Pre-Close 2021 British American Tobacco PLC Trading Update Call
Hello, and welcome to the beat H, a pre close trading update my name's, Rihanna and it'll be a coordinator for today's event. Please note. This call is being recorded because the duration of the call. Your lines will be able to slowly. However, you will have the opportunity to ask questions at the end of the call that can be done by pressing star one on your <unk>.
Telephone Keypad Register your question for now I'll hand, you over to your House My Nightingale to begin today's conference. Thank you.
Thank you good morning, everyone.
Go head of Investor Relations.
This morning, it today in Morocco financing transformation director.
Welcome to us when he takes you out in full year pretty close conference call.
Okay, well, thank you for taking the time to join US This morning.
Before we begin any store your attention to the cautionary statements regarding forward looking statements as well as the notice and disclaimer contained in the trading update.
I'll now hand over some status.
Sure.
On contrail before opening it up to questions unless otherwise stated all comments will focus on constant currency adjusted measures and Osha yesterday average to September 2021.
Thank you Mike Good morning, everyone and welcome at the start of the year, we said that 2021 would be the pivotal year in our journey to transform Bac and build a better tomorrow.
The business is delivering on that.
Firstly is strong the new category revenue growth continues to be driven by accelerated consumer acquisition. This year and we are making excellent progress towards our 25 5 billion pounds revenue targets.
Secondly, with increased scale and operating leverage new category losses start to reduce these here. This is a key first step in our pathway to profitability by 20 to 25.
And finally, our strong focus on cash flow and the leverage means that we anticipate reaching around three times net debt to EBITDA by the year end.
This is important as it provides greater capital allocation flexibility as we enter 2022.
Taking each of these in turn.
The first key driver of our people, though here is that we're accelerating new category performance.
This is driven by continued strong consumer position.
In the first nine months, we have added three six medium consumers.
Our noncombustible brands, reaching a total of over 17 million consumers in September.
This is already more than the growth over the full 12 months of last year.
And this is driving continued strong volume and revenue growth across all three new categories.
We are building strong global new contemporary brands of the future.
To us is a great example, with the brands achieving global value share leadership in vapor in September.
And also becoming the first global carbon neutral vaping brands.
That has been independently validated.
With our products available in 77 comfortably markets across 55 countries globally, we are leveraging our established multi country consumer centric approach to provide consumers with a wide choice of scientifically substantiated reducing risk alternatives.
And the digitalization of our business is increasingly important in accelerating our transformation.
Revenue growth management, and marketing spend effectiveness and now being applied across the new categories.
Enabling us to generate higher returns on our investments and drive our improvement in profitability.
Our new category performance over the second half is being fueled by a further increase in the investments.
[noise] views is fast approaching value share leadership in the West and is now leader in 26 states.
In our all of the top five markets views continues to expand its value share leadership position with a global brand migration from right now successfully completed.
In October <unk> received the first of its kind U S SBA vapor marketing authorization.
Confirming the marketing of solar products is appropriate for the protection of public health.
The abuse outdoor P. MTA submitted nearly a year after review solo shares the same foundation of science, giving us confidence in the quality of all the applications.
In THP. The continued success of low hydro is driving category volume share growth in consumables across every one of our top nine markets, reaching an overall 17, 7% category share up four five percentage points.
In Japan, driven by the ongoing success of hyper lowest growing THP category volume share, which is up 170 basis points, reaching 21, 1%.
LOE has capture 100% of the THP category volume share growth in Japan, and the six months ended September 2021.
It was total nicotine bond Michelle is up 120 basis points to reach six 6%.
Indiana, which now represents 50% of our THP volume little hyper continues to accelerate volume and revenue growth with consecutive quarter on quarter share gains in key markets.
In Russia, and Ukraine, we have nearly double our consumable category volume share with category one machine both markets now around 20%.
Across our top nine markets, which account for over 95% of our THP volume our consumables, Brian says on average at an index of 92, our main peer.
Hello, Hi, Perry is now available in 22 of 24 below markets globally with further market Rollouts planned for 2022.
In modern oral we are extending our international volume share leadership.
Our overall category volumes sharing in our top five markets ex U S reached 28, 9% up 140 basis points.
These markets accounted for more than a half of top five more than auto volume.
We are particularly pleased by our strong performance in Sweden, and Norway, where our modern oral category volume shares of 59, 5% and 63, 8% were up five six and one seven percentage points respectively.
In a highly competitive markets in the U S. While below our year to date volume share growth has slowed since the half of the year. We have still achieved five five percentage points growth to reach 13, one percentage.
Overall more than auto category volume share in the top five markets was 36, 1% down five percentage points driven by the increase in the weight of the U S markets, where we have lower share.
Turning now to improving new category profitability.
Second key driver of our people to all year.
While we have continued to increase our investment in new categories. We are leveraging our increasing scale and expect our new category business to contribute to profit growth from 'twenty to 'twenty, one as losses stature reduced for the first time.
For the 2022 financial reporting periods, we will disclose new category contribution to group profits to provide investors with increased visibility and clarity on our pathway to new category profitability by 2025.
We have invested and built significant IP in all three of our new categories.
This is essential for the long term profitability and sustainability of our business.
And is critical to our work on tobacco harm reduction.
We have many patents registrations across the world some of which have been the subject of litigation.
And a worse, we have successfully asserted our patents in THP with the recent determination by the ITC the competitors' products infringe <unk> valid patents owned by railroads.
In Japan, THB patent litigation brought by both sides is ongoing.
In the UK there has been one substantive substantive decision against us regarding the validity of <unk> UK THB patents in the same family.
Four of our competitors flagship CHP patents have also be found to be valid in the UK.
In Germany, our product views. He brought was found not to infringe our competitor a paper patents other than this there have been no substantive men judgments on the merits in Europe.
Patent registrations are unique to that jurisdiction. So judgments concerning patent validity one country have no legal bearing on validity in another.
We believe we have strong patent protection for our new category products and our litigation record in this area to date has been strong.
Finally, turning now to the third driver of our pivotal year.
Our focus on cash flow and leverage.
With a strong full year operating cash conversion expected to be in excess of 90%.
Our year end net debt to EBITDA would be expected sure Brad below three times at constant rates, reducing by more than four turns.
As we approach the year end the ratio become sensitive to the difference between U S spot rates and average rates throughout the year.
The gap widening in recent months as the U S has strengthened.
Despite these we expect net debt to EBITDA, even at current spot rates should be around three times at three one times.
We recognize the clear value of our share buyback at the current valuation.
We also continue to be clear on the need to deliver on our 2021 commitments to reduce leverage to around three times.
As we enter 2022 and as our leverage approaches our medium term leverage target corridor of two to three times, we anticipate having greater capital allocation flexibility.
So our pivotal year is on track.
We're also on track to deliver on our financial guidance.
We continue to expect constant currency group revenue growth in excess of 5%.
Benefiting from the strong new category performance.
Which is now a sizable contributor to group revenue growth.
We now expect full year tobacco industry volumes should be broadly flat an improvement from the previously forecast decline of around one 5%.
This improvement is mostly due to our strong industry recover in Indonesia, driven by the low price segment, which will not benefit California.
We maintain our expectation for full year U S industry volume decline of around five 5%.
Robust combustibles revenue growth is expected to be driven by strong pricing as we continue to drive value growth with cigarette value share up 10 basis points.
We expect this to be partially offset by the mix effect of volume recovered post COVID-19 and share growth in key emerging markets, including Bangladesh and Pakistan as well as lower volume in the U S.
Our U S business continues to perform well driven by good pricing and share growth with value share up 50 basis points and premiums share up 60 basis points.
This is being driven by the continued strong performance of Newport and natural American spirits.
We expect to generate savings of 1 billion pounds from quantum one year ahead of plan.
And we have confidence in achieving our upgraded target of $1 5 billion pounds by the end of 2022.
Overall this strong operational performance is allowing us to absorb a large one off profit headwind of 206 million pounds for the full year.
This includes a 220 million pounds impact from exercise and competitive pricing in Australia in the second half.
An increase from the 170 million pounds exercise impact previously stated at our interim results together with a 40 million pounds impact from exercising New Zealand.
As a result, we are maintaining our expectations for mid single figure constant currency adjusted diluted EPS growth for 2021.
Applying current foreign exchange spot rates of 132 as of December 30, we continue to expect that transactional.
The wind of around 2% on adjusted profit growth for 2021, and the translational headwind of over 7% on adjusted diluted EPS and around 9%.
The new category revenue growth.
Overall, we have confidence in delivering our financial guidance in this pivotal year.
The core of our transformation is to build a better tomorrow and thats now deeply embedded throughout the business.
Our strong new category growth is a demonstration of our transition and is central to our purpose to reduce the health impact of our business.
And to deliver on this ambition, we continue to develop a substantial body of scientific data of our reduced risk products across each new category.
This includes the 180 day results from our landmark one year clinical study on Globe publishing July which demonstrated that completely switching to <unk> result in positive change to all indicators of potential harm compared to smoking.
With the majority similar to quitting smoking.
During the year, we have continued to make good progress trance, our other ESG objectives.
In addition, we recently sign up to the UN backwards race to zero Global campaign.
The next phase of our journey to create a sustainable enterprise of the future is being driven by our transformation program quests.
Digital technology, and innovation will drive that transition leveraging our <unk> organization and building on the success of quantum.
Our focus on scientifically substantiated reduced risk tobacco and nicotine products continues and will not stop there.
We are expanding our portfolio beyond <unk>.
That means delivering products that stimulated sense about audits consumers wowing hain seats satisfaction enjoyment in Wyoming.
BHF tomorrow will be a high growth consumer goods company.
Global consumer centric multi category with sustainability at our core.
Thank you and I will now open the call to questions.
Thank you so as a reminder, if you would like to ask a question or make a contribution on todays call. Please press star one on your telephone keypad.
Question. This morning comes from the line of Gaurav Jain.
Please go ahead.
Good morning, diarrhea pass a lot for taking my questions.
I have a few questions one is on.
The leverage and share repurchase so could you. Please again comment on what your leverage is at the end of the year and iPad that regardless of the hybrid debt insurance it would be south of <unk>, but it seems to be slightly ahead of it.
So what's the leverage and then how does one think of share repurchase going forward like would you like to keep this flat leverage and free.
Free cash flow after dividends.
Investor should expect all of it comes back in the form of share repurchases are you would've been like to Delever.
Hello, guys.
Okay. Thank you <unk> for your question look the hybrid.
Is it a more niche products.
We did the hybrid with intention to actually choose to reach out to <unk>.
New new.
Types of investors that we Havent had the opportune before which we did successfully and.
Also tool to provide a better match in terms of hedging with <unk>.
<unk>.
Because we didn't have much euro capacity choose to issue senior debt.
But the total magnitude of it is not in the in the in the grid scheme is not that much relevance. So you would expect some benefits are more or less one turn but the fact is that we are seeing.
Big headwind in terms of currency as I explained in the statements and you'll know that.
We are now subject to the spot rate of U S. Dollar at the 31st of December what we have.
What we are seeing now is after.
A stronger bounce throughout the year, we would see weakness more recently and this creates a.
Pressure on this indicator of net debt to EBITDA because the net debt is translated into the 31 December spot rate why are they a bit. The <unk> is the average of the year, which was in a much stronger bounds. So this is more than offset the potential benefit that we saw from from hybrids.
That's why we are we are mentioning the CFO three times.
At this point in time, so in there in terms of the expectation. We are we will be satisfied to be within the range of three to two.
We are not.
Making any type of.
Yes.
Our commitment to go to for example, the low end of the range all that we want to be in the range. We think that is important.
We have reached the range and having the.
The flexibility otherwise, referring to 222 to make other types of call. It in terms of capital allocation.
We know that we will note that we are quite committed and we understand the importance of dividends through many of our shareholders and we are also very clear in terms of delivering our commitment to deleverage the company. After the acquisition of our railroads. So that's why we're putting so much emphasis on cash generation and we have.
Massive cash generative company today.
To date.
After the acquisition of Raynaud's with with that with a very stronger conversion.
<unk>.
<unk>.
And we and we want to and we have all the possibility to keep their hour hour hour. That's moving forward is very well managed we did a liability exercise last year retiring some of the most expensive that 'twenty two 'twenty three so in every single year moving forward, we have a peak of that $4 billion in which more than half of.
That we can generate organically so it's completely manage both the newbuild refinance we have a good match between currencies in terms of debts and earnings and our our hour.
Interest cover is very healthy at approaching four eight times. So all the metrics on treasuries, it's quite substantial so for me within the range of <unk>. Two is enough to have that flexibility that we are referring to and we understand that there is a lot of.
Our attention for buybacks given the share price and we the mainboard described.
Sensible to that as well we have done in the past we understand the value of that and this will be one of the considerations that we will take care as we close the year.
Sure Patrick.
My second question is on cigarette pricing and the industry. So your key competitor is now.
Saying explicitly that they don't think they need to take a lot of cigarette pricing because of the mix benefits that they're seeing from my cost.
<unk>.
How do you think of cigarette pricing.
Outside the U S. As you go forward.
The pricing environment is still very healthy.
If youll see what we expect to achieve in 'twenty one.
Is even with a higher level than what we had in 2020 and.
And we and we in particular <unk>.
<unk>.
Pleased with the strength the strong portfolio that we have we are now reaching 7% of our portfolio in what we call our global drive brands and well represented in the in a very different <unk>.
Pricing categories, and we are rolling out the data analytics tools that we develop in the U S across the world that gives us.
Better chance to.
To leverage on the on the on the strength of our portfolio. So we believe that we.
We have a strong foundations.
Two to continue delivering the results and the value that we expect to deliver in this aligns with our strategic objective of BT from combustible moving forward.
Sure My last question is on Germany.
<unk> cannabis legalization proposal that is there so clearly Canada did not participate directly and you have an investment in one of the companies there with Germany.
Much bigger and more important market. So when you look at participating in the cannabis market in Germany.
We utilize next year.
Look this is a continuum.
Assessment that we make on that space, we saw the opportunity in Canada, because we like the organic Graham as a company, we thought that was well positioned through growth in the future. So we enter also in this.
Product development collaboration agreement with organic growth that leverage the combined expertise in plant based science and product development with initial focus on CBD.
And.
And we are satisfied with the with these levels of investments that we have.
We have to see.
The evolution of cannabis moving forward the legalization because you'll note that we have some restrictions in the UK, where we have to comply with volcker and all that so we will be continue to be prioritizing beds. The core level of compliance, but we have to choose to keep.
Assessing the opportunities out there. So it's very early to say that we're going to take part on this we have to to understand first the dynamics of the markets.
Sure. Thanks, a lot Daniel thank.
Thank you.
So our next question comes from the line of Nicole <unk> from UBS net till now in research. Please go ahead.
Good morning, Mike Thanks for the questions.
Two from my side, Firstly, another one on pricing.
The U S. Because I guess, we see I think three price increases year to date in the U S. So I think those four last year.
What's giving you the confidence to push so hard on price and any changes EBIT deserved on electricity even nationally.
At the regional level.
And then second one on modern oral you mentioned in the U S. It's a highly competitive market.
Trusted wet that any plans for PMT eight on the non U S b.
Great.
Thank you Anita.
Look Nick.
Yes, we are very very pleased with the performance of our <unk> in the first place as we saw from the announcements we have now grown.
Premiums share by six basis points the value share is 50 basis points, we have not seen any downgrades in our portfolio. We are well represented in all the different price points with the introduction now of the look at look strike at.
At the top of the end of the portfolio.
And which we have deployed the tactically in some of the states, where we see stronger competition from these non big three brands. So we are very pleased and this gives us reassurance that we can we can it's still pursuing a value from the market given the fact.
That's the elasticity is still very benign we haven't seen any difference a major difference in terms of elasticity in the U S is around <unk> four which is.
Any indication that there is still a lot of pricing power in the U S to go up to <unk>.
And on top of that like I mentioned that previous question. We have developed a very strong analytical tool that we call revenue growth management tools that allow us to have a very very granular visibility of.
Competitiveness, even answer in pricing even at <unk>.
<unk> code or different channels, our key accounts and we can react to any lack of competitiveness and pricing and changing trade terms for example, very fast so when you pull all this together.
We feel comfortable.
In taking the value out of the market and the <unk>.
And Thats exactly what we are doing in line with the strategic imperatives of the group now in terms of more than Oro.
Modern oral category remains highly price competitive and these are very very small one.
Just to given that this is only around 20% of the value of the vapor category for example to provide.
And idea is the value I think that reached now something like $1 five around one 5% of the total nuclear can value and it's a continued low average data consumption.
With the vast majority of consumers.
Users.
With other nicotine products just to provide the information for example, the average data consumption in the U S of more than <unk> is around three pouch.
Why on the in the in the in Sweden. These nine in Denmark is eight eight boats. So.
It's a segment that is steel.
In its infancy and trying to mature.
We have learned a lot in the last year. After the acquisition of drift. There are clearly some areas that we want to improve in terms of our product mix and consumer acquisition and.
You are referring to <unk>.
International products that clearly is something that we is in our our strategy because as you'll know we have a leadership in our modern auto products outside the U S. Because of basically the best in class and we want to bring those products in the U S. There is a process to go.
Through the MTA is there, but there is science that we may choose to deploy so there is some time that we need to to materialize that and Meanwhile, our priority also has been.
We see the biggest opportunity to sweep smokers in the U S, which is which is vapor, which we are doing extremely well and.
<unk> leaders in 2006 states very close should take leadership in the month. So we are very pleased with the progress we are making our noncombustible business in the us.
Great. Thank you that's really clear.
Okay.
So our next question comes from the line of Richard Felton from Goldman Sachs.
Please go ahead.
Yes. Good morning, two questions for me. Please and my first question is on potential changes to federal excise taxes in the U S.
If they are implemented have a fairly material impact on the modern or categories.
Could you maybe share some thoughts on.
And how you see that as potential changes impacting those categories and specifically I guess my question is how important is price and the consumer decision to switch from deflation to data for instance.
My second question.
You can find that new categories will contribute to profit growth for the first time this year as losses begin to Rajiv is there anything you can share at this stage on how big that impact is going to be for your EBIT growth. This year. Thank you.
Okay ratio look.
Just on the first one I think that is.
Pretty mature to speculate what will happen in terms of the federal excise tax and we saw a build that went to the lower house, which is different from the ones that now is in the Senate and you are right to the current bill is expecting increasing <unk> sizing and smokeless products, mainly which.
It doesn't make much sense in terms of the risk continue are there benefits for consumers that's the only.
The comment that I can make for you at this point in time, and but I think that is very as I said very early on to make any conclusions of the outcome of that there is still a lot of.
Negotiations the batesville going through so.
For sure that prices.
<unk> is an important element of this transition thats why we believe that.
Common sense will prevail at the end then.
And.
They will.
Nacho Paradise, all the of the.
Probably not <unk> all the transitions that has already happening in terms of incentivize the alternatives to cigarettes in the U S. So but to be seen.
On the on the loss, we are not providing any.
Disclosure in terms of the magnitude of the loss reduction, but the important point is that.
From now on from 'twenty to 'twenty one onwards.
New contract will be a creative for the profit of the group. So has already been material and our revenue growth. That's one of the reasons why we have upgraded our guidance for revenue of above 5% is exactly that you're already seeing a material impact of revenue.
Coming from new categories, and and these will slowly build from the product side as well. So from 2022 as I said in the statements. We will provide now a full disclosure about.
The profit impact on new categories. So you'll know exactly where we stand on that but we are very pleased with the progress we are making in terms of.
Margin improvement across the patch.
Mainly on the <unk> business.
As you as you know we.
We have some.
Some levers to play which is materializing the cost of products for example, reducing as a consequence of more automation and.
The trade margins improving.
As a consequence of.
The deployment of revenue growth management, with which translates into new offerings for consumers in different boards in four months and the pricing taking for example, and the and the price we are start recovering price and advice and consumers. We have never taking discounts. When we are also increasing our pricing consumers. So.
When you pool NDA and the improvements that we're making now in the e-commerce sites, which is.
Is one of the top.
Branded.
Web sites that we have out there. So we are very pleased with the performance we are making comments. So when you pull all this together the margins in <unk>.
Being a big driver of this recovery in the in terms of profitability across the new categories and we are very pleased but we're going to see these in more detail from next year onwards.
Great. Thank you very much.
Our next question comes from the line of Ray <unk> from SPG Securities You will know and research. Please go ahead.
Hi, Mike.
Mike Thanks for the questions.
Just a few quick ones.
I just wanted to get an understanding of your commentary around cigarette volumes you said the industry you expect to be largely flat.
You also talk about you.
<unk> value share is up 10 basis points, but there is not a reference to your actual volumes sure.
If you could maybe just elaborate.
On what we can expect on the volume share buyback, Okay sure great, though yes, what we said is that the major driver is compared with what we have guided before the interim results is the improvement team in the <unk>.
And in the Indonesia, and the consequence of that is basically the reason for that is basically the.
The government Hasnt enforced the minimal price yet so industry hasnt taken the price and.
So there is clearly a trade off there between.
Value from on site and volume so you'll have more volume with less value for us not much relevant because we don't have <unk>.
Much presence in that market in particular, that's why we called your attention.
On the <unk>.
The way that we are measuring now.
With the market share given the transition between tobacco heating products to cigarettes is putting all them together and as we stand today year to date, we have a 10 basis point increase in market share.
Okay excellent.
Just to get an understanding of the profit drag in Australia, and New Zealand I mean, the increase of about 19 million pounds.
Half year.
I mean.
He appropriate more or less the <unk>.
Impact of the <unk> situation is it safe to assume that this additional increase in the drag as a result of price competitiveness.
Yes, we have posted already in the interim and expectation of $170 million as basically a consequence of X size and what we saw as we move around the second half is.
Is the impact of X sight that materialize as we were expecting but also very competitive.
Pricing environment.
So we had to react to some of the.
Actions taken by competition, there and in this reflecting in lower any higher losses in the market. We are also quoting.
New Zealand, that's also changed the exercise, but let me tell you that signs it is.
Is that is a headwind in the in these short term, but it's beneficial for the long term of the business because what we have seen AD hoc excise increase since 2012, when they into the Mark the Wilmington producer plant packaging that market and this has started now so we it's good for their sustainability.
The business in the long run.
His beds.
Some sort of impact in the short term and Thats one of the reasons why we kept our mid single digit performance this year.
We had this impact we call total transactional FX with Heather Ed said that some time ago since the beginning of the year. The transactional FX. This year is quite substantially account for close to 2% of operating profits and we also had to deal for example, with our Iranian business that we do.
This diversity of running a business in the in August this year. So we are lapping that as well. So we are and and the fact that we still are not out of the woods in terms of Covid, India in particular has been.
Better impact and this reflects mainly the ITC performance enhance our key coastal between operating profit and EPS were I remember that we report ACC numbers with six months lag. So we are still reporting a very difficult environment for ITC as a consequence of the immediate and Thats, where we did.
Sorry to keep the mid single digits for this year.
Okay, and then just quickly I just confirmed.
Did you say the the market share in tobacco heating products in Russia, and Ukraine was around about 20%.
Yes, and our share in THP category in Russia, Ukraine also Romania and is around 20%, Japan is slightly above that as you saw in the statement yes.
Yes.
Thank you.
Our final question comes from the line of Jon Leinster at Society Generale Youll know when research. Please go ahead.
Thank you very much good morning, gentlemen, hi, Jeff two questions if I may.
The first one.
Of your competitors.
They've got problems in terms of supply chain with semiconductors, which will limit that growth in terms of feature tobacco in last place potentially some of the more advanced <unk> products is that an issue that you have gotten into 2022 or indeed in second half this year no it's not.
Have a very strong supply chain management and engagement with our suppliers in terms of tier one tier Chu with a product that allows us a lot of flexibility in that we could accommodate all these pressures that we are reading the news in the sense that we are not seeing any any headwind coming from that.
Okay.
<unk>.
Again, our special on input costs are clear.
A feature of the type of consumer goods in general.
Looking forward into 2022 is do you foresee any major.
Increases in costs for input costs.
Yes, we.
We definitely are seeing an increase in cost for next year.
But remember that we have a vertical integrated lease operations. So this is being hampered by the devaluation of real in Brazil, but there has been major source of leads that we have in the group.
But we mitigate some of this impact there the impact is mainly on the labor cost in the factories, but also freight.
In general and we expect.
The inflation overall would be double that once that we faced in 2021, but we have as a consequence of rolling out quantum and Youll start that we have just upgraded our hour.
Our target for one to one 5 billion, we expect to generate savings to mitigate all these cost impacts for next year.
Thanks, and then also.
Clearly you've been looking at the nicotine pouch product, particularly even in some of the emerging markets and some of the non Scandinavian.
European markets can you give feedback on on the size of the markets and the sort of non scan the European but also the any feedback you can give on whether the trials and some of the emerging markets have been successful for whether the product needs to be adjusted.
Yes look.
We are we are excited about these opportunities in the emerging markets, we believe that the affordability debts as allowed by more than auto.
Good match with some of those market mainly for example, the ones that we saw a lot of Citi.
Cigarettes being sold by <unk>.
For the beauty is an issue because in those months, who can provide for example, these nicotine policy even in <unk>. If you want so we are in test market in the likes of Pakistan, Indonesia, We are trying to do in a very.
Balanced way.
But there is in some of those market. There is a red traditional oral tradition, which makes it easier for these products will be accepted some others not so youll have to to build the awareness of the product first and we.
We are really.
Excited with the first with.
With the first.
Results that we are having but it's early days for those two to make a meaningful difference in terms of volume, but it is building nicely and this business some of those markets.
Thanks, and lastly, I mean clinic low hot.
Yes, good success in Europe and Japan.
Okay. Similar question to one that I think that was put forward with.
European Nicotine pouches is there any plans for PMT for the U S market.
Yes, the U S.
Market.
I think we spoke about this before we are not seeing.
Any any major attractiveness in terms of THP in that market, which is not a surprise for us because we know.
From an experience that we had before in the likes of Canada, where the interest has invested a lot and.
With the absence of any progress from THB that would be.
So given the circumstance of the the characteristic of the market is very high.
<unk> equity and marketing secrets and.
And where we have a very well established.
<unk>.
Markets already so when the consumers.
Had made around the culture move away from cigarettes are into vaping. For example, it's difficult for us to see them for example, moving back towards tobacco rods that you still you still have to deal with tobacco Road set of bond you are hitting it but it's still a tobacco rod. So we have seen that in Canada. That's the reason why in markets.
France for example, where our vape is also well establish our UK you all haven't seen much progress on that so what is not a surprise to see that there is no traction in CHP in the U S market, but.
We have plans to choose to to take to apply for <unk> and in the in our own product. There because we believe that is also an important movement for in terms of FDA advocacy outside the U S to have that product approved in the us. So yes, we are on track.
Do that.
Okay, great. Thank you very much.
Yeah.
Okay. So.
Thank you all for listening and for your questions and in conclusion 2021 is a pivotal year in our journey to transform and build a better tomorrow.
We are delivering strong new category revenue growth driven by accelerated consumer acquisition. This year, resulting in further good progress towards achieving our 5 billion pounds revenue.
By 2025, secondly, we increase the scale and operating leverage.
Large part to reduce this year.
A key first step in our pathway to profitability by 2025, and finally, our strong focus on cash flow and the leverage means that we anticipate reaching around the three times net debt EBITDA by the year end broadly this provide us with greater capital allocation flexibility as we enter 2022 and with that I hope that you all keep safe in these in.
Certain times.
We'd like to issue and you and your families a very enjoyable holiday season.
Thank you.
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