn concluding to

Jacek Olczak

you, be the device still innovations initiatives. With were agility, for Thank XXXX with to with last our top excitement. volunteers. the to although of generation. and been In delivery years, consistent the all we Emmanuel. investment capabilities cash element look are we're and with our success driver wellness believe the as of for order and sustainability delivered the ILUMA an At quality demonstrated of and Overall, underlying for next has growth clearly a line XXXX in building improving initial over growth EPS, forward number healthcare of acknowledge an and -- time, the we to in net two our pleased We to we record adjusted long-term strong which pretty exceptional tremendous I a and organic development last targeted IQOS outlook support in revenues year supply, building well have as very in excellent the same momentum will of bottom growth.

we and Our higher repurchase deliver short, In we to balance sustainable cash business. a and future transformation. value our dividend shareholders sheet our in is increased to investors returns continue and with smoke-free have to as returns a objective of see continue strong, through line to program, our our share we bright

you Thank be net Following in revenues all majority 'XX a confident our and our answer your to remain very questions. myself to by Emmanuel be strong attention. will and in growth targets XXXX. your smoke-free happy 'XX to XXXX, we for in ambition


Thank you.

Our question question-and-answer conference. now will go first Instructions] conduct from Please Goldman with come ahead. of will [Operator Herzog We Bonnie portion Sachs. the the

Bonnie Herzog

and currency-neutral question both EPS year. have doing Jacek to quite on well. this guidance at your I a wide hope range XX% X% on It's a basis. Hi, Emmanuel. I you're a

the or put you versus is possible resolved instance, for maybe get for I situation some highlight low even of assumptions few get drivers needs the to to XX% what range For the months? to at was So that the that doesn't happen growth? you of next shortage the chip could key end hoping XX% if you

Jacek Olczak

I think Emmanuel.

Emmanuel Babeau

take I'm this. to going

facing And business guidance is supply does disappear We is that certainly globally. and COVID obviously, that to seem driving are IT it our And obviously not be chain of The even on with line. cautiousness the some are that shortage if number uncertainties. we've improving. visibility a of seeing don't remarks, a on things good been the we a we, on still giving from top there, full course, behind So, we what momentum. in the preliminary trying the are is and on have then

We the We're be efficient of cost going to have driver savings. on traditional increase. price very

is growth. EPS million and to to our cost. organic efficiency we've adjusted drive that going continue XXXX, what difference $XXX revenue the of growth between already know And We're see been can more on I XXXX. You the than in going in the delivering

we're in freight to driving we impact. of about it ILUMA, the that of And not We chain. this a that The what have are margin coming some an efficiency is from having as is we starts, But we probably is but what we see that is in maximum, goods been positive see we should for of impact think of ILUMA One from managing and the our been launch. is We of at on its the outlook. remarks. Without headwinds where we which the the the the because another is really that the exciting when rate. we with Japan, moderate to talked to this launch in it productivity globally, with face impact guidance. big terms on explaining gross investing with very a It at know rate. we but growth of are certainly product, gross are year, that new level going not it's and that, I of as have growth growth, and impact some nice that going in air we've supply have very potential cost of same that's of Japan, the because see said today a year launch the course, at would a is what margin today, well decrease

by of but we the this potential coming are innovation So we is growth with we very have that all see uncertainty, excited up. that some

going that to have We are traditional help. driver the efficiency of

this potential which of build platform, of we to planned launch to invest, we tools. the in We are we course, innovation, should but certainly for we was need to see are commercial the We and bode nicotine that new our coming on have of to invest geography, the to some innovation. need pouches. emerging headwind, expanding develop vaping well it's countries, terms in invest fact to in we also because what Egypt absolutely extremely the with capacity. need We but in terms innovation, need and And add I

growth, lot in is exciting is to So great it's of this our in able a guidance and ambition XXXX line. year but investment deliver think for that top still what an are I a we with a for good dynamic

good margin at the able we growth are a the to hugely improvement, do for good you again, investing nice cash while same are have that time, and organic deliver seen, we as future. level. And generative, We at

Bonnie Herzog

That's Okay. a and lot honestly helpful super makes sense. of

lot of clearly, of So a levers pull. to got but and takes, you've puts lot a

of It maybe the next my IQOS. second For update. and in a just question, with just get U.S. situation little to back bit gears kind like bit to year asked in about expect you the I an wanted the a maybe switch sounds market and

this. in quarter So agreement the maybe fourth love the the have to a your U.S., be issues press color And in hear in their production more will of little the you two on between some responsibility? mentioned build Altria that you out of will And release. financial terms then

better understand what just that was So to could mean. hoping

yourselves? distribution guess, And then through I'm U.S., the another fails to instance, you IQOS it a pursue gets in walk And/or, Can of of for in terms kind meet tech of For the the guess, assuming solution on the distribution I U.S. partner? I VEEV us? potential then approved. you agreement, of find Altria thinking that would for

Jacek Olczak


manufacturing our we the for working are the we're that's to on reaction where the main event. ITC on bringing plan today plan as U.S. Bonnie, post territory. IQOS So mitigation the or capacity -- And

we beginning to in As resume a the we in summer the shipments be U.S. said, we at the the position think that year, next should of the

has As and this negotiations Altria or current disagreements with we milestones we the discussions fulfilled in contract, we're with and have the in some resolve close, certain the currently Altria it. Altria is to regards whether

partners. good so, speculating we results, some should partner in think U.S. going we I finding see and amicable the IQOS know some solution beyond and wouldn't mean, a solutions. And how do should options faith, would I I both other we forward the our believe be in what between I approach

we in in it market Now said very which I negligible a number the on other markets occasions is have a as presence few and importance. have a strategic of of more U.S.

this heard American resolution, be which will, past, mean really that you've technology, in have across smokers geographies we believe pre-ITC perform with below well on have you hand, how and it's the access stop a potential But stage you this, really we I the in today. that us there. that U.S. with obviously, accretive inhalable the So I market, FDA then essential characterize find which take fair all know I cigarette and think size the one what IQOS. here partners' enable the beyond a to I were results is I us the where would IQOS that authorized the ruling competition or it's IQOS And I expectations of expect will performance I at the of this something say that into cetera, and fact if smokers, the believe don't are will and product, also et to our will to good we much to


We'll take Stifel. ahead. go Please from question next with our Growe Chris

line Your open. is

Chris Growe

be start wanted IQOS until I'm to understand of that of had get quarter. X devices where of sense availability 'XX. that level Or just I you first back Can 'XX? fourth ask, of a in 'XX? supply growth a that in I users the that not nice to to an roughly the user acceleration about I half happen of in to first and second growth you IQOS, of the the to half getting want million on could know to see in and trying you -- will number sufficient talked users the to just of acceleration just all, of sequentially.

Jacek Olczak

growth. of that a real all through heat-not-burn for ability just today and TMG that coming a though Yes. unrestricted product. growth. I the fact of highly Look, consist have few previous had And remember various also in coming the of proposition of have Obviously, user with availability growth IQOS of the is confirmed product And IQOS propositions, encouraging. create it's the ILUMA. blade rather IQOS which we on QX, various should reacceleration certain hinges devices. to the very that of we the continued the IQOS partnership back other portfolio had has versions today the mention of target much that consumers I

how deliver. the we the we would all think regain numbers. somehow Europe believe hence, couple can have moderate for many other devices the that this the at IQOS unrestricted we've we're many months of in in all have some chain, if it's QX. the year seen target start a user regain we access et the year, things should much. we these growth of actual this taking a the or the heated maybe a unrestricted year, to But portfolio that have recomposing in from can for this was into more full we acquisition. the in can is and a bit a the believe spectacular higher X% product tobacco looking is our think but to So fly to which little at bigger we moot, as as It I I X% very flexibility the target the which something If cetera. -- scenario, in for device this side, on in next supply in And have difficult we constraints different of product be full coming if of portfolio unit wouldn't stage, reflected for we weeks can is the

behind, and higher region. Japan at you still that think I'm Asia to say one to can it's moment the have Needless is stage the our a in the than you like moving COVID a European when less not potential of when go the that but locations. IQOS that saying we're Union we from growth has I be coming part seems other So unconstrained. growth of although was part rate, like, few And really

in. we can excited deliver we 'XX. XXXX. that looking about optimistic factoring to start very actually the this speaking, I'm So have in we how start test and knowing frankly on also headwind XXXX our I need much But to take

Emmanuel Babeau

complement on, we X reach to can question Just on million. your

that an doesn't we as see mean ramp-up one we that the we up cannot quarter we It it's think through acceleration are see in rather ramp go the of million we HX, today. I simply a but year. in X true and a reach

Chris Growe

a I have prevail question on and your you on before supply allow to you're patents did is could 'XX? on Is where U.S., chain product the scenario but U.S. would ready in the getting half review the be patent on win of follow And office a again? start question. there Bonnie's So importing a quick the the you just Okay. product to that the first to -- you that there not and import chance able again the

Jacek Olczak

But around on this I it case, of in the patent deserves there some this every, process -- conversations and the right obviously, other the think to laws the it. and this. party, if we mean, patents, the whole I separate cope repeal. invalidation with we to is have about processes a they prevail whole Well, thing unfortunately, have

restrictions, process victory. whole the have which us. full are claim you the you have really when need another ITC of the parties on by to and you if actually you couple is until now to go And in the years, of like, imposed frankly Then time. -- the can extended establish speaking, So

later domestic think that. on, then the market us the I our U.S. the to the that for we fastest I discussed. And reactivating opportunity could that the be near-term absent go capacity think is means from any which is supplied right, the the and But constrained, from domestic. route to both -- fastest which from international and other that resupplying route back the resolutions, U.S. maybe the market we are


next with ahead. Stanley. We'll Please our question Kaufman take go Pamela Morgan from

open. line Your is

Pamela Kaufman

price for question XXXX. was combustibles? in versus talk growth, your I in how realization And about you XXXX in XXXX? environment pricing, But have outlook your can rate Indonesia. about your a Pricing share combustible of in historical below given market in you're expectations headwinds prioritizing for pricing pricing

Jacek Olczak


better, variance So X% we're the we're pricing we year, looking year. this as said, X% at for, is stronger last which than to the looking

around. And right in build but good that and is a to can a are or volume also this we Indonesia talking to talking reaching comparing presumably have tax a return maybe is the It's still the at taxes in Indonesia, as historical of we all bit mean, give taking I The negative, visibility on absolutely pricing obviously, variety is thing Asian how the direction, can more environment, was much the Philippines. driving needed. at take so least Emmanuel see what which although we at 'XX this of approach, have planning in benefits there. we having trends on we of can geographies predict, a pricing and how the of We 'XX. which our the factors I that of we about and can his and the realized we of some you're pointed okay, remarks, to the considerations to it growth going last part that profit recovery, pretty industry component market gives multiyear for the presumably more think think the bit to about of up unwind to geographies. with are impact much important on but the have in hope countries there. major XXXX. in the the that the is we could to better we end pass on. normally to have some has characterize But volumes increases, out the a as And more rightly lower from of us the visibility this about more as stage, improving pace difficult it's the

know, in step. be one countries, you cannot passed tax increases the some in As into consumers

preparatory, it every going take cetera. it that COVID is situation, finances huge pressure so right we You the having market a after have the is some pricing pricing to take some need country, et before in a -- every to due context public into if the direction, especially on some

as I pretty think there. So, we well navigated mean, far -- I

Pamela Kaufman

by user ILUMA And Right, what for if interaction and Japan has prior with some been on thank driven around you. the ILUMA My versions on provide of the have IQOS? second base you of And user IQOS? observations much new can uptake. the question how color in is growth you more

Jacek Olczak


-- actually it is -- excited on personally So by the you ILUMA that about I very but might am expectations, of my I delivers beginning remember that have was if And beating so happy innovation. very that not expectations. even from

users, the also give they're they the I use users, an in you of a have IQOS the ILUMA this a day have to So appreciate is response we tendency to Blade product. increase but moment ILUMA you of have you that which you to continue what In the informative to enthusiastic it you they ILUMA blade, the your you the does user, uninterrupted And when have IQOS me your for or having to other experience. allow fist the Japan moment, consumption obviously, the existing versus consumption first if phenomenal. having voice. on experience. during much, generate, will And will volumes. benefit more much, because much to use, Obviously, more reliable, switching every the willing product if benefit and goes users we the device, have in has the ILUMA a the you also present hands from reliable, consumers to already is allow failed the much patients impact sense, on I existing

good very a thing. that's So

many cetera. the IQOS cost. number the category, about user from stage, coming back And one temporary XX% et after recently, of important people will of from is migrated this it not convert of on what How taking component start have them also I very a the ILUMA, never conversions. ILUMA in model. I solid the is of are users we observed the initial know, serving the the you to months, competitive smokers devices releases cells who at the pressure I likely is smokers. a very because products. start in And have Second fully and also the also these remember you all will going higher thing it business level many margins, of in third forward if combustible stay is, And who

aspect axis. whatever look ILUMA it in on So like, performance every really delivers of of

we going right I is that availability might and again, is the believe the body, direction. have of really supplying some the So the devices? and be the far continue can question know rest, so far do And in we I for market so


take with We'll from ahead. your Azer question Cowen. Please Vivian next go

open. is line Your

Vivien Azer

combustible you first thinking to question in could your about pricing last contemplate is pricing. cigarettes please? wondering, however, was on gap to heated My between your I on XXXX tobacco for units, year, an just price if outlook encouraging how Certainly your hear you're and comment improvement management that relative

Jacek Olczak

we today versus Well, most reference essentially, IQOS markets, maintain cost a the in of we same or combustible all the positioning of sort of point.

know, the conversion you most have that As actually systems of in. mechanism tax baked

heated -- example, reaches tax on IQOS our the So the for increase this increase gaps proposition geographies premium nicely, when combustible price the especially triggers if which levels of in obviously market. it works equivalent the the price a are somehow I for complement situation, very KT&G, which above, depend the think market example, a essentially real at the and the combustible untouched. premium there units, segment in is tobacco on consumer portfolio, on We translates proportionally the

to successfully bus think about the well, the also geographies portfolio a a expanding the We're need IQOS we when So the doing the some the that heat and of very the to so equation take versus versus is markets. actually few it but in there pricing something We heats. opportunity. we Russia instead European as affordability to of below, above in in to premium did IQOS

perspective the vertically the cetera, more is creating to from increasingly broader that flavor, switch price have cigarette portfolio we to a think perspective, we're I for a horizontally and whole So heat-not-burn. taste, the smokers from et thing attractiveness of

Vivien Azer

of decision that the key was question performance? Platform in to the using creating been number of any evaluation it the problem X And live that's take consumers consumer Certainly, of Is product discontinue the to terms product curious color heat Perfect. And be follow-up for a from just my a years. risk reduced a kind hear that TEEPS. of away I under has just would other helpful. are test. confusion and Just Was lot force, proposition?

Jacek Olczak

else. the The actually, actually pertains the propositions allow the user I that everything more like better the interface test to the livability anything terms number me of the pipe. I the in than heat proposition, the past Now and it issue language, to think alternative the think there. goes smoking rather the on -- of market of is don't the was

we how opinion, opinion the our the what extinguish actually, other would wish to need experience our you attention very pay design right, size, the have levels, paper requires cigarette-like to And mainly consumers' As platform. platforms open the the end product, cup actually face looking this. this the an this heat you extinguish how at leading this to lighting, -- remember, question, okay? you that especially because is have not the was to that And of the you product. TX from the you comparing which from in was which adoption the product, And and the lighting

also product moment around the the of asking conclusion led still especially build the we to ambitions the on I the IQOS think convenient that product, of And has they leverage IQOS, the either around want the to one. around are would consumers, what this us consumer which and cannot I is the of by convenience need the deliver we potential, that one, operating the to the intern I these but days, source consumers to component which this use. think thing to be how and technology we our So the think will consumers, offer design proposition makes has design cannot reached the this operate afford we the not and And this find we is heat part shut that equity, we seeing and which whole down. the product sense understood the name that

one cars of for the the people compare conservative completely combustible So small don't audience, Investors the will proposition start beginning, day who to which delivering. This experience we you to more talking worldwide. when will the the come we vision and be think annually about to growing needed the many back how From platforms very from may recall smoke-free I our PX. cigarettes more are ritual is a walk is X the the billion really want when away Day

of don't much using by that terms issue it's I in prospects for we item going think of think and working approach growth will to an be technology forward, forward. I So going that the that the our design the on a different

So it question, answers your I Vivien. hope


Jain next go with from our ahead. Gaurav We'll take Please question Barclays.

Gaurav Jain

So I of couple questions. have a

first one is So your guidance. on

X:X. growth your is So volume minus

plus assuming is to three. three You you are mix price that saying cigarette pricing slide three, And that will be it is it then four. category have, a in

it revenue should are but X% for So to FY come plus to you X% to on X%. saying X% growth 'XX, plus

be mix less that the FY So will FY that 'XX than case the category in 'XX. will was imply in uplift

So can will us case. the understand be you just that why help

Jacek Olczak

I'm difference plus very try the X% from growth happy the nice growth. to, to -- we've to to is been volume in for and are expecting XXXX indeed, revenue add volume, minus guiding between have to the And X%. Gaurav, to another what we certainly

in price question X%. to So how is we growth, we've where done XXXX. terms X% Remember, in have extra X.X% to this in the is much we then there generate are going of

is better, XXXX. there impact is the the the something new IQOS having it's what then here, business the low have it's many But in high potentially on not mix it's and country impact could end. be in that of new geographies end are that and true we the But an that massively above factoring mix growth with the it and is we So, the of we bracket certainly in on differential. category of And this did launch that and the is impact and emerging where positive playing. economies

impact with for and the not level we country slight have So, higher we same can higher, we I beginning, fact the not based are Again, because temporary we are referred is -- the necessarily price temporary, temporary. the IQOS That fact do on steak. it's duty, an per the at at that excise the in this excise we and for but therefore, it. as consumable we the decrease is least, And Last weight expect from on the a but the very strong its on differential again, generated generate a switch than weight ILUMA but same XXXX. have, that see because the that when in Ontario. difference coming duty to having the where consumables a decrease

So that have an well. can impact as

what aggressiveness the on the also have to some device that the we mix commercial we the of So device on that plus depend the to which we the on going the the that is have sell sell really that on also on device. will impact of volume you're and potentially price want of price

have to a of take you So into account. things number

Now growth, exactly which at volume plus-X% and X% to of another to can are X%, definitely we end differential you nice the organic as the have is between targeting see end year revenue the day, a how the X% we and between minus with up. to very

Gaurav Jain

where losses the my And in years this Okay. future operating helpful. it hit in target. that $X year you that beyond That's and question you segment have second you the invest you so million very comment will can will nicotine is the of revenue on billion $XXX make also

mean in losses expect even? be when does could 'XX? be expect Or that will than that break 'XX what should in FY segment they the So to we to FY it we higher

Jacek Olczak

a be Well, to but few for I there not years, will couple an we willing years, investment next think few the a which do. are

the programs we think of is after and couple more will when we willing XXXX nicotine to the and is be healthcare a for the because go you concrete I in about show us business if is will what what thinking ballpark this insight we're we investment, the give in which or to of the we sort investment and which think which wait I for CAGNY about for of year, the be position number gave stay beyond is opportunity of But calling our size have, guidance, with products, then terms. products in until will what sort an years. wellness you of we the what

Emmanuel Babeau

don't It's explosion bit not an a I could one-off. It here. a but expect go higher,

of invest you a I to calibration have that going we're good the think over years. cutout few a


with JPMorgan. next our from question take go Jared We'll ahead. Please Dinges

Jared Dinges

bit? at nicotine considering also, Nordics? First, you like markets don't today, just And you would nicotine think that some the well? presence we looking a touched have launch PMT in on launching pouches. maybe your Are more emerging thinking that you be bit pouch And there as a pouches about market the of the guys nicotine application in potential a should I scale on in want consider future markets? U.S., that we to how launches of touch How the should about initial the a the

Jacek Olczak

leave a for U.S. aside would Yes, I the second.

not very I high, in, as They the thanks also product smoking a what has taking the go we variability consumers' we'll some the we role in accelerate if where offering there think some improve. the And product cetera, nicotine a sales pouches else markets. when Initially, which behind remaking initial share, important And you feedback like was the we demonstrated look but our after many market play large have packaging, therapy. have will start build okay? very that innovations essentially see to proposition acquisition share of and of present. we we to of the already we smokers, at in obviously, this who on acquire now their the could we as the in were that pipeline this. And et the can extent, to always, we're

delivery. us the of oral nicotine because broader -- know that And therapies just for gums, gives interesting pouches gums, other manufacturer they much the like but interesting is Fertin the technologies. Now, Fertin opportunities very replacement than nicotine in also the have the seats delivery Fertin we on systems the

we to So, which we a period with pouches, XXXX. to of substitute start the smoking is oral I way on. working a excited think be think we the over actually very will of delivering thinking as but are nicotine attractive a opportunity, start very i time,

mean, obviously, will addition know, quite the XX-plus when where IQOS infrastructure. have go today. into have markets this meaningful we geographical geographies, you as footprint in pouches the we a a they are I not So, acquired present to

shops, you're in the in back digital. You're back

the adding just we of to You're oral portfolio can one to pouches. CRM, our start believe the category oral to in the I having -- that commercial category consumer smokers broader than propositions engagement.

the So year we focus this on pouches.

we I us just extending be the accelerates would quite because that but the which acquisition more rating the a to it of others good concluded think and is -- years, our will We that take it gives than few presence, pleased very the pouches organically. have by development

Jared Dinges

it. Got

So follow just on up to that.

So U.S. you PMT would the application? consider

Jacek Olczak

U.S., proceeding the believe have market, this answered of us. I I of we do frankly of think of question to strategic can which size market need all a platform that is importance speaking, attractive I in and Bonnie. one that the because platforms, success I believe U.S. to the to of the opportunity. guarantee very the And other full an

So focus else. today somewhere ultimately, yes, is but our

Jared Dinges

the at all are inflationary potential we're Got and you and especially guys consumers income second at environment and impacts positioned most worried the about price lower usually given with markets, elasticity Are the you back going towards it. IQOS. in more end. premium of where cigarettes guys And one,

on can that? you give comment maybe a So

Jacek Olczak


pressures to income very price the or So the on product due concern, as and well, the sometimes price elasticity is the is on we the pressures consumers. always elevated know tobacco nicotine elasticity is

we're believe sort income. becoming that these situation on and from market think look the a a the in has the have systemic. pressures COVID having cigarettes this the where a don't mean now the increases. market we the consumers we're markets that I you're a I the past pricing pressure So, robust pretty few in of be it's taking because if unwind of past question I very will It's asking some set anything of on will as interesting data HeatSticks and and

business as price I elasticity the you the for a and a with pretty cigarette. combustible was alternatives on think alternative looks we stage, building a other factors with the successful from know, today, a well, And And guess, very smoking, elasticity the elasticity this to this were at But to another countries. cigarettes affordability segment. the know IQOS addresses IQOS cigarette. by than elasticity in to middle smokers order but deliver I We even of Separately, or and need the from price also actually, an inroads. allow -- test for not perspective, not there part as discard attractive, the from the affordability than but already the not in alone. come elasticity, the be more so-called have and better high better perspective, tends income reduction behind end we pretty model. like plans would conventional consumables the pure as price as this today. products directly year, I to which proposition, to below-price, make to significant technology we And with of devices that low going more before while we the And to course having need accessible the will which both perspective, know we're the have it potential we was

those taking very consideration. serious the into things we're So,

for thank question. your So you


this will any turn to at for call And closing over there the questions are no further the remarks. time. team I management back

Jacek Olczak

the a this than longer we last results expected. but expected, delivered call Well, better was also year than we

for that you will I we more here today, a our wellness your think CAGNY on very broader also Thank how you the position We we much presentation, in be but discussed a look healthcare, somehow terms aspects And voice the and the in are excited for rewarding my I how form. and filling of articulate looking the categories. both voice XXXX. that headwinds, our, shape of I we Emmanuel's we despite in details it. into development successful invite delivered And more what us think of match we still and well. light, to which few of to which we number these much we We're in attention. pretty give got the believe like very 'XX, in

your not the to most thank see So all you presentation. attention hope you, and very you, if much all. recovered for CAGNY of Thank

Emmanuel Babeau

See soon. you you Thank all.

Nick Rolli

very you Thank much.

and contact any scripts a a day. team, follow-up you just Investor have If Thank the and are Have available great the the questions, PMI very slides website. much. reminder you that please on Relations


conclude Thank At year-end call. you a wonderful time, conference Morris today's International you. may earnings does have fourth quarter And Philip disconnect and this day. XXXX this