Philip Morris International Inc

Good day and thank you for standing by. Welcome to the Philip Morris International Inc. 2025 Fourth Quarter Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. to withdraw your questions, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, James Bushnell, VP of Investor Relations and Financial Communication. Please go ahead.

Welcome. Thank you for joining us. Earlier today, we issued a press release containing detailed information on our 2025 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 US GAAP measures for non-GAAP financial measures cited in this presentation are available in the company's Form 8K dated today's date and on our IR 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, Group CEO of PMI, and Emmanuel Bavou, Chief Financial Officer. Over to you, Jacek.

Thank you, James, and welcome, everyone. was another outstanding year for PMI. The shift of adult smokers to better alternatives is a lasting structural movement, one that we continue to lead and from which we are generating strong sustained growth. Our leading global position in smoke-free products enabled us to deliver a fifth consecutive year of positive volumes with rapid top-line progress and significant margin expansion. We grew our smoke-free products volumes by an excellent 12.8% with the increasing profitability of the portfolio reflected in organic smoke-free gross profit growth of 18.7%. ICOS remains the core driver with both shipment and adjusted IMS growing around 11%. This includes an impressive acceleration in the fourth quarter with a return to strong double-digit growth in Italy and a very promising start in Taiwan, just two examples of the broad growth across geographies. This performance also reflects the success of our multi-category strategy with Bonzin, ExNordic, Zenvive more than doubling shipment volumes in international markets. Our strong brand offering which includes high-quality science-backed products in all three smoke-free products categories, allows us to better serve consumers and enhance our financial performance. While the nicotine pouch category remains nascent in most geographies, ZEN gained significant international share as we expanded the product portfolio and market reach. The more established evapour category VIV is the fastest growing brand of any major player in international closed pots and holds the number one position in eight markets with a substantial increase in gross profit. Although our performance continues to be fueled by the international business, we generated the vast majority of total PMI organic net revenue of growth left by SFPs. We have a substantial opportunity in the U.S. where ZIN grew shipments by 37% despite supply constraints in the first half, a significant price premium, and the competitive portfolio gaps. Our Aspire Wellness business also grew organic net revenue strongly. Combustibles delivered robust top and bottom line performance, notwithstanding a more normalized industry volume decline and supply chain issues in Turkey. We accomplished this through strong pricing, portfolio resilience, and disciplined execution, with Malbro reaching a historic high share. Managing this business responsibly enables us to invest boldly in better alternatives and sustain our smoke-free momentum. Together, these factors enabled us to deliver 15% adjusted diluted EPS growth in dollar terms, the strongest growth since 2011, excluding the pandemic recovery year of 2021. This reflects currency neutral growth of 14%, well above our expectations at the start of the year and the second year of mid-teens progress. Indeed, we have successfully achieved our three-year CAGR targets for organic OI and currency-neutral EPS in two years. With another strong performance expected in 2026, despite some transitory headwinds, we are today renewing these growth targets for the next three years, further validating our Basin-class growth profile within a consumer packaged goods. Importantly, This is accompanied by strong and increasing cash generation, and we target a leverage ratio of close to 2x by the end of 2026 at prevailing exchange rates. With our dividend payout now close to our objective of around 75% of adjusted diluted EPS, this provides capacity for strong returns to shareholders. Before I turn it over to Emmanuel, I would like to highlight the achievement of several important milestones as we entered the second decade of our smoke-free journey. Our total net revenues reached over $40 billion in 2025, with 41.5% or close to $17 billion generated by our smoke-free business. Even more impressive is the smoke-free gross profit contribution, which has essentially doubled in five years to 43% of total PMI. Our adjusted operating margin also returns to above 40% this year as our transformation expands profitably. Our business is increasingly smoke-free, with 27 markets exceeding the 50% net revenue milestone, including South Korea, Poland, Italy, Romania, and of course the U.S., which is also one of eight markets exceeding 75%. In the last quarter of 2025, the Europe region also surpassed 50%, making three out of four regional segments majority smoke-free. We continued to scale our global smoke-free presence, reaching 106 markets, 52 of which have already deployed a multi-category strategy, which is a critical accelerator of consumer adoption and long-term growth. As adult nicotine consumers search for better alternatives to smoking, we continue to lead the broader industry transformation. A prime example is Japan, where the heat-not-burn category crossed the 50% total industry threshold in December, driven by the undiminished strength of ICOS. Across our 106 smoke-free markets, our double-digit adjusted IMS volume growth continues to outpace the industry, demonstrating the collective strength of our leading brands. While we are proud of what we have accomplished so far, our focus remains sharply on the future with an exciting pipeline of initiatives and innovations over the next three years. This is supported by increasing digitalization and our new organizational model. With that, I will hand over to Emmanuel to discuss our results and outlook in more detail, and I will come back at the end of this presentation.