Emmanuel Babeau
Chief Financial Officer at Philip Morris International
Thank you, Yatzek. I will start with the headline financials for the year. As said, this was a truly outstanding year of growth across our business as the rapid progress of IQOS and US ZYN was complemented by emerging growth contribution from VIVE and ZYN internationally and a much-improved combustible performance. We delivered in-line or above our last communicated expectation across key metrics: organic net revenue growth of plus 9.8%, adjusted IMS and shipments of HTUs and combustible pricing of plus 8.7% were strong. Excellent total shipment volume growth of plus 2.9%, including zin and combustible volumes performed at the top-end of our expectations. Coupled with accelerated cost efficiencies, this led to better-than-expected plus 14.9% organic operating income growth and plus 15.6% currency-neutral adjusted diluted earnings per share growth. Our clear focus on delivering performance in dollar terms was reflected in the plus 9.3% growth in adjusted diluted EPS. As a result, we achieved record operating cash-flow of $12.2 billion, which was significantly above both our initial and most recent forecast, supported by excellent profit delivery and favorable working capital. Combined with strong adjusted EBITDA, this allowed us to significantly improve our leverage ratio, which I'll come back to later. We closed the year strongly in Q4 with organic net revenue growth of plus 7.3% despite the impact of timing and comparison effect, most notably related to Red Sea disruption, the EU characterizing flavor ban for HTUs and pre-launch ILUMA eye device shipments. This was driven by total volume growth of plus 2.3% alongside positive smoke-free mix and robust pricing. Combined with operating leverage and manufacturing efficiencies, we delivered close to plus 12% organic operating income growth and plus 10% currency-neutral adjusted diluted EPS growth. In dollar terms, adjusted operating income increased plus 15% and adjusted diluted earnings per share grew plus 14% to $1.55. This includes a positive currency impact of $0.06, which reflects an unfavorable transactional impact in the prior year in Argentina, as well as the move to hyper-inflationary accounting in Egypt, which also had a negative impact on our organic growth of around 1 point on-net revenues and 2 points on operating income. The non-cash impairment of our equity investment had no impact on our adjusted financials. In future, we may benefit from AirbH dividend income, but we do not include any impact in our 2025 forecast at this time. Let's take a step-back and consider 2024 in the context of the last few years. Our organic top-line delivery has been consistently strong since the pandemic and further accelerated this year as both smoke-free product and combustible stepped-up their trajectory. Clearly, 2024 was also a standout year for adjusted diluted EPS growth. The profitability of our smoke-free business accelerated due to the operating leverage of ICO's increasing scale, favorable unit economics, pricing, efficiency and the impressive accretion from Zyn's rapid growth at superior US margins. We also benefited from a notably robust combustible performance, which provide important structural support for our transformation journey. These dynamics are further demonstrated by the organic top-line and gross profit growth of both categories in the year. Our smoke-free business accelerated to plus 17% net revenue growth and plus 23% gross profit growth, reaching close to $10 billion in gross profit. This drove an impressive plus 330 basis-points of organic gross margin expansion, fueled by the factors I just mentioned. On the combustible side, net revenue and gross profit grew organically by plus 6% and plus 7% respectively, leading to plus 60 basis-points of organic gross margin expansion. Our combustible business is once again contributing positively with pricing and cost-efficiency more than compensating for the third year of significant input cost headwinds, which we expect to ease in 2025. I would also note that adjusted gross margin for smoke-free product were plus 490 basis-points higher than combustible in Q4 and plus 270 basis-points higher for the year overall at 66.6%. While we continue to target gross margin expansion in combustible, we expect this gap to grow over-time as we continue to drive profitable growth from smoke-free product while investing in new market, brand-building and innovation. Now taking a closer look now at our volume performance, we delivered our fourth consecutive year of shipment growth, up plus 2.3% in the 4th-quarter and close to plus 3% for the full-year. Including our Viv evapor business in equivalent unit, this growth was plus 2.4% and plus 3% respectively. Our total 2024 smoke-free volume growth, including VIV was plus 13.5% or 19 billion unit equivalent, an acceleration compared to 2023. For IQOS, we delivered HTU adjusted in-market sales growth of close to 13% and shipment volumes of $139.7 billion, both broadly in-line with our expectation. Adjusted IMS growth accelerated in H2 to close to 14%, essentially in-line with our target of plus 14% to plus 15%. This includes dynamic growth of close to plus 11% in Europe with strong momentum across the large majority of markets. As I touched on earlier, Q4 HTU shipment growth includes the impact of additional shipments in the prior year to prepare for the EU characterizing flavor ban and the phasing effect of additional shipment to Japan in H1, notably due to disruption. Our oral smoke-free business grew 2024 shipment volume by plus 24.6%, including US growth of plus 51% to 581 million cans. Snuffs and volumes were stable. Cigarette shipments grew by plus 0.6%, approximately in-line with the estimated growth of the international industry. The growth of the cigarette market can be largely attributed to growth in-markets where smoke-free products are not permitted such as Turkey, Brazil and India. Excluding such markets, we observe a low single-digit decline consistent with historic trends. Our strong full-year top-line growth of almost plus 10% was again achieved through a combination of volume growth, pricing and the positive mix impact of the shift to smoke-free product. Pricing contributed plus 6.2%, reflecting almost plus 9% combustible pricing and plus 2% for smoke-free product. Smoke-free also drove a positive mix impact of plus 1.9% due to the higher net revenue per unit of both IQOS and Zyn, overall smoke-free product contributed plus 2.2% to overall Group top-line growth for the year, demonstrating Zyn's role as a meaningful accelerator to our performance. As in prior years, geographic mix was negative, primarily due to combustible, but to a lesser degree given robust net revenue growth in Europe. Moving down to adjusted operating margins, we delivered full-year organic expansion of plus 180 basis-points and plus 100 basis-points in dollar terms, comfortably achieving our objective of expansion on both basis. This reflects a strong Q4 with OI margin expanding organically by plus 140 basis-points as gross margin expansion outweighed SG&A investments. Full-year gross margins increased organically by plus 160 basis-points and by plus 120 basis-points in dollar terms. SG&A drove plus 20 basis-points of margin expansion enabled by cost-efficiency action despite significant reinvestment and commercial support behind our small food business and US capabilities, especially in HP. We delivered over $750 million in gross cost-efficiency for the year with COGS productivity across smoke-free and combustible and continued back-office savings. This places us well on-track for our '24-'26 target of $2 billion. Focusing on our smoke-free business, we grew our estimated user base by over 5 million people in 2024 to reach approximately 38.6 million legal edge users as of December. This includes an estimated 32.2 million ICO users, 5.7 million oral users and 1 million users. I am pleased to report robust ICOS user growth of plus 3.4 million versus prior year and plus 1.5 million during HP. This growth is broad-based and consistent with recent years despite limited new market opening and the characterizing the bank. Overall added plus 1.5 million users year-on-year, driven by continued strong traction with legal-aged consumer in the US despite supply constraints. Zooming in now on IQOS. Home user momentum is reflected in adjusted IMS volume with 2024 growth of over 15 billion units, in-line with the prior year despite the impact of the EU flavor dynamic. This growth is also in-line with the five-year average and more than 1 billion units above when excluding contribution from markets launched in the current or preceding year. Importantly, following the rollout of and with the increasing scale of the business, the profitability of IQOS is growing strongly. We illustrate this year with the index product contribution over-time at constant rates. As we've explained before, the upcoming cost of the business-to-consumer operation results in declining in-process per user over-time as the user count grows in the market. This is a dynamic we expect to continue in the future. Turning to. As expected, HTU adjusted IMS growth accelerated strongly in H2 to almost plus 11%, following H1 progression of around 8%. This resulted in robust plus 9.4% growth overall for the year despite the significant destruction of the characterizing. This double-digit adjusted IMS growth in H2 was driven by strong progress in a large number of markets, including growth of around 20% or more in-markets such as Bulgaria, Greece, Germany, Romania and Spain, while growth was less dynamic in Poland, Czech Republic and Italy. Recovery in Italy is ongoing following the disruption of the band, although at a slightly slower pace than expected in Q4. The continued momentum in the region drove Q4 adjusted share growth of plus 0.9 points year-on-year to 10.6% with adjusted IMS volume reaching 13.5 billion units on a four-quarter moving average. Q4 shipment volumes increased by plus 6% against the prior year comparison, which included additional volumes related to the implementation of the ban, notably in Italy. The band is now active in all that 60 new markets with a generally consistent pattern of short-term disruption followed by a return to the pre-ban growth trajectory. Following an impact of around 2 billion units in 2024, we expected a 2025 impact of around EUR1 billion on both segment and IMS, including annualization effect with the most prominent effect in the fourth -- in the first-quarter of 2025. We also continue to roll-out the ILUMA I device and new consumable variants such as and Lydia to more markets, providing an increasing choice of test profile and price point by this. Looking at our of tech shares in Europe, we reached a number of important milestones with achieving over 40% share, Rome over 30% and London approaching 10% with Madrid not far behind. Japan delivered outstanding results yet again with HTU adjusted IMS growth of close to plus 13% in both the quarter and the full-year to reach an adjusted Q4 share of 30.6%, plus 3.1 points higher year-on-year. This was supported by continued share growth of Terra and as well as a positive fraction of the IQOS eye device as we reach over 9.5 million adult users. Share in Tokyo for the overall eat not done category reached 52.8% in December with the addition of and in 10 cities and five exceeding the 50% share threshold. On a national offtake basis, 47% of the total industry is now. Outside of Europe and Japan, adjusted in marketplace growth continued to grow strongly in Q4. Promising growth in a number of markets is illustrated by TCP shares in Saudi Arabia, Indonesia and Mexico. Continuous innovation is a key driver of this growth with steria variants and capsule in Indonesia, driving an uplift in the quarter and some good initial results on the trial of, our lower tie -- our lower-tier offering. IQOS continues to perform well in, though share performance was impacted by the dynamic of the combustible market where competitor supply normalized and a very strong prior year quarter following the launch of ITV market. Our duty-free HPE offset share increased nicely as we start to harness the strength of our multi-category portfolio, drive sales of IQOS, and Viv together. Turning now to the US where our IQOS will be the first campaign in Austin is progressing well and we expect to commence direct sales of device and HPUs in around the end of Q1. We are seeing high-interest from consumers with over 4,000 adult smokers on our. As we learned from this initial consumer engagement, we are planning the rollout of pilots to other cities. As you know seen, our focus will be on selective adult consumer engagement and building awareness to category and brand education in legal-edge smoker communities. We do not assume any significant volume from US IQOS before the at-scale launch of IQOS ILUMA and we continue to hope for an every authorization in H2 2025. Switching categories now to zinc, where we continued where continued strong demand supported Q4 US shipment volume growth of plus 42% year-on-year to 165 million ton. Despite ongoing production limitation, this reflects an acceleration to a near-record sequential increase of plus 16 million tons versus Q2. On a full-year basis, shipment volumes grew by plus 196 million tons versus 2023, highlighting both the magnitude of growth and the tremendous effort made to maximize our production capacity. Zin category share incrementally improved through the second-half, reaching 55.9% in Q4 as we progress in increasing production further supported the growth of the category. Indeed, category growth slowed significantly during the summer peak of our supply constraint as shown on this chart. As the situation started to gradually improve, ZYN was again leading and outpacing the category. I am pleased to share that underlying demand for zinc from adult consumer continued to grow in Q4 and was higher than previously assumed. We continue to experience some out-stock at retail and while production capacity continues to increase, we now target full normalization sometime in the second-half of 2025. We continue to target around 900 million tons of capacity for the full-year from our Kentucky facility and as supply continues to improve, we will look to further expand growth beyond our existing consumer base to other legalized users. Our greenfield site in Colorado is due to come online in early 2026 and we believe we are well-positioned to capture this potential over the coming years. Responsible regulation of the industry is fundamental in supporting sustainable future growth for this dynamic category. We are therefore encouraged by the recent FDA authorization for the marketing and sale of all zin currently marketed in the US following extensive scientific review by the agency. As mentioned, this makes the first and only authorized pouch in the market. Among several consideration was a substantially lower amount of harmful constituent versus cigarette and other smokeless tobacco products as well as current low usage levels. The FDA's authorization marks an important step-in the protection of public health by recognizing the role that zinc can play in providing better alternatives to cigarettes and other traditional tobacco products for legal age adults. We remain committed to driving industry standards in under 21 prevention with policy and initiatives designed to help prevent you access. Further, converting trade-in tobacco and nicotine products remain a core priority and we dedicate a significant level of resources to support this growth also has an exciting future outside of the US. While still in its very early stages, international pork shipments grew by 27 million ton or plus 75% and we already see strong volume momentum in key international markets such as Pakistan, South Africa, Mexico, the UK and Global. We launched nicotine pouches in 16 market during the quarter to reach a total of 37 worldwide, including Italy, Romania and Thailand. Within evapor, we continue to see strong consumer traction behind Viv One. The brand holds a top three postpot position in 13 European markets and as the number-one position in five, including Italy. These plays an important role within our multi-category strategy as an increasingly trusted choice for smoke-free category quality users as a source of incremental growth with improving economics. Our primary focus for the combustible business is to maximize value over-time, while supporting the growth of the. Pricing and cost efficiencies are the key levers to drive performance while maintaining our category leadership. We delivered another robust volume quarter with growth of plus 1.1%. All regions contributed to strong Q4 organic net revenue growth of plus 6.2% with gross profit increasing by plus 10.8%. Full-year pricing of plus 8.7% includes strong contribution from Germany, Egypt and Turkey. We expect organic 2025 combustible pricing to normalize to plus 5% to plus 6%, partly reflecting Egypt move to higher inflationary accounting in Q4 2024. Category share was flat in Q4 with positive contribution from Turkey and India, offset by decline in Egypt and Indonesia with continued growth in the below Tier-1 segment. On a full-year basis, we grew category share plus 0.1 points, reaching all-time high for both Marlboro and our global brands overall. This brings me to the outlook for 2025, where we expect another year of strong growth from all categories driving top and bottom-line delivery. We anticipate a fifth consecutive year of positive volumes with growth of up to plus 2%, notably driven by another year of strong growth in smoke-free products at around plus 12% to plus 14%. For IQOS, we expect a continuation of strong momentum with the absolute growth in HPU adjusted IMS volume expected to be at a similar level to 2024, translating into plus 10 to plus 12 growth 10% -- 12% growth. We expect shipment growth to be broadly in-line with this double-digit trajectory subject to the usual inherent volatility of shipment timing and trade inventory movement. We expect ongoing strong growth dynamic within the US nicotine pouch category. Despite the supply constraint I mentioned before, we forecast a US zin volume shipment range of 780 million to 820 million ton for the year, supported by capacity expansion. This represents another year of substantial acceleration in volumes with an expected increase of approximately 200 to 240 million can compared to the $196 million can increase in 2024. This supports a total PMI forecast of plus 6% to plus 8% organic net revenue growth. This includes a headwind of over 100 basis-points due to hyper-inflationary accounting in Egypt and the technical impact of implementing a new financial model in the Indonesia below Tier-1 segment. The change in Indonesia has no effect on operating income. Moving down to the P&L, we expect ongoing smoke free mix effect, operating leverage and cost-efficiency to drive double-digit adjusted operating growth -- income growth of plus 10.5% to plus 12.5%. This includes strong gross profit growth with both gross and adjusted operating margin forecast to expand in both organic and adjusted dollar terms at prevailing exchange rates. We expect SG&A cost to increase broadly in-line with net revenue on an organic basis as we invest behind our. We forecast currency-neutral adjusted diluted EPS growth of plus 10.5% to plus 12.5%. This factors in essentially stable net interest expense and an increase in our effective corporate tax-rate to approximately 22.5% to 22.5% due to tax increases in-line with OECD plusive global minimum tax and the mix of international earnings. In dollar terms, we forecast growth of plus 7% to plus 9% to a range of $7.4 to $7.17. This includes an unfavorable forecast currency impact of $0.22 at prevailing exchange rates, primarily driven by the broad strength of the dollar mitigated by our hedging activities. For the first-quarter of 2025, we expect a strong start to the year with net revenue and operating income growth broadly in-line with our full-year objective despite the comparison. We forecast HPU adjusted IMS growth of around plus 10%, which factors in the large annualization impact from the easing flavor ban in the quarter with a progressive improvement through the year. We forecast shipment volume of 35 billion to 36 billion for HPUs and 170 million to 180 million can for US zin. We project Q1 adjusted diluted EPS of $1.58 to $1.63, including a negative currency variance of $0.04 at prevailing rates and an effective corporate tax-rate two to three points higher than the prior year quarter. With our 2024 delivery and 2025 outlook, we are well-positioned to meet or exceed all metrics of the '24-'26 target targets presented at our 2023 Investor Day. This is especially true at the level of operating income growth as well as for EPS delivery where our algorithm assumed constant 2022 corporate tax-rate. This level of top and bottom-line growth reflects a best-in-class growth profile within the context of large-cap consumer packages. Importantly, we're also well on-track to deliver high single-digit adjusted diluted EBITDA growth in dollar terms across the 2024 2026 period at prevailing exchange rate. Indeed, we measure our cash flows in dollar and after a record delivery in 2024, we expect to deliver operating cash-flow of around $11 billion for 2025. This is broadly in-line with 2024 once accounting for three non-recurring payments with a total impact of around $1 billion. While we continue to achieve the German tax recharge case, we have decided to make a $0.8 billion payment this year and we also anticipate a final transition tax payment-related to the US Tax and Jobs Act. We anticipate capital expenditure of around $1.5 billion with a large portion of this related to as we prioritize the investment behind our project. Our strong 2024 cash-flow and EBITDA growth combined with a favorable impact from our euro balance sheet hedging allowed us to reduce our net-debt to adjusted EBITDA ratio by 0.5 times to 2.66, ahead of our expectation and representing a dramatic acceleration of our deleveraging. We expect further progress in 2025, placing us on-track for our target ratio of around 2 times by the end of 2026. I will now turn it back to for concluding remarks.
