Philip Morris International Inc

Good day everyone and welcome to the Philip Morris International 4th Quarter 2024 and Full Year 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 1 on your touchtone phone at any time. As a reminder, today's call is being recorded. I will now turn the call over to James Bushnell, Vice President of Investor Relations and Financial Communications. Please go ahead, sir.

Welcome. Thank you for joining us. Earlier today, we issued a press release containing detailed information on our 2023 fourth quarter and full year results. The press release is available on our website at PMI.com. A glossary of terms, including the definition for smoke-free products, as well as adjustments, other calculations, and reconciliations to the most directly comparable U.S. GAAP measures for non-GAAP financial measures cited in this presentation, and additional net revenue data are available in Exhibit 99.2 to the company's Form 8K, dated on today's date and on our investor relations website. Today's remarks contain forward-looking statements and projections of future results. I direct your attention to the forward-looking and cautionary statements disclosure in today's presentation and press release for a review of the various factors that could cause actual results to differ materially from projections or forward-looking statements. I'm joined today by Jacek Olczak, Chief Executive Officer, and Emmanuel Babot, Chief Financial Officer. Over to you, Jacek.

Thank you, James, and welcome, everyone. PMI delivered another strong operating performance in 2023. We achieved our third consecutive year of positive volumes and a high single-digit organic top-line growth driven by smoke-free products. Smoke-free products delivered accelerated accretion to profitability in the fourth quarter as our high-cost business delivered meaningful 2023 operating leverage, mitigating a significant drag from combustibles. I'm also very pleased to report the continued outstanding growth of zinc, which was not included in organic metrics until mid of November last year. Importantly, smoke-free products reached nearly 40% of total PMI net revenues in the fourth quarter, and over 40% of gross profit. For the year, smoke-free gross profit increased by 19% organically, and we expect smoke-free organic growth to accelerate for both net revenues and gross profit in 2024. VIN delivers exceptional growth in its first year within PMI, with U.S. pro forma volumes up by over 60% for the year and over 75% in the quarter four. Oral smoke-free is accretive to both our smoke-free business and the overall group, with Swedish match contributing 50 basis points organic uplift to Q4 oil margins from only 50 days of the period. Our ICOS business continues to deliver excellent results, with 15% adjusted in market sales growth for 50 tobacco units, reflecting broad-based momentum in Europe, Japan, and emerging markets. The rollout of ICOS Illuma is substantially complete and now is present in the 51 markets, representing over 95% of ICOS geographies by volume, excluding Russia and Ukraine. The superior experience and design of Illuma, combined with the strong premium bank-weight equity of ICOS and our commercial infrastructure, enabled ICOS to outgrow the Hidnot Bern category, despite holding a category share of over 75%. Importantly, as we have seen in Japan, the launch of Illuma is a multiyear growth driver consistent with past high-cost innovation. Our 2023 combustible performance was margin dilutive despite strong commercial results with very good pricing and higher category share. This reflects the significant cost pressures in the category geographic mix from volume growth in lower-margin markets without smoke-free products, and the impact of ICOS cannibalization. This was also compounded by the technical impact of third-party manufacturing in Indonesia and Israel. While cost and currency headings impacted our earnings in 2023, the strengthening growth and margin profile of smoke-free products set us up well to deliver sustainable growth and returns, including currency, in 2024 and beyond. We reached a number of key transformation milestones in the last quarter of last year. First, ICO's net revenues surpassed Marlboro to become the number one international nicotine brand on this measure. This demonstrates the power of innovative smoke-free alternatives to switch adult smokers away from cigarettes and to address the societal issue of combustible tobacco. It is also a testament to our organization's ability to build strong and sustainable brand equity. This also applies to Zune, the fastest growing U.S. smoke-free brand with another outstanding performance in Q4, marked by an increase in category volume share, retail value share, and overall volume. We're also proud to have reached 25 markets where smoke-free products exceed 50% of our top line for both Q4 and the full year. We aim to reach 60 markets by 2030, driving our ambition to exceed two-thirds of group net revenues. Last, as I already mentioned, over 40% of our total gross profit was generated by smoke-free products, with the adjusted gross margin rate on smoke-free surpassing combustibles for both the quarter and year. We are encouraged by the increasing number of governments adopting tobacco harm reduction policies to encourage reduced-risk nicotine consumption instead of smoking. which is ultimately more sustainable for society. Nevertheless, a considerable amount of work remains. Sustainable growth requires a sustainable business, and we continue to garner increasing recognition for our sustainability performance across the key product and operational topics for our company. PMI was included in the Dow Jones Sustainability World Index for the first time. and for the fourth year in a row, the DJSI North America. In addition, PMI was awarded Carbon Disposal Project's AAA rating for the fourth consecutive year. I will now hand it over to Emmanuel to discuss our results and outlook in more detail.