Philip Morris International Inc

Good day and welcome to the Philip Morris International Fourth Quarter 2020 Year-End Earnings Conference Call. Today's call is scheduled to last about 10 hours, including remarks by Philip Morris International Management and question and answer sessions. In order to ask a question, please press the start key followed by the mark or touch the 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 Senator Crowley, 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 fourth quarter and full year results. You may access the release on www.pmi.com. 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. gap measures, and additional heated tobacco unit market data are at the end of today's webcast slides, which are also posted to the website. Unless otherwise stated, all references to ICOS are to our ICOS Heat Not Burn products. Comparisons presented on a like-for-like basis reflect pro forma 2019 results, which have been adjusted for the deconsolidation of our Canadian subsidiary, Rothmans, Benson & Hedges, Inc., effective March 22, 2019. Please also note that the growth rates presented on an organic basis reflect currency-neutral underlying results and like-for-like comparisons where applicable. 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 full review of the various factors that could cause actual results to differ materially from projections or forward-looking statements. Please also note the additional forward-looking and cautionary statements related to COVID-19. In addition, please be aware that today's remarks and question and answer session will focus on the performance in 2020 and the outlook for 2021. We plan to address the outlook beyond 2021 at our Virtual Investor Day next week on February 10th. Now, my pleasure to introduce Emmanuel Babot, our Chief Financial Officer, Andrzej Kalantzopoulos, our Chief Executive Officer, and Jacek Olczyk, our Chief Operating Officer, will join Emmanuel for the question and answer session. Emmanuel.

Thank you, Nick, and welcome, ladies and gentlemen. I hope everyone listening to the call is safe and well. Our business delivered a robust performance in 2020, despite the unprecedented challenges of the global pandemic. Most impressive was the continued strong growth of ICOs, which made up over 10% of our volumes and almost one quarter of our net revenues for the year. The daily consumption of HTUs by high-cost users saw minimal impact from social restrictions, and despite significant constraints, we were able to continue acquiring new users in switching from cigarettes at a very good pace, to reach a total of 17.6 million, of which 12.7 million have switched to high-cost and stopped smoking. HTU shipment volumes grew 28% compared to the prior year, with record market shares in key high-cost geographies in Q4. Moreover, 10 markets exited 2020 with double-digit national share in December. Our rate of user acquisition was again strong in Q4, propelled by the increasing sophistication of our digital commercial model and the positive word-of-mouth effect from this increasing prominence, despite tighter restrictions in a number of markets. The most significant pandemic-related headwinds we faced were in the combustible business with the highest impact in duty-free and Southeast Asia, where we also faced additional challenges in Indonesia due to the excise tax structure. The least impacted region was the EU. While the timing and duration of the recovery remain uncertain, we expect a rebound in industry volumes over the next one to two years as the pandemic recedes. Despite these challenges, our operating margins were again significantly ahead in the fourth quarter and the full year. This reflects the increasing weight and profitability of ICOS and the delivery of our three-year cost efficiency target one year ahead of schedule, which also enables reinvestment in the business. This drove excellent EPS growth and cash generation, where we also exceeded our prior targets. From a product standpoint, we broaden our smoke-free portfolio with a wider range of consumables such as Heat, Dimension and Feet and the launch of Icosviv in eVapor and Lil in Heat Not Burn. We also continue to make good progress around the world on the recognition of the positive impact of switching smokers to scientifically substantiated RRPs. The FDA's modified risk tobacco product authorization of a version of IQOS was a major milestone in this regard. This was also followed by the pre-market authorization of the IQOS 3 device in December. Turning now to the headline numbers, our full year net revenue declined by 1.6% on an organic basis. This was an exceptionally resilient performance in the context of the pandemic. We estimate that duty-free net of partial volume recapture in local markets and Indonesia alone were a mid-single-digit drag on our top-line growth. Despite these factors, we saw strong organic growth of 6.9% in our net revenue per unit, driven by the increasing weight of ICOs in our sales mix. Combustible tobacco pricing was plus 3.7%, reflecting solid pricing in many markets, partially offset by headwinds in Indonesia. Excluding Indonesia, combustible pricing was around plus 6%. Despite the decline in organic net revenue and combustible volumes, our adjusted operating income margin increased by 240 basis points on an organic basis. This reflects the positive impact of ICOS on both our gross margin and the ratio of SG&A to net revenue, which I will come back to. The resulting 7% adjusted diluted organic EPS growth exceeds our previous guidance of around 6% and also reflects a strong end to the year in Japan. This brings me on to the fourth quarter, which had very similar dynamic to the full year. organic net revenue declined by 3.5%. While a significant improvement from the decline of almost 10% in Q2, continued weakness in Indonesia and duty-free and a lower total market in the Philippines, including price increase effect, more than offset a strong performance from ICOS. Our net revenue per unit again increased solidly by 5.2% due to the same factors as the full year. Our adjusted operating income margin expanded by 200 basis points to deliver plus 7.4% adjusted deleted EPS growth, all on an organic basis. Before we turn back to the full year, I will now expand on the strong underlying Q4 dynamic in a little more detail. Our HTU shipment volumes continue to show strong growth and reach a record 21.7 billion units driven by the EU region, Japan, and Russia. In Japan, the industry was weak, as expected, as consumer and trade deloading following the October tax-driven price increase led to a 13% decline in the total tobacco market, including cigarillos. We outperformed this trend significantly as a strong finish for high-cost off-tech and share gave rise to higher shipment for both in-quarter sell-out and to provide appropriate inventory requirements. for a strong expected start to 2021. With social restriction starting to tighten towards the end of the quarter in a number of markets in response to a second wave of the pandemic, combustible volumes and revenue saw some impact from reduced mobility and social location, albeit to a significantly lesser degree than the second quarter. Nonetheless, The strength of the high-cost business enabled the EU, Eastern Europe and East Asia and Australia region to deliver mid single-digit top-line growth. Elsewhere, the continued challenges in Indonesia and duty-free against a tough comparison and a lower total market in the Philippines in the immediate aftermath of a price increase weighed on revenue growth. Despite the ongoing restriction in many markets in the first quarter of 2021, and a tough prior year comparison, we expect better top line performance, which I'll come back to later. Let me now go into the drivers of our 2020 margin expansion, starting with gross margin, which expanded by 200 basis points on an organic basis. This is driven by multiple levers. First, our ongoing transformation is delivering an increasing mix of high cost consumable in our business. Second is pricing on combustible. Third is our focus on overall manufacturing and supply chain productivity, which compensated for lower combustible volume exacerbated by impact of the pandemic, in addition to inflation, investment and extraordinary COVID related costs in our supply chain. Growth margin expansion was augmented by our focus on SG&A efficiency with our adjusted marketing, administration, and research cost 40 basis points lower as a percentage of net revenue on an organic basis. This reflects the ongoing digitalization and simplification of our business processes, including our high-cost commercial engine and more efficient ways of working. Clear focus. on cost efficiency allows us to improve profitability while continuing to invest in the growth of ICOS. I am very pleased to report that we have already achieved our 2019-2021 target of over $1 billion in annualized growth saving in only two years, with $1.1 billion delivered by the end of 2020. Over two-thirds of these savings came from manufacturing and supply chain productivity and device costs, where our focus on efficiency, quality and footprint more than offset inflation, supply chain investment, extraordinary COVID-related costs and the effect of lower combustible volumes. The remainder came from commercial efficiency and G&A costs. Importantly, these savings do not include those resulting from the pandemic, such as reduced travel and the necessary shift of consumers to digital channels. Between higher manufacturing costs and SG&E savings such as these, we estimate a net efficiency of around $150 million due to COVID effect. We plan to elaborate further on our cost initiative and the fueling of high-cost growth at next week's Investor Day. The strong uplift in our profitability and excellent earning growth allowed us to deliver nearly $10 billion in operating cash flow for the year, well above our expectation of at least $9 billion. This represents 3.5% like-for-like ex-currency growth and also reflects ongoing working capital initiative and impressive performance in a year with significant disruption to global supply chain. Our capital expenditures amounted to $0.6 billion below our historic run rate. Significant improvement in manufacturing performance have translated into lower ongoing requirements. However, we also benefited from the timing of certain investments and expect capex of around $0.8 billion in 2021. Aside from reinvesting in the business, The primary use of cash is on return to shareholders, and we raise the quarterly dividend this year to an annualized rate of $4.80 per share. Capital allocation is another topic we will cover at Invest Today. I turn now to industry volumes, which declined around 6% in 2020, excluding US and China. This compares to the historic average of a 2 to 3% decline. We estimate the 3 to 4% difference is almost entirely attributable to the effect of the COVID pandemic on the combustible category. As is evident in our results, the smoke-free category has displayed remarkable resilience, reflecting its convenience and suitability for different use occasions. As we have covered in prior quarters, lower daily consumption in combustible has been driven by two main factors. First, the reduction in usage occasion during confinement, especially in markets with a large amount of daily wage worker. And second, the reduced amount of social occasion due to closure of hospitality settings and restriction on social gatherings. Duty-free also remains depressed in line with global travel. We have seen a partial recovery in daily consumption since the most severe period of reduced mobility in Q2, and we expect a gradual improvement as the pandemic recedes. As we all know, there remains considerable uncertainty on the speed, shape and timing of exiting the pandemic, and at present, many countries are experiencing a serious resurgence in infections. However, Based on our recent experience with renewed lockdown situation, we do not expect to see a repeat of the severe drop in consumption of Q2 2020. However, it is uncertain if any rebound will occur this year, so we assume the historic average decline of 2-3% to be the floor for industry trends in 2021. I'll come back to this when discussing guidance assumptions. Turning now to our volume performance, weak combustible industry volumes were compounded by our exposure to Indonesia and duty-free, and the over-indexing of our premium portfolio to social consumption occasions. It follows that as pandemic recedes, we should see a better dynamic in our market share, and I'll come to this point shortly. As expected, quarterly fluctuations in inventory levels were evened out over the year with no significant difference between our IMS and shipments. The clear highlight in our volume performance was the shipment of 76.1 billion HTUs in 2020. This was just above the upper end of our previously communicated 75 to 76 billion range and represent 28% growth over the prior year. HTU net revenues increased by plus 33% on an organic basis, partly reflecting positive mix. We remain well on track to deliver on our target of 90 to 100 billion units this year, and we will have more to say on the outlook beyond 2021 next week. This strong performance from ICOS means that heated tobacco units made up over 10% of our total shipment volume in 2020 and over 12% in the fourth quarter, as compared to approximately 8% in the year of 2019 and 5% in 2018. We continue to expect this proportion to grow over time as the positive momentum on ICOS continues, providing a powerful driver of revenue and margin growth. Our sales mix is changing rapidly. Smoke-free product made up 26% of our total net revenue in the fourth quarter. IQOS devices accounted for approximately 7% of the $6.8 billion of RP net revenue for the full year, mainly due to a naturally lower ratio of new user to existing user, longer replacement cycle, and geographic mix. In some geographies, We still sell a substantial amount of the lower price original high-cost 2.4 plus device and we have now introduced Lil Solid in Eastern Europe. Focusing now on our total international market share, our volume share increased by 0.2 points before the impact of duty-free cigarettes in Indonesia. was driven by higher share for heated tobacco units, which increased by 0.8 points to reach 3%, only partly offset by lower share for cigarettes. In key markets where ICOS has a meaningful presence, our share increased with very few exceptions. However, our total international market share was negatively impacted by Duty Free and Indonesia. Marlboro remains by far the world's leading brand with 9.5% share of cigarettes in 2020. However, in many markets, it over-indexes to social consumption occasions, which are naturally lower during COVID-related restrictions. Indeed, we saw aggregate Marlboro share movement track pandemic development over the course of the year and expect its recovery to have a similar trend. In terms of value share, our share of total industry net revenue, excluding the US and China, which is more closely related to financial performance, we estimate to be significantly above our volume share, given the premium positioning of Marlboro and ICOS. We expect our value share to grow strongly in 2021, driven by ICOS. I turn now to Indonesia. After a difficult 2020, we entered 2021 with a sequentially stable share trend, supported by our leadership of the annual CRETEX segment, which is growing again. New Exile Duty Rates will come into force on February the 1st, with a weighted average increase of around 13% for our portfolio over 2021. This is broadly in line with the average annual increase prior to 2020, and for PMI, is a lower average increase than the industry given our over-indexing to annual CRETEX, where excise rates are unchanged. Given this higher margin segment, which supports significant employment in Indonesia, is both lower price and less tax than machine-made product, We expect a tailwind for our market share and financial performance over the coming year. Despite the negative consequences for government revenue, there has not yet been a significant move to level the playing field between the Tier 1 and below Tier 1 segments. We remain hopeful that the government will address this issue over time. With respect to the minimum retail selling price, enforcement continues to progress slowly given mobility constraints. However, we expect the impact on the market is now likely to be more limited. The large majority of the industry is now above minimum level, and with no change in the minimum price in 2021, the pass-on of new excise rates would move the remainder of the industry above compliant levels. We also saw a flattening in the growth of the below Tier 1 segment in the fourth quarter and a gradual improvement in our shipment volume. As in many other markets, daily consumption improved since Q2, but is still below pre-pandemic level and remains sensitive to social restrictions. Indonesia was a material drag on our 2020 financial results. While there remains much work to be done on the exercise structure and ongoing uncertainty with regard to the pandemic, for 2021, we expect a much less negative industry volume trend, a better market share outlook and a much smaller impact on our overall performance. For the total international cigarette category, we assume a rebound over 2021-2022 as a negative impact of COVID on daily consumption reverse. The fundamental of the category also remain intact, including price elasticity, which we estimate at around minus 0.4 on the global average basis. With regard to our combustible portfolio, investment levels remain adequate. However, incrementally more may be needed in the immediate aftermath of COVID. We will continue investing in the brand equity of Marlboro, which remains by far the world's leading brand. Given the economic environment, the management of price gaps and growing our share of the low price segment will also be a focus. Pricing in combustibles remain an important driver of performance, and while the carryover effect of COVID may impact our 2021 variants, the pricing power of our portfolio remains strong. Additionally, as HTU volumes grow, This pricing power increases due to the higher price productivity on its and our other HTU brands. I would also highlight that pricing is no longer the sole driver of our top-line growth, with the increasing weight of ICOs in our sales mix generating significant growth in our average selling price. I move now to ICOs performance. We estimate that there were 17.6 million legal age high-cost users as of December 31st. This represents the addition of around 1.2 million adult users since the end of the third quarter and over 4 million in 2020. We have notably seen user acquisition accelerate through the second half of the year despite renewed pandemic-linked restrictions in the fourth quarter in a number of markets. Our accelerated pivot to digital and remote engagement, combined with strong momentum for the ICOS brand, is paying off. We further estimate that 72% of this total, or 12.7 million adult smokers, have switched to ICOS and stopped smoking with the balance in various stages of conversion. This again reflects widespread user growth momentum across all ICOS geographies, including the EU region, Japan and Russia. As our user base expands in markets such as Japan and Russia, we are increasingly enriching our offer and segmenting the category with new products and more price points. The addition of Lil Solide in Russia and Ukraine in the second half helped us to reach a broader range of legal-edge smokers in this market and bring them into the smoke-free category Though at this early stage, the number of users acquired through the purchase of a little device is immaterial in the context of our user base. As we have said previously, we plan to bring more exciting innovation from ICOS in the coming quarters, which we'll elaborate on further next week. In the EU region, fourth quarter share for Eats reached a record 5% of total cigarette and HTU industry volume. As shown on the slide, this reflects strong sequential and year-over-year growth in IMS volumes. I draw your attention to the contrast between the consistent sequential growth in IMS and the progression in sequential quarterly share, which can be distorted by the seasonality of the combustible market, in addition to other fluctuations linked to the pandemic, such as border closure and other social restrictions. It follows that 2021 and future years are also likely to see underlying share gain, accentuated in the winter months, with a converse dynamic in Q2 and Q4. This excellent performance reflects strong growth in Italy, exiting the year with 10% share, with a large majority of user acquisition coming organically as increasing awareness and prominence of the product build its own momentum. Germany and Poland were also strong contributors. We added a further 0.6 million high-cost users in the fourth quarter to reach 5.2 million, a continuation of recent strong performance. In addition, we saw further progress in Spain and in the UK, where both national and London Eats of Tech shares continued to grow, with the latter reaching almost 4% in the quarter. We show here select key cities which demonstrate the strong traction of ICOS and the excellent potential for national shares across the region. I also refer you to the appendix where we show shares for key EU markets and globally key cities. Strong performance continued in Russia with our HTU share up by 2.2 points to reach a record 7.2% in Q4. As with the EU region, we highlight the effect of the seasonality in the combustible category on quarterly shares. The seasonal fluctuation in Russia can be significant, and we urge you to bear this in mind when reading our quarterly results in the future. A notable success in the latter part of the year was the expansion of our product portfolio with little solid and fit consumables to cater to a broader range of adult smokers across the socio-economic spectrum. In both Russia and Ukraine, the majority of consumers purchasing a LIL device are new users with the incrementality contributing to an acceleration in user acquisition with a high level of conversion in line with ICOS. The volume of feed consumables sold is broadly commensurate with LIL device ownership, and at this early stage of commercialization, Both are small in the context of the high-cost business in this market. However, while we have successfully upgraded many legal edge smokers in the medium price segment to high-cost, this bodes well for our ability to reach consumers in certain markets in the medium and below price segment for whom purchasing power may be a barrier to entering the category. The high-cost brand also resonates strongly across the Eastern Europe region. Rapid growth and excellent market share are testament to our agile commercial model and the consumer appetite for smoke-free alternatives, even in markets with lower purchasing power, and again serve as very encouraging indicators for the continued progression of our national market share. In Japan, our total reported share for heated tobacco units reached 22.1% in the fourth quarter, supported by line extension for both Marlboro heat sticks and heats, such as the recent launch of Marlboro black menthol. On a more representative total tobacco basis, including cigarillos and adjusted for trade inventory movement, the share for our HTU brands increased by 2.9 points versus the prior year quarter and by 1.2 points sequentially to 20%. Both heats and Marlboro HD grew market share following the October price increase, highlighting the strength of our price tiered portfolio. We are especially pleased by our Q4 off-tech share in Tokyo, which reached the milestone of 25% in December. Q4 2020 adjusted in-market sales volume for our H2 brands grew 0.6% sequentially, which we regard as a strong performance given the pull forward of consumer of tech into Q3 before the price increase. The overall heated tobacco category made up over 27% of the total tobacco market in Q4, with IQOS maintaining its high share of segment. We are especially pleased by our Q4 of texture in Tokyo, which reached the milestone of 25% in December. A very similar picture is seen in QCT across Japan, including Sendai. The Korean market has specific challenges around consumer misperception of the category. And while we continue working to address this issue, it's notable that Kuala Lumpur in Malaysia has already overtaken Seoul in market share terms, crossing double digits in the third quarter. In addition to strong growth in existing markets, the geographic expansion of ICOs continues. We leverage our digital capability to launch in three new markets, Estonia, Kuwait and the Maldives. This takes the total number of markets where IQOS is available for sale to 64, of which over half are outside the OECD. We continue the commercialization of IQOS Vive, our new EVapor product, with the first EU market launch in the Czech Republic in December. This follows Lead Market New Zealand in August 2020, and we will continue to enter new markets over 2021, including Italy and Finland in the coming weeks. As we have said previously, the commercial infrastructure of ICOS allows us to deploy efficiently and at scale. Both the VIVE device and the consumable will be premium positioned. We also place great importance on efforts to guard against youth access for all our products. As we roll out iQOS-V, we will be testing age verification technology in select markets. Switching now to sustainability, I want to again emphasize that our corporate strategy and our sustainability strategy are deeply aligned. ESG issues are business issues that serve as input to our long-term strategy and sit at the core of our mission. Despite the unprecedented challenges of the global pandemic, we have not deviated from our efforts to be a more sustainable company, and we achieved a number of key milestones in 2020. By replacing cigarettes with less harmful alternatives, we can significantly reduce the negative impact our products have on the health of our consumers. That's why the core of our strategy focuses on addressing the impact of P product, the first and most critical pillar of our approach to sustainability. This is what differentiates our company and highlight our unique value proposition as the final piece of our ESG plus P framework. Phasing out cigarettes remain our focus. And in 2020, we estimate a further 4.1 million legal aid smokers entered the smoke-free category with ICOS, with a total of 12.7 million now switched and stopped smoking. We also show here some recent notable achievements across ESG, which we'll come back to in more detail at Invest Today. While there remains much work to do, we believe our transparency and detailed approach to sustainability, materiality, and disclosure make PMI an excellent example of impact, which we are achieving through carefully embedding sustainability into business and understanding it as an opportunity for innovation and growth, including our planning role in tobacco harm reduction. In other words, our transformation is a unique sustainability story, another topic we will return to next week. I will now turn to guidance for 2021, where we expect a significant recovery. The main unknown is the speed and shape of the global exit from the pandemic. While COVID was clearly disruptive to our performance in 2020, it is not yet over and we must factor this uncertainty into our outlook for the coming year. With the rollout of vaccine just starting and lockdown measures currently in place across many markets, we do not assume any meaningful change in the first quarter where we also face an unfavorable pre-COVID prior year comparison. Looking beyond this, there are clearly a range of outcome, and we are reflecting this by providing a range for our assumed organic growth in net revenue and EPS. These ranges assume that even in the event of prolonged restriction, we will not see a return to the depressed consumption level of Q2 2020, which is consistent with our observation of a less severe impact in the second wave. For duty-free, a rebound in global travel is likely to lag the improvement of in-country mobility. Our guidance assumes no meaningful recovery in duty-free this year. Despite this assumption, we expect organic net revenue growth in the range of 4% to 7%, and organic adjusted deleted EPS growth of plus 9% to plus 11%, or plus 14% to plus 16% in dollar terms. This title range for EPS reflects the likely higher level of growth investment in the event of a faster recovery, and thus our assumption is for at least 150 basis points of margin expansion in all scenarios within the range. This reflects the ongoing positive mixed effect of ICOs in our business, and the accretion of cost-efficiency net of continued growth investment. This projected organic EPS growth, including an estimated favorable currency impact of approximately 25 cents at prevailing rates, translates into an adjusted diluted EPS range of $5.90 to $6. This guidance does not assume share repurchases. This guidance also assumes the achievement of our three-year HTU shipment volume target of 90 to 100 billion units. Coming to some of the other key assumptions underpinning this guidance, we expect a total industry volume progression of flat to minus 3% depending on the speed and shape of recovery from the pandemic. We expect to outperform the industry trend driven by the share gains of ICOs with the resulting PMI volume forecast of plus one to minus 2%. This also incorporates a manageable excise outlook, including a positive structural change in Turkey and above average increase in Russia and the increase in Indonesia in line with historic averages. As I mentioned earlier, our combustible pricing power remains strong. However, given 2020 carryover effect, notably in Indonesia, and the immediate aftermath of the COVID crisis, we assume combustible pricing of 2% to 3% in 2021, or around plus 4%, excluding Indonesia. As in 2020, the biggest driver for our top-line growth is likely to be the higher weight of the high-cost business, which has significantly higher average net revenue per unit. As laid out in this morning's press release, we assume that our full-year effective tax rate will be around 22% and assume that operating cash flow will grow strongly to around $11 billion at prevailing exchange rate and subject to working capital requirement. As I already mentioned, we assume capital expenditure of around $0.8 billion. Let me now spend a moment on the expectation for the first quarter. Our organic net revenue are likely to be around stable to slightly down as we lap a strong Q1 2020, which benefited from inventory build-up in March as the pandemic began to spread in many markets, in addition to being a largely COVID-free quarter. This incorporates continued strong year-on-year growth in the shipment and IMS volumes of HTUs. Due to normal seasonal patterns and the lower number of selling days in Q1, we expect this volume to be sequentially stable to slightly below Q4 2020. We also expect strong sequential HTU share gains on both an underlying and reported basis compared to Q4, noting the seasonal factors in the combustible market I already mentioned. We expect strong margin progression in Q1, primarily due to the positive mix effect of ICOs and the effect of the cost efficiency realized in 2020. We believe this should result in an organic adjusted deleted EPS growth of around 8%, which equates to around $1.40, including an estimated $0.09 favorable currency impact at prevailing rates. Looking beyond the first quarter, it will come as no surprise that the easier comparison in Q2 should enable higher than average year-over-year growth in volumes and net revenues. To conclude, our results were stronger than expected, with plus 7% organic EPS growth delivered in the tumult of 2020. We are building a business through ICOS to deliver superior and sustainable growth over the coming years. Continued momentum of ICOs through the challenges of the pandemic demonstrate this structural growth characteristic. We are also committed to maintaining the strong leadership and competitiveness of our combustible business. We have a number of levers for growth in our top and bottom line. First, the powerful mixed effect of ICOs. Second, pricing, which remains important for combustible and, where appropriate, for ROPs. Additionally, efficiency in our manufacturing, supply chain and SG&A costs are further lever as we continue to hone our business model. Moreover, with the launches of the Icosvif and LIL product, we are broadening and stepping up our product offer and innovation in 2021. You can also expect us to bring further exciting innovation to our Icos HeatNotBurn platform. As I mentioned, sustainability is at the heart of our smoke-free strategy, and we continue to work tirelessly to further our mission. Our organization demonstrated extraordinary resilience in 2020, coping and growing admirably through one of the most challenging periods in recent history. At the same time, our business continues to transform, incorporating and leveraging new skills and capabilities. In short, we look forward with confidence and we will expand on this topic further at our Visitorial Investor Day on February the 10th. We look forward to seeing you there. Thank you. André, Jacek and I are now more than happy to answer your questions.