Q4 2024 Philip Morris International Inc Earnings Call
Okay.
Good day, and thank you for standing by.
Speaker Change: Into the Philip Morris International fourth quarter, 'twenty, 'twenty, four and full year results conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone you will there.
Sara Push: Sure an automated message if I see your hand is raised to a draw. Your question. Please press star one one again please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today. She didn't push now vice president of Investor Relations.
Speaker Change: Financial Communications. Please go ahead.
Sara Push: Welcome and thank you for joining us.
Sara Push: Earlier today, we issued a press release containing detailed information on our 2020 for fourth quarter and full year results.
Sara Push: The press release is available on our website.
Sara Push: The stock comp.
Sara Push: A glossary of terms, including the definition for smoke free products as well as adjustments other calculations and reconciliations to the most directly comparable U S. GAAP matches, but non-GAAP financial measures. In this presentation are available in exhibit 99, two to the company's form 8-K dated February six 2025.
Sara Push: And on our Investor Relations website.
Today's remarks contain forward looking statements and projections of future results I direct your attention to the forward looking and cautionary statements disclosure in today's presentation and press release.
Sara Push: 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 uptick or Chuck <unk>, Chief Executive Officer and demand.
Speaker Change: Chief Financial officer over to you, yes, Sir.
Yeah.
Speaker Change: Thank you James and welcome everyone.
Speaker Change: We delivered.
Speaker Change: An outstanding performance in 'twenty to 'twenty four with all the key elements of the business contributing strongly to deliver best in class organic top and bottom line growth.
Speaker Change: This resulted in significant acceleration in adjusted diluted earnings per share growth in both currency neutral and equally importantly, dollar terms as we mitigate the substantial currency headwinds.
Speaker Change: Our business outperformed the industrial consumer packaged goods overall with growth across with growth across all categories to deliver our fourth consecutive year of positive volumes.
Iqos continued its strong underlying momentum with continued excellent growth in Japan robust progress in Europe. Despite the EUR characterising flavor ban and further strong growth in our global markets.
Speaker Change: Importantly, the growth of Iqos is increasingly profitable as the benefits of scale and pricing more than offset continued substantial growth investments, including brand building activities and innovations on devices and consumables.
Speaker Change: Vin once again delivered strong growth in the U F F 'twenty to 'twenty three demand acceleration continued in 2024.
Speaker Change: This resulted in short term supply challenges, which will have progressively addressed throughout the year working towards our goal of matching existing users.
As we unlock further capacity, we will be in a position to exploit the full potential of this dynamic category.
Speaker Change: Outside the U S shipments grew by 7% to 5% as we increased our global presence in Europe and pouches to seven markets.
Speaker Change: E vapor.
Speaker Change: <unk> is progressively contributing to growth with an encouraging volume momentum in close pulse and strengthening market position with our premium offer.
Speaker Change: Our combustible business performed well on all metrics.
Speaker Change: We delivered double digit gross profit growth in quarter four of last year.
Speaker Change: And around 7% organically for the year.
Speaker Change: Led by strong pricing resilience volumes in certain markets and the ongoing benefits of our cost actions.
Speaker Change: Overall, our strong performance across all categories and regions drove meaningful operating leverage notably in our smokefree business alongside cost efficient efficiency initiatives across the entire value chain.
Speaker Change: This enabled us to deliver upper delivered operating cash flow and adjusted they looked at EPS above our expectations at the start of the year, despite ongoing currency and input cost headwinds.
Speaker Change: Our transformation journey and growth drivers have excellent momentum and we are confident in our ability to deliver sustainable growth and returns in 2025 and beyond.
Speaker Change: Over the past year, we achieved several key milestones in our smoke free Jordan.
Speaker Change: Including the 10 year anniversary of vehicles.
Speaker Change: Our smoke free business is large profitable and growing fast.
Speaker Change: Our total Smokefree net revenues reached almost $15 billion in 2024.
Speaker Change: Combined with our strong combustible performers our company also surpassed $10 billion in adjusted net earnings for the first time.
Speaker Change: Our Smokefree business reached 40% of total PMI net revenues in the fourth quarter and around 42% of adjusted gross profit as our transformation becomes increasingly can be profitable.
Speaker Change: In our top five markets by your operating income.
Speaker Change: 60% of net revenues were a smoke free.
Speaker Change: We have deployed our smoke free multi category strategy across almost half of the 95 markets with smoke free products and we closed the year with over $38 5 million estimated adult users across keeping up the baton Ora and ebay.
Speaker Change: Our smokefree business surpassed 1 billion tons, including 645 million pounds of nicotine pouches.
Speaker Change: Zane brand continues to resonate with adult <unk> consumers across the U S where it is the number one a smoke free brand and the fourth biggest sneak opt in brand and also grows internationally.
Speaker Change: We're also very pleased that the robust science and responsible marketing practices behind thin over are recognized by FDA for the recent marketing authorization of all currently commercial commercialized <unk>.
Speaker Change: Making <unk> the only authorized nickel tin Polish brand in the United States.
Speaker Change: We remain at the forefront of the effort to increase understanding of smoke free products and advanced double cohort and reductions among consumers and regulators.
Speaker Change: We are encouraged by the increasing number of governments adopting saba cocom reduction policies for incentive by switching to reduce nicotine product instead of continuing to smoke, which is a sound public policy.
Speaker Change: A number of markets also moving favorably with regards to the robust regulation of nicotine pouches and debate.
Speaker Change: Our regretfully there is also resistance in many places.
Speaker Change: Often driven by ideology, not facts and science and therefore, a considerable amount of work still in front of us.
Speaker Change: While reaching important milestones is pleasing after 10 years, we are still in the early stages of industrial type of formation.
Speaker Change: With our strong brands and our <unk> and commercial capabilities.
Speaker Change: Many years of opportunities in growth.
Speaker Change: I look forward to sharing model with you at the upcoming Cagny Conference on February 19.
Speaker Change: Yes.
Speaker Change: I will now handover to remind the world to discuss our results and outlook in more detail.
Speaker Change: Thank you, yes, I will start with the headline financials for the year.
Speaker Change: As yet <unk> said this was a truly outstanding year of growth across our business.
Speaker Change: As the rapid progress of Iqos and <unk> was complemented by emerging gross contribution from these and then internationally and much improved convertible performance.
We delivered in line or above our last communicated expectation across key metrics.
Speaker Change: Net revenue growth of plus nine 8%.
Speaker Change: Did I Miss in shipments of hte use and convertible pricing of plus eight 7% were strong.
Speaker Change: Excellent total shipment volume growth of plus two 9%, including <unk> and convertible volumes perform at the top end of our expectation.
Coupled with accelerated cost efficiencies just led to better than expected close 14, 9% organic operating income growth and plus 15, 6% currency neutral adjusted diluted earning per share growth.
Speaker Change: Our clear focus on delivering performance in <unk> was reflected in the plus nine 3% growth in adjusted diluted EPS.
Speaker Change: As a result, we achieved record operating cash flow of $12 $2 billion, which was significantly above both our initial and most recent forecast supported by excellent profit delivery and favorable working capital.
Speaker Change: Combined with strong adjusted EBITDA this allowed us to significantly improve our leverage ratio, which I'll come back to later.
Speaker Change: Okay.
Speaker Change: We closed the year strongly in Q4 with organic net revenue growth of plus seven 3%. Despite the impact of timing and comparison effect, most notably related to Ritchie disruption the EU.
Speaker Change: You're characterizing favorite band for <unk> use and prelaunch Illumina <unk> device shipments.
Speaker Change: This was driven by total volume growth of plus two 3% alongside positive smoked remix and robust pricing.
Speaker Change: Combined with operating leverage and manufacturing efficiencies, we delivered close to plus 12% organic operating income growth and plus 10% currency neutral adjusted diluted EPS growth.
Speaker Change: In dollar terms adjusted operating income increased 15% and adjusted diluted earning per share grew plus 14% to $1 55.
Speaker Change: This includes a positive currency impact of <unk>, which reflects an unfavorable transactional impact in the prior year in Argentina as well as the move to hyper inflationary accounting in Egypt, which also had a negative impact on our organic growth of around one point on net revenues and two points.
Speaker Change: Operating income.
Speaker Change: The noncash impairment of our <unk> equity investment had no impact on our adjusted financials in future. We may benefit from <unk> net income, but we do not include any impact in our 2025 forecast at this time.
Speaker Change: Let's take a step back and consider 2024 in the context of the last few years.
Speaker Change: Our organic top line delivery has been consistently strong since the pandemic and further accelerated this year as both smoke free product and combustibles stepped up their trajectory.
Clearly 2024 was also a standout year for adjusted diluted EPS growth.
Speaker Change: <unk> ability of our Smokefree business accelerated due to the operating leverage of Iqos intriguing scale civil.
Speaker Change: Or do you need to call it mix pricing efficiency and increase your attrition from the <unk> rapid growth at superior U S margins.
Speaker Change: We also benefited from notably robust convertible performance, which provide important structural support for our transformation journey.
Speaker Change: These dynamics are further demonstrated by the organic top line and gross profit growth of both category in the year.
Speaker Change: Our smokefree business accelerated to plus 17% net revenue growth and plus 23% gross profit growth, reaching close to $10 billion in gross profit.
Speaker Change: This drove an impressive plus 330 basis points of organic gross margin expansion fueled by the factors I just mentioned.
Speaker Change: On the convertible side net revenue and gross profit grew organically by plus 6% and plus 7%, respectively, leading to plus 60 basis points of organic gross margin expansion.
Speaker Change: Our combustible business is once again contributing positively with pricing and cost efficiency more than compensating for the third year of significant input cost headwinds, which we expect to ease in 2025.
Speaker Change: Okay.
Speaker Change: I would also note that adjusted gross margin for smoke free product, plus 490 basis points higher than convertible in Q4, and plus 270 basis points a year for the year overall at 66, 6%.
Speaker Change: While we continue to target gross margin expansion in convertible we expect this gap to grow over time as we continue to drive profitable growth from smoke free product, while investing in new market brand building and innovation.
Speaker Change: Okay.
Speaker Change: Taking a closer look now at our volume performance, we delivered our fourth consecutive year of shipment growth of plus two 3% in the fourth quarter and close to plus 3% for the full year.
Speaker Change: Including our <unk> E vapor business in equivalent unit.
Speaker Change: This growth was plus two 4% and 3% respectively.
Speaker Change: Our total 2020 for Smokefree volume growth, including <unk> was plus 13, 5% or 19 billion unit equivalents, an acceleration compared to 2023.
Speaker Change: For Iqos, we delivered hte, you adjust that in markets and the growth of close to 13% and shipment volumes of $139 7 billion.
Speaker Change: Both broadly in line with our expectation.
Speaker Change: Adjusted IMS growth accelerated in its too close to 14% essentially in line with our target of plus 14% plus 15%.
Speaker Change: This includes dynamic growth of close to plus 11% in Europe with strong momentum across the large majority of markets.
Speaker Change: As I touched on earlier Q4, <unk> shipment growth into the impact of additional shipment in the prior year to prepare for the EU characterizing flavor ban and the phasing effect of additional shipment to Japan in each one notably due to Ritchie disruption.
Speaker Change: Our oral Smokefree business grew 2020 for shipment volume by plus 24, 6%, including Zen as U S growth of plus 51% to 581 million tons.
Speaker Change: Snus and moist snuff volumes were stable.
Speaker Change: Cigarette shipments grew by plus 0.6% approximately in line with the estimated gross.
International industry.
Speaker Change: The growth of the cigarette market can be largely attributed to growth in markets with more free product or not permitted such as Turkey, Brazil and India.
Speaker Change: Excluding such markets, we observe a low single digit decline consistent with historic trends.
Speaker Change: Our strong full year top line growth of almost plus 10% was again achieved through a combination of volume growth pricing.
Speaker Change: The positive mix impact of the shift to smoke free product.
Speaker Change: Pricing contributed plus six 2%, reflecting almost plus 9% convertible pricing and plus 2% for smoke free product.
Speaker Change: Smoke free also drove a positive mix impact of plus one 9% a year.
Speaker Change: Mitch.
Speaker Change: Both iqos.
Speaker Change: And.
Speaker Change: Overall, it's more people that contributed.
Speaker Change: 2%.
Speaker Change: Group top line growth for the year, demonstrating meaningful as a meaningful accelerator.
Speaker Change:
Speaker Change: I think prior year was negative primarily due to the convertible debt.
Speaker Change: We're lesser degree even robust net revenue growth.
Speaker Change: Moving down to operating margins, we delivered organic expansion of 180 basis points.
Speaker Change: And plus 100 basis points in Dropdowns could possibly achieving our objective of SME.
Speaker Change: Extension on both basis.
Speaker Change: This reflects one Q4 with Oi margin lending again.
Speaker Change: This 140 basis points as gross margin expansion.
Speaker Change: Jenny.
Speaker Change: Full year gross margin increased by one basis point, and plus 120 basis point build out there.
Speaker Change: SG&A.
Speaker Change: One basis point of margin expansion enabled by cost efficient action, Despite Michigan reinvestment and so that's what supports our small business.
Speaker Change: And uhm.
Speaker Change: Mitch.
Speaker Change: We delivered over $750 million in gross cost efficiency for the year.
Scott: We Scott.
Scott: Across more Cui and convertible and continued back office savings.
Scott: This places us well on track.
Scott: Our core target.
Doug It's bill.
Scott: Yes.
Scott: Focusing on our more prudent.
Scott: We grew our estimated user base by over 5 million people.
Scott: Or reached uplift.
Scott: <unk>.
Scott: Legal aid users.
Scott: These numbers are split.
Scott: This includes an estimate.
Scott: Slide 7 million overall user and $1 million.
Scott: I am pleased to report.
Scott: Robust iclusig the rules.
Scott: $3 4 million versus prior year, and one 5 million during it.
Scott: This growth is broad based and consistent with recent periods Despite limited new market opening.
Scott: Characterizing piggyback.
Scott: Overall.
Scott: That's $1 5 million user a year on year driven by continued strong.
Scott: Action with legal.
Scott: Sure.
Scott: Despite the supply constraint.
Scott: Joining me now on Michael.
Well use the momentum is reflected in adjusted volume growth of over 16 billion unit.
Scott: In line with the prior year, despite being blocked.
Speaker Change: You bet.
Speaker Change: This growth is also in line with the five year average and more than 1 billion Boe.
Speaker Change: When excluding contribution from the market.
Speaker Change: Launched in the current year.
Speaker Change: Importantly, following the rollout of Iqos and with increasing scale of the business.
Speaker Change: Profitability also iqos is growing.
Speaker Change: Misread this year with the index for the contribution overtime.
Speaker Change: Right.
Speaker Change: As we've explained before.
Speaker Change: Business to consumer operation.
Speaker Change: It is declining.
Speaker Change: That user over time.
Speaker Change: A user count growth in the market.
Speaker Change: This is a dynamic we expect to continue in the future.
Speaker Change: Turning to Iqos in Europe.
Speaker Change: As expected.
Speaker Change: Our unit growth accelerated when we image.
Speaker Change: Almost 11%.
Speaker Change: Each one progression of around 8%.
Speaker Change: This resulted in robust was 19, 4% overall for the year.
Speaker Change: Right.
Speaker Change: And with some of the debt.
Speaker Change: Eric.
Speaker Change: We're done.
Speaker Change: This double digit adjusted EBITDA growth was.
Speaker Change: Driven by strong progress in the large number of market.
Speaker Change: <unk> growth of around 20% or more.
Speaker Change: Market.
Speaker Change: Germany, Romania, and Spain, while growth was less dynamic in Poland, Czech Republic anything.
Speaker Change: Recovery.
Speaker Change: Ongoing including the discipline of the ban although at a slightly slower pace than expected.
Speaker Change: Sure.
Speaker Change: The continued momentum in the region drove Q4 adjusted share growth.
Speaker Change: <unk> thousand nine year on year 10, 6%.
Speaker Change: Is that just that I am as volume, reaching $13 5 billion unit on a four quarter moving average.
Speaker Change: While shipment volume increased by 6% against the prior year comparison, which included additional volumes related to the implementation of the Citibank, notably.
Notably Nathan.
Speaker Change: This is a bad is now active in all that.
Speaker Change: New market.
Speaker Change: Is the generally consistent.
Speaker Change: Short term disruption followed by a return to the premium growth.
Following an impact of around 2 billion units.
Speaker Change: Sure.
Speaker Change: Around $1 billion in both segments.
Speaker Change: Annually that you may take.
Speaker Change: Most women that effect in the fourth.
Speaker Change: But.
Speaker Change: We also continue to rollout.
Speaker Change: A new consumable volumes with Gilead and read yet more market.
Speaker Change: I think an increasing choice.
Speaker Change: Finally on slide one.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Looking at our PCT of pictures in Europe.
Speaker Change: A number of important milestones we achieved.
Speaker Change: Achieving over 40% share.
Speaker Change: <unk> over 30% and London approaching 10% with Madrid, and that's far beyond.
Speaker Change: Japan delivered outstanding results yet again.
Do you I, just had a growth of close to 13% boosted quarter.
Speaker Change: And the good year to reach an adjusted for sure.
Speaker Change: No.
Speaker Change: Yes.
Speaker Change: One point higher year on year.
Speaker Change: This was supported by continued schedules of Sara and Cynthia.
Speaker Change: Well as the positive traction.
Speaker Change: Goodbye.
Speaker Change: We reach over $9 5 million.
Speaker Change: Sure.
Speaker Change: So the overall.
Speaker Change: Category, which.
Speaker Change: 8% in December.
Speaker Change: The addition of <unk> and Mackenzie.
Speaker Change: Exceeding the 50% share.
Speaker Change: On the national business, 47% of the total industry.
Speaker Change: No.
Speaker Change: Outside of Europe, and Japan.
Speaker Change: The growth continues.
Speaker Change: Paul.
Speaker Change: What are you seeing growth in a number of market you get inspected by EQT can shed in Saudi Arabia, Indonesia and Mickey.
Speaker Change: Continuous innovation is a key driver of your growth this year at your volumes in <unk> in Indonesia, I think at least in the quarter and some good initial results from the sale of loans.
Speaker Change: Aloha.
Speaker Change: Lower tier offering.
Speaker Change: Iqos continues to narrow.
Speaker Change: Zero.
Speaker Change: <unk> performance was impacted by the dynamic of the convertible market, where competitor supply normalized and a very strong quarter. Following the launch of <unk>.
Speaker Change: William.
Speaker Change: Our duty free.
Speaker Change: Sure.
Speaker Change: Nike.
Speaker Change: We stopped the strength of our portfolio and drive sales of Iqos.
Speaker Change: And we gather.
Speaker Change: Turning now to the U S, where our Iqos would be the first campaign campaigning you've seen is progressing well and we expect to come in direct sales of device and its E.
Speaker Change: Around the end of Q1.
Speaker Change: We have seen IHS.
Speaker Change: With over 4000 adult smoker.
Speaker Change: <unk>.
Speaker Change: As we learn from this the initial.
Speaker Change: The engagement.
Speaker Change: We are planning the rollout of platelets.
Speaker Change: <unk>.
Speaker Change: As you know our focus will be on the.
Speaker Change: Adult consumer engagement and building awareness.
Speaker Change: Category and bring litigation in legal age smokers.
Speaker Change: Not.
Speaker Change: Any significant volume from your Iqos before.
Speaker Change: Looks like with Newmont and we continue to.
Speaker Change: Or an <unk> solution.
Speaker Change: That's right.
Speaker Change: Switching categories now to <unk>, where we continued the weapons and some demand supported Q4 achievements during growth of plus one 2% year on year.
Speaker Change: $165 million yet.
Speaker Change: Despite ongoing potential mutation.
Speaker Change: The next generation to a new record sequential increase.
Speaker Change: Million Kansas.
Speaker Change: On a full year basis shipment volumes grew by 119 million tons.
Speaker Change: Highlighting both the magnitude of growth and the tremendous report made to maximize our predictions.
Speaker Change: Category share incrementally improve through the second half.
Speaker Change: Reaching five 9% in Q4 as.
Speaker Change: As we progress increasing quality and further.
Speaker Change: The growth of the capability.
Speaker Change: Indeed category growth slowed significantly during the summer peak.
Speaker Change: Just like in Spain as soon on the stock.
Speaker Change: As the situation started gradually improve zinc was again.
Dean: Dean and outpacing the category.
Dean: I am pleased to share that underlying demand for zinc from adult consumer.
Dean: <unk> grew in Q4 and was higher than previous.
Dean: Yeah.
Dean: We continue to experience some outflows.
Dean: Dell and while production capacity continues to increase we now target to normalization sometime in the second half.
Dean: Right.
Dean: We continue to target around 900 million of Capex.
Dean: For the full year from our <unk> facility.
Dean: And as supply continues to improve.
Dean: We look to further extend well beyond our existing customer base or their legal agent that need it.
Dean: Our Greenfield site in Colorado is due to come online.
Dean: And we believe we are well positioned to capture these potential over the coming year.
Dean: Responsible regulation of the industry.
Dean: And demonstrable.
Dean: <unk> sustainable future growth.
Dean: In any category.
Dean: We are therefore encouraged by the recent FDA authorization for the marketing and sale of all the nicotine pouches currently marketed in the U S.
Dean: Following extensive.
Dean: You bet.
Dean: As mentioned these magazines, a FERC and only authorizing different boats in the market.
Dean: Among several consideration where the system is really lower amongst them.
Dean: The cigarette and smokeless tobacco product.
Dean: Well, our current low levels.
Dean: The Fda's authorization marks an important step in the protection afforded.
Dean: By recognizing the rule that Lincoln place, providing better right.
Dean: And other traditional tobacco products.
Speaker Change: I don't.
Speaker Change: We remain committed to driving industry standout.
Speaker Change: One prevention.
Speaker Change: Display designs.
Speaker Change: Designed to prevent to Texas.
Speaker Change: So, they're making trade initiative.
Speaker Change: For the remainder of Copa and we didn't get the significant level of resources.
Speaker Change: Is it cool.
Speaker Change: Zane.
Speaker Change: So as an exciting future outside of the U S.
While still in very early stages internationally couldn't box shipments grew by 27 million tonnes of plus 75% and.
Speaker Change: And we already see some building momentum in key international markets with respect you've done South Africa, Mexico, the UK and global duty free.
Speaker Change: We launched nicotine pouches and CPU market during the quarter, we reached a total of 67 worldwide, including Italy. Meanwhile, in Taiwan.
Speaker Change: E vapor, we think agencies will consume that section behind we've won the grant.
Speaker Change: Equal split position.
Speaker Change: In European market and.
Speaker Change: And as the number one position in spine.
Bill: Thank you Bill.
Bill: <unk> plays an important role within our multi category strategy as an increasingly trusted choice for small groups a degree for the users and the source of incremental growth.
Bill: Excellent.
Bill: Our primary focus for the convertible business maximize value over time, while supporting the growth of this.
Bill: Lightning and cost efficiency.
Bill: We can either like performance, while mentioning our category leaders.
Bill: We delivered another robust quarter with growth of one 1%.
Bill: All regions contributed to this point to for organic net revenue growth.
Bill: The six 2%.
Bill: Gross profit increasing by 10, 8%.
Bill: What are your pricing of eight 7% included spoke contributions from Germany and.
Bill: In Turkey.
Bill: We expect organic since 2012.
Bill: Both bison normalized plus five to plus 6%.
Bill: Lastly, with Egypt.
Bill: They are inflationary accounting.
Bill: Thank you Scott.
Speaker Change: Category share was flat in Q4, we split it is contribution from Turkey, and India offset by declines in Egypt, and Indonesia with continued growth in the <unk>.
Speaker Change: Tier one statement.
Speaker Change: The full year basis, we grew category share plus European.
Speaker Change: One point, reaching all time high for both Marlboro and our global brands overall.
Speaker Change: Yeah.
Speaker Change: This brings me to the outlook for 2025.
Speaker Change: We expect another year of strong growth from all categories, driving top and bottom line delivery.
Speaker Change: We anticipate the <unk>.
Speaker Change: Consistent with year of working with growth.
Speaker Change: Plus 2%, notably driven by another year of strong growth and smoke free product at their own plus 12 plus 14%.
Speaker Change: Well it goes we expect a continuation of strong momentum.
Speaker Change: Absolute growth in.
Speaker Change: Adjusted arguments would you expect it to be a similar level to 2418 I'm thinking.
Speaker Change: The third growth.
Speaker Change: Yes.
Speaker Change: This is Bruce.
Speaker Change: We expect shipment growth to be broadly in line with this double digit trajectory subject as usual nearing bullock.
Shipments I mean and trade inventory movement.
Speaker Change: We expect ongoing strong growth dynamic within the U S nicotine pouch category.
Speaker Change: Despite the supply constraint I mentioned before we forecast U S volume shipment range of 788 million for the year.
Speaker Change: Supported by capacity expansion.
Speaker Change: This represents another year of system integration volume.
Speaker Change: Unexpected increase of approximately 200 to 112 million tons compared to the one of them.
Speaker Change: Median can increase.
Speaker Change: Sure.
Speaker Change: This.
Speaker Change: The total PMI forecast.
Speaker Change: With 8% organic net revenue growth.
Speaker Change: This includes a headwind of over 100 basis points due to either inflationary accounting in Egypt.
The cyclical impact of.
Speaker Change: International model.
Speaker Change: Indonesia tier one cities.
Speaker Change: The churn Indonesia has no effect on the pricing.
Speaker Change: Moving down the P&L, we expect ongoing small community effect operating leverage and cost efficiency to drive double digit adjusted operating growth, but I think the rules are.
Speaker Change: <unk>.
Speaker Change: Wisdom.
Speaker Change: These include.
Speaker Change: Gross profit growth.
Speaker Change: <unk> growth and that just sort of the margin forecast the extent.
Speaker Change: Organic and adjusted the loft them absolutely.
Speaker Change: We expect SG&A costs to increase broadly in line with net revenue on an organic basis.
Speaker Change: As we invest behind our estimates.
Speaker Change: We forecast currency neutral adjusted.
Speaker Change: The growth of less than 5%.
Speaker Change: Welcome.
Speaker Change: These factors in essentially stable net interest expense and an increase in our execution.
Speaker Change: The corporate tax rate to approximately.
Speaker Change: 5000 coupons like descent.
Speaker Change: Tax increases 90, OECD global minimum tax and the mix of international.
Speaker Change: The lockdown, we forecast growth of flu season.
Speaker Change: 9% range of seven.
Speaker Change: Given there are $47 17.
Speaker Change: This includes an unfavorable forecast currency.
Speaker Change: 90% occurring in late December.
Speaker Change: Similarly, driven by the broad strength of the data are mitigated by our genes.
Speaker Change: Yes.
Speaker Change: For the first quarter of 2025, we expect a strong start to the year with net revenue and operating income growth broadly in line with our full year objectives.
Speaker Change: Despite the leap year comparison.
Speaker Change: We forecast adjusted <unk> growth of around plus 10%, which factors in the large and utilization.
Speaker Change: Included in the quarter.
Speaker Change: Progress improvement.
Speaker Change: We forecast shipment volume of 75 to 7 million or <unk>, and 171 8 million tons for USD.
Speaker Change: We project one adjusted diluted EPS of $1 eight 1 billion.
Speaker Change: Including a negative currency value for <unk>.
Speaker Change: When rates and an effective corporate tax rate to three points higher than the prior year quarter.
Speaker Change: You said <unk> 'twenty 'twenty four delivering inconsistent supply outlook, we are well positioned to meet or exceed all metrics of the 2014.
Speaker Change: Targets presented at our centers.
Speaker Change: Year to date.
Speaker Change: This is especially true at the level of operating income growth as well.
Speaker Change: Delivery.
Speaker Change: Our ability to achieve.
Speaker Change: Okay.
Speaker Change: This level of top and bottom line growth reflect a best in class growth profile within the context of lockstep intimate that going to be.
Speaker Change: You will also well on track to deliver high single digit adjusted.
Speaker Change: Both of them.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: It's been great.
Speaker Change: Indeed, we measure our cash flows.
Speaker Change: And after we got delivery.
Speaker Change: For which.
Speaker Change: We expect to deliver operating cash flow of around $11 billion.
Speaker Change: Right.
Speaker Change: This is in line with.
Speaker Change: For once accounting for nonrecurring payment discipline impact of around $1 billion.
Speaker Change: While we continue to achieve the Germans export subsidy, we have decided to make.
Speaker Change: A billion dollar payments each year and we also anticipate the final transition tax payment related to the U S and Europe.
Speaker Change: Paul.
Speaker Change: We anticipate capital expenditure of around one 5 billion that are these the last portion of this related to the U S.
Speaker Change: As we prioritize investment behind.
Speaker Change: <unk>.
Speaker Change: Our strong 2020 for cash flow and EBITDA growth combined with the favorable impact from our euro balances at June <unk>.
Speaker Change: Allowed us to reduce our net debt to adjusted EBITDA ratio by reopens lifetime.
Speaker Change: 66, well ahead of our expectation and representing a dramatic acceleration.
Speaker Change: Acceleration of OID.
Speaker Change: Deleveraging.
Speaker Change: Expect further progress in 2025, placing us on track.
Speaker Change: If I get to ensure of around two times by the end of <unk>.
Speaker Change: Yeah.
Speaker Change: I will now that we get sick for concluding remarks.
Manuel: Thanks Manuel.
Speaker Change: Somewhat.
Speaker Change: In summary, 2021 of the ones that we monitor but yet for PMI.
Speaker Change: Our final shall resolve it neutralize the plans of our strategy.
Speaker Change: The volatile formation with underlying momentum.
Alrighty.
Speaker Change: But there's no sales on pricing than we thought.
Speaker Change: Awesome.
Speaker Change: We remain confident in our position as the global smoke the same form as well.
Speaker Change: Continued to lag.
Speaker Change: Our multi category strategy.
Speaker Change: <unk> been one Glenn Iqos.
Speaker Change: <unk>.
Speaker Change: Sure.
Speaker Change: Our key strategic priorities for 2020.
Speaker Change: But.
Speaker Change: As we continue with the support of the punishment on development of our multiple Walgreens annualized.
Speaker Change: Last one.
Speaker Change: We expect continued momentum in plentiful supply and we remain confident in our ability to believe that.
Speaker Change: Our 2020.
Juan Fonseca: Juan Fonseca.
Juan Fonseca: As we progress towards our ambition of becoming substantially supported by quantitative.
Juan Fonseca: Finally, and importantly, our strong growth outlook and a highly cost one without the dismal enables us to continue reinvesting in our smart grid transformation.
Juan Fonseca: While it will part of the investment portfolio.
Juan Fonseca: In September.
Juan Fonseca: Our annualized dividend for the 17th consecutive year.
Juan Fonseca: With our long term funding.
Juan Fonseca: Thank you.
Juan Fonseca: Well the NIE testing.
Juan Fonseca: Now one of your questions.
Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.
Speaker Change: And our first question today comes from Matt Smith of Stifel. Your line is now open.
Matt Smith: Hi, Yes, I can emmanuel good morning.
Speaker Change: Medicare by abortion.
Speaker Change: The 2025 outlook calls for <unk> shipments in numbers or in market sales growth fairly in line with what you saw in 2024, but could you talk about the composition of the growth. If it's overall in line are you seeing different contribution by geography in your outlook.
Speaker Change: Can you remind us on if there has been any progress in new markets contributing to growth in 2025, or if you've made any progress in those markets. As you look out to your 2026 calls. Thank you now.
Speaker Change: So in our guidance.
Speaker Change: Franchisees continue seeing good growth in Japan.
Deane: And Deane there.
Speaker Change: Number of parts in Europe.
Manuel: Manuel mentioned about the Italy, Czech Paula and try to win the growth of.
Manuel: EBITDA below what we would expect at this stage, especially in Italy and Czech following.
Manuel: The flavor.
Manuel: Barton, but we also see that there is some recovery coming in the sort of thing who know.
Manuel: Hopefully in the second part of the year, we should.
<unk> and other geographies that part up toward the rest of the Europe piece going through and towards have not in the guide dialysis Schulman is significant new market openings in terms of our volume.
Manuel: As you know.
Manuel: And I had it in my remarks.
Manuel: And they know where they will incorporate this rationale or fighting with the irrational worth.
Manuel: <unk> debt.
Manuel: Most recent.
Manuel: <unk> of EBITDA following our call.
Manuel: Organizations of heat not burn out the powertrains will.
Manuel: It will be.
Manuel:
Manuel: Incentive for encouragement by other governments, which to preventive of Franks to precipitously appulse smoke free products away, allowing cigarettes, but in our guidance, we have not presented significant volume coming from the new geographies. So this is all organic good offense as you.
Manuel: So it's in the four quarters of this year.
Manuel: Despite that fact, given if you look at Japan, when almost half of the market is already on a on a smoke free products that growth continuous though.
Manuel: Thank you Jessica I'll pass it on.
Manuel: Thank you.
Speaker Change: Our next question comes from Bonnie Herzog of Goldman Sachs. Your line is open.
Speaker Change: Alright, Thank you Hi, Manion yardstick London.
Speaker Change: I had a question on your margin Youre guiding robust operating leverage on a currency neutral basis. This year. So.
Speaker Change: Hoping you could highlight.
Speaker Change: And the key drivers behind this also sort of wanted to verify if your guidance assumes a potential entry of a U S or.
Speaker Change: Just possibly it continued investments without any corresponding sales and then.
Speaker Change: How should we think about the margin contribution front of alumina in the U S and how long it might take after year entry.
Speaker Change: The market for those margins to really be meaningful.
Speaker Change: Yeah, So maybe I start Bonnie good morning is there.
Bonnie Herzog: Yes, we're looking for a robust margin expansion this year might be not precisely to the same level as we had last year, but still it has gone up a robust set of changes.
Bonnie Herzog: Under the basis points of solid territory is this what we are looking into is that.
Bonnie Herzog: Combinations of actual facts that we're still looking at the pricing contributions for <unk>, There's obviously a positive.
Bonnie Herzog: Mix right between our categories, and especially now that we have a pretty small categories.
Bonnie Herzog: On the positive.
Bonnie Herzog: Jean Pascal in clothing today vape.
Bonnie Herzog: Very happy that's.
Bonnie Herzog: Our strategy of growing selectively but.
Bonnie Herzog: The rise in focus in the geographies that this new debt will not delivering.
Bonnie Herzog: <unk> behind July marching behind.
Bonnie Herzog: So this will contribute and we've had in the past as you remember quite a headwind headwinds coming from Cogs and I think those have.
Bonnie Herzog: I think they are.
Bonnie Herzog: Behind US. Okay, then obviously this whole.
Speaker Change: Conversations this base here and are especially coming from the U S about the topics and salon, but the way we organize our supply chain as Youll know you asked some the zune is essentially self sufficient.
Bonnie Herzog: Our supply chain in Europe, we are going.
Bonnie Herzog: Nice our supply chain automotive buy blocks, so I don't see.
Bonnie Herzog: At this.
Bonnie Herzog: At this stage they shouldn't be any surprises coming on the tariff side. So I think we're pretty confident where we are left with the cogs for the year.
Speaker Change: The resolve the Austria ongoing soft forthcoming from the scale of Iqos, especially devices.
Bonnie Herzog: When.
Bonnie Herzog: Okay that was the economy of scale there was the robustness of the device in terms of the quality et cetera. So we actually don't have.
Bonnie Herzog: Like in the past a bit of a pressure on the margins.
Bonnie Herzog: Coming from a device.
Bonnie Herzog: We have well stabilize for 'twenty or 'twenty, four or so behind the margin expansion and I think rich.
Bonnie Herzog: Should we expect the same level, we are expecting the same in.
Bonnie Herzog: <unk> now your questions.
Bonnie Herzog: <unk> U S.
Bonnie Herzog: Okay, maybe one by one we still expect that hopefully.
Bonnie Herzog: We will get that translation for Iqos Zillow Ma around the needs of this euro.
Bonnie Herzog: Again.
Bonnie Herzog: On the one hand.
Bonnie Herzog: One quick to read this as encouragement tough tour as we said its total high end if you've got such a review of our EBITDA is it gave us organizations followed by the <unk>.
Bonnie Herzog: I wouldn't be mice wouldn't be myself I wouldn't comment that obviously, some big takes five GRS it must be total because otherwise I kind of explained.
Bonnie Herzog: The length of the process, but I do hope that.
Bonnie Herzog: F D a.
Speaker Change: We laugh.
Bonnie Herzog: More fast faster and Iqos.
Bonnie Herzog: <unk> spending for a while and by the way a few other also authorization.
Bonnie Herzog: Photos are present so.
Bonnie Herzog: Margins start out with the repeat myself that obviously when we start adding.
Speaker Change: Support behind Us behind Zillow Ma.
Bonnie Herzog: Initial period, if you will.
Bonnie Herzog: <unk> got to eat but in that scheme of the Phoenix in the P&L size. If you like of our business in the U S. I don't think it should be something which is.
Bonnie Herzog: That's mature it and I believe the U S will go into a similar purpose as we have done are keeping up the burden and other places so two to three years, we should iqos.
Bonnie Herzog: Iqos should be net net contributory to.
Bonnie Herzog: To the bottom line.
Bonnie Herzog: Bearing in mind as always a reminder, capital arm that we don't really.
Bonnie Herzog: They're cut.
Bonnie Herzog: Duane cannibalization right. So we've done three we're weighing a better starting position and we had a growing confidence in diet Coke Zero Mountain International, but we know where iqos Hello, my products and international over the last three years.
Bonnie Herzog: It's generating the growth user acquisition. So I believe it's really a great proposition for that.
Bonnie Herzog: Smokers in the U S.
Speaker Change: Maybe just to complement on the margin side Bonnie.
Speaker Change: As you can judge from our guidance, we have significant ambition in terms of margin improvement in 2025, and what is driving that is the fact that we are flying on civil engineer on margin improvement and everything is coming together pretty positively at the same time. So indeed, we have of course the mix.
Speaker Change: Evolution that is very favorable to us.
Speaker Change: We smoke free product coming with a higher margin and they are growing very fast amongst those multi product we have the U S and zinc that is growing even faster and which as we already said is best in class in terms of margin. So that's obviously a plus.
Speaker Change: We are also increasing price, yes of course, we are not going to continue to deliver 8% plus price increase.
Speaker Change: On Congress people that he is going to remain extremely robust.
Speaker Change: And we also have the ambition to.
Speaker Change: Grew our price not at the same level, but significantly on our smoke free portfolio and then when we look at our Cogs. We are working on productivity as a scale effect that are delivering positively and as you know we were fishing and till now significant edwin on cost.
Speaker Change: On the convertible business.
Speaker Change: This is easing 25 should be better and 26 could be even better than 25 by the way. So we are going in the right direction, there and that is making us clearly targeting nice margin improvement both organically and thereafter and 425.
Speaker Change: Okay Super helpful and actually I'm, just going to ask a quick follow up because you kind of touched on this but you also mentioned this morning.
Speaker Change: About targeting or you continue to target gross margin expansion in combustibles and then you did say that you expect the gap to grow tier smoke free product gross margin. So previously.
Speaker Change: Previously you guys have talked about I think a 10 point gap so.
Speaker Change: Your gross margins expand on.
Speaker Change: Basketball.
Speaker Change: Think what I'm hearing you say is that not only is that an opportunity. But also continued margin expansion on smoke free it's what you just mentioned.
Speaker Change: Do you foresee that gap expanding I mean does it go to 15 point spread or could it go to 'twenty. It just kind of trying to think through that in the next couple of years.
Speaker Change: Luke on the consumable we've already highlighted the fact that there was a 10 percentage point gap and it has been expanding in the last few years. So indeed, we have the ambition to do better on the gross margin for convertible and we explain why.
Speaker Change: But as we continue to progress also rapidly on smoke free product.
Speaker Change: <unk>.
Speaker Change: Mix effect coming from from Zane, but separately on Iqos and <unk>, we want to continue to progress.
Speaker Change: So we could have indeed, a gap that could continue to expand between smoke free product and convertible in the in the coming years.
Speaker Change: Alright, Thank you I'll pass it on.
Bonnie Herzog: Thank you binnie.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Greg <unk> of Barclays. Your line is open.
Speaker Change: [noise].
Speaker Change: Good morning.
Speaker Change: The assay.
Speaker Change: My questions Kevin.
Speaker Change: But then so if I look at the scatter makeup.
Speaker Change: Volumes are decelerating to mid teens growth.
Speaker Change: <unk>, 44% to 41% growth and then you also mentioned that the supply normalization that only happened in <unk> 25. So just wanted to understand what gives the part in front of that.
Speaker Change: Then there'll be actually total.
Speaker Change: This almost 40% growth rate again.
Speaker Change: So I would think would go down because logic. So we look all of <unk>.
Speaker Change: How the volumes what are evolving in Q4 of the weeks of the last quarter we.
Speaker Change: We see that growing velocities.
Speaker Change: Behind US then and actually there was the ultimate brand I think over the last few weeks.
Speaker Change: Which was growing at a velocity not the rest of the at least the big four other brands are smaller but big other brands.
Speaker Change: Look we are also have to understand that we're already in golf this data.
Speaker Change: Now full supply of the supply constrained environment.
Speaker Change: We call that Youll see it there.
Speaker Change: Retail dependency win and which sold as Youre looking at something which would be significantly different than what we shipping too.
Speaker Change: So the to Detroit, but Q4.
Speaker Change: Yes.
Speaker Change: Predicted they.
Speaker Change: They increased capacity on Owensboro.
Speaker Change: We've had the first quarter with the significant sequential quarter on quarter growth.
Speaker Change: Even if you will take the run rate of what do we see the last weeks et cetera.
Speaker Change: The guidance is somehow reflecting what we see.
Now dollar comments that.
Speaker Change: We should we think that we should be meeting demand.
Speaker Change: By about mid of this year.
Speaker Change: I have to make around the reserve ratio means that.
Speaker Change: It's difficult to ask Joe to read what the demand is because we know what is the level of out of stock would know what does the existing users of ASEAN.
Speaker Change: Demand for the product and knowing that this.
Speaker Change: This purchases or the purchases.
Speaker Change: Have impacted by the fact that Fortunately they are confronted with the lack of lack of availability availability to out of stock and that means there.
Speaker Change: All the positives for momentum, which does and has I believe also.
Speaker Change: The FDA our organizations reach.
Speaker Change: The one hand want to put the right product growth in our market. So there is no change.
Speaker Change: But actually I think it gives a lot of.
Speaker Change: Our visibility and stability to all the market participants, including trade and I believe also the consumers that the product can now has the full fledge right language authorization in NOLA flavor body honest so all of this things.
I think will translate into the volumes, which we prefer projections of the volumes, which were reflected in our in our guidance.
Speaker Change: Sure and a follow up question to that.
Speaker Change: Simply I mean supply shortages due data as had been putting their mock ups I think you increased pricing.
Speaker Change: Tier one retailer or increased pricing by $1.
Speaker Change: $3 $5, how do you control the retail price of one of also Youtube as supply normalizes to reduce retail price. So that that will also have a positive effect on your volume.
Speaker Change: Yeah. So generally if you're kind of at the grille. The out of stock is Zen is experiencing its obviously.
Speaker Change: Uh huh.
Speaker Change: Managing the price at the retail level at least.
Speaker Change: It's a little bit more challenging right.
Speaker Change: Yes.
Speaker Change: I believe with the growing demand.
Speaker Change: This started with a growing supply of the product I think this pricing a while to come to the Samsung naturally to the normalization. So I have to also add to meet that look we're very happy with the support we're getting from <unk>.
Speaker Change: Retailers handling all the products and it's not that easy for them also to be confronted with.
Speaker Change: Product, which under one hand has the demand on the other hand, they cannot realize the margins.
Speaker Change: They take from us in price.
Speaker Change: And I Hope My bank and I think that general just pricing situations in the market will sort of some color on that shortly at the moment when the product will be in a fuller unconstrained suppliers as we said.
Speaker Change: Second half of 'twenty five we should start seeing we should start seeing improvement.
Speaker Change: Sure and if I could.
Speaker Change: Squeezing one last question on vanilla crop could you just talk about that the LTM wonder product again then.
Speaker Change: You can see it in the market.
Speaker Change: So obviously as well as we all know to thrive <unk> cauterization pay them.
Speaker Change: Essentially lost days or hours. So the one administrations now I guess, we'll have to wait for that.
Speaker Change: For the new outdoor has started for the new administration.
Speaker Change: As I said in the.
Speaker Change: In the answers to the questions before that I.
Speaker Change: I do hope that.
Speaker Change: Periodic photo of five years waiting for amortization.
Speaker Change: Yes.
Speaker Change: Too much.
Speaker Change: Mr Locke.
Speaker Change: I do believe that there will be some I hope there will be some acceleration in the processing because of the authorizations and.
Speaker Change: To also understand that pilot study the challenge, which the U S market has very much on the very product. Despite the fact that the legal part of the market has not be create.
So underlying.
Speaker Change: EBITDA is doing a lot of right things in terms of their.
Speaker Change: Law enforcement changed into illegal Chinese or whatever importance of on the other hand, there is a demand among the small Curtis adult clinical 10 users for this type of a product and unless we create.
Speaker Change: In a fast manner, the legal part of that market.
Speaker Change: Well.
Speaker Change: We essentially.
Speaker Change: Wasting our time and money so I do believe that EBITDA.
Speaker Change: I'll take this one salvina considerations that.
Speaker Change: This situation shutdown happened in our product categories.
Speaker Change: There is the demand of the product.
Speaker Change: Good day.
Speaker Change: All of that the inflows into space and believe that part of the mall and then excellent volume growth for the law enforcement et cetera, the illicit market, but you kind of just control the illicit market. If you haven't provided the legal solutions in the market, which I available. So I don't believe that all of their iqos, sorry, iqos as well, but the Zen has.
Speaker Change: Some pending.
Speaker Change: Sure.
Speaker Change: I'll correlation so applications I should say.
Speaker Change: Believe that theyre going to be processed in a faster and faster than before.
Speaker Change: Yes.
Speaker Change: Thank you so much thank.
Speaker Change: Thank you Laura.
Thank you and as a reminder, if you have a question. Please press <unk> one.
Speaker Change: And our next question comes from.
Speaker Change: Eric Serrano of Morgan Stanley. Your line is now open.
Speaker Change: Great. Thanks, guys.
Speaker Change: Okay.
Yes give some color in terms of.
Speaker Change: What youre seeing in Italy you.
Speaker Change: You mentioned that the fourth quarter was a little bit softer than you had anticipated after the nice recovery you saw in the third quarter from <unk>.
Characterizing flavor ban and then in terms of Poland can you remind us when.
Speaker Change: When do you expect to see some disruption from the ban being implemented and what sort of an impact do you expect in terms of overall European combustibles business.
Speaker Change: And then.
Speaker Change: Lastly.
Speaker Change: On FX.
Seems like the FX headwind that you called out for the year and our guidance was.
Speaker Change: Less than what seems to be implied based on spot rates and your typical.
Speaker Change: Yen hedge wondering if theres been any change in the hedging policy or.
Speaker Change: If there is any reason why it may be a bit lower than anticipated. Thank you.
Speaker Change: Yeah. So.
Speaker Change: Maybe I'll take the last one is the easiest one and I come back to Italy, which is a bit longer story.
Speaker Change: 22 science at spot rates right now.
Speaker Change: But frankly speaking the biggest contributor to the negative as the Russian ruble.
Speaker Change: Thats well above the 60% of the body.
Speaker Change: Yeah, and actually goes in a sense of I guess it was.
Speaker Change: Color about the photo sent in our estimate is that the spot rates, obviously as we all know we're living in a pretty dynamic times.
Speaker Change: As we speak but this is what it is there was a big contribution last year coming from the Egyptian pound thrive when.
Speaker Change: We've had to take the heat that obviously will not repeat.
Speaker Change: Terrific.
Speaker Change: And.
Speaker Change: We're not repeating that in 25 actually.
Speaker Change: This will result in a positive currency variance, but this is on the currency. So frankly speaking at this stage is there a robot and the.
Speaker Change: And as I said for central Soma, the yen and the rest is just the mix value due to our international footprint. The monorail wants to add something I want to add something because I think I mean, the volatility we're seeing on the currency market today. It would be a good cultural tourists Rcs are working for us.
Speaker Change: I should first remind you that.
Speaker Change: We have natural important edging our balance sheet with more than 60% of our debt that is in euro and therefore, when we have a weakness in the euro versus the dollar which institution. We've seen recently of course, we have a negative impact on our P&L, but we have also a decrease of our debt in the lockdowns.
Speaker Change: And we're also benefiting from lower cost of the debt in Europe of course, lower interest rate interest costs in euros translated into dollars. So that has been certainly helping our trajectory in 'twenty four and if there was continued weakness of the euro that will continue to help us.
Speaker Change: In the future probably what is not fully captured by the market is the fact that indeed on top of that we have two significant edge position one on our exposure to the yen for 2025, we have around 60% of our exposure that is covered.
Speaker Change: Our rate of around 138.
Speaker Change: And for ones that are so that mean that we are not impacted by the placebo deterioration of the yen.
Speaker Change: For that part of of our exposure and we are also lower exposure to lower aging sorry on neuro.
Speaker Change: Where we have around a bit more than one shift is already one fourth of our exposure to euro where we are covered at 112.
Speaker Change: Which is also limiting the impact on the P&L when deal is going down so with everything I've been saying you have all the explanation.
Speaker Change: Do you think has been sharing with you on the Forex impact for us today.
Speaker Change: Yes.
Speaker Change: Italy, So I think the second half was weaker than may be <unk>.
Speaker Change: <unk> Italia was growing interest.
Speaker Change: But it's not all but whenever.
Speaker Change: Member states of the yield for the flavor ban.
Speaker Change: I think what we see is that.
Speaker Change: Some small some users have helped.
Speaker Change: Temporary but the return for cigarettes, which always was that the risk. So that also explains in some geographies the secular trends.
Speaker Change: Slightly a better than mono cooks.
Speaker Change: Expect a quick thing there is some poly yields between database products very much.
Speaker Change: I believe.
Speaker Change: Might be part of Australia also explains why our beef proposition.
Speaker Change: As advanced.
Speaker Change: March you Nathan.
Speaker Change: And this was in the <unk>.
Speaker Change: Sure.
Speaker Change: Refinish parts in a closed system.
Speaker Change: Yeah.
Speaker Change: That is sharply after a short period of time, John travel to the number one proposition.
Speaker Change: When you might be looked at.
Speaker Change: The category of a smoke free over a period of time on a total basis, because there will be some poly usage and sometimes driven by day events like this.
Speaker Change: Bye.
Speaker Change: Flavor is Bob but we also have a geographies in Europe that very shortly after the implementation of the.
Speaker Change: Of the eight flavors.
Speaker Change: Flavors ban I mean at the actually return to the.
Speaker Change: The growth rates, which we had before.
Speaker Change: Maybe it'll ease our player we're looking into this country, but as I said.
Speaker Change: Part of our multi category strategy is also should there be any leakage that they're keeping up revenues temperature and things move a proposition and then I guess, if we need a bit more time to see the stabilization Paul and you asked about the fall and I don't think Portland has put the stick in the ground.
Speaker Change: Each moment, they really want to fully implement Dubai.
Speaker Change: Well it happened.
Speaker Change: I think somewhere in the 25 million has to be if this is not.
Speaker Change: Is this because not put in the ground. It's March four at the end of this year.
Speaker Change: Great. Thanks, so much.
Speaker Change: Thank you. Thank you.
Speaker Change: Thank you.
Speaker Change: Sure.
Speaker Change: And our next question comes from.
Speaker Change: Think of UBS Your line is open.
Speaker Change: Yes.
Speaker Change: Good morning, guys. Thank you.
Speaker Change: General questions Hi, guys.
Speaker Change: Couple from me as well firstly on <unk>.
Speaker Change: On San again in the U S.
Speaker Change: We noticed a couple of your peers have have launched synthetic moist nicotine products and according to the scanner data have seen some.
Speaker Change: Initial uptake.
Speaker Change: How do you see the moist versus dry dynamic in the U S and where do you think the consumer.
Speaker Change: And in the future recognizing that in Europe, most products moist.
Speaker Change: And the second question.
Maybe it comes back to your comments around Italy, but just longer term.
Speaker Change: We see the vapor category continuing to grow.
Speaker Change: Quite strongly and we can discuss its floors around flavors marketing underage use et cetera, but do you see this as a headwind for the tobacco industry or do you believe the total pie can continue to grow with limited impact on tobacco.
Speaker Change: Yeah. So maybe the second part I think of.
Speaker Change: That brings the total pie grows despite the fact that the movements.
Speaker Change: Between the categories within a small creek.
Speaker Change: There was some dynamics right between a heat not burn and Ive been approaches now depends from market is organizing the regulated.
Speaker Change: We also know that.
Speaker Change: The most difficult actually to REIT category.
Speaker Change: Is that the way the moniker disorganized currently as they categorize because you'll have there.
Speaker Change: Disposables, you'll have that parts, you'll have opened tongue system still and some products.
Speaker Change: Right.
Speaker Change: The regulations and properly <unk> depends on the jurisdiction some products I just popping up in the market. So let's call. It the different forms of illicit trade, but kind of thing.
Speaker Change: Youll see this in the U S. But also in Europe in the UK and a few other places.
Speaker Change: And regulators governments, taking commodity serious low keyed until properly organized in that market.
Speaker Change: This will be completed in the 25, but definitely there is there.
Speaker Change: The most.
Speaker Change: Most are amongst the most value in the right direction I believe $25 26 that category should be normalized by the fact that it's going to be properly regulated and then we take it from there.
Speaker Change: I have another one to talk about the Youll flex publisher et cetera, because.
Speaker Change: Part of our policy.
Speaker Change: Our views on this one but definitely difficult to control of the discipline the market <unk>.
Speaker Change: And all of the different combinations of the product coming essentially you look out into the marketplace that obviously also enjoys the less disciplined trade channel.
Speaker Change: Completely invisible trade channel does it feel like et cetera. When it comes to your questions about the synthetic event is about is dry so just to take it from our perspective the way we look at the data in the U S. For example.
Speaker Change: <unk>, new things, which are coming into the market there was a quite.
Speaker Change: Long lease of a different ESCO uses and.
Speaker Change: The moist allow cars.
Speaker Change: The coal market, but thats part of the market if I am not mistaken go move year on year by barely 20 basis points. So in the scheme of this thing.
Speaker Change: Maybe a lot of dynamics on the on the on the weekly basis, but doesn't seem that is.
And the major attractions et cetera, the insights, which will have when we talk of our consumers we see.
Speaker Change: Yes.
Speaker Change: And obviously when you read the consumer insights, it's not a pure mathematical.
Speaker Change: <unk> the exact number but.
Speaker Change: I think that the most product small pouch products more appealing to the moist snuff.
Speaker Change: Hi, Bhavan users right like snows et cetera.
Speaker Change: What do we see in the market place that the dry product is more RFP.
Speaker Change: Towards the small cars and E vapor.
Speaker Change: Right.
Speaker Change: But this is what I can tell you at this stage.
Speaker Change: Thank you guys really appreciate that thanks.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Sure.
Speaker Change: Our last question today comes from Philip <unk> of Jpmorgan. Your line is open.
Philip: Hi, good afternoon, and thanks very much Terry.
Speaker Change: Yes.
Speaker Change: And I just had one question. Please I was just on the <unk> guidance.
Speaker Change: In Atlanta at the end of 'twenty, four and then I look at the guidance range of 10% to 12% used quite a difficult one to 25, but then just extrapolating that out for 'twenty six and looking at your guidance there of the $180 million to $200 million.
Speaker Change: Good.
Speaker Change: Shipment volume just trying to get a sense of what gives you confidence in.
Speaker Change: That sort of implies.
Speaker Change: Acceleration in the growth in 2026, and just wanted to understand I suppose what gives you that confidence that you will see that reacceleration.
Speaker Change: In 2026, thank you.
Speaker Change: Yeah, So as I said earlier, maybe in the guidance for this year for 25, essentially stay provided allowing to essentially focus on organic growth in their markets existing markets.
Speaker Change: Obviously, if you open the.
Speaker Change: <unk> 25, and beyond 2000 to six I think is becoming maybe more prudent or fair to assume that there will be some geographies also coming finally.
Speaker Change: And opening the market to the new proposition there was one point, which I.
Speaker Change: That might be with haven't articulated rallied.
Speaker Change: In our remarks, and the answers to the questions before is that.
Speaker Change: There is still about the 20 or so percent of the volumes on the heat not burn that we've done really well.
Speaker Change: Can't really realize the full growth potential and I'm, referring here to.
Speaker Change: The geographies of where Ross Shire and Youre correct now for obvious reasons, but because I was just look at the number itself <unk> too far off.
Speaker Change: I think we have left to beef up behind evolved.
Speaker Change: Six maybe even more point of a graph, which you would normally expect to delivery followed these markets who are.
Speaker Change: Subject to the same sort of market conditions as other places right Zillow my et cetera, So let's see how this sunrise I think the the graph, which would project is very much focused on organic organic meaning the geographies in which we have today.
Speaker Change: <unk> is a good growth volume terms is essentially.
Speaker Change: The same volume good offense, we used to have been a pause but also in a broader sense. We modern models see the potential of the multi category and the total volumes of the smoke free products is just in one category and as we know very well the margin.
Speaker Change: From the margin perspective.
Speaker Change: They all essentially create the great.
Speaker Change: Opportunities.
Speaker Change: <unk>.
Speaker Change: They all have greatly accretive to where do we have today and to especially to the combustibles.
Speaker Change: Second thing gauged on our Haynesville zoom, a little bit of mono price is what might be the more to this with our cognizant pezzella cognitive presentations, but from the user's perspective is actually pretty nice economic proposition, because we essentially down leveraging all the investments for deals that are acquisitions et cetera.
Speaker Change: And one of the category obviously it takes the burden off.
Speaker Change: Of acquiring the user but all the other product categories actually very nicely benefitted from Vishal <unk>. So you will hear from us more and more talking obviously, we'll give you the granularity about the kid not about <unk>.
Speaker Change: But I think.
Speaker Change: In the next few years, the focus will be more and more turning into total of smoke free rather than just the individual because theres also somehow reflects their <unk> directions user or consumer dynamics.
Speaker Change: Thank you very much.
Speaker Change: Thank you.
Speaker Change: Thank you I'm showing no further questions at this time I would like to turn it back to teens. Thanks now for closing remarks.
Speaker Change: Thank you before closing I'll call I'd like to remind you that.
Speaker Change: Yes, as I mentioned, we will be presenting at the Cagny conference on February 19th and we hope youll be able to join us 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 have a great day. Thank you. Thank you is the Q2.
Speaker Change: This concludes today's conference call. Thank you for participating and you may now disconnect.
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