Q2 2022 Philip Morris International Inc Earnings Call
Speaker 1: starting in the second quarter of 2022 and on a comparative basis, PMI will exclude amortization and impairments of acquired intangibles from its adjusted results.
Speaker 1: Todayís remarks contain forward-looking statements and projections of future results. I direct your attention to the forward-looking and cautionary statements disclosure in todayís presentation and press release for a review of the various factors that could cause actual results that differ materially from projections or forward-looking statements.
Speaker 1: It's now my pleasure to introduce Emmanuel Babou, Chief Financial Officer. Over to you, Emmanuel. Thank you, James. Well, welcome to you in your new role and welcome everyone. Before I begin, I want to reiterate our focus on supporting our employees and their families affected by the war in Ukraine and, above all, on the safety of our people.
Speaker 1: We continue to deploy pledge humanitarian support and additional benefits for our Ukraine employees. And additional benefits for our Ukraine employees.
Speaker 1: As previously announced, we intend to exit the Russian market in an orderly manner, as the complexities of continuing to operate in Russia increase, such as supply chain challenges and financial and banking sector restriction.
Speaker 1: We continue to actively work on options for doing so in the context of an increasingly complex and rapidly changing regulatory and operating environment, including the requirement to obtain certain governmental approval for any transaction.
Speaker 1: Turning to our business, we demonstrated strong underlying momentum in the second quarter of 2022, with another quarter of positive volumes supporting better-than-expected top and bottom line growth.
Speaker 1: Most impressive was the continued excellent ICO performance and so in Q2 performance, I use the growth of more than 1.1 million demonstrating further sequential acceleration compared to Q1 as divide limitation and COVID restriction continue to ease.
Speaker 1: This reflects strong momentum in the EU region, Japan and developing markets.
Speaker 1: Q2RP performance and net revenue grew by plus 11%, despite the adverse treatment timing impact due to supply chain constraint, highlighted last quarter, while HGU IMS volumes grew by plus 20%. Q2RP performance and net revenue increased by 20%.
Speaker 1: ICONSINUMMA delivered further impressive results in its first three markets of Japan, Switzerland and Spain.
Speaker 1: The acceleration in category growth in these diverse geographies, I like the exciting future growth opportunity across the world, including in the latest launch market of Greece.
Speaker 1: In combustible, Robert's Q2 performed volume growth of plus 2.4%. And organic net revenue growth of plus 4.2%. We're driven by Margaro share gains, stronger pricing and the continued recovery of the market. Stronger pricing and the continued recovery of the market.
Speaker 1: Maintaining leadership of the cigarette category allows us to maximize the switching of other smokers to smoke-free alternatives and accelerate our transformation into a predominantly smoke-free business by 2025.
Speaker 1: We expect the strong underlying momentum of our business in H1 to continue and we are
Speaker 1: former organic growth outlook for the year.
Speaker 1: We are now well-entracked to deliver two consecutive years of volume growth, confirming our status as a growth company in terms of volumes, organic natural revenues and margins.
Speaker 1: Despite a substantial currency edwin in 2022, we expect to deliver a full year adjusted deluded EPS of around $6, including Russia and Ukraine. 7 dollars, net cash index, November 2019, the largest Ba?? stolen under supply for the extra 2 million deed investment. Now report volume 500, the non-compes, the newly boom payment per crisis has given sort of ?Talk of rules as NOT OK. 8. 3. 3. 6. 6. 4. 3. 7. you
Speaker 1: The proposed addition of Swedish Match would further boost our future financial profile. This is a value creating offer for both sets of shareholders with a compelling strategic and cultural fit, providing an additional opportunity to accelerate our smooth future.
Speaker 1: Turning to the headline numbers, our Q2 volumes grew by plus 3% on the pro-former basis and by plus 1.1% in total, including Russia and Ukraine. And by plus 1.1% in total, including Russia and Ukraine.
Speaker 1: Performance and net revenues grew organically by plus 6.2% and by plus 5.3% for total PMI. Reflecting both the continuous strong growth of FICOS and the ongoing recovery of the combustible business in many markets against a pandemic affected comparison.
Speaker 1: As we anticipated and indicated previously, less unfavorable timing of cigarette shipment also played a role, notably due to replenishment of duty free inventories.
Speaker 1: Our total organic net revenue per unit grew by plus 3% on the pro-farm basis and by plus 4.1% in total despite the expected delay of HTU shipments to Japan as we managed through global supply chain disruption.
Speaker 1: This incorporates combustible pricing of plus 3.5% on the pro-forma basis, or almost plus 5% excluding Indonesia.
Speaker 1: I work you to adjust operating in the margin, decline organically by 190 basis points on the performer basis and by 1.0 and 50 basis points in total.
Speaker 1: As expected, and communicated in our Q1 quarterly result, this reflect four main factors.
Speaker 1: First, investment to further expand and match the speed of growth in our smoke report video.
Speaker 1: This includes the initial higher cost of Illuma devices and HTUs and the transitory dilute is margin impact of higher device cells as we roll out Illuma and replenish distribution channel as device constraint is to support reactivating icos you the growth
Speaker 1: Second, the impact of supply chain disruption notably due to the war in Ukraine, including around 80 million dollars in additional air freight expenses.
Speaker 1: Third, inflation of around 4% in our cost of goods driven by the blue bull pandemic recovery and exacerbated by the war, notably for certain direct materials, wages, energy and transportation costs.
Speaker 1: And last, a challenging prior year margin comparison, which included substantial cost of goods and its productivity failure.
Speaker 1: Despite these atypical margin challenges, our robust top-line growth and ongoing cost efficiency enable us to deliver plus 5.6% growth in performer, curancy, neutral, adjusted, deleted ETS, a rate of expectation to $1.32 and plus 3.8% growth for total PMI to $1.48, including Russia and Ukraine.
Speaker 1: Looking at the first half of the year now, our volumes grew by plus 4% on the pro-forma basis and by plus 2.2% for total PMI.
Speaker 2: ProBroadcast Cast
Speaker 1: within use, grew by plus 8.1% and by plus 7.1% total, also driven by strong icos performance and the recovery of the cigarette category.
Speaker 1: We delivered organic net revenue per unit growth of plus 4% on the pro-farmer babies and plus 4.7% in total again, reflecting the positive impact of growing HD volumes and pricing.
Speaker 1: Our H1 adjusted operating income margin contracted organically by 110 basis points on a pro forma basis and 90 basis points in total, driven by the factors mentioned previously.
Speaker 1: We expect better margin performance in H2, but the topic are really short.
Speaker 1: Currency neutral adjusted diluted EPS grew by plus 10.4% to $2.79 on the pro forma basis and plus 9.2% in total to $3.06. An excellent performance given the circumstances.
Speaker 1: Reflecting this strong momentum, we are
Speaker 1: our guidance for 2022. With strong I-Cose growth and robust trends in combustible, we foresee an acceleration in our current neutral growth expectation relative to our previous forecast.
Speaker 1: First, we now expect to grow our total pro-farm achievement volume by plus 1.5% to plus 2.5% for 2022, achieving another year of volume growth.
Speaker 1: For performance and net revenue, we expect to deliver between plus six and plus eight percent organ growth, as compared to the plus 4.5 to plus six, 0.5 percent announced previously, despite a greater than anticipated drag from Iber inflationary accounting in Turkey.
Speaker 1: With a stronger recovery in device volume, the increasing contribution of philumar with initially either unit cost and ongoing global inflation, we are narrowing our forecast for pro forma adjusted organic or I'm adding expansion to between zero and plus 50 daily points.
Speaker 1: We are also raising our growth outlook for performer current neutral adjusted digital EPS between plus 10 and plus 12 percent.
Speaker 1: This reflects a range of $5.23 to $5.34, including an estimated unfavourable currency impact of 80 cents at prevailing rates, notably due to the Euro and Japanese yen.
Speaker 1: We include a slide in the appendix with further detail on this estimated impact.
Speaker 1: For total PMI, which assumes a fully a contribution from Russian Ukraine, we expect adjusted the LITLIPS of $5.90 to $6.05, reflecting similar dynamic to the pro-former basis, and including an estimated $0.69 and favorable currency backed.
Speaker 1: Please note our 2022 forecast assumes no contribution from the proposed combination with Swedish match, which is expected to close in the fourth quarter of this year, subject to Swedish match shoulder acceptance, and the necessary regulatory approvals.
Speaker 1: The outlook for ICOs growth is excellent and we now expect to deliver a full year pro forma HTU shipment volume of 90 to 92 billion units representing the other half of our previous forecast range.
Speaker 1: With growth momentum very strong, the main concern for not further raising our HTU volume target is our production capacity, notably for ILUMA HTUs, due to their outstanding initial success and the constellation of production in Russia as we convert existing production line for induction consumable.
Speaker 1: We continue to expect excellent HTU growth in the coming quarters, with a progressive improvement in ILLUMR HTU capacity through the first half of 2023.
Speaker 1: We are prioritizing Illumma launch market accordingly with further launches planning to floor as communicated previously.
Speaker 1: Notable further updates to our outlook is an increase in our operating cash flow forecast to around $10.5 billion as compared to around 10 billion there are previously despite notable currency adwinds.
Speaker 1: This includes our accelerated pro forma earnings growth forecast and an assumed full year contribution from Russia and Ukraine.
Speaker 1: We delivered robust operating cash flow growth in H1 of plus 14%.
Speaker 1: And as shown through the challenges of recent years, the Cajunation Capacity of our business remains exceptional.
Speaker 1: While flattered somewhat in 2021 by favorable timing and one-off impact, our revised full-year forecast demonstrates underlying growth against this exceptional year after also accounting for higher inflation driven working capital requirements and currency.
Speaker 1: This and align our ability to maintain a strong balance sheet, we down that and invest in the goals of our business.
Speaker 1: Our net debt of 23 billion dollars June 30, 2022 decreased compared to both June and December 2021, despite H1 capital expenditure of 0.5 billion dollars and ongoing dividend payments.
Speaker 1: Our commitment to our progressive dividend policy is unweathering and we look forward to the additional cash flow, the proposed combination, and we should this match will bring.
Speaker 1: We also continue to expect around $1 billion in full year capital expenditure.
Speaker 1: Moving now to the pro forma outlook for the second half, we expect to deliver strong top-line growth organic adjusted OI margin expansion and further acceleration in bottom-line growth. For Q3, we expect mid-single digit organic top-line growth driven by Icos with around 22 billion in pro forma HQ shipment volumes.
Speaker 1: While there is a tougher comparison for cigarette and the modest negative impact expected from shipment timing, we expect combustible volume trends to remain resilient by three costendants.
Speaker 1: Natural renewables will also continue to be impacted in both Q3 and Q4 by the shift to hyperinflationary appointees in virtual bois this new tuned as you
Speaker 1: While the temporary cost-advancing in Q2 are expected to ease somewhat in the third quarter, we expect this to be broadly offset by a step-up in smoke-free commercial and ironed investment as compared to a device-consuring Q2 2020-21.
Speaker 1: This results in an expected Q3 pro forma adjusted DUTDPS range of $1.23 to $1.28, including an estimated adverse currency impact of $0.24 at prevailing rates.
Speaker 1: We expect a strong Q4 with a rebound in STU shipment volume due to facing to be most pronounced as STU capacity with a strong Q4 with a rebound in STU shipment volume with a strong Q4 with a rebound in STU shipment volume with a strong Q4 with a rebound in STU shipment volume
Speaker 1: The H2 recovery in our pro forma adjusted OI margin is also expected to be Q4 weighted.
Speaker 1: Turning back to our result, performer H2U in market sales volume goes strongly by plus 20% for both the second quarter and the first half notably driven by strong performance in the EU region.
Speaker 1: As expected, Q2-IMS Pro-Farmer growth was significantly ahead of shipment-rolling growth, reflecting the later timing of shipment I mentioned earlier.
Speaker 1: Our total pro-forma shipment volume increased by plus 3% for Q2 and plus 4% for H1. As I touched on earlier, this put us well on track to deliver total volume growth for the second consecutive year on both a pro-forma and total PMI basis.
Speaker 1: the impressive performance of I-Cose, ETA-TBECO units comprise 12.6% of our performance shipment volume in H1 or 14% in total, despite the anticipated H2U shipment timing in H2U. H2U. H2U.
Speaker 1: Our sales mix is also changing rapidly as we aim to become a majority smoke-free company by 2025.
Speaker 1: Smoke-free net revenues made up almost 30% of our pro-format total and exceeded 30% for total PMI in the first half of the year.
Speaker 1: IKO devices accounted for approximately 5% of the $4.2 billion of pro forma H1RP net revenues.
Speaker 1: This reflects higher device volume at a lower average price than last year as we expand our device portfolio with Lille and Illuma One and Priceladder, our blade device portfolio, in preparation for the launch of premium position Illuma.
Speaker 1: The positive momentum of IKOs continues and is further accelerating in many geographies, providing a powerful driver of revenue and margin growth.
Speaker 1: We deliver organic growth of plus 8.1% in each one pro-form and net revenue, on cheapment-wing growth of plus 4%.
Speaker 1: This reflects the twin engines driving our top line in addition to volume.
Speaker 1: The first is pricing, laid by KumbustiBone. The second is the increasing mix of RPs in our business at higher net revenue per unit, which continue to deliver substantial roles. The second is the increasing mix of RPs in our business at higher net revenue per unit, which continue to deliver substantial roles. The second is the increasing mix of RPs in our business at higher net revenue per unit, which continue to deliver substantial roles. The second is the increasing mix of RPs in our business. The second is the increasing mix of RPs in our business. The second is the increasing mix of RPs in our business.
Speaker 1: This is an increasingly powerful driver as our transformation accelerates.
Speaker 1: Let's now turn to the drivers of...
Speaker 1: O-Forma adjusted OI margin which contracted organically by 110 basis points.
Speaker 1: Proformer growth margin decreased by 200 and 80 base point organically, reflecting the factors I mentioned previously as we invest in our smoke-free business and manage temporary supply chain disruption and growth inflation.
Speaker 1: This margin headwind was partially offset by better pro forma adjusted marketing administration and reserve costs which improved by 160 basis points organically.
Speaker 1: This was driven by the positive operating leverage of ROP growth and successful cost efficiency program where we generated around $420 million in gross cost savings of which approximately $117 million came from COBS productivity and over $250 million from SG&E.
Speaker 1: With more than $1.2 billion of savings realized by this alpha point, we are well-entracted to deliver a cost saving of $2 billion for 2021-2023.
Speaker 1: This allows us to reinvest in top-line growth and mitigate inflationary pressures while continuing to deliver margin expansion.
Speaker 1: We continue to accelerate investment in our commercial programs, digital engine and R&D for long-term growth, as well as a number of growth opportunities across categories and geographies.
Speaker 1: As reflected in our full year outlook, we expect our operating margin trajectory to improve in the second half of the year as temporary Edwin and Tof comparison.
Speaker 1: Focusing now on combustible, our portfolio again delivers growth in pro-farm-by-volume and organic net revenue in Q2.
Speaker 1: Our performance achievement volume grew by plus 2.4% against a pandemic affected comparison, notably driven by Indonesia, Poland and Turkey.
Speaker 1: In addition, we saw a continued recovery in international duty-free outside Asia as passenger traffic increases.
Speaker 1: Performance-computable pricing of plus 3.5% was slightly ahead of our expectation and while we remain cautious on the economic outlook, the pricing environment has been gradually improving.
Speaker 1: We expect to deliver a similar level of pricing for the full year.
Speaker 1: Our leadership in combustible adds to maximize switching to smoke-free product, and both the positive Q2 and H1 segment share demonstrate the strength of our portfolio.
Speaker 1: We continue to target stable category share over time, despite the impact of ICO scan realization. We continue to target stable category share over time, despite the impact of ICO scan realization.
Speaker 1: This year marks the 50th anniversary of Marlboro becoming the world's leading cigarette brand.
Speaker 1: With the return of social consumption occasions, Marlboro volumes grew plus 7% year-over-year in each one, with categories share again surpassing 10% on the pro forma 12 months rolling basis.
Speaker 1: Of course, our longstanding success in building a Malvo brand equity is a strength we are now. The Malvo brand equity is a strength we are now.
Speaker 1: Small free product as we make excellent progress with ICOs as the undisputed global small free leader.
Speaker 1: The positive combination of stable share and combustible and the continued growth of ICOs positions to deliver total market share growth over time.
Speaker 1: We capture a plus 40 basis point of pro-farmer share gain in Q2, including gains in duty-free, Italy, Japan and Turkey.
Speaker 1: Moreover, PMI HTU strengthened their position as the second largest nicotine brand in markets where Icos is present with a 7.5% share excluding Russia and Ukraine.
Speaker 1: Moving now to IKO's performance.
Speaker 1: We estimate there were approximately 19 million Icos user as of June the 30th on the pro forma basis.
Speaker 1: This reflects very strong growth of over plus 1.1 million newder in Q2 and plus 2.2 million in H1, the record says as I on this basis.
Speaker 1: The acceleration of ICOs user growth compared to both Q1 and last year was driven by the reactivation of acquisition and retention program in many markets as device supply constraint received as well as impressive start of ICOs alumni. The reactivation of ICOs alumni
Speaker 1: While device supply constraints have eased in recent quarters, this is largely due to the success of our own proactive efforts.
Speaker 1: The global supply of semiconductors, women tight, and we continue to closely monitor and manage a situation.
Speaker 1: In the EU region, we are now approaching the milestone of 9 million high cost users, reflecting stepped up commercial activities to drive acquisition and retention, along with the launch of Illuma in Switzerland and Spain.
Speaker 1: Our second quarter HTU share increased by plus 1.6 point to 7.1 percent of total cigarette and HTU industry volume.
Speaker 1: As noted in prior years, sequential share compared to Q1 was affected by the usual seasonality of the combustible market with the additional element of a strong year-over-year combustible recovery tomished over the quarter.
Speaker 1: Most importantly, IMS volume continue to exhibit rubber second show blows and we expect this to continue in the second half.
Speaker 1: The strong performance includes excellent user and volume growth across the region with notable contributions from Italy and Poland.
Speaker 1: Now to give some further color on our progress in the region, this slide shows a selection of the latest key city of the texture YouTube. Now to give some further color on our progress in the region, of texture YouTube.
Speaker 1: Despite the denominator effect of the combustible category I just mentioned, share results remain very strong.
Speaker 1: Most impressive is the news. The first sitting in the world to surpass 40% share while Athens' Budapest and Rome are in the mid to I-20s. The first sitting in the world to surpass 40% share?? 30% share! 20s.
Speaker 1: And where we are especially pleased by the results in London, Vienna and Zurich.
Speaker 1: In Japan, I also number Each
Speaker 1: And our share of market continues to increase in TCTs such as Tokyo.
Speaker 1: Most importantly, our IMS volume trends will remain strong with continued sequential growth.
Speaker 1: As indicated last quarter, Q2 shipments were lower due to timing factors and should recover in the second half with the weighting toward Q4.
Speaker 1: The adjusted share for our HQ brands increased by plus 1.9 points to a record 22.9% in Q2 despite seasonality.
Speaker 1: While we are very pleased with these results, our share performance could have accelerated even further. The combustible category was notably resilient in the quarter and our rollout of mainline price Sentia HTUs for use with Illuma was slightly slower than initially planned.
Speaker 1: However, early results were encouraging. Cynthia is designed to cater to its consumers with a consulting enthusiast and a price conscious mucous smoker.
Speaker 1: We also observed an increase in legal edge users switching from low-price competitive is not done product.
Speaker 1: We estimate users of competitive offering to have less average daily consumption due to lower full condition which will be the Iluma should improve over time. August
Speaker 1: The Eat Not Burn category now represents around one third of total tobacco in Japan, with high costs increasingly driving this year's growth.
Speaker 1: In addition to strong progress in developed countries, we continue to see very promising high cost growth in low and medium income markets.
Speaker 1: The performance share of our HTG brand in the 28 such market launched by December 31, 2021 continue to grow and reach 2.9% in Q2, reflecting the growth in IMF's volume.
Speaker 1: Given the large size of this market, the premium positioning of the existing IECO portfolio and the relatively early stages of commercialization, this represents outstanding progress.
Speaker 1: For prime example of these are Lebanon, where Q2 of tech sharing in Beirut increased by plus 8.1 point to 17.4%. And Egypt, where of tech sharing in Cairo reach around 5% to launching less than one year ago. In
Speaker 1: Other notable successes include the recently launched market of Morocco and Tunisia, as well as Georgia, Jordan, North Macedonia, and the Philippines, despite pandemic restrictions in Manila.
Speaker 1: Moving now to ICO's Illumma, which continue to drive increased conversion and retention rate across initial launch market.
Speaker 3: In Japan.
Speaker 1: Pan, Ilouma continue to exhibit strong growth with premium-priced terrier, HTNU's growing rapidly to become the second largest tobacco brand, reaching an off-tech share of 14.6% within nine months of national launch.
Speaker 1: Encouragingly, sent here of take-a-glitch air has already surpassed the level of heat in non-strefactors covering around 45% of industry volume.
Speaker 1: The extension of our device portfolio with Iluma 1 in Q1 has also seen robust traction with legal aid smokers.
Speaker 1: We exited Q2 with a record eye of the X-Share and continued to see a long runway of growth in Japan for Illuma over the common growth.
Speaker 1: Iluma and Terria HTUs also continue their superb start in Spain and Switzerland.
Speaker 1: We launched ILLUMA in Spain in March 2022 with very positive initial results, notably in QCT such as Barcelona and Madrid.
Speaker 1: Second show IMS volumes, and I'm going to show you a group by 27% in Q2.
Speaker 1: Pateria exited the quarter making up over 50% of H.D.U. sales only four months after commercialization and our national H.D.U. share as grown to plus 1.7%.
Speaker 1: This is especially encouraging as Spain had been a market where regulatory restrictions had limited the speed of Ico's growth.
Speaker 1: In Switzerland, the demand for Illumar remains very strong.
Speaker 1: IEM is going to continue to grow sequentially, increasing plus 13% in the second quarter.
Speaker 1: A significant proportion of existing users have upgraded to Illuma, and the off-tech ex-ex-ex-ivolume of Terria now exceeds 70% of our HTU sales.
Speaker 1: We continue to expand our global smoke feed portfolio through our rich pipeline of innovation. We launch Illuma in Greece in May-June with further market launches planned for Q4.
Speaker 1: With regard to our new, it not done device tailored to low and middle income market. We continue to plan pilot long shows in the fourth quarter further expanding our portfolio to serve different consumer needs and segment the market.
Speaker 1: In EVAPOR, I could this continue to deliver encouraging results. And for example, is now the established number to close-pot brand in Italy, with off-text sharing sequentially to around 20 percent.
Speaker 1: VIV is a premium proposition with an average price premium to competitive devices of 20-30% as we pursue a differentiated and profitable category leadership position over time.
Speaker 1: In Q2 we expanded into 3 additional geographies including France and are now present in 10 markets.
Speaker 1: The latest addition to our EVAPOR portfolio is a VBA disposable device.
Speaker 1: Responsibly, marketed disposable EVP or product can play an important role as a convenient, assault-free entry into the smoke-free category for legal edge smokeers.
Speaker 1: Vibas was recently launched in Canada with nine varieties.
Speaker 1: Our geographic expansion of smoke-free product also continues in Q2 with a launch of ICOs in the line. The smoke-free product also continues in Q2 with a launch of ICOs in the line.
Speaker 1: Of course, the biggest potential near-term addition to our smoke-free portfolio is the proposed combination with pretty much. The
Speaker 1: This will deliver a major acceleration in our transformation to becoming a small free company.
Speaker 1: The visions of our two companies are aligned in working toward a smoke-free future without cigarettes and would create a global smoke-free champion.
Speaker 1: If completed, we would have a comprehensive global smoke-free portfolio with leadership position in heat not burn and the fastest growing category of oral nicotine with potential for accelerated international expansion.
Speaker 1: Another competing rationale for this deal is a large, attractive and growing US smokefree market.
Speaker 1: Swedish Match has a leading nicotine pouch franchise with Zhiyin and a substantial US operational platform which would help us unlock the significant opportunity across other smoke free categories over the coming years.
Speaker 1: This would be a strong strategic and cultural feat, offering significant shareholder value creation over the medium and long term.
Speaker 1: As stated in the offer document published on June 28, the waiting period for the transaction under the US antitrust process has expired, meaning that we have satisfied our requirement in the US to proceed with the transaction.
Speaker 1: We expect the transaction to close in the fourth quarter of this year, subject to Swedish match orders acceptance and the necessary regulatory approval.
Speaker 1: Moving to sustainability, I want to first draw your attention to our 2021 integrated report published in May, which outlines our new sustainability strategy and ESG performance in detail as we continue to transform for good.
Speaker 1: Included in the report is our new sustainability indexed, comprised of 19 KPIs across our most material sustainability issues.
Speaker 1: The index is weighted towards product transformation and now represent 30% of our long-term performance base and equity and executive compensation.
Speaker 1: The definitions, methodology, and scope of each of these KPIs are included in our recently published ESG KPI Protocol, providing further transparency on how we define success and measure ESG performance.
Speaker 1: With regard to tackling climate change, I am delighted to report that the science-based target initiative has today validated our 2040 net zero target.
Speaker 1: The initiative also revalidated our near-term 2030 target for reducing greenhouse gas emission and our new 2025 target for 15% of our suppliers by span to have their own science-based target by 2025, a very positive development, given that scope three remains the most challenging aspect of any company de-carbonization strategy. of any company de-carbonization strategy.
Speaker 1: To support the achievement of this target, we are accelerating progress to decarbonize our virtual chain. And we have made eight more factory carbon neutral this year, more than doubling from last year and placing us on track to meet our goal of all factories by 2025. To meet our goal of all factories by 2025.
Speaker 1: Finally, product health impact remains one of our most critical LG priorities.
Speaker 1: There is a growing body of scientific and real world evidence of the substantial risk reduction potential of smoke free product compared to smoke in it.
Speaker 1: We continue to support policy and fiscal framework that we recognize the positive impact the Baccalaureate Reduction policy can have on public health. The Baccalaureate Reduction policy can have on public health.
Speaker 1: Recent examples include further multi-attacks plan in differentiated treatment for smoke-free product in Romania and statement from the Belgian Super L's Conceal on the role, iletop product can play in switching either smokers away from cigarettes.<|en|><|transcribe|> smokers away from CLS.
Speaker 1: To conclude to this presentation, we have delivered a strong first-ass, despite some challenging edwin, placing us well on track to deliver robust volume growth and an accelerated current and usual performance financial performance in 2022.
Speaker 1: We remain excited by the promising result of ICO's Illumar. Increased consumer satisfaction is driving higher retention and conversion, and we look forward to further market runches later this year. We look forward to further market runches later this year.
Speaker 1: Our combustible business continues to perform well with pro forma volume and organic net revenue growth.
Speaker 1: Maintaining our share of market over time despite the impact of high cost cannibalization allows us to accelerate further switching of smokers to better alternatives and to invest for long term growth in the development of innovative wellness and healthcare products which seek to deliver a net positive impact on society.
Speaker 1: We continue to enrich our pipeline of smoke-free innovations such as ILuma and Ziba to expand and grow across new and existing categories in geography.
Speaker 1: We are raising our performance growth guidance for the full year and expect to deliver around $6.00 in total adjusted digital DPS, including Russian Ukraine, despite currency bearing and improving options.
Speaker 1: Importantly, with an excellent 2021 performance, and I was from 2022 Outlook.