Q2 2020 Philip Morris International Inc Earnings Call
Washington every statements disclosure in todays presentation and press release for review of the various factors that could cause actual results to differ materially from projections or forward looking statements.
Please also note the additional forward looking and cautionary statements related to Kogut 19.
It's now my pleasure to introduce of annual Babbo, Our Chief Financial Officer manual.
Thank you, Nick and welcome ladies and gentlemen, I hope everyone listening to the cool and who is close to you are safe and well.
Our main focus remains the health and wellbeing of our employees their families and the communities in which we operate.
During restrictions, we have implemented stringent policy images to minimize risk flowserves continue to work in our facilities and offices.
For all our employees, including lose working from own providing guidance and support is also essential.
We are now facilitating a gradual carefully manage return to the workplace in some location, where local condition and authorities restrictions allow.
The strengths and spirit shown in this challenging time by the people that makeup our organization.
Continues to be a real inspiration to me and the PMI in management team and I'd like to take this opportunity to thank them for their outstanding imports.
I now turn to the business, which delivered robust performance in the first half of the year. Despite the unprecedented circumstances of the pending Mitch.
Most importantly, the continued momentum of Iqos was excellent with an estimated 15.4 million users at the end of the second quarter.
Our commercial model pivoted rapidly to digital and remote engagements, while preserving our rate of heico's user acquisition and brand retention.
With volumes of each of tobacco units growing 24% in Q2, twentytwenty compared to the prior year Rps made up almost one quarter of our net revenues.
In addition, after two very difficult homes in the quarter due to the pandemic our combustible business is now improving.
Industry volume started to recover in June and the beginning of July.
Reflecting the gradual easing of confinement in many countries.
The improvement was particularly driven by the you our largest region in term of net revenue and adjusted operating income.
The main enduring headwinds linked to coverage related restrictions of the absence of recovery in duty free and in Indonesia, where this is compounded by pricing dynamics.
Economic uncertainty remains and we all hope for new major resurgence of the pandemic.
Notably despite additional coverage related expenses, our operating margin have been strong in both the second quarter and first apps.
This reflect the increasing mix of Rps in our business and they are improving profitability.
Productivity savings in manufacturing across Rps and combustible.
As Janus saving from the private to digital the elimination of our postponement of certain lower priority project and the operating leverage of higher ARPU volumes all contributed.
Indeed, it is no coincidence that the three region, where our piece of a strong presence are driving this margin performance.
We reached a truly historic milestone for I course, our mission and our future growth prospect on July 7th with the FDA is authorization of Iqos as a modified risk tobacco product.
I cost is the first electronic nicotine products to receive an immunotherapy order.
Following a review of our extensive scientific evidence package. The agency found that an exposure modification order for Iqos is appropriate to promote the public health in the United States demonstrating that accrues is fundamentally different product from combustible cigarettes at a better choice for.
Adults, who would otherwise continue to smoke.
The agenda concluded that issuing the order for Ipos is expected to benefit the health of the population as a whole.
Taking into account both user of tobacco product and person who do not currently used tobacco product.
A critical enabler for the future growth of Rps is the implementation of differentiated regulatory framework that can help encourage others would otherwise continue to smoke to instead switched to better alternatives in line with the harm reduction principle.
The authorization allows version of high cost to be marketed with information concerning the validity of our scientific studies with regard to the significant reduction of exposure to the and food and potentially harmful chemicals contain in cigarette smoke.
The FDA decision and subsequent comprehensive post market controls and monitoring.
Focusing on news use prevention provide an important example of our government and public EPS organization around the world can implement an inclusive.
Science based approach to help rapidly shift adult smokers would otherwise continue smoking to better options.
While simultaneously guarding against unintended consequences.
With investors increasingly focused on environmental social and governance aspect I would like to.
I like our recently published integrated report for 2019.
The report covers a variety of important edgy topics and measures, including our business transformation matrix.
Notably our expanded aspirational targets now include new goals for the number of user of our smoke free product in non LCD countries and youth access prevention the.
The report is available on our website at PMI dotcom.
Let's turn now to our strong performance over the first half of the year. This was clearly a very challenging period with disruption to many aspect of our operations, including our supply chain and route to market.
I am proud to say that our organization at the strengths and agility to withstand this with limited impact on supply to our consumer and trade partners.
Despite this unprecedented headwinds across many of our key markets.
Our currency neutral net revenues at by a strong first quarter were close to flat versus the prior year on a like for like business.
Driven by pricing in combustible manufacturing and as gene efficiency and the dual ARPU margin effect of growing weight and improving profitability. Our adjusted operating income margin increase over 200 basis points to deliver 8% adjusted diluted EPS growth.
All on the like for like X currency basis.
I focused now on our second quarter performance.
Effect of confinement on mobility impacted daily consumption patterns at a market, including those of good income workers in developing countries and disrupted the retail trade.
This led to significant industry volume decline in a number of geographies during April and May, which primarily impacted our combustible business.
As expected duty free sales were weak the large buildup of trade and distributor inventory largely reversed in the first part of the quarter and we had to delay a few pricing decisions.
This period also coincided with a challenging prior year comparison.
Notwithstanding these changes our performance was better than we expected when we last updated our guidance on June 11.
Currency neutral net revenue declined 9.5% compared to our assumption of around the end of minus eight to minus 12%.
Given this net revenue decline and the strong prior year profitability. We were pleased to maintain stable adjusted operating income margin.
This was supported by growth in the net revenues and profitability of Rps and cost efficiencies.
Combustible pricing of 3.3% also contributed and reflect robust pricing in many market.
Partly offset by Indonesia, and a strong prior year comparison in Turkey.
Reported diluted EPS of $1.25.
As notably better than the upper end of our previous guidance range, including lower currency impact of six cents.
Our adjusted diluted EPS was $1.29, excluding reporting adjustment for asset impairment and exit cost.
Which represents an ex currency decline of 7.5% compared to the prior year.
There were three main driver of is better than anticipated performance.
First the recovery of industry volume in June notably in the higher margin you region benefited our net revenues and margin.
Second I course user acquisition grew substantially in December loans with markets, such as Russia back to pre coverage rates and overall icls acquisition for the quarter only 35% below pre pandemic levels.
Last we had the benefit of certain non underlying factors.
These include trade inventory movements in June head of tax and regulatory changes in Germany, Russia, and Saudi Arabia.
Yes, phasing and a lower tax charge largely driven by reduced corporate income tax rate in Indonesia, as well as changes in our earnings mix.
There are factors accounted for approximately 10 cents of the better EPS performance.
Before we come to guidance I will outline some of the dynamic for the second half of the year.
We expect a gradual underlying improvement in the combustible business.
Coupled with continued robust growth for Ipos.
The pandemic continues to present, an uncertain operating environment with the potential for Titan restriction in localized areas.
Why not included in our guidance assumptions. There also remain a non negligible risk of a resurgence in the virus and the return of national of Downs.
The full economic fall out of the various restriction is also unclear.
This said, we observe relative stability in term of Pandemics restriction and improving visibility across a number of geographies in recent weeks.
Conversely visibility remains lower in some areas such as Indonesia, and Latin America. In addition to the absence of any recovery so far in duty free which as a reminder, represented close to 4% of our net revenues in 2019.
In terms of our cigarette business, while underlying industry volumes are gradually improving as restrictions ease.
We assume that the return to normal level of consumption occasion for consumer will take time.
We do not assume a significant widespread increase in downtrading, we such dynamic currently concentrated in markets, where a trend already existed due to elevated price gaps.
It is reasonable to expect some delays in the timing of pricing in certain market due to the pandemic situation.
In Rps sales of devices, an edge to use are performing strongly.
Reflecting the better than expected I cost user acquisition and continued stronger brand retention and conversion.
Our unique commercial model as demonstrated the flexibility to accelerate the shift to digital and remote activity.
And we continue with high level of such engagement in market where stores of reopened.
Despite the exceptional headwinds of Twentytwenty, we expect to grow our full year adjusted diluted EPS between plus two and plus 5% on the currency neutral like for like basis.
This corresponds to an adjusted diluted EPS range affordable, our 92 to $5 zero seven including an estimated unfavorable currency impact at prevailing exchange rate of 31 cents.
This forecast assumes a total industry decline of 7% to 9% excluding to us and China.
And a decline in total PMI shipment volume of 8% to 10% on a like for like basis, do notably two duty free and Indonesia.
With regard to net revenue in like for like X currency, Tim we assume low single digit growth, excluding duty free and Indonesia.
Due to these two factors our overall net revenue may see modest decline.
The forecast also reflect expansion in our ex currency like for like adjusted operating income margin of more than 150 basis point.
We expect the full year effective tax rate to be in the range of 20% to 23%.
Twentytwenty operating cash flow of at least 9 billion dollar and 0.7 billion dollar of capital expenditures.
All these estimates assume that national Downs will not recur in our key international market in the remainder of the year.
Specifically for the second half while underlying trends should gradually improve we expect the recovery in our growth to be skewed towards the fourth quarter.
This assumes the progressive easing of restrictions across the remaining market, which commensurate greater industry recovery toward the end of the year and the compound effect of increase sequential a cost user acquisition.
In the third quarter, we expect the reversal of certain onetime benefit from the first Alf with entities impact of approximately 10 cents and the net revenue impact of around 1%.
The continuation of Ed wins in duty free and Indonesia, the timing of Twentytwenty pricing in certain market and the phasing in of course also included in our assumptions.
We expect to see a good sequential improvement in reported net revenues in this third quarter better decline compared to the challenging prior year comparison.
For adjusted EPS also due to the timing of certain as Dziennik cost and the wonderful demos of styles.
We expect Q3 twentytwenty to be broadly in line with Q2 Twentytwenty.
Sequential improvement in reported net revenue should continue in the fourth quarter, although likely still in slightly negative territory compared to 2019.
Growth in adjusted EPS will also be driven by a greater expected realization of cost efficiency from new initiatives.
I will now cover our second quarter performance in more detail.
As expected our shipment volumes were weak driven by the effect of smart industry declines on our convertible volume due to pandemic related logged on measures.
Notable market contributors to the decline, where Indonesia, Mexico and the Philippines.
All of which were impacted by restrictions loss of income for daily wage workers and significant price increases.
Conversely, our HQ shipment volumes continue to grow strongly to reached a record 18.7 billion units driven by the region, Japan and Russia.
While overall volume in the quarter were weak the sequential recovery seen in June and the beginning of July is more encouraging.
Our combined June in kit sales volume were the highest monthly total this year and grew 2.8% compared to June 2019.
Though these growth includes an estimated 3 billion unit effect from inventory movement, it mainly reflect better industry dynamics across many geographies, notably the region, which declined by 7.3% in Q2 overall, but grew in June.
We are also encouraged by the sequential improvement in HBU volumes, which exhibited positive year on year growth throughout the quarter.
This strong performance from I course, meaning that each of tobacco units made up over 10% of our total shipment volume in the first as the year as compared to approximately 8% in 2019 and 5% in 2018.
While somewhat flattered into two twentytwenty by weaker combustible volume, we expect this proportion to grow overtime as our positive men momentum on our piece continues.
RP net revenues reached 3.2 billion dollar in the first Alf reaching almost one quarter of PMI is total net revenue in Q2.
Ico devices accounted for approximately 8% of RP niche revenue into second quarter due to a lower ratio of new user to existing user given pandemic effect.
Longer replacement cycle and geographic mix as in some countries to sell a substantial amount of the lower priced I cost 2.4 plus device.
Turning now to market share our total international share declined by opened 1.2, 28% in the second quarter with higher share for it'd tobacco units, which increased by 0.9 points to reach 3% offset by lower share for cigarettes.
Our market share was negatively impacted by Indonesia, and the market mix effect of duty free where volumes dropped sharply and our share is typically much higher than our overall international share.
The cannibalization effect of Outreaching, too I calls, where essentially offset by positive impact elsewhere and in markets, where I costs as a meaningful presence our share increase with almost no exceptions.
It follows that our combined market share increase notably in the EU region, Japan and Russia.
It's also true then in many markets Marlboro over indexes to social consumption occasions, which were naturally lower during college related Confinements, we expect marlboro's share to recover as restrictions ease.
Indonesia cigarette market saw an accumulation of headwinds in second quarter, a pronounced impact from pandemic related restriction on daily consumption.
Added to the effect of tax driven pricing and retail disruption.
Industry volumes declined by 22%, excluding trade inventory movements, whereas our shipments declined 28%.
Our share decline can be attributed to three broad dynamic.
First within the tier one segment price gaps remain elevated given our price leadership of the past 18 months and the delay in the enforcement of the minimum retail price.
Combined with covered effect this as contributed to the and the performance of our premiums crude portfolio, despite better sequential performance from a mind.
The process of minimum selling price enforcement as started government inspectors have returned to the field. However, the full enforcement and subsequent trade flow through of compliant product may not be complete until the fourth quarter.
Second is a strong growth of the tax advantage below tier one segment, which in conjunction with the tax driven pricing and Pandemics tradition of Twentytwenty as led to increased downtrading.
This was designed for small players with pollution below a certain volume threshold.
However segment is not operating within the spirit and intent of the low.
With the segments now at approximately 25% of the market.
This represents a serious threat to government excise revenue and the correction of volume based tax tiers become urgent.
Third.
The stricter public mobility restriction in Europe in areas, where our share is higher as disproportionately impacted our portfolio.
However, our market share sequentially improve in June supported by strength of our brands.
While we see signs of improvement in the market. The situation remains challenging we know assumed the total industry decline will be approximately 15% for the full year, reflecting progressive sequential improvement in daily consumption from the particularly weak second quarter.
We are fully committed to improving our performance in this key markets. We have a number of ongoing commercial initiatives to leverage equity of our brand portfolio through the remainder of the year.
This includes the introduction of new variants in the growing SK tea, and who favor SK EMS segment, such as the GSM Sue Twelves launch in March and Marlboro filter Black Sixteens launch this months.
However, with enforcement of the minimum retail pricing on the way. The main outstanding structural issue is a volume tier tax system, which clearly advantages growth of the Super low segment.
In the status quo. This will have a significant impact on government excise revenues this year.
We concur with the public policy experts and economist that urge the government to create more predictability and a level playing field by reforming the multi tier excise tax structure and enforcing the minimum retail selling price without exception across Indonesia.
Overall, while short term challenges remain the structural headwinds in the market our addressable through government action.
The headwinds directly related to the pandemic are likely to be temporary nature and our brands are strong.
Giving us a solid platform to rebuild our share.
I shift now to our RP performance, we estimate that they were 15.4 million total icls user as of June 30 years.
Compared to an estimated 14.6 million last quarter.
This represents the addition of around 4 million I don't users since the same time last year, a phenomenal achievement given the circumstances.
This reflect widespread use of growth momentum across all key icls geographies, including in Japan.
Ooh region and Russia.
We further estimate that 72% of this total or 11.2 million adult smokers.
Stopped smoking and switch dry course with the balance in various stages of conversion.
We observe early indication that the propensity of smoker to switch to Rps is trending positively since a pandemic began.
And we will see all the developed in the coming period. We also optimistic that the FDA granting of the modified risk tobacco product order for version of Heico's will contribute over time to better understanding of the tobacco category and the benefit of switching to iqos compared to continue smoking.
The overall share performance of heico's edge to use continue to see excellent progress indeed in international markets, where I costs as being commercialized ikonos edge to use where again the third largest brand in the second quarter with 6.3% share increasing.
From 4.5% in Q2 2019 on the comparable market footprint.
This was achieved despite not having full national distribution in many markets.
In the region, we added a record number of Iqos user in the second quarter. Two reached 4.3 million an impressive performance given the context of the pandemic.
This includes strong growth in Italy, the Czech Republic, Poland and Germany.
And in eastern equally slower markets, such as UK, where Ht you volumes increased more than five fold over the prior year quarter and Spain.
National uptick share surpass 1% in both of these latter market Despite limited disruption.
Distribution, sorry second quarter share of it reached 3.9% of total industry volume, which was depressed by an estimated 4.2 points due to consumer pantry loading effect.
Sequential share increased by Geopunch, we point on an adjusted basis with in market sales volume, 5% year compared to Q1 Twentytwenty.
I also refer you to the appendix, where we show shares for key you markets and global key cities, which serve as a useful indicator for national share growth potential.
I cost continued its strong performance in Russia with its share of by 3.2 reached 5.9%.
On a sequential basis versus the first quarter of Twentytwenty its share decreased by 0.6 points, reflecting higher combustible market in the quarter due to increase daily consumption in the warm and loans and the trade inventory buildup read of the July introduction of the track and trace system.
A more reliable indicator is a sequential in market sales, which increased by approximately 12% compared to 3% sequential growth in the first quarter.
In Japan, our total reported share for into tobacco units reached 20% in the second quarter supported by line extension for both Marlboro It sticks and each.
I Coos user grew to an estimated total of 5.8 million of which an estimated 4.3 million a stop smoking and switched cycles.
On an adjusted total tobacco view, including Cigarillos and adjusted for trade inventory movement.
The share for our edge to you brands increased by two points versus the prior year quarter and by 0.7 point sequentially to 18.5%.
Q2, Twentytwenty adjusted in market sales volume for our HQ brands grew 4.9% sequentially.
This helps drive growth of the overall into tobacco category to second quarter total tobacco share of over 25%.
In addition to strong your ARPU growth in exiting markets. The geographical expansion of Ficos continues despite pandemic rated restriction, we leverage our digital capabilities to launch in for new market, Austria, North Macedonia, Montenegro, and Saudi Arabia.
This take the total number of markets, where I could see is available for sale to 57.
Importantly, we still plan to expand our portfolio of smoke free offering in the second that for the year with the launches of Ico disease in the easy for category and of license KPMG product in select markets.
To conclude on the today's presentation, our growth prospects remain strong.
The continued momentum of ficos through the unprecedented circumstances of the coverage from the Meek demonstrate a structural growth characteristic of Rps and we are on track to reach our Twentytwenty one target of 90 to 100 billion shipments of it'd tobacco units.
Rps now make up almost a quarter of our net revenue and we expect this percentage to grow overtime.
With digital efficiency operating leverage from scale effect and productivity savings simultaneously driving up the profitability of Rps. This is a very positive dynamic for our margin outlook.
The historic milestone of modified risk tobacco product authorization for I close is a further testament to the integrity of the product and brand proposition and underlying the need for government to implement science based regulation.
In addition, after a difficult April and May the industry recovery has now started providing better visibility for the rest of the year.
It is also now clear that the effect of the pandemic on the duty free business as a specific dynamic in Indonesia will persist for at least another quarter.
These factors are reflected in our expectation of sequential improvement through the second half of Twentytwenty.
We assume the global economic backdrop is likely to affect total cigarette volume and induce some downtrading in certain market.
This is a dynamic we have faced before in a variety of markets, where we have demonstrated robust business performance.
As a reminder, we expect the unprecedented declines in Q2 Twentytwenty to reverse next year is in comparison.
We also remain committed to increasing our market share through the growth of Rps and by maintaining our leadership position in combustible.
This is supported by your continued sharp focus on cost.
We remain on track to deliver our target of over 1 billion dollar in efficiency by 2021 through both manufacturing productivity and as Janney saving we have additional opportunities on top of this from changes in our first on the way of working including the acceleration of the.
A little activities.
Importantly, our balance sheet and financial position are strong and our commitment to the dividend remains unwavering.
Last.
When coverage related headwinds abate, we expect to regional growth consistent with the currency neutral compound annual growth rate in our 2019 Twentytwenty one algorithm of at least 5% net revenue growth and at least 8% adjusted diluted EPS growth.
Thank you I am now happy to answer your questions.
Thank you we will now can that the question and answer portion of the conference again in order to ask a question or make a comment.
Past Starkey, followed by one on your Touchtone phone.
Our first question comes from line of credit squarely at Stifel.
Hi, good morning.
Nice to hear from new Emmanuel.
I'd like to recommended good morning, I'd like to continue for giving guidance for the year and others uncertainty. We certainly appreciate your outlook and even a mophie uncertainties in the marketplace. So thank you for that.
I have a question if I could first of all on.
The on Iqos performance, obviously is very strong in the quarter I'd like to understand how you approach to your Eicholtz investment did you pull back on that in the second quarter. Obviously some of the stores were closed and did you restart that in June the third quarter, just understand kind of momentum behind that that the product line as we move into second half of the year.
Yes, sure Chris well.
Of course I costs remain our.
Top priority and we are focusing our efforts and investment.
And I call. So even in this challenging environment, we kept investing behind I cost of course, we had to take into account.
Evolution of the environment and there was a number of investment that add to be postponed because there were no longer making sense alternative equal to just do then there was a number of seeing on the commercial motor that we had to revisit and notably you know when they were involved in face to face contact the we're launching as you know.
All of our new product that we were working on that we had to delay. So they were they were clearly versus you know initial plan some reduction in the investment, but we absolutely stay committed.
To keep increasing investment beyond Nichols I would say for me. The good thing of this Q2 and each one as a whole is that we see that the investments are getting an increasing return.
As we are first you know on that what I would call. The six partners investment the structure that we have to invest behind our Rps and I costs. We are growing volume. So we are monetize this investment over larger volume and sales. So we decreased the first it cost if you want and we increased profitability through that and there is also.
Variable part on the investment in term of consumer acquisition or retention and year I would say through the crisis. We of course already working on that but we are certainly has been accelerating.
The usage of digital customer experience and way to engage with them.
In a more efficient more digital and manner and that is going to be.
Most scalable that is going to reduce these variable cost per user which is also very good news for the future of Iqos and equals profitability.
Thank you for that I had just one follow up question, if I could and in relation to a pricing, which was a stronger than expected in the quarter, which is great. I'm. Just curious you talked about maybe delaying some pricing decisions are those just to delay of you had a pullback on pricing decisions as you've seen some downtrading in some markets I'm just curious how that how you approach to pricing.
Peter.
Yeah, well of course, you know we have to take into account the environment. When it comes due to price increase and it is clear that in market that are severely disrupted where you know the trade is is disrupted where there is.
Some some very challenging evolution.
In some places because of the look down we have to revisit planned for increasing price.
So it is it is clear that we take that into account.
It doesn't change the potential of price increase that we absolutely retain and thats been a once a quarter past, we will continue to implement but clearly in this environment. They are seeing that we were planning in a normal environment that neither I would say desirable not doable in the current environment and that could.
And include some delay and I think we are flagging that for Q3.
Where there was last year, a number of price increase and.
This year I think it could move be more skewed towards Q4, when things are normalizing hopefully.
Okay. Thanks, Oscar Turner.
Thank you.
Our next question comes from the line of granting of Barclays.
Grafton on tanks or not.
I have precautions.
Number one is that you youre talking off an acceleration in June the political in high cost and we know that they have other mentality ban in may.
So was there any benefit that I costs fall, because the best Elevenand flavors, especially our highlighting Poland within that segment on market cycle, just curious on that.
Yes. Thanks for the question so you're absolutely right as you will know the mental than.
Came into force on the Twentys of May.
And we know that mean that yet aspley over the months of June.
I think it's premature to say that we have benefited from that as you know we have an under exposure to the to the category. So that is probably a positive evolution for us in terms of of evolution of the of the market.
Well, let's say that you know zikos evolution is obviously impacted by that I cannot exclude that it has been in all else being a little bit that I would say I cause in the EU behaved well through the quarter once again underlines the strength of cycles in the EU.
Through this second quarter, and and I would expect you know probably Q3 to bring more answer on the impact of the mental ban both on on I could possibly and on the impact on the rest of the of the Cc category.
Sure.
My second question is on your guidance Aneurism channels that are no further national long downs.
During the remainder of 2000 Brandy and I appreciate your not commenting on 2021.
If we were to assume that the case in 2021 as well then Q2 granting will create a very favorable comp because you have national load balancing due to grant and most likely there won't be so.
But there we are here in 2021 when volumes are flattish for you.
Well, if you allow me and agreeing to until now into the comment of Twentytwenty. One we do that in due course.
But I can like you come to the.
Sure.
No.
Look at the fact that indeed, we have a depressed Q2, we have a market duty free.
That is a very severely impacted by the coffee 19 crisis.
And if things were back to normal next year that would globally mean.
And new as favorable basis of comparison at that stage I will.
Keep with this.
Simple fact based in a possibility. If this was a scenario being confirmed and in due course of course Wheeler we share with you what it could mean for our 21 21.
Our two but it's too early to commence.
Sure.
Thank you and my last question early on and on your travel retail business can you talk a bit more in detail as to what exactly because we know travel retail and not begun use and you're not there in China. So it does seem that a lot of purpose probably within you travel. So is that what we should focus on that product laminate.
Dynamics within Q.
To be able to forecast what's happening in your travel retail.
Well you is is certainly important but I think we have you know a global exposure you're right you know we're not.
In the U.S., we're not in China, but it doesn't mean that when the benefiting from us and in Chinese travelers. When they are trial into other airport. So you I would say area is important but our exposure is much much broader than that.
And therefore, it can be summarized to.
European exposure issuance.
Sure, but what I was curious if that is it like 50% of businesses and try to travel or 30% of articles and is there anyway to quantify no no. One I don't think we did that split.
But I can tell you that this would be to a percentage if I was to characterize it.
Okay, but in particular.
Thank you.
Our next question comes from the line of Bonnie hair club of Goldman Sachs.
Thank you Hello.
Well go back online.
Tackle question engines, helping you Craig.
Ken It's an update on the progress you've made on additional Frank in terms that some of the virtual guided trial you mentioned.
Really how that's impacting consumer engagement and then I'd be curious here.
5% of here.
Turning some data at this point.
Thanks very for the question.
Yes.
Of course, you know we can share what we can share both by the way for Confidentially Division because it's part of the recipient of the success on the and as we gather information clearly we've been accelerating on engaging with our.
Customers through digital so the initial model as as you know was first not only but first center around customer contacts through shops through us who could shows you know and engaging into explaining to smokers the benefit of switching to two lycos.
Through it does it have started we dinner discover that with with the covered crisis, but of course in front of market that you know were.
Locked down and people confine at all we had to accelerate the plan on digital engagement and to develop all the tools through.
Through all the digital contact and people were of course at home using a lot in internet.
To develop full interaction and full capacity to contact first explain follow and add a footnote using it totally remote experience.
For our consumer so im not able to to give you and I'm not sure that we would like to share that because it's quite sensitive but I can tell you that we see as a percentage of acquiring and fully managed customer through digital which is increasing very fast and becoming very important and of course the beauty of that is that it is.
Easily scalable at a cheaper cost, which was probably more difficult when it was a full human you know related experience and again you know.
I think that this and H. one twentytwenty we remained.
Landmark for our Ico business for a number of reason.
MLP.
Decision is and is one.
The improvement on profitability on the RFP business is another one and but certainly the acceleration of our digital Modelled on acquisition and on retention for our heico's customer is another is another one.
Thats really helpful color and I think it's pretty impressive.
Banking rail how this is really accelerate your after its potential changes you're learning so yes, I think about.
Coronary and during this environment in terms of acquiring.
Morning, New users than you originally expected.
Yes. It suggests that your quarterly new user rate, which has been about 1 million.
New users in each quarter last summer cars do you think that cap up.
The world start to reopen in other words have you learned.
Something now in terms of strategies to accelerate that conversion.
Well I would not go as far as to say that you know we are now at that stage coming with decision that is going to accelerate seeing but it is certain confirming that our ambition is absolutely legitimated. We are confirming the 90 to 100 billion stick next year and this is going to come from the continuation of a very strong.
On acquisition of New Lycos users no doubt that is digital.
And play is going to help us achieving that goal and as I said is going to do that at at the cheaper cost, which is which is definitely good news.
Now that that's great and then my final question Samuel.
I just wanted to.
The market pool that you were saying and I I just want.
From you maybe next step in terms that if there are sent it to get to the next level.
Approval just wanted to understand that.
And then timing, possibly and then.
Wanted to maybe better understand how you might.
Yes, yes granted.
In terms of altering or modifying your marketing plans going forward, how you might try and include Pat. Thank you.
Thanks, Bonnie will as you all can imagine this MLP.
Authorization and is is a fantastic news.
And I would say both for us and for the consumers because I think it's it's coming as.
As a game changer as I knew I.
Our user will landmark it of course start by evaluating all the scientific evidence that we we have we've put together.
And it's going to be.
An important.
Element.
In the in and that's I think the sense of accretion in or out do you use this.
The same RTP, maybe starting with who is your questions. A next level of course, you know the FDA.
As a left the door open to continue.
Dialogue with them on precisely you know the next level, we enter two we intend to do that in the coming months and I would say the.
A question is whether the.
Reduce risk authorization for marketing can come through a modified claim or through providing additional study or maybe a combination of both.
What we intend to discuss with the FDA in the coming months.
And of course, we are in patient who as this is dialogue with with them.
Now on what it means.
Globally.
Well first of all quite important we hope is going to stop the discussion on whether you know I cools and is not done technology is a better product on the than combustible cigarette I think that it's a it's very very important.
Confirmation.
It really should put the focus on Oh, we make this better alternative for the smoker.
As fast as possible I would say and in a in the broadest placebo geographies and Thats really what it means so we think that as the FDA is recognized you know as a as a very.
Ali regarded regulator as they are coming from me with the right approach, where they are both dealing with.
Review on offer reducing arms on on tobacco product and at the same time.
Continued restriction on tobacco use edge, we think that this is the right approach that we are going to be able to.
I would say share with other regulator and we held food that of course people. We look at his decision and and we learn and we learn.
You know a draw conclusion on that let's be clear we already.
Of this type of decision with several regulator in the world. So we think it was going to amplify that and we are beyond the U.S. We are now we have the so the.
Authorization to market as a reduce exposure we already in other countries.
Communicating on that reduce exposure of our iconic products. So it's going in the in the right direction to I think really define what should be the right priorities and the and hopefully going to accelerate sings globally.
Thank you very lax.
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Our next question comes from one of Robert Rampton, Yes.
Hello, three questions for me.
The first is on Indonesia can you help me understand where the Indonesian market should be from revenue perspective, if price enforcement takes place like should revenue per stake reached 29 teed levels, but from a low volume base or is that market just cannot deliver 20% has that revenue from that market has been.
Base down 20% till the lower price tear issues.
These results thanks.
Hi, Robert if I understand where your question Youre asking you know what we should think about Indonesia beyond the coffee prices and what we should the which will understand so let's be clear you have ready to dimension that we need to explain on the situation.
Indonesia.
Well the first one of course is everything related to the credit crisis to start with remember that we started the year and before the credit crisis flagging. The fact that Indonesia would be difficult in Twentytwenty and there was a double I would say excite duty increase.
At the beginning of the year, we have been leading the price positioning the market for quite awhile in Indonesia, and we had not been increasing price at the end of 2019, so that was creating difficulty and we were saying that this difficulty would last until the.
A minimum of retail selling price is implemented.
Then you know the coded crises started and obviously.
That has been creating a total disruption of the market.
We have seen what we've seen in other new economy with the impact on the consumption driven by.
Daily wage workers, you know reducing their daily.
Average consumption and I mean is it 20, 30% difficult defined but that has been and impacting and as we flagged. It has been probably more impactful in Europe in areas that in the countryside.
We are seeing some downtrading into as there was some pressure on purchasing power and there has been also you know in division of the market's summer summer some some some some evolution.
Well certain category, where we have a lower representation again in line with with wisdom trading.
On top of that there was this a second tier system.
On the excise duty due to all corresponding to a low volume are supposed to be low volume company.
Ill benefiting from a much lower excise duty and which can generate a price differential of 40% to 50% versus a tier one system. So it's very substantial we took about a market where this cigarette of the second.
This is Tim can enjoy a significantly lower price.
And of course, you know at the time of Downtrading consumer has been looking for cheaper alternative.
And this market was supposed to stay at a very low level. Because this was supposed to only be granted to very small level of production.
There's been some.
Abuse underway. This has been played and this second tier you know category as rich in Q2, 25% of the market, which as you can imagine on something which was based on reduced volume was not at all the intention and that has further disrupted the the market.
Now when we see these various you know at wins that we have been facing wasn't get what can we expect well first of all regarding the minimum retail selling price implementation.
It does now started is going to be implemented.
Through Q3, but we don't expect really the impact in Q3, and therefore, we can expect to see the benefit of that in Q4. So that's going to be a first element that is going to improve the situation.
Second we are of course, you being active in trying to make sure that we developed our brands and we launched offer in the most dynamic part of the market and.
I've been referring to edge.
GSM soon and and and Marlboro on the on which we are launching extension in dynamic part of the market.
We expect globally, you know as a good crises pass and we know that into next next year people economists are expecting a strong rebound of of Indonesian economy. So we expect globally also the pressure on downtrading to reduce as the economy is improving the daily consumption to also improve so that.
I should add the trend.
And last element that of course, we don't control is this you know second tier.
Category, where we will need and we think is going to happen because otherwise is going to massively decrease the.
Income of the country, but there is a need for reform.
To eliminate the benefit or or change.
The structure of the excise duty, depending on the values you new category.
Whereas the you know to create a level playing field.
And for you all players to be playing on the kind of equal basis and no. We are certainly hoping that is going to impact is going to them.
Right as soon as possible. If everything is have just been described describing upenn well. We know there is no reason why we cannot rebound in Indonesia and be back to our.
Market share.
That we experienced in the past years.
Our brands are extremely strong we have an incredible.
Commercial machine in the country.
And all that are of course in as a strings on which we will be the our rebound in the in the coming quarters.
Right. Thank you. Thank you very much.
Next question. My next question is on Downtrading, I know you flagged, Indonesia and that you don't expect tampering going forward, but are there any mark can you flagged which markets you have seen downtrading.
The most yet.
Yeah, what we flagged is that downtrading.
May have accelerated in a few countries, where it was probably already you know visible.
Before the crisis started so we took about Turkey, we could talk about in Mexico. These are typically a in addition, with Indonesia, a these other market, where where we have seen I would say increased pressure on purchasing power triggering downtrading.
Now for the future of course, nobody knows what's going to be zee.
The impact of the economic crises that everybody is forecasting.
We've been there before so that will be the first time that we are managing very tough environment and we have show in the past that we have an absolute capacity to manage is kind of environment with the agility with the we at room and we delivered.
Two manages kind of environment. So we would see and we will add that to the situation.
Great. Thank you very much that's it for me.
Thank you.
Our next question comes from the line of Michael Library of Piper Samar.
Oh, Thank you good morning.
Can you update on on.
The heat launch in Japan, and just you called out I think a little bit of.
Mix pressure that surely would have come from that and we saw the share gains, but maybe give us a sense of how it's tracking relative to your expectations and and what sort of margin impact that has on your business there.
Sure Michael.
So probably Jeff and you know is at the at the forefront of what.
You can expect in many countries as it gets more mature I would say on.
Gross of of the and I costs I think it makes sense to of several offering for the customers and and in Japan, I think probably my first comment will be on the fact that the market did perform well clearly in each one and in Q2, we have been growing double digits.
Our shipment and end market sales in Japan in into two four if not then globally. So as you can see it's a market that continue to grew very nicely and certainly its has been a contributor to that so the fact that we are playing with both Marlboro.
It's in will enable us to recapture maximum opportunity in a in the market.
And.
We we see a very very.
Very positive trend on its which has captured crews to 4% of the market.
So you see that it's already a sizeable.
Part of our RFP business in Japan.
And and that bodes very well for what we can do you know with two brands in the country.
Okay. Great. Thanks could you also just clarify in engine Asia.
You gave color that in your guidance thinking you don't expect enforcement of minimum prices at least until September.
Yes.
For Q goes what's your your base case thinking is your.
Thinking reflected in guidance that there's no enforcement all year or is there belton some assumption that does improve.
No well what is taken in the guidance is essentially that we should have a large part of the benefit in Q4, So we're not expecting anything in Q3.
But we think a large part of the benefit of housing minimum retail selling price should be seen in Q4.
Okay, Great and just one last one on Mexico, where.
Governmental spanned the importance of heated tobacco devices.
You just gave US a sense you had just been getting underway there with figure I close launch. So it's it's sort of maybe hitting it before it hits momentum, but yeah, how though youre navigate we're happy that look yes, you're absolutely right now because of the good news is that we had the or the right level of inventory before this is Dan.
I happen. So we are not facing out of stock situation. So of course, we hope is not going to last.
Too much.
Because a we were nothing that we have.
Some devices, our inventory for several years, but but for the timing it's that it's not an issue we are.
Okay for that Mexico is going to look at the year after year decision on the that that will influence the.
They're.
The decision on more on capturing Puerto Rico's, but it's not as you know it's not targeted to I call. So we're just unfortunately year.
Prison year of AFFO of a broader decision if I may say hopefully they will they will come back on that one rapidly.
And that will allow us to resume.
The.
The the export.
To to Mexico of devices.
Okay, great. Thank you very much.
In Q.
Our next question comes from the line stemming from Citi.
Hi, Thank you very much a quick question for you.
Well Thats one it is.
Really about EPS guidance.
In June for caustic [noise].
In June you forecasted bps lower $1.10. It turned out that was wrong by about 20 cents.
Recourse to the ending in June.
Without giving guidance.
In some range and I just wonder why you got range is appropriate.
Given that balance sheet for cost even among accurately so my question.
It's about range I mean, why yes, and I understand that im saying. Thank you for the question well, let's let's face the reality of number it's not 20 cents because what we're saying is that we have I would say a big as for the 20 cents as you said that is coming from.
One other factor that's going to be compensated in Q3. So it's not as if you knew we had missed the lending is just that the number of fact that we couldn't that anticipated the beginning of June app and at the end of June and that out the the lending of Q2 now Youre right. There is approximately eight.
A sense eight to nine cents that we deliver both the.
Anticipation at the beginning of June and I would say that's I mean, the most of June has been very important because in fact, we all realize that.
Overall locked down and the confinement and Oh last until beginning of June when things, where you are gradually released in many many geographies and even if there was still a number of disruption I think that when we look for instance that like people you know not all being back to work.
Physically I think that we don't know when all that is gonna be back to normal. So let's assume that June was probably giving us a pretty good visibility on what we could expect for the coming months and that's ready on the basis of of that that we.
I've come to this.
Capacity to come with.
With with this vision and guidance for.
The full year. So again June has been important the learning of doing the as important and the miss as not being a 20, but rather than a 10 cents and of course, the first weeks of dry as we've been saying.
It is confirming just kind of understanding of than the environment in which we are for the timing.
Okay well.
Okay, an implicit in that is we're working on.
Im expecting commonsense movement at the end of December and I suppose.
Absolutely.
Turning to say that wasn't basically it looks like it's going sentence bottles on how concerned that.
Or is that the you know the completely understand what would be on the team.
And then 10 cents movement.
Well and of course, you know I I've broken my Crystal ball, so I'm not able to tell you whether this kind of seen could happen I.
I think we're coming with the carefully consider a range for the lending with a number of you know scenarios.
Indeed.
And I think Thats, you know encapsulating, several possibility and pluses and minus as always when you build a a guidance and we think that this is at that stage with all the information that we have.
The rights.
Guidance and the right vision for the lending and I'm not able to say Moreno is they are seeing that we haven't been anticipating in I was very scenario that happened that you can always happen of course, and and you know the last months are here to reminders that there were not able to anticipate everything well, we'll see but for the time being with.
Again, all the information that we are the June you know to mid July vision, we think that this is the right a guidance for the end of the year.
Okay. Thank you very much in us. It's it's a question Thats really helpful on something that phrase. It. So can I talk about something completely different which is the gross margins specifically in our people.
So are you starting this quarter you didn't really pleased partly because our appease arm on a percentage of the hope.
But also within that.
RRP margins going off probably.
So.
So thats towards digital.
And I guess my question is within all please how should we think about margins. So obviously, there's a whole mix that's not many of the question customers.
I think that you've got a good level and that's a little growth and now that will modestly than it does in Q2 on each quarter. We can really important thing are up in margins, adding a next fall.
Sure Yes.
Okay, there's a slight lung function.
I'm not trying to already that are managed very it's a very a fair question.
Let me, let me be staff by remaining what is the mother of Eichholz, an RFP is you know it starts with.
Consumable that are as you know.
And during today IYR.
You on a percentage basis, okay, which is the intrinsic to these.
Our p. business.
And that's a business on which as well versus the CC you know we also.
Improving the way, we are producing improving productivity and therefore, you know when you look at the gross margin on the.
Edge to use.
There is some positive it was always with starting from of course. This favorable situation that described and there is a possibility of Oh I would say a positive evolution. Then you have the devices, Okay, which we've seen is is is a small percentage of the total but it's a it's it's a matter.
They were one and on this one I think we've been clear on the fact that the margin by you know type of device can be a bank can be different but we can accept to.
Some time not make money or in some condition, even lose some money because at the end of the day, it's part of the investment that we make to acquire new customers. So that the starting point and then below that of course, you as the all machine to a quite.
You know to convert to newer smokers to a two I close and then to retain.
And on that machine as well, we gonna we're going to improve.
Things as we are growing the top line on our piece, we are gaining efficiency. We use more digital we said it and we are I would say publishing the machine and increasing at the same times the strength of the engine, but also I would say, reducing the cost of the engine. So that's going to keep playing positively so.
So I don't know, whether you know I should take impressive and I don't know what you put the an impressive but you should certainly expect us to keep growing.
Margin on RFP is gradually in a meaningful manner as we continue to grow on Iqos, an RFP that certainly our objective.
Okay, Let me talk a little bit more precise about impressive.
Pulling locals palmer or or.
Walker module response is also.
Good margin right.
Very dramatically in terms in the past opportunity from last year.
And so I suppose the questions really.
We expect some like similar uplift the gambling 2021 on all just on the RFP business or is it can be multiple models.
Each month.
Adam I won't comment on on on that you know, whether it's going to be a bull below what I can tell you is that we believe that we have.
Some significant headroom to keep improving margin, but I won't comment further.
Okay. That's fine thanks very much.
Okay. Thank you.
Our next question comes from one of the DNA of Cowen.
Hi, good morning, Thank you.
My first question is on on Marlboro, you know I appreciate the commentary around fun.
Modest downtrading that you've already seen in markets like Turkey, and Mexico, I'm, just trying to square that comment you guys are cut Tamara markets I'm, just trying to square that commentary on which the assertion that you believe tomorrow market share I will hover on given its outsize exposure can you social occasion, so just wondering how much of that.
Margin pressure do you think it's really excuse me that market share pressure, it's coming from Downtrading in select markets that have a high degree and exposure tomorrow versus social occasion. Thanks.
Well I think that.
You're right. The you have the two driver behind Marlboro and that is being you know Q2 as being a difficult quarter for formal borough has been losing some share both because of you said it down trading and it's a few market where you know we can we can see that but also I think two large extent in many market will.
Although as a big market share and because of the social moment that have in almost entirely disappear during Q2 and at the same time as a way you have markets such as the Philippines, where Marlboro has been growing nicely as well. So HM. It's it's a mixed picture I would say, it's not you know one direction and it's a bit more comply.
Next than that than that but we are.
Certainly confident that the.
You know Marlboro is going to be able to rebound nicely first with everything around the social or consumption.
And then and we are going to certainly see some.
Some some some rebound as well even in country, where we have seen downtrading during the period when.
'cause it crises hopefully and is when it come to the Downtrading in or is it really nalbone road downward or more mid to low. So I think you know even the real impact of you know when I was talking about Philippines, which has been a market where the economics engine has been difficult and despite that we've seen good evolution.
And for mobile I think my Boy, then getting three point of marketer in.
In in the quarter. So so it's quite good so I would say when we took about don't really I'm not sure that this has been the main impact on mobile, but but rather again in the downtrading is rather meat pricing going to lower pricing and the biggest impact on my boys.
We see is is this a absence of social moment, where.
Well My boys is an important brand so we hope that that will enable.
A good and fast we down for the brand.
That's helpful. Thank you and then my second question is on the on I kind of development and looking quickly at your number of users and juxtaposing that against your volumes. It seems like perhaps there's a little bit degradation in terms of average volumes per user on is that a function.
Just new countries coming online and you need consumers can ramp there perhaps consumption or is there like a structural shift in terms of per capita consumption in new geographies on in combustible cigarettes at like translate into he's tax relative to Q existing I 'cause geography. Thank you.
Well, even though I'm not sure that we have you know any information that would clearly in 2.2 that we know that Q2 has been impacted and globally on the two in the typical market you know by a lot of disruption that has been.
Potentially influencing the daily consumption and that you know maybe in some markets. It can have an impact on a few.
Market for Ipos, but frankly, we have no data and nothing pointing to that.
Based on the on all the data that we have on Q2.
Understood. Thank you very much.
Thank you.
Our next question comes a lot of Pamela Kaufman of Morgan Stanley.
I just wanted to ask how you're thinking about the puts and takes the current excise tax environment, there's been a number of development during the quarter, including.
How do you read the tea increase in Germany BHP reduction.
So what is the impact of these tax changes and are you passing managed through consumers.
I guess looking similar to what is your outlook for excise taxes as a result to other economic environment and what did you see in the past following prior economic downtime.
Yeah.
Thank you for the question so as a general yes, we are passing on this.
Tax evolution, whether on excise duty or all of the 80, that's a junior rules.
But maybe more important is a conventional on.
What we can expect for the coming quarters in term of.
Evolution of the tax environment.
Well it is true and Thats you know certainly is a sense behind your question that many countries are gone phase Iia deficits.
Budget deficit because of the crisis and the and the temptation you know could be a there to try to find a way to finance it.
First of all these type of decision you know are usually made in the fourth quarter of the year. So neupogen of the Q3 beginning of Q4, so we knew more at the time.
But I have the feeling that the versus maybe what happened in 2008 and a nine.
Europe the environment is quite different and many governments are reza trying not to depress the consumption and you know that when you increased price at the end of the day unit to sure about the net impact you're going to get.
On your on on on the money that youre going to receive and and therefore, it's it remains to be seeing what's going to be the decision in term of tax increase of all nature I think it's it's not clear.
But if it was the case as I said, we we've seen that in a in the past in 2809 you know.
As as Okay, again, with probably a different way to approach the crisis.
I I seen a a lot of excited you to increase in many countries and I think we've shown our capacity to.
Of course, whether this kind of environment and the and then I would say overcomes is kind of of at wins and we have no doubt that if it was the case, we would do that again, but and I reiterate my but.
It could be quite different this time and that that is at least what we are hearing from a number of politicians and government.
Thank you and then I was wondering if you could provide more color on the trends that you saw exiting the second quarter you highlighted that that was a particular recovery in Europe and can you comment on what trends youre seeing across other region and then I guess more broadly how are you thinking about design.
Fans across markets and Youre starting to 9%.
Industry volume forecast for next year.
What are the difference between emerging and developed markets.
The.
Drivers behind that for a cash.
Well sure.
I should probably be back to what we've been sharing about our expectation for Q3. So.
We are as we said you know in June 1st weeks of of July.
Seeing a kind of gradual improvement of the market the global down our over a wee doesn't mean that we are back to normal that as as I said, when we start to see the market operating maybe in a more consistent manner and with a bit less.
Disruption so that is a trend that we've been flagging on June but.
So that is why we are saying that we expect for Q3.
Net revenue that will be in sequential improvement versus Q2. So that's exactly what is behind our vision for the rest of the year. It doesn't mean that we're going to be back on the growth year on year and also of course in addition to that we have some.
Negative impact coming from each one that's going to play on the topline and we said about 1% in Q3.
But we are going to continue to see into three.
Some a year on year negative evolution, because lots market remained extremely disrupted and you know.
Of course of into Cubo duty free Indonesia, but many other markets are going to be.
Disrupted because of of the 'cause it crises because of the restriction because of potentially some impact on on the economy's all that is going to to play and impact us another thing to enter into you know trajectory.
Bye bye bye market, but but certainly we would expect a Z mature economy.
And that's probably what we've seen you know in a at the end of the quarter to show. Some good resilience in this environment and maybe less disruption versus a new weakening that would be the ball park. Our Philly and then you know each winter Q4, as we said we continue to expect.
An improvement on net revenue for Q4 versus Q twos was a two three so sequentially, we're going to keep.
Improving the net revenue number.
But nevertheless into Q4 could still be negative a year on year and so we really have to make the difference between the a quarter on quarter trend you know the sequential trend and then the year on year comparison.
Thank you I am just my last question.
Russia has gained an important market for eichler scurrilous can you comment on what you're anticipating from the economic environment.
And I cost adoption in Russia, and what isn't a performance for your Super premium she can launch.
Thank you well I could tell me I've been doing very well in Russia in in in Q2, you know interest in this environment. So.
And it's of course, you know I cannot say that there was no impact from a from the disruption some look down in Russia.
But we continue to grow share for four I close and and we are pleased with the evolution of.
Our RFP in a in in this market.
Altogether, the Russian markets, it's probably been impacted but in a mine away by the.
The evolution. So when you look at at at the volume you know it was it was down and it was not you know with strong acceleration in the underlying decline in volume that we have seen in Q2. So that's a market that has resisted pretty well through this 'cause it crises and again, we're very pleased with.
The Iclusig development I'm not going to elaborate on we're going to be the trend in the in the next two quarter, we expect Gee I Coos.
And market share to keep growing and that we're going to continue to to perform went on I could the good news is that.
We also maintained.
<unk> market share in C.C. at the same time, so that was a nice achievement.
Thank you.
Thank you.
Final question will come from the line on Bennett of Jefferies.
Good afternoon, and Pulpo, while and I'll keep it very quick so just wanted to come back to sequential industry volume improvement in the E. In June and I was just want to any possible to break that out between cigarette and I comment on what we see a the main driver there. Thank you.
Yeah, well isn't it with we see no in June with the end of the look down in many countries an improvement of the trend.
I would say I course has been doing where as we said through the quarter So of course.
We've seen.
Some acceleration in June, but but the whole quarter has been good for I cost and clearly we have seen some acceleration in a in a in India cc business, which has been quite impacted by yet by the love down in some geographies.
And and we've seen some some improvement in a in June.
All markets under the cool and notably you the market that are impacted by lower tourism have been more penalize and I took about southern Europe here of course, the market that typically see a lot of.
You know coach as being made a broad you know and a lot of cross border activity with the border being closed I mean, there's been globally doing better through the quarter.
So this is kind of trend that we have seen in Europe.
Okay very helpful and very much.
Thank you.
And that was my final question I'll turn the floor back of excellent management for any additional are closing remarks.
Thank you very much for joining us today that concludes our call. If you have any follow up questions. Please contact the investor Relations team. Thank you again.
Well and have a great day.
Thank you. Thank you all too soon thanks bye.
Thank you ladies and gentlemen, this does conclude today's conference call you may now disconnect.
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