Hello, and welcome to the BAT 2023 Second Half Pre-close Conference Call. My name is Alex, and I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star followed by one on your telephone keypad. If you'd like to remove your question, you may press star followed by two. I'll hand it over to your host, Victoria Buxton, Head of Investor Relations. Please go ahead. Good morning, everybody. I'm Victoria Buxton, Group Head of Investor Relations, and with me this morning is Tadeu Marroco, our Chief Executive, and Javed Iqbal, our Interim Finance Director. Welcome to our Full- year 2023 Trading and Strategy Up date Conference call. I hope that you're all well, and I'd like to thank you for taking the time to join us this morning. Before we begin, I need to draw your attention to the cautionary wording regarding forward-looking statements, as well as the notes and disclaimers contained in the trading update. Unless stated otherwise, our comments will focus on constant currency adjusted measures, and all our share data is year-to-date average to September 2023 versus full- year 2022 average. I would also like to remind you that there'll be an opportunity to ask questions later in the call. With that, I'll now hand you over to Tadeu. Thank you, Victoria. Good morning, everyone, and welcome. I'm pleased to reiterate our full- year 2023 EPS guidance, driven by our broad-based performance across categories and markets. Today, in addition to our pre-close trading update, I would like to begin by sharing some key highlights of the comprehensive strategic review we have now completed. I'm clear that our early commitment to our multi-category strategy is right. I'm also clear that we must continue to make active choice to sharpen our strategic execution through delivery of fewer, bigger operational priorities. To accelerate the next phase of our transformation journey, we are now committing to Building a Smokeless World. We will deploy our global multi-category portfolio to actively encourage smokers to switch to better nicotine products, realizing the multi-category... the multi-stakeholder benefits of a better tomorrow. This commitment is demonstrated by our new ambition to become a predominantly smokeless business with 50% of our revenue from non-combustible by 2035. With only 10% of the world's 1 billion smokers currently using new category products, the long-term opportunity for growth as we deliver on our transformation is vast. Consistent with our vision to build a smokeless world, and in combination with the current macroeconomic headwinds impacting the U.S. combustible industry, in 2023, we will take an accounting, non-cash, adjusting impairment charge of around GBP 25 billion. This accounting adjustment mainly relates to some of our acquired U.S. combustible brands, as we now assess their carrying value and useful economic lives over an estimated period of 30 years. Accordingly, we will commence amortization of the remaining value of our U.S. combustible brands from January 2024. This non-cash amortization charge will be treated as an adjusting item and does not impact the future capital allocation decisions. Work is ongoing as part of our normal year-end process, and we will disclose further details at our full- year results in February. Building on our progress in 2023, I'm clear that now is the right time to further invest to accelerate our transformation. We are making active investment choice to strengthen our U.S. business, accelerate innovation momentum on heated products globally, and enhance capabilities that support our strategic delivery. These investments will impact in 2024, and alongside continued macroeconomic pressures in the U.S., we now expect low single-digit growth in revenue and adjusted profit from operations on an organic basis at constant rates. Looking forward, we expect our core new category growth and stable combustible revenue to continue to drive total nicotine industry revenue growth. This underpins our medium-term guidance, where we expect a progressive improvement to 3%-5% revenue and mid-single-digit adjusted profit from operations growth on an organic basis at constant rates by 2026. We'll continue to reward shareholders through our strong cash returns, including our progressive dividend, and once the middle of our leverage range is reached, we will evaluate all opportunities to return excess cash to our shareholders. Turning now to current trading. Benefiting from our global footprint and multi-category portfolio, we expect to deliver 3%-5% organic revenue growth and mid-single-digit adjusted diluted EPS growth. Our earnings guidance includes the divestment of our business in Russia and Belarus in September. In new categories, we continue to drive strong volume and revenue growth, led by Vuse and Velo. However, due to the continued weakness of U.S. combustibles, we now expect to deliver group organic revenue growth at the low end of our 3%-5% guidance range. I'm particularly pleased by our continued strong performance in AME and APMEA, which together we expect will deliver close to double-digit revenue and adjusted profit from operations growth. The continued strength of these two regions, driven by both combustibles and new categories, gives me confidence that once we have restrengthened our U.S. business, our global multi-category strategy will deliver long-term, sustainable, profitable growth.... Turning now to one of the key priorities I set out in the summer, to drive profitability in new categories. After significant upfront investments, since 2020, we have reduced the new category losses by GBP 1.1 billion. As a result, we now expect our new category contribution to be broadly break-even 2023, and to continue to be profitable moving forward. Vapor and modern oral are already delivering profitable growth. This continues to give me confidence that we will profitably transition our portfolio from combustibles to new categories. In vapor, Vuse continues to extend our value share leadership, reaching close to 37% value share in key markets, up 100 basis points. Vuse continues to deliver strong revenue growth, driven by an increased number of consumers, robust pricing, and the benefit of growing cross-category poly- usage. We see the fundamentals of the vapor category as a reduced risk alternative for adult smokers as strongly positive. More adult smokers are switching to vapor than any other category, with vapor and heated products equally effective at encouraging smokers to switch. In addition, positive demographics support the long-term sustainability of the category. In the U.S., our PMTAs for Vuse Alto's two tobacco flavor products remain under FDA review. These applications further build on the foundational science of our successful tobacco flavor submissions for Vuse Solo, Ciro, and Vibe, which received marketing authorization in 2021 and 2022. We are confident that the successful outcome of the Vuse Alto PMTAs remaining under review with FDA will be received in the coming months, consistent with the agency's most recently communicated time frame. We are challenging the marketing denial orders received for Vuse menthol variants, including most recently for Vuse Alto. We have received stays of enforcement for FDA denial orders. This means that the Vuse menthol products can continue to be marketed and sold while the judicial review process continues. We believe appropriately regulated flavored vapor, vaping products, including menthol, are critical in supporting the migration of adult smokers from combustible cigarettes. Indeed, while FDA did not request long-term consumer switching data as part of the PMTA applications for Vuse, interim results of our 24-month longitudinal study for Vuse showed that the proportion of Vuse users completely switching from combustible was higher among those using menthol flavored products than those using tobacco flavored products. Globally, the modern disposables segment is driving incremental vapor category growth. We continue to approach this fast-growing segment in a responsible way in regulated markets, consistently implementing our global underage access prevention guidelines and take back schemes for responsible disposable. Vuse Go is now available in 59 markets, and our recent launches in emerging markets, including Colombia and Peru, are delivering positive results. We expect our vapor footprints to continue to grow as regulatory developments in new markets increasingly allow smokers to access authorized, reduced-risk products, which enables our entry. In modern oral, Velo continues to deliver strong volume-led revenue growth and increasing profitability. Modern oral is a fast-growing category, driving our volume share of total oral in key markets up 110 basis points, reaching 8.5%. The category is also developing quickly outside the traditional oral areas of Scandinavia and the U.S., with newer markets now representing a quarter of industry volume. While our global volume share of modern oral is down 210 basis points, driven by the large U.S. market, we are encouraged by the strong results from our recent Velo pilot in New York, including a more premium brand expression and design. In addition, we remain confident of securing the PMTA of our European leading Velo 2.0 platform to support our long-term competitiveness in the U.S. Elsewhere, Velo continues to perform strongly, maintaining its clear category leadership in Europe, with 67% volume share in our top four markets. We are taking further steps towards broadening accessibility of our reduced risk products through unlocking emerging market opportunities. Velo continues to deliver strong growth in Pakistan, driven by increased consumer numbers, and with average daily consumption now close to five pouch per day. In addition, we have accelerated our national rollout in Kenya after a successful pilot test. In heated products, Glo's performance in 2023 has been disappointing. Slower industry volume growth, increased poly- usage, particularly in the vapor category, together with heightened competitive activity in Japan and Italy, has impacted our performance. As a result, our organic volume and revenue growth has lowered in the second- half, and our volume share is down 100 basis points in key markets to 18.2%. Although Glo maintains its strong number two volume share position globally and continues to perform well in a number of AME markets, including Poland and the Czech Republic, since become chief executive, I have been clear that we need to do more to strengthen our innovation pipeline to drive momentum in long-term performance... While it's still early days, I'm excited by the accelerated cadence of our innovation pipeline in both consumables and device. Glo Hyper is performing in line with expectations, and in addition, we have recently launched Veo, a range of non-tobacco consumables in 10 markets in Europe, gaining first mover advantage in this new space with encouraging early results. I look forward to sharing more details on our innovation pipeline next year. Now turning to combustibles, where our global volume share is flat year to date, with value share down 40 basis points, reflecting the impact of our commercial actions in the U.S., partially offset by stronger performance in AME and APMEA. In the U.S., combustible industry volume continues to be impacted by the volatile macroeconomic environment, with premium segment shares showing recent signs of pressure after a more stable first half. Although our volume share is down 10 basis points year to date versus full- year 2022, I'm encouraged that our commercial plans are delivering early signs of volume share recovery with a 50 basis points improvement between January and October, driven by Newport, Natural American Spirit and Lucky Strike. While returning our U.S. combustible business to consistent value growth will take time, we are confident that the actions we are taking will strengthen our portfolio over the longer term. In California, the impact of the flavor ban continues to evolve, with consumers accessing flavor products through illicit channels. We can clearly see the lack of effective enforcement on the ground, with overall nicotine consumption broadly stable year to date. Due to our menthol skew, 45% of our combustible portfolio had to be delisted at the end of last year. We activated commercial plans and adjusting for a 13% pre-ban rate of decline, our underlying retention rate in combustible has been over 80% and over 90%, including the impact of elevated menthol volumes in neighboring states. Outside the U.S., our combustibles business has continued to perform well. In AME, our volume share gains and pricing have driven strong revenue and profit growth. In APMEA, the impact of excise-led volume declines in Pakistan has been more than offset by our pricing across the region, and we expect 2023 to be another year of strong revenue and profit delivery. This demonstrates the benefit of our global footprint, well-balanced portfolio, and our ability to deliver in challenging environments. BAT is a highly cash generative business, and we expect to deliver close to 100% operating cash flow conversion in 2023. We are making progress towards reaching the middle of our guided 2-3 times adjusted net debt to adjusted EBITDA leverage range and expect to be close to 2.7 times by year-end. As we set out at half a year, we continue to seek and evaluate our opportunities to enhance balance sheet flexibility, including disposals, disposals and the exit of non-strategic markets. We remain committed to a progressive dividend, and once the middle of our leverage range is reached, we will evaluate all opportunities to return excess cash to our shareholders. Now, turning to our strategic update. Building on our strong progress to date and to continue to deliver long-term sustainable growth and returns, we are now focused on sharpened strategic execution through delivery of fewer, bigger operational priorities. In addition, we are building a more collaborative and inclusive culture as we drive a more agile, modern BAT. To steer us towards these two objectives, we have refined our strategic direction and ambition. This will drive our priorities and future choice. First, we will drive a step change in our innovation capabilities and speed to market. We have all the right foundations in place. We're committed to a multi-category strategy from the outset, recognizing that consumer taste and preference are not homogeneous. In less than a decade, we have built a portfolio of three powerful brands, Vuse, Glo, Velo, delivering more than GBP 3 billion of revenue. After significant early stage investment, I'm particularly pleased that we now expect our new categories to be broadly break even in 2023 and be profitable from 2024 onwards. Building on our deep cross-category consumer insights, we will deliver an enhanced innovation pipeline by further investing in our people, our science, our IP, and our capabilities, driving an innovation-focused culture. We will continue to leverage our centers of excellence in Southampton, Trieste, and Shenzhen, in order to assess wider internal and external strategic partnerships focused on developing consumer-relevant premium propositions. Second, we are making an active choice to accelerate our transformation. We will leverage our market archetypes to guide how and where we deploy our products and allocate resources to deliver long-term value creation. In the U.S., we have now completed a deep and thorough review of our business. We have begun and will continue to invest in sharpening our portfolio management, strengthening our route to market, and further leveraging our broad, digitally enabled revenue growth management capabilities. We are confident this will drive quality growth over the long term and ensure greater resilience through economic cycles. In heated products, we continue to invest to rejuvenate our momentum with an enhanced innovation cadence in both device and consumables. The launch of our new tobacco, non-tobacco consumable range Veo since September is an early sign that this focus to deliver first to market consumer relevant innovations is yielding results. We are also taking action to strengthen our organizational capabilities. We are committed to playing a more proactive role in sharing our science and insights to support the development of new category regulation and our contribution to tobacco harm reduction globally. This is incredibly important for both the future development of new categories and also to ensure the proper functioning of existing new category markets. The recent proliferation of illicit disposable vapor products in the U.S. is a clear example of the importance of effective regulation enforcement. We estimate that these products now represents over 60% of the U.S. vapor market, with over 90% of the segment estimated to be in non-menthol flavors, where we are unable to participate. In recognition of the critical role regulation is playing for the future of new categories, as part of the management board changes announced in June, we created a new corporate and regulatory affairs function. The success of our transformation will also be accelerated by a more collaborative and inclusive culture, which is at the heart of my leadership agenda. I'm delighted to welcome Cora Koppe-Stahrenberg to the new role of Chief People Officer. Cora brings a valuable external lens from a diverse range of transforming industry, and she will be focused on driving a winning culture in a more agile, modern BAT. And finally, we are increasing investments into 2024 to secure our long-term sustainable growth. While we expect continued headwinds to impact our U.S. business next year, we will build our broad-based performance in 2023 by making the active investment choice I have just outlined. We are confident that these are the right near-term investments to secure long-term quality growth and accelerate our transformation. I look forward to sharing more detail on our refining strategic direction, including the KPIs, against which we can be measured at our full- year results in February. Thank you for listening, and I will now open up the call to your questions. Thank you. As a reminder, if you'd like to ask a question, you can press star followed by one on your telephone keypad. Our first question comes from Jacob de Klerk of Redburn Atlantic. Your line is now open. Please go ahead. Morning, guys. Thanks for taking my questions. Just a couple. Just going back to your smoke-free target you set for 2035, will the contribution be evenly split in three categories or continue to be lopsided to vapor? And then just secondly, how do you expect to maintain profitability in the NGP category if you're stepping up investment into 2024, specifically behind the THP category? Yes, thank you for the question, Jacob. Well, look, we... What we are seeing now currently is that the phenomenon of poly users is an indication that the smoke-free will be adopted through the different categories. There is clearly in terms of number of consumption the more use of vapor currently, if you take out of the estimated 100 million consumers of these non-combustible products, you have a bit of 60% plus of those co-users using vaping. But we are also conscious that a lot of them are poly using amongst those categories. So I don't think that we can highlight one specific category, and that's plays in line with our strategy since the outset, to be a multi-category company. Because we always believe, because of consumers are different, the regulatory environment is different, that we would need to activate, the three categories at once. So I think that we'll be very well prepared for this future that we have already materialized to happen at this point in time. In terms of, NGP, we are- what we are saying is that we expect profitability to come from 2024, so we will be using some of the profits, reinvesting back in the new categories, mainly on the heat products, category specifically, but net-net will still be a positive, outlook in terms of profitability in new categories for 2024. Brilliant. Can I just squeeze in one last one? Sorry. There was no mention this time of your GBP 5 billion revenue target in 2025 for NGPs. Is this target still maintained, or will the exit of Russia impact this? Yeah, no, for sure, that's Russia, it's a headwind if you want. But we have the ambition to get to GBP 5 billion by 2025. The major headwind that we'll be facing is really not the divestment of Russia, but is the continued increase of these illegal products of modern disposables in the U.S.. U.S. is a big part of our revenue that we have achieved so far, and this just makes it more difficult. Let's put it that way. For sure, that's the other side of the coin, is if we start seeing enforcement as you would expect in the U.S. from the FDA, this could be a very strong white space that will be ready to approach. But the targets and the ambition is there. Thank you very much. Thank you. Our next question comes from Owen Bennett from Jefferies. Your line is now open. Please go ahead. Morning, guys. Hope all well. I had a couple of questions, please. The first one on the incremental investment, would you be able to say how much of that incremental investment will be on heated tobacco? And then can you outline where on heated that investment will be going? Is it likely to be on additional discounting, or will it be below the line on things like terms of education and building these consumer relationships? ... Okay. Only the incremental investments, we are, we are highlighting three areas, and they are not very different from what I have been saying. In reality, if you've heard consistently from me that since I took over as a CEO, that there are clearly a need to reset the U.S business. So, a lot of these investments will be us continuing to build the commercial plans that are needed in the U.S. to transform the U.S. into a more consistent long-term business for the group. Not just on the making the portfolio more resilient in terms of regulation and economic cycles, but also investing in trade markets covered, and investing in the digital capabilities in the U.S., and some other areas that will strengthen the business. So a lot of these investments will carry on in the U.S., and the HTS products is the one that I have singled out since the beginning, because we have a strong performance in new categories overall, and mainly specifically in the vapor and the modern oral. We are very pleased with the progress that we have been able to make in those two categories, but clearly, HTS products are not there. So the investment will pretty much be aligned with leveraging some innovations that we want to bring to the market, and how you make them more accessible for consumers. We are in a very. We want to strengthen where we play in terms of portfolio of the heated product. And the first step has been the introduction of these non-tobacco flavors products in some markets in Europe. We will continue to roll out this next year as the ban on flavors tobacco heating start to be adopted by more European markets, so this will be part of the investment, but also related to some new innovations. For sure, that we also want to, to, step up our investments around IPs, and, 'cause this is one area that has been putting us, have constrained us, in the past. And, that's why I was referring to our, our center of innovations in places like Shenzhen, and, and the investments that we are making in terms of, leveraging internally and external partnerships, to reflect into more compelling products that we could launch in the market. Well, thank you, sir. And then the next question is just on the 2024 guidance. What are you assuming for U.S. vape, in terms of are you assuming any meaningful action on disposables? And then are you also assuming your tobacco PMTA get approved, and you perhaps would see some acceleration on the back of that? Thank you. Okay. Yeah, the 2024, the first point I would like to highlight is that we, we expect the two regions outside the U.S. to continue to deliver strongly. And we also expected the new categories, like I, I answered the question before, to, to making inroads, not just in terms of revenue, but more important, in terms of profitability as well. So this is all going in the, in the direction that you would expect to go. There is no doubt that some of the commercial plans that we have already start addressing 2023, you are, you are already seeing the reflection of that in terms of our share performance from January to now, which I disclose in the statement, has an impact in terms of carryover for 2024. And on top of that, we are answering your question, not assuming any meaningful enforcement from the FDA, because unfortunately, we haven't been seeing this up to this point in time. Clearly, the FDA, we expect them, first of all, to conclude the process of the PMTAs in vapor. So in concluding that, they will be able, let's put it that way, to start publishing a complete list of legal products, and they haven't done this so far, which creates a lot of uncertainties in terms of enforcement. 'Cause a lot of when you visit key accounts, for example, in the U.S., they're still doubtful if that product will be approved or not, because they are still pending some definition from the FDA. So the first thing is, the FDA needs to be a bit clear in terms of what's illegal, what's allowed to be in the market, which they haven't done. We also believe that they need to really dramatically increase inspections of retailers, distributors, wholesalers, hold law breakers accountable, which we are not seeing yet, employing its most powerful enforcement tools that they have, and eventually drive effective enforcement with coordination with other government law enforcement agencies. So we are not seeing any of that, so at this point in time, enhance our assumption for this plan, which is, you know, underpinning the 2024, is that we are not seeing any meaningful FDA enforcement. For sure, that if we are wrong on that, and all of a sudden we start seeing them be much more active and hence open up space in that space, in that market, we will be benefiting from that. And, in terms of the PMTA, we are very confident that they will be approving our tobacco flavors. They took... It seems that they have taken a kind of, right, blank, blanket approach in terms of menthol, denying all-... products, they haven't approved any products of menthol, which is very frustrating, to say the minimum, because this goes against even their belief in terms of risk continuum and migrating consumers out of cigarette, they just make this more difficult. We hope that with the expedited process of PMTA, with some technology to prevent youth use, they can reassess that and bring the flavors back. But we are very confident that our tobacco flavor products will be approved in the coming months. Okay. And then just on that with the, I'm assuming kind of you're referring to Bluetooth technology. As I understand, you were hoping to get a new PMTA in by year end. Is that, is that still the case? Well, our expectation is that, 'cause like I said in the statement, they have just basically ignored all the studies relating our process, specifically, all the studies that we have to prove that, the menthol flavors in vapor are much more effective in converting smokers out of cigarettes towards vapor. They basically ignored that. And they issued the deny order, which we are appealing in the justice, as you heard, and we will continue to be in the market as a consequence of this appeal. So in the meantime, they have issued a more expedited PMTA process to allow the manufacturers to submit device that has intrinsic technology through Bluetooth to enable to assess the age and with that, prevents the access of youth to these products. We believe that, and there is no certainty on that, it's basically a belief, that with that, they will be more keen and to approve the flavors because of at least the menthol one. Because it's a strong belief that they also see the benefits of smokers moving away from cigarettes to vapers via flavors. So in our case, our Bluetooth device will be early next year, be filed as a PMTA. Based on what we heard from the FDA, this process will be expedited compared with the normal ones. Okay. Thank you, sir. I appreciate it. Thank you. Our next question comes from Rey Wium of SBG Securities. Your line is now open, please go ahead. Thank you. Hi, Tadeu. Just a question regarding the 2024 guidance, which has now been reduced to revenue and operating profits in low double single digit. I'm a bit surprised on the revenue side that that's also been lowered. So the only sort of thing that I can sort of, you know, determine from this is that maybe you plan to be probably more aggressive on pricing, or maybe, you know, reduce the price increases that you had in the U.S. Is that a fair assumption? Yeah. It's difficult for me to make comments on the pricing. But there is a part of the commercial plans in the U.S., we will be 'cause we said that. We will be making our—we will be strengthen our portfolio of brands and, and laddering, for example, is part of the process. We are reviewing also all the coverage that we have in the different channels in the U.S. And... but more important, don't forget that, in the plan for 2024, we are not really seeing a major shift in terms of macroeconomic downward pressures in the U.S. market. I'm not giving guidance to the U.S. market, but this year will be—the industry will be finishing close to a decline of high single digits. For sure, it's not just the microeconomic that is driving that. This illicit modern disposables, though, is having more and more impact on combustible as well. But answering the previous questions from Owen, we are not expecting any major change in terms of enforcement from the FDA, in terms of our assumptions. And the other assumption is that the macroeconomic environment will not get substantially better in 2024 either. So and like I said before, the commercial plans that we have started this year has an implication in terms of carryover for next year. So everything else, in terms of performance in the other two regions, we're expecting them to continue to be very strong. So our overall new categories business. U.S. will take some time, and it's not different from what I have consistently said since the beginning, that to adjust the U.S. and plus with the macroeconomics that we are now seeing, that will take time or more time to recover, will have an implication in the short term for the group results. Good. And then just a quick question just on... I, I see you referred to looking at measures to increase the balance sheet flexibility, which includes disposals. Now, obviously, this brings us back to the issue around your investment in ITC. I don't, I don't know if you just wanna elaborate a little bit more, I mean, why it is so important for you to hang on to this investment? Or is there not an opportunity for you to still have meaningful influence and just reduce part of the investment and still- Uh. you know, keeping a, like a 20% stake in the business? Yeah. 'Cause I mean, that can easily, you know, reduce your debt by GBP 5 billion. Yeah. Yes. Just on the ITC in January, for sure, ITC is a company that is continuing to perform extremely well. It's a credit to BAT in terms of performance, has had a very strong share price performance over the last couple of years. If anything, it is still undervalued compared with most of the FMCG companies in India, and FMCG today is more than 50% of revenues of ITC, so there is plenty of opportunities for share price to continue to grow there in ITC. So we see a longer runway for future share price outperformance and value creation in ITC. Now, for sure, we don't need to have more than 25% shareholding ITC to have a strategic influence, including veto rights. Today, we have more than that. But you cannot underestimate the complexity related to making divestments in ITC. There are two major pain points, let's put it that way. One is the foreign direct investment rules in tobacco specifically, which precludes international companies from investing in the India tobacco sector, which means the universe of buyers is limited. But more important, there are specific RBI approvals, RBI is the central bank in India, that are required in respect of any action taken in relation to our stake. And this adds a significant level of additional bureaucracy. So I'm not saying we'll be sticking to the shares, but what I'm saying is that it's not as easy as could transpire outside. So the points that you are making, we see this. For sure, that the recent ITC board approval of the demerger of this hotel business may provide us with some greater capital allocation flexibility going forward. But your point, specifically, is something that will always be regularly reassessed by the board regularly in terms of capital allocation opportunities. And we do, we're gonna navigate through all the difficulties that we have in that space, but this is a point that the board considers as usual, as you would expect. Let's put it that way. Okay. Thank you very much. Thank you. Our next question comes from James Edwardes Jones of RBC. Your line is now open, please go ahead. Thank you. Good morning. The GBP 25 billion write-down, what does that indicate about your view of growth and profitability in the U.S.? I guess related to that, has there been any change in price elasticity in the U.S.? Okay. Yeah, the price elasticity continues to be very benign. It's still around 0.35, 0.4, and we haven't seen any change on that. The accounting is basically catching up with reality of the U.S. market. But it's reflecting the natural evolution of the increased interaction of U.S. smokers with new categories. This is happening elsewhere, and not just in the U.S. Also, against the fact that we have already reviewed our strategy to be much more assertive in terms of our ambition to transform the company, accelerate the transformation by 2035. With all this in mind, we'll... It's very difficult to defend the existence of a finite value for some of these combustible brands in the U.S. that equates to almost GBP 80 billion in our balance sheet. So what we have decided to do is basically to move the accounting treatment of some of these U.S. combustible brands from an indefinite life to a finite life. And meaning that they will be valued over approximately 30 years instead of a perpetuity. So when you do that, you have to make an adjustment, and that's exactly what adjustment we are doing. Like I said, it will be adjusted, and in the results of the group, will be a non-cash item, will have no impact on leverage, will have no impact in terms of capital allocation decisions, and then we commence amortization over the next 30 years. In that period of time, for sure, there is no way to justify the presence of the brands. I'm not saying that the combustibles, the cigarettes, will disappear in 30 years in the U.S. I really don't believe that, but you cannot justify the value of those brands equating to a number as equivalent to what we have today in the balance sheet. So at certain stage, you have to do this anyway, and we decide to do this right now. Thank you. Thank you. Our next question comes from Gaurav Jain of Barclays. Your line is now open, please go ahead. Hi, good morning, Tadeu. Three questions from me. Yes. So one is on the guidance for FY 2024, and, you know, I think others have also asked this question in a different way, but, you know, what you are telling us is that NGPs will break even this year and will be profitable in FY 2024, and that the total company organic EBIT growth is low single digits. I think most of us are assuming that international cigarette EBIT will be growing, you know, mid-single digit to high single digit, based on whatever we are seeing in terms of volume trends across the space and what other companies have communicated. So this will imply that U.S. cigarette EBIT is down mid to high single digit. Is that the math which is happening? The 2024 is a clear indication that. It's a recognition of, first of all, the U.S. business, like I always said, will take more time to fully recover, and this is basically compounded by the fact that we have this macroeconomic situation and the situation with illicit trade to modern disposable carry on for longer. And the fact that we are carrying on with our initiatives and investments to strengthen our business there in terms of portfolio resilience, in terms of capabilities and so on. That's one first point, and this is mainly related to that, but also the fact that we want to keep investing in the, in the mainly on the heated product. We expect, just to answer your question, to have a positive profitability in terms of new categories in 2024. But what I'm saying here is that part of this profit will be reinvested mainly in strengthening our heated product positions. So you saw that in the last two years we have basically reduced, reduced our loss by GBP 1 billion, and in the new category. So it's a very strong- pace in the annual -base. So we will continue to increase profit, but not with that magnitude moving forward, because we are reinvest some of that to strengthen our category. So that's what we are trying to say here. Sure. And so as a follow-up on that, so, you know, you clearly tell us the overall NGP, you know, EBIT. Is it possible to give some indication on the profit contribution of the different categories, modern, oral, e-cigarettes, and heated tobacco? And, you know, some other companies have sort of given sort of the max loss that they will bear on NGPs and, and heated tobacco. So is there a way for you to- Yeah. -you know, help us understand? Like, is there a max loss on heated tobacco you will be willing to bear, and- Yeah. And that's the way to model it? Gaurav, we are not giving the disclosure of per category. I don't think that this call would be the appropriate time for us to go in deeper into this. We're gonna have more time in the next year to give more visibility on that. But one thing, and even in the statement, you can capture from that, we are already in a positive territory. We are already in 2023 in a positive territory in terms of profitability in vapor modern oral, which means that we had a loss on the heated product. And overall, the other two categories more than offset the loss on heated product. What we expect moving forward is with more compelling offers for heated products, more competitive offers, we can start also to turn this around and start firing all three cylinders in the new categories, and make it a driver for a creation of, for the group moving forward. So you're gonna have different engines in BAT in the medium term. We have the two regions outside the U.S., which is already, if anything, delivering extremely exceptional results. And it's not just in combustible, it's also doing quite well in new categories, mainly the European region. And we will have the new categories overall continue to be created for the group. At a certain point, once the macroeconomics improve in the U.S., hopefully the FDA starts doing the job that they were supposed to do in terms of enforcement of these illegal disposable modern disposable products, and us being able to do the adjustments that we want to do, that we think that most of it will be done in 2024, we're gonna have a much improved result for the group. That's why we are giving a three years guidance this time, as opposed to just one year. So you can contextualize the 2024 as an investment year that is necessary to secure the long-term sustainable growth of the group. Sure. And one last question on the Organigram investment that happened. So how should we think of that, you know, in the context of what's happening? You know, today, the stock is down a lot. Dividend yield is almost touching 11%. So clearly, investors want to see capital return to them, and, you know, leverage is also higher than what anybody thought. So, how should we think of investments like Organigram in that context? Investments in Organigram? Well, this, the Organigram is, it's not really a relevant capital deployment at this point. What we want to do is to create a foundation in that, in the cannabis space, and, without, you know, having to deploy massive capitals like other companies have done, in order to be prepared in case the regulatory environment changes, to be able to have a stronger foothold on that segment. And, Organigram, in our belief, is the best company out there in terms of management, in terms of capabilities. They are pretty much focused on the smokeless side of cannabis, which is also aligned with the group's strategy. This is pretty much a kind of setting the grounds and the foundations and more than anything. Sure. Thank you so much. Okay. Thank you. Our next question comes from Jonathan Leinster of Société Générale. Your line's now open. Please go ahead. ... Hi, good morning, gentlemen. A couple of questions, if I may. First of all, you say you've launched the non-tobacco heated tobacco consumables in 10 countries. I mean, given that, that would seem to be a fairly easy way around the sort of ban on flavors. Has there been any reaction from the EU regulators on this? Well, look, look, this is early days in terms of reaction from them. And I think that they—some of them are surprised to see the product, because there is no clear classification of this product at this point in time. And I think the debate will be more on the excise discussion than anything. But it's clearly an opportunity to keep consumers migrating out of cigarettes towards these products, 'cause like a vapor, it's not different. We know that flavors plays a big part on that. Okay. Second question. You obviously disposed of the operations in Russia in September. Have you seen any proceeds from that? And are your expectations for eventual proceeds the same as they were in September? Yeah. Look, you know that based on our disclosure, that this has been a very, let's say, there is a big hit that we have to take in order to materialize these investments. We had some proceeds, because we have the sale of it, and this is flowing through, as we were expecting. But the overall, you cannot lose perspective, that the, it's far away from the real value of the business, given the circumstance that the deal was done, and couldn't be done more differently than that. But, I think that was a good compromise, 'cause at the end of the day, we preserve the jobs of almost 2,700 people in the Russia business, and which was our intention since day one. And we did it in compliance with all the rules, international rules and local rules. So it was a very complex process, as you can imagine. And we expect to conclude, actually, the receipt of some of the proceeds now in December, and it's basically a kind of completely independent company now, and has nothing to do anymore with BAT. Just to clarify, I thought there was some talk of a potential buyback of the business in a couple of years, or is that not part of the deal anymore? The call option? Yeah. The call option is restricted for a very short period of time. It's two years, so I don't think that will be really... Well, it's anybody's guess, but will be effective. This is a requirement from the Russian authorities. They wouldn't allow you to have a call option with a larger period of time than these two years. Okay. Just coming back to a previous question, if I may. I mean, you mentioned the discussion on the disposal of non-core assets. I mean, although the disposal of ITC in itself might be difficult, is the sort of disposal of the hotel assets presumably much or, you know, the potential spin-off from ITC or much easier because that's clearly got nothing to do with tobacco, or would that remain still quite difficult? Yeah, well, our expectation is that... Well, let's put it that way, we have no intention to be in the hotel business. But you cannot forget the fact that ITC still hold, will still hold something like 6% of the shareholder of the hotels. But this is, this is, it's not, the problem is not the, the, the hotel, it's the tobacco that has the FDI. So there is no FDI involved in the hotels. Let's put it that way. Yeah. Okay. Thank you very much. Thank you. Our next question comes from Simon Hales of Citigroup. Your line is now open. Please go ahead. Thank you. Morning Tadeu. Three quick ones from me, please. I don't know if I can first just follow up on John's question there about the Russian cash proceeds coming in. You said you've received some cash in December. I don't know if you're able to quantify that at this point, and also talk about the timeline going forward as to when you hope to receive the remaining sort of cash in from that sale? That's the first question. Yeah, we are not giving any amount related to that, John, but what I can say is that we expect to conclude all the proceeds now in December, in the next coming weeks. And, because this has been happening since September, there was some limitations and agreements in terms of, a cap on a monthly basis, and, and this is bringing us to an end now in December. So by the end of the year, it's all done. Just to be clear then, in your 2.7x net debt, EBITDA leverage guidance you've issued this morning, that includes your assumption of those proceeds coming in this year? Yeah, it includes. Yeah, includes the assumption. And then secondly, I just wanted to go back to the U.S. Today, you talked about obviously the industry combustible volumes declining high single digits this year. How do you think about the building blocks of that? You know, what do you think has been macro-related, what's poly- usage, what's just the underlying decline rate in the market? I'm just trying to understand the build and how we think about this for not only 2024, but perhaps longer term, what you're now assuming is the rate of decline of U.S. combustibles. ... Yes. You know that the secular decline in the U.S. market has been always around 4%-5%. For sure, that the COVID years was an exception to that. A lot of consumers with a lot of support from tax and federal and state tax, and without having the opportunity to spend anything. So, we saw a very, I would say, unexpected trajectory for the positive, that has reversed completely from 2022 onwards. But normally, you would expect to see 4%-5%. There is a big weight now related to the macroeconomics, but there is also an impact coming from the illicit, modern disposable, which we believe that could well represent something close to 2% of this volume decline that you are seeing. So when you ask about what you see moving forward, like I said before, the elasticity is not different from before, is still 0.35, 0.4. So which means that there is still a lot of pricing power in the U.S. The cigarettes is still very cheap compared with consumer purchasing power. For sure, that the scenario will improve once the macroeconomics gets better, which means interest rates start coming down, consumer confidence start to go up, and then it will be everybody guess when this starts happening. Some people are saying that it's more towards the second half of 2024. That's why I'm also saying that we expect that most of the year we'll be seeing still a lot of pressure from the consumer point of view, and we start seeing some green shoots at more towards the end of 2024. But the bigger question will be in terms of, again, on the enforcement from the FDA on these modern disposables. And because this, if this happens, not just help with the vapor closed system where we are present, the legal part of vapor, let's put it that way, there opens up a big wide space, because today, we believe that EUR 6 billion out of EUR 10 billion vapor revenue is coming. More than EUR 6 billion, coming from these modern disposables. And this is also have an implication on the consumables trend, how they are trending, the consumables volume, the reduction in consumables for cigarettes. And this is something that we need to see in the next, I would say few months, as soon as the FDA conclude its process related to vapor. If they really can make a step change in terms of enforcement, and this will be more clearly to be able to precisely answer your question around what's the estimate moving forward. Got it. And then, just finally, I mean, you've said again this morning that you'll evaluate further cash return opportunities once you reach the middle of your leverage range. Yes. I mean, without getting too caught up in the semantics, I just wonder how you're now defining the middle of the leverage range. Is that 2.5x and below, or is that a range of sort of 2.4x-2.6x? Just a little bit of color there, please. Yeah. Well, we are seeing 2.5. That's what we are saying in the range. We have to take into consideration that the world has changed dramatically since we established the 3-2 range. Now, the cost of capital has increased substantially. The interest rates has increased. We expect them to have peaked now and start reducing, but it's still much higher than before. So, and also the fact that we still have out there a process in Canada, which is the CCAA, that at certain point needs to conclude itself. And so we had to create some space for that. So we don't believe that to be in the upper range of the range, for example, is acceptable anymore. That's why we want to bring this to the middle of the range, and then when you get there, we'll make some decisions in terms of capital allocation. Plus, one thing that is imperative in our mind is that once we restart the buyback, to do it on a consistent basis, and not on and off. So I need to be in a position to be comfortable, given all that I just said before, in order to be able to restart the buyback. That's why the 2.5 is the reference that we have. Very clear. Thank you very much. Thank you. Thank you. We have no further questions for today, so I'll hand back to Tadeu for any further remarks. Okay. Thank you all for all, all of you for listening and for your question. I would like to leave you with a few final comments. We are maintaining our full- year 2023 guidance, reflecting the resilience of our global multi-category portfolio. In addition, our expectation that new category contribution will be broadly break even in 2023, give us confidence in the long-term sustainability of our multi-category strategy. As we accelerate the next phase of our transformation, we are now committing to Building a Smokeless World. This is reflecting our ambition for 50% of our revenues to be non-combustible by 2035. By achieving this, BAT will deliver value for all our stakeholders. I'm clear that now is the right time to continue to invest. While this choice and investment have implications for our 2024 guidance, they will ensure sustainable growth and returns over the long term. We'll continue to reward our shareholders throughout this period, and we'll seek and evaluate all opportunities to enhance balance sheet flexibility. And with that, I look forward to updating you again at our full- year results in February. Thank you very much.