Philip Morris International Inc

Philip Morris International first quarter and 2021 earnings conference call. Today's call is scheduled to last about one hour and could be marked 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 the question and answer from the investment community. I would now like to 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 2022 first quarter 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. GAAP measures, and additional heated tobacco unit market data, 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, and all references to smoke-free products are to our RRPs. Growth rates presented on an organic basis reflect currency-neutral adjusted results, excluding acquisitions. Figures and comparisons presented on a pro forma basis entirely exclude PMI's operations in Russia and Ukraine. In the third quarter of 2021, we acquired Fertin Pharma, Vektora Group, and Otatopic. On March 31st, 2022, we launched a new wellness and healthcare business, Vectora Fertin Pharma, which consolidates these entities. The operating results of this new business are reported in the other category. Business operations of our wellness and healthcare business are managed and evaluated separately from the geographical segments. 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. It's now my pleasure to introduce Jacek Golczyk, Chief Executive Officer, and Emmanuel Babau, Chief Financial Officer. Over to you, Jacek.

Thank you, Nick, and welcome everyone. I hope you are all safe and well. Recent months have been extremely challenging for many of us given the tragic events related to the war in Ukraine. I would like to express our sadness and solidarity for the people of Ukraine. Our primary concern is for our employees and their families and we have been doing everything we can to support them with three priorities. First, evacuating our colleagues. We have evacuated over 1,000 colleagues and family members from the country and supported more than 2,700 others to move from conflict zones to locations away from the heaviest fighting. we are delivering critical aid to people that cannot live or who decided to remain in Ukraine. And third, we are providing accommodation, immediate assistance and a path forward to those who left the country. In addition, we have already contributed around $10 million in funds and donated essential items across the country directly to humanitarian organization and through our own employee-led initiative projects with heart. This includes providing medicine, food, clothes and a variety of other items to our colleagues and to the broader population, the purchase of 25 ambulances and the setup of a mobile hospital. Based on our current visibility, we estimate an additional cost of around $25 million for additional support to employees this year. Our colleagues in neighboring countries continue to provide vital support to all people arriving from Ukraine to seek refuge. Our heartfelt gratitude goes to everyone involved in this generous effort to help at such a difficult time. In terms of the impact on our business operations, production at our Ukraine manufacturing facility in Kharkiv remains suspended. While business activities in eastern Ukraine have been mostly heavily impacted, we have seen some resumptions in areas where conditions allow, as we seek to maximize product availability and service to consumers using existing inventories on hand. We are also now planning to import products from other manufacturing locations, although this may involve higher costs. We continue to pay salaries to all our Ukrainian employees and to provide substantial in-kind support to them and their families. As communicated in our March 24 press release, PMI's board of directors and senior executive team are working on options to exit the Russian market in an orderly manner in the context of a complex and rapidly changing regulatory and operating environment. This is no easy task in view of recently introduced complex legislation, but we are committed to seeking a viable path to exit the market while supporting our employees in Russia for this period. It is also clear that we cannot continue business as usual in light of regulatory and supply chain disruption, which has already impacted the Russian business in the Q1. We have taken concrete steps to scale back our operations such as the cancellation of all new investments and product launches, including IQOS Illuma and IQOS V. We are delisting 25% of our cigarette products, including Marlboro and Parliamentary SKUs. We have also cancelled the $150 million investment in capacity to ultimately manufacture more than 20 billion Terra sticks for IQOS Illuma in our Russian factories. Clearly, the impact of the conflict has also created disruption in global supply chains and exacerbated inflationary pressures in certain materials and services. However, the Q1 performance and outlook for our business, excluding Russia and Ukraine, remains strong. On a reported basis, our outlook conservatively assumes no further contribution from Russia or Ukraine from April 1st. To provide a consistent view, given the uncertainty and volatility of these two markets, we will now also provide adjusted results and guidance on a pro forma basis, excluding Russia and Ukraine from both the prior and full current year. I will now hand over to Emmanuel to cover this in more detail.