Q4 2025 Philip Morris International Inc Earnings Call

February 6, 2026

Speaker #1: Good day, and thank you for standing by. Welcome to the Philip Morris International Inc 2025 fourth quarter results conference call. At this time, all participants are in a listen-only mode.

Operator: Good day and thank you for standing by. Welcome to the Philip Morris International Inc 2025 Q4 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 the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, James Bushnell, VP of Investor Relations and Financial Communication. Please go ahead.

Speaker #1: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone.

Speaker #1: You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded.

Speaker #1: I would now like to hand the conference over to your speaker today, James Bushnell, VP of Investor Relations and Financial Communication. Please go ahead.

Speaker #2: Welcome. Thank you for joining us. Earlier today, we issued a press release containing detailed information on our 2025 fourth quarter and full year results.

James Bushnell: Welcome. Thank you for joining us. Earlier today, we issued a press release containing detailed information on our 2025 Q4 and full-year results. The press release is available on our website at pmi.com. A glossary of terms, including the definition for smoke-free products as well as adjustments, other calculations, and reconciliations to the most directly comparable US GAAP measures for non-GAAP financial measures cited in this presentation, are available in the company's Form 8-K dated today's date and on our IR 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 for a review of the various factors that could cause actual results to differ materially from projections or forward-looking statements. I'm joined today by Jacek Olczak, Group CEO of PMI, and Emmanuel Babeau, Chief Financial Officer. Over to you, Jacek.

Q4 2025 Philip Morris International Inc Earnings Call

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Q4 2025 Philip Morris International Inc Earnings Call

Friday, February 6th, 2026 at 2:00 PM

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Speaker #2: The press release is available on our website at pmi.com. A glossary of terms, including the definition for smoke-free products as well as adjustments, other calculations, and reconciliations, to the most directly comparable US GAAP measures for non-GAAP financial measures cited in this presentation, are available in the company's form 8K, dated today's date, and on our IR website.

Speaker #2: Today's remarks contain forward-looking statements and projections of future results, either direct your attention to the forward-looking and cautionary statements disclosure in today's presentation and press release, for a review of the various factors that could cause actual results to differ materially from projections or forward-looking statements.

Speaker #2: I'm joined today by Jacek Olczak, Group CEO of PMI, and Emmanuel Babeau, Chief Financial Officer. Over to you,

Speaker #2: Jacek.

Speaker #3: Thank you,

Jacek Olczak: Thank you, James, and welcome, everyone. 2025 was another outstanding year for PMI. The shift of adult smokers to better alternatives is a lasting, structural movement, one that we continue to lead and from which we are generating strong, sustained growth. Our leading global position in smoke-free products enabled us to deliver a fifth consecutive year of positive volumes with rapid top-line progress and significant margin expansion. We grew our smoke-free products volumes by an excellent 12.8%, with the increasing profitability of the portfolio reflected in organic smoke-free gross profit growth of 18.7%. IQOS remains the core driver, with both shipments and adjusted IMS growing around 11%. This includes an impressive acceleration in the Q4 with a return to strong double-digit growth in Italy and a very promising start in Taiwan, just two examples of the broad growth across geographies.

Speaker #3: James, and welcome everyone. 2025 was another outstanding year for PMI. The shift of adult smokers to better alternatives is a lasting, structural movement—one that we continue to lead and from which we are generating strong, sustained growth.

Speaker #3: Our leading global position in smoke-free products enables us to deliver a fifth consecutive year of positive volumes with rapid top-line progress and significant margin expansion.

Speaker #3: We grew our smoke-free products volumes by an excellent 12.8% with the increasing profitability of the portfolio reflected in organic smoke-free gross profit growth of 18.7%.

Speaker #3: ICOS remains the core driver, with both shipments and adjusted IMS growing around 11%. This includes an impressive acceleration in the fourth quarter, with a return to strong double-digit growth in Italy and a very promising start in Taiwan—just two examples of the broad growth across geographies.

Speaker #3: This performance also reflects the success of our multi-category strategy with bonds in ex-Nordics and VIF, more than doubling shipment volumes in international markets. Our strong brand offering, which includes high-quality science-backed products in all three smoke-free products categories, allows us to better self-consumers and enhance our financial performance.

Jacek Olczak: This performance also reflects the success of our multi-category strategy, with BONDS, ZYN ex-Nordics, and VEEV more than doubling shipment volumes in international markets. Our strong brand offering, which includes high-quality science-backed products in all three smoke-free products categories, allows us to better serve consumers and enhance our financial performance. While the nicotine pouch category remains nascent in most geographies, ZYN gained significant international share as we expanded the product portfolio and market reach. In the more established e-vapor category, VEEV is the fastest-growing brand of any major player in international closed pods and holds the number one position in eight markets with a substantial increase in gross profit. Although our performance continues to be fueled by the international business, we generated the vast majority of total PMI organic net revenue growth led by SFPs.

Speaker #3: While the nicotine pouch category remains nascent in most geographies, ZIN gained significant international share as we expanded the product portfolio and market reach. In the more established evapor category, VIV is the fastest growing brand of any major player in international closed pots and holds the number one position in eight markets with a substantial increase in gross profit.

Speaker #3: Although our performance continues to be fueled by the international business, we generated the vast majority of total PMI organic net revenue growth led by SFPs, with a substantial opportunity in the US, where ZYN grew shipments by 37% despite supply halts, a significant price premium, and competitive portfolio gaps.

Jacek Olczak: We have a substantial opportunity in the US, where ZYN grew shipments by 37% despite supply constraints in the first half, a significant price premium, and a competitive portfolio gap. Our Aspeya wellness business also grew organic net revenue strongly. Combustibles delivered robust top- and bottom-line performance, notwithstanding a more normalized industry volume decline and supply chain issues in Turkey. We accomplished this through strong pricing, portfolio resilience, and disciplined execution, with Marlboro reaching a historic high share. Managing this business responsibly enables us to invest boldly in better alternatives and sustain our smoke-free momentum. Together, these factors enabled us to deliver 15% adjusted diluted DPS growth in dollar terms, the strongest growth since 2011, excluding the pandemic recovery year of 2021. This reflects currency-neutral growth of 14%, well above our expectations at the start of the year and the second year of mid-teens progress.

Speaker #3: Our ASPAIA wellness business also grew organic net revenue strongly. Combustibles, delivered robust top and bottom-line performance, notwithstanding a more normalized industry volume decline and supply chain issues in Turkey.

Speaker #3: We accomplished this through strong pricing, portfolio resilience, and disciplined execution. With MALBRO, reaching a historic high share. Managing this business responsibly enables us to invest boldly in better alternatives and sustain our smoke-free momentum.

Speaker #3: Together, these factors enabled us to deliver 15% adjusted diluted EPS growth in dollar terms, the strongest growth since 2011, excluding the pandemic recovery year of 2021.

Speaker #3: This reflects currently neutral growth of 14%, well above our expectations at the start of the year, and the second year of mid-teens progress. Indeed, we have successfully achieved our three-year CAGR targets for organic OI and currency-neutral EPS in two years.

Jacek Olczak: Indeed, we have successfully achieved our three-year CAGR targets for organic OI and currency-neutral EPS in two years. With another strong performance expected in 2026, despite some transitory headwinds, we are today renewing these growth targets for the next three years, further validating our basic-class growth profile within consumer packaged goods. Importantly, this is accompanied by strong and increasing cash generation, and we target a leverage ratio of close to 2x by the end of 2026 at prevailing exchange rates. With our dividend payout now close to our objective of around 75% of adjusted diluted EPS, this provides capacity for strong returns to shareholders. Before I turn it over to Emmanuel, I would like to highlight the achievement of several important milestones as we entered the second decade of our smoke-free journey.

Speaker #3: With another strong performance expected in 2026, despite some transitory headwinds, we are today renewing this growth targets for the next three years, further validating our basin-class growth profile within a consumer package goods.

Speaker #3: Importantly, this is accompanied by strong and generation, and we target a leverage ratio of close to 2x by the end of 2026, at prevailing exchange rates.

Speaker #3: With our dividend payout now close to our objective of around 75% of adjusted diluted EPS, this provides capacity for strong returns to shareholders. Before I turn it over to Emmanuel, I would like to highlight the achievement of several important milestones as we entered the second decade of our smoke-free journey.

Speaker #3: Our total net revenues reached over 40 billion dollars in 2025, with 41.5% or close to 17 billion dollars generated by our smoke-free business. Even more impressive is the smoke-free gross profit contribution, which has essentially doubled in five years to 43% of total PMI.

Jacek Olczak: Our total net revenues reached over $40 billion in 2025, with 41.5% or close to $17 billion generated by our smoke-free business. Even more impressive is the smoke-free gross profit contribution, which has essentially doubled in five years to 43% of total PMI. Our adjusted operating margin also returned to above 40% this year as our transformation expands profitably. Our business is increasingly smoke-free, with 27 markets exceeding the 50% net revenue milestone, including South Korea, Poland, Italy, Romania, and of course, the US, which is also one of eight markets exceeding 75%. In the last quarter of 2025, the Europe region also surpassed 50%, making three out of four regional segments majority smoke-free. We continued to scale our global smoke-free presence, reaching 106 markets, 52 of which have already deployed the multi-category strategy, which is a critical accelerator of consumer adoption and long-term growth.

Speaker #3: Our adjusted operating margin also returns to above 40% this year, as our transformation expands profitably. Our business is increasingly smoke-free, with 27 markets exceeding the 50% net revenue milestone including South Korea, Poland, Italy, Romania, and of course the US, which is also one of eight markets exceeding 75%.

Speaker #3: In the last quarter of 2025, the Europe region also surpassed 50%, making three out of four regional segments majority smoke-free. We continued to scale our global smoke-free presence, reaching 106 markets, 52 of which have already deployed a multi-category strategy, which is a critical accelerator of consumer adoption and long-term growth.

Speaker #3: As adult nicotine consumers search for better alternatives to smoking, we continue to lead the broader industry transformation. A prime example is Japan, where the Heat Not Burn category crossed the 50% total industry threshold in December, driven by the undiminished strength of ICOS.

Jacek Olczak: As adult nicotine consumers search for better alternatives to smoking, we continue to lead the broader industry transformation. A prime example is Japan, where the heat-not-burn category crossed the 50% total industry threshold in December, driven by the undiminished strength of IQOS. Across our 106 smoke-free markets, our double-digit adjusted IMS volume growth continues to outpace the industry, demonstrating the collective strength of our leading brands. While we are proud of what we have accomplished so far, our focus remains sharply on the future, with an exciting pipeline of initiatives and innovations over the next three years. This is supported by increasing digitalization and our new organizational model. With that, I will hand over to Emmanuel to discuss our results and outlook in more detail, and I will come back at the end of this presentation.

Speaker #3: Across our 106 smoke-free markets, our double-digit adjusted IMS volume growth continues to outpace the industry, demonstrating the collective strength of our leading brands. While we are proud of what we have accomplished so far, our focus remains sharply on the future.

Speaker #3: With an exciting pipeline of initiatives and innovations over the next three years, this is supported by increasing digitalization and our new organizational model. With that, I will hand over to Emmanuel to discuss our results and outlook in more detail, and I will come back at the end of this presentation.

Speaker #2: Thank you, Yatsek. I will begin with the headline financial for the year, which were indeed impressive. Organic top line and operating income growth were in line with our forecast ranges set at the start of 2025, and currency-neutral adjusted diluted EPS growth exceeded those expectations by 1.7 points.

Emmanuel Babeau: Thank you, Jacek. I will begin with the headline financials for the year, which were indeed impressive. Organic top-line and operating income growth were in line with our forecast ranges set at the start of 2025, and currency-neutral adjusted diluted EPS growth exceeded those expectations by 1.7 points. Positive shipment volume, strong smoke-free category mix, and pricing drove organic top-line growth of +6.5% or +7.9%, excluding the technical Indonesia impact, positioning us at the high end of our +6% to +8% mid-term CAGR targets. We delivered another year of double-digit organic operating income growth at +10.6%, above our mid-term target range and reflecting +140 basis points of organic margin expansion. In dollar terms, adjusted operating income grew by +11.8% to $16.4 billion. Excellent currency-neutral adjusted diluted EPS growth of +14.2% was ahead of our expectations.

Speaker #2: Positive shipment volume, strong smoke-free category mix, and pricing drove organic top line growth of plus 6.5% or plus 7.9%, excluding the technical Indonesia impact, positioning us at the high end of our plus 6 to plus 8% mid-term CAGR targets.

Speaker #2: We delivered another year of double-digit organic operating income growth at plus 10.6%, above our mid-term target range and reflecting plus 140 basis points of organic margin expansion.

Speaker #2: In dollar terms, adjusted operating income grew by plus 11.8% to 16.4 billion dollars. Excellent currency-neutral adjusted diluted EPS growth of plus 14.2% was ahead of our expectation.

Speaker #2: This was driven by strong underlying business performance, notably in international multi-category and incombustible, coupled with a more favorable effective tax rate and lower net financing cost.

Emmanuel Babeau: This was driven by strong underlying business performance, notably in international multi-category and in combustibles, coupled with a more favorable effective tax rate and lower net financing costs. In dollar terms, adjusted diluted EPS of $7.54 was at the high end of our last guidance range, despite a lower than expected currency tailwind of $0.04 due to non-recurring transactional losses in Q4, largely related to the Russian ruble and the Swiss franc. Robust cash generation enabled us to deliver operating cash flow of $12.2 billion, matching the record delivery of 2024. Now, looking at Q4 specifically, while growth rates were below the overall year, partly due to the shipment and phasing factors outlined last quarter, underlying performance was ahead of our expectations. This enabled us to deliver almost plus 10% in adjusted diluted earnings per share growth to $1.70 or plus 9%, excluding a $0.01 currency tailwind.

Speaker #2: In dollar terms, adjusted diluted EPS of 7.54 dollars was at the high end of our last guidance range, despite a lower than expected currency tailwind of 4 cents, due to non-recurring transactional losses in Q4, largely related to the Russian ruble, and the Swiss franc.

Speaker #2: Robust cash generation enabled us to deliver operating cash flow of $12.2 billion, matching the record delivery of 2024. Now, looking at Q4 specifically, while growth rates were below the overall year, partly due to the shipment and phasing factors outlined last quarter, underlying performance was ahead of our expectation.

Speaker #2: This enabled us to deliver almost plus 10% in adjusted diluted earning per share growth to 1.70 dollars or plus 9%, excluding a 1 cent currency tailwind.

Emmanuel Babeau: I will now cover our 2025 performance in more detail, starting with volumes. As Jacek mentioned, we delivered our fifth consecutive year of positive volumes with total shipment growth of +1.4%. This was driven by the continued dynamism of our smoke-free business, which generated more than 100 billion incremental units over the past five years, combined with a very resilient cigarette performance. In 2025, smoke-free shipments grew +12.8% or +20 billion units to 179 billion, more than offsetting the -1.5% decline in cigarette shipments. All smoke-free categories grew strongly, with IQOS HTU shipment growth of +11% to 155 billion units, VEEV +102% to 3.3 billion equivalent units, and overall smoke-free product +18.5% to 20.7 billion units. Notably, this includes +37% growth from US ZYN to 11.9 billion pouches, making up close to 7% of total smoke-free product volumes.

Speaker #2: Covering our 2025 performance, I will now go into more detail, starting with volumes. As Yatsek mentioned, we delivered our fifth consecutive year of positive volumes, with total shipment growth of plus 1.4%.

Speaker #2: This was driven by the continued dynamism of our smoke-free business, which generated more than 100 billion incremental units over the past five years, combined with a very resilient cigarette performance.

Speaker #2: In 2025, smoke-free shipments grew plus 12.8% or plus 20 billion units to 179 billion, more than offsetting the 1.5% decline in cigarette shipments. All smoke-free categories grew strongly, with ICOS HTU shipment growth of plus 11% to 155 billion units, these plus 102% to 3.3 billion equivalent units, and overall smoke-free product plus 18.5% to 20.7 billion units.

Speaker #2: Notably, this includes plus 37% growth from US ZIN to 11.9 billion pouches, making up close to 7% of total smoke-free product volumes. As expected, adjusted IMS growth for ICOS HTU accelerated in Q4 to plus 12%, while shipment volumes were impacted by the dynamic flag last quarter and grew by plus 7.5%.

Emmanuel Babeau: As expected, adjusted IMS growth for IQOS HTU accelerated in Q4 to +12%, while shipment volumes were impacted by the dynamic flag last quarter and grew by +7.5%. Notwithstanding this impact, total Q4 smoke-free product volumes increased by a healthy +8.5%. The full-year cigarette volume decline of 1.5% was slightly better than our expectation of around 2%, with our category share performance in the second half proving resilient in several markets, including Egypt, and India. The total international cigarette industry, excluding China, declined by an estimated 1.1%, with continued divergence between markets where smoke-free products are available, which declined by around 3%, and markets where smoke-free products are not permitted or still at low level of penetration, which were broadly flat. The composition of our 2025 top-line performance was extremely consistent with the five-year average of each key component, demonstrating the sustainability of these dynamic drivers.

Speaker #2: impact, total Q4 smoke-free product volumes increased by a Notwithstanding this healthy plus 8.5%. The full-year cigarette volume decline of 1.5% was slightly better than our expectation of around 2%, with our category share performance in the second half proving resilient in several markets, including Egypt and India.

Speaker #2: The total international cigarette industry, excluding China, declined by an estimated 1.1%, with continued divergence between markets where smoke-free products are available, which declined by around 3%, and markets where smoke-free products are not permitted or are still at a low level of penetration, which were broadly flat.

Speaker #2: The composition of our 2025 top line performance was extremely consistent with a five-year average of each key component, demonstrating the sustainability of this dynamic drivers.

Speaker #2: Continued volume growth is the first pillar of our growth model. The second is pricing, which contributed plus 4.1 points. The 2025 impact reflects plus 7.6% pricing from combustible, and low single-digit pricing on ICOS, partly offset by the H2 normalization of US ZIN promotional activities.

Emmanuel Babeau: Continued volume growth is the first pillar of our growth model. The second is pricing, which contributed +4.1 points. The 2025 impact reflects +7.6% pricing from combustibles and low single-digit pricing on IQOS, partly offset by the H2 normalization of US ZYN promotional activities. The third pillar of growth is smoke-free mix, which contributed +3.5 points in 2025. Combustible geographic mix and other factors had an unfavorable impact of 1.1 points, whereas currency and scope effect added +0.8 points. Breaking down now our full-year performance by category. Both smoke-free and combustibles contributed to our strong net revenue and gross profit delivery, with gross margin expanding organically by +220 basis points to over 67%. Smoke-free net revenue grew organically by +14.1%, while gross profit advanced by +18.7%.

Speaker #2: The third pillar of growth is smoke-free mix, which contributed plus 3.5 points in 2025. Combustible geographic mix and other factors add an unfavorable impact of 1.1 points, whereas currency and scope effect added plus 0.8 points.

Speaker #2: Breaking down now our full-year performance by category. Both smoke-free and combustible contributed to our strong net revenue and gross profit delivery, with gross margin expanding organically by plus 220 basis points to over 67%.

Speaker #2: Smoke-free net revenue grew organically by plus 14.1%, while gross profit advanced by plus 18.7%. As a result, adjusted gross margin increased by 270 basis points to reach 69.5%.

Emmanuel Babeau: As a result, adjusted gross margin increased by 270 basis points to reach 69.5%, further widening the gap to combustible to four points for the year. IQOS was, again, the primary driver of this performance, combining global top-line momentum with increasing scale and cost efficiencies. VEEV's improving profitability also contributed positively, and while the normalization of US ZYN commercial activity in H2 had a dilutive year-over-year impact, its gross margins remained best-in-class, above the average of our IQOS business, including in Q4. As mentioned last quarter, we expect this to be an enduring positive mix driver. Combustible performed well in 2025, with low single-digit top-line growth and low to mid-single-digit gross profit growth, a proxy of what we expect this business to deliver over time.

Speaker #2: Further widening the gap to combustible to 4 points for the year. ICOS was again the primary driver of this performance, combining global top line momentum with increasing scale and cost efficiencies.

Speaker #2: With improving profitability, also contributed positively and while the normalization of US ZIN commercial activity in H2 at the dilutive year-over-year impact its gross margins remained best in class above the average of our ICOS business, including in Q4.

Speaker #2: mentioned last quarter, we expect this to be As an enduring positive mix driver. Combustible performed well in 2025, with low single-digit top line growth and low to mid-single-digit gross profit growth, a proxy of what we expect this business to deliver over time.

Speaker #2: Strong pricing more than offset volume decline and unfavorable mix, with disciplined cost management supporting gross margin expansion of plus 160 basis points to reach 65.5%.

Emmanuel Babeau: Strong pricing more than offset volume declines and unfavorable mix, with disciplined cost management supporting gross margin expansion of +160 basis points to reach 65.5%. Moving to operating margins, we delivered full-year organic expansion of +140 basis points and +160 basis points in dollar terms to reach an adjusted operating income margin of 40.4%. We achieved this in a year of strong investment in commercial, marketing, and brand building behind our smoke-free portfolio, including international multi-category deployment and US ZYN. We also continue to invest in expanding our US capabilities to capture the substantial growth opportunities ahead. This performance was supported by a relentless focus on both cost of goods sold and back-office efficiency, enabling meaningful margin expansion even as we continue to invest for growth.

Speaker #2: Moving to operating margins, we delivered full-year organic expansion of plus 140 basis points and plus 160 basis points in dollar term to reach an adjusted operating income margin of 40.4%.

Speaker #2: We achieved this in a year of strong investment in commercial, marketing, and brand building, behind our smoke-free portfolio, including international multi-category deployment and US ZIN.

Speaker #2: We also continue to invest in expanding our US capabilities to capture the substantial growth opportunities ahead. This performance was supported by a relentless focus on both cost of goods sold and back office efficiency, enabling meaningful margin expansion even as we continue to invest for growth.

Speaker #2: We have delivered around $1.5 billion in gross cost savings since 2024, placing us firmly on track to achieve our $2 billion objective for the 2024–2026 period.

Emmanuel Babeau: We have delivered around $1.5 billion in gross cost savings since 2024, placing us firmly on track to achieve our $2 billion objective for the 2024-2026 period. Focusing now on our smoke-free business, where all categories have an important role to play. Our global presence continues to grow, with PMI smoke-free products now available in 106 markets. This includes the recent launch of ZYN in Argentina and IQOS in Taiwan. We increased the number of markets with all three categories to 26, compared with nine markets two years ago. We continue to outpace the smoke-free market. Measured in the categories where we are present across these 106 markets, we delivered over +12% estimated in-market sales volume growth for the year, compared to over 9% for the industry.

Speaker #2: Focusing now on our smoke-free business, where all categories have an important role to play. Our global presence continues to grow, with available in 106 markets, this includes the recent launch of ZIN in Argentina, and ICOS in Taiwan.

Speaker #2: We increased the number of markets with all three categories to 26, compared with nine markets two years ago. We continue to outpace the smoke-free market.

Speaker #2: Measured in the categories where we are present across these 106 markets, we delivered over plus 12% estimated in-market sales volume growth for the year, compared to over 9% for the industry.

Speaker #2: We estimate our volume share of smoke-free product on this basis is around 60%, and our 2025 share of category growth is over 70%. With our portfolio of leading premium brands, our share of smoke-free in value term is notably higher than 60%.

Emmanuel Babeau: We estimate our volume share of smoke-free products on this basis is around 60%, and our 2025 share of category growth is over 70%. With our portfolio of leading premium brands, our share of smoke-free in value terms is notably higher than 60%. As we expanded our portfolio and geographic reach, the number of legal-age consumers of our smoke-free products reached an estimated 43.5 million as of 31 December, an increase of around 10 million users in two years, with broad-based growth across categories. IQOS adjusted IMS growth accelerated to an outstanding +12% in Q4, reflecting strong momentum across the globe and a presence now in 79 markets. All regions contributed, as illustrated by exceptional performance in key cities such as Mexico City, Manila, Riyadh, Rome, London, Madrid, and Munich. You can find further key city and European share data in the appendix to these slides.

Speaker #2: As we expanded our portfolio and geographic reach, the number of legal edge consumers of our smoke-free product reached an estimated 43.5 million, as of December 31st, an increase of around 10 million users in two years, with broad-based growth across categories.

Speaker #2: ICOS adjusted IMS growth accelerated to an outstanding plus 12% in the fourth quarter, reflecting strong momentum across the globe and a presence now in 79 markets.

Speaker #2: All regions contributed as illustrated by exceptional performance in T cities, such as Mexico City, Manila, Riyadh, Rome, London, Madrid, and Munich. You can find further key city and European share data in the appendix to these slides.

Speaker #2: This enables us to achieve full-year growth of plus 10.5% within our target range. Annual adjusted IMS again increased by around 15 billion units, despite the continued headwind of the EU characterizing flavor ban and a step up in competitive intensity.

Emmanuel Babeau: This enabled us to achieve full-year growth of +10.5% within our target range. Annual adjusted IMS again increased by around 15 billion units, despite the continued headwind of the EU's characterizing flavor ban and a step-up in competitive intensity. Our global share of the heat-not-burn category remains impressively resilient at approximately 76%. This is supported by brand engagement initiative and continuous innovation across devices and consumables, including the continued introduction of IQOS ILUMA i to reach a total of 55 markets. Importantly, IQOS profitability continued to increase significantly, driven by pricing, scale, and productivity improvement on consumables and device costs. This is illustrated by a substantial increase in product contribution over time. Turning to nicotine pouches, ZYN is the global number one brand, with a 2025 PMI category share of around 40% in pouch terms.

Speaker #2: Our global share of the Eat Not Burn category remains impressively resilient, at approximately 76%. This is supported by brand engagement initiative and continuous innovation across devices, and consumable, including the continued introduction of Iluma Eye to reach a total of 55 markets.

Speaker #2: Importantly, ICOS profitability continued to increase significantly, driven by pricing, scale, and productive improvement on consumable and device cost. This is illustrated by a substantial increase in product contribution over time.

Speaker #2: Turning to nicotine pouches, ZYN is the global number one brand with a 2025 PMI category share of around 40% in pouch terms. The US represents approximately two-thirds of the category today, while international markets, though still relatively small, are growing rapidly.

Emmanuel Babeau: The US represents approximately 2/3 of the category today, while international markets, though still relatively small, are growing rapidly. We made excellent progress this year, expanding ZYN's presence by +19 markets to 56 and delivering +36% shipment growth to 13.6 billion pouches or 880 million cans, achieving our 2026 target one year early. US shipments grew +37%, while international volume grew +31% or +112%, excluding the more mature Nordic market, where Q4 performance was impacted by a demanding shipment comparison. We are focused on the future growth of the category, broadening our portfolio to address the need of legal-edge smokers looking to switch. This includes new strengths and flavor variants, including ZYN X-Low, 1.5mg, which was successfully rolled out to around 2/3 of ZYN markets, driving a significant improvement in first-experience acceptance among adult nicotine consumers.

Speaker #2: We made excellent progress this year, expanding ZIN's presence by plus 19 markets to 56, and delivering plus 36% shipment growth to 13.6 billion pouches or 880 million cans, achieving our 2026 target one year early.

Speaker #2: US shipments grew plus 37%, 31%, or plus 112%, excluding the more mature Nordic markets, where Q4 performance was impacted by a demanding shipment comparison.

Speaker #2: We are focused on the future growth of the category, broadening our portfolio to address the need of legal edge smokers looking to switch. This includes new strengths and flavor variants, including ZIN X Low, 1.5 milligram, which was successfully rolled out to around two-thirds of ZIN markets, driving a significant improvement in first experience acceptance among adult nicotine consumers.

Speaker #2: While we are in the early stage of developing the category, which makes up only a low single-digit share of total nicotine in most markets, it's a very encouraging to see ZIN's share of international pouches, excluding the Nordics, rise by around plus 60% in 2025 to reach 16%, following the launches and relaunches of the past one to two years.

Emmanuel Babeau: While we are in the early stage of developing the category, which makes up only a low single-digit share of total nicotine in most markets, it's very encouraging to see ZYN's share of international pouches, excluding the Nordics, rise by around +60% in 2025 to reach 16%, following the launches and relaunches of the past 1 to 2 years. In e-vapor, VEEV is the fastest-growing international vape brand of any major player within closed pods. The pod segment is growing rapidly as disposables decline, and VEEV is gaining significant volume share in a fragmented landscape, sourcing primarily from legal-age consumers of other vaping products and adult smokers. As covered earlier, shipments doubled for the year with a meaningful improvement in profitability. VEEV is now present in 47 markets and grew notably well in Italy, Romania, Greece, the UK, Germany, and Indonesia.

Speaker #2: In e-vapor, VIV is the fastest growing international vape brand of any major player within close pods. The pod segment is growing rapidly, as disposables decline, and VIV is gaining significant volume share in a fragmented landscape, sourcing primarily from legal edge consumers of other vaping products and adult smokers.

Speaker #2: As covered earlier, shipments doubled for the year, with a meaningful improvement in profitability. VIV is now present in 47 markets and grew notably well in Italy, Romania, Greece, the UK, Germany, and Indonesia.

Speaker #2: Reviewing the smoke-free portfolio now by geography, starting with Europe, where, as in the ad segmentation, smoke-free products now represent more than 50% of regional net revenue.

Emmanuel Babeau: Reviewing the smoke-free portfolio now by geography, starting with Europe, where, in this segment, smoke-free products now represent more than 50% of regional net revenue. Total IQOS, ZYN, and VEEV volume grew by an impressive +13% for the year, with significant further growth potential given the overall penetration of SFP remaining low compared to Japan or the US. IQOS delivered another strong quarter with an acceleration in adjusted IMS growth to +10.3%. This was led by an exceptional performance in Italy, where we successfully navigated the impact of the flavor ban, supported by recent innovation. With an acceleration through the quarter of 2025 to deliver double-digit in-market sales growth for the year, quarterly market share passed 20% for the first time. Other notable call-outs with strong double-digit growth include Bulgaria, Germany, Greece, Spain, and Romania.

Speaker #2: Total ICOS ZIN and VIV volume grew by an impressive plus 13% for the year, with significant further growth potential given the overall penetration of SSP remained low compared to Japan or the US.

Speaker #2: ICOS delivered another strong quarter with an acceleration in adjusted IMS growth to plus 10.3%. This was led by an exceptional performance in Italy, where we successfully navigated the impact of the flavor ban, supported by recent innovation.

Speaker #2: With an acceleration through the quarter of 2025 to deliver double-digit in-market sales growth for the year, quarterly market share passed 20% for the first time.

Speaker #2: Other notable callouts, with strong double-digit growth, include Bulgaria, Germany, Greece, Spain, and Romania. ZIN pouch shipment volumes grew plus 9% for the year, and while the Nordics make up close to 60% of regional volume, shipments more than doubled elsewhere, with good progress in the UK, Poland, Italy, and Austria.

Emmanuel Babeau: ZYN pouch shipment volumes grew +9% for the year, and while the Nordics make up close to 60% of regional volume, shipments more than doubled elsewhere, with good progress in the UK, Poland, Italy, and Austria. As noted earlier, excellent VEEV momentum continued with shipment growth of +110%. In Japan, we reached an impressive milestone in December as the heat-not-burn category surpassed 50% of total industry offtake volumes, driven by the continued strength of IQOS. The path to 50% has not been linear, and following two years of very strong expansion in 2023 and 2024, category growth moderated in 2025. The adjusted in-market sales growth of IQOS HTUs has reflected this trend, with a healthy +7% in 2025, representing very robust absolute growth.

Speaker #2: As noted earlier, excellent VIV momentum continued with shipment growth of plus 110%. In Japan, we reached an impressive milestone in December as the Eat Not Burn category surpassed 50% of total industry of tech volumes, driven by the continued strength of ICOS.

Speaker #2: The path to 50% has not been linear, and following two years of very strong expansion in '23 and '24, category growth moderated in 2025.

Speaker #2: growth of ICOS The adjusted in-market sales HTUs has reflected this trend, with a healthy plus 7% in 2025, representing very robust absolute growth. In Q4, the Japanese nicotine industry and the Eat Not Burn category grew slightly below the full-year trend, with some impact from inflationary pressures on consumer purchasing power.

Emmanuel Babeau: In Q4, the Japanese nicotine industry and the heat-not-burn category grew slightly below the full-year trend, with some impact from inflationary pressures on consumer purchasing power. Nonetheless, IQOS HTU adjusted IMS grew +5.8%, while Q4 adjusted share grew +2 points year-on-year to 32.6%. While competitive intensity increased markedly this year, IQOS category share was broadly stable, with most movement occurring among other players. We are encouraged by early signs that the increase in category activity is generating higher interest among more traditional adult smokers, a positive indicator for category growth. Looking forward, the upcoming excise tax increases on heat-not-burn in April and October make 2026 an atypical year.

Speaker #2: Nonetheless, ICOS HTU adjusted IMS grew plus 5.8%, while Q4 adjusted share grew plus 2 points, year on year, to 32.6%. While competitive intensity increased, market lead this year ICOS category share was broadly stable, with most movement occurring among other players.

Speaker #2: We are encouraged by early signs that the increase in category activity is generating higher interest among more traditional adult smokers, a positive indicator for category growth.

Speaker #2: Looking forward, the upcoming excise tax increases on Eat Not Burn in April and October make 2026 an atypical year. As discussed at the Morgan Stanley Conference in December, the level of pass-on makes this a headwind for the category, representing about ¥50 to ¥100 per pack, which translates to 2%, 10%, to 20% of current retail prices, with the greatest impact for products at lower price points.

Emmanuel Babeau: As discussed at the Morgan Stanley conference in December, the level of pass-on makes this a headwind for the category, representing about JPY 50 to 100 per pack, which translates to 2% to 10% to 20% of current retail prices, with the greatest impact for products at lower price points. As announced recently, we have submitted an application to increase our prices in April. We anticipate these price increases will impact category growth and volume for 2026, despite the fact that heat-not-burn consumers have demonstrated higher price resilience than cigarette smokers in the past. Shipment volatility in 2026 is also possible, driven by in-market sales trends around the April and October excise increases. Importantly, we do not expect the underlying category growth trend to change, and we target substantial further growth from IQOS in Japan in the years to come.

Speaker #2: As announced recently, we have submitted an application to increase our prices in April. We anticipate this price increases will impact category growth and volume for 2026, despite the fact that Eat Not Burn consumers have demonstrated higher price resilience than cigarette smokers in the past.

Speaker #2: Shipment volatility in 2026 is also possible, driven by in-market sales trends around April and October excise increases. Importantly, we do not expect the underlying category growth trend to change, and we target substantial further growth from IQOS in Japan in the years to come.

Speaker #2: We are also pleased to report ZIN's successful pilot launch in Tokyo. Outside of the US, Japan, and Europe, all three of our smoke-free categories are delivering strong, broad-based growth, with full-year shipment up plus 17%.

Emmanuel Babeau: We are also pleased to report ZYN's successful pilot launch in Tokyo. Outside of the US, Japan, and Europe, all three of our smoke-free categories are delivering strong broad-based growth, with full-year shipment up +17%. This includes IQOS' strong start in Taiwan during Q4, where we exited the year with around 4% offtake share, and rapid progress in markets such as South Korea, Malaysia, and the Philippines. ZYN momentum was notably strong in Pakistan and Mexico. In e-vapor, we've achieved excellent results, particularly in Asia. Our global travel retail business further supports all three brands and continues to deliver impressive multi-category performance, serving as a powerful platform to showcase our portfolio. Turning now to the US, which made up around 7% of our global net revenues and around 8% of our adjusted operating income in 2025.

Speaker #2: This includes ICOS strong start in Taiwan during Q4, where we exited the year with around 4% of tech share, and rapid progress in markets such as South Korea, Malaysia, and the Philippines.

Speaker #2: ZIN momentum was notably strong in Pakistan and Mexico. In e-vapor, we've achieved excellent results, particularly in Asia. Our global travel retail business further supports all three brands and continues to deliver impressive multi-category performance, serving as a powerful platform to showcase our portfolio.

Speaker #2: Turning now to the US, which made up around 7% of our global net revenues, and around 8% of our adjusted operating income in 2025.

Speaker #2: Nicotine pouches remain the fastest-growing US segment, representing a high single-digit percentage of total nicotine industry volume. Despite supply constraints, commercial normalization, and portfolio gap, ZIN continued to lead the category in 2025 with its premium offer, capturing around 50% of category growth, 61.5% canned volume share, and a value share of over 67%.

Emmanuel Babeau: Nicotine pouches remain the fastest-growing US segment, representing a high single-digit percentage of total nicotine industry volume. Despite supply constraints, commercial normalization, and portfolio gaps, ZYN continued to lead the category in 2025 with its premium offer, capturing around 50% of category growth, 61.5% canned volume share, and a value share of over 67%. ZYN offtake volume also grew strongly by +25% for the year, as estimated by Nielsen. Shipment grew by +37%, or 230 million cans, to 794 million. The gap between shipment and offtake reflects a net channel inventory rebuild, and we estimate the underlying 2025 shipment base, corresponding to consumer offtake, was around 740 to 750 million cans.

Speaker #2: ZIN off-tech volume also grew strongly by plus 25% for the year, as estimated by Nielsen. Shipment grew by plus 37%, or 230 million canned, to 794 million.

Speaker #2: The gap between shipment and off-tech reflects a net channel inventory rebuild, and we estimate the underlying 2025 shipment base corresponding to consumer off-tech was around 740 to 750 million cans.

Speaker #2: This was notably concentrated in the first quarter of 2025, and we estimate the underlying shipment base by quarter for 2025 was around 160 million canned in Q1, 180 million canned in Q2, 205 million in Q3, and 200 million in Q4.

Emmanuel Babeau: This was notably concentrated in the first quarter of 2025, and we estimate the underlying shipment base by quarter for 2025 was around 160 million cans in Q1, 180 million cans in Q2, 205 million in Q3, and 200 million in Q4. Indeed, Q4 saw a lower-than-expected destocking of about 5 million cans as we deployed promotion, limited time offers, and announced a January list price increase of $0.10 per can in December. Looking ahead to 2026, we expect ZYN shipment volume to broadly reflect offtake growth from this underlying base before any further channel inventory movement. We estimate there remain around 25 million cans of surplus inventory in the downstream supply chain, which we assume will normalize in due course, most likely in the first quarter. The level of offtake growth for ZYN in 2026 will be influenced by three key factors in which we are investing.

Speaker #2: Indeed, Q4 saw a lower-than-expected destocking of about 5 million canned, as we deployed promotion, limited-time offers, and announced a January lease price increase of 10 cents per canned in December.

Speaker #2: Looking ahead to 2026, we expect ZIN shipment volume to broadly reflect off-tech growth from this underlying base, before any further channel inventory movement. We estimate there remain around 25 million canned of surplus inventory in the downstream supply chain, which we assume will normalize in due course most likely in the first quarter.

Speaker #2: The level of off-tech growth for ZIN in 2026 will be influenced by three key factors in which we are investing. The most critical over the mid to long term is ZIN's brand equity as we strengthen marketing in a responsible manner, enhance point-of-sale visibility, and deepen the connection with our legal-age consumers.

Emmanuel Babeau: The most critical over the mid to long term is ZYN's brand equity, as we strengthen marketing in a responsible manner, enhance point-of-sale visibility, and deepen the connection with our legal-age consumers. Accessing all segments of the US nicotine pouch category will require us to navigate a dynamic and uncertain regulatory environment. We have developed and are preparing to launch innovation to address a broad spectrum of consumer preferences. We have a number of pending ZYN submissions before the FDA, including ZYN Ultra, which is included in the FDA's pilot program. ZYN Ultra offers higher strengths and an expected range of adult-oriented flavors. We are taking steps to prepare for the launch of ZYN Ultra as soon as possible, pending FDA action. We also believe IQOS ILUMA's strong application and demonstrated track record, converting smokers to better alternatives, warrants expeditious FDA action.

Speaker #2: Accessing all segments of the US nicotine pouch category will require us to navigate a dynamic and uncertain regulatory environment. We have developed and are preparing to launch innovation to address a broad spectrum of consumer preferences.

Speaker #2: We have a number of pending ZIN submissions before the FDA, including ZIN Ultra, which is included in FDA's pilot program. ZIN Ultra offers higher strengths and an expected range of adult-oriented flavors.

Speaker #2: We are taking steps to prepare for the launch of ZIN Ultra, as soon as possible, pending FDA action. We also believe ICOS Iluma's strong application and demonstrated track record converting smokers to better alternatives warrants expeditious FDA action.

Speaker #2: We also continue to optimize ZIN's premium price position. Despite elevated promotional intensity across the category, ZIN remains the leading premium brand by a clear margin, fully aligned with our strategy for sustainable, long-term growth.

Emmanuel Babeau: We also continue to optimize ZYN's premium price position. Despite elevated promotional intensity across the category, ZYN remains the leading premium brand by a clear margin, fully aligned with our strategy for sustainable long-term growth. We have a comprehensive commercial program planned for 2026, and as a reminder, commercial activities, including promotions, were unusually low in the first half of 2025. As I mentioned before, we continue to expect ZYN to deliver best-in-class growth margin within PMI, above the average of IQOS. We are very excited about the significant growth potential of the brand over the coming years, which fully justifies the above-mentioned investment. One example of our enhanced brand-building effort is the recently announced global partnership between ZYN and Ferrari, which recognized our long-standing heritage in Formula 1, with smoke-free products now at the forefront.

Speaker #2: We have a comprehensive commercial program planned for 2026, and as a reminder, commercial activities including promotions were unusually low in the first half of 2025.

Speaker #2: As I mentioned before, we continue to expect ZIN to deliver best-in-class gross margin within PMI above the average of ICOS. We are very excited about the significant growth potential of the brand over the coming years, which fully justifies the above-mentioned investment.

Speaker #2: One example of our enhanced brand-building effort is the recently announced global partnership between ZIN and Ferrari, which reignites our long-standing heritage in Formula One, with smoke-free products now at the forefront.

Speaker #2: Formula One's overwhelmingly adult audience provides a highly impactful platform to engage consumers responsibly, and reinforces ZIN's premium combustible, which delivered another robust year of pricing of plus 7.6%, including plus 6.8% in Q4, and very good gross profit growth.

Emmanuel Babeau: Formula 1's overwhelmingly adult audience provides a highly impactful platform to engage consumers responsibly and reinforce ZYN's premium equity. Finally, moving to combustibles, which delivered another robust year of pricing of +7.6%, including +6.8% in Q4, and very good profit growth. Our full-year cigarette share declined by 0.2 points to 25.3%, mainly due to Turkey, and was otherwise stable, including a record high for Marlboro, both for the full year and in Q4, where its share reached 11% of the international category, excluding China. For 2026, we forecast a combustibles pricing variance of around +6%, reflecting continued dynamic performance. With that, I will now hand it back to Jacek.

Speaker #2: Our fully cigarette share declined by 0.2 points to 25.3%, mainly due to Turkey, and was otherwise stable, including a record high for Marlboro both for the full year and in Q4, where its share reached 11% of the international category excluding China.

Speaker #2: For 2026, we forecast a combustible pricing variance of around plus 6%, reflecting continued dynamic performance. With that, I will now hand it back to Jacek.

Speaker #2: Thank you, Emanuel. This brings me to our outlook for 2026, where we expect another year of a strong and profitable growth despite several transitory headwinds.

James Bushnell: Thank you, Emmanuel. This brings me to our outlook for 2026, where we expect another year of strong and profitable growth despite several transitory headwinds. Starting with volumes, we expect continued strong underlying momentum in our smoke-free business for all three categories. Both shipments and adjusted IMS volumes are projected to grow in a high single digit after factoring in the headwinds from Japan excise taxes and US ZYN inventory comparisons described earlier. For combustibles, we forecast a cigarette decline of around 3%, with weaker industry volumes in India and Mexico following recent excise tax increases, and our ongoing recovery in Turkey likely to impact comparisons in the first half. Altogether, this results in a broadly stable outlook for total shipment growth, subject to the usual variability in shipment timing and trade inventory movements, as compared to a forecast total industry decline of around 2% for cigarettes and HTUs.

Jacek Olczak: Thank you, Emmanuel. This brings me to our outlook for 2026, where we expect another year of strong and profitable growth despite several transitory headwinds. Starting with volumes, we expect continued strong underlying momentum in our smoke-free business for all three categories. Both shipments and adjusted IMS volumes are projected to grow in a high single digit after factoring in the headwinds from Japan excise taxes and US ZYN inventory comparisons described earlier. For combustibles, we forecast a cigarette decline of around 3%, with weaker industry volumes in India and Mexico following recent excise tax increases, and our ongoing recovery in Turkey likely to impact comparisons in the first half. Altogether, this results in a broadly stable outlook for total shipment growth, subject to the usual variability in shipment timing and trade inventory movements, as compared to a forecast total industry decline of around 2% for cigarettes and HTUs.

Speaker #2: Starting with volumes, we expect continued strong underlying momentum in our smoke-free business for all three categories. Both shipments and adjusted IMS volumes are projected to grow in the high single digits after factoring in the headwinds from Japan excise taxes and U.S. ZIN inventory comparisons described earlier.

Speaker #2: For combustibles, we forecast a cigarette decline of around 3%, with weaker industry volumes in India and Mexico following recent excise tax increases, and our ongoing recovery in Turkey likely to impact comparisons in the first half.

Speaker #2: Altogether, these results in a broadly stable outlook for total shipment growth, subject to the usual variability in shipment timing and trade inventory movements, as compared to a forecast total industry decline of around 2% for cigarettes and HDUs.

Speaker #2: We expect another strong year overall for pricing, led by combustibles, notwithstanding the impact of US first-half comparisons, and for continued positive smoke-free mix.

James Bushnell: We expect another strong year overall for pricing, led by combustibles, notwithstanding the impact of US first-half comparisons, and for continued positive smoke-free mix. Taking all these elements into account, we forecast 2026 organic net revenue growth of 5 to 7%. We expect the same factors, in addition to operating leverage and ongoing cost efficiencies, to drive further robust margin expansion, with projected organic operating income growth of 7 to 9%. This includes continued strong investment behind our smoke-free portfolio. We are forecasting currency-neutral adjusted diluted EPS growth of 7.5 to 9.5%, factoring in broadly stable net finance costs and an effective corporate tax rate approximately in line with 2025, at around 21.5%. Including an estimated $0.28 currency benefit at prevailing exchange rates, this translates to 11.3 to 13.3% growth to a range of $8.39 to $8.54, which would mark another year of double-digit EPS growth in dollar terms.

Jacek Olczak: We expect another strong year overall for pricing, led by combustibles, notwithstanding the impact of US first-half comparisons, and for continued positive smoke-free mix. Taking all these elements into account, we forecast 2026 organic net revenue growth of 5 to 7%. We expect the same factors, in addition to operating leverage and ongoing cost efficiencies, to drive further robust margin expansion, with projected organic operating income growth of 7 to 9%. This includes continued strong investment behind our smoke-free portfolio. We are forecasting currency-neutral adjusted diluted EPS growth of 7.5 to 9.5%, factoring in broadly stable net finance costs and an effective corporate tax rate approximately in line with 2025, at around 21.5%. Including an estimated $0.28 currency benefit at prevailing exchange rates, this translates to 11.3 to 13.3% growth to a range of $8.39 to $8.54, which would mark another year of double-digit EPS growth in dollar terms.

Speaker #2: Taking all these elements into account, we forecast 2026 organic net revenue growth of 5% to 7%. We expect the same factors, in addition to cost efficiencies, to drive further robust margin expansion, with projected organic operating income growth of 7% to 9%.

Speaker #2: This includes our smoke-free portfolio. We are forecasting EPS growth of 7.5 to 9.5%, factoring in broadly stable net finance costs and an effective corporate tax rate approximately in line with 2025 at around 21.5%.

Speaker #2: Including an estimated $0.28 currency benefit at prevailing exchange rates, this translates to 11.3% to 13.3% growth to a range of $8.39 to $8.54, which would mark another year of double-digit EPS growth in dollar terms.

Speaker #2: We expect a significant acceleration in operating cash flow growth at around $13.5 billion at prevailing exchange rates and subject to year-end working capital requirements.

James Bushnell: We expect a significant acceleration in operating cash flow growth at around $13.5 billion at prevailing exchange rates and subject to year-end working capital requirements. This strong cash generation is expected to support further meaningful deleveraging in 2026, which I will come back to shortly. On a quarterly basis, we expect Q1 to be the softest quarter of the year, reflecting demanding year-on-year comparisons and investment phasing. We expect first-quarter combustible volumes to decline by up to 5% as we lap a prior year quarter of volume growth, whilst having the highest expected impact of the dynamics in Turkey, India, and Mexico, which I mentioned for the full year. Smoke-free product shipments will also be impacted by the US ZYN shipment dynamics explained by Emmanuel and the strong HTU comparator, with low levels of commercial activity on ZYN in prior year impacting the net revenue per can comparison.

Jacek Olczak: We expect a significant acceleration in operating cash flow growth at around $13.5 billion at prevailing exchange rates and subject to year-end working capital requirements. This strong cash generation is expected to support further meaningful deleveraging in 2026, which I will come back to shortly. On a quarterly basis, we expect Q1 to be the softest quarter of the year, reflecting demanding year-on-year comparisons and investment phasing. We expect first-quarter combustible volumes to decline by up to 5% as we lap a prior year quarter of volume growth, whilst having the highest expected impact of the dynamics in Turkey, India, and Mexico, which I mentioned for the full year. Smoke-free product shipments will also be impacted by the US ZYN shipment dynamics explained by Emmanuel and the strong HTU comparator, with low levels of commercial activity on ZYN in prior year impacting the net revenue per can comparison.

Speaker #2: The strong cash generation is expected to support further meaningful deleveraging in 2026, which I will come back to shortly. On a quarterly basis, we expect the first quarter—reflecting a demanding comparator—to be the softest quarter of the year-on-year comparisons, and expect first-quarter combustible volumes to decline by up to 5% as we lap a prior year quarter of volume, expecting impact of the dynamics in growth, whilst having the highest, which I mentioned, for the full year.

Speaker #2: Smoke-free product shipments will also be impacted by the US ZYN shipment dynamics explained by Emmanuel, and the strong HDU comparator. With low levels of commercial activity on ZYN in the prior year impacting the net revenue per can comparison, and a higher quarter of investment globally behind our smoke-free due to phasing, we anticipate broadly flat year-on-year first-quarter organic net revenue and operating income.

James Bushnell: A higher quarter of investment globally behind our smoke-free due to phasing, we anticipate broadly flat year-on-year Q1 organic net revenue and operating income. We forecast high single-digit adjusted diluted EPS growth of $1.80 to $1.85, including a $0.14 tailwind at prevailing rates, supported by a favorable comparison to transactional currency impacts in the prior year. As I mentioned earlier, we have delivered our three-year CAGR targets on operating income and EPS in just two years. Combining our 2026 forecast with the strong results of 2024 and 2025, we expect to meet or exceed all of our 2024-26 CAGR targets presented at our 2023 Investors' Day. This is especially the case for operating income and EPS growth, despite our algorithm assuming a more favorable corporate tax rate. In addition, our expected adjusted EPS CAGR in dollar terms represents a strong double-digit delivery.

Jacek Olczak: A higher quarter of investment globally behind our smoke-free due to phasing, we anticipate broadly flat year-on-year Q1 organic net revenue and operating income. We forecast high single-digit adjusted diluted EPS growth of $1.80 to $1.85, including a $0.14 tailwind at prevailing rates, supported by a favorable comparison to transactional currency impacts in the prior year. As I mentioned earlier, we have delivered our three-year CAGR targets on operating income and EPS in just two years. Combining our 2026 forecast with the strong results of 2024 and 2025, we expect to meet or exceed all of our 2024-26 CAGR targets presented at our 2023 Investors' Day. This is especially the case for operating income and EPS growth, despite our algorithm assuming a more favorable corporate tax rate. In addition, our expected adjusted EPS CAGR in dollar terms represents a strong double-digit delivery.

Speaker #2: We forecast high single-digit adjusted diluted EPS growth of $1.80 to $1.85, including a $0.14 tailwind at prevailing rates, supported by a favorable comparison to transactional currency impacts in the prior year.

Speaker #2: As I mentioned earlier, we have delivered our three-year CAGR EPS in just two targets on operating income and the 2026 forecast. With the strong results of 2024, we expect to meet or, in 2025, exceed all of our 2024–26 CAGR targets presented at our 2023 years.

Speaker #2: Day. This is combining our income and EPS growth, despite our algorithm assuming a more favorable corporate tax rate. In addition, our expected—especially the case for operating double-digit delivery.

Speaker #2: This brings me to the adjusted EPS CAGR, in dollars, for the 2026–2028 outlook, where we are renewing our medium-term years. We continue to have growth targets in the next three years, targeting positive total shipment volumes, with the growth of smoke-free products more than offsetting cigarette volume declines.

James Bushnell: This brings me to the 2026-2028 outlook, where we are renewing our medium-term growth targets in the next three years. We continue to target positive total shipment volumes, with the growth of smoke-free products more than offsetting cigarette volume declines. While our 2026 forecast ranges are marginally lower due to the specific factors we explained, for the three-year period to 2028, we continue to target compound annual growth rates of 6% to 8% in organic net revenues, 8% to 10% in organic operating income as margins expand, and 9% to 11% in adjusted diluted EPS at constant currencies. These renewed targets reflect our confidence in sustaining the strong pace of top and bottom-line growth over time. They also reaffirm our best-in-class growth profile within the large-cap consumer packaged goods sector. We target smoke-free product shipment and adjusted IMS volume growth of high single-digit to low teens.

Jacek Olczak: This brings me to the 2026-2028 outlook, where we are renewing our medium-term growth targets in the next three years. We continue to target positive total shipment volumes, with the growth of smoke-free products more than offsetting cigarette volume declines. While our 2026 forecast ranges are marginally lower due to the specific factors we explained, for the three-year period to 2028, we continue to target compound annual growth rates of 6% to 8% in organic net revenues, 8% to 10% in organic operating income as margins expand, and 9% to 11% in adjusted diluted EPS at constant currencies. These renewed targets reflect our confidence in sustaining the strong pace of top and bottom-line growth over time. They also reaffirm our best-in-class growth profile within the large-cap consumer packaged goods sector. We target smoke-free product shipment and adjusted IMS volume growth of high single-digit to low teens.

Speaker #2: While our 2026 forecast ranges marginally lower due to the specific factors we explained, for the three-year period to 2028, we continue to target compound annual growth rates of 6% to 8% in organic net revenues, 8% to 10% in organic operating income as margins expand, and 9% to 11% in adjusted diluted EPS at constant currency.

Speaker #2: This renewed target reflects our confidence in sustaining the strong pace of top- and bottom-line growth over time. This also reaffirms our best-in-class growth profile within the large-cap consumer packaged goods sector.

Speaker #2: We target smoke-free product shipment and adjusted IMS volume growth of high single-digit to low teens. Our multi-category strategy in international markets will continue to be the dominant driver of smoke-free products growth, further amplified by the substantial opportunity in the U.S.

James Bushnell: Our multi-category strategy in international markets will continue to be the dominant driver of smoke-free products growth, further amplified by the substantial opportunity in the US. As we progress through the period, we expect this to be bolstered by the new market openings and an active innovation pipeline. The US launch of IQOS ILUMA is included in these targets, including initial commercial investment with the precise cadence subject to the timing of launch. Meanwhile, the resilience of our combustible portfolio provides a critical backbone, providing the infrastructure, financial firepower, and consumer connection to accelerate smoke-free growth. We look forward to sharing more with you on this topic at the CAGNY conference on 18 February. We remain a highly cash-generative business, which is based on the strength of our brands and reinforced by disciplined management of cost and cash.

Jacek Olczak: Our multi-category strategy in international markets will continue to be the dominant driver of smoke-free products growth, further amplified by the substantial opportunity in the US. As we progress through the period, we expect this to be bolstered by the new market openings and an active innovation pipeline. The US launch of IQOS ILUMA is included in these targets, including initial commercial investment with the precise cadence subject to the timing of launch. Meanwhile, the resilience of our combustible portfolio provides a critical backbone, providing the infrastructure, financial firepower, and consumer connection to accelerate smoke-free growth. We look forward to sharing more with you on this topic at the CAGNY conference on 18 February. We remain a highly cash-generative business, which is based on the strength of our brands and reinforced by disciplined management of cost and cash.

Speaker #2: As we progress through the period, we expect this to be bolstered by the new market openings and an active innovation pipeline. The US launch of ICO ZLUMA is included in this target, including initial commercial investment, with the precise cadence subject to the timing of launch.

Speaker #2: Meanwhile, the resilience of our combustible portfolio provides a critical backbone, providing the infrastructure, financial firepower, and consumer connection to accelerate smoke-free growth. We look forward to sharing more with you on this topic at the CAGNY conference on February 18.

Speaker #2: We remain a highly cash-generative business, with its base on the strength of our brands and reinforced by disciplined management of cost and cash. This gives us the financial capacity to invest strongly behind our smoke-free business, maintain superior shareholder returns, and optimize our balance sheet.

James Bushnell: This gives us the financial capacity to invest strongly behind our smoke-free business, maintain superior shareholder returns, and optimize our balance sheet. Over the next three years, we target aggregate operating cash flow of around $45 billion at prevailing exchange rates. We anticipate capital expenditures of approximately $1.3 to $1.5 billion per annum on average, with the potential for lower amounts beyond 2026, and the lion's share of investments again focus on smoke-free products. Alongside superior business results, we are committed to delivering superior shareholder value. Having essentially reached our target dividend payout ratio of around 75% of adjusted diluted EPS, we have the capacity to pursue dividend growth closer to the level of earnings growth, as demonstrated by the 8.9% increase announced in September last year. Strong cash flow and the big tech growth enable us deleveraging.

Jacek Olczak: This gives us the financial capacity to invest strongly behind our smoke-free business, maintain superior shareholder returns, and optimize our balance sheet. Over the next three years, we target aggregate operating cash flow of around $45 billion at prevailing exchange rates. We anticipate capital expenditures of approximately $1.3 to $1.5 billion per annum on average, with the potential for lower amounts beyond 2026, and the lion's share of investments again focus on smoke-free products. Alongside superior business results, we are committed to delivering superior shareholder value. Having essentially reached our target dividend payout ratio of around 75% of adjusted diluted EPS, we have the capacity to pursue dividend growth closer to the level of earnings growth, as demonstrated by the 8.9% increase announced in September last year. Strong cash flow and the big tech growth enable us deleveraging.

Speaker #2: Over the next three years, we target aggregate operating cash flow of around $45 billion at prevailing exchange rates. We anticipate capital expenditures of approximately $1.3 to $1.5 billion per annum on average, with the potential for lower amounts beyond 2026, and the lion's share of investments again focused on smoke-free products.

Speaker #2: Alongside superior business results, we are shareholder value. Having committed to delivering superior essentially reached our target dividend payout ratio of around 75% of adjusted diluted EPS, we have the level of earnings growth as demonstrated by the 8.9% increase announced in September last year.

Speaker #2: Strong cash flow and the big tech growth enables delivery. We closed 2025 with an adjusted leverage ratio of 2.5x, reflecting solid progress despite the unfavorable impact of year-end currency movements and our net debt.

James Bushnell: We closed 2025 with an adjusted leverage ratio of 2.5x, reflecting solid progress despite the unfavorable impact of year-end currency movements and our net debt. We expect further improvements in 2026, targeting close to the 2x by year-end at prevailing exchange rates, providing increased flexibility for capital allocation. In summary, our full-year performance underscores the strength and momentum of our global smoke-free business, supported by investment in our premium brands and continued resilience of combustibles. Despite the complex operating environment shaped by economic uncertainty, geopolitical tensions, and evolving regulations, we continued to make significant progress towards our vision of a smoke-free future. As we delivered consistent best-in-class growth, we are reinvesting in our leading brands, innovation, and the critical capabilities which support long-term performance. This allows us to generate significant value for our shareholders, including the largest dividend increase in over a decade.

Jacek Olczak: We closed 2025 with an adjusted leverage ratio of 2.5x, reflecting solid progress despite the unfavorable impact of year-end currency movements and our net debt. We expect further improvements in 2026, targeting close to the 2x by year-end at prevailing exchange rates, providing increased flexibility for capital allocation. In summary, our full-year performance underscores the strength and momentum of our global smoke-free business, supported by investment in our premium brands and continued resilience of combustibles. Despite the complex operating environment shaped by economic uncertainty, geopolitical tensions, and evolving regulations, we continued to make significant progress towards our vision of a smoke-free future. As we delivered consistent best-in-class growth, we are reinvesting in our leading brands, innovation, and the critical capabilities which support long-term performance. This allows us to generate significant value for our shareholders, including the largest dividend increase in over a decade.

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Q4 2025 Philip Morris International Inc Earnings Call

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Philip Morris

Q4 2025 Philip Morris International Inc Earnings Call

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Philip Morris

Q4 2025 Philip Morris International Inc Earnings Call

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