Full Year 2025 British American Tobacco PLC Pre-Close Call

Chief executive and Javed ikbal are interim Chief Financial Officer. Welcome to our 2025 full year pre-class conference call. I hope you're all well and I'd like to thank you for taking the time to join us this morning.

Before we begin, I need to draw your attention to the cautionary. Statement regarding forward-looking statements as well as the notes, and disclaimer contained in the trading update.

Unless otherwise stated or comments will focus on constant currency, adjusted measures, which include adjustments related to profit from our Canadian combustible business.

And average year to date, share data is to September 2025 versus full year 2024 average.

I will now hand over to today, with a reminder that as always, there will be an opportunity to ask questions later on in the call.

Thank you, Victoria. Good morning, everyone and welcome. We remain firmly on track for full year results. And now expect to deliver around 2% revenue and adjusted operating profit growth.

I would like to begin with 4 key. Takeaways from today's update.

First.

I'm particularly pleased that our us business has continued to deliver positive momentum in the second half.

Driven by ongoing combustibles delivery and an excellent Villa plus performance.

As the world's largest nicotine value pool, the US is an important growth engine for our business.

Second, we expect an acceleration in our new category. Revenue growth to double digit in the second half.

Driven by modern Norway cross, all 3 regions and recent Improvement in US vapor.

We expect to deliver meet single digit. New category, Revenue growth, for the full year.

Third, we expect the new category contribution growth to accelerating H2 driven by our quality growth discipline.

Together this reinforced our confidence in the delivering our midterm algorithm in 2026.

And finally, I remain fully committed to achieving our 222.5 times. Net debt to Aid, The Leverage targets for the full year 2026 while delivering sustainable. Shareholder value, through our Progressive dividend and the sustainable share buyback program with 1.3 billion pounds announced for 2026.

Let's start with new category Dynamics.

The global nicotine industry is growing and rapidly transforming with adult smokers, increasingly switching to new categories.

We are well positioned to benefit from this consumer trends.

Leveraging, our world class insights.

Enhanced Innovation, ecosystem brand building and Regulatory expertise and distribution capabilities.

We have invested to build a well established and differentiated portfolio of global brands with premium product offerings across all 3 new categories.

Modern Norway is by far the fastest, growing new category globally.

And is highly profitable with a fast Payback.

It is now our second largest new category and is becoming a meaningful contributor to our group delivery as vo continues to go from strength to strength.

We expect to deliver double digits, Revenue growth, for the full year.

As we look continues to gain volume, share up 590 base points to 31.8% across top modern oral markets.

It's also positioned as the lowest risk new category containing 99% less toxicants when compared to cigarettes.

A recent peer-reviewed, clinical study, confirmed that oral nicotine Parts can deliver nicotine quickly and effectively to satisfy smokers.

In addition, the FDA has recently recognized the positive role that nicotine pouches can play in helping others transition away from combustibles reinforcing the role in tobacco harm reduction.

We are also encouraged that the FDA has committed to providing accurate scientific based information about the relative risks.

Of different nicotine products in order to combat consumer misconceptions that may prevent switching to reduce at Home Products.

We welcome the fda's Newport pilot program to streamline the pmta review process for nicotine pouches.

We are confident in the strength of our science and portfolio and we look forward to begin to being able to launch our leading high moisture, Modern Auto products in the US market.

Category values expected to almost double over the next 2 years and has already overtaken the size of the legitimate Vapor category at around 2 billion pounds.

Vop, plus, is the fastest growing us Modern Auto brand, it has a red. Richard, the number 2 volume value. Share category position, gaining 15% points of volume share since launch,

Encouragingly despite the heightened competitive promotion activity. We have seen in the last few months, our latest volume share is 21.9% in October up, from 6.9% in November, last year, prior to the launch of V. Plus

V plus has continued to the to drive. Triple digit us modern oral Revenue growth in H2 and importantly. We remain confident that it will deliver positive category contribution for the full year.

These results reflect the strength of our products branding and distribution capabilities, and the sharper, execution Tetra rejuvenated rhinos is delivering

In am we are clearly leaders selling at a premium price and strongly, outperforming our peers across the region.

We are close to 6 times the size of our closest competitor and continue to capture around 60% of category. Growth highlighting the further opportunity ahead

Our latest Innovation Villa shipped was recently launched in Kia counts and online. In Sweden.

It's a premium product designed to reshape the modern artworks experience, with a new Comfort pouch design.

5 new distinct and sensory flavors and the differentiated xcan designed it to stand out on the Shelf.

Yellow shift is driving criminal sharing channels where it has been launched with a full National Rollout, planned for January and further Market rollouts planed during 2026.

In heated products, our year to date performance. Reflects a transitional period, ahead of key innovation rollouts.

Globally, Michelle was down. 1.2 percentage points in top markets, primarily driven by heightened competitive pressures in their value for money, segments in Japan and the continued strategic phase out of our Legacy. Super Slims platform.

Share was down, 60 base points with continuous. Strong performance in Czech Republic's, Spain in Portugal more than offset by competitive Dynamics in Germany, Italy and Romania, as we reallocated resource ahead of the launch of glow Hilo,

Our new breakthrough, Innovation, platform gilu includes our first 2-piece device, and is designed to establish glow in the premium segments, which represents over 80% of Industry value.

In September, we launched the national in Japan, with a 360 degree Target marketing campaign, including a new flagship store in central. Tokyo immersive pop-up, experience with digital art, collaborations and strong retail visibility through convenience store takeovers,

We have focused on driving trial targeting premium, consumers in the combustibles and HP spaces through online and in-person activations.

Early performance. Indicators are positive with an increase in brand awareness together with the emotional and functional imagery resonating strongly with consumers.

We are encouraged by early trial to retention rates around 50% from both smokers and HP consumers.

While the heated products category remain remains highly competitive, we are confident in the strength of the of the of this Innovation and expect to progressively, gain, share in the premium space over time.

In line, with our quality growth strategy, we are focused on rolling out glow. Hilo in the largest heated, product profit pools,

Where we can generate the strongest returns. We launched in Poland, in October, in Italy November, and we'll continue the market roll out next year altogether. We expect broadly flat glow Revenue growth.

For the full year.

Vapor Remains the largest new category in terms of number of outdoor consumers and continues to demonstrate strong conversion of effectiveness.

Views, maintained Global value share leadership in track and channels across top markets at 38.3% up. 10 base points versus full year 24.

While the vapor category continues to be impacted by the proliferation of illicit products, we are encouraged by early signs of performance recovery in the US where views has returned to volume and revenue growth in recent months after 18 months of the client and gained 70 base points of value share here today to reach 50.4%.

Early signs of increased Feathering forcement, targeting borders, and larger, Distributors leading to increased seizures and finds together with enforcement at state level, with Vapor directory enforcement legislation. Now enacted in 18 states representing around 50% of track of the industry volume.

While we estimate around, 70% of the US Vapor industry value is illicit over time. We believe us is well, positioned to benefit from stronger regulatory enforcement at both the federal and state levels.

We are pleased to receive a favorable initial determination. On our International Trade Commission. Complaint from the administrative law judge, who has recommended a general exclusion order on imported, elicit Vapor device.

We expect a final determination from the ITC in the coming weeks which will then be subject to a 60-day presidential review.

In am our value share in tracked, channels declined, 50 base points, mainly driven by the impact of illicit. Headwinds in Canada.

Early consumer response to the phased rollout of our new premium product has been strong, with views, Ultra gaining, nearly 80% value, share in rechargeable. Consumables in Canada, close to 5% in Germany and 2% in France, in October reflecting, the appeal of its differentiated offer.

Are supported by proposition the views brand as Vapor done, right?

While we expect a high single digit Revenue decline for the full year. This is a clear Improvement versus the mid tense. Declining H1 primarily driven by the earliest signs of enforcement actions in the US.

The fully a performance with also being impacted by strategic decision to reduce our footprint and reallocate resources away from markets, where regulation enforcement, do not support the responsible level, and competitive playing fields.

32 combustibles where we have continued to offset, volume declines, with robust price and mix.

And efficiency gains, we expect an improving H2, Revenue performance led by the us in our top markets published at declined by 10, B points and value share was flat.

With the US gains of set by apnea and heightened. The competitive activity in some am markets.

While the US microeconomic environment remains Dynamic, the pace of Industry decline has improved versus prior years down around 8% year to date on a sales to retail basis.

Against this backdrop. I'm delighted that our us combustibles business. Is expected to deliver both revenue and profit growth this year for the first time since 2022.

in the US, our commercial actions, portfolio Investments and sharper execution, has driven value share growth of 20 base points with flat volume share

In am we have continued to deliver a resilient combustible performance with robust, pricing driving revenue and operating profit. Growth led by strong delivery in Brazil, turkey and Mexico.

We are also taking targets actions to rejuvenate key portfolio offers in Germany and Romania.

In up near growth, in key markets, including Pakistan Nigeria and Indonesia is expected to be more than offset by previously guided fiscal and Regulatory headwinds in Bangladesh and Australia.

Both markets are seen significant double digit industry reform. The clients here today

In Bangladesh, generous entering budget, introduced broad-based and increase in vat and supplementary duties. Alongside the largest ever hiked in minimal. Cigarette pricing materially impacting consumer for the ability.

In Australia years of exercises above inflation. Now, compounded by sweeping regulatory reforms the most extensive since plan package rules in 2012.

Are accelerating industry volume declines in the legal Market.

we expect this ineffective policies to further erode the legal market and fuel illicit trade, which are red accounts for over 85% of nicotine usage when combined with illegal Vapor use,

Warranty, these policies have also driven a return to growth in smoking incidents for the first time in 20 years. By establishing a lower tier of affordable illicit. Cigarette offers and are more than 50% reduction in government excise collection over the last 5 years.

Together. We continue to expect these headwinds to impact fully a group Revenue growth by around 1% and group adjusted operating profit growth by around 2%.

Turn into Cash.

Bets are highly cash generative business with operating cash. Conversion, expected to exceed 95% again in 2025, reflecting our strong cash, discipline, and a clear focus on returns.

Our financial flexibility continues to improve and we all track to deliver more than 50 billion pounds in free cash flow by the end of 2030.

We continue to focus on the the leveraging and we expect to be within our targets 2 to 2.5 times adjusted, net debt to adjust a bit the range by year end 2026.

Our progress has been further supported by the partial disposal of our ITC Hotel sticks last week.

As we transform. My remain committed, to delivering sustainable shareholder returns, through our Progressive dividend, which dates back over 25 years and the sustainable share buyback. Programme including 1.3 billion pounds announced for 2026 is starting in January.

To conclude before we move to Q&A, we are making good progress and remain firmly on track for full year delivery.

Looking ahead while there is more to do, I'm confident that the Strategic choice we have made and the investment actions. We are taking are the right way forward to be 80.

I'm excited about the future and confidence that we will return to our midterm algorithm of 3 to 5% Revenue growth and 4 to 6% adjusted profit from operations growth.

With 2026 expect to be at the lower end of this range. As we continue to invest to drive, sustainable Financial delivery and transformation.

Our confidence is on the pin by continued growth in the US accelerating new category. Revenue growth led by Villa globally and the roll out of our premium Innovations in the largest profit pools.

Continued robust. Delivering AME lapping Bangladesh combustibles headwinds.

For the Improvement in new category, contribution.

And the stepping up efficiencies delivered by our new feature. In program, in addition to the 2 billion pounds cost of goods, sold savings targets are now at our Capital markets day.

Moving forward. We expect our going to drive 5 to 8%. Adjusted diluted DPS growth.

Therefore to better align our Guidance with investor returns from 2026 will be guiding to revenue and adjusted dilute EPS growth at constant rates.

On annual base. Thank you for listening Javon and I will now be very happy to take your questions.

Thank you, sir. As a reminder to ask a question, please signal by pressing star 1.

And our last question is, from Andre, and an eon from Jeff. Please, go ahead.

Hi, good morning, today, Javid and, and Victoria, and thank you for taking my questions. Uh, a couple for me, please. Uh, first of all in us, uh, modern oral, you have a alluded to a positive category contribution, for fiscal 25, uh, beyond that. How do you expect profitability to evolve as you continue to gain? Um, scale there? And then the second question from me is, um, in US, combustible the share gains have continued into H2, could you give us a bit more color in terms of the key Dynamics driving this and how much is attributable to a better End Market versus uh, bats improved execution in in, in the US market. Thank you. Okay.

uh,

Okay, look the US modern. Absolutely. We are expecting to

Obviously, moving forward, as I said, in my in my introduction. We expecting a very strong growth of the new categories, and we'll be leveraging, uh, our uh, operational efficiencies and and the volumes and the and the brand. In that environment. Uh, we have a made a huge progress over the last year, in terms of positional sales in the as a second uh, player in the market. And uh, and I just give you some interesting headlines. If you take vo outside. The US, our category margin, uh, is already equivalent, uh, to the group margin. So we have a group margin around 44%. If you, if you go for V outside, the US is 39% at category level, not talk about gross margin as a percentage of, I'm talking about category margin.

How fast is the? Payback around Modern Auto category and uh, I don't see any reason why? Over time we cannot get to those levels.

in terms of, uh, combustible

Uh, we our performance is is, is is a bit of a everything that you just referred to. We are seeing slightly, uh, more uh, supportive Market. The level of decline has, has reduced a bit compared with the previous year. Despite the fact that, uh, low income consumers are the consumer confidence, still very low, in the us, but we are seeing, uh, some support coming from oil price mainly, and, uh, this could be a factor and, uh, we haven't, although, despite the fact that, uh, we are encouraged signs in terms of, uh, of, uh, enforcement in the vapor is still some some way to go, to make a, uh, a potential impact on on combustible. But this might happen in future, uh, but hasn't explained that the, the the performance of 2025 clearly. And, uh, I think that the performances attributed more to what we have done in Reynolds over the last few years. And, uh, and I

I mentioned about the commercial activities that we have put in place.

in terms of a coverage in terms of increasing our sales force, increasing our database of consumers, Reach Out direct to consumers in

Improve our competitiveness in the market through our, our leading in some Brands. So there's a lot to do with that. Uh, we also have some benefits coming from uh, the due to drawback that generates uh more employment uh in the US and uh and Reno's now is the largest buyer of a leaf in in the US market, uh, just to give some uh, insights on that. So I think that is a combination of all and that's the reason why we are very, uh, uh,

Positive about the, the the, the momentum can carry on, uh, for the, for the, for the, for the, for the next years.

Thank you very much.

Our next question is done from bake from UBS. Please go ahead.

Good good, good morning everyone. Thanks for, um, taking my, um, questions, I have, um, 2 as, as well. Um, the first 1 on glow Hilo. Um, could you maybe talk a bit more about the early consumer sourcing signals? Um, you're seeing in in Japan and Poland, whether from existing glow, users, competitive products or, or or, or combustibles, um, and and, and what, what early learnings give,

See the confidence as you sort of plan broader role out in, in in 2026, any share figures that you can share it would be much appreciated. Um, and, and my second question,

Um on FY 26. Um, if you've guided towards the lower end of your midterm growth algorithm um, as you look into next year and and maybe even Beyond, um, what are the key drivers or variables, that could help you migrate towards the upper half of of that range?

Okay, thanks for look, oh, I I am very excited about the glow healer. I think that we have a

A fantastic product. Uh,

it's resonate quite nicely with consumers. The the the level of retention is uh and I mentioned that in my, in my introduction is 50% which is is

Quite high and is obviously uh, a bigger uh change in terms of uh what we have had in the market, trying to establish a a real truly premium brand uh in Japan that is as you know, very highly competitive markets. We have achieved the 1% of uh market share with low hilu. It's about 2% of uh the premium segment we in Poland that uh the brand health indicators of glow is is very is even stronger than in Japan. We have a rather achieved 1% in a much.

You know, short period of time and in Italy that we have been, you know, very you know, in a month or so uh we have achieved the 0.5. So all those are very good early indications and uh of chiloe which is a demonstration that we really have.

Victoria Buxton: Our Chief Executive and Javed Iqbal, our Interim Chief Financial Officer. Welcome to our 2025 Full Year Pre-Close Conference Call. I hope you're all well, and I'd like to thank you for taking the time to join us this morning. Before we begin, I need to draw your attention to the cautionary statement regarding forward-looking statements, as well as the notes and disclaimer contained in the trading update. Unless otherwise stated, our comments will focus on constant currency adjusted measures, which include adjustments related to profit from our Canadian combustibles business, and average year-to-date share data is to September 2025 versus full year 2024 average. I will now hand over to Tadeu with a reminder that, as always, there'll be an opportunity to ask questions later on in the call.

It's much harder in the second half of 'twenty four is a is a very good momentum.

Okay. Thank you so much.

Our next question is from Ryan <unk> from Barclays. Please go ahead.

Hi, I apologize if I missed this earlier and I was just wondering if you could quantify the benefit that you're seeing from the duty drawback.

Will demand uh extra Investments uh behind glue in 2026. So uh but we are really really positive uh about the prospects of Glo Hilo and us being able to establish a credible offer in the premium segment where most of the value seats.

We are not quantifying the benefits what I'm, saying to you is that.

uh, in terms of our guidance,

Our performance will still be positive in terms of revenue up combustible excluding the drawback.

well, look, uh, the end of the day we are, uh,

Obviously, there is an element there that.

Is he.

He is helping with the results that we have achieving each one will be the same for the full year.

For next year.

We expect to see.

Some further.

Tadeu Marroco: Thank you, Victoria. Good morning, everyone, and welcome. We remain firmly on track for full year results and now expect to deliver around 2% revenue and adjusted operating profit growth. I would like to begin with four key takeaways from today's update. First, I'm particularly pleased that our US business has continued to deliver positive momentum in H2, driven by ongoing combustibles delivery and an excellent Velo Plus performance. As the world's largest nicotine value pool, the US is an important growth engine for our business. Second, we expect an acceleration in our new category revenue growth to double-digit in H2, driven by modern oral across all three regions and recent improvement in US vapor. We expect to deliver mid-single-digit new category revenue growth for the full year. Third, we expect new category contribution growth to accelerate in H2, driven by our quality growth discipline.

Our creation coming from the drawback and but more important that our underlying numbers will still be positive given the fact that we are growing value share in the U S market at the back of all the commercial activities that we have done.

Okay. Okay. Thank you.

Our next question is from Boston ago from Bank of America. Please go ahead.

Good morning, Bastian from from Bank of America. Thank you for taking my question I have one on on Zillow.

If you look pricing so in Europe Shaw.

The product is priced at a premium both of your main competitor.

As you know, we, we we, we have a, in terms of Revenue. We have, uh, uh, uh, uh, just guided around 2%, uh, obviously if we're not for Bangladesh, Australia. This number will be around 3% uh for next year, we expect to lap Bangladesh, not necessarily Australia because this misguided policy will probably carry on. And uh and we also have some exit Market markets to to lap like a Mozambique and and and as you know, we are we have the expectation to to to leave Cuba as well. And that's the reason why we are getting guiding to the low end of the range or obviously, in terms of apfo. All right, shows that we expect operating margin continue to be a creative, uh, for the group next year, the low end is basically our desire to keep in investing behind this Innovative products that in my mind, in my view, is the best momentum.

And I understand that you have noted <unk> for.

Paul.

In the U S, but going forward, if we should expect pricing for for Zalviso in the U S. In case, you would see PMT for the put it should we expect you to trade in line with your main competitor at a premium or question you to price a pretty kept a slight discount compared to competitors.

The complete details.

Thank you look as you as you would expect that cannot be.

Tadeu Marroco: Together, this reinforces our confidence in delivering our Mid-term Algorithm in 2026. Finally, I remain fully committed to achieving our 2 to 2.5x net debt to EBITDA leverage targets for the full year 2026, while delivering sustainable shareholder value through our progressive dividend and a sustainable share buyback program with GBP 1.3 billion announced for 2026. Let's start with new category dynamics. The global nicotine industry is growing and rapidly transforming, with adult smokers increasingly switching to new categories. We are well positioned to benefit from these consumer trends, leveraging our world-class insights, enhanced innovation ecosystem, brand building, and regulatory expertise, and distribution capabilities. We have invested to build a well-established and differentiated portfolio of global brands with premium product offerings across all three new categories. Modern Oral is by far the fastest growing new category globally and is highly profitable with a fast payback.

Or making <unk> influence or discussions about future pricing.

I can say to us that our our our polo product can confirm that is positioned at that premium price outside the U S. The introduction of Zillow plus has been done with a discount which is normal because when you introduce a product to get some traction in key accounts and with their consumers and their effect.

That we have ever had. Uh, vo shift is is doing extremely well in Sweden, and we want to to roll out this premium innovation of VO elsewhere. Vo plus, obviously we have to carry on investing in the brand behind the brand, uh, glow hill. We just spoke about, uh, views Ultra is doing extremely well in in Germany, uh, and France and Canada. And we, we want now to roll out, uh, this premium offering Vapor to other markets. So, that's the reason why we are guiding the low end of the range. Uh, I would say on the, on the sensitivity side, uh, the, the, the US Vapor M is so huge and, uh, the illegality is so it's still so big that any type of of uh, further Crackdown be from the federal levels for the state level or the ITC.

We always knew that this would be a very competitive product with enhanced we need trial, we applied some.

Uh, that I just referred to in my opening. This could result in a in a, in an upside. Uh, but it's too early days for us to to call on that. Hence, the guidance that we are giving right now.

Thank you.

Discount to their to the price list and AR and what we happen is is that we have been reducing these discounts.

I want to next question, is from Damian, McNeil from Deutsche Bank, please go ahead.

Throughout the one year of a FILO and and and but I cannot comment on you about future pricing strategy.

I understand thank you very much.

Thank you.

There are no further questions on the call and with that I'd like to hand, the call back over to <unk> for his closing remarks.

So thank you all for joining us today and for your questions I'd like to leave you with these key message first our U S business has continued to deliver strong growth in the second half and I am encouraged by the sustained momentum, resulting from the commercial actions. We have taken combustibles. This reinforced my confidence for future delivery.

Tadeu Marroco: It is now our second largest new category and is becoming a meaningful contributor to our group delivery as Velo continues to go from strength to strength. We expect to deliver double digit revenue growth for the full year as Velo continues to gain volume share up 590 basis points to 31.8% across top modern oral markets. It's also positioned as the lowest risk new category, containing 99% less toxicants when compared to cigarettes. A recent peer-reviewed clinical study confirmed that oral nicotine pouch can deliver nicotine quickly and effectively to satisfy smokers. In addition, the FDA has recently recognized the positive role that nicotine pouches can play in helping adults transition away from combustibles, reinforcing their role in tobacco harm reduction.

Yeah, hi morning everybody. Uh, thanks for taking the question. Um, first question is, is just back on the US views performance. Um, clearly, it's pleasing that we're back in volume and, um, Revenue growth. Um, I was wondering if you could provide a little bit more color on, on the sort of, um, on a state level performance and whether that performance is concentrated or the positive performance is concentrated on a small number of states, or whether you're seeing a more broad-based Improvement for the brands, the US is the first question. And, and then the second 1 is

Just on I think previously you've talked about sort of running Pilots with dual in deep discounts. I was just wondering if you could provide an update on a how that's going and be whether there's plans to expand that that pilot of Durrell please.

Second our new categories are gaining traction we expect full year revenue growth to accelerate to mid single digits led by Bill a pleasant day Wes.

okay, so then I mean, look on the, on the views us, uh,

And supported by recent improvements in U S vapor alongside accelerating improvement in profitability.

And third that remain fully committed to achieving our two to two five times net debt to EBITDA leverage targets for the full year 'twenty, two and six while delivering sustainable shareholder value through our progressive dividend in a sustainable share buyback program with one 3 billion pounds on us today for <unk> 2006.

We clearly see a a better performance on the states that have implemented directory. And uh as I said before the the the levels of legislation varies by state, there are some that are going deeper than others

Finally, with this momentum I am confident that we will sustainably return to our midterm algorithm next year. Thank you again for joining us and I look forward to update you further at our full year results on February 12, and at the Cagny Conference. The following week.

And hence, our level of performance also varies, but I would say, overall is a, we we have an upside around 7% that we are seeing, uh, around those States, uh, with a, with a range of high and, and lower depending on, or which state, and the, and these particularities of the legislation. Uh, so

Tadeu Marroco: We are also encouraged that the FDA has committed to providing accurate science-based information about the relative risks of different nicotine products in order to combat consumer misconceptions that may prevent switching to reduced harm products. We welcome the FDA's new pilot program to streamline the PMTA review process for nicotine pouches. We are confident in the strength of our science and portfolio, and we look forward to being able to launch our leading high-moisture modern oral products in the US market. In the US, the modern oral category value is expected to almost double over the next two years and has already overtaken the size of the legitimate vapor category at around GBP 2 billion. Velo Plus is the fastest growing US modern oral brand. It has already reached the number two volume and value share category position, gaining 15 percentage points of volume share since launch.

[music].

What we expecting next year is that, uh, vaping the West will not be a drag anymore in our new category numbers. Uh,

Yes.

Tadeu Marroco: Encouragingly, despite the heightened competitive promotion activity we have seen in the last few months, our latest volume share is 21.9% in October, up from 6.9% in November last year prior to the launch of Velo Plus. Velo Plus has continued to drive triple-digit US modern oral revenue growth in H2, and importantly, we remain confident that it will deliver positive category contribution for the full year. These results reflect the strength of our products, branding, and distribution capabilities, and the sharper execution that a rejuvenated Reynolds is delivering. In AME, we are clear leaders, selling at a premium price and strongly outperforming our peers across the region. We are close to six times the size of our closest competitor and continue to capture around 60% of category growth, highlighting the further opportunity ahead. Our latest innovation, Velo Shift, was recently launched in key accounts and online in Sweden.

We expect to carry on, rolling out, door out in some further States next year. And this will be a consequence of, uh, you know, price increase eventually. And then, uh, if if the case to, to launch Dora in a way that uh, doesn't compromise our our, our contribution margins uh uh a favorable and uh, and then we carry on uh, rolling out. So there are in the plans expectations that we can carry on rolling outdoor out. But like I said, in a measured and thoughtful way.

Very clear. Thank you today.

Our next question is from Philip Spain from JP Morgan. Please go ahead.

Tadeu Marroco: It's a premium product designed to reshape the modern oral experience with a new comfort pouch design, five new distinct sensory flavors, and a differentiated X-Scan designed to stand out on the shelf. Velo Shift is driving incremental share in channels where it has been launched, with a full national rollout planned for January and further market rollouts planned during 2026. In heated products, our year-to-date performance reflects a transitional period ahead of key innovation rollouts. Global volume share was down 1.2 percentage points in top markets, primarily driven by heightened competitive pressures in the value-for-money segments in Japan and the continued strategic phase-out of our legacy SuperSlims platform. In AME, volume share was down 60 basis points, with continued strong performance in Czech Republic, Spain, and Portugal, more than offset by competitive dynamics in Germany, Italy, and Romania as we relocated resource ahead of the launch of glo Helo.

Hi good morning. Thanks very much for taking my questions. Uh I do please. The first 1 was just on um the guide for 2026. I appreciate your comments on the profit while you're going towards the lower end. But just what did you provide a bit more color and why for the Top Line, you also expecting at the lower end and and also wondering how much of a a benefit, you expect the, uh, drawback in the US to be for your Topline next year, as well as in using that more next year. And and then my second question is just on the going, back to the illicit Vape, Crackdown in the US. I just wanted in terms of what you're you're seeing in terms of consumers, where in states where the enforcement is occurring, what they're switching back to and if they're mostly switching back into

Into the into legal Vapor options uh or if they're switching more into pouches or back into cigarettes as well just kind of interested to hear that that shape. Thank you. Okay. Yeah the guidance uh uh on the top on the top line of the guys is like I mentioned to you. Before we uh we we will be uh, exiting some markets uh

Like Mozambique and and and uh, and we have a desire to to access the Cuban market. Like we have said before, and obviously, this is doesn't trigger any type of organic adjustment. Uh,

Tadeu Marroco: Our new breakthrough innovation platform, glo Helo, includes our first two-piece device and is designed to establish glo in the premium segment, which represents over 80% of industry value. In September, we launched a national launch in Japan with a 360-degree target marketing campaign, including a new flagship store in central Tokyo, immersive pop-up experience with digital art collaborations, and strong retail visibility through convenience store takeovers. We are focused on driving trial, targeting premium consumers in the combustibles and HP spaces through online and in-person activations. Early performance indicators are positive, with an increase in brand awareness together with emotional and functional imagery resonating strongly with consumers. We are encouraged by early trial to retention rates around 50% from both smokers and HP consumers.

And uh, we are also expecting uh, Australia to to carry on with this misguided policy uh, towards the 100% illegality. If you want of the use of nicotine, they are already 85. So, uh, these are these needs to be offset by obviously the momentum that we have in the US by the new categories that we are now expecting to go back to double digits next year as opposed to this year that has been made single digits, uh, like I said before. And uh, and uh, and and and eventually there will be a potential upside depending on the circumstance of the mainly on the vapor uh, illegal Market in the US. So that's basically what is triggering the, the the guidance for 2026 on the top line. Obviously, the the

The operating profit, like I said, will be impacted by our desire to keep investing for the long term of the business uh not to make 1 year looking brilliantly. I would

for obviously I could have deliver much higher number in 2026 but this would be the the wrong call for the business in the long term. So now that we have a very competitive products in every single category, uh like I said before,

uh, in terms of, uh,

Tadeu Marroco: While the heated products category remains highly competitive, we are confident in the strength of this innovation and expect to progressively gain share in the premium space over time. In line with our quality growth strategy, we are focused on rolling out glo Helo in the largest heated product profit pools, where we can generate the strongest returns. We launched in Poland in October, in Italy in November, and we'll continue the market rollout next year. Altogether, we expect broadly flat glo revenue growth for the full year. Vapor remains the largest new category in terms of number of adult consumers and continues to demonstrate strong conversion effectiveness. Vuse maintained global value share leadership in tracked channels across top markets at 38.3%, up 10 basis points versus full year 2024.

in Vapor, uh,

Tadeu Marroco: While the vapor category continues to be impacted by the proliferation of illicit products, we are encouraged by early signs of performance recovery in the US, where Vuse has returned to volume and revenue growth in recent months after 18 months of decline and gained 70 basis points of value share year-to-date to reach 50.4%. This has been supported by early signs of increased federal enforcement targeting borders and larger distributors, leading to increased seizures, and fines, together with enforcement at state level, with vapor product enforcement legislation now enacted in 18 states representing around 50% of tracked industry volume. While we estimate around 70% of US vapor industry value is illicit, over time, we believe Vuse is well positioned to benefit from stronger regulatory enforcement at both the federal and state levels.

the Crackdown that we are seeing some of these states. Uh, we are not seeing, uh, return to cigarettes. Uh, what we are seeing is basically uh, uh uh uh return to to Legal Vapor markets and uh, and also uh some of the pouches where the flavors are still there. Because 1 thing that we would like to to see uh happening in the US is not just about the Crackdown on, the illegality of the market, but uh, re-establishing flavors in, in Vapor back in the market because that's the root cause of why. The the the traction of of vapor illegal uh was was was was was, was there in the first place. Know, the reason why this illegal Vapor Market was went up. So much is basically the absence of uh of flavors in the legal markets and eventually the FDA uh could consider in their approval process.

Why the product anymore, migrating more towards the the parts and and and some of them going to the to the legal Vapor like I said, but not in its totality.

Okay.

Thank you very much. Could I just 1 follow up to that uh final point in your conversations with the FDA are they being more open towards introducing flavors in in the league of vapor Market again?

Tadeu Marroco: We are pleased to receive a favorable initial determination on our International Trade Commission complaint from the administrative law judge, who has recommended a general exclusion order on imported illicit vapor device. We expect a final determination from the ITC in the coming weeks, which will then be subject to a 60-day presidential review. In AME, our value share in tracked channels declined 50 basis points, mainly driven by the impact of illicit headwinds in Canada. Early consumer response to the phased rollout of our new premium product has been strong, with Vuse Ultra gaining nearly 80% value share in rechargeable consumables in Canada, close to 5% in Germany and 2% in France in October, reflecting the appeal of its differentiated offer supported by positioning the Vuse brand as vapor done right.

I think that they understand that the the the the major root cause is this absence of the of the of the flavors and uh, but it's up to them and how how they Pro proceed on that, you know? And uh, but I think that's a obviously we, we have some, some previews files of a device with technology that prevents or that allows age verification. And that could be 1 route. Uh, but I don't have any for information on that, they, they, i, i, i note that they, they understand that the problem,

Okay, thank you very much.

Our next question comes from Ray VM from anchors, Tech Brokers. Please go ahead.

Good morning all um, just a question around the the rollout of glow high low. Um,

Tadeu Marroco: While we expect a high single-digit revenue decline for the full year, this is a clear improvement versus the mid-tens decline in H1, primarily driven by the early signs of enforcement actions in the US. The full year performance will also be impacted by strategic decisions to reduce our footprint and reallocate resource away from markets where regulation enforcement does not support a responsible level and competitive playing field. Turning to combustibles, where we have continued to offset volume declines with robust price, mix, and efficiency gains, we expect an improving H2 revenue performance led by the US. In our top markets, volume share declined by 10 basis points and value share was flat, with US gains offset by upme and heightened competitive activity in some AME markets.

You, you mentioned, obviously, uh, full rollout in, in Japan, in September, and then October November for, for, for Poland, and Italy. Um, I'm just curious, um, how long will this?

Roll out, take place. Um, will will you be able to get like a, you know, full full scale, roll out. Let's say by the end of 2026 or are there any capacity, constraints around the the product availability?

Yeah, I I we, uh, we expect to make big progress in 2026. Uh, we are not seeing constraints, uh, in terms of, uh, product availability. Uh,

Tadeu Marroco: While the US macroeconomic environment remains dynamic, the pace of industry decline has improved versus prior years, down around 8% year-to-date on a sales-to-retail basis. Against this backdrop, I'm delighted that our US combustibles business is expected to deliver both revenue and profit growth this year for the first time since 2022. In the US, our commercial actions, portfolio investments, and sharper execution have driven value share growth of 20 basis points with flat volume share. In AME, we have continued to deliver a resilient combustibles performance with robust pricing driving revenue and operating profit growth led by strong delivery in Brazil, Turkey, and Mexico. We are also taking target actions to rejuvenate key portfolio offers in Germany and Romania. In APMEA growth in key markets, including Pakistan, Nigeria, and Indonesia, it is expected to be more than offset by previously guided fiscal and regulatory headwinds in Bangladesh and Australia.

Obviously, every time you get into a new market, it's very different from the pouches where they pay back is very fast in, uh, in in HP, it takes a longer, but like I said, we are in a entering, a premium, uh, uh, segment of HP, which means higher margins, which is positive for us. And, uh, but we have to do it in a way that uh, it's it's also considered our resource allocation decisions in everything that we see out there in terms of the other categories and the other geographies as well. But definitely we expect to make a big progress in terms of roll out. Uh,

2026.

So is it fair to assume that um THB will probably be the slowest growing unit of the 3 new categories?

Uh, well look, if if you consider the glow Hilo, we expect to carry on growing. But overall, glow is not just about Hilo is about hyper. We know that is very competitive in the be what like I said. And hence, our objective for next year is to stop the, the the share the client in the category and, uh, stabilize and start to come back to growth. That's is, uh, you know, success looks like as a glow as a family, at the back of the of of an increase in glow, Hilo, moving forward.

Tadeu Marroco: Both markets are seeing significant double-digit industry volume declines year-to-date. In Bangladesh, January's interim budget introduced a broad-based increase in VAT and supplementary duties alongside the largest-ever hike in minimum cigarette pricing, materially impacting consumer affordability. In Australia, years of excise increases above inflation, now compounded by sweeping regulatory reforms, the most extensive since plain packaging rules in 2012, are accelerating industry volume declines in the legal markets. We expect these ineffective policies to further erode the legal market and fuel illicit trade, which already accounts for over 85% of nicotine usage when combined with illegal vapor use. Worryingly, these policies have also driven a return to growth in smoking incidence for the first time in 20 years by establishing a lower tier of affordable illicit cigarette offers and a more than 50% reduction in government excise collection over the last five years.

Might be just a quick.

Um, you indicate an improvement in in into the second half.

so it's it's it's this is just a marginal Improvement on on the first off, I mean the first off Revenue, I think

It was up to 0.8%. Um,

So, I just want to get a sort of an idea of of the Improvement that you expect in, in, in the compact for the second time. Yeah, it's, you have to consider that the first half we were, uh, uh, lapping a very easy comparator from the first half of 2024 and, uh, but even that I still, we still expecting an improvement in the second half compared with the first half.

Would be a marginal Improvement, but considering that the comparator is much harder in the second half of 24 is a, is a very good moment.

Okay, thank you so much.

Our next question is from, Rya from Bartley's. Please go ahead.

Hi there. Apologies, if I missed this earlier, um, but I was just wondering if you could quantify the benefit that you seen from the duty drawback.

Tadeu Marroco: As a result, there has been a significant rise in criminality in addition to the increased burden of associated enforcement costs, as widely reported in the media. Together, we continue to expect these headwinds to impact full year group revenue growth by around 1% and group Adjusted Operating Profit growth by around 2%. Turning to cash, BAT is a highly cash-generative business with operating cash conversion expected to exceed 95% again in 2025, reflecting our strong cash discipline and a clear focus on returns. Our financial flexibility continues to improve, and we are on track to deliver more than GBP 50 billion in Free Cash Flow by the end of 2030. We continue to focus on the deleveraging, and we expect to be within our target 2 to 2.5x Adjusted Net Debt to Adjusted EBITDA range by year-end 2026.

With the results, uh, that we have achieving H1 will be the same for the full year, uh, for next year. Uh, we expect to see, uh, some further, uh, uh, uh, creation coming from the drawback. And uh, but more important that our underlying numbers will still be positive. Given the effect that we are growing value. Share in the US market at the back of all the commercial activities that we have done.

Okay, that's okay. Thank you.

Have a good. Next question is from Bastion ago from Bank of America. Please go ahead.

Tadeu Marroco: Our progress has been further supported by the partial disposal of our ITC hotel stakes last week. As we transform, I remain committed to delivering sustainable shareholder returns through our progressive dividend, which dates back over 25 years, and the sustainable share buyback program, including GBP 1.3 billion announced for 2026, starting in January. To conclude, before we move to Q&A, we are making good progress and remain firmly on track for full year delivery. Looking ahead, while there is more to do, I'm confident that the strategic choice we have made and the investment actions we are taking are the right way forward to BAT. I'm excited about the future and confident that we will return to our mid-term algorithm of 3% to 5% revenue growth and 4% to 6% adjusted profit from operations growth.

Good morning, uh, Bastion from from Bank of America, thank you for taking my question.

I have 1 on on Zillow.

Uh, Zillow pricing. So in in Europe, your, uh, the product is priced at a premium over over your main competitor. And, uh, I understand that you have not received pnt yet. So for, for vo, in the US, but going forward us, we should expect, uh, pricing for for, for vo. In the US, in case you receive a pmta for the product, you would expect you to spread in line with your main competitor at a premium or continue to uh, price the product at a slight discount compared to to competitors to the competitors. Uh, thank you look, as you as you would expect, I cannot be, you know, ex, you know, or making in inference, or, or discussions about future pricing.

Tadeu Marroco: With 2026 expected to be at the lower end of this range as we continue to invest to drive sustainable financial delivery and transformation. Our confidence is underpinned by continued growth in the US, accelerating new category revenue growth led by Velo globally and the rollout of our premium innovations in the largest profit pools, continued robust delivery in AME, lapping Bangladesh combustibles headwinds for the improvement in new category contribution, and stepping up efficiencies delivered by our new feature win program in addition to the GBP 2 billion cost of goods sold savings targets announced at our capital markets day. Moving forward, we expect our algorithm to drive 5% to 8% adjusted diluted EPS growth. Therefore, to better align our guidance with investor returns from 2026, we'll be guiding to revenue and adjusted diluted EPS growth at constant rates on an annual basis. Thank you for listening.

What I can say to you is that uh our our vo product can confirm, that is position at the premium price outside. The US the introduction of V plus has been done with a discount, which is normal. Because when you introduce a product to get some Traction in key accounts and with your consumers, and the fact that we always knew that this would be a very competitive product enhance. We need trial, we applied, uh, some, uh, discount to the, to the price list. And, uh, and what we happen is, uh, is that we have been reducing these discounts, uh, throughout the this 1 year of, uh, of uh, of, uh, of of yellow and, uh,

And, and but I I cannot comment on you about future pricing strategy.

I understand. Thank you very much.

Tadeu Marroco: Javed and I will now be very happy to take your questions. Thank you, sir. As a reminder, to ask a question, please signal by pressing star one. Our first question is from Andrei and then Ionita from Jefferies. Please go ahead. Hi, good morning, Tadeu, Javed, and Victoria. And thank you for taking my questions. A couple for me, please. First of all, in US Modern Oral, you have alluded to a positive category contribution for fiscal 2025. Beyond that, how do you expect profitability to evolve as you continue to gain scale there? And then the second question for me is, in US combustibles, the share gains have continued into H2. Could you give us a bit more color in terms of the key dynamics driving this and how much is attributable to a better end market versus BAT's improved execution in the US market? Thank you.

So thank you for joining us today and for your questions. I'd like to leave you with this key message.

Second, our new categories are gaining traction. We expect full year, Revenue growth to accelerate to meet single digits. Led by Villa plays in the US and supported by recent Improvement in US, Vapor alongside accelerating Improvement in profitability.

And third that remain fully commit to achieving our 222.5 timeline. Data leverage targets for the full year 2026 while delivering sustainable. Shareholder value, through our Progressive dividend and a sustainable share buyback program with 1.3 billion pounds announced today for 2026.

Tadeu Marroco: Okay. Okay, look, the US Modern Oral, absolutely, we are expecting to close the year already in the positive territory in terms of category contribution. Obviously, moving forward, as I said in my introduction, we are expecting a very strong growth of the new categories, and we'll be leveraging our operational efficiencies, the volumes, and the brand in that environment. We have made huge progress over the last year in terms of positioning ourselves as a second player in the market. I just give you some interesting headlines. If you take Velo outside the US, our category margin is already equivalent to the group margin. So we have a group margin around 44%. If you go for Velo outside the US, it's 39% at category level. I'm not talking about gross margin. As I mentioned to you, I'm talking about category margin.

Finally, with this momentum, I'm confident that we will sustainably return to our midterm algorithm next year. Thank you again for joining us. And I look forward to update you further at our full year, results on February 12th. And at the kagni conference, the following week,

Tadeu Marroco: So obviously, the US is just turning positive in the first year, which indicates how fast is the payback around modern oral category. And I don't see any reason why over time we cannot get to those levels. In terms of combustible, our performance is a bit of everything that you just referred to. We are seeing slightly more supportive markets. The level of decline has reduced a bit compared with the previous year, despite the fact that, for low-income consumers, the consumer confidence is still very low in the US. But we are seeing some support coming from oil price mainly, and this could be a factor. And we haven't, although despite the fact that we are seeing encouraging signs in terms of enforcement in the vapor, still some way to go to make a potential impact on combustible.

Tadeu Marroco: This might happen in the future, but hasn't explained the performance of 2025 clearly. I think that the performance is attributed more to what we have done in Reynolds over the last few years. I mentioned about the commercial activities that we have put in place in terms of coverage, in terms of increasing our sales force, increasing our database of consumers, reaching out direct to consumers, and improving our competitiveness in the market through our laddering in some brands. So there's a lot to do with that. We also have some benefits coming from the duty drawback that generates more employment in the US. Reynolds now is the largest buyer of leaf in the US market, just to give some insights on that.

Tadeu Marroco: So I think that is a combination of all, and that's the reason why we are very positive about the momentum can carry on for the next years. Thank you very much. Our next question is from Faham Baig from UBS. Please go ahead. Good, good, good morning, everyone. Thanks for taking my questions. I have two as well. The first one on glo Helo, could you maybe talk a bit more about the early consumer sourcing signals you're seeing in Japan and Poland, whether from existing glo users, competitive products, or combustibles? And what early learnings gives you the confidence as you sort of plan broader rollouts in 2026? Any share figures that you can share here would be much appreciated. And my second question on FY26, you've guided toward the lower end of your mid-term growth algorithm.

Tadeu Marroco: As you look into next year and maybe even beyond, what are the key drivers or variables that could help you migrate toward the upper half of that range? Okay. Thanks, Faham. Look, I'm very excited about glo Helo. I think that we have a fantastic product. It resonates quite nicely with consumers. The level of retention is, and I mentioned that in my introduction, 50%, which is quite high. It's obviously a bigger change in terms of what we have had in the market, trying to establish a real, truly premium brand. In Japan, there is, as you know, a very highly competitive market. We have achieved 1% of market share with glo Helo. It's about 2% of the premium segment. In Poland, the brand health indicators of glo are even stronger than in Japan. We have already achieved 1% in a much shorter period of time.

Tadeu Marroco: And in Italy, that we have been very in a month or so, we have achieved 0.5. So all those are very good early indications of glo Helo, which is a demonstration that we really have a differentiated offer in the market. Obviously, glo as a whole, we have to look after that. We have to look also to our platform, Hyper, as we go along, because we see a lot of competitive activities in many of these markets in the BWAP as well. And this will demand extra investments behind glo in 2026. But we are really, really positive about the prospects of glo Helo and us being able to establish a credible offer in the premium segment where most of the value sits.

Tadeu Marroco: In terms of our guidance, well, look, at the end of the day, we are, as you know, we have in terms of revenue just guided around 2%. Obviously, if we're not for Bangladesh, Australia, this number would be around 3%. For next year, we expect to lap Bangladesh, not necessarily Australia, because this misguided policy will probably carry on. We also have some exit markets to lap, like Mozambique. And as you know, we have the expectation to leave Cuba as well. And that's the reason why we are guiding to the low end of the range. Obviously, in terms of APFO, already shows that we expect operating margin continues to be a credit for the group next year.

Tadeu Marroco: The lower end is basically our desire to keep investing behind these innovative products that, in my view, is the best momentum that we have ever had. Velo Shift is doing extremely well in Sweden, and we want to roll out this premium innovation of Velo elsewhere. Velo Plus, obviously, we have to carry on investing in the brand behind the brand. glo Helo, we just spoke about, Vuse Ultra is doing extremely well in Germany, France, and Canada, and we want now to roll out this premium offer in Vapor to other markets. So that's the reason why we are guiding the lower end of the range.

Tadeu Marroco: I would say on the sensitivity side, the US vapor market is so huge, and the legality is still so big that any type of further crackdown, be from the federal levels, from the state level, or the ITC that I just referred to in my opening, this could result in an upside. But it's too early days for us to call on that, hence the guidance that we are giving right now. Thank you. Our next question is from Damian McNeela from Deutsche Bank. Please go ahead. Yeah. Hi, morning, everybody. Thanks for taking the question. First question is just back on the US Vuse performance. Clearly, it's pleasing that we're back in volume and revenue growth.

Tadeu Marroco: I was wondering if you could provide a little bit more color on the sort of on a state-level performance and whether that performance is concentrated or the positive performance is concentrated on a small number of states, or whether you're seeing a more broad-based improvement for the brand across the US, is the first question. And then the second one is just on, I think previously you've talked about sort of running pilots with Doral and deep discount. I was just wondering if you could provide an update on, A, how that's going, and B, whether there's plans to expand that pilot of Doral, please. Okay. So look, on the Vuse US, we clearly see a better performance on the states that have implemented the directory. And as I said before, the levels of legislation vary by state.

Tadeu Marroco: There are some that are going deeper than others, and hence our level of performance also varies. But I would say overall, we have an upside around 7% that we are seeing around those states with a range of high and lower depending on which state and these particularities of the legislation. So what we are expecting next year is that vaping in the US will not be a drag anymore in our new category numbers. Now, from not being a drag to be an engine of growth depends on how much more we can see in terms of enforcement. And hence, I'm trying to be cautious here when I guide for 2026.

Tadeu Marroco: Doral, we are in two states with Doral, and we are being very thoughtful in how we roll out Doral across the states in the US and being very thoughtful about the source of business in order to avoid any type of cannibalization with our own brands, which would be detrimental for the financial or the margins of the company. We expect to carry on rolling out Doral in some further states next year. This will be a consequence of price increase eventually, and then if the case to launch Doral in a way that doesn't compromise our contribution margins are favorable. Then we carry on rolling out. So there are in the plans expectations that we can carry on rolling out Doral, but like I said, in a measured and thoughtful way. Okay. Very clear. Thank you today.

Tadeu Marroco: Our next question is from Philip Spain from JP Morgan. Please go ahead. Hi. Good morning. Thanks very much for taking my questions. I had two please. The first one was just on the guide for 2026. Appreciate your comments on the profit while you're guiding towards the lower end, but just wanted you to provide a bit more color on why for the top line you're also expecting at the lower end. And also wondering how much of a benefit you expect the drawback in the US to be for your top line next year as well, as in using that more next year. And then my second question is just on the going back to the illicit vape crackdown in the US.

Tadeu Marroco: I just wondered in terms of what you're seeing in terms of consumers in states where the enforcement is occurring, what they're switching back to, and if they're mostly switching back into the legal vapor options, or if they're switching more into pouches or back into cigarettes as well. Just kind of interested to hear that shape. Thank you. Okay. Yeah. The guidance on the top line of the guidance, like I mentioned to you before, we will be exiting some markets like Mozambique, and we have a desire to exit the Cuban market, like we have said before. And obviously, this doesn't trigger any type of organic adjustment. And we are also expecting Australia to carry on with this misguided policy towards the 100% illegality, if you want, of the use of nicotine. They are already 85.

Tadeu Marroco: So these needs should be offset by, obviously, the momentum that we have in the US, by the new categories that we now expect to go back to double digits next year, as opposed to this year that has been mid-single digits, like I said before. And eventually, there will be a potential upside depending on the circumstance of the mainly on the vapor illegal market in the US. So that's basically what is triggering the guidance for 2026 on the top line. Obviously, the operating profit, like I said, will be impacted by our desire to keep investing for the long term of the business, not to make one year look brilliantly. Obviously, I could have delivered a much higher number in 2026, but this would be the wrong call for the business in the long term.

Tadeu Marroco: So now that we have very competitive products in every single category, like I said before. In terms of vapor, the crackdown that we are seeing in some of the states. We are not seeing a return to cigarettes. What we are seeing is basically a return to legal vapor markets and also some of the pouches where the flavors are still there. Because one thing that we would like to see happen in the US is not just about the crackdown on the illegality of the market, but reestablishing flavors in vapor back in the market. Because that's the root cause of why the traction of illegal vapor was there in the first place. The reason why this illegal vapor market in the US went up so much is basically the absence of flavors in the legal markets.

Tadeu Marroco: Eventually, the FDA could consider in their approval process to reestablish that behind an age-verified gate, for example, in the device or in the trade. So that's our hope that this could materialize. But as this is not there yet, what we'll be seeing is that probably some of these users of illegal vapor that don't like the product anymore are migrating more towards the pouch, and some of them going to the legal vapor, like I said, but not in its totality. Okay. Thank you very much. May I just add one follow-up to that final point? In your conversations with the FDA, are they being more open towards introducing flavors in the legal vapor market again? I think that they understand that the major root cause is this absence of the flavors.

Tadeu Marroco: But it's up to them and how they proceed on that. But I think that obviously, we have some previous files of a device with technology that allows age verification, and that could be one route. But I don't have any further information on that. I know that they understand the problem. Okay. Thank you very much. Our next question comes from Rey Wium from Anchor Stockbrokers. Please go ahead. Good morning, all. Just a question around the rollout of glo Helo. You mentioned, obviously, full rollout in Japan in September, and then October, November for Poland and Italy. I'm just curious, how long will this rollout take place? Will you be able to get a full-scale rollout, let's say, by the end of 2026, or are there any capacity constraints around the product availability? Yeah. We expect to make big progress in 2026.

Tadeu Marroco: We are not seeing constraints in terms of product availability. Obviously, every time you get into a new market, it's very different from the pouches, where the payback is very fast. In HP, it takes longer. But like I said, we are entering a premium segment of HP, which means higher margins, which is positive for us. But we have to do it in a way that is also considered our resource allocation decisions in everything that we see out there in terms of the other categories, and the other geographies as well. But definitely, we expect to make big progress in terms of rollout in 2026. So is it fair to assume that THP will probably be the slowest growing unit of the three new categories? Well, look, if you consider the glo Helo, we expect to carry on growing.

Tadeu Marroco: Overall, glo is not just about Helo; it's about Hyper. We know that it's very competitive in the BWAP, like I said. Hence, our objective for next year is to stop the share decline in the category, stabilize, and start to come back to growth. That's what success looks like, as a glo as a family at the back of an increase in glo Helo moving forward. Maybe just a quick follow-up. Talk about the combustibles business. You indicate an improvement into the second half. So is this just a marginal improvement on the first half? I mean, the first half revenue, I think, in constant currency was up 0.8%. So I just want to get sort of an idea of the improvement that you expect in the combustibles in the second half. Yeah.

Tadeu Marroco: You have to consider that the first half, we were lapping a very easy comparator from the first half of 2024. But even that, we are still expecting an improvement in the second half compared with the first half. It would be a marginal improvement, but considering that the comparator is much harder in the second half of 2024 is a very good momentum. Okay. Thank you so much. Our next question is from Mariah Adzina from Barclays. Please go ahead. Hi, there. Apologies if I missed this earlier, but I was just wondering if you could quantify the benefit that you've seen from the duty drawback. Look, we are not quantifying the benefit. What I'm saying to you is that our performance will still be positive in terms of revenue of combustible, excluding the drawback.

Tadeu Marroco: Obviously, there is an element there that is helping with the results that we have achieved in H1. It will be the same for the full year. For next year, we expect to see some further creation coming from the drawback. But more importantly, that our underlying numbers will still be positive given the fact that we are growing value share in the US market on the back of all the commercial activities that we have done. Okay. That's clear. Thank you. Our next question is from Bastien Agoult from Bank of America. Please go ahead. Good morning. Bastien from Bank of America. Thank you for taking my question. I have one on Velo pricing. So in Europe, the product is priced at a premium over your main competitor. And I understand that you have not received PMTA yet for Velo in the US.

Tadeu Marroco: But going forward, if we should expect pricing for Velo in the US, in case you receive PMTA for the product, should we expect you to trade in line with your main competitor at a premium or continue to price the product at a slight discount compared to the competitors? Thank you. Look, as you would expect, I cannot be making inferences or discussions about future pricing. What I can say to you is that our Velo product can confirm that it's positioned at a premium price outside the US. The introduction of Velo Plus has been done with a discount, which is normal. Because when you introduce a product to get some traction in key accounts and with your consumers, and the fact that we always knew that this would be a very competitive product, hence we need trial, we applied some discount to the price list.

Tadeu Marroco: What happened is that we have been reducing these discounts throughout this one year of Velo. But I cannot comment to you about future pricing strategy. I understand. Thank you very much. Thank you. There are no further questions on the call. And with that, I'd like to hand the call back over to Tadeu for his closing remarks. So thank you for joining us today, and for your questions. I'd like to leave you with this key message. First, our US business has continued to deliver strong growth in the second half, and I'm encouraged by the sustained momentum resulting from the commercial actions we have taken in combustibles. This reinforces my confidence for future delivery. Second, our new categories are gaining traction.

Tadeu Marroco: We expect full-year revenue growth to accelerate to mid-single digits, led by Velo Plus in the US and supported by recent improvement in US vapor alongside accelerated improvement in profitability. And third, I remain fully committed to achieving our 2 to 2.5x net debt leverage target for the full year 2026, while delivering sustainable shareholder value through our progressive dividend and a sustainable share buyback program with GBP 1.3 billion announced today for 2026. Finally, with this momentum, I am confident that we will sustainably return to our mid-term algorithm next year. Thank you again for joining us, and I look forward to updating you further at our full-year results on 12 February and at the CAGNI conference the following week.