Q4 2023 Philip Morris International Inc Earnings Call

Unknown Executive: For more information, please visit www.abc.gov.au. I'm Colleen Mason. Thanks for watching. And I'm Rachel Sears.

Yes.

Speaker Change: Good day, everyone and welcome to the Philip Morris International fourth quarter, 2024, and full year earnings Conference call.

Unknown Executive: Have a great weekend. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye.

Speaker Change: Today's call is scheduled to last about one hour, including remarks by Philip Morris International management, and the question and answer session.

Unknown Executive: Good day everyone and welcome to the Philip Morris International 4th Quarter 2024 and Full Year Earnings Conference Call. Today's call is scheduled to last about one hour, including remarks by Philip Morris International management and a question and answer session. In order to ask a question, please press the star key followed by the number one on your touch-tone phone at any time.

Speaker Change: In order to ask a question. Please press the star key followed by the number one on your Touchtone phone at any time.

James Bushnell: As a reminder, today's call is being recorded. I will now turn the call over to James Bushnell, Vice President of Investor Relations and Financial Communications. Please go ahead, sir.

Speaker Change: As a reminder, today's call is being recorded I will now turn the call over to James Bushnell, Vice President of Investor Relations and financial Communications. Please go ahead Sir.

Speaker Change: Yeah.

James Bushnell: Well. Thank you for joining us earlier today, we issued a press release containing detailed information on our 2023 fourth quarter and full year results. The press release is available on our website at <unk> Dot com.

James Bushnell: Welcome. Thank you for joining us. Earlier today, we issued a press release containing detailed information on our 2023 fourth quarter and full year results. The press release is available on our website at PMI.com. A glossary of terms, including the definitions of smoke-free products, as well as adjustments, other calculations, and reconciliations to the most directly comparable U.S. GAAP measures for non-GAAP financial measures cited in this presentation, and additional net revenue data are available in Exhibit 99.2 to the company's Form 8K, dated on today's date and on our Investor Relations website. Today's remarks contain forward-looking statements and projection I direct your attention to the forward-looking and cautionary statements disclosure in today's presentation and press release for a review of the various factors that could cause actual results to differ materially from projections or forward-looking statements. I'm joined today by Jacek Olczak, Chief Executive Officer, and Emmanuel Babeau, Chief Financial Officer. Now, over to you, Jacek.

James Bushnell: Our close rates.

James Bushnell: The definition for smoke free products as well as adjustments other calculations and reconciliations to the most directly comparable U S. GAAP measures. The non-GAAP financial measures cited in this presentation and additional net revenue data are available and exited at 99 two to the company's form 8-K stated on today's date and on our Investor.

James Bushnell: Relations website.

Today's remarks contain forward looking statements and projections of future results.

Direct your attention to the forward looking and cautionary statements disclosure in today's presentation and press release for a review of the various factors that could cause actual results to differ materially from projections or forward looking statements.

Speaker Change: I'm joined today by Yes, Echo Jack's Chief Executive Officer, and Manuel <unk>, Chief Financial Officer.

Yes: Over to you yes it.

Yes: Thank you James and welcome everyone.

Jacek Olczak: Thank you, James, and welcome, everyone. PMI delivered another strong operating performance in 2023. We achieved our current consecutive year of positive volumes and high single-digit organic top-line growth driven by smoke-free products. Smoke-free products delivered accelerated accretion to profitability in the fourth quarter as our high-cost business delivered meaningful 2023 operating leverage, mitigating the significant drag from combustion. I am also very pleased to report the continued outstanding growth of Zain, which was not included in Organic Metrics until mid-November last year. Importantly, smokefree products reached nearly 40% of total PMI Net Revenues in the fourth quarter and over 40% of gross profit. For the year, smoke-free gross profit increased by 19% organically, and we expect smoke-free organic growth to accelerate for both net revenues and gross profit in 2024.

Speaker Change: PMI is they'll be very.

Yes: Strong operating performance in 2023.

Speaker Change: We achieved our 10th consecutive year of positive volumes.

Speaker Change: Single digit organic top line growth.

Speaker Change: By smoke free products.

Speaker Change: Multi probe items that you'd want to accelerated accretion to pepsico diluted in the fourth quarter.

Speaker Change: Cause the business to deliver meaningful 'twenty to 'twenty, three operating deleverage mitigating a significant drag from combustibles.

Speaker Change: I am also very pleased to report the continued outstanding good ultimately gain which was not included in all of them the metrics until <unk> of November last year.

Speaker Change: Okay.

Speaker Change: Importantly, small banks of which nearly 44% of total PMI.

Speaker Change: It was in the fourth quarter.

Speaker Change: 40% of gross profit.

Speaker Change: Part of the yard smoke free gross profit increased by 19% organically and we expect smokefree organic growth to accelerate for both net revenues and gross profit in 2020 photo.

Jacek Olczak: VIMS delivers exceptional growth in its first year within PMI, with U.S. pro forma volumes up by over 60% for the year and over 75% in the quarter 4. Oral Smoke Free is equitative to both our smoke-free business and the overall group, with Swedish Match contributing 50 basis points organically to Q4 OLI margins from only 50 days of the period. Our ICOS business continues to deliver excellent results, with 15% adjusted market sales growth for six big tobacco units, reflecting broad-based momentum in Europe, Japan, and emerging markets. The rollout of ICO's ILIMA is substantially complete, and it is now present in 51 markets representing over 95% of ICO's geographies by volume, excluding Russia and Ukraine.

Speaker Change: Debbie was exceptionally good all in its first year with few PMI.

Speaker Change: U S pro forma yields up by over 60% for the yard and over 75% in the quarter fall.

Speaker Change: Although the smoke free quotas to bolster our smokefree business and all around the globe with Swedish match, contributing 50 basis points organic opportunity.

Speaker Change: Q4, OLED margins among the 50 days of the period.

Speaker Change: Although the business continues to deliver excellent results with 15% adjusted in markets. Good all sort of keeps the claw back of your needs.

Speaker Change: Like it seems broad based momentum in Europe, Japan and emerging markets.

Speaker Change: The rollout of Iqos in the market.

Speaker Change: Shall we complete and now to present.

Speaker Change: <unk> 51, the moniker representing over 95% of Iqos geographies by volume, excluding Russia and Ukraine.

Speaker Change: The superior experience in designing a regional mall combined with a strong premium brand great I could feel by April and our commercial infrastructure enabled iqos to all the good that he's not the bedroom category.

Jacek Olczak: The superior experience and design of Illuma, combined with the strong premium brand weight equity of Icos and our commercial infrastructure, enabled Icos to outgrow the heat does not burn category, despite holding a category share of over 75%. Importantly, as we have seen in Japan, the launch of Illuma is a multi-year growth driver consistent with past high-cost innovations. Our 2023 combustible performance was margin dilutive despite strong commercial results with very good pricing and higher category share. This reflects the significant cost pressures in the category.

Speaker Change: I called the.

Speaker Change: Sure.

Speaker Change: 75%.

Speaker Change: Importantly, as we look at.

Speaker Change: Savings upon the launch of the Newmar is a multiyear growth driver Koci explained with Iqos innovation.

Speaker Change: Our 'twenty to 'twenty, three combustible performance well, it's margin dilutive despite strong commercial results.

Speaker Change: Very good pricing and higher cut that very sharp.

Speaker Change: This reflects the significant cost pressures in the cup that go to geographic mix of loan volume growth below that margin market, because you've got smoked products.

Speaker Change: The impact of Iqos cannibalization.

Speaker Change: This was also compounded by the Technicolor in bulk of counterparty monocytes in them.

Speaker Change: He looks like.

Speaker Change: Constant currency headwinds impacted our revenues in 2023.

Jacek Olczak: Geographic mix from volume growth in lower-margin markets results in multiple products and the impact of ICOS cannibalization. This was also compounded by the technical impact of third-party manufacturing in Indonesia and the U.S.A. While cost and currency headwinds impacted our revenues in 2023, the strengthening growth and margin profile of smoke-free products set us up well to deliver sustainable growth and returns, including currency, in 2024 and beyond. We reached a number of key transformation milestones in the last quarter of last year. First, ICO's net revenues surpassed Marlboro to become the number one international nicotine brand on this measure. This demonstrates the power of innovative smoke-free alternatives to switch adult smokers away from cigarettes and address the societal issue of combustible tobacco.

Speaker Change: <unk> growth and the margin profile of smoke free product set us up well to deliver sustainable growth and returns in Colombian currency in 2024 and beyond.

Speaker Change: We reached a number of key transformation milestones in the last quarter of last year.

Speaker Change: First ipass not director Mr Pass Tamale Bowl to become the number one international Yucatan brand in this measure.

Speaker Change: This demonstrates the power of innovative smoke free alternatives.

Speaker Change: To switch adult smokers away from cigarettes and to authorize the societal issue of combustible double.

Speaker Change: It is also a testament to our organization's ability to deliver strong and sustainable brand equity.

Speaker Change: This also applies to them.

Speaker Change: Hospitals to get all the Ngls Smokefree brand with another outstanding performance in Q photo modest by an increase in category volume shed a retail value yourself.

Speaker Change: Our volume.

Speaker Change: We're also proud to have reached 25 moniker smoke free products exceeds 50% of our top line for both Q4 and the full year.

Speaker Change: We aim to reach 60 markets about 20 quality driving a lot of ambition to exit to catapult growth driven.

Speaker Change: Hmm.

Speaker Change: Alaska.

Speaker Change: The Madison, although 40% of our total gross profit was generated by smoke free product, whereas.

Jacek Olczak: It is also a testament to our organization's ability to build strong and sustainable brand equity. This also applies to Zinn, the fastest-growing U.S. smoke-free brand with another outstanding performance in Q4, marked by an increase in category volume share, retail value share, and overall volume. We're also proud to have reached 25 markets where smoke-free products exceed 50% of our top line for both Q4 and the full year. We aim to reach 60 markets by 2030, driving our ambition to exceed two-thirds of group net revenue.

Speaker Change: The adjusted gross amount of junior rate on smoke free so, possibly combustibles for both the quarter and year.

Speaker Change: We are in college, and the increasing demand that all the governmental adopting standby co harm reduction policy.

Speaker Change: Cottage reduce the lease vehicles in consumption instead of smoking, which is ultimately a modest sustainable for society.

Speaker Change: Nonetheless, a considerable amount of work remains.

Speaker Change: Sustainable is it also requires a sustainable business and we continue to guide a net increase in total confusion.

Speaker Change: Our sustainability profile months, I close that keep product and operational topics.

Speaker Change: Our company.

Speaker Change: <unk> Global unit that would Jones sustainability index for the first time.

Speaker Change: And the thought of the fall of the year in a row.

Emmanuel Babeau: Lars, As I already mentioned, over 40% of our total gross profit was generated by Smoke-Free products. With the adjusted gross margin rate on Smoke-Free, help us with combustibles for both the quarter and the year. We are encouraged by the increasing number of governments adopting tobacco harm reduction policies to encourage reduced-risk nicotine consumption instead of smoking, which is ultimately more sustainable for society. Nevertheless, a considerable amount of work remains. Sustainable growth requires a sustainable business, and we continue to garner increasing recognition for our sustainability performance across the key product and operational topics for our company. PMI was included in the Dow Jones Sustainability World Index for the first time, and for the fourth year in a row, DJSI North America. In addition, PMI was awarded the Carbon Disposal Project's AAA rating for the fourth consecutive year. I will now hand it over to Emmanuel to discuss our results and our plan in more detail. Thank you, Jacek.

Speaker Change: D J S.

Speaker Change: America.

Speaker Change: In addition, PMI.

Speaker Change: What is the kind of one disposal projects AAA rating for the fourth consecutive year.

Speaker Change: I will now hand, it over to Manuel to discuss to discuss our results and outlook in more detail.

Manuel: Thank you <unk>.

Manuel: Let's start with that he headline numbers.

Manuel: <unk> finished the year strongly with Q4 organic net revenue growth of plus eight 3%.

Manuel: This includes 14% growth from smoke free product despite slower.

Manuel: <unk> shipment growth due to comparison effect and also plus 5% growth from combustibles.

Manuel: Pricing was a strong driver for both categories.

Manuel: Monthly pricing, including the impact of retail price increases on <unk>.

Manuel: While Swedish match was only included inorganic metrics as of November the 12th each contributed plus 0.8 percentage points to Q4 organic top line growth and grew by a mixing and plus 26% on a pro forma basis.

Manuel: Operating income grew organically by your very good plus 8%, including a Swedish match contribution of close to two points.

Manuel: As expected Q4 margins were broadly stable organically and grew excluding the technical effect mentioned by yet.

Manuel: This enabled our business to deliver another quarter of double digit currency neutral adjusted diluted EPS growth.

Manuel: Plus 12, 2%.

Manuel: This exceeded our prior expectations, we've seen remarkable growth as we look at the contributor.

Manuel: Despite these strong currency neutral results Q4, adjusted diluted EPS of $1 66.

Emmanuel Babeau: Let's start with the headline numbers. We finished the year strongly with Q4 organic net revenue growth of plus 8.3%. This includes plus 14% growth from smoke-free products, despite slower H2O shipment growth due to the comparison effect, and also plus 5% growth from combustion. Pricing was a strong driver for both categories, with smoke-free pricing including the impact of retail price increases on H2Us.

Manuel: Was adversely affected by a greater than expected currency impact of 2010.

Manuel: This includes a <unk> balance sheet related impact under either inflationary accounting in Argentina. Following the devaluation of the peso in mid December.

Manuel: As we previously mentioned in fact in Q3. This reflects the depreciation of monetary net assets denominated in peso.

Manuel: Which are subject to capital controls.

Emmanuel Babeau: While Swedish Match was only included in Organic Metrics as of November the 12th, it contributed plus 0.8 percentage points to Q4 Organic Top-Line Growth and grew by an excellent plus 26% on a pro forma basis. Operating income grew organically by a very good plus 8%, including a Swedish Match contribution of plus 2.2 points. As expected, Q4 margins were broadly stable organically and grew, excluding the technical effects mentioned by Yeti. This enabled our business to deliver another quarter of double-digit, currency-neutral, adjusted-deleted EPS growth at plus 12.2%. We have succeeded beyond our prior expectations. We've seen remarkable growth as a notable contributor. Despite this strong currency neutral result, Q4 adjusted deleted EPS of $1.36 was adversely affected by a greater-than-expected currency impact of $0.20.

Manuel: By its nature does not carry forward to future periods.

Manuel: Turning to the full year net revenue grew by plus seven 8% organically, representing the third straight year of high single digit growth.

Manuel: Similar to Q4 does reflect continued excellent iqos momentum and strong convertible pricing.

Manuel: In 2023, Swedish match led based <unk>.

Manuel: Pro forma ex currency driven used by plus 20%.

Manuel: Operating income grew by plus three 7% organically, reflecting the challenging first half followed by strong growth niche too.

Manuel: We delivered expansion in boost adjusted gross margin and operating income margin in its too driven by the strong progress of smoke free product.

Manuel: The impact of accelerated device sales from the Illumina rollout in the base and return to sea freight to Japan, the effect of growing HDD and ongoing cost optimization are clearly visible.

Manuel: As expected, Hawaii margin organically contracted 150 basis points because of the year.

Manuel: Primarily due to acute cost and supply chain headwinds in each one.

Emmanuel Babeau: This includes a nine-tenths balance sheet related impact under hyperinflationary accounting in Argentina following the devaluation of the peso in mid-December. As with the previously mentioned impact in Q3, this reflects the depreciation of monetary net assets denominated in pesos, which are subject to capital control. By its nature, this does not carry forward to future periods.

Manuel: As flagged in prior quarters <unk> margin included 40 basis point headwind from the accounting treatment of third party manufacturing, Indonesia, and Ukraine, primarily reflecting the vintage excise tax gross up of around 250 million belonged groups both net driven.

Manuel: And cost of sales.

Manuel: While headwinds in convertible notes.

Emmanuel Babeau: Turning to the full year, net revenue grew by plus 7.8% organically, representing the third straight year of high single-digit growth. Similar to Q4, this reflects continued excellent high-cost momentum and strong combustible prices. In 2023, Swedish match, led by Zing, grew Proforma's ex-currency net revenue by plus 20%. Operating income grew by plus 3.7% organically, reflecting a challenging first half, followed by strong growth in H2.

Manuel: Abated, our Smokefree business is delivering excellent profit growth and our organic results leading to the strong contribution from Swedish match going forward.

Manuel: We successfully mitigated inflationary pressure and supported investment with efficiencies.

Manuel: Across our total operating cost base, we delivered an incremental <unk> million dollars in gross cost efficiency in Q4, and $2 $2 billion for 2021 2023 overall.

Manuel: So far our $2 billion target.

Manuel: We target an additional $2 billion over the next three years.

Manuel: These positive factors allowed us to deliver very strong currency neutral adjusted diluted EPS growth of plus 11%.

Emmanuel Babeau: We delivered expansion in both adjusted gross margin and operating income margin in H2, driven by the strong progress of smoke-free products. With the impact of accelerated devices from the Iluma Rollout in the Bays and a return to sea freight to Japan, the effects of growing HTD volume and ongoing cost optimization are clearly visible. As expected, OI margin organically contracted 150 basis points for the full year, primarily due to acute cost and supply chain headwinds in H1.

Manuel: Head of our prior expectation.

Manuel: Adjusted diluted EPS of steel that are.

Manuel: Zero one.

Manuel: <unk> unfavorable currency of 63 cents.

Manuel: Primarily reflecting the Japanese yen Russian ruble and specific Argentine peso dynamic I just explained.

Manuel: We include a slide <unk> presentation with more detailed.

Manuel: Focusing now on the volumes.

Manuel: We confer quickly achieved a third consecutive year of shipment growth driven by a plus 15% increase for iqos edge to us in addition to our resilient convertible debt falling.

Emmanuel Babeau: As flagged in prior quarters, full-year margins include a 40-basis-point headwind from the accounting treatment of third-party manufacturing in Indonesia and Ukraine, primarily reflecting the Indonesian excise tax growth of around $250 million in both net revenue and cost of sales. While headwinds in combustibles have not fully abated, our smoke-free business is delivering excellent profit growth, and our organic results will include a strong We have successfully mitigated inflationary pressure and supported investment with efficiency.

Manuel: Our smokefree volumes made up over 20% of total PMI in Q4.

Manuel: And we've continued mid teens or better growth expected. Yeah, we are very well positioned to continue growing volumes over the mid and long term.

Manuel: 2023, HQ shipments would you of $125 3 billion unique we're at the lower end of our targeted range due to delayed launches in Saudi Arabia in Taiwan, combined with lower than expected underlying growth in Russia and Ukraine.

Manuel: [laughter].

Manuel: For Iqos etch to use we believe the best indicator of underlying growth is adjusted IMS as the closest Mitchell to consumer offtake.

Emmanuel Babeau: Across our total operating cost base, we delivered an incremental $100 million in gross cost efficiency in Q4 and $2.2 billion for 2021-2023 overall, surpassing our $2 billion target. We target an additional $2 billion over the next three years. These positive factors allowed us to deliver very strong currency-neutral adjustability to DPS growth of plus 11% ahead of our prior expectations. Adjusted Deleted EPS of $6.01 includes unfavorable currency of $0.63, primarily reflecting the Japanese yen, Russian ruble, and specific Argentine peso dynamic I just explained. We include a slide in the appendix to this presentation with more details.

Manuel: For the full year adjusted in market sales volume and shipment growth.

Manuel: In line at plus 15%.

Manuel: In the fourth quarter Ht your shipment growth of plus 6% reflect trading inventory buildup.

Manuel: Prior year quarter, and the plus 14% adjusted EBITDA growth.

Manuel: Therefore, the more reliable measure of continued strong growth momentum.

Manuel: Excluding Russia, and Ukraine, I, just said in market sales grew by more than plus 17% for the year.

Manuel: For context across the two years before the war began in 2022.

Manuel: These markets made up 23% of <unk> shipment volume and exceeded the company's growth rate by a notable margin.

Manuel: These smokefree volume growth rates exclude the excellent development of our overall utility portfolio driven by <unk>.

Manuel: Shipment volumes by plus 23% in Q4, and plus 17% in 2023 on a pro forma basis.

Manuel: Cigarette shipments declined by a modest one 4% in 2023 outperforming international category decline of two 4%.

Manuel: Turning to profit.

Manuel: Okay, I Didnt income growth stepped up in its two two plus 10% following the exceptional Edwin of which one we.

Manuel: We believe this is more representative of the underlying momentum of our business and in line with our 2004 2006, good target trends of plus eight to plus 10%.

Emmanuel Babeau: Focusing now on volumes, we comfortably achieved a third consecutive year of shipment growth, driven by a plus 15% increase for high-cost HTUs, in addition to a resilient combustible performance. Our smoke-free volumes made up over 20% of total PMI in Q4, and with continued mid-teens or better growth expected here, we are very well positioned to continue growing volume over the mid- and long-term. 2023 H2U shipment volume of 125.3 billion units was at the lower end of our targeted range due to delayed launches in Saudi Arabia and Taiwan, combined with lower than expected underlying growth in Russia and Ukraine. For high-cost HTUs, we believe the best indicator of underlying growth is adjusted IMS as the closest metric to consumer offsets. For the full year, adjusted in-market sales volume and shipment growth were in line at plus 15%.

Manuel: Focusing now on some key drivers of our full year operating income.

Manuel: <unk> gross profit grew organically by an excellent plus 19% expanding gross margin by 340 basis points.

Manuel: This reflects part of the operating leverage of Heico's I already mentioned with a notable contribution from Swedish match overall, you could see in the last 50 days of Q4 with organic operating profit growth.

Manuel: Over 50%.

Manuel: We smoke free commercial costs also increased by less than net revenue. This clearly bodes well for 2024 as we continue to benefit from scale effects and manufacturing optimization.

Manuel: Yeah.

Manuel: Despite very strong pricing there was only marginal organic growth in convertible gross profit.

Manuel: This partly reflects the negative geographic mix I already mentioned with greater volume decline in IR margin market like Japan, as adult smokers to smoke free product and better volume trends in lower margin geographies, where smoke free product, a small or not available such as Turkey.

Manuel: There were also significant inflationary pressures on leaf direct materials and other manufacturing costs.

Emmanuel Babeau: In the fourth quarter, HTU shipment growth of plus 6% reflects trade inventory build-up in the prior year quarter, and the plus 14% adjusted IMS growth is, therefore, a more reliable measure of continued strong growth momentum. Excluding Russia and Ukraine, adjusted in-market sales grew by more than +17 for the year. For context, across the two years before the war began in 2022, these markets made up 23% of H2O shipment volume and exceeded the company's growth rate by a notable margin. These smoke-free volume growth rates exclude the excellent development of our oral nicotine portfolio driven by Zin, with shipment volumes up by plus 23% in Q4 and plus 17% in 2023 on a pro-forma basis. Cigarette shipments declined by a modest 1.4% in 2023, outperforming the international category decline of 2.4%.

Manuel: Cost increases on leaf where inventory cover multiple crop he is and winches are likely to carryover into 2024 and should ease thereafter.

Manuel: Moving now to Swedish match, which delivered outstanding performance in its first full year as part of PMI.

Manuel: The pro forma currency neutral top line growth of plus 26% in Q4 and plus 20% in 2023.

Manuel: When we announced our offer for Swedish match in 2022, we target to the return on investment in excess of our cost of capital within five years.

Manuel: The growth of Zain, surpassing our expectations, we now expect to achieve this well ahead of time.

Manuel: <unk> delivered another remarkable U S performance with plus 78% volume growth in Q4, and plus 62% in 2023.

Manuel: Internationally, we have launch or relaunch.

Manuel: 10 markets as plan as we continue to focus on building a truly global brand.

Manuel: <unk> posted robust 2023 results growing net revenues and profit.

Manuel: This was driven by strong pricing following an increase in the April partially offset by volume decline, which reflect lagged competitor pricing and comparison effects.

Manuel: These excellent U S progress.

Manuel: Continued in Q4 with plus 15% sequential growth improvements volume shipments.

Emmanuel Babeau: Turning to profits, organic operating income growth stepped up in H2 to plus 10% following the exceptional headwind of H1. We believe this is more representative of the underlying momentum of our business and in line with our 24-26 CAGR target range of plus 8 to plus 10%. Focusing now on some key drivers of our full-year operating income, smoke-free growth profit grew organically by an excellent plus 19%, expanding growth margin by 340 basis points. This reflects part of the operating leverage of FICOS I have already mentioned, with a notable contribution from Swedish Match oral nicotine in the last 50 days of Q4, with organic operating profit growth of over 50%. With small free commercial costs also increasing by less than net revenue, this clearly bodes well for 2024 as we continue to benefit from the scale effect and manufacturing optimization.

Manuel: Impressively category value share grew for the third consecutive quarter to 72, 8% an increase of plus five four points year on year and plus two points sequentially.

Manuel: Retail value share also grew during the quarter to 77, 4% <unk> premium positioning and superior brand equity.

Manuel: This accelerated growth again reflects gross fitbit nationwide store velocity and gradual distribution expansion as the category gained strong traction.

Manuel: We that does nicotine user for its convenience and pleasurable experience.

Manuel: Now focusing on Iqos stocking user growth.

Manuel: We estimate they were $28 6 million iqos users as of December 31st.

Manuel: Representing growth of one 2 million users in the quarter and plus $3 7 million for the full year.

Manuel: It's a nice acceleration compared to 2022.

Manuel: This includes notable progress in Japan, and Europe. In addition to a broad range of other geographies.

Manuel: <unk> is now available in essentially all the major markets outside of Russia, and Ukraine with over $17 million estimated average user as of December 31 2023.

Emmanuel Babeau: Despite very strong pricing, there was only marginal organic growth and combustible growth profit. This partly reflects the negative geographic mix I already mentioned with greater volume decline in higher margin markets like Japan, as adult smokers wish for smoke-free products, and better volume trends in lower margin geographies where smoke-free products are small or not available, such as Turkey. There were also significant inflationary pressures on leaf, direct materials, and other manufacturing costs.

Manuel: The switching of existing Iqos user and the acquisition of adult smokers.

Manuel: We expect to drive continued strong iqos user growth in 2024 and beyond.

Manuel: Considering the seasonal fluctuation and volatility put to the user estimation. We plan to report this metric on the Sydney annual basis going forward.

Manuel: With the addition of <unk> into our portfolio under smaller but growing these E vapor business. We also intend to provide a more holistic view of our total smokefree user base to investors.

Manuel: Moving now to Iqos in the Europe region, where smoothly product made up more than 45% of Q4 niche revenues.

Emmanuel Babeau: Cost increases on LEAF, where inventory covers multiple crop years, and wedges are likely to carry over into 2024 and should ease thereafter. Moving now to the Swedish match, which delivered outstanding performance in its first full year as part of PMI, with adjusted pro forma currency neutral top line growth of plus 26% in 2004 and plus 20% in 2023. When we announced our offer for Swedish Match in 2022, we targeted a return on investment in excess of our cost of capital within five years. With the growth of ZIN exceeding our expectations, we now expect to achieve this well ahead of time. VIN delivered another remarkable U.S. performance with plus 78% volume growth in 2004 and plus 62% in 2023. Internationally, we have launched or relaunched VIN in 10 markets as planned, as we continue to focus on building a truly global brand.

Manuel: Our Q4, adjusted <unk> share increased by plus one two points to nine 6% of total cigarette and HDD industry volume.

Manuel: A key driver is the growing uptake of <unk>, which is available to around 90% of iqos users in the region. After eight further launches during the quarter.

Manuel: In the EU 11 market, making up nearly 30% of regional Iqos volumes adopted the delegated directive to implement but characterizing flavor ban on tobacco product and implemented clean shelf policy in October.

Manuel: While it's still early days, we estimate only a small impact on offtake as consumers adjust as well as on trade inventory levels.

Manuel: Indeed, adjusted IMS will you continue to exhibit very good sequential growth and reached a record high.

Manuel: 12, 4 billion unit on a four quarter moving average.

Manuel: This reflects double digit year on year progression of plus 13% in Q4.

Manuel: Despite the lack of growth in Ukraine.

Manuel: We expect the remaining new market to adopt the characterizing flavor ban in 2024.

Emmanuel Babeau: USCGov posted robust 2023 results, growing net revenues and profits. This was driven by strong pricing following an increase in April, partially offset by volume decline, which reflects lagged competitor pricing and comparison effects. Wing Excellence U.S. Codeword continued in Q4 with plus 15% sequential growth in the 12-month rolling sheet. Impressively, category volume share grew for the third consecutive quarter to 72.8%, an increase of plus 5.4 points year-on-year and plus 2 points sequentially. Retail value share also grew during the quarter to 77.4%, highlighting Veeam's premium positioning and superior brand equity. This accelerated growth, again, reflects a growth steppage in nationwide store velocity and gradual distribution expansion as the category gains strong traction with other nicotine users for its convenience and pleasurable experience. Now, focusing on ICOs, starting with user growth, we estimate there were 28.6 million ICO users as of December 31st, representing growth of 1.2 million users in the quarter and plus 3.7 million for the full year. It's a nice acceleration compared to 2022. This includes notable progress in Japan and Europe, in addition to a broad range of other geographies. Illuma is now available in essentially all major markets outside Russia and Ukraine, with over 70 million estimated adult users as of December 31, 2023.

Manuel: We estimate our full year consumer adjustment impact of around 2 billion unique on both shipment and IMS, representing less than 5% of original volume and less than 2% of total PMI.

Manuel: This is consistent with other paths flavor restrictions such as EU ban applied to convertible in 2020.

Manuel: Based on the initial data from market that are addicted to Bang our fundamental view remains the same we do not expect a meaningful change in the central trajectory of the category and indeed expect Europe adjusted IMS provision to be broadly in line with the group growth rate in 2024.

Manuel: Europe is also an important geography for innovation.

Manuel: Zero tobacco, which to use we have launched in the Czech Republic in mid October through limited channels with an encouraging initial response, we plan a broader check rollout later this month and further market launches this year.

Manuel: In Japan.

Manuel: Net burn category now represent close to 40% of the total industry with iqos driving its growth and reaching over $8 5 million at the visa.

Manuel: In Q4, the adjusted total tobacco share for our <unk> brand increased by $3, one point to 27, 6%.

Manuel: Optic shifts surpassing 34% in Tokyo.

Manuel: Adjusted the IMS volume increased by plus 14, 5% year over year for 2023.

Manuel: Plus 13, 4% in Q4 alone, reaching a record of almost 10 billion unique on a four quarter moving average.

Manuel: Such increase in growth in the market was already category penetration is a clear testament to the system will potential of cycles around the world.

Manuel: <unk> shipments will you return to a more normalized state in the fourth quarter as compared to a tough prior year inventory comparison following the substantial completion of the condition back to sea freight in Q3.

Manuel: In addition to strong iqos share gain in developed countries. We continue to see very promising growth in low and middle income market.

Manuel: This slide I like our selection of Q4, TCT offtake shares across market in Eastern Europe Africa, Asia, and Latin America.

Emmanuel Babeau: This reflects the switching of existing IQOS users and the acquisition of adult smokers. We expect Illuma to drive continued strong ICOS user growth in 2024 and beyond. Considering the seasonal fluctuation and volatility important to user estimation, we plan to report this metric on a semi-annual basis going forward. Additionally, with the addition of Zin to our portfolio and the smaller but growing Ziv e-cigarette business, we also intend to provide a more holistic view of our total smoke-free user base to investors. Moving now to ICOs in the European region, where smoke-free products made up more than 45% of Q4 net revenue. Our Q4 adjusted HTU share increased by +1.2 points to 9.6% of total cigarette and HTU industry volume.

Manuel: <unk> continues to impress with care offtake share at plus three points to nine 4%.

Manuel: Also noting encouraging result, escalating the regions, such as Morocco and abandonment.

Manuel: Indonesia also some notable progress in this capital city, especially given limited commercialization.

Manuel: We continue to see dynamic offtake volume growth across these important future market.

Manuel: The city shares towards the right of this chart an indication of the exciting potential.

Manuel: While we have already covered the margin dynamic on <unk>. Our 2023 commercial performance was very robust with organic top line growth of five 5%.

Manuel: This reflects both strong pricing with notable contribution from Germany, and Indonesia and positive share performance within our resilient International category.

Emmanuel Babeau: A key driver is the growing uptake of Illuma, which is available to around 90% of iCloud users in the region after eight further launches during the quarter. In the EU, 11 markets, making up nearly 30% of regional ICOS volumes, adopted the delegated directive to implement a characterization flavor ban on heated tobacco products and implemented clean shelf policy in October. While still early days, we estimate only a small impact on off-tech as consumers adjust, as well as on trade inventory levels. Indeed, adjusted IMS volume continues to exhibit very good sequential growth and reach a record high of 12.4 billion units on the four-quarter moving average. This reflects double-digit year-on-year progression of plus 13% in 2004, despite the lack of growth in Ukraine.

Manuel: Our cigarette category share grew by <unk>, one point in Q4, and plus 0.2 points in 2023 with notable contribution from Egypt, Poland and Turkey.

Manuel: Although reflected by competitor supply constrained in Egypt, which may normalize in 'twenty four.

Manuel: We again achieved our ongoing objective of stable category share. Excluding this effect despite the impact of Iqos cannibalization.

Manuel: <unk> remains key.

Manuel: Our leadership in convertibles adds to maximize switching to smoke free product.

Manuel: This convertible share performance combined with the structural growth of Iqos.

Manuel: Added to an increase of <unk> six point of international cigarette and <unk> share for the full year.

Manuel: As mentioned previously our superior share of Smoothie product gives us a formidable platform for sustainable share gains.

Manuel: Unit economics.

Manuel: Before we turn to the <unk> outlook.

Manuel: Let me briefly reflect on our strong delivery over the past three years in spite of a number of substantial headwind.

Emmanuel Babeau: We expect the remaining EU market to adopt the characterizing flavor ban in 2024 and estimate a full-year consumer adjustment impact of around 2 billion units on both shipment and IMS, representing less than 5% of regional volume and less than 2% of total PMI. This is consistent with other past flavor restrictions such as the EU ban applied to combustibles in 2020. Based on the initial data from markets that have enacted the ban, our fundamental view remains the same. We do not expect a meaningful change in the structural trajectory of the category and indeed expect Europe-adjusted IMS progression to be broadly in line with the group growth rate in 2024. Europe is also an important geography for innovation. Livia Zero Tobacco HDUs were launched in the Czech Republic in mid-October through limited channels with an encouraging initial response.

Manuel: The performance was clearly positive compared to our currency neutral 2021, 2023 target of more than 5% organic top line and more than 9% bottom line growth supported by overall growing volumes.

Manuel: For the next few years, we target a similar strong volume delivery at plus.

Manuel: Plus six to plus 8% organic revenue CAGR and a step up in organic operating income growth to plus eight 2% 10%.

Manuel: We target an adjusted EPS CAGR of plus 9% plus 11% ex currency growth at constant 2023, corporate tax rate, including an increase in net financing costs.

Manuel: Skewed towards the first year of the period in 2024.

Speaker Change: Okay, then bring me to the outlook for 2024, where.

Manuel: Where we expect a strong acceleration in smoke free performance across Iqos volume smoothly net revenue and gross profit.

Emmanuel Babeau: We plan a broader check rollout later this month and further market launches this year. In Japan, the Eat Not Burn category now represents close to 40% of the total industry, with high cost driving its growth and reaching over 8.5 million adult users. In Q4, the adjusted total tobacco share for our HTU brand increased by plus 3.1 points to 27.6 percent, with off-tech shares surpassing 34 percent in Tokyo.

Manuel: We forecast.

Manuel: Ever absolute increase in HQ adjusted IMS will use to deliver plus 14, two plus 16% growth in percentage terms. Despite the inclusion of an estimated impact of around 2 billion unique from consumer adjustment you're characterizing feasible.

Manuel: Mentioned earlier and.

Manuel: And essentially no of the growth in Russia.

Manuel: Poor shipment volume, we target more than 140 billion unit.

Manuel: Two the usual inherent volatility of shipment dining new market launches and potential supply chain disruption.

Emmanuel Babeau: Adjusted IMS volume increased by plus 14.5% year-over-year for 2023 and plus 13.4% in Q4 alone, reaching a record high of almost 10 billion units on the four-quarter moving average. Such increasing growth in a market with already high category penetration is a clear testament to the sustainable potential of ICOS around the world. H2U shipments volume returned to a more normalized state in the fourth quarter as compared to a tough prior year inventory comparison following the substantial completion of the transition back to safe rates in 2003.

Manuel: Such as lumber institution in the Red Sea.

Manuel: Shipment growth rates naturally follow adjusted IMS overtime, there is a possibility of some lower inventory level compared to 2023, given the substantial completion of the <unk> launches and opportunities for working capital optimization.

Manuel: We expect continued excellent U S volume growth to around 520 million tons.

Manuel: We have also accelerated our capacity expansion plan to support this further significant step up in volume and to manage inventory levels, which are naturally affected by the recent level of growth.

Manuel: Such a strong outlook for Iqos and gene means we expect to deliver an acceleration in organic smokefree topline growth compared to 2023 reached.

Emmanuel Babeau: In addition to strong high-growth share gains in developed countries, we continue to see very promising growth in low- and middle-income markets. This slide highlights a selection of key Q4 City of Tech shares across markets in Eastern Europe, Africa, Asia, and Latin America. Egypt continues to impress, with Cairo's off-tech share up plus 3 points to 9.4%, also noting encouraging results elsewhere in the region, such as Morocco and Lebanon. Indonesia also saw notable progress in its capital city, especially given limited commercialization.

Manuel: Reaching close to $15 billion in Metro Avenue at prevailing exchange rates.

Manuel: This supports a total PMI forecast of plus six five to plus 8% organic net revenue progression, including the fourth consecutive year of total volume growth and mid single digit convertible pricing.

Manuel: We also forecast an acceleration in smoothly gross profit growth from the organic plus 19% delivered in 2023 as iqos profitability expand.

Emmanuel Babeau: We continue to see dynamics of tech volume growth across these important future markets with the city shares toward the right of this chart, an indication of the exciting potential. While we have already covered the margin dynamic on combustible, our 2023 commercial performance was very robust with organic top-line growth of 5.5%. These reflect both strong pricing with notable contributions from Germany and Indonesia and positive share performance within a resilient international category. Our cigarette category share grew by plus 0.1 points in 2004 and plus 0.2 points in 2023, with notable contributions from Egypt, Poland, and Turkey. Although flattered by competitor-supplied constraints in Egypt, which may normalize in 2024, we again achieve our ongoing objective of stable category share excluding this effect, despite the impact of high-cost cannibalization. This remains key as our leadership in combustibles helps to maximize switching to smoke-free products.

Manuel: Excellent economics continue.

Manuel: We expect smoke free to again drive the lion's share of our forecast organic oi growth of plus eight to nine 5%.

Manuel: Notably given the enduring cost pressure and negative geographic mix and convertible I just mentioned.

Manuel: This naturally implies organic margin expansion, even factoring in the ongoing technical dilution impact of setback in manufacturing Indonesia.

Manuel: We expect a meaningful organic improvement in overall gross margin, excluding technical impact and the very limited currency impact on adjusted Oi margin.

Manuel: This forecast includes notable capability investment in the U S that Ive mentioned at Investor Day, we still expect to deliver strong double digit operating income growth in this market.

Manuel: As flagged at the last year at Investor Day, we anticipate and increased net financing expense. This year is that is renewed at higher rates.

Manuel: We forecast a range of one three to $1 4 billion golar as compared to $1 $1 billion in 2023.

Manuel: We also assume a higher effective corporate tax rate due to Russia suspension of certain double tax treaty and earnings mix.

Emmanuel Babeau: This combustible share performance, combined with the structural growth of ICOS, led to an increase of plus 0.6 points in international cigarette and HTU share for the full year. As mentioned previously, our superior share of Smokefree products gives us a formidable platform for sustainable share gains with superior unit economy. Before we turn to the 2024 outlook, let me briefly reflect on our strong delivery over the past three years, in spite of a number of substantial headwinds. The performance was clearly positive compared to our currency neutral 2021-2023 target of more than 5% organic top line growth and more than 9% bottom line growth, supported by overall growing volume for the next few years. We target a similar strong volume delivery, a plus six to plus 8% organic net revenue CAGR, and a step up in organic operating income growth to plus eight to plus 10%. We target an adjusted EPS CAGR of plus nine to plus 11% ex-currency growth at a constant 2023 corporate tax rate, including an increase in net financing costs, which skews towards the first year of the period in 2024.

Manuel: These tax and interest factors combined impact our currency neutral adjusted diluted EPS.

Manuel: Growth projection by around two percentage points.

Manuel: Accordingly, we forecast currency neutral adjusted diluted EPS growth of plus seven two plus 9%.

Manuel: This translates into a net adjusted diluted EPS range of six that are 32% to $6 44, including an unfavorable currency impact of 11.

Manuel: At prevailing rates.

Manuel: This notably includes a net favorable impact of setting.

Manuel: Relative to the revaluation of monetary balances and Ipi inflationary.

Manuel: In 2023 skewed to the second as comparison.

Manuel: Moving to the shape of our expected 2020 for performance on a quarterly basis, we anticipate good double digit growth in adjusted Amos FTE growth every quarter supporting the full year forecast of 14% to 16%.

Manuel: We forecast a strong Q1 overall, we SBU shipment volume of 31 to 32 billion and continued strong volume growth from Xena.

Manuel: We expect organic top line and operating income growth to be broadly consistent with the full year outlook, which implies organic margin expansion with the full year.

Manuel: We project Q1 currency neutral adjusted diluted EPS growth of plus seven to plus 10%. This translates to a range of $1 37 to $1, 42%, including a negative currency volumes of Sterne Agee.

Emmanuel Babeau: Okay, this brings me to the outlook for 2024, where we expect a strong acceleration in smoke-free performance across high-cost volumes, smoke-free net revenue, and gross profit. We forecast the highest ever absolute increase in HTU-adjusted IMS volumes to deliver plus 14 to plus 16% growth in percentage terms, despite the inclusion of an estimated impact of around 2 billion units from consumer adjustment to the EU's characterizing phasor ban I mentioned earlier, and essentially no off-take growth in Russia. For shipment volume, we target more than 140 billion units, subject to the usual inherent volatility of shipment timing, new market launches, and potential supply chain disruption, such as the ongoing situation in the Red Sea. While shipment growth rates naturally follow adjusted IMS over time, there is a possibility of some lower inventory levels compared to 2023, given the substantial completion of ILUMA launches and opportunities for working capital optimization. We expect continued excellent U.S. zinc volume growth to around 520 million cans.

Manuel: At prevailing rates with currency comparison, improving in the second half as we lap the Argentina impact of 2023.

Manuel: Our business remains highly cash generative a waiver the $9 2 billion in 2023 operating cash flow was lower than expected.

Manuel: This was due to currency effect on net earnings, including the Argentine peso devaluation, although year end currency impact and higher than expected working capital needs.

Manuel: In 2024, we target between 10 and $11 billion in operating cash flow at prevailing exchange rate and subject to working capital requirements.

Manuel: We continue to prioritize investing in innovation and the growth of our smoke free portfolio in.

Manuel: In 2024, we expect capital expenditure of around $1 $2 billion, including zinc capacity extension I just mentioned.

Manuel: Deleveraging remains a key priority for us and as expected our 2023 net debt to adjusted EBITDA ratio was around three times given the 2023 purchase of the remaining Swedish match minority and the final U S iqos tending to Altria.

Manuel: We target much better progress of 0.320, <unk> deleverage in 2024, driven by continued EBITDA growth and strong cash flow generation.

Manuel: We continue to target a ratio of around two times by the end of 2026 with buyback to be considered once confirm we are on track.

Manuel: Finally, our commitment to our progressive dividend policy is unwavering and in line with our long term commitment to return cash to shareholders.

SICK: I'll now turn it back to get sick for concluding remarks.

SICK: Thank you Manuel.

SICK: Let me now take a moment to talk about our key strategic priorities for 2020, Florida.

Emmanuel Babeau: We have also accelerated our capacity expansion plan to support this further significant step-up in volume and to manage inventory levels, which are naturally affected by the recent level of growth. Such a strong outlook for high-cost enzymes means we expect to deliver an acceleration in organic, smoke-free top-line growth compared to 2023, reaching close to $15 billion in net revenue at prevailing exchange rates. This supports a total PMI forecast of plus 6.5 to plus 8% organic net revenue progression, including a fourth consecutive year of total volume growth and mid-single-digit combustible pricing. We also forecast an acceleration in smoke-free gross profit growth from the organic plus 19% delivered in 2023 as high-cost profitability expands and then excellent economics continue. We expect smoke-free to again drive the lion's share of our forecast organic OI growth of plus 8 to plus 9.5 percent, notably given the enduring cost pressure and negative geographic mix in combustibles I just mentioned.

Speaker Change: First is supporting sustained growth momentum provides cost for continuous innovation.

Speaker Change: This includes leveraging the rollout of the full amount to maximizes our growth while innovating further on both devices and consumables.

SICK: Second is the continued their strong growth what resilient supported by targeted commercial investment long term capacity expansion.

SICK: Organizational infrastructure, which will also support our Apis.

SICK: Outside the U S. So we intend to continue developing our integrated multi category offering to add <unk> with further launches of <unk> and <unk>.

SICK: Wed rather advance our lead is April portfolio.

SICK: Of course in 'twenty to 'twenty four it will be a landmark year for Iqos in the U S.

SICK: While the ultimate launch of Iqos Illumina as the main priority will continue to provide for the forest City test of the Iqos three blade products starting in Q2 this year.

SICK: The smaller scale pilot launches will allow us to experiment with the different aspects of commercialization and support our drive for a scaled commercial success is our price.

SICK: While we have no update on the expected to be in Ta.

SICK: <unk> timeline.

SICK: Patent settlement agreement announced last week allows for the commercialization of both blight and induction products, while mitigating risks of up and the related disruptions and enables us to leverage the scale optimize cost and flexibility of our global supply chain.

SICK: Okay.

SICK: Incombustible. This will continue to target a stable capable of shadow over time, despite the impact of Iqos cannibalization, while taking leadership pricing actions to drive a positive profit contribution.

SICK: Our capital allocation priorities are crystal clear what will come.

Emmanuel Babeau: This naturally implies organic margin expansion, even factoring in the ongoing technical dilution impact of third-party manufacturing in Indonesia. We expect a meaningful organic improvement in overall gross margin, excluding technical impact, and a very limited currency impact on adjusted OI margin. This forecast includes notable capability investment in the U.S., but as mentioned at Investor Day, we still expect to deliver strong double-digit operating income growth in this market. As a flag that last year invested in, we anticipate an increased net financing expense this year as debt is renewed at a higher rate. We forecast a range of $1.3 to $1.4 billion as compared to $1.1 billion in 2023. We also assume a higher effective corporate tax rate due to Russia's suspension of certain double-tax treaties and a mixed economy.

SICK: We continue to invest in the growth of smoke free products and our commitment to dividend remains steadfast.

SICK: Following the acquisition of Swedish match deleveraging remains our key balance sheet objectives.

SICK: We aim to continue our excellent progress on our sustainability initiatives, including the Dol related to product impact such as global access prevention and past calls and otherwise.

SICK: Finally, and importantly, we remain committed to transform the tobacco harm reduction landscape by providing superior alternative for adult smokers, who would otherwise continue smoking and advocating for science based regulations.

SICK: So it will be expanded excited there are many of these topics at the Cagny conference in two weeks time.

Speaker Change: Let me now conclude todays presentation.

Speaker Change: Overall, our business delivered a strong 12% to 24 months in the phase of notable cost headwinds driven by structural smoked for a moment.

SICK: The continued excellent performance of Iqos.

SICK: As a matter of couple of global design.

SICK: <unk> position as the leading brands with excellent equity.

SICK: Combined with our annual results commercial and innovative capabilities.

SICK: We have a powerful platform to expedite our smoke free future as we broaden our portfolio and the reach to adult smokers.

SICK: We expect quanta to quantify per day out of accelerated growth for smoke free product and remain confident in our 'twenty to 'twenty to 'twenty to 'twenty six growth targets.

Emmanuel Babeau: These tax and interest factors combined impact our currency-neutral adjustability ETF growth projection by around 2%. Accordingly, we forecast currency-neutral adjusted deleted EPS growth of plus 7 to plus 9 percent. This translates into an adjusted deleted EPS range of $6.32 to $6.44, including an unfavorable currency impact of $0.11 at prevailing rates.

SICK: We have exciting opportunities in the U S and internationally, which we are fully dedicated to capture as we progress towards our ambition of being sustainably smokefree by 'twenty.

SICK: Finally, and importantly, our strong growth outlook and a highly cash generative business underpins our ability to double the HOA returning cash to shareholders.

Speaker Change: Thank you and the mono LMI and are happy to answer your questions.

Speaker Change: Thank you we will now conduct a question and answer portion of the conference again in order to ask a question or make a comment. Please press the star key followed by one on your Touchtone phone.

Emmanuel Babeau: This notably includes the net travel impact of 13 cents related to the revaluation of monetary balances in a hyperinflationary economy in 2023, skewed to the second half comparison. Moving to the shape of expected 2024 performance on a quarterly basis, we anticipate good double-digit growth in adjusted IMSHQ growth every quarter, supporting the full-year forecast of plus 14 to plus 16 percent. We forecast a strong Q1 overall, with H2O shipment volume of 31 to 32 billion and continued strong volume growth from Zin. We expect organic top line and operating income growth to be broadly consistent with the full year outlook, which implies organic margin extension as with the full year. We project 21 continuous or adjustable GDP growth of plus 7 to plus 10 percent.

Speaker Change: And the interest of fairness and time, we ask that participants keep to a maximum of two questions. Each.

Speaker Change: Time allows follow up questions may be taken.

Speaker Change: You may rejoin the queue by again by pressing Star and then one on your Touchtone phone.

Speaker Change: Our first question will come from Bonnie Herzog with Goldman Sachs.

Bonnie Herzog: Hi, everyone.

Speaker Change: Ion.

Bonnie Herzog: To ask a high level question on the year, you originally guidance FX neutral EPS growth and 23 seven.

Bonnie Herzog: 79%, yet you really did finish out the year, a lot stronger reporting 11% currency neutral EPS growth. So as you look back.

Bonnie Herzog: Or some of the key areas of outperformance versus your initial expectations and then as you think about this year, you're initially guiding that 79% FX neutral EPS growth again, so I'm just trying to understand how conservative this may be especially considering you know your 9%.

Emmanuel Babeau: This translates to a range of $1.37 to $1.42, including a negative currency variance of $0.10 at prevailing rates, with currency comparison improving in the second half as we lap the Argentina impact of 2023. Our business remains highly cash-generative, however, the $9.2 billion in 2023 operating cash flow was lower than expected. This was due to currency effects on net earnings, including the Argentine peso devaluation, other year-end currency impact, and higher-than-expected working capital needs.

Bonnie Herzog: 7% mid term growth targets.

Bonnie Herzog: But.

Bonnie Herzog: With regards to 'twenty to 'twenty, three I think the momentum of our.

Bonnie Herzog: Which of the SaaS and Deca prioritizing, Japan is there anywhere else.

Bonnie Herzog: So simply doubt and despite the fact that of course.

Bonnie Herzog: <unk> buys a very sizable part of the segment.

Bonnie Herzog: Capital well above other segments I think recapture about 80% of the entire segment growth in Japan. So business is very strong.

Emmanuel Babeau: In 2024, we target between $10 and $11 billion in operating cash flow at the prevailing exchange rate and subject to working capital requirements. We continue to prioritize investing in innovation and the growth of our smoke-free portfolio. In 2024, we expect capital expenditure of around 1.2 billion dollars, including the ZIN capacity expansion I just mentioned. Deleveraging remains a key priority for us, and as expected, our 2023 net debt to adjusted EBDI ratio was around three times, given the 2023 purchase of the remaining Swedish match minority and the final U.S. high-cost payment to Altria.

Bonnie Herzog: Ill jump on is on the forefront of our smoke free.

Bonnie Herzog: Transformation or approach and because you have kind of unlevered et cetera of Iqos in Japan.

Bonnie Herzog: And if I just look.

Bonnie Herzog: Over the last few weeks how categories continuous expansion in Japan, now thinking that thought.

Bonnie Herzog: The smoke free products now about exceeded the size of the cigarette category. So if iqos containers. After 10 years participating in this phenomenal growth, which is where we want to single out clearly as well and as they indicated weather months, we have been very keen.

Bonnie Herzog: I am very pleased that we could conclude the acquisition of Swedish March didn't ask the important element of our portfolio of alternatives for small teams of Powershares.

Bonnie Herzog: Obviously, nevada without putting for us now.

Bonnie Herzog: In the U S market and is clearly volume growth growing above expectations, while it is.

Bonnie Herzog: Is it adding product and as we hear from time to time quite likely conversations about.

Jacek Olczak: We target much better progress of 0.3 to 0.5 times the leverage in 2024, driven by continued EBITDA growth and strong cash flow generation. We continue to target a ratio of around two times by the end of 2026, with buyback to be considered once confirmed that we are on track. Finally, our commitment to our progressive development policy is unwavering and in line with our long-term commitment to return cash to shareholders. I will now turn it back to Jacek for his concluding remarks. Thank you, Emmanuel.

Bonnie Herzog: Some unintended consequences about the use of the product.

Bonnie Herzog: Pleased with above Iqos, Venezuela actually delivered.

Bonnie Herzog: Delivering of as they were designed for volumes after about smokers in the U S above 21 years, well familiar with the CDC data, whereas the MEP percent royalty acreage of the savings for Iqos in international. So we have a good <unk> will have a variety of growth sustainable.

Bonnie Herzog: Growing fabulous propositions in a smoke free product and we're also trying to.

Bonnie Herzog: <unk>.

Bonnie Herzog: Our forecast from a financial perspective with regards to the right. So right now with all this forward to 'twenty to 'twenty four I think that Japan is on the growth momentum.

Bonnie Herzog: In the U S is continuous this momentum.

Bonnie Herzog: Europe is 1 billion provided strong diverse well, yes, we'll have this distortion multipurpose shelf headwinds, resulting relatively indicated that $2 billion potential impact from that flavor.

Bonnie Herzog: Flavor ban in the euro but other than that.

Bonnie Herzog: Key geographies in this key geographies also are very important from the margin perspective.

Jacek Olczak: Let me now take a moment to cover our key strategic priorities for 2024. First, is to support the sustained growth momentum of ICOS for continuous innovation. This includes leveraging the role of VLUMA to maximize user growth while innovating further on both devices and consumables.

Bonnie Herzog: Soon.

Bonnie Herzog: It's very early on the positive side and I don't want to sound negative on the rest of the world.

Bonnie Herzog: However, one thing, which I know that.

Bonnie Herzog: Cases, there might be some conversations around that growth trajectory of Ips and so on you'll remember we havent investors like I've been very clear we are running.

Jacek Olczak: Second, is to continue the strong U.S. growth of ZIM, supported by targeted commercial investment, long-term capacity expansion, and organizational infrastructure, which will also support ICOs. Outside the U.S., we intend to continue developing our integrated multi-category offering to adult nicotine users with further launches of ZIM and, where relevant, our VIV evapor portfolio. Of course, 2024 will be a landmark year for ICOSIEDA US. While the ultimate launch of Icos Illuma is the main priority, we continue to prepare for the first CT test of the Icos FreeBlade product starting in Q2 this year.

Bonnie Herzog: And the 10th consecutive.

Bonnie Herzog: The address of our Fabulous growth. Despite the fact that we essentially lost any growth access to revenue growth in Russia toolkit, and historically I mean, Russia alone was delivering on it depends how you are now with each period will pick up but easily about their forward it might be even a $5 billion per annual growth.

Bonnie Herzog: Growth of the category. So I think we need to look at this trajectory from this perspective, which makes me even more confident about the about our three year outlook.

Speaker Change: Okay. Thank you that was helpful. And then I did want to ask a little bit more on margin just hoping for a little bit more color on your margins in Q4, especially in Americas, where you know they were actually negative I I'm, assuming I think you called this out you know a key driver of this is <unk>.

Jacek Olczak: These small-scale pilot launches will allow us to experiment with different aspects of commercialization and support our drive for a global commercial success once Iruma is authorized. While we have no update on the expected PMTA timeline, the patent settlement agreement announced last week allows for commercialization of both blade and induction products while mitigating risks of patent-related disruptions and enables us to leverage the scale, optimized cost, and flexibility of our global supply chain. In combustibles, we continue to target a stable category share over time, despite the impact of ICOF cannibalization, while taking judicious pricing actions to drive a positive profit contribution. Our capital allocation priorities are crystal clear.

Speaker Change: Our investments ahead of the Iqos your lines in the U S. In may so in the context of that.

Speaker Change: Should we think about.

Speaker Change: Operating income growth in Americas. This year will it continue to be negative.

Speaker Change: And then for the full year of 24, you just total company your guidance as you know.

Speaker Change: For FX neutral revenue growth and operating income growth does imply operating margin expansion. So can you maybe touch on.

Speaker Change: Your expectations for gross margin and Opex in the context of that.

Speaker Change: Yeah.

Speaker Change: Here is what happened.

Speaker Change: Nevada.

Speaker Change: In keeping with loyalty that is our thinking the America segment, whereas most of the impact of the devaluation in Argentina, which.

Speaker Change: Drove the margins down but other than the U S market, specifically about the U S. Market is there is the increase the investment also to continued support of King.

Jacek Olczak: We will continue to invest in the growth of smoke-free products, and our commitment to dividends remains steadfast. Following the acquisition of Swedish Match, leveraging remains our key balancing objective. We aim to continue our excellent progress on sustainability initiatives, including those related to product impact, such as youth access prevention and post-consumer waste. Finally, and importantly, we remain committed to transforming the tobacco harm reduction landscape by providing superior alternatives to adult smokers who would otherwise continue smoking and advocating for science-based regulations. We will be expanding further on many of these topics at the Cogney Conference in two weeks' time.

Speaker Change: It.

Speaker Change: Good all of a sudden expansion, but also.

Speaker Change: Tiring Swedish modular organizations of predictive models internationally and visualize the organization.

Speaker Change: Being able to handle Iqos soon and now goes to separate organizations, which is up to the opportunities and challenges of the U S. Market. So there is a there are some investments which already flowing through the P&L. Even ahead of the iqos pretty satisfied.

Speaker Change: All of our commercialization and R&D.

Speaker Change: Yes, just to complement.

Speaker Change: Answer your question Banana component, we're typically seeing on what is behind us.

Speaker Change: Higher than expected performance for 2003.

Unknown Executive: Let me now conclude today's presentation. Overall, our business delivered a strong 2023 performance in the face of notable cost headwinds driven by structural smoke-free momentum. The continued excellent performance of ICOs and remarkable growth of ZIN have strengthened their position as leading brands with excellent equity. Combined with our unrivaled commercial and innovative capabilities, we have a powerful platform to expedite our smoke-free future as we broaden our portfolio and reach the adult smoke market. We expect 2024 to be a year of accelerated growth for smog-free products and remain confident in our 2024-2026 growth target. We have exciting opportunities in the U.S. and internationally, which we are fully dedicated to capturing as we progress towards our ambition of being sustainably smoke-free by 2030. And, importantly, our strong growth outlook and highly cash-generative business underpin our ability to leverage while refocusing cash to shareholders. Thank you, and Emmanuel and I are now happy to answer your questions. Thank you. We will now conduct the question and answer portion of the conference. Again, in order to ask a question or make a comment, please press the star key followed by 1 on your touchtone phone.

Speaker Change: Clearly as <unk> described the very strong dynamic on the volume on the commercial dimension. If you want but we've been very pleased as well with the development of our margin on our smoke free product and we are today.

Speaker Change: The margin boost on Iqos and on zoom being above the average margin in <unk>, we are making progress on the profitability of the Iqos product.

Speaker Change: And we have some price increase in Q4 overall, so that was the plan and dynamic but it is happening maybe even a bit better than what we were expecting and we expect that to continue in Q4 and in that perspective, I mean, clearly the U S is a fantastic market. We've described the fact that the margin of women in the U S is best in class.

Speaker Change: Among our portfolio of product and therefore make no mistake, even if indeed, we're going to continue to invest in the U S.

Speaker Change: The U S is going to be super nicely accretive in all parameter of our P&L at the level of the of course revenue growth that also is the level of the margin evolution and the level of the operating income I mean, we flagged. The fact that we took about double digit growth and very strong <unk> growth.

Speaker Change: <unk> is a very powerful contributors to our financial performance.

Speaker Change: Okay, and then if I may just clarify something then for this year you are expecting gross margin and possibly op margin expansion based on your guidance.

Unknown Executive: In the interest of fairness and time, we ask that participants keep to a maximum of two questions each. If time allows, follow-up questions may be taken. You may rejoin the queue by pressing star and then one on your touchtone phone.

Speaker Change: <unk> op margin.

Speaker Change: Yes, we do absolutely yes.

Speaker Change: Hey.

Speaker Change: Alright, thank you.

Speaker Change: Thank you.

Speaker Change: We'll go next to Gaurav Jain with Barclays.

Gaurav Jain: Hi, good morning.

Gaurav Jain: Two questions from me one just to clarify the Argentinian peso impact so yellow 19 cent impact this year.

Bonnie Lee Herzog: Our first question will come from Bonnie Herzog with Goldman Sachs. Hi, everyone. I am, Ask a high-level question on the year. You originally guided FX neutral EPS growth in 2003 of 79%, yet you really did finish out the year a lot stronger, reporting 11% currency neutral EPS growth. So as you look back... You know, what were some of the key areas of outperformance versus your initial expectations? And then as you think about this year, you're initially guiding 79% FX-neutral UPS growth again, so, you know, just trying to understand how conservative this may be, especially considering, you know, your 9 to 11% midterm growth. Bonnie, with regard to 2023, I think the momentum which we have and the category has in Japan is really worth thinking about. And despite the fact that, as you know, ICOS occupies a very sizable part of the segment, I mean, we capture well above our segment share; I think we capture about 80% of the entire segment growth in Japan. So this is very strong.

Gaurav Jain: Linked to balance sheet revaluation and on the slides we are using the Argentinian peso rate, which has been filed with the spot rate.

Gaurav Jain: Couldnt be any further balance sheet revaluation down which means that there is an automatic 19% benefit to EPS within that arena network.

Gaurav Jain: Luke.

Gaurav Jain: Of course, we cannot speculate on any further duration of the peso the reality is that the <unk>.

Speaker Change: Until the Lockdown has been significantly reduced by the likely valuations. So a further devaluation with impact to a much lower amount now.

Speaker Change: I don't know whether more devaluation could come.

Speaker Change: Frankly, we are not able to anticipate this kind of thing what you have to take into account is that the basis has been in fact.

Speaker Change: Basically with the division in December so any further devaluation would apply to a lower base.

Speaker Change: And then in Argentinian peso.

Speaker Change: Sure maybe I can ask.

Speaker Change: So quickly.

Speaker Change: And my second question is around them.

Speaker Change: I'm getting a lot of statements.

Speaker Change: Other segment by Chuck Schumer, and a lot of investors are concerned that that regulation is coming and then slowed us we'll get back to how do you plan to get ahead of that potential controversy that could emerge around.

Speaker Change: Yes, so we observe over the last few weeks.

Jacek Olczak: You know, Japan is on the forefront of a smoke-free transformation. We're approaching this year's 10th anniversary of ICOS in Japan. And if I just look over the last few weeks, how categories continue these expansions in Japan, I think in the Tokyo area, the smoke-free products category has now almost exceeded the size of the cigarette category. So if ICOS continues after 10 years participating in this phenomenal growth, this is really worth thinking about. Here we are, and as we indicated very much, we were very keen and very pleased that we could conclude the acquisition of Swedish Match.

Speaker Change: Hum.

Speaker Change: Like a lot of conversations around does in a social DBM generally internet media.

Speaker Change: I think.

Speaker Change: Blood centers in the U S market for 10 years.

Speaker Change: Any of your log even under CDC Qunar latest baytown, you've underage usage et cetera.

Speaker Change: It's.

Speaker Change: Space.

Speaker Change: Below that to continue.

Speaker Change: <unk>, which is the lowest from any product neutral 10, and also other products like the some age restrictions.

Speaker Change: Our plight.

Speaker Change: I think.

Speaker Change: Now whether other Swedish match marketing practices and we are taking this.

Speaker Change: So as the deal is the acquisitions at the other regions et cetera.

Jacek Olczak: It adds an important element to our portfolio of alternatives to smoking, the pouches, and obviously creates a very good opening for us in entering the U.S. market. And, as for growth, it's clearly growing above expectations. What is very important, as we hear from time to time, quite rightly, conversations about, you know, some unintended consequences of the use of the product. I am so pleased that both ICOS and Asin are actually delivering as they were designed. I go after adult smokers in the U.S. by about 21 years.

Speaker Change: I would have thought that the alignment with service module, it's not only that barrel per se the smoke free.

Speaker Change: Our projects are there, but also that they have a better.

Speaker Change: Sponsor and a disciplined approach to the marketing as we are on with Iqos, we are keeping up with our own team.

Speaker Change: International.

Speaker Change: We have reached out to the field geopolitical Dana most of our calls.

Speaker Change: In the conversations of Senator Schumer that only sold through.

Speaker Change: <unk> to FDA.

Speaker Change: The Fox.

Speaker Change: The facts are performed at some times it has been trying to be positioned in the media.

Jacek Olczak: We are familiar with the CDC data, less than 2% youth usage. The same is for ICOS and international. So we have a good, my view is we have a very good, sustainable, growing, two fabulous propositions in a smoke-free product. And we're also trying to be very focused from a financial perspective with regard to the rate. So right now, with all this through to 2024, I think Japan is on good momentum. Then in the U.S., East Asia continues this momentum.

Speaker Change: The <unk> to smokers.

Speaker Change: Let us take over the age.

Speaker Change: A verification is obviously when it comes to the conversations amongst AD dollars.

Speaker Change: In the beautiful Sunshine media.

Speaker Change: That's a very dilutive eligibility and frankly speaking at the retailers, where we don't have that controllers <unk>.

Speaker Change: And pay to ambassadors.

Speaker Change: Whatever it is being called in a social media. So we're saying what we're doing is pick the right product from that.

Speaker Change: The potential of a reduction of the hard and like what is the product is based on science positioned under risk reduction continuum.

Jacek Olczak: Europe is doing very strongly, very well. Yes, we have this discussion, maybe potential headwinds, which I think were very clearly indicated, the $2 billion potential impact from that flavor ban in the U. But other than that, you know, these key geographies, and these key geographies are also very important from the margin perspective of expansion. They really are on the positive side. I don't want to sound negative about the rest of the world.

Speaker Change: <unk>.

Speaker Change: Frankly speaking because the best April 10 alternative to announce that neupogen product is that a much obviously versus the figure that we have a pending the MTA was arbiter.

Speaker Change: I've been finger Sciences.

Speaker Change: Is that a stronger better conclusive on the site. So I feel very confident from the very beginning of our transformation solid Swedish match believed would put the moniker team that better match the protection of the yield.

Speaker Change: That has got a very high on our agenda. So I think it gives you the confidence that as I said earlier the body's question.

Speaker Change: We have a progress phenomenal growth on the products, which are delivered in a very sustainable manner instead that smartphone.

Speaker Change: Thank you so much.

Speaker Change: And it will go down.

Speaker Change: We'll go now to Pamela Kaufman with Morgan Stanley.

Pamela F. Kaufman: Good morning.

Pamela F. Kaufman: Good morning.

Pamela F. Kaufman: Good morning, I have a question about that as well.

Pamela F. Kaufman: Phenomenal growth in the U S can you talk about what's driving the acceleration in growth.

Jacek Olczak: However, one thing I know is that, you know, on occasions, there might be some conversations around the growth trajectory of ICOS and so on. And you remember during investors' day, I've been very clear. We're running ICOS through 10 consecutive years of fabulous growth, despite the fact that we essentially lost access to any growth in Russia and Ukraine. And historically, I mean, Russia alone was delivering, and depends on how you know in which period you pick up, but easily about the 4, maybe even 5 billion per annum growth of the category. So I think we need to look at this trajectory from this perspective, which makes me even more confident about our three-year outlook. Okay. Thank you. That was very helpful.

Pamela F. Kaufman: And the U S.

Pamela F. Kaufman: Are there any particular regions, where you're seeing stronger growth.

Speaker Change: On the guidance it implies about 35% growth in U S shipments, but that seems conservative given the strength that we've seen so is there anything that would tamper growth outlook relative to what we're observing.

Speaker Change: Yeah, So there's a nice Europe.

Speaker Change: The remember from our Investor day.

Pamela F. Kaufman: Profile of the burden when it comes to where the smoke over their barrels are coming from there is there any sort of sale very nicely from a combustible cigarettes, obviously saw some categories, including that.

Pamela F. Kaufman: Debacle containing pouches switches signals a similar product, but also we saw the same from the vapor category. So it is.

Pamela F. Kaufman: June recognize the growing number of that guidance.

Pamela F. Kaufman: The convenience of usage of Azalea.

Speaker Change: In other way of looking at it is I'm not sure.

Emmanuel Babeau: And then I did want to ask a little bit more on margins, you know, just hoping for a little bit more color on your margins in Q4, especially in Americas, where they were actually negative. I, I'm assuming, I think you called this out, a key driver of this is your investments ahead of, you know, the ICOs relaunch in the US in May. So in the context of this, you know, how should we think about it? [inaudible] Yeah, Emmanuel can chip in with more details.

Pamela F. Kaufman: Innovation or extension.

Pamela F. Kaufman: Of the Swedish snus product the tieback of the technique pouches. So obviously as we now have them. Some people are not may be comparable of having a cup of coffee in the pouch.

Pamela F. Kaufman: Some optical hygienic type of there may be constraints et cetera, and zoom is.

Pamela F. Kaufman: Something which is <unk>.

Pamela F. Kaufman: Looks cleaner with Hawaii 2000 contained about coverage might have been for there might be some consumer.

Pamela F. Kaufman: Create some resistance so theres a lot I can say I think.

Pamela F. Kaufman: The products are good.

Pamela F. Kaufman: It has a good trajectory the monarch is a large market in the U S with the right level of Capex.

Jacek Olczak: I think in the America segment, there is more the impact of the devaluation in Argentina, which drove the margins down rather than the U.S. market. Now specifically about the U.S. market, yes, there is increased investment also to continue supporting Zin growth and expansion but also preparing Swedish margin organizations and Philip Morris International in the U.S. organization for being able to handle high costs soon, and obviously have the organizations that are up to the opportunities and the challenges of the U.S. market. So there are some investments which are already flowing for the P&L even ahead of the high cost process start of commercialization. Emmanuel, do you want to go?

Pamela F. Kaufman: <unk>.

Pamela F. Kaufman: Still a very sizable combustible cigarettes category and also to remind me of that on top of our portfolio. So it's a nice obviously for us in which is appealing to this this.

Pamela F. Kaufman: <unk> with regard to steel covenants to avoid the number of accounts for our costs, which are reported to our guidance for next year great.

Pamela F. Kaufman: Hey.

Pamela F. Kaufman: Well, some <unk> trends in the U S.

Pamela F. Kaufman: Ken is there any surprise us to the positive yes.

Pamela F. Kaufman: Okay.

Pamela F. Kaufman: Our guidance is built on the number of the assumptions right.

Pamela F. Kaufman: <unk> global business multi category and.

Emmanuel Babeau: Yeah, just to complement, answer your question, Benny, and complement what Jacek was saying about what is behind the higher than expected performance for 2023. Clearly, Jacek described a very strong dynamic on volume, on the commercial dimension, if you want. But we've been very pleased as well with the development of our margin on our smoke-free product, and we are today seeing the margin both on ICOs and on Zin being above the average margin on CC. We are making progress on the profitability of the ICOs product, and we had some price increases in Q4 overall. So that was the planned dynamic, but it is happening maybe even a bit better than what we're expecting, and we expect that to continue in Q4.

Pamela F. Kaufman: Sam.

Pamela F. Kaufman: <unk> headwinds.

Pamela F. Kaufman: Already today I'm not sure whether they will all have materialized, but I think it's the matter of provinces that this.

Pamela F. Kaufman: Part of the added at the beginning of the year to.

Pamela F. Kaufman: To assemble them all of them.

Pamela F. Kaufman: The program, but there are also some upsides and obtain leads withdrawal or whatever of the year unfolds will come to their Q1.

Pamela F. Kaufman: And as every year, we build that confidence is the above for the year.

Pamela F. Kaufman: And to clarify the guidance, we are coming with a growth year on year.

Pamela F. Kaufman: That would be similar than the one we've been experiencing in terms of total volume growth I'm looking at the percentage of the year.

Pamela F. Kaufman: Versus 'twenty three 'twenty two so these are similar volume growth.

Pamela F. Kaufman: It's related to reduction in the growth rate.

Pamela F. Kaufman: We'll see where the euro.

Pamela F. Kaufman: We have since then.

Pamela F. Kaufman: Even higher than what we're forecasting for the pending.

Speaker Change: Okay. Thank you that makes sense.

Speaker Change: And a question.

Emmanuel Babeau: And in that perspective, I mean, clearly, the U.S. is a fantastic market. We described the fact that the margin of Zin in the U.S. is best in class among our portfolio of products, and therefore, make no mistake, even if we're going to continue to invest in the U.S., the U.S. is going to be super nicely accretive in all parameters of our P&L at the level of, of course, revenue growth, but also at the level of the margin evolution and at the level of the operating It's like the fact that we talk about double-digit growth and very strong growth. The U.S. is a very powerful contributor to our financial performance. Okay, Emmanuel, if I may just clarify something. For this year, you are expecting gross margin and possibly, you know, operating margin expansion based on your guidance. It implies an op margin.

Speaker Change: The patent settlement with BHP can you elaborate on the implications of that I know you've been investing in manufacturing capabilities in the U S for Iqos.

Speaker Change: How does the settlement influence your ability to import into the U S and does it change your manufacturing strategy.

Speaker Change: Our exact Charlie allows us.

Speaker Change: Now to.

Pamela F. Kaufman: Total contract value policies in the U S.

Pamela F. Kaufman: The supply chain, which is the international supply chain from a day, one of which is operating with all the benefits of economies of scale et cetera, so of the slate.

Pamela F. Kaufman: As the mitigating type of a strategy, we have been implementing given partner.

Pamela F. Kaufman: Dikaryotic manufacturing in the U S, but that obviously is that.

Pamela F. Kaufman: Factory volumes.

Pamela F. Kaufman: We would obviously result in increased or elevated costs, both on the devices and acoustics and the road take a while until the us on a standalone basis.

Emmanuel Babeau: Yes. Yes, we do. Absolutely. Yes. All right, thank you. Thank you. We'll go next to Gaurav Jain with Barclays. Hi, good morning.

Pamela F. Kaufman: Cause the same level of the benefits of the cost if you like as we head on international so for us it's.

Gaurav Jain: Two questions from me. One is just to clarify the Argentinian peso impact. So you have a 19 cent impact this year, which is linked to balance sheet revaluation. And on the slides, you're using the Argentinian peso rate, which is equal to the spot rate.

Pamela F. Kaufman: Clears the path for Iqos adult life any low months, so we're bringing a lot of.

Pamela F. Kaufman: Moving back to I should say onset of guarantee from today and going forward and Iqos.

Pamela F. Kaufman: Because it is the U S.

Emmanuel Babeau: So there shouldn't be any further balance sheet revaluation down, which means that there is an automatic 19 cent benefit to EPS. Isn't that the way the math works? Look, of course, we cannot speculate on any further devaluation of the peso. The reality is that the amount in dollar terms has been significantly reduced by the last devaluation.

Pamela F. Kaufman: Yes.

Pamela F. Kaufman: There is another amount of coverage, we added to the geographical family of Iqos presence from a day one of an access as I've said.

Pamela F. Kaufman: The pipeline of the products and it's the economy cost benefits as an international market. So for us actually is clarity and acceleration.

Emmanuel Babeau: So a further devaluation would impact for a much lower amount. Now, you know, I don't know whether more devaluation could come. Frankly, we're not able to anticipate this kind of thing. What you have to take into account is that the basis has been, in fact, basically the devaluation in December. So any further devaluation would apply to a lower base of Argentinian pesos. Maybe I can ask it separately. And my second question is about ZIN.

Pamela F. Kaufman: Again for this like the demand and obviously.

Pamela F. Kaufman: We are now.

Pamela F. Kaufman: The patent litigation territory.

Pamela F. Kaufman: The high degree of uncertainty and chemo.

Pamela F. Kaufman: We are running a very sizable business plan to have even more sizable business.

Pamela F. Kaufman: Now the U S.

Pamela F. Kaufman: And that cloud ATM, the visibility going forward, so that important which I believe is also important for investors.

Speaker Change: Thank you I'll pass it on.

Speaker Change: Thank you Tom.

Pamela F. Kaufman: We'll go next to Ryan <unk> with UBS.

Jacek Olczak: You know, we are hearing a lot of statements. You know, we had a statement by Chuck Schumer. A lot of investors are concerned. They think that regulation is coming on ZIN. Flavors will get banned.

Pamela F. Kaufman: Okay.

Ryan: Hi, guys good afternoon.

Ryan: You for the questions I have a couple as well please.

Ryan: Firstly, you are guiding for another impressive year of mid teens heated tobacco.

Jacek Olczak: So how do you plan to get ahead of this entire potential controversy that could emerge around ZIN? Yeah, so as we have seen over the last few weeks, I have had a lot of conversations around Zen and social media, generally the internet and media. I think... Look, Zen has been in the US market for 10 years. Okay. And if you look even at the CDC's latest data on youth underage usage, etc., it's, you know, stays well below 2%, which is the lowest from any product, nicotine and also other products where there are some age restrictions are applied to this conversation, to Senator Schumer, but also to FDA. And I think, you know, the facts are different, but sometimes it is being pushed in the media.

Ryan: End market sales growth.

Ryan: Finalize that Europe will be within that range historically.

Ryan: Historically Europe has done.

Ryan: Slightly better.

Ryan: What markets make up the sort of difference to help you just don't get to the.

Ryan: The mid teens growth, if you could allude to the larger markets.

Ryan: Within that are you assuming any contribution.

Ryan: Taiwan.

Ryan: Saudi Arabia, you mentioned.

Ryan: What should we expect for the U S as well please.

Speaker Change: So maybe I start with the U S.

Ryan: We're a little bit the test monitor and Iqos tripling, what we call. The Iqos 3.0, ablate protocols, which is clearly for us the high costs and.

Ryan: Looking forward to get the multi modal profitability promo EBITDA with regards to the PMT a amount of PPA for vehicles than normal, which would allow us to accelerate the broader more national type of a commercial organization. So what do we have a fairly important to prevent control in terms of the volume contribution of Iqos from <unk>.

Jacek Olczak: So, you know, the product is helping adult smokers with very strict age verifications. Obviously, when it comes to the, you know, conversations among adults on social media, that's going a little, well, it's going, frankly speaking, into a territory where we don't have control. When it's not using any paid ambassadors or whatever this is being called, you know, social media, so we think what we're doing is pretty right. Product Because of the potential for a reduction in harm and where the product is based on science positioned on the risk reduction continuum, it's, frankly speaking, it is the best nicotine alternative to any other nicotine product, very much, obviously, versus cigarettes.

Ryan: Many of our more tweaking those.

Ryan: Testing the MGM common shareholder consumer facing type of a solution to have other than that it's all over the car.

Ryan: <unk> of the product the different Scott will have a film.

Ryan: We made some assumptions with regard to evolve that into the monetization, which iqos today is not allowed.

Ryan: The choice that under leases, obviously, Taiwan.

Ryan: That's.

Ryan: And our reach our assumptions and there might be a right or wrong, but.

Ryan: Does that the assumptions with unite which obviously hinges on the spirit of some regulatory decisions the lowest being fast plant et cetera.

Ryan: Delivery guidance to you.

Ryan: Although I believe the history have shown to work there.

Ryan: Slavery type of regulations in the different categories in the different places that all of a period of time, they don't have much of an impact achievable.

Jacek Olczak: We have a pending PMTA with FDA, but I think the science is very, very strong and very conclusive on the site. So, I feel very confident from the very beginning of our transformation. So, with Swedish Match, we put marketing and very much the protection of the youth very, very, very high on our agenda. So, I think it gives me confidence that, as I said earlier to Bonnie's question, we have phenomenal growth on the products, which are delivered in a very sustainable manner to adults. Thank you so much.

Ryan: Bob.

Ryan: And in the period, but some modest coastal markets.

Ryan: We will be.

Ryan: Sure.

Ryan: Implemented regulations thinking.

Ryan: I think we need to be call. It shows that there might be some.

Ryan: <unk> put in the guidelines.

Ryan: Very transparent with $2 billion pumper in Charlotte.

Ryan: Which would like premium volume outlet for Iqos, but we'll have to serve our dismantling analyzer has not materialized as expected and as a matter of prudent so we ship.

Ryan: We showed Felicia Felicia talked about this other than that you know the underlying value of course, good all right.

Ryan: Low growth.

Ryan: While we are assured of ambition.

Pamela Kaufman: And we'll go now to Pamela Kaufman with Morgan Stanley. Good morning.

Ryan: Essentially Elliott RPM markers is pretty strong despite the fact that the better margin of central Europe.

Jacek Olczak: I have a question about zinc as well. It's seen phenomenal growth in the U.S. Can you talk about what's driving the acceleration and growth of Zin in the U.S.? And are there any particular regions where you're seeing stronger growth? And just on Zinc guidance, it implies about 35% growth in U.S. shipments, but that seems conservative given the strength we've seen. So is there anything that would temper Zinc's growth outlook relative to what we're observing? Yeah, so the Xen, as you might remember from our investors, the profile of the Xen when it comes to where the smoke or where the adults are coming from, the Xen is sourcing very nicely from a combustible cigarette, obviously sourced from the oral categories, including the tobacco-containing pouches, or Swedish snus, or similar products, but also sourced from the e-cigarette category.

Ryan: May be more of the pricing competition from our Sigma <unk> participants.

Speaker Change: I'll also cover that.

Speaker Change: Our debt as strong price competition and extremely strong price competition.

Speaker Change: Faith on the devices and consumables consumer base.

Speaker Change: In Japan and.

Speaker Change: Over that period of time out of course not.

Speaker Change: Bill gates with its highly.

Speaker Change: Sometimes aggressive competitive pricing environment, but anyway. So.

Speaker Change: That's essentially where we are.

Ryan: Monarch grows very nicely with our continuous where we're very.

Ryan: Strong growth momentum.

Ryan: Major type of a Spain will make the we started making significant progress so.

Speaker Change: That's it from me.

Speaker Change: Thank you and then just one other question. Please so you're expecting a smoke free acceleration in 2024, but that's not translating into group net revenue growth.

Speaker Change: Acceleration in 2024 are you expecting a.

Jacek Olczak: So it is being recognized by a growing number of adults the convenience of usage of a Xen. It is another way of looking at Xen; it is a natural innovation or extension of the Swedish snus product, the tobacco-containing pouches. Obviously, as we know them, some people are not maybe comfortable with having tobacco in the pouch, there are some optical hygienic type of maybe constraints, etc.

Speaker Change: Softer performance in combustibles in 'twenty four is that the.

Speaker Change: Discrepancy.

Speaker Change: Yes.

Speaker Change: Right.

Speaker Change: At this moment in time of the beginnings of.

Speaker Change: The blended outflow quarter group revenues combustible as auto other than obviously heat not burn.

Speaker Change: Few other smaller things, but we.

Speaker Change: Have to manage.

Speaker Change: Last year to deliver a very strong pricing variance.

Jacek Olczak: And Xen is something which is, you know, looks cleaner and is white, doesn't contain tobacco, which might have been for or might be for some consumers, which creates some resistance. So, this is what I can say. I think the product has a good trajectory. The market is a large one in the U.S. with the well-developed e-cigarette category, obviously, but there's still a very sizable combustible cigarettes category, and also many other oral tobacco forms. So, it's a nice source for Zin, which is appealing to these audiences. With regard to your comments about the number of accounts forecasted and to put the Greek into our guidance for next year, we are very well familiar with the underlying trend in the U.S. Can you really surprise us with a positive? Yes,

Speaker Change: I think again.

Speaker Change: <unk> tried to assume that that level of a pricing body items may not be repeatable. This year, but there was obviously a pricing potential which would basically mean that are in <unk>.

Speaker Change: Give you that guidance.

Speaker Change: For some of the things that we would need a little bit more visibility to start increasing our comfort in Brazil delayed that when a light compared to what we bought is delivering now.

Speaker Change: <unk>.

Speaker Change: And then a number of the others with annual EBITDA of revenue top line about 70 per side remember right around that time is when we started the transformation whether the 55% now.

Speaker Change: Now I think our quality what counts for us versus what we will pay a lot of attention.

Speaker Change: We not only want to leave in a sustainable matter, but rather look at all of this.

Speaker Change: Importantly, the quality of the delivering of growth. So now having a three years totaled.

Speaker Change: Total <unk> portfolio still start the way above while no decline motive in Florida, but the broadly let me just add a global agent goes down.

Speaker Change: Are you pricing them managing our <unk>.

Jacek Olczak: [inaudible] But, you know, guidance is built on a number of assumptions, right? I mean, it's a global business, multi-category, and there are some headwinds which we are, you know, aware of today. I'm not sure whether they were all materialized, but I think it's a matter of prudence at this part of the year, the beginning of the year, to single them out and, you know, be prudent.

Speaker Change: And third to avoid the risk of some down trading et cetera.

Speaker Change: The 7% is above 7% revenue growth is that <unk>.

Speaker Change: From a qualitative perspective, not just from the nominal growth perspective.

Speaker Change: Works, Inc.

Speaker Change: So this is about.

Speaker Change: Just to add to <unk>.

Speaker Change: <unk> been seeing in India is taking to account that 2023 was exceptional when it comes to price increase is close to 9% on the convertible portfolio and then we don't intend to repeat that we are guiding to mid single digit price increase for 2020 here for software.

Jacek Olczak: But there are also some upsides and tailwinds, which you are not aware of. The year unfolds. We will come to Q1. I mean, like every year, you build confidence as you go through the year.

Speaker Change: That will have an impact and make a difference on the growth of our revenue on them on the convertible business.

Speaker Change: Thank you very much.

Speaker Change: Thank you.

Speaker Change: We will go next to Cowen Elliott with Bernstein.

Cowen Elliott: Hi, Good morning, Thank you for the questions guys.

Emmanuel Babeau: Yeah, and to clarify the guidance here, we are coming with growth year on year that would be similar to the one we've been experiencing in terms of total volume growth. I'm looking at the percentage here, versus 23 on 22. So these are similar volume growths, it's true that it's a reduction in the growth rate. We'll see whether we have things going even higher than what we are forecasting for the time being. Okay, thank you. That makes sense.

Cowen Elliott: I just wanted to start with disposable vaping products.

Cowen Elliott: We've obviously seen these folks have huge success in the U S. In 2023 in the UK also driving us is steep.

Cowen Elliott: Volume declined for combustible cigarettes in those markets.

Cowen Elliott: Obviously, your combustible cigarette business in those two markets is not huge.

Cowen Elliott: Non existent or was it in the U S.

Cowen Elliott: So not a huge impact on your business so far.

Jacek Olczak: And a question on the patent settlement with BHC. Can you elaborate on the implications of that? I know you've been investing in manufacturing capabilities in the U.S. for ICOS. How does the settlement influence your ability to import into the U.S., and does it change your manufacturing strategy?

Cowen Elliott: My question is why do you think we haven't seen equivalent success for these products in the markets that are big markets for your business in the EU in particular and do you think this could be a threat to your business in 2024.

Speaker Change: You mean, the threat to our business coming from the EU.

Cowen Elliott: <unk> provide disposable income.

Jacek Olczak: It actually allows us now to hook or connect ICOS in the U.S. to the supply chain, which is on the international supply chain from day one, which is operating with all the benefits of economies of scale, etc. So obviously, as the mitigating type of a strategy, we have been implementing in parallel with alternative manufacturing in the U.S., but that obviously, you know, it's the first factory, first volumes, and it would obviously result in increased or elevated costs both for the devices and logistics, and it will take a while until the U.S. on a stand-alone basis would cruise at the same level of the benefits of the cost, You know, it's just another market which we added to the geographical family of ICOS presence from day one.

Speaker Change: Unless there are number of factors right. So one is that.

Speaker Change: I think that that category with a product is being disposables not disposable is very much focused in terms of the offsetting <unk>.

Speaker Change: So frankly speaking into the flavor right. Then we are very authentic forgot that the color of the small case market by market, where there is really two exceptions about March and what I want.

Speaker Change: I'd characterize it for us.

Speaker Change: Additional bipolar type of a experienced flavor et cetera. So this creates.

Speaker Change: So Robert noted the world consumption occasion of consumption, but I think for some smelters and we know that from our experience of vehicles.

Speaker Change: Thanks, Charlie.

Speaker Change: Triggers curiosity to try but at the same time triggers.

Speaker Change: The bottleneck in terms of full time type of switching.

Speaker Change: Adoption.

Speaker Change: That's the one of the facts that are okay.

Speaker Change: There are obviously other factors.

Speaker Change: <unk>.

Jacek Olczak: We'll have access, as I said, to the pipeline of products and its economic cost benefits as an international market. So for us, actually, it's clarity and acceleration, which we gained through this agreement. And obviously, you know, as we all know, the patent litigation territory has a high degree of uncertainty. And, you know, we're running a very sizable business, and we plan to have even more sizable business in addition now in the U.S., and that clarity and the visibility going forward are very important, which I believe is also important for investors too. Thank you. I'll pass it on.

Speaker Change: Let's play.

Speaker Change: Okay.

Speaker Change: Yes, I understand that but why hasnt nuts.

Speaker Change: Seems like in the U S and the UK that hasn't been an impediment to these products success over the past 12 18 months.

Speaker Change: As a result of the focus right because of our UK was on the platform as well as the U S. It's I remember historically of defaults on both of this category.

Speaker Change: Sallie I guess also attracted by the underlying commodity <unk> cc capex. So.

Speaker Change: Obviously people are valued growth alternatives to their places, which creates some signs of that.

Speaker Change: Of the underlying commodities opportunity where is the relative three buildings also to talk about these products. As you know we are a better March but also in Turkmenistan Hassan counters this product.

Speaker Change: No.

Speaker Change: Let me put it that way you won't really wide economy. So let's leave aside the hardware that's increase approach.

Speaker Change: Some of our.

Speaker Change: And our opinions on it.

Speaker Change: Hey.

Speaker Change: And we know that when we.

Speaker Change: And thirdly E vapor category, but.

Speaker Change: Good times to be vetted. This with the bulk of I should say and it's very easy to enter into this category or is that too much of the path to sustainable profitability.

Speaker Change: We don't want to defocus, the compounded from some other procurement piece of injury.

Speaker Change: Which in our view as a more sustainable on a good path for the margins and the underlying profitability, but whether we enter with this product recall each other a few other markets and then our products. Despite the fact that we are relatively late and liquid from a capabilities perspective, and then they worked out.

Speaker Change: Regarding to the double digit Chelsea this marketing.

Speaker Change: Peter a span of less than 12 months or so so that tells you. There is a lot of lack of loyalty and there is a lot of that he is I know that we see the volumes, but a lot of trial.

Speaker Change: It should not dilute category and there are pockets of judges.

Speaker Change: Judging by performance in the U S. Although by definition the consumers more loyal to more of a focus more discipline.

Jacek Olczak: Thank you. Thank you, Don. We'll go next to Fahim Bey with UBS.

Speaker Change: In fact, they navigate though so.

Speaker Change: Okay. Thank you and I have a follow up that is related but maybe a slightly more philosophical question.

Badrul A. Chowdhury: Hi guys, good afternoon. Thank you for the questions. I have a couple as well, please.

Jacek Olczak: Firstly, you're guiding for another impressive year of mid-teens, heated tobacco, in-market sales growth. And you have highlighted that Europe will be within that range. Historically, Europe's done slightly better. What markets make up the sort of difference to help you to still get to the mid-teens growth, if you could allude to the larger markets? And within that, are you assuming any contribution from Taiwan, Saudi Arabia, you mentioned, and what should we expect from the US as well? So, maybe I should start with the US.

Speaker Change:

Speaker Change: And a number of markets and especially the U S.

Speaker Change: Related to some of these disposable setting for us we've been saying this formation of I would describe it as like a dual tiered market that's been forming with big legacy players such as yourselves sort of forced to play by the rules and hold themselves to a sudden set of standards.

Speaker Change: Marketing to existing nicotine users.

Jacek Olczak: I mean, in the U.S., we will do the test market on ICOS 3.0, what we call the ICOS 3.0 blade product, which is literally for us the high cost, and we keep looking forward to getting more capability from FDA with regard to the PMTA, MRTPA for ICOS, which would allow us to accelerate the broader, more national type of commercialization. So what we have assumed in 2024 in terms of the volume contribution of ICOS from the U.S. is very minimal. We're more treating this as, you know, testing the engine, commercial, consumer-facing type of solution rather than lower the current version of the product at the full scale. We have assumed, and we made some assumptions with regard to opening the markets in which ICOS today are not allowed. The truth is that Andalusia is obviously Taiwan.

Speaker Change: All of us would've signor.

Speaker Change: Video on <unk> last week I would imagine.

Speaker Change: But at the same time, we also have a secondary set of smaller new businesses. So you seem to be doing basically whatever they want and often illegally but having great success in the marketplace and attracting those of consumers.

Speaker Change: So I guess my question is do you think that this dual tiered structure that seems to be forming in a number of markets structurally in Paris, the attractiveness of your business and your brands, but when it seems like Youll, just being forced to play on that.

Speaker Change: <unk>, which is not level.

Speaker Change: Well obviously.

Speaker Change: <unk> like all of us.

Speaker Change: As noted in your thinking about doing something which would be again, so crossing the line of regulations or even I would say a societal expectations. So obviously our.

Jacek Olczak: Okay, that's, You know, it's our assumptions, and we might be right or wrong, but these are the assumptions we've made. These are just the hinges on the speed of some regulatory decisions and the laws being passed and etc. And with regard to you, look, I mean, Although I believe that history has shown with the slavery type of regulations in different categories in different places that, over a period of time, they don't have much of an impact on the goal. But, you know, we're going into a period when some markets or markets will be, Implementing these regulations, I think, in the... I think we need to be cautious that there might be some distortions. I mean, they put in the guidelines, and they were very transparent.

Speaker Change: Our ability to continue this.

Speaker Change: I agree with what you are asking grossly different.

Speaker Change: Some other operators and participants in the market, especially.

Speaker Change: <unk> don't have a bureau of 10 years or 15 years our float.

Speaker Change: As a financial hit them around almost type of operation.

Speaker Change: We know what has happened in all of these companies due to the U S, whereas I understand some.

Speaker Change: Disappointed that the market is now under way, but frankly speaking to the long overdue because there was a lot of.

Speaker Change: Pardon My language about the mess created in America. Despite the fact that our regulators lighting product lines.

Speaker Change: <unk> has been designed for this.

Speaker Change: Our designated for these agencies, whether it'd be the slope and I think it's.

Speaker Change: Frankly speaking directly call, which we have.

Speaker Change: Have you added since.

Speaker Change: Sterling Someplace, that's kind of on a cigarette it's mark <unk>.

Speaker Change: <unk> six type of.

Speaker Change: All of our participations in the amount of code is not only marketing practices, but also products product stand does all of this phased creates completely.

Speaker Change: Ron.

Speaker Change: Distortions in the market that they experience of the ledger to mate.

Speaker Change: Michael.

Speaker Change: I go to manufacturers.

Jacek Olczak: It could be me on top of the shelf with headwinds, which we typed in at the volume outlet for ICOS, but we'll have to see whether this materializes or not, but I think, as a matter of prudence, we should talk about this. Other than that, you know, the underlying ICOS growth, if I look at the value of share evolution in essentially all European markets, is pretty strong, despite the fact that, very much in Central Europe, there is maybe more pricing competition from other HIPAA participants, but we also have very strong price competition, extremely strong price competition, I should say, both on the devices and the consumables in Japan. And, you know, over the period of time, ICOS navigates through this highly, sometimes aggressive, competitive pricing environment very well. That's where we are now. Germany is growing very nicely. Italy continues to have very strong growth momentum. We have a major tribe in Spain.

Speaker Change: We also divested the conversation.

Speaker Change: The announced outside of better work in progress and have reductions in the diabetic things reach relative believes we should be should be should be fixed.

Speaker Change: Alright, Thanks Patrick.

Speaker Change: Thank you.

Speaker Change: Our final question will come from Matt Smith with Stifel.

Matthew Edward Smith: Okay. Thank you Jessa can Emmanuel I wanted to ask a follow up question about investment levels in embedded in the 2024 outlook. If we if we consider the expectation for gross and operating profit margin expansion on an organic basis can.

Matthew Edward Smith: Can you talk about the areas, where youre seeing a step up meaningfully and incremental investment last year, you called out $150 million of explicit investments, including $75 million or so in the U S. It would seem like the growth in Zen would allow you to step that investment level up while still being able to achieve your double digit profit ex.

Matthew Edward Smith: <unk> in the market.

Matthew Edward Smith: That's a lot of pent up yesterday.

Matthew Edward Smith: Great.

Speaker Change: Okay.

Speaker Change: Adjusted the Hawaii good off.

Jacek Olczak: We should start making significant progress. That's it from me. Thank you. And then just one other question, please.

Speaker Change: Above our revenue growth.

Speaker Change: <unk>.

Speaker Change: Sure may incur some improvement in the amount of genes, but then the other.

Emmanuel Babeau: So you're expecting a smoke-free acceleration in 2024, but that's not translating into group net revenue growth acceleration in 2024. Are you expecting a softer performance in combustibles in 2024? Is that the discrepancy?

Speaker Change: <unk> has now further resources to support the revenue growth, so because if rewards to completely stop investing because obviously they expansions.

Speaker Change: It would also be much more significant margin expansions, where there is much more significant.

Speaker Change: It's not what is seen in our strategy. So I think <unk> operated at scale and we feel like the consumer has the size the scale in the USA.

Jacek Olczak: Yeah, look, this is the blended, at this moment in time, at the beginning of the year, the blended outlook for the group's revenues, combustibles, oil, and obviously, he's not burnt, the few others, smaller things. Look, we managed last year to deliver a very strong pricing variance. I think, again, it's hard to assume that that level of a pricing variance may not be repeatable this year, but there is obviously a pricing potential, which we're basing in there or included in the guidance. Look, for some of these things, we need a little bit more visibility to start increasing our confidence. From a qualitative perspective, not just from the nominal growth perspective, I would think that it's all the bigger part.

Speaker Change: Revenues very substantial over there it is by the U S.

Speaker Change: But those markets standouts.

Speaker Change: And the revenue we generate from a small credit also combustibles only detect nationality, but that's sort of the revenue growth rates I think we have the room to go to.

Speaker Change: Two.

Speaker Change: Provides further investments to support today's intermodal growth, while also allowing for the better or drive EBITDA margin expansion. We also have provided some inflationary pressure.

Speaker Change: Think especially on the combustible.

Speaker Change: We assume that the 24 is a solid.

Jacek Olczak: Just to add to what Jacek has just been saying, I mean, India keeps taking into account that 2023 was exceptional when it comes to price increases, close to 9% on the combustible portfolio, and we don't intend to repeat that. We are aiming for a mid-single-digit price increase for 2024, so of course, that will have an impact and make a difference on the growth of our revenue from the com Thank you very much. Thank you. We'll go next to Callum Elliott with Bernstein.

Speaker Change: The last year of this extra auto did not evaluable for inflation under pressure and as a 2005 in other words.

Speaker Change: We should start to see easier on the Cogs pressure cylinders is about <unk> and some other materials and I would think.

Speaker Change: Incremental iqos and every incremental.

Speaker Change: This obviously requires proportion there'll be less of the investments that the Chinese vehicles until 2030, so the scale of what is going forward.

Speaker Change: Turning to.

Speaker Change: Separately the March.

Speaker Change: Thank you Jessica I can leave it there and pass it on.

Callum Elliott: Hi, good morning. Thank you for the questions, guys. I just wanted to start with disposable vaping products. We've obviously seen these products have huge success in the US in 2023 and the UK, also driving a steeper volume decline for combustible cigarettes in those markets. Obviously, your combustible cigarette business in those two markets is not huge, if non-existent, obviously, in the U.S., so it hasn't had a huge impact on your business so far. But my question is, why do you think we haven't seen equivalent success for these products in the markets that are big markets for your business and the EU, in particular? And do you think this could be a threat to your business in 2020? Do you mean the flat flower business coming from e-brake products? There are a number of factors, right?

Speaker Change: Thank you. Thank you thank you Matt.

Speaker Change: That concludes the formal claim.

Speaker Change: Alright before closing our call I would like to remind you that we'll be presenting at the Cagny conference on February 21st and we hope you'll be able to join either in person or virtually thank you again for joining us today. If you have any follow up questions. Please contact the Investor Relations team and hope you have a great day.

Speaker Change: Six years ago.

Speaker Change: That concludes today's call. Thank you for your participation you may disconnect at this time.

Speaker Change: [music].

Speaker Change: Uh huh.

Speaker Change: Yeah.

Speaker Change: [music].

Jacek Olczak: I think that the category of eBay products is being disposable; it's not disposable. It's very much focused in terms of the offering and innovation, frankly speaking, into the flavors, right? And we very often forget that the core of the smokers, market by market, with literally few exceptions, are very much on what I would characterize as a traditional tobacco type of experience, flavor, etc.

Speaker Change: Oh.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [noise] [noise].

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Speaker Change: Yeah.

Jacek Olczak: So this creates, you know, a sort of dual consumption or occasional consumption. But I think for some smokers, and we know it from our experience of ICOs, it's actually... It triggers curiosity to try, but at the same time triggers the bottleneck in terms of a full-time type of switching adoption. That's one of the factors.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [noise] [music].

Speaker Change: Mhm.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [music].

Jacek Olczak: Obviously, other factors are at play. I guess I understand that, yes, but why hasn't that, you know, it seems like in the U.S. and the U.K. that hasn't been an impediment to these products' success over the past twelve, There is also, you know, the focus, right, because, you know, the UK was on the forefront, as was the US, which I remember historically as the forefront of this category, partially, I guess, also attracted by the underlying margins in the CC category, so, you know, obviously people are going with alternatives to the places which create some sort of the, you know, underlying margins opportunity, But when we entered this product, we tried to check a few other markets, and then other products, despite the fact that we're relatively late into the, from a category history perspective, and then we have gained double-digit sales in these markets. Peter Spano of less than 12 months or so, so it also tells you there is a lot of lack of loyalty in this, there's a lot of, yes I know that we see the volume, but there's a lot of trial.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Jacek Olczak: I should not blame Catergory and their policies judged by performance in the U.S. I mean, by definition, the consumer is more loyal, more focused, and more disciplined in how they navigate their show. Okay, thank you. And I have a follow-up that is related, but maybe a slightly more philosophical question.

Callum Elliott: In a number of markets, and especially in the U.S., related to some of these disposable vaping products, we've been seeing this formation of what I would describe as a dual-tiered market that's been forming with big legacy players, such as yourselves, who are sort of forced to play by the rules and hold themselves to a certain set of standards. You know, marketing only to existing nicotine users and, you know, all of us will have seen your video on Zin last week, I would imagine. But at the same time, we also have a secondary set of smaller new businesses who seem to be doing basically whatever they want, and often illegally, but having great success within the marketplace and attracting lots of consumers.

Speaker Change: Okay.

Speaker Change: [music].

Callum Elliott: And so I guess my question is, do you think that this dual-tier structure that seems to be forming in a number of markets structurally impairs the attractiveness of your business and your brands when it seems like you're just being forced to play on a playing field which is not level? Well, look, obviously, companies like ours are not even thinking about doing something which would be against or crossing the line of regulations, or even I would say societal expectations. So obviously, I mean, our ability to compete is, you know, what you're asking, grossly different from some other operators or participants in the market, especially people who, you know, don't have a view that participation in the market is not only marketing practices but also products, product standards, all of these things create completely wrong distortions in the market at the expense of the legitimate, you know, tobacco category manufacturers, and also in a diverse conversation.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Yes.

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Speaker Change: Yes.

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Speaker Change: Yes.

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Speaker Change: Okay.

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Jacek Olczak: So, you know, how further we can progress and have reductions and diversify into the things which, relatively, should be should be fixed. Okay, thanks. Thank you. Our final question will come from Matt Smith with Stiefel. I think Jacek and Emmanuel wanted to ask a follow-up question about investment levels embedded in the 2024 outlook. If we consider the expectation for gross and operating profit margin expansion on an organic basis, can you talk about the areas where you're seeing a step up meaningfully in incremental investment? Last year, you called out $150 million in explicit investments, including $75 million or so in the U.S. It would seem like the growth in ZIN would allow you to step that investment level up while still being able to achieve your double-digit profit expectations in the market.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Jacek Olczak: After a lot of times on DS3, you know, we've got to get the..., that just did the live good old days. I think, you know, once you operate at scale, as we do, I presume, at the scale in the U.S., the revenue is very substantial over there, at least by the U.S., by the market standouts. And the revenue which we generate from smoke-free zones but also combustibles only internationally, with that sort of a revenue growth rate, I think we have room to provide for the investments to support today's and tomorrow's growth while also allowing for or driving margin expansion. We also have provided here some inflationary pressure, and I think, especially on the combustibles, I would assume that 24 is a sort of last year of this extra ordinary type of inflationary pressure. And as of 25 and onwards, we should start seeing an easing of the COGS pressures, which is about lead and some other materials. And I think every incremental ICOS and every incremental ZIM is obviously, it requires proportionally less of the investments that the first ICOS and the first ZIM required.

Speaker Change: [music].

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Speaker Change: Yes.

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Emmanuel Babeau: So, I mean, the scale offers this opportunity for supporting the market going forward. Thank you. Thank you. Thank you very much. That concludes today's question. Sorry, before closing our call, I'd like to remind you that we'll be presenting at the Cagney conference on February 21st, and we hope you'll be able to join either in person or virtually. Thank you again for joining us today. If you have any follow-up questions, please contact the Investor Relations team. I hope you have a great day. Thank you all. I will speak to you soon.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

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Speaker Change: Yes.

Unknown Executive: That concludes today's call. Thank you for your participation. You may disconnect at this time.

Speaker Change: Yes.

Speaker Change: Okay.

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