Philip Morris International Q4 2022 Earnings Call Transcript

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Provided by Quartr
February 9, 2023

There are 10 speakers on the call.

Operator

Good day, and welcome to the Philip Morris International 4th Quarter 2022 and Full Year Earnings Conference Call. Today's call is scheduled to last about 1 hour, including remarks by Philip Morris International Management and the question and answer session. Media representatives on the call will also be invited to ask questions at the conclusion of the questions from the investment community. I will now turn the call over to Mr. James Bushnell, Vice President of Investor Relations and Financial Communications.

Operator

Please go ahead, sir.

Speaker 1

Welcome. Thank you for joining us. Earlier today, we issued a press release containing detailed information on our A glossary of terms, including the definition for smoke free products as well as adjustments, other calculations and reconciliations to the most directly comparable U. S. GAAP measures And additional smoke free volume and net revenue data are at the end of today's webcast slides, which are posted on our website.

Speaker 1

Growth rates presented on an organic basis reflect currency neutral adjusted results, excluding acquisitions and disposals. As such, figures and comparisons presented on an organic basis exclude Swedish Match up until November 11, 2023. As mentioned previously, starting in the Q2 of 2022 and on a comparative basis, PMI 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 Orchak, Chief Executive Officer and Emmanuel Babaut, Chief Financial Officer.

Speaker 1

Over to you, Jacek.

Speaker 2

Thank you, James, and welcome, everyone. We had a remarkable year for our smoke free transformations in 2022. Despite the exceptional challenges of the war in Ukraine, severe supply chain disruptions and global inflation, We delivered very strong financial performance and took 2 major strategic strides towards a smoke free future. I would like to express my deepest thanks to all my colleagues who stirred no effort to drive excellent business results during these unprecedented times. Our thoughts also continue to be with those affected by the war in Ukraine and the recent tragedy in Turkey and Syria.

Speaker 2

In 2022, PMI delivered its 2nd consecutive year of total volume growth, reflecting continued IQOS progress and broadly stable cigarette volumes. Full year Smokefree net revenues reached almost 1 third of total PMI and over 50% in 70 markets. This is impressive progress towards our ambition of becoming a predominantly smoke free company by net revenues in 2025. IQOS outstanding results continued with over 21% full year growth in both shipment volumes and in market sales, excluding Russia and Ukraine. This reflects IQOSI LUMO continues to generate excellent growth in its launch markets with upgrades from existing users The success is supported by the increasing deployment of a 2 tier heated tobacco units portfolio Providing adult smokers with an expanding range of innovative and high quality alternatives to cigarettes.

Speaker 2

In combustibles, we delivered a robust performance with a 3.7% growth in organic net revenues And 0.3 percentage points higher shared of segment, excluding Russia and Ukraine, despite The impact of adult smokers moving to smoke free products. We also achieved 2 critical strategic milestones this year, Reaching an agreement to take full control of IQOS in the U. S. In 2024 and successfully completing the acquisition of Swedish Match. These achievements will accelerate our smoke free journey and further position us to lead the transformation of the wider industry.

Speaker 2

Clearly, currency headwinds were extremely strong and weighed on our U. S. Dollar performance. But although volatility remains, I am pleased that they seem to significantly abate in 2023. Overall, 2022 was a pivotal year and we look forward with confidence to 2023 and beyond.

Speaker 2

Let me now take a moment to cover our key strategic priorities for the coming year. With the acquisition of Swedish Match and securing the rights to IQOS in the U. S, We are now a global smoke free champion. The addition of the world's biggest market and the leading nicotine pouch brand ZYN Alongside IQOS provides us with significant untapped opportunities to further accelerate the growth of smoke free products. As the strength of our IQOS business continues to grow rapidly, the full global rollout of IQOSIYLUMA is a major priority and we expect to make substantial progress on this in 2023.

Speaker 2

The success of Illumina in launch markets so far demonstrates the importance of groundbreaking consumer centric innovation And we continue to broaden our portfolio with new science backed offerings. This includes bonds by IQOS, Our latest heat not burn device aim at low and middle income adult smokers. Pilot City launches in Colombia and the Philippines in the last quarter of last year show encouraging early results Following a successful first three years of partnership with KT and G, we also recently Extended our long term agreement to commercialize the innovative smoke free portfolio outside South Korea. I am very pleased to welcome Swedish Match to the PMI family. In particular, the fast growing potential of Zen is an incredibly exciting addition to our company.

Speaker 2

We are focused on supporting the Swedish Match to continue and accelerate ZYN's outstanding success in the U. S. While also leveraging PMI commercial capabilities To prepare for international expansion of nicotine pouches, IQOS and ZYN Our premium brands leading the global categories. In the U. S, ZYN is helping American smokers leave cigarettes behind and offers great growth prospects.

Speaker 2

For IQOS, the world's biggest smoke free market is a fully untapped opportunity and our plans are well underway in anticipation of our commercialization in the Q2 of 2024. We will be leveraging the sales and distribution capabilities of Swedish Match and deploying our commercial model, Digital Engine Organization and Infrastructure for a successful rollout. We continue to expect Logically, the international expansion of pouches, U. S. IQOS penetration And the replacement of IQOS 3 of VELUMA entail additional investments this year, which combined with pressure will wait temporarily on our margins.

Speaker 2

Indeed, many of the Elomer related costs We continue to target a stable category share over time despite the impact of IQOS cannibalization, while taking judicious pricing actions. As we have explained previously, maintaining our leadership in combustibles Helps us maximize switching to smoke free products through the connection to adult smokers and the retail trade. In terms of our financials, the strength of our business provides robust operating cash flow, which we intend to maximize to provide reinvestment in our Smokefree business, deleveraging and growing dividend. Finally and importantly, shaping tobacco harm reduction by providing better alternatives to smokers And advocating for science based regulation is critical to accelerate the end of smoking. Harm reduction is also at the core of our transformation as we lead on sustainability to achieve a positive impact.

Speaker 2

We will be expanding on some of these topics at the CAGNY Conference on February 22, And we also plan to host an Investor Day in September this year, where we will go into greater detail on our And our first question comes from the line of Michael to discuss our results in 2023 and outlook in more detail.

Speaker 3

Thank you, Jacek. Our business, driven by the strengths of our innovative and expanding smoke free portfolio, generated excellent top and bottom line 2022 growth despite a very difficult operating environment and currency headwinds. Our full year net revenues grew organically by +7.7 percent, excluding Russia and Ukraine, and by +7.1 percent for total PMI despite the impact of hyperinflationary accounting in Turkey. This reflects the continued strength of IQOS, accelerating pricing and the recovery of combustible in many markets against the pandemic affected comparison, notably in H1. HEICO devices accounted for approximately 5% of our full year smoke free net revenue, both including and excluding Russia and Ukraine.

Speaker 3

Our net revenue per unit grew plus 4.4 percent organically, excluding Russia and Ukraine, and by plus 5.5 percent in total. This was driven by combustible pricing of +4 percent excluding Russia and Ukraine and plus 5% overall and the positive mix impact of an increasing proportion of HTUs heated tobacco unit in our overall volumes at higher net revenue per unit. Our 2022 operating income margin contracted organically by 60 basis points, excluding Russia and Ukraine, and by 70 basis points in total due to a number of headwinds, which I will come back to. These headwinds were partially mitigated by the growth of IQOS, pricing and ongoing cost saving. $2,000,000,000 over 20.21, 2023 and mitigate recent inflationary pressures.

Speaker 3

Despite margin pressures, our excellent top line growth and diligent cost management enabled us to deliver currency neutral diluted EPS growth of +11.9 percent to $5.34 excluding Russia and Ukraine. This includes unfavorable currency of $0.85 and a small contribution from Swedish Match, net of financing cost for the 50 days of consolidated results. For total PMI, we delivered adjusted diluted EPS of 5.98 We also had a strong finish to the year. We delivered excellent Q4 organic net revenue growth of +7.9 percent excluding Russia and Ukraine, again reflecting continued strong IQOS performance and robust combustible pricing. Our Q4 operating income margin expanded organically by 80 basis points, excluding Russia and Ukraine, mainly due to a favorable comparison.

Speaker 3

On a total PMI basis, organic margin were flat, including the impact of a challenging comparison in Ukraine and shipment timing in Russia. 4th quarter currency neutral adjusted diluted EPS grew by plus 20.8 percent to 1 point $0.23 excluding Russia and Ukraine and plus 15.3 percent in total to $1.39 an excellent performance. Before discussing our 2023 guidance, I would like to provide an update on our Ukraine and Russia businesses. We continue to support our employees in Ukraine. I would like to personally thank them for their tremendous efforts to secure Our business continued during these extremely difficult times.

Speaker 3

In Russia, the environment for divestment has become increasingly challenging and complex, especially given recent December 2022 regulatory developments. To provide more clarity to investors on the full extent of our business, We will now include both Ukraine and Russia in our 2023 outlook and reporting. Now turning to the 2023 outlook. We expect to deliver very strong organic net revenue growth of +7 percent to +8.5 percent, supported by a step up in combustible pricing and another year of rapid progress from IQOS. This would represent the 3rd consecutive year of organic top line growth above plus 7% and excludes the impact of Swedish Match for the large majority of the year.

Speaker 3

Including Swedish Match, we expect Our reported currency neutral net revenues to grow into the teens as its business continued to deliver strong performance. We expect excellent IQOS momentum to increase our HTLU volume growth on a total PMI basis, supported by the growing presence of Illumina across our key markets. We forecast between 125,000,000,000 130 1,000,000,000 HTU shipment volumes, representing plus 15% to plus 19% growth. This reflects an acceleration compared to the total PMI growth rate in 2022, despite an expectation of no significant progress in Russia, given our decision to restrict investment and innovation. As mentioned previously, the pace of Illumina launches has also been constrained by supply chain disruption and the outstanding take up in initial launch markets.

Speaker 3

We expect this constraint to gradually improve through the first half as we progressively roll out to more geographies. We expect organic smoke free net revenue growth to have an aligned progression with the rate of HTU volume growth this year With less distortion from device revenues, including Swedish Match and at constant currency, We expect to deliver around $13,500,000,000 in smoke free net revenue compared to $10,000,000,000 in 2022 and to approach 40% of total PMI net revenues this year. While our top line outlook is very strong, Like many other global companies, we are facing significant margin pressures from the intensifying inflationary environment in addition to a number of specific transitory factors and investments, which I will come back to shortly. As a result, We expect our adjusted operating income margin to contract between 50 basis points to 150 basis points organically. Accordingly, we forecast currency neutral adjusted diluted EPS growth of plus 7% to plus 9%.

Speaker 3

This includes a full year's positive contribution from Swedish Match, net of the related interest expense. However, this benefit is offset by the increased interest cost on our non Swedish Match debt and planned investment. This translates into an adjusted diluted EPS range of $6.25 to 6.37 including EUR0.15 of unfavorable currency at prevailing rates. This forecast Notably, it does not factor any potential favorable court ruling in Germany regarding the legality of the surcharge on the existing excise tax on heated tobacco product effective in Germany as of 2022. We continue to account for the excise surcharge in our results and outlook.

Speaker 3

However, the obligation to pay the surcharge is currently suspended. If favorable, the difference to our forecasted 2023 excise payments We'd increase our net revenue by around 1% and adjusted diluted EPS growth by around 3 points, thereby increasing our forecast currency neutral growth range to plus 10% to plus 12%. In this scenario, we would expect our operating cash flow would move towards the upper half of our forecast range. We expect a judgment towards the end of the year. There are a number of other assumptions underpinning our outlook.

Speaker 3

We expect total international industry volume of cigarette And heated tobacco unit, excluding China and the U. S, to decline by minus 1% to minus 2%. Given our leadership in smoke free product and the growth of the category, we expect to gain share and target total PMI shipment volume to be flat to +1%, which would represent a 3rd consecutive year of growth. While we seek to maintain our share of the combustible category, given the current inflationary environment, we assume Combustible pricing will accelerate to around plus 6% on an organic basis compared to the plus 5% realized in 2022. We also expect full year capital expenditure of around $1,300,000,000 as compared to $1,100,000,000 in 2022, reflecting increased investment behind our smoke free platform, including Illumina and Swedish Match portfolio.

Speaker 3

Let me now come back to the various factors impacting our margins. In 2022, total PMI gross margin contracted By 220 basis points organically. While growing inflationary pressures were a drag, the largest impact came from the combination of the rapid growth of Illumina and transitory factors such as supply chain disruption and the need to use air freight. Illumina drove accelerated device replacement from existing user in Japan and other launch market. Such devices are positive for acquisition, retention and full conversion.

Speaker 3

However, devices are margin dilutive, and this dynamic is likely The initially higher weight and cost of Filuma consumable also played a role, and this meant that the overall impact of our heat not burn business, including devices, was margin dilutive in 2022. Importantly, Average gross margin on HTUs remained around 10 percentage points higher than for cigarette on a higher net revenue per unit. This is a fundamental long term positive margin driver through the growing HDW volume mix in our business, And this had a +110basispointfavorableimpact in 2022. Our 2 other Key long term margin drivers of pricing and productivity also continued to contribute favorably. Gross margin headwinds were mitigated at the operating income margin level by SG and A cost, which declined by 150 basis points of net revenues due primarily to cost efficiency, operating leverage and comparison effect.

Speaker 3

The picture for 2023 is quite Different, while our gross margin will face increased inflationary pressure, this is now primarily due to COGS for the cigarette business as leaf, Asset at tau, salaries and energy cost increase. An acceleration in combustible pricing and lower air freight cost We serve to mitigate this exceptional inflation. However, the time line is built into our projections. Importantly, while cost inflation is also a headwind for IQOS, the 2023 margin impact of our hit not burn business is expected to be favorable due to the positive impact of increased HTU volume at higher net revenue per unit, planned Illumina efficiency and a more measured increase in device volumes. Overall, These underlying strength from IQOS combined with pricing will not be sufficient to offset combustible cost inflation in 2023.

Speaker 3

However, We expect lower organic gross margin decline compared to last year and for our Edenodern business to have an increasingly visible Positive impact as we approach 2024. 2023 SG and A cost would include incremental investment to drive future growth, including in the commercialization of Illumina. Also included is around $150,000,000 With a broadly even split between the U. S, where we are preparing our organization capability for the launch of IQOS, and Wellness and Healthcare Investment in Product Development and Clinical Trials. In addition to inflation, this means an SG and A cost increase A few words now on 2023 phasing.

Speaker 3

We expect margin pressures to be weighted to the first half, particularly given a challenging Q1 2022 comparison and a progressive decrease in air freight costs throughout the year. In addition, Investments are expected to be front loaded, and we know that the rollout of Filuma can lead to a short period of slower user acquisition as consumers wait for the launch. Combined with the timing of shipment and cost saving, we expect our 2023 top and bottom line delivery to be heavily H2 weighted. Indeed, we expect the Q1 to be the most challenging with low single digit organic top line growth and soft margin. Shipment timing and Illumina launch impact are expected to be pronounced, and we accordingly expect HTU shipment volume of around 26,000,000,000 to 28,000,000,000 HDUs.

Speaker 3

We also face a comparison with a significantly lower impact from war related disruption. We forecast adjusted diluted EPS of $1.28 to 1.33 including $0.10 of unfavorable currency at prevailing rates. Importantly, we expect Margin to improve as we approach 2024 as headwinds relent and the fundamental margin accretive driver of our Smokefree transformation continue in the form of heated tobacco unit growth, pricing and cost optimization on Illumina. Our cash flow generation remains strong. We delivered $10,800,000,000 in 2022 operating cash flows, representing plus 3% growth on a currency neutral basis.

Speaker 3

This includes the favorable timing of certain financing item of around $300,000,000 Given non recurring item and working capital movement benefited 2021 by around $1,000,000,000 This was an excellent result. In 2023, we forecast $10,000,000,000 to $11,000,000,000 in operating cash flow despite a notable expected impact from higher working capital requirements due to growth, global inflation and the reversal of one off timing benefit. This put us on track to deliver our 2021, 2023 target of around $35,000,000,000 given in February 2021 at then prevailing rates. While our net debt is 2.9x adjusted EBITDA on a 12 months trailing basis, This reflects only 50 days of Swedish Match results, including a full year contribution for Swedish Match would clearly result in a lower ratio. We target robust EBITDA growth, which combined with strong cash flow, allows us to focus on deleveraging while continuing to invest in innovation and the growth of our business.

Speaker 3

In addition, our commitment to our progressive dividend policy is unwavering and in line with our long term commitment to return cash to shareholders. Turning back to our 2022 results. Both our HTU and in market sales volume increased by around 21.5%, supporting total volume growth of +3.2 percent excluding Russia and Ukraine. Q4 HTU shipment volume grew by +37.5 percent, Partly reflecting the replenishment of inventory for Illumina in Japan following lower shipment earlier in the year and favorable shipment timing in the EU, notably in advance of new Elumab launches. Supported by very solid sea guide performance, we delivered total volume growth for the 2nd consecutive year, both including and excluding Russia and Ukraine.

Speaker 3

Focusing now on Combustibles. Our portfolio delivered robust organic net revenue growth of +3.7 percent for the full year, excluding Russia and Ukraine. Combustible pricing increased in H2 as we continue to adjust to the inflationary environment. This resulted in Q4 organic pricing of +4.8 percent, excluding Russia and Ukraine, and yielded full year pricing in line with our expectation with notable contribution from Germany, The Philippines and Turkey, despite the impact of hyperinflationary accounting. In 2022, Our share of the cigarette category increased by plus 0.3 percentage point, excluding Russia and Ukraine, following category share decline in 2020 and 2021 exacerbated by the pandemic.

Speaker 3

This includes sequential growth in every quarter of 2022. Marlboro remains extremely resilient despite pressure on disposable income and the impact of IQOS cannibalization with plus 0.2 percentage point share of segment growth. In addition, while we have not yet seen any meaningful acceleration in down trading, Our share in the low price segment increased by plus 0.6 percentage points, excluding Russia and Ukraine. As Jacek mentioned earlier, maintaining our leadership in the cigarette category is a key enabler in accelerating smokers switching to better alternatives. Our robust cigarette share, combined with the growth of IQOS, delivered an overall market share gain of +0.6.

Speaker 3

In 2022, excluding Russia and Ukraine, with notable contribution from Egypt, Italy, Japan and Poland. PMI heated tobacco units continue to strengthen their position towards becoming the largest nicotine brand in markets where IQOS is present and reached the number 2 position in 2022 with a record eye share of 8.5% in Q4. Now focusing on IQOS user growth. There was an estimated 20,300,000 IQOS users as of December 31, Excluding Russia and Ukraine, this reflects growth of around +3,500,000 for the full year. For total PMI, We estimate there were almost 25,000,000 IQOS users as of year end.

Speaker 3

Consistent with comments in our recent disclosure, user growth in October November was in anticipation of the launch of Illumina in Southern Key Market. However, we saw a strong rebound in December as Illumina launches continued, delivering robust user growth of +0.8000000 for the quarter. This was actually close to our initial expectation, and we look forward with confidence to 2023 as Illumina continues to be deployed. Illumina is driving volume and share growth across its market, supporting our strong position in the Eat Not Ban category. We launched in 8 new markets in Q4, including the Czech Republic, Italy, Portugal and South Korea, bring the total to 16.

Speaker 3

Market with ILLUMA launched now represents more than half of our total HTU volumes. Illumina delivers a superior consumer expense as evidenced by Net Promoter Scores, which on average increased by more than 10 points across its different market archetypes and higher conversion rate compared to IQOS 3 Duo. While the rates of acceleration differ by market, in both Switzerland and the more recently launched United Arab Emirates, Oftech share has almost doubled since launch. Importantly, as I mentioned earlier, the benefit of scale and optimization should allow us Focusing now on the European Union, where Smokefree net revenue exceeded 40% of the region for the full year. Our 4th quarter HTU share increased by +2.4 points to reach 8.8% of total cigarette and HTU industry volume with a modest flattering effect from timing factor.

Speaker 3

IMS volume continued to grow sequentially and reached a record high of 9,300,000,000 units on the 4 quarter moving average. This reflects success across many markets and T cities, including Vilnius with over 43% share as well as Athens and Rome with over 25%. In Japan, the with IQOS increasingly driving its growth. In Q4, the adjusted total tobacco share for our HQ brands increased by +2.6 to 24.5 percent with Oftech share in Tokyo surpassing 30%. Our 2 tier consumer portfolio continued to deliver strong results.

Speaker 3

IMS again grew sequentially to reach a record high of 8,800,000,000 unit on the 4 quarter moving average as the number of Japanese IQOS users crossed a remarkable 7,500,000 adult consumers. In addition to strong IQOS gain in developed markets, we continue to see Very promising growth in low- and middle income market. In 2022, our HTU shipments grew by almost 50%, excluding Russia and Ukraine. This robust performance reflects success across many markets, including Egypt, where UBanc Hero exit of stake share surpassed 7%. Bulgaria and Malaysia were Q4 of Techshare, which reached 14% in both capital cities.

Speaker 3

Let's now move on to Swedish Match, which finished the year strongly, further confirming our belief that this combination will be accretive to our growth and margin profile over the coming years. Please note for housekeeping purposes that my comments on Swedish Match financial results are based on publicly available information through September 30 and from November 11 when it was consolidated in PMI's financial statement. Swedish Match delivered excellent performance following the acquisition with strong net revenue and adjusted operating income. Most impressive was the phenomenal U. S.

Speaker 3

Growth of ZYN, which I will come back to on the next slide. In other U. S. Smoke free product, moist snuff also performed well, gaining almost 1 percentage point share of segment and growing 2022 volume within a declining category. In Scandinavia, the overall smoke free market and Swedish Match continued to grow, albeit helped by year end trade inventory movement led of a generic excise tax increase in Sweden.

Speaker 3

The cigar business delivered robust performance To end the challenging year with growth in volume and category share. We are very pleased with the strong 2022 results from Swedish Match, which also included positive pricing across all smoke free category. We look forward to reporting our combined results going forward. Now let's discuss ZYN's recent U. S.

Speaker 3

Performance in more detail. Excellent progress continues With shipment volume growth of +37 percent in 2022 and +35 percent in Q4, reaching a record quarterly high. ZYN's category volume share grew sequentially by 1 percentage point compared to The Q3 and by 2.2 percentage points compared to the prior year, further strengthening its position as a clear number one nicotine pouch brand despite continued heavy competitive discounting from less premium offering. Importantly, retail value share for ZYN remained strong at 75.7%, highlighting its premium positioning and Ibrance Equity. 2023 promises to be a very exciting year.

Speaker 3

We are thrilled to have welcomed Swedish Match employee And leading oral nicotine portfolio into the PMI family to create a global smoke free champion, and we will work together to create value as we accelerate toward our share vision of a smoke free future. In particular, bringing ZYN and IQOS together in both the U. S. And International Markets present a significant opportunity to drive accelerated growth and switching of adult smokers to better alternative. As a well run and successful business, we expect continued strong performance from Swedish Match existing operation.

Speaker 3

A key focus this year will be supporting and further driving strong ZYN growth in the U. S. In addition, We are now preparing for the international expansion of nicotine pouches, leveraging Swedish Match rich product portfolio and PMI's extensive Smoke free commercial infrastructure. In parallel, we'll be actively enhancing Swedish Match U. S.

Speaker 3

Distribution and commercial capability for the launch of IQOS in 2024. Moving now to sustainability. As we transform our company, our business and sustainability strategy are advancing end in end with increasing momentum. TMI and Swedish Match have a shared vision and values. The combination helps us further accelerate toward achieving our purpose, Transforming for good to make cigarettes obsolete and maximize the benefit of smoke free products.

Speaker 3

Our goal for best in class ESG performance is aligned as we seek to address the environmental impact of our product, eradicate child labor, In December, we published a stand alone report detailing our new biodiversity and water ambitions. For biodiversity, we aim to achieve no net loss on ecosystem connected to our value chain by 2,033 and contribute towards a net positive impact on Nature by 2,050. For water stewardship, We aim to scale Solutions towards a positive impact on water resources by 2,033 and contribute towards a positive impact on Water Resources by 2,050. I am also proud to share that for the 3rd consecutive year, we have been awarded CDP's AAA. CDP scored nearly 15,000 20 on their climate change, forest and water security disclosures, of which only 12 received this prestigious score.

Speaker 3

In addition, I am excited to share that we are included in the 2023 Bloomberg Gender Equality Index for the 3rd year running. I'll now turn it back to Jacek for concluding remarks.

Speaker 2

Thank you, Emmanuel. Overall, our business delivered both a strong 4th quarter and full year performance despite many challenging headwinds. We achieved excellent top and bottom line growth with double digit currency neutral adjusted diluted EPS growth and almost $6 of adjusted EPS for total PMI. The consistent quality and sustainability of our organic Top and bottom line delivery has been clearly demonstrated over the last 3 years. Most impressive Was the continued outstanding performance of IQOS, which is now complemented by the remarkable growth of ZYN.

Speaker 2

Combined with Swedish Match, we have a comprehensive global smoke free portfolio with leadership positions in Hindnotburn We expect 2023 to be a landmark year For our Smokefree transformation, we have Smokefree net revenues of around $13,500,000,000 at constant currency, Approaching 40% of our company, we have exciting opportunities for growing nicotine pouches in the U. S. And internationally along with the U. S. Commercialization of IQOS next year.

Speaker 2

We expect margin headwinds will persist in 2023 before improving in 2024. However, our underlying growth fundamentals remain strong and we look forward with confidence. With an excellent performance over the past 2 years and our strong 2023 outlook, we expect to comfortably Our freer minimum CAGR targets of more than 5% organic net revenue growth, more than 9% in currency neutral adjusted diluted And highly cash generative business enables us to deleverage while maintaining our steadfast commitment to our progressive dividend policy. Thank you for your attention. Emmanuel and I will be happy now to answer your questions.

Operator

Thank you. We will now conduct the question and answer portion of the conference. In the interest of fairness and time, we ask that participants keep to a maximum of 2 questions each. We'll take our first question from Chris Growe with Stifel.

Speaker 4

Hi, good morning.

Speaker 3

Good morning. Hi, Chris.

Speaker 4

Good morning. I want to ask you, first of all, and you gave some great color there and detail in your remarks. As I look at the EPS growth in 2023, just to understand some of the burdens on that growth. We know about $150,000,000 of investment you've outlined for the U. S.

Speaker 4

And your Health and Wellness division. What other costs do you Some of the supply chain costs and use of air freight, for example, how much are those burdening your costs for the year? If you can give some color on that.

Speaker 2

Yes. So maybe I start and then Emmanuel will chip in, I guess. Yes, it's $115,000,000 between the U. S. Dollars 115,000,000 And the Wellness Healthcare almost evenly spread between the 2.

Speaker 2

Now you have the airfreight and this is more of the thing which I think we should start seeing some improvement in 2020 Free and especially as we go towards the second half of the year, I think we should That normalize the use of the airfreight, which will then obviously continue for the 2024. Now you have The inflationary pressure on the COGS, I think, Emmanuel mentioned in his remarks, the leave obviously is that due to our The duration of inventories of the leaf and the way the leaf prices are rolling through the P and L, That's something which lasts usually longer. You have a 3 year about the duration of inventory. So on a moving average Valuations, I mean, that spreads over the period of time. You have energy, which is obviously the big hit across the number directly or indirectly for the materials.

Speaker 2

Now we start seeing energy prices Easing at least at this stage, but also you're binded by some contractual arrangements, etcetera. So I don't think this Helping at 2023, but I remain cautiously optimistic that as of 2024, we should start seeing reversal of those. Obviously, you have a cost of the IQOS Illumina rollout, right? Because we are at the year end, we've been at the 16 markets out of 73 markets total IQOS. So there is a bulk of the markets in front of us in 2023 and we don't want to stop or slow down the rollout of Illumina.

Speaker 2

So obviously, you have a pressure on the margin coming from the extra sales of the Devices, right, which obviously are the drag on the margins and we're essentially accelerating replacement of the devices at the existing consumers level, But with the very clear view now that we have a very nice payback going forward with the accelerated acquisition, Better consumption, better conversion rates. And that's the key items. Emmanuel, if I missed something

Speaker 3

No, I think you were very exhaustive clearly, Jacek. Just a couple of Further detail, clearly in 2023, we've been flagging it. We expect our Eat Not Done business To contribute positively at the level of the gross margin rate evolution. So in 2023, it's really inflation Impacting us very negatively at the level of all cost of goods. But on combustible, we're going to increase price, but it's not going to be sufficient To offset this impact.

Speaker 3

And just to give you a color, Jacek was alluding to energy price. We're not talking about even double digit inflation. I mean, Energy price between 2023 2021, we are talking about close to a 3x factor. So it's a big increase with a big impact on the P and L. Over time, with price increase, we're going to overcome that, but there is just a lag, as we said, on matching that.

Speaker 3

Then there is a big difference also on our SG and A cost evolution. In 2022, We were flat because we've been generating a lot of efficiencies. Inflation was not as hard as it's going to be in 2023 with a lot of Salary increased and probably the basis of comparison were more favorable. In 2023, we expect to grow our SG and A in line with top line, more or less, which one would expect. We continue to invest a lot in order to support the growth of the business to acquire new user digital investment.

Speaker 3

We talk about the U. S. And wellness and SKARE, and there will still be efficiency, but not at the same level. Last element that I have to add, the cost of the debt. I'm not talking about the debt of acquisition of Swedish Match because for Swedish Match, we are in line with expectation, I.

Speaker 3

A low single digit accretion on the EPS. But clearly, for the existing debt, there is also an increase in the cost and that is having an impact on the evolution of the adjusted EPS. I think with that, Chris, we are giving all the information we can on what we are facing in

Speaker 2

terms of Evolution on our cost.

Speaker 4

That was sure exhaustive. Thank you for that. It was very helpful. I had just one quick follow-up, which would be that you have Heat tobacco unit growth expectation of that 15% to 19%. I just want to get an understanding on 2 facets of that.

Speaker 4

Is Russia Ukraine down likely in 2023 given you're not investing there? And then just to what degree it's capacity limited today? If you had more Aluma

Speaker 2

Okay. So actually, the Russia and Ukraine Obviously, Russia, due to its weight even more, there were drag on our performance both in 2022 And will be as far as you know, it will be a drag in 2023. As you know, as our decisions, strong decisions today, investor And essentially, Illumise, for example, is the key technology advancements, which we have, which we decided not to roll out in Russia Chuck has an impact, right? So the numbers which we now just for the visibility to the investors Of the business as is today, we're including Russia and Ukraine, but both are very much Russia not contributing to the growth. So one could think Opposite, excluding Russia and Ukraine, our growth rates would be at the higher level on a comparable level.

Speaker 2

Capacity, We will I think we have we are guiding the market that we expect the better results in the second half of the year And that's partially reflects the moment when we think we will be beyond the bottleneck with regards to the capacity around Illumina. So we Really managing the business on a very tight supply chain through still this year sorry, 2022 and for the first half of 'twenty And the second half of twenty twenty three, we should be okay. That's again, I can bridge Back to the famous airfreight, etcetera, because all of these things are consequences of us riding on a very tight supply.

Speaker 4

That makes sense. Thank you.

Operator

We'll take our next question from Bonnie Herzog with Goldman Sachs.

Speaker 5

All right. Thanks. Hi.

Speaker 3

Good morning, Bonnie.

Speaker 5

Good morning. I guess my first question is on your Off margin guidance and the implied deleverage, maybe you could break down the headwinds you highlighted just a bit further And thinking about in the context of what you can control like the investments you're making to drive future growth, Could you help frame that for us? Just trying to think through how big of a step up the investments will be this year versus last year? And then how do we think about the investments required next year and beyond? I guess, I'm trying to get a sense of how much of the investments required to essentially roll out IQOS in the U.

Speaker 5

S. It will take place this year versus next I'm well aware of the investments you need to roll out Alooma, but anything there would be helpful.

Speaker 3

I'll take that one, Bernie. So I think on the U. S, we've been clear on the fact that we expect something like Half of €150,000,000 of course, it's a rounding of extra investment in the U. S. As we prepare the Launch of IQOS in the U.

Speaker 3

S, that is for 2023. When we have a plan for the coming years and, of course, With more detail, we'll, of course, come to you and elaborate and detail that. Now for the rest of the business, I think we are And that was the sense of my comment on SG and A evolution. On a relatively regular basis, we are investing an extra Few 100,000,000 and please allow me not to be more specific because, of course, that is sensitive information, behind the acceleration of IQOS and it's going to come, Of course, behind IQOS Illumina in 2023. So the growth, when we say we expect SG and A to grow broadly in line with top line, There is a huge impact of inflation.

Speaker 3

I mean, I don't need to explain that inflation is, in most countries, around high single digit, and we need to reflect that On salary increase, we have efficiency on cost in front of that, and that is enabling us to on top of the inflation impact To keep investing on the growth of the business. And we do that in a rather consistent manner, of course, very much focused behind ILLUMA in 2023.

Speaker 5

Okay. That's helpful. And then just a second question, if I may. It's just related to the user growth And Q4 on IQOS, could you maybe talk through some of the puts and takes that you saw in the quarter? I mean, it seemed to accelerate relative Q3 despite some of the headwinds you have recently highlighted.

Speaker 5

And then you did mention that Aluma drives higher conversion rates So could you possibly quantify that for us? I guess I'm trying to think through when that platform Gail, do you expect your overall conversion to grow meaningfully, possibly above your current 70% rate?

Speaker 2

Yes. So I maybe take it. Illumina conversion rates in the markets at this stage Run rate conversion rates before the IQOS Blade will be somewhere up in the range of 10 percentage points, Okay. So obviously, different markets, there is some difference between the market, but the rule of thumb is about the 10 percentage points, which essentially means The way we measure conversion that 10% of the devices sold through acquisition of new users are in use And they should they are generating the recurring demand for the consumables. So this also has there's a better productivity on the PBT on the user acquisitions and the devices sold.

Speaker 2

I want to just bridge back to your previous question, Bonnie, if you allow me. When we look at the U. S. Investment, we've highlighted including the wellness healthcare about 150,000,000 But we shouldn't just look at the investment from the lenses of IQOS, because part of the investment, which we already started what we committed to make this year, I believe we'll also benefit further growth opportunity for ZYN, okay, for Swedish Match. It's not that we're really running this as a 2 separate type of a business as we try to look at this from the leveraging and further enhancing the The opportunities for ZYN in the U.

Speaker 2

S, look, they had a Spectacular of phenomenal growth depends which objective you like better, but I think there is more to come on this one. So the way we're looking allocating the resources that it is not just going to prepare us for the IQOS stake back in 2024, but also in the meantime Can be a further boost to the ZIL. Now to your question also about the future Rollout of IQOS alone in the U. S, I think September when we met, I hope during the Investors Day, we will be in a position to give a more precise plans. We obviously take into considerations the expected timelines Vis a vis from FDA, we said that we're going to file ecosyloma, which is our the best flagship and the best propositions we have today.

Speaker 2

And obviously, our objective prime objective would be to enter markets, U. S. Markets with a very big Momentum coming from international on the best what we have. But I think by September this year, we should have More details and more visibility about this one.

Speaker 5

Okay. That's super helpful. I appreciate it.

Speaker 3

Thank you, Benny.

Speaker 2

Thank you, Mike.

Operator

We'll take our next question from Gaurav Jain with Barclays.

Speaker 2

Hi, good morning. A couple of questions from Hi, Garam. Hi, Emmanuel. So the first is on the step up in cigarette pricing. So it was 5% last year, you're saying it will be 6% in FY 2023.

Speaker 2

Now Japan had 5% pricing last year, this year it will be 0. So clearly, ex Japan cigarette pricing is accelerating from 4% to 7% approximately. So where exactly is this biggest step up happening And cigarette pricing? Yes. Japan, you're pretty good in a single out Japan in this case, right?

Speaker 2

It's the biggest in a pricing from the Unknown, right? And it's difficult to make any assumptions in Japan. But we have already this year working pretty well with the good results on the Reversing the pricing trend in Indonesia, as you may recall, and I believe we really turned the corner in Indonesia, which always due to volume underlying size of the The weight of the business to us is very important. I think we have a stronger Philippines, plus the European markets also Come with a strong pricing. So that 6%, which we assume in the for this year is just a reflection of this.

Speaker 2

Now Depends what's happened in Japan. I mean all of these things will be coming on the top. But actually Japan from the large geographies is the only market when Visibility for obvious reason is very limited. Sure. Thank you.

Speaker 2

And then on this EU heated tobacco flavor ban, which It's expected to come later this year. How should we think about it? And how is it factored in your guidance? I mean, it's one of the events which nobody ever We have some sort of similarities with the flavor bans, including Menthol and the combustible cigarettes, you may recall a few years ago. And frankly speaking, that has not had any material sort of impact on the cigarette volume.

Speaker 2

So I think here okay, we'll see what's going to happen. We think it's going to be manageable. Sure. Thank you so much. Thank you, Bharat.

Speaker 2

Thank you.

Operator

We'll take our next question from Pamela Kaufman with Morgan Stanley. Hi, good morning.

Speaker 2

Hi, Pam. Good morning, Pam.

Operator

Can you discuss your strategy for the U. S. Market this year for Swedish Match and What your key priorities are? And then what are your plans for the international rollout of ZYN and the timeline?

Speaker 2

So obviously, the focus is to continue and enhance the spectacular momentum of Pouches in growth in the U. S. I mentioned this before answering in our question that part The investments we are allocating to U. S, I believe also will benefit the current business of Swedish Match. I think there should be a better pricing, especially on the cigar business, although it is not really our Strategic focus, but still obviously helps the overall business performance.

Speaker 2

And the strategy in terms of a long term, the big question obviously is how we will approach IQOS commercialization at the moment when we fully take it back In that in 2024 and we know what sort of infrastructure capabilities These are missing at the Swedish Match level, so we're adding them. But the real big commercial spend, I mean, it will depend on the timing and the dense And the intensity of our rollout plans, which we will share, I guess, around the September during the investors September this year around the Investors Day. When it comes to the pouches on international, I think Swedish Match and us now together have plans how to Start addressing some share pressure, especially in the Nordics, okay? But on the bigger international scale, We have quite a few markets which we will start rolling out the pouches this year, but for obvious reasons I will not Mention which markets, but there was the whole purpose of acquisition of Swedish Match, as you recall, leverage The base and our growth opportunity in the U. S.

Speaker 2

Is a huge relief in a sense of preparedness for IQOS, But also I believe the category has quite the potential in the RRP in the reduced risk product space on international basis. So we have infrastructure in most of the markets. It's I'm not releasing relief disclosing any Strategy confidential matters, obviously, Vicos is present in a 70 plus market. This is where the developed infrastructure is most developed and very likely the markets for ZYN products will be Within the list of these markets.

Operator

Thanks. And then can you just talk about your strategy with the Bonds product that you launched in test markets and what your early observations are? And then how are you thinking about a broader rollout over time.

Speaker 2

Yes. I mean, the broader rollout of the bonds is for the We're more strategically planned for the 2024, so the next year. We will have some volume, but Nothing compared to be very frank to what we have about the IQOS and NELUMA product. This is by far the prime focus. But I think the early results which we'll get from the Philippines and Colombia, I mean, they're very strong.

Speaker 2

Actually, they are very strong. Obviously, our expectations after 7 or so years of experience with IQOS products are much higher than we ever had. So bonds have to come and meet that expectations as well. The proposition essentially, we knew that the moment when we'll be going more into the Emerging markets, lower income when they afford to consumer affordability might be at a bottleneck In achieving our small pre ambitious, we had to also come up with a technology both on the consumables and on the device, We somehow adjust the cost of the propositions to the potential pricing we can offer to the market. So obviously, the focus will be on the emerging markets, but I do believe that that proposition also Nicely will help in some developed economies because across the Spectrum of the smokers audience, obviously, there are also a group of people for whom the affordability Might create some constraints.

Speaker 2

So that will be a very nice complementary propositions in our portfolio. And essentially, it also helps IQOS to continue on its extremely successful History of occupying this premium or medium plus space, this is this mega brand which we're trying to build, While preparing ourselves that 1,000,000,000 plus smokers in the world, I mean, are they going across the different Various price segments from the premium meat, low, super low, etcetera, and we need to provide the relevant propositions there. So I think bonds is on the And this is how we're going to play strategically in the portfolio.

Operator

Thank you. That's very helpful.

Speaker 3

Thank you, Pam. Thank you.

Speaker 2

Thank you.

Operator

We'll take our next question from Vivien Azer with Cowen.

Speaker 6

Thank you. Good morning.

Speaker 2

Hi, Joanna. Hey.

Speaker 6

I was hoping to talk about the IQOS Removal of characterizing flavors on HTUs in the EU impacting your outlook, how are you accounting for that? And what's the expected timing

Speaker 2

Yes. I partially answered that question before, Vivian. But the characterizing flavor, we We had an experience with cigarettes, combustible cigarettes in the past and it's the only reference point we might we have today. And as you recall, the mental and adverse ban in Europe didn't really impact in any material way the volumes of the cigarettes. So I think here one can expect a similar sort of a manageable impact, if you like, of that bag.

Speaker 2

The second thing, it's worth of also reminding everyone that IQOS by far today is the best Tabacco flavor proposition. Yes, there are some flavors which we have in our portfolio in the market that Might be different, but by far IQOS on the pure tobacco flavor and this is by the way where the bulk of the cigarette market The rest in essentially all geographies, I mean, this is an IQOS strength. So there is a portion of the portfolio which will be impacted. But I think for the vast majority of the smokers, existing sorry, existing converted to IQOS Users and the smokers, which are still on a combustible, I mean IQOS still offers today best in class A taste and a flavor experience, which is in the core of the tobacco flavor.

Speaker 6

Thank you for that. And I apologize if I missed this, but is there any way that you can provide an update on kind of the infrastructure build out for IQOS in the U. S. Ahead of your reacquiring the commercial rights to that proposition both in terms of the consumables as well as the devices? Thank you.

Speaker 2

Yes, I think there was look, there was a we're looking also as a we're also looking at this not only on IQOS on a standard basis, But I could entertain and our parts of the Swedish Match business. And I believe, the obvious Questions of the optimal distribution and I believe this can occur very well. Any enhancements or it's the distribution We serve not only in the future IQOS, but can and will serve actually in Growth opportunities today. There is the whole digital aspect. There is a better management of the Pricing, promotions, the whole consumer piece, right, which is so strong behind the IQOS success.

Speaker 2

I mean, that's something which we are preparing the infrastructure for.

Operator

Okay. Thank you.

Speaker 2

Thank you, Vivien.

Operator

We'll take our next question from Owen Bennett with Jefferies.

Speaker 7

Afternoon, gents. Hope all well.

Speaker 3

Good afternoon, Owen.

Speaker 7

Yes. My question is more a bigger picture longer term one around the U. S. And the overall RRP space now you've got Control of your own destiny. I was hoping to get your thoughts on how you see RRP overall develop longer term across the different categories, Whether you see some more attractive than others and do you still think heated can be sizable when reintroduced into the U.

Speaker 7

S, obviously, bearing in mind the limited traction And then just linked to these U. S. RRP plans, any update on timing for a PMTA submission with your vape product? Thank you.

Speaker 2

Yes. As I start with the last one, we plan to submit Daikoziloma to PMTA to FDA in the second half of this Now with regards to the potential, we think that the Nyquist Strength, which is really if you go to the core of the smokers today, when they really enjoy this Pure unaffected by any flavors, etcetera, tobacco flavor and so on is undisputed. Every market you go, Icosy It delivers on the flavor based expectations to this audience. And that's also, I believe, a critical factor in IQOS high conversion I know how many people fully adopt IQOS. And not only that they're leaving cigarettes fully behind them, they don't even Okay.

Speaker 2

So that's the core and I believe for the audience, which was the smoking audience, which we have in the U. S, IQOS perfectly fits into this whole thing. Obviously, the other platforms which offer you the different ritual, different experience, the e cigarettes And the pouches, no, e cigarettes usually more driven by the flavors. Obviously, absence the pure tobacco natural type of a flavor, that's the challenge, which partially, In our opinion, it's behind more of the dual consumption, the full conversion, but also the products Under development and they're getting better. And pouch is actually on the risk continuum of the product.

Speaker 2

I mean, it's another important offering for the consumers who really want to reduce significantly Exposure and potentially the harm by while enjoying the product. So I think there is this complementary There is complementary role of each of these platforms. Also that we're working on our Platform forward with Eternaly, which is the Giv and the Viva products, the electronic cigarette segment Going through the zone dynamics, this mix of the flavors, disposable, etcetera, is not necessarily great for the Economics, but partially also because of this lower conversion rate compared to the other platforms. So we have said it from the very beginning of our transformations. If you follow us 7, 8 years ago, I recall at one of the first investors conferences when we announced The purpose that we want to go smoke free, we have said that there is room for every platform at And the benefit to the smoker.

Speaker 7

Great. Fantastic. And just sorry to follow-up, the question on the PMTA was not for Aluma. I think Previously for Viveve, you said you targeted first half of twenty twenty three. Just any update on Viveve PMTA submission?

Speaker 2

Yes. I think we're also thinking about the 2023, but now having also the ZYN and knowing what Illumina can do and Knowing that before we also need to make sure that we have the right PMTA submission Right, because an effort behind each of them and we need to prioritize. But I mean, we are thinking we are sorry, thinking It's more than a thinking. We're working on bringing our P4 to the U. S.

Speaker 2

As well.

Speaker 7

Great. Thanks guys. Appreciate it.

Speaker 3

Thank you, Owen.

Operator

We'll take our next question from Andre Condra with UBS.

Speaker 8

Hi, everyone. Thank you for taking my question. Just one for me.

Speaker 3

Hi, Andres. Hi.

Speaker 8

Sticking to U. S. IQOS, We know that the U. S. Menthol ban from the FDA proposed standards allows potentially will allow for some exemptions to it.

Speaker 8

And thinking that your IQOS has the MRTP designation, which is rather unique versus all its peers, Were you factoring this in when you set out your ambition of, I believe, 10% market share by 2,030, if I'm not mistaken?

Speaker 2

Yes. I think you're quoting my words. This is Jacek here. Yes, I still do believe that IQOS by 2,030 And knowing how it performs on the many other international markets, the 10% is not It can be a realistic, ambitious ambition or realistic dream. Now to be very frank, When we look into this, we have not been trying to factor being that there might be some Flavors, Omental, Vans and other products.

Speaker 2

But you rightly notice that IQOS today Is 2 variants of IQOS authorized with the mental flavor? Will this be an accelerating factor or not? Look, I mean, the future will tell, but I still believe that IQOS is in a current environment Due to its strength and the satisfactions it gives to smokers, etcetera, has that big potential in front of us.

Speaker 8

I see. Very clear. Thank you.

Speaker 2

Thank you, Andre.

Operator

We'll take our last question from Jared Dinges with JPMorgan.

Speaker 9

Yes, thanks. Hi, guys.

Speaker 2

Thank you. Hi.

Speaker 9

A couple for me, please. First, given the CapEx step up in CapEx that you expect for this year, I just wanted to ask, how should we be thinking about CapEx levels beyond Is next year kind of a one off given the ZYN international expansion plans?

Speaker 3

Look, I think you should expect us, of course, to accompany the growth. We are growing volume within more capacity, so the CapEx will reflect that. There is certainly, when it comes to Illumina, a moment where we build the capacity for Illumina and that is Translating into a significant investment. So you see that in the 1.3. I would say we are going to certainly regularly invest on the capacity for the Swedish Match oral business.

Speaker 2

So I'm not able yet at

Speaker 3

that stage. I'm not giving guidance on 2024. I certainly believe that there is This transition moment where we are building the capacity on Illumina, then of course, that will be accompanying the growth of Illumina. And we are very ambitious, as you know, on growing oral product. So that will come with investment.

Speaker 3

But of course, They are not of the same magnitude as the one that we've been making in order to build the capacity on IQOS. Smaller volume, smaller base, so not with the same impact on the long term anyway.

Speaker 9

Got it. That's clear. And for the second one, maybe just on the Healthcare and Wellness segment, 2023 will be another investment year. I know you guys have talked about that probably being a multiyear investment cycle, but I don't know if you can give any indication on when you think that business could potentially start to contribute to growth. And maybe also, could you guys talk about your learnings so far in those businesses that you have acquired?

Speaker 2

Yes. I mean, look, obviously, and we've been very clear about this from the very beginning. I mean, in order to develop and bring to the market of a couple of the programs or products which we have in mind, I mean, I will have to go through the investments. We talked about us, prepared. We also have a very promising investment in the medical In the medical space of cannabinoids, etcetera, so all of these programs, they are agreed to Establish milestones in terms of the development of these products, including the series of Clinicals and meeting the different regulatory expectations.

Speaker 2

So that's about what's going to be. We have That's historically ambitious target of achieving this $1,000,000,000 revenue by 2025. There is a pipeline of the product, but the more interesting actually is what's going to happen with that business Beyond 25 because it's a longer term investment. Obviously, when we allocate the capital, we look 1st, we allocate the capital behind those things, which are in the near and the mid term for us. And there's obviously heat not burns in IQOS, Illumina expansions to the U.

Speaker 2

S. And I can go through the long list of opportunities, but keeping also denied that This business has quite a the wellness and healthcare offers us very interesting opportunities in the longer run We very well leverage both our scientific life science expertise, capabilities Combined with the commercial, etcetera. So this is how I would look on this thing. I think when we meet on the In September of this year for the Investors Day, we will start obviously opening a much more longer term horizon How the management, how we see the future of PMI, not just in the next year or 2, but with a longer time of a perspective. And this is a moment when, I guess we will share more details.

Speaker 2

By the way, also, I think we'll be able to answer more precisely your first question to Emmanuel about the CapEx, Because obviously, if we open a 10 years horizon for Filipe Morris, we'll have to touch upon that capital allocation component as well.

Speaker 9

Great. That's helpful. Thank you.

Speaker 2

Thank you. Thank you.

Operator

It appears we have no further questions at this time. I will now turn the program back over to management for any additional or closing remarks.

Speaker 1

Thank you. Before closing our call, I would like to remind you that we'll be presenting at the CAGNY Conference on February 22. And as we mentioned earlier, we plan to host the September Investor Day in Switzerland. We hope you will be able to join these events either in person or virtually. That concludes our call today.

Speaker 1

Thank you again for joining us. If you have any follow-up questions, please contact the Investor Relations team. Thanks.

Speaker 3

Thank you. Talk to you soon.

Speaker 2

Thank you.

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Earnings Conference Call
Philip Morris International Q4 2022
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