Philip Morris International Inc

Good day and welcome to the Philip Morris International first quarter 2020 earnings conference call. Today's call is scheduled to last about one hour, including remarks by Philip Morris International Management and the question and answer session. In order to ask a question, please press the star key followed by the number one on your touchtone phone at any time. Media representatives on the call will also be invited to ask questions at the conclusion of questions from the investment community. I will now turn the call over to Mr. Nick Rowley, Vice President of Investor Relations and Financial Communications. Please go ahead, sir.

Welcome and thank you for joining us. Earlier today, we issued a press release containing detailed information on our 2020 first quarter results. You may access the release on www.pmi.com or the PMI Investor Relations app. A glossary of terms, including the definition for reduced-risk products, or RRPs, as well as adjustments, other calculations, and reconciliations to the most directly comparable U.S. GAAP measures, additional heated tobacco unit market data, and our business transformation metrics are at the end of today's webcast slides, which are posted on our website. Unless otherwise stated, all references to ICOS are to our ICOS Heat Not Burn products. Comparisons are presented on a like-for-like basis reflecting pro forma 2019 results, which have been adjusted for the deconsolidation of our Canadian subsidiary, Rothmans, Benson & Hedges, Inc., effective March 22, 2019. 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, or review the various factors that could cause actual results to differ materially from projections or forward-looking statements. Please note, we now also include additional forward-looking and cautionary statements related to COVID-19. Now, my pleasure to introduce Andre Kalantzopoulos, our Chief Executive Officer, and Martin King, our Chief Financial Officer, both of whom will be available for the question-and-answer session. Andre? Andre?

Thank you, Nick, and welcome, ladies and gentlemen. These are unprecedented times for all of us, and I hope everyone listening and their families are safe and well. I would also like to express a deep appreciation for the life-saving efforts of medical, social, and other frontline workers during the COVID-19 pandemic. Our main focus at this time is on the health and well-being of our employees, their families, and the communities in which we operate. We've implemented stringent policies and measures to minimize risks for those who continue to work in our facilities and offices. For all our employees, including those working from home, providing guidance and support is also essential. We recently announced a new set of guiding principles to reassure employees of the company's commitment to job security throughout the global pandemic period in three areas, employment stability, financial stability, and special recognition. The strength and spirit shown in these challenging times by the people that make up our organization is a real inspiration to me and the Philip Morris International Management Team. And I would like to take this opportunity to thank them for their outstanding efforts. Indeed, our people continue to generate ideas on how they and PMI can contribute skills and resources to the wider societal effort. Ongoing and planned initiatives in more than 60 countries include providing protective equipment to our trade partners, support to care communities, procurement support to purchase items essential to fight against COVID-19, and financial support to institutions and non-government organizations working to end this crisis. In addition, our employees in many countries are volunteering to help elderly, low-income, and other at-risk populations, and some of our factories are producing hand sanitizer and masks for their local communities. Lastly, but very importantly, we have also taken steps to ensure the continuity of our supply to our customers and consumers, and to support our suppliers through this challenging time. Let me now comment on the overall impacts of COVID-19 around business and outlook before I hand over to Martin, who will cover this impact and the performance in the quarter in more detail. We started the year with a very strong first quarter, with minimal disruption to business performance and continuous structural growth momentum. While we have had a number of temporary shutdowns at different manufacturing facilities and some additional complexities in our route to market, who have activated contingency plans, where required, to ensure sufficient inventories and consumer access to our products. Allied to a healthy balance sheet and liquidity position, our ability to generate cash will allow us to continue investing in our business, retire maturing debt, and pay dividends. Turning to the outlook, the inherent uncertainty in the global economic picture makes forecasting much more challenging than usual. With social isolation measures placing day-to-day life on hold for much of the world's population, this temporarily impacts our operating environment. The most direct effect is on duty-free sales due to reduced travel, with additional impacts from delayed ICOS user acquisition and regulatory price enforcement in Indonesia. In total, this is likely to have a negative impact on our 2020 currency-neutral performance, with recent exchange rate movements a further drag. As visibility on the duration and extent of lockdown measures across the world is extremely limited, we are withdrawing our annual forecast and replacing it with quarterly guidance where visibility is relatively better. Martin will talk through the key moving parts and our EPS guidance for the second quarter. when the most impact is likely to be felt. We are confident the strong momentum Sonaico user acquisition shown in recent quarters will start to resume as restrictions ease. In the meantime, our digital and commercial aging allows us to serve our existing adult consumers, maximize the conversion of adult smokers under the prevailing circumstances, and tailor our investments as required to optimize cost. There is also considerable uncertainty as to the magnitude of the economic consequences of the current situation and the speed and shape of the recovery, including the impacts on disposable incomes and employment. While it's too early to fully assess potential effects on market dynamics in terms of consumption and down trading, we have to assume there will be some impact. We also sense in certain developing countries difficulties in ensuring business continuity for some smaller general trade players, which may lead to localized out of stocks. However, as in previous times of economic and social turbulence, we expect to show resilient performance through these challenges.