Shoals Technologies Group Q4 2021 Earnings Call Transcript

Quartr
Provided by Quartr
February 10, 2022

There are 8 speakers on the call.

Operator

Good day, and welcome to the Philip Morris International 4th Quarter 2021 Year End Earnings Conference Call. Today's call is scheduled to last about 1 hour, including remarks by Philip Morris International Management and the question and answer session. Media representatives On the call, we'll be also invited to ask questions at the conclusion of questions from the investment community. I will now turn the call over to Mr. Nick Crowley, Vice President of Investor Relations and Financial Communications, please go ahead, sir.

Speaker 1

Welcome and thank you for joining us. Earlier today, we issued a press release containing detailed information on our 2021 Q4 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.

Speaker 1

GAAP measures and additional heated tobacco unit market share data are at the end of today's webcast slides, which are posted on our website. Unless otherwise stated, all references to IQOS are to our IQOS heat up burn products and all references to smoke free products are to our RRPs. Growth rates presented on an organic basis reflect currency neutral underlying results. Following the acquisitions of Fertin Pharma, Otitopic and Vectura Group, PMI added the other category in the Q3 of 2021. Business operations for the other category are evaluated separately from the geographical operating segments.

Speaker 1

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 for forward looking statements. Please also note the additional forward looking and cautionary statements related to COVID-nineteen. It's now my pleasure to introduce Jacek Olczyk, our Chief Executive Officer and Emmanuel Babbo, our Chief Financial Officer. Over to you, Jacek.

Speaker 2

Thank you, Nick, and welcome, everyone. I hope you're all safe and well. Our business delivered an excellent performance in 2021, reaching record net revenues, Adjusted diluted EPS and cash flow with growth in overall volumes, high single digit organic net revenue growth and strong double digit adjusted EPS growth. This illustrates the sustainable nature of our growth There is a new product and innovation as demonstrated by continued strength of IQOS, which delivered 31% full year organic growth in RRP net revenues. Smoke free products surpassed 30% of by 2025.

Speaker 2

We are especially pleased by the acceleration of our business in Q4 to deliver a better than expected result. This reacceleration was visible in organic net revenues, IQOS user growth heated tobacco unit market shares across developed and emerging markets, Innovation in Devices and Consumables and Commercial Investments and Combustible Market Share. IQOS user growth recovered in Q4 to reach an estimated 21,200,000 total users. Despite ongoing tightness in device supplies in the second half of the year, full year The growth outlook for IQOS remains very positive with outstanding initial results from IQOS Yuma in Japan and Switzerland, The only 2 launches so far and growing traction for IQOS V in early launch markets. In combustibles, we essentially reached our goal of stable category share in the 4th quarter Despite the impact of IQOS cannibalization, during the year, we laid the foundations For our long term growth ambitions beyond nicotine in wellness and healthcare, including the milestone acquisition of Ferti and Vectura, which provide essential capabilities for future product development.

Speaker 2

And last, bolstered by strong operating cash flow, We continued to prioritize returns to shareholders for a 4.2% increase in the dividend and ongoing share repurchases. Turning to the headline numbers. Our full year adjusted net revenues grew organically by 7.6% of 10.3% in dollar terms, including positive currency. This reflects the continued underlying strength of IQOS and the ongoing recovery of the combustible business in many markets compared to the pandemic affected prior year. Our net revenue per unit grew 5.3% organically, driven by the increasing proportion of IQOS in our sales mix and pricing.

Speaker 2

Combustible pricing was in line with our expectations at 2.7% or around 4%, excluding Indonesia. Our adjusted operating income margin increased by 200 basis on an organic basis, in line with our expectations, with continued positive effect from the increasing size And profitability of IQOS, pricing and productivity savings. Through first half expansion although Strong hair sal expansions was tempered in the second half by the expected initial higher unit costs of IQOSIYLUMA, geographic and category expansion investment and the Q4 resumption of consumer programs in a number of markets. Our resulting adjusted diluted EPS of $6.08 represents 17.6% growth In dollar terms and 15.3 percent currency neutral growth, this is well above our prior guidance As IQOS user growth, the launch of Illumina and total industry volumes exceeded our expectations. Finally, we generated operating cash flow of $12,000,000,000 reflecting excellent underlying cash conversion in addition to strong Q4 business results and certain timing factors.

Speaker 2

Looking at our Q4 performance, Net revenues grew by 8.4% organically. This reflects the sequential improvement in IQOS user acquisition, The initial success of Illumina in Japan and strong overall volumes, including a further recovery in combustibles. We delivered robust organic net revenue per unit growth of 4.1%, again reflecting our shifting business mix. We achieved this despite softer pricing on combustibles of 1.4% due to the factors flagged previously Continued pandemic related challenges in certain markets as well as comparison effects in Germany and Australia. Our Q4 adjusted operating income margin declined by 10 basis points on an organic basis, primarily due to the same factors mentioned for the second half as accelerating business performance opened More opportunities for investment in future growth.

Speaker 2

Despite that, our currency neutral adjusted diluted EPS Again, grew strongly by 11.9%, also reflecting a lower interest cost and effective tax rate. Turning now to 2022 guidance. After the temporary slowdown in IQOS user growth in the second half Of 2021, the device supply situation is gradually improving. While the situation remains fluid, We now expect a more limited impact allowing us to gradually return to prior rates of user progression over the coming quarters. With the remarkable success of Illumina in its first market, a number of other innovations planned And promising growth for IQOS in low and middle income markets, our 2022 Growth fundamentals are strong and we look forward to an exciting year.

Speaker 2

We note that the slower user growth in the second half of twenty twenty one, particularly in the third quarter, We'll have an estimated carryover effect on our growth this year of around 4000000000 to 5000000000 heated tobacco units. This is reflected in our 2022 expectations of $113,000,000,000 to $118,000,000,000 HTL shipment volume. Given this continued growth, we expect our full year H2O shipment to again be ahead of IMS volumes. We expect to deliver between a 4% 6% organic net revenue growth, keeping us well on track to deliver our 20212023 Compound annual growth rate target of more than 5%. This range prudently incorporates the continuing uncertainty on full device availability and the pace of the ongoing pandemic recover.

Speaker 2

For Duty Free, we assume no meaningful pickup in Asian travel, but a continued gradual recovery in other geographies. We expect our adjusted operating income margin to expand between 50 basis points 150 basis points as the positive effects of our product transformation continued despite the expectation of a moderately Lower gross margin. This is essentially attributable to temporary Iruma related factors, Such as the higher initial rate and cost of Terra consumables and the cost of devices, which we expect to decrease over the 18 to 24 months post launch as we have experienced in previous with previous major innovations. We also account for higher logistic costs, while the tremendous uptake of Illumina in Japan has led to increased use of airfreight, Investments to grow capacity across our smoke free platforms and inflation in certain supply chain elements. Operating income margin expansion and continued reinvestment in attractive smoke free growth opportunities Ending Wellness and Healthcare R and D will again be supported by our ongoing efficiency programs.

Speaker 2

We remain on track to deliver around $2,000,000,000 in gross savings by 2023. Accordingly, we forecast currency neutral adjusted diluted EPS growth of 8% to 11%. This translates into an adjusted diluted EPS range of $6.12 to $6.30 including an estimated unfavorable currency impact of around $0.45 at prevailing rates. This is primarily due to translation effects and this currency impact reflects notably the depreciation of the euro, Japanese yen and Turkish vila versus the dollar. This guidance includes the impact of 785,000,000 of dollars of share repurchases made in 2021, which were somewhat restricted by blackout periods.

Speaker 2

It does not reflect the impact of repurchases in 2022 as we continue to take an opportunistic approach within our target of between $5,000,000,000 to $7,000,000,000 over 3 years. Our guidance also reflects The impact of acquired businesses, which we expect to generate underlying operating income in line with our business plan, But with an operating loss of around $150,000,000 or approximately 1% of adjusted diluted EPS, which we'll come back to explain later. As outlined in today's release, There are a number of other assumptions underpinning our outlook. We expect the total industry volume of cigarettes Tobacco units, excluding the U. S.

Speaker 2

And China, to decline between a minus 1% and minus 2%. Given our leadership in Smokefree Products, the structural growth of the category and its growing proportion in our business, We expect to gain share a target broadly stable total PMI shipment volumes within the range of minus 1% to plus 1%. We assume full year combustible pricing of 3% to 4% with a softer first half and a stronger second half of the year, and this is clearly above 2021 levels. The pricing environment is improving, but still challenged in certain markets with ongoing pandemic related impacts. Our balance sheet is strong.

Speaker 2

We delivered excellent operating cash flow of $12,000,000,000 in 2021, reflecting robust underlying cash conversion in addition to favorable timing and one off impact of around $500,000,000 With further strong organic profit growth expected in 2022, we expect to generate around $11,000,000,000 of operating cash flow, subject to year end working capital requirements and after accounting for the reversal of timing benefits and using prevailing exchange rates. As a result, we raised our 2021 to 2023 operating cash flow target Communicated at the February 2021 Investor Day at then prevailing rates from around $35,000,000,000 We also expect full year capital expenditures of around $1,000,000,000 Reflecting increased capacity investment behind our small fleet platforms, including the Illumina and enhancing our digital commercial engine in addition to certain projects, which were delayed due to the pandemic. Lastly, looking specifically to the Q1 of 2022, we expect adjusted diluted EPS of $1.50 to $1.55 including $0.15 of unfavorable currency at prevailing rates. We expect robust organic top line growth and operating margins comparisons, which reflect both the very strong prior year quarter, which benefited from a high level of productivity savings and relatively low levels of investment and the Q1 of 2022 dynamics of increased device sales, commercial investments, iloma related costs and increases in some inputs such as freight.

Speaker 2

Let me now hand over to Emmanuel, who will give you more details of our performance in 2021. Thank you, Jacek. Turning back to our 2021 results. Total shipment volumes increased by +4.2 percent in Q4 and by plus 2.2 percent for the year. This reflects continued strong broad based growth from HTUs of plus 25% Or 18,900,000,000 units for the full year, comfortably exceeding the decline of 3,600,000,000 cigarettes.

Speaker 2

The plus 2.4% increase in our Q4 cigarette volumes reflects the continued sequential recovery of the total industry and of our category share, in addition to a 2,700,000,000 stick favorable inventory movement, which mainly reflect inventory reduction in the prior year quarter. Due to the remarkable performance of IQOS, heated tobacco units comprised almost 14% of our total shipment volume in the 4th quarter and 13.2% for the year as compared to 11% in full year 2020, 8% in 2019 and 5% in 2018. Our sales mix is evolving rapidly, putting us on track to become a majority smoke free company by 2025. Smokefree net revenues made up over 30% of our adjusted total revenue in Q4 and 29% for the year as compared to 24% in 2020. In 10 markets, we have already surpassed 50%.

Speaker 2

IQOS devices accounted for over 6% of the $9,100,000,000 of 20.21 RPNH revenues, With a step up in H2 reflecting the IQOS Illumina launch, outweighing the effect of supply constraint on other IQOS versions. We delivered plus 7.6 percent organic growth in 2021 net revenues On shipment volume growth of +2.2%, reflecting the twin engines driving our top line. The first is pricing on combustible and in certain markets on HDUs. 2nd Is the increasing mix of HTUs in our business at ironnetrevenueperunit, which continues to deliver substantial growth, an increasingly powerful driver as our transformation accelerates. Let's now turn to the driver of our 2021 margin expansion.

Speaker 2

Our gross margin increased by 190 basis points On an organic basis, due to product mix, pricing and cost savings, while our adjusted marketing, administration and reserves cost We are 10 basis points better as a percentage of adjusted net revenues. We generated over $800,000,000 in growth cost savings in 2021 with around $550,000,000 in manufacturing and supply chain productivity and more than $215,000,000 in SG and A efficiency before inflation. This represents strong progress towards our target of around $2,000,000,000 for 20 21, 2023 and allows us to reinvest in top line growth while continuing to deliver robust margin progression. While OI margin expansion was lower in H2, this reflects the positive dynamic of our business and the ability to return to normalized Investment levels compared to the pandemic affected prior year. Isooma device and HTU shipments commenced with higher initial unit cost and we reaccelerated investment in our commercial program, digital engine and R and D as well as a number of growth opportunities across category and geographies.

Speaker 2

We intend to continue investing in such opportunities in 2022, but with the benefit of scale, Operating leverage and accelerated efficiencies, we continue to target organic SG and A increases below the rate of sales growth. Moving now to market share. Our share of the combustible category recovered and was essentially stable in Q4 On a year over year basis, as our portfolio initiative, bear fruit and pandemic linked restriction received in many markets. Our leadership in combustible has to maximize switching to smoke free product, and we continue to target a stable category share over time despite the impact of IQOS cannibalization. As IQOS user growth reaccelerates, we target at worst a slightly decline in 2022.

Speaker 2

For the combustible category overall, The improving total market volume backdrop includes notable Q4 recoveries in Indonesia, Mexico and Turkey, Growth to stable industry volume in the EU region and a modest recovery in Beauty Free, driven by sales outside Asia. Daily consumption remains below pre COVID level in certain markets, such as the Philippines, where our share of market is influenced by mobility and social consumption. In Indonesia, our share was again broadly stable on a sequential basis despite the continued growth of the below Tier 1 segment and our volumes grew over 4% for the year. The reduction from 10 to 8 excise tax year in 2022 We represent a step in the right direction and the industry weighted average excise increase of around plus 13% is slightly below the prior year. However, the playing field remains unequal between industry player and the pricing environment remains challenging.

Speaker 2

In terms of our overall share, Ongoing gain for our IQOS portfolio create positive momentum going into this year, and we expect to resume overall share growth as well as achieving broadly stable total shipment volume. PMI HTUs now have a 7.1% share in the markets where they are present, making them the 3rd largest tobacco brand. This into the number one position in 5 markets and the number 2 in a further 6 markets. Moving now to IQOS performance. We estimate there were approximately 21,200,000 IQOS users as of December 31.

Speaker 2

The improved user growth of +0.8000000 in Q4 reflect our agile commercial model, which allowed us to rapidly adjust our consumer program and assortment. As demonstrated by the performance Of Inuma in Japan and Switzerland, the underlying momentum of the IQOS brand remains strong. While we don't get a full visibility over the full year of 2022, as device shortages ease, we expect to gradually return to user growth at or above the prior run rate of around $1,000,000 per quarter. We estimate that 72% of total users Our 15,300,000 adult smokers have switched to IQOS and stopped smoking with the balance in various stages of conversion. In the EU region, 4th quarter HTU share reached 6.4% of total cigarette and Industry volume, 1.4 points higher than Q4 last year.

Speaker 2

Underlying IMS growth trends remain excellent. This very good performance include strong growth across the region with Italy reaching The milestone of 2,000,000 users and positive contribution from Germany and Poland. I also want to highlight Angari, where our Q4 national HTU share exceeded 20% following Japan and Lithuania in reaching this important threshold. To give some Further color on our progress in the EU region, this slide shows a selection of the latest key city Oftech shares. While Vilnius continued to lead the way with 37.5 percent share, the 20% level was also reached in Budapest, Ron and Athens.

Speaker 2

With strong progress across the region, we are especially pleased by Vienna, almost doubling to 4%, The strong traction in London at almost 6% share and an acceleration in Zurich with the introduction of IQOSINUMA. We show further HTU share data in the appendix to this slide. Share growth continued in Russia With our Q4 HTU share up by +0.8 to reach 8%. For both Russia and the overall region, Sequential growth in adjusted IMS slowed in the last two quarters, partly reflecting the more acute device shortage and lead on commercial program. In addition, the region was affected by the holding of sales in Belarus, which impacted sequential IML growth in Q4.

Speaker 2

In this context, as mentioned in last quarter, We have seen some increased consumer trial in Russia of discounted competitor offerings and disposable e vapor products. We continue to see high interest in the category and with the pipeline of exciting innovations planned, including the launch of INUMA, We aim to resume strong growth this year. In Japan now, the adjusted Total tobacco share for our HTU brand increased by plus 1.7. To a record 21.8% in Q4 And an offtake exit share approaching 23%, with Q4 adjusted IMS sequential trends incorporating the pull forward of consumer uptake into Q3 before the price increase. This performance reflects the strength of our portfolio and the launch of IQOSILUMA, which I will come back to shortly.

Speaker 2

The overall heated tobacco category Continues to grow, making up over 31% of the adjusted total Japanese tobacco market in Q4, With IQOS maintaining a high share of segment and capturing the majority of the categories 2021 growth. In addition to the strong progress in developed countries, we see very promising IQOS growth in low and middle income markets. A prime example of this is Egypt, where Oftech share in Cairo is approaching 4% within 6 months of launch With other notable successes including Lebanon, Jordan, the Dominican Republic and the Philippines despite pandemic restrictions in Manila. This low- and middle income market TCT performance is especially encouraging as we achieve it despite The premium position of the current IQOS portfolio. We do intend to bring a new complementary range of heat, not burn products With this potential in mind, we continue to drive the geographic expansion of our smoke free product as we aim to be in 100 market by 2025.

Speaker 2

During the quarter, we launched IQOS in both Morocco and Tunisia. This The total number of markets where PMI smoke free products are available for sale to 71, of which 30 are in low- and middle income markets. We plan to add more markets this year as we also meaningfully Broadened our product offer and price segmentation within existing geographies. This includes the extension of Lille and Fit, which are now available in over 20 markets across multiple regions and our expansion of e vapor and nicotine pouches. Following the implementation of the ITC's importation ban, IQOS is not currently available in the U.

Speaker 2

S. We continue to work on contingency plans, including domestic manufacturing and hope to be able to resume U. S. Supply in the first half of twenty twenty three. It is important to remember that the ITC's decision on this patent is an outlier.

Speaker 2

We were encouraged by the U. S. Patent Office recent invalidation of 1 of the 2 patents included In the ITC ruling, I do expect a decision on the second patent by April 2nd, Though these decisions are subject to an appeal process. BAT has been universally unsuccessful in asserting the same 2 patent family against IQOS in Europe. Separately, in December, The German court ruled that BAT Glow Hyper, we'll call heat not burn device infringes our patent and that we are entitled, among other things, to an injunction against BAT sales of the device.

Speaker 2

Moving now to IQOSILUMA. We are delighted to report the outstanding success since its launch in Japan and Switzerland with sales performance and consumer reaction exceeding our expectation. In Japan, the uptake of Illumad Devices and consumables among both Existing IQOS users and digital edge smoker has been rapid with more than 20% of the large user base Switching since the OIBIS launch and over 20% of sales to legal aid smokers new to IQOS. Moreover, the enhanced and consistently high quality user experience, better reliability and no need for cleaning has led to significant observed increases in conversion rate, retention rate and net promoter score. This bodes well for volume growth and indeed premium priced terrier consumables have been the fastest growing launch In the smoke free category, reaching an offtake share in the 3 main convenience store share change of 8% within 3 months of national launch and driving the growth of the ethanol ban category following the October taxes and price increase.

Speaker 2

Early results in Switzerland have been even more remarkable with over onethree of sales to new user And Teria making up over 1 third of HTU sales after only 2 months of commercialization. Our HTU share growth has accelerated accordingly from 6% in September to 7.9% in December. These results are very encouraging for the wider rollout of Illumina in the EU region and around the world, And we plan to roll out gradually to more markets this year, mostly in H2. While we continue to manage device supply constraint, The unprecedented growth in Japan also means we have had to accelerate both the supply of Tera consumable Using airfreight and the conversion of our production line to support new market launches. With the NUMA, IQOS 3 Duo and NIL, we now have 3 is not burn technology under the IQOS umbrella to serve different consumer needs and segment the market.

Speaker 2

We have an exciting pipeline of innovation on devices and consumables across our technology at Different price tiers. As I mentioned, we also plan to enhance our portfolio for future growth with the introduction of a new complementary Technology towards the end of this year. This will be targeted at smokers in low and middle income markets, catering to the consumer need of simple, high quality, affordable devices and consumable and specific local test preferences. In terms of HTUs, after launching over 15 new non Luma SKUs in Q4, We plan to continue expanding our portfolio across platforms, geography and price points this year. We continue to commercialize IQOS V with very promising results in the first group of markets where we started in our own channel with a limited range of test variant and nicotine levels.

Speaker 2

IQOS V is a premium product providing a superior experience and the commercial infrastructure of IQOS allows us to deploy efficiently and scale through a bespoke route to market approach. As we start to expand distribution and the consumable offering, we observe signs of increased uptake and clear positive consumer feedback relative to competitive product. We see encouraging success in Italy and the Czech Republic, reaching double digit Oftech shares of closest Tempur with rapid progress also visible in Croatia within 3 months of launch. After launching in Canada and Ukraine in the Q4, we plan to add more markets in 2022, with timing subject to device availability. We also continue preparation to apply for a PMTA from the U.

Speaker 2

S. FDA I now prudently assume readiness for filing in early 2023 given further clarity on the required preparatory steps. An additional exciting mid term growth opportunity is in the nicotine pouch category, where we aim to become a leading player with the Shero brand. Nicotine pouches provide a convenient smoke free alternative for adult smokers. And while still early in many markets, we see Shero playing an important role in our Smokefree portfolio over the coming years.

Speaker 2

Following the acquisition of Aegisnus and Firstin Pharma, we have established a base of product development and manufacturing expertise. Although we are still learning about the promising category, our IQOS commercial infrastructure allows for a fast rollout, and we plan a number of launches over the coming quarters. The first major activity is the full relaunch of the revitalized Shero portfolio in the Nordic This month, from its more limited prior presence, with full commercial activity and a broad portfolio of flavors and strength variants. Separately, following feedback from the 2021 consumer test of our Platform 2 Carbon Key product, the design of our current technology has been discontinued. We are assessing alternative design for this consumer segment.

Speaker 2

Turning now to our nascent business, Beyond Nicotine. The 2021 acquisition of 13 Vectura and Otitopic provides a base for building critical respiratory and oral product development capabilities in tandem with our existing expertise. This opens up opportunity to deliver the positive effect of existing wellness and Eskam molecules in a fast in an effective manner. For the time being, our reported number in the other segment showed the existing acquired business, which delivered $101,000,000 in net revenue in the 4th quarter and the marginal operating loss of $1,000,000 The underlying performance is in line with our expectation with reported operating expenses reflecting the amortization of intangible Deal related item and our planned investments. Around 39% of Q4 revenue We are derived from 13 smoking cessation product and nicotine pouch operations.

Speaker 2

While we Intent to continue the CBMO activities of the acquired company, the most significant value to PMI is in this ability to develop and commercialize new products in the wellness and health care segment over time. We plan important R and D investment over the course of the coming years to support The aim of delivering meaningful incremental revenue starting 2 to 3 years from now as we pursue our ambition of at least $1,000,000,000 of net revenue from wellness and healthcare products by 2025. As I mentioned earlier, we expect an operating loss of around $150,000,000 in 2022 with revenue of around $250,000,000 including smoking cessation product. We recognize investor interest in our future product plan in these new areas and plan to provide more color at our CAGNY conference presentation on February 23. Moving to sustainability and our ESG priorities.

Speaker 2

I'm happy to share that we Recently completed the new sustainability and facility assessment to update and recalibrate our priorities in accordance With our biggest impact on society, double maturities and extensive stakeholder input. While addressing the health impact of our product remains by far the biggest focus, we also identified a number of topics, which are emerging in importance or required an evolved approach. We will publish the results next week. It is increasingly important to align management incentives with sustainability, materiality, performance and impact. We will strengthen this link in 2022 with the new sustainability index and plan to provide more details in the near future.

Speaker 2

Our progress on sustainability continued to be recognized by leading external stakeholders with repeated inclusion in both The Dojo and Sustainability Index North America and the Blomberg Gender Equality Index and receiving CDP's AAA score for the 2nd year running. We also published an agricultural labor practices report, marking 10 years of the program. Since its introduction, we have successfully eradicated systemic issue related to child labor, while improving living condition of farmers and farm workers. It also outlines our ambition targets such as 100% of farmers supplying tobacco to PMI, making a leading income by 2025. On our most critical priority of product impact, the growing penetration of Smoke free products around the world is accelerating the end of cigarettes as legal edge smokers switch to better alternatives.

Speaker 2

I am also pleased to report further recent positive regulatory development. For example, As part of its beaten concert plan, the European Parliament Special Committee recognized and featured arm reduction in its draft report, for which a plenary vote will take place next week. In New Zealand, the government published its smoke free action plan, expressly excluding smoke free product from the proposed measures. In addition, a number of countries, including Poland and Russia, I've announced new multiyear excise tax plan with taxation of smoke free product clearly differentiated from cigarettes, making 15 markets globally with such plans. There is a growing body of Scientific and real world evidence of the substantial risk reduction potential of smoke free product compared with smoke in.

Speaker 2

While challenges in some markets are to be expected, we continue to support regulatory and fiscal framework that recognize It's critical arm reduction opportunity. I will now turn it back to IASEC for some concluding remarks. Thank you, Emmanuel. Overall, we are very pleased to have delivered excellent growth in Last year in 2021, we have a strong underlying momentum for IQOS as well as a record adjusted EPS, net revenues and cash generation. The consistent quality and sustainability of our organic top and bottom line delivery has been clearly demonstrated over the last 2 years, which I believe we all acknowledge were pretty turbulent years.

Speaker 2

With an improving outlook for device supply, although still with some element of Agility, the exceptional initial success of Illumina and the number of innovations and growth initiatives, We look forward to 2022 with a tremendous excitement. At the same time, we're building We will be building our development capabilities in wellness and healthcare through targeted investment in order to Support the next driver of our long term growth. Our balance sheet is strong and we have increased cash returns to shareholders through a higher dividend and our share repurchase program, in line with our objective to deliver sustainable value and returns to investors as we continue our Snow Creek transformation. In short, we continue to see a bright future for our business. Following a very strong 2021, we remain confident in our 2021 to 2023 growth targets and in our ambition to be majority smoke free by net revenues in 2025.

Speaker 2

Thank you all for your attention. Emmanuel and myself will be happy to answer your questions.

Operator

Thank you. And we will now conduct the question and answer portion of the conference. In the interest and fairness of time, we do ask that you please maximize your And one on your touchtone phone. Our first question will come from Bonnie Herzog with Goldman Sachs. Please go ahead.

Speaker 3

Right. Thank you. Hi, Yasser and Emmanuel. Hope you're both doing well. I have a question on your Hi.

Speaker 3

I have a question on your EPS guidance this year. It's quite a wide range at 8% to 11% on a currency neutral basis. So I was hoping you could highlight some of the key assumptions or drivers that put you maybe at the low end of that range versus what needs to happen, so you get to the 11% growth. For instance, is 11% EPS was possible even if the chip shortage Situation doesn't get resolved for the next 2 months?

Speaker 2

I think you're Emmanuel. I'm going to take this, so I'll answer that one, Benny. So obviously, and we've been trying it in our preliminary remarks, we are still facing a number of uncertainty. The COVID has not disappeared. Even if things seem to be improving, we don't have full visibility on the IT shortage and on the supply chain globally.

Speaker 2

And that is obviously what is behind with some certainty cautiousness on the guidance that we are giving on the top line. And then from there, we, of course, are driving a business that is seeing good momentum. We have the traditional driver of Price increase, we're going to be very efficient on cost saving. You can see what we've been delivering in 2021, Already more than €800,000,000 of efficiency on our costs. We're going to continue in 2022.

Speaker 2

And all that is going to drive the difference between the revenue growth and the adjusted EPS organic growth. One of the headwinds that we're going to face this year, which I think we should see as very positive because it's coming from the growth and we are managing A very nice potential of growth is that we are investing for exciting outlook. It starts, of course, with Illumina in Japan, But globally, the launch of Fevuma, but certainly with a big impact in Japan, where we know that when we launch a new product, this is having some impact On the cost of goods, because we are not at the same level in terms of efficiency on the supply chain, the productivity is not at its maximum, And we've been explaining that in our remarks. And that is going to have some impact at the launch. We talk about airfreight as well.

Speaker 2

And that means that impact we said it with probably what we see today is a modest decrease of the gross margin rate. Without that, it would have been, from what we see today, another year of growth of the gross margin rate. But that's really what is driving the guidance. So we have some uncertainty, but we are very excited by the potential of growth that we see with all this innovation That is coming up. We are the traditional driver of efficiency that are going to help.

Speaker 2

We have some headwind, which was absolutely planned because we are coming with innovation, And we need to invest in audience innovation. And I should add in terms of innovation, but certainly the fact that We also expanded in terms of geography what we see in Egypt both extremely well for the potential in In emerging countries that we need to invest, of course, to build the capacity. We need to develop our commercial tools. We need to invest on the new Two platforms, vaping and nicotine pouches. So what I think is great in this guidance and in our ambition for 2022 is that It's a year with a lot of investment for an exciting growth, but we are still able to deliver a good dynamic top line.

Speaker 2

We are able to deliver Nice margin improvement, good organic growth at a good level. And as you have seen, we are hugely cash generative, We do all that at the same time, again, while investing for the future.

Speaker 3

Okay. That's super helpful and honestly makes a lot of sense. So clearly, a lot of puts and takes, but You've got a lot of levers to pull. For my second question, I maybe wanted to switch gears a bit and just kind of ask a little bit about The situation in the U. S.

Speaker 3

And just maybe an update, it sounds like you expect to get back in the market Next year with IQOS. So maybe love to hear a little more color on this. And will the build out of the production in the U. So that's your financial responsibility. And then Altria mentioned some issues between You too in terms of the agreement you have in their 4th quarter press release.

Speaker 3

So just was hoping To better understand what that could mean, for instance, if I guess Altra's sales to meet the terms of the agreement, Would you then pursue distribution of IQOS in the U. S. Yourselves and or I guess find another distribution partner? Can you kind of walk Through that for us and then I'm thinking about the context of a potential solution for Veeve in the U. S.

Speaker 3

Assuming It gives you an idea. Thanks.

Speaker 2

Yes. So, Bonnie, yes, we're working on Bringing the manufacturing capacity for IQOS on the U. S. Territory and that's our main mitigation plan Our reaction comes to where we are today, post the ITC event. As we said, we think that in summary, the beginning of the next year, we should be in a position to resume the shipments in the U.

Speaker 2

S. As we and Altria as I hear disclose, we have some This agreement with regards with Altria has fulfilled certain milestones in the current contract and we're currently in negotiations Our discussions with Altria how to resolve it and so I believe In a good faith, we should be finding some solutions. I wouldn't go now beyond speculating what other options and how we would approach The IQOS going forward in the U. S, I mean, our partner is Altra, and I think we should seek some Amicable solution between both partners. Now I have said it on a number of occasions that the U.

Speaker 2

S. Market As a few other markets in which we have a very negligible and no presence, we have a strategic importance. So obviously, You've heard us in the past at the late that the pre ITC rolling IQOS Performance in U. S. And you know how we perform in global IQOS across All essentially geographies, I mean, it's really well below what I would expect at this stage Okay.

Speaker 2

All you characterize is the potential of IQOS. I mean, if I take into this the fact that this is long inhalable FDA authorized Product, you don't really have a competition and the size of the market, etcetera, I think it's just hard to say that the expectations were Much beyond where we are today, but I will stop here and I believe we will find a good resolution, which We will on the one hand enable American smokers, cigarette smokers to have access to that technology And also something which will be accretive to us or the partners' results there.

Speaker 3

Okay. Thank you both. I'll pass it on.

Speaker 2

Thank you, Bhavan.

Operator

We'll take our next Question from Chris Growe with Stifel. Please go ahead. Your line is open.

Speaker 4

Hi, good morning. Good afternoon to you, probably.

Speaker 2

Hi, Chris. Hi, Chris.

Speaker 4

Hi. I just wanted to ask first of all on IQOS and you had a nice acceleration in the number of IQOS users in the I just want to get in, I know you talked about an acceleration of getting back to that roughly 1,000,000 users sequentially. Can that not happen until the second half of twenty twenty two or will supply be sufficient to where you could start to see that level of user growth in the first half of twenty twenty two. I'm just trying to get a sense of that availability of devices to understand the growth in 2022.

Speaker 2

Yes. Hello, the Q4, the reaccelerations coming back to the previous user growth is highly encouraging. You just confirmed that Acros had that ability of a continued growth. Obviously, it's very much hinges on the fact that we have Unrestricted access availability of the devices. And remember, IQOS today is The heat not burn proposition which we have today consist of the few versions of IQOS blade product.

Speaker 2

I should mention a little product coming from our partnership with AT and T And Icosiloma. And all of that altogether creates certain portfolio proposition for the various targeting the various consumers group. So we regain a little bit of a flexibility of recomposing the full portfolio in Q4. And hence, you will see that we're all seeing the spectacular Again, in the UZAR acquisition, it is somehow reflected in our 4% to 6% growth target and I think it's time for our target for this year that for how many months or for how many weeks in a year We think we can have unrestricted access to the full product portfolio of devices very much. I believe that actually our costs can fly higher if we're in the unrestricted mode.

Speaker 2

But somehow in the forecast for the next year, We should have a bigger scenario, which is maybe more on the moderate side, etcetera. If this was the If we wouldn't have all these constraints coming from the devices, couple other things in the supply chain, I believe we would be looking at the different numbers. But at this stage, it's difficult to start baking this into something which we think We can deliver. I think I'm saying that IQOS has a higher potential, the debt growth rate, But we really have to believe the moment when we can go on unconstrained. Needless to say that Part of our growth is coming from Asia region.

Speaker 2

And although European Union, Western part of the world, if you like, Seems like it's leaving COVID behind. We're still not at this stage in Japan and a few other locations. So we also have to start factoring the ZYN. But I'm very optimistic that we can deliver 2022. And frankly speaking, knowing how much headwinds we need to Take on our test in 2022, I started looking actually excited about the 2020.

Speaker 5

Okay. Thank you for that.

Speaker 2

Just to complement on your question on can we reach EUR 1,000,000, think we are thinking we see rather a ramp up today. It doesn't mean that we cannot reach €1,000,000 in 1 of the quarter in H1, That is true that we see a ramp up and an acceleration as we go through the year.

Speaker 5

Okay. Thank you for that. And I did just have

Speaker 4

a quick question on the U. S. To follow on Bonnie's question, is there a scenario where you prevail on the patent office review that would allow you to start importing the product again before the first half of twenty twenty three. So you're getting your supply chain ready in the U. Is there a chance that you could win on the patents and not and to be able to import the product again?

Speaker 2

Well, there is, but the whole process is and I think it deserves a separate conversations about The patent laws and the processes around this whole thing, and unfortunately, we have to cope with this. I mean, even if we prevail on the invalidation of some patents, obviously, the other party, in this case, the right to appeal. So the whole process is really And by you need another couple of years, frankly speaking, until you have When one of the parties actually can claim the full victory, then you have to go to the ITC and start lifting the restrictions, if you like, which I think the fastest absent any other resolutions, right, The fastest route back to the U. S. Is through activating that our domestic capacity and resupplying the market From that, and then it might be that later on, we are unconstrained, which means that the U.

Speaker 2

S. Market could be supplied from the both international and from the domestic. But I think the near term opportunity for us is to go the route which we discussed.

Speaker 4

Okay. Thank you for your time today.

Speaker 2

Thank you, Faiz.

Operator

We'll take our next question from Pamela Kaufman with Morgan Stanley. Please go ahead. Your line is open.

Speaker 6

Hi, good morning.

Speaker 2

Good morning. Good morning.

Speaker 6

I have a question about your outlook For combustibles pricing in 2022, pricing in 2021 was below your historical rate of growth Given headwinds in Indonesia, but can you talk about your expectations for pricing environment in 2022? And how you're prioritizing price realization versus market share in combustibles?

Speaker 2

So we're looking for as we said, we're looking at the 3% to 4% pricing variance this year, which is better, Stronger than last year. I think some Asian geographies, due to the variety of factors, are still Presumably, driving us lower on what we think we could have normally realized a bit comparing at least to the historical trends we had there. Indonesia, absolutely rightly pointed out is on the negative, although the tax increases, which The industry has to pass on. I mean, Give some hope that we can end up with the that maybe Indonesia can return to that Pricing is the important component of the growth there. But you also have to take it from the considerations of the impact of the The volumes and presumably talking more about the Philippines, would you say how much of this thing we can unwind in 2022 And having a reaching the benefits in 2022 and how much we can build It's going in the right direction, but a bit of a more is needed.

Speaker 2

The rest of the pricing environment, okay, is always difficult to predict, but as we characterize it, it's improving, okay, You know a lot of geographies. And we have a pretty good visibility at this stage, obviously, about the taxes, which is in a major Volume of profit market, Emmanuel, in his part of the remarks, was talking There is more and more countries are taking this multi year approach, which always gives us a better visibility and a planning around. As you know, in some countries, the tax increases cannot be passed into consumers in one step. You need We have some proprietary, take some pricing before, some pricing after. So we're always going into The right direction, especially if we take it in the context that every country, every market is We are having a huge pressure on the public finances due to the COVID situation, etcetera.

Speaker 2

So I think we

Speaker 6

Great. Thank you. My second question is on Luma uptake. And if you can provide some more color on How much of the new user growth in Japan has been driven by Illumina for IQOS? And what observations you have around the user base and the interaction with prior versions of IQOS?

Speaker 6

Thank you.

Speaker 2

Yes. So I but you might If I remember that from the very beginning of Illumina, I was personally very excited about that innovation. And I am so happy that it delivers on my expectations actually, if not even beating my expectations. I will continue if you allow me with event adjusted voice. Illumina does generate obviously, if you are IQOS user, Blade product users, you appreciate In the first moment, you have it in your hands and you have your first experience.

Speaker 2

And the response from the consumers in Japan is Phenomenal, obviously, the 5 Illumina goes to the existing users, but we also already having the benefit of existing IQOS users switching to Illumina Because they have uninterrupted consumption during every moment that they when they wish or they're willing to use the product. And this also has an impact on the volumes. In other sense, if I give you the device, which is much more intuitive to use reliable much, much, much, much more reliable, You will have a tendency to increase the consumption versus what you had on a blade, which I wonder, occasions fail to allow for having that experience. So that's very good thing. 2nd thing is IOLOMA, after all of this initial months, we observed a very solid higher level of conversions.

Speaker 2

And if you know, It is a very important component in the business model, I. E. How many devices We will fully convert smokers, combustible smokers, how many of them will stay because it releases the pressure going forward also on the margins, etcetera. And the third one is, at this stage, if I remember the number correctly, about 20% of the And also what I started serving recently, Unima also starts taking back users who have Temporarily integrated from IQOS to competitive products. So in whatever aspects of performance of Elumai look like, It really delivers on every axis.

Speaker 2

So the question is, again, and I know that for some might be boring, Do we have availability of the devices? And can we continue supply in the market? And the rest I believe so far

Operator

We'll take our next question from Vivien Azer with Cowen. Please go ahead. Your line is open.

Speaker 7

Hi, good morning.

Speaker 2

Hello, Vivien. Hi, Vivien.

Speaker 7

So my first question is on pricing. Certainly encouraging to hear that your outlook for 2022 an improvement in pricing relative to last year. I was wondering, however, if you could just comment on how you're thinking about price GAAP management between your combustible cigarettes and your heated tobacco units, please? Thank you.

Speaker 2

So we essentially in most or in all markets, we maintain the same sort of the positioning of IQOS today versus the combustible reference point. As you know, most of the tax Actually have that conversion mechanism baked in. So if there was a tax increase on a combustibles, Somehow proportionally this triggers the increase on the heated tobacco units, which translates to the consumer price gaps Essentially untouched. We obviously complement, depends on the market situation, our portfolio, for example, KT and The real proposition and I think it works very nicely, especially in the geographies when IQOS reaches the levels which are above, for example, premium equivalent of the premium Price segment in the combustible market. So we need to take affordability into equation as well.

Speaker 2

So instead of doing something about the Pricing of IQOS and the HEETS were actually extending the portfolio To the below, but also to the above in some geographies when we think there is above premium versus IQOS versus keeps the opportunity. We did it very successfully in Russia and In Russia, I mean a few European markets. So I think the whole thing is that the broader we have a portfolio both horizontally From a price perspective and vertically from a taste, flavor, etcetera perspective, we increasingly Creating more attractiveness for the cigarette smokers to switch to hit not to burn.

Speaker 7

Perfect. Thank you so much. And my follow-up question is on your decision to discontinue Platform 2 teeth. Certainly, that product has been under evaluation for a number of years. And I was just curious to hear Kind of the key takeaway from the consumer test is the problem that consumers are using a live heat source and that's creating a lot of confusion in terms of the reduced risk proposition.

Speaker 7

Was it product performance? Just any other color would be helpful. Thanks.

Speaker 2

No, no. Actually, using that, if you like, if you allow me the type language, it was more on the You will interface rather than anything else. I don't think that the test which already did the number of the in market test, the proposition, The visibility of the propositions in terms of the better alternative to smoking and everything goes well. The issue Surely pertains to the heat source. As you remember, the design at the very end of the cigarette like looking product, you had the heat source, Which requires lighting, okay?

Speaker 2

And this was We need to first open this from the paper card to lighten this and then is the question how you extinguish the product, right, because you need to pay attention how you extinguish the product. And this was actually in our opinion, well, the consumer's opinion actually not leading to that adoption levels, which we would wish to have, Especially comparing our experience from other platforms, I mean, the main new P1 platform. So I think we reached the moment that design of that product and this part of the technology around the heat source and operating Asking the consumers how to interact and operate around this whole thing led us to the conclusion that we are saying that design component will be shut down. And I think still the proposition makes sense, is understood by the consumer, has the potential, But we cannot offer the product to the consumers, which they will not find convenient to use. And the convenience It's the middle name of what the consumers want these days and I think we need to deliver on this one, especially that our ambition would be To also leverage the equity, which we build around the IQOS, and IQOS cannot afford going to the product, So I think we will come back one day to the P2.

Speaker 2

From the very beginning, you may recall our Early Investors Day when we start talking about the reason of going smoke free and how many platforms will be needed to convert the 1,000,000,000 Small cars worldwide. This is a proposition which is more for the more conservative audience, The people who really don't want to completely walk away from the retail and experience with the combustible cigarettes are delivering. So I think in terms of our growth prospect for the year term, I don't think it's that much of an We will be working on that by using a different approach to the design and the technology going forward. So I hope it answers your question, Deepa.

Speaker 7

Yes, that's very helpful. Thank you so much.

Speaker 2

Thank you. Thank you, Vivien.

Operator

We'll take our next Question from Jaeme Gorey with Barclays. Please go ahead.

Speaker 2

Thanks a lot. Good morning,

Speaker 1

So I have a couple

Speaker 2

of questions. The first one is on your guidance. So your volume growth is minus 1 to 1. You are saying cigarette pricing will be 3% to 4% and then category price mix in that slide that you have it is plus 3%, Assuming it is plus 3%, so it should come to plus 5% to plus 8% on revenue growth for FY 2022, but you are saying 4% to 6%. So that will imply that the category mix uplift will be less in FY 2022 than was the case in FY 2021.

Speaker 2

So can you just help us understand why that will be the case? I'm happy to try to let you go. Certainly, what we are Expecting in 2022 is to have another very nice difference between the volume growth and the revenue growth. And indeed, for the volume, we've been guiding to from minus 1 to plus 1. So then the question is how much are we going to Generate in terms of extra growth, there is this price where we are seeing Q2 for.

Speaker 2

Remember, we've done 2.7 in 2021. So the low end of the bracket is not massively above what we did In 2021, but it's true that it could be better and certainly something that we are factoring in the high And then there is impact of the growth of the IQOS business and the it's not done category Well, we have this mix impact that is playing. At here, the mix and with The launch in many new economies and new geographies, emerging country, that is potentially having an impact On the differential, so we do expect a very strong differential again, but not necessarily at the same level as the difference that we generated in 2021. Last but not least, we refer to the fact that We are at the beginning and it's temporary, IO waste on the consumables for IQOSILUMA on Terrier. And this is having an impact because the excise duty in the country where the excise duty are based on weight is higher And therefore, because we are coming with the same price for the consumables and it's that can generate when we have a switch, a temporary again, I insist on the fact that it's temporary Decrease a slight decrease on the Thorstick, so that can have an impact as well.

Speaker 2

So that is really what you're going to have, Plus, potentially some impact on the price of the device, which will depend on the volume of the device that we sell, So on the mix of the device that we sell and also on the commercial and aggressiveness that we want to have on the price of the device. So You have to take a number of things into account. Now at the end of the day, as you can see, between the minus 1% to plus 1% and the 4% to 6%, We are definitely targeting to have another year with a very nice differential between volume and organic revenue growth. We can see exactly how we end up. Okay, that's very helpful.

Speaker 2

And my second question is on the Beyond Nicotine segment, where you will have $150,000,000 of operating losses this year and you made also the comment that you will invest in it in future years so that you can hit the $1,000,000,000 With a new target, so does it mean that the losses we should expect to be higher in FY 'twenty three than what they will be in FY 'twenty two? Where could we expect that segment to breakeven? Well, I think there will be an investment for the next Few years, not a couple, but a few years, which we are willing to do. I think when if you Stay with us and wait until the CAGNY when we will give you more insights of what we have, What is our thinking about this beyond EcoTrina Wellness and Healthcare Business? Because then we will be in a position to show which product, concrete products or programs We're willing to go after what is the size of an opportunity and what sort of investment it entails.

Speaker 2

But I think the number which we gave for this year, For 2023, the guidance will be about the ballpark sort of the investment, which we will be carrying for the couple of years. It's not a one off. It could go a bit higher, but don't expect an explosion here. I think you have a good calibration of the amount that we're going to invest over a few years. Okay.

Speaker 2

Thanks a lot. Thank you.

Operator

We'll take our next question from Jared Demas with JPMorgan. Please go ahead.

Speaker 5

Hi, guys. First, I want to touch a More on the nicotine pouches. How should we be thinking about the scale of that initial launch in the Nordics? And How should we think about the future market launches that you guys touched on a bit? Are you considering launching nicotine pouches in markets maybe They don't have a nicotine pouch presence today like some of your emerging markets.

Speaker 5

And also just looking at the potential in the U. S, would you consider a PMT application there as well.

Speaker 2

Yes. I would leave the U. S. Aside for a second. I think new cup and pouches can play the very important role in, if you like, smoking smokers, Okay.

Speaker 2

They demonstrated the variability in that as debt proposition in many markets. Initially, we are essentially taking Geshiro As we acquired this and after remaking of the product and the packaging, etcetera, we will go in the markets when there was some sales of Shiro, obviously not very high, but we start where we already were present, okay? And we build on this as always in our innovations. We will look at the consumer's feedback, see what else we have to improve and we also have some product timelines behind the initial offering of Now Fertin gives us much broader opportunities than just the pouches because Fertin On the very interesting delivery systems in for the Oral delivery, we know that Fertin is the manufacturer of the nicotine replacement therapies like the GANS, nicotine GANS, But we also have an interest in other technologies. So we will be thinking we start with the pouches, but I think over a period of time, not 2022, I think the oral way of delivering amicotin as a substitute to smoking is actually very Attractive opportunity, which we are very excited to start working on.

Speaker 2

So we will go into the geographies, obviously, And pouches are not present today. And then as you know, we have a geographical footprint in addition to this In digital, you're having all the CRM, commerce, consumer engagement. I believe we can start adding to that our portfolio of The propositions to smokers to the overall category broader overall category than just the pouches. So we focus this year on the pouches. We'll be extending the present, but I think there is more than just the pouches.

Speaker 2

And I'm better for what it is that And we concluded the acquisition of Fertin because it gives us it accelerates our development by a quite Good few years, whichever is we would have to take organic.

Speaker 5

Got it. So just to follow-up on that. So you would consider the U. S. PMC application?

Speaker 2

I think I answered the questions to Bonnie. U. S. Is a very attractive market, and I believe, you know, this is of the strategic importance to us. And I do believe that on the market of the size of the U.

Speaker 2

S, you need to have All platforms, frankly speaking, because not the one platform which can guarantee the full Got it.

Speaker 5

And the second one, going back towards cigarettes and IQOS, are you guys worried at all about Potential impacts of price elasticities with especially with lower income consumers, given the inflationary environment and Where you guys are positioned in most markets, usually more at the premium end. So maybe you can give a comment on that.

Speaker 2

Yes. So the price elasticity is always the concern. And as we know very well, sometimes this price elasticity on the Cabo Cognacoten product is elevated The pressures or income pressures on the consumers. So we're now having that situation in a few markets that Consumers have a pressure on the income. I mean, I believe some of these pressures will unwind As the COVID will be becoming the sort of the past and I don't think it's anything systemic.

Speaker 2

It's very interesting you're asking this Because if we look in the market where we were taking pricing on Cigarettes and then the sheet sticks and the market has a pretty robust set of data from the past increases. I think today products like IQOS or alternatives to smoking And to have a better elasticity price elasticity than the conventional cigarette. And as you know, I guess very well, The price elasticity on cigarettes, undisturbed by other factors, was pretty attractive, and this was a part of the building as a business model. And actually at this stage, it looks like alternative even have a not higher, but better elasticity You know, then a combustible cigarette. So, apparently, not from the elasticity perspective, but from the pure affordability perspective, We already pretty successfully have IQOS in the so called low middle income countries, But we also know that in order to make the more significant new roles, we need to come with the proposition which directly addresses the In a mid or below mid price, low price segments, and we will not leave the smokers behind alone.

Speaker 2

And before the end of the year, we have in our plans to test another technology, which would allow for the Both devices and the consumable to be more accessible from affordability perspective, while they're ordering on the harm reduction potential As I recall, as we know it today, so we're taking this thing into the very serious consideration. So thank you for your question.

Speaker 5

Got it. Very clear. I appreciate the answers.

Operator

And there are no further questions At this time, I will turn the call back over to the management team for any closing remarks.

Speaker 2

Well, this was a call longer than expected, but we also delivered the results last year better than we I think somehow we match it. Thank you very much for your attention. We invite you to our CAGNY presentation, We will be in a position to give you more light, more details on the Few aspects like what we discussed today very much health care, but also how we look there in a much broader terms the development of these categories. And I think you could feel in our my voice and Emmanuel voice how excited we are that 2021 we delivered in that shape and form. And despite the number of headwinds, which I believe we articulate pretty well, we're still looking into the very successful and rewarding for both So thank you very much for your attention and hope to see most of you if not all during our Thank you all.

Speaker 2

Thank you very

Speaker 1

much.

Speaker 3

And if

Speaker 1

you have any follow-up Please contact the Investor Relations team. And just a reminder that the slides and script are available on the PMI website. Thank you very much. Have a great day.

Operator

Thank you. And this does conclude today's Philip Morris International

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Shoals Technologies Group Q4 2021
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