Okay. Good morning, everybody, and thank you for attending this meeting. Fireside chat with Jacek Olczak this morning, Chief Exec of Philip Morris. I'm Damian McNeela, Head of Tobacco Research here at Deutsche Bank. I think, Jacek, you have some opening comments to make before we get into some questions. Yeah, just to close the loop, earlier today, we issued the press release reflecting the latest dynamic environment on the exchange rates. We adjusted our guidance just for the currency. The whole underlying views for the year remains intact. I guess later on, we're going to talk, which was also in our release, about the ZYN U, and maybe in Japan. The way we look how we're unfolding, well, almost about the half of the year through. Most of our assumptions are coming because we predicted them well. However, estimating them at the beginning of the year, including the evolution of the volumes in Japan, post the tax hike and price increase. Also, I know there is a lot of focus on the U.S., quite rightly, and the expansion of the portfolio. At the beginning of the year, when we were giving a guidance, we have said and communicated that we expect as an expansion towards the end of H1. Actually, we have said this before the FDA guidance have been released. Now we actually converge in terms of FDA's views and our views on how the market's going to evolve. Yeah. The rest is in the release, in the details. Okay, well, let start there then. Obviously, IQOS is the driver of the business. I think given the focus of what's happening within the FDA, is it worth just sort of talking through your current views on where the FDA is heading, what you think of the progress has been made in terms of how they're changing the enforcement guidelines? We can sort of dig into the U.S. performance of ZYN and what you hope to do with ZYN ULTRA. Look, any clarification from a regulator, especially like FDA, is very warmly welcome, right? We avoid assumptions and speculations, and on the receiving end, we somehow can incorporate this into our planning. As a consequence of these guidelines and our assumptions before we start shipments of IQOS Excuse me. ZYN. We will come back to IQOS. The ZYN ULTRA in the nine and 11 mg strength and the portfolio of flavors, essentially this week, we start the shipments. We have started the manufacturing already some time before. It's a convergence, as I said, of FDA views on how they want to regulate, wish to regulate the market, and our views how to interpret the regulations. There will be more to come. I see the guidelines as a net positive. Obviously, the ideal scenario is that you have a very firm sort of a very clear regulations. In absence of those, these words from FDA found very positive, which should contribute. I'm talking about the pouch category or oral nicotine category. I think this should contribute to the further growth of the category. Just let's remember one thing, that the category is still in a very embryonic phases and phase. As the portion of the total nicotine space, very much in the U.S., but also in international is the smallest one. Okay? By all measures. This is good. We also taking opportunity while introducing ZYN ULTRA to the market to address some pressure on the price points. We said it on the release, but just to be very clear, the ZYN ULTRA will go in a pouches in a cans of 20 pouches. The price which we set for this part of the ZYN portfolio is an equivalent of 16 pouches. Per a can is slightly more expensive. Per pouches, we adjusting the pricing index. At least this is our move for now. Yeah. What's sort of driven that sort of thinking? Because obviously ZYN has sort of maintained its premium price point throughout the sort of the last couple of years. What's behind the thinking with the pricing with Ultra? I think if you ZYN is, as we all know it, under market share pressure over the last few quarters for a variety of reasons, partially because of what I call the asymmetry in a portfolio. Lineup of the products from a competition and lineup of the products from us, from ZYN. There's also the price. I mean, essentially as we speak now, ZYN will be trading or retailing, sorry, at about 160 + 170 price index. 70% premium. I believe obviously this translates into the share pressure. The good thing about it is that at 70% premium, many other product categories, including combustibles, if I compare Marlboro, this will be completely unbearable price premium. ZYN, under the circumstances, obviously is not growing, but it's also not tanking. Very sorry for the language. I believe adjusting to the adjustment in a price premium is needed there, but I believe ZYN has the ability to command the premium price positioning or price premium in the market. Yeah. Given the sort of the changes with the FDA and your ability to perhaps move in innovation faster or start to move innovation full stop. What do you think the outlook is for the category in the U.S.? Some people talk about it tripling over the next couple of years. Do you subscribe to that? Category today is growing somewhere in the range of, I don't know, 20%, 30%. Yeah. Can this accelerate from this level? Yeah, I could see the path there. Will it happen? It's very much on the consumer readiness. Remember that the switching between inhalable products from combustible cigarettes to the inhalable smoke-free requires a different behavioral, et cetera, adjustments from consumers than going from the inhalables to the oral category. Obviously, for people, for consumers who are in the oral tobacco, snus, loose tobacco, et cetera, which is quite a, not large, but still a substantial market in the U.S., it's definitely much easier to migrate to the cleaner form of the product formulations, which are the pouches. The same is in the Nordics, in Sweden, et cetera. In vast majority of our locations, people have to go through the inhalation to the oral use, which is not so obvious. The runway for adoption is longer, and you need to have a right product portfolio and the right marketing approach how to get the consumers there. Pouches obviously offer much less, if you like, much more opportunities during a day. Depends on how your day goes on. I am in the office, I am at home, I am in a taxi. I'm in all of the situations when people will reach out for nicotine-containing products. The freedom of use is vastly better, is almost unrestricted, compared to inhalable products. I think, long-term, oral has the great potential. The question is now how quickly consumers will be going into this category. Yeah. Do you think innovation has got a big role to play in that? It has. The spaces today, the way I look into this whole thing from all smoke-free product categories, so heat-not-burn, vape, and oral. The product differentiations on a heat-not-burn is presumably the broadest one between a market, what is in the market, very much to the advantage of our IQOS. Hence, 10 or 11 years after the launch of IQOS, we still command the three-quarters of the total market. There is a product differentiation, and obviously, consumers are preferring IQOS to other propositions. Vape space is a little bit convoluted, in absence of other word. Is this mix of illicit and a lot of flavors, a lot of proposition. It's a little bit difficult for consumers to navigate. Product differentiation on the pouches is not to the level which you will have on a heat-not-burn. Yes, you have dry formulations, you have moist formulations. They translate in a different speed of a nicotine release, which some people prefer this one, some people prefer the other one. I think there is more product differentiations on a heat-not-burn than on the pouches, for example. Yeah. One last question on pouches before we get onto the IQOS. In terms of the international markets that ZYN is in, are there any ones in particular where you're particularly excited about the potential of the brand? We are today in a 30+ markets with ZYN. The reason Obviously, we're leveraging the scale which we have for infrastructure, if you like, which we have built for IQOS. It's relatively easier for us to use the same brand retail infrastructure, but many other consumer-driven infrastructures which is deployed in about 100 markets. Some of these places we're going also to test in what is the reception of this category in a given market. Obviously, if you go to the markets, as I said before, when you have a history of oral usage of tobacco, it's obviously starting point is different. It also requires a different product portfolio. If you go to the markets which they're not even aware that you could consume a tobacco nicotine product for oral forms, the starting point is different. In every market, you will find today the phenomenal growth, but we also have to be aware that this is your early adopters group of consumer, which I believe is in every category. Obviously, it's good what is the first reactions for the consumers, but I believe more time is needed to see what actually sticks. Once you go for those people who always are very open to innovations and trying new formats, new formulations, what really will stay in the market. I do believe that in every market, when the new oral pouches exist, you could see the growth. Okay, I think may well follow the same path as a heat-not-burn or vape. Presumably, the runway will be a bit longer. For us, the most important is the destination. Is the consumer finding this format as interesting? Maybe I am not fully okay of adopting my full-day consumption into this format and the mix. We have said it in a previous communications that at least at PMI, we strongly believe in a multi-category approach. We see a synergetic effect between a heat-not-burn, a vape, and pouches, not only from us leveraging the route to market infrastructure, consumer-facing infrastructure, but also consumers. You could see that the consumers don't mind having another product format in their pocket because it offers them ability to consume, the nicotine consumer to consume the product in the different moments of the day. I myself, I am IQOS users and okay, I'm in Paris, so I will not tell you what I have in my pocket. There. I have a vape as well in my backpack. I can find the places where sometimes it's convenient as well. It's a synergetic effect that the sum of the three is more than the individual one of the category at the consumer level, and this is what we're trying to put as a commercial strategy. Yeah. If we move to IQOS now, I think going towards the end of last year and through this year, there's some investor concerns about IQOS's ability to maintain its share in key markets like Japan, given the expectation of increased competition. This morning you've said, "Look, we've still maintained strong share in Japan." Given the journey that you've been on with IQOS, can you give some high level key learnings about the brand that supports your conviction and your ability to maintain share? Yeah. IQOS in It's a great question. IQOS is okay, look, it's a 10+ years of us staying behind the IQOS, and I think as many of you have noticed, it is the one execution across every place where you go. Wherever you are, in Tokyo, Milan, London, whatever, and hopefully soon U.S., you will see the one product presentations, the one brand presentations, the one retail presentation, et cetera. It's nothing else, by the way, that us recycling the recipe from the past, how we built Marlboro. Our aspirations is to build a truly global leader premium positioning brand. We know that the consistency in execution is very important, especially in the world that everything is extremely connected online, offline, et cetera. There is a product differentiation. The experience which IQOS offers you today from a duration of experience, consistency of experience when I am consuming a stick is still today not matched by other products in the market. IQOS price premium index is presumably the highest on SFP categories if I compare it to other products. That's the brand and product differentiation. I never know how these methodologies are done, but if last or two weeks ago, I think it was, forgot now the agency which issued the top 100 most valuable brands in the world, and obviously Marlboro iconic is on a 30-something position. IQOS made it to the list with the position 70-something. Within 10 years, if you're building the brand which is being recognized and start entering these rankings, it means we're doing something very well, very right. IQOS is the brand to the extent that we also know that IQOS is extendable because of a common usage of infrastructure to other product propositions. Let me just translate it. If we have a VEEV, our e-vapor proposition, we'll put the VEEV merchandising co-presence in a brand retail, et cetera. Despite the VEEV doesn't carries the symbols of IQOS and the name of IQOS, consumer will connect the dots and will treat it as another innovation from IQOS. This is where the brand start being expandable or extendable to other categories. We don't talk about this because it is in the very early stages, but as we speak with launching or trying ZYN in Japan, when we're doing ZYN and IQOS. This is the examples where in 10 years of investment behind the brand, we can start leveraging to accelerate the growth of our propositions. Obviously, the product has to be right, et cetera. ZYN stand, excuse me, IQOS stands definitely Is a reputable brand for the high quality, great experience, et cetera. These things is not just the money which you put as an investment, but the time and the repetition of the investment which gives you that ability to leverage this later. Yeah. Okay. If we move to Japan, I think you described it as an atypical year for 2026. Yeah. Can you just talk through some of the strategies that the business is deploying to, A, fend off the competition and, B, deal with the excise increase? Yeah. There is a What we have in Japan is a first of the three steps of excise tax changes on the heated tobacco products and cigarettes later on. Obviously, it has resulted in the price increases. We have increased our portfolio of heated tobacco products. It is a TEREA and SENTIA by JPY 30. What we see, okay, there was a pantry loading, a very proportional or maybe even disproportional at the consumer level to the size and the relevance of IQOS in the market. I think the things now have ironed out, and we'll see where the category is. Obviously, it is a slowdown in a growth of a category because it is just the heat-not-burn which increases the prices, not the cigarettes at this stage. IQOS share plus minus is intact. TEREA obviously is under higher pressure than the tier 2 product which we have in our portfolio. The tier 2 product captured more, but so far is going as per our assumptions or expectations. As you know, Japan is not the market when you have frequent price changes, right? Every time you take the price, and especially if you take the magnitude as we did- Yeah -there will be some adjustment or time needed for consumers to adjust to the new reality. So far, cross the fingers, so good. Yeah. Then you touched on it earlier with the potential launch of IQOS ILUMA in the U.S. Yeah. Can you just give us your thoughts on, A, where you are with that- Yeah. -application in the U.S.? Okay. Every time when I got this question, since I remember. Yeah. Look, I am a CEO, not a fortune teller, right? Every time I said I think it is close, we have to define what is close. I do believe it is very close. Look, the file is being, to our information, and there is quite a regular exchange with our U.S. unit, with FDA. I think the file is being processed. FDA is doing these things very thoroughly. One could argue could they do it faster, but leave it around. I think IQOS is coming. It's closer to us than we think. I'm not saying this will be this quarter, et cetera. Yeah. I could see that we're progressing well. Look, we always were also very clear that I mentioned earlier about the multi-category. Our aspirations are that in every country in which we operate, we are present in all three categories of smoke-free products as we have today. In order of priorities, when we re-enter or enter U.S., okay, Swedish Match acquisition pouches. IQOS is longer way to get into the market. I believe there is a potential for the product proposition like it is. We also start thinking what we do about the e-vapor, et cetera. I think e-vapor, and I do appreciate the fact that I do understand the fact that in most of the countries, very much in the U.S., e-vapor has its own problems, and the category is not properly regulated, and it led to the massive penetration of so-called illicit product. We have to be careful. The illicit on a combustible product is very much about the tax price arbitration between the countries, while illicit on the smoke-free product is very much by the fact that the regulations do not allow some product to be present, and therefore, as the response to the demand and a growing demand, the so-called illicit products finds the way. I believe e-vapor category is also very attractive. Which ultimately, eventually, the problems in the market organizations will go away. The most important for us is where is the demand. If I see that one thing which we see very clearly after these 10 years of transformation, there is not a single country which you will not see the growing demand for the smoke-free products, maybe some more e-vapor, maybe more pouches, maybe more heat-not-burn. The direction of travel for the smokers is set. You see the accelerations or decelerations of this demand growth only driven by your ability to supply the product to the market in a legal- in a regulated type of manner. I think this thing will have confirmed that the smoke-free is not just a sentiment of this quarter, but this is what the smokers or current nicotine users are looking for. Yeah. Just going on that point about potential U.S. vape opportunity. It's clearly very large at the minute, but heavily dominated by illicit. What degree of improvement would you need to see before you? Okay. I will bridge to one of your earlier questions. I think that the guidance which you read very much, obviously from the pouches perspective. I think what, I can't say by design or by coincidence, but what FDA does right is that if there will be more innovative innovations or new products coming in the oral category from the legitimate part of the market, the less space you're leaving for the illicit market. What went wrong, I believe on the e-vape category is that FDA, as such, through the authorization process, have not created the legal market in a sense of a product offerings with whatever a consumer is looking for. Obviously, when you have this massive demand will find a supply. Unfortunately, there is illicit supply, now nobody knows what consumers are using. FDA is not comfortable. You have a couple other things which is more difficult to enforce. For example, youth prevention, and you name it, right? There are quite significant serious concerns which people may have around the category. I think what is right, what is happening in the U.S., that these pouches somehow are finding a regulated pathway to the market, which by definition takes the oxygen out for any attempts to supply the market from illicit sources. The consumers don't really feel like going and buying something in a Mickey Mouse or whatever questionable shop, et cetera, environment. They want to participate in the legal market when they have a guarantee of the product quality, et cetera. This is good. I believe ultimately, FDA will achieve the same on a e-vapor market. It's just the starting point is very messy at this stage as we are today. Yeah. I think a lot of the organic growth that PMI delivers is driven by IQOS. Can you just talk about how much further the margin opportunity is from increased scale in the IQOS platform from where we are today? Well, there is. I have guided the street that we see the opportunity for the margin improvement this year, and there is a margin improvement is baked in into our three years of midterm, if you like, growth algorithm. While this is coming from the number of factors, but look, we operate at scale. Okay? We're truly leveraging the global footprint. This is followed by the same product strategy, et cetera. Upstream economies of scale are going into our direction. If we will talk about the cost of our propositions, it doesn't matter which product, at the very beginning, when you had the small volumes and you don't know which of the product formulations will stay. You take devices, you take a consumer build, but also e-vape. Where are we today? You have a massive advantage to this one. Second is over a period of time, you're also normalizing your value sharing between the retail, yourself, and so on. All of these things are actually coming to the margin enhancement territory. There is a third component very much which we'll see on a heat-not-burn, obviously, as the taxation is lower. Very often we forgot about that thing, that the price productivity on a heated tobacco products is better than the price productivity of the combustible due to the tax structures. Not tax levels, but tax structures. Essentially, the difference between paying per unit, whatever the unit is, whether more skewed to the ad valorem price related. Net net, there is for smoke-free category, there is the room for the continuous margin improvement. Having said so, I know that we will run out of time. We'll never talk about the cigarettes. Yeah. We still see the room for improving the margins on a combustible cigarettes, which is the case as we speak. There's obviously different dynamics and different levers which we're using there, you know that we're playing to the value extraction from a combustibles category. You could look at our past results and what we see going forward. There is still a room for the further margin, already high, but the margin enhancements on the combustible products. Yeah. Okay. Well, let's jump into combustibles then. I want to come back to VEEV- Yeah -and the role it plays in the multi-category strategy. Like you say, we've probably run out of time. Combustibles are still the largest part of the business. How should investors think about how you prioritize your efforts on maximizing value from combustibles whilst trying to drive that smoke-free business? Okay, great question. If I take it from a resource allocation and the long-term resource allocations, which is our R&D and the CapEx, 90%+ is coming behind the smoke-free product. I use this as a example that our CapEx on the combustibles is well below the depreciation on a combustible. We have not built, over the last 10 years, a single cigarette factory. We have opened 16 manufacturing centers for a smoke-free product. This is how you allocate resources. Three quarters of our commercial spend is behind the SFPs, smoke-free products, and so on and so on. I will never disclose how much time I spend as the CEO on the smoke-free and the non-smoke-free, but it's a significant amount of time. A little bit less than R&D. Yeah. Okay. No, that's the alignment because, look, this is where we see, we brought the company to, I believe, a very strong top-line growth. Starting that for the last few years, we absolutely today operate on a different trajectory of the volume evolution. I remember the days when you always get pressure on the volumes offset by the pricing. Today we brought the company on a combined basis to the flat or growing total volumes. Within which, obviously, you have a decline combustibles grow SFPs. Pricing on a combustible stays intact. Obviously, you have all the margin enhancements coming from SFP. Both parts of the business are actually delivering as intended. There is a massive resource allocations from the combustibles going to SFPs. It's difficult for me always to talk about the others, but I think one thing which people may underestimate how we approach the transformations of the vision of a smoke-free is that we didn't treat it, or we're not treating this as addition to the existing business. Our direction of travel is this business is to replace the previous business. We will borrow from the past business the best of the things which we like in the past and try to protect them and enhance them in the new business. One of them is a margin profit. Another is the high cash conversion. I can go on and on and on, which we're trying to take ability to build the great brands like Marlboro, and now we're trying to use it for IQOS in and for other brands. This is how we're playing this game here. I think it's very important that if you make up your mind, do I want this business to be extension of the business or addition to the business? Or this is one business which is to overshadow and take over the other business, is completely different decision-making over short term, but very much long term. As I believe today still differs us in a marketplace, this razor-sharp focus on where we want to go. It yields the results. As I said, I started with a top line. Unlike in the space in which we operate, in our industry, you have flat growing volumes. You have a pretty quality, I would argue, top-line growth. We not only retain the margins from the past business, but we're actually enhancing the margins further. Okay. Yeah. There is still a lot of things we can do, but so far, I believe so good. Yeah. Okay. Just moving back to the final leg of the multi-category strategy. It's done really quite well across Europe. What do you attribute that success to? Well, there was a massive learning of organization, okay, because we always talk about the resources in terms of monetary. Look, what we know today, it's not me, but the thousands of people at PMI. What we know today about the consumer centricity, consumer journey. Remember, we've been repositioning the company from a classical B2B to B2C, not maybe from a transactional perspective, but from the relations perspective. I think it serves us very well, okay. This is now we're leveraging the investment, which very much was carried by IQOS. I said earlier, we can leverage this to our product categories within a smoke-free territory. I think maybe there were setbacks, right? There is no questions that you never have, sorry, the growth line. There's always something happens on the regulations. Like I mentioned unintentionally or intentionally, the new regulations in France that you can end up in jail but having nicotine pouches. Look, the level of the human stupidity sometimes have no limits, and every time we're getting surprised. Look, I've seen a lot of crazy things in my life, and I think, okay, it's just the blip. At the end of the day, people will come up to their senses and will have sensible regulations. Okay. On the one hand, you have almost enthusiasm on pouches in the U.S. You have France, which is in the moment of weakness. One of many. They come up with regulations like this. Okay. I am not involved in the French politics. I think the experts in this country could know what to do. Yeah I think the regulations is simply stupid. Yeah. I do have a question on EU regulation. EU regulation. It's very important, actually, because we haven't talked for a while. We are in the middle of the final stages of a Tobacco Excise Directive conversations, final negotiations. We'll see. I think the next few weeks, we should have an outcome of this. I think it will go in the right direction. It's EU, so everyone has their say, and there is a lot of convergent and divergent opinion. I believe it's going in the right direction. Within EU, you have mix of countries which are very open mind, forward-looking, carbon reduction-based regulations. You have islands of still being stuck in the past. I think the things are going in the right direction. I am positive on this one. I believe when we'll be closing a quarter, Q2, we should presumably know more facts about the Tobacco Excise Directive. Yeah. There is a Tobacco Products Directive, which is a next wave of regulations there. Okay. Slightly conscious of time. I know you've reiterated guidance this morning. It's always a focus for investors. What are the key sort of risks, both positive and negative, to delivering the guidance for this year? I don't think we are unique, right? We're all exposed to the same external work dynamics. Right. You have impact of conflicts. It's not the one conflict. You have energy prices which start to going up. You have to somehow accommodate this into your numbers. You have currencies which are never been very stable. Definitely, this is not a period of uneventful work for the currencies. We're reiterating the guidance. I think we have ability in the business to offset some things which we have not been thinking about at the beginning of the year. The other hand is, look, we operate that scale of a global basis, smoke-free products in 100+ markets. There's always things which are getting a bit better so you can accommodate the things which are going against you. Not the major things. I always underline this whole thing. The things which keeps us going and keeps me going is the demonstration of a growing demand behind smoke-free product in every part of the world. That's the nice problem to have. If I see where the consumer is going and the consumer is voting, I want and I am open to try more smoke-free products. The rest is closer to our abilities. How do we develop the product? How do we market the product? How do we advocate for the product with the regulators, et cetera? There are some other industries which have a demand problem. We're not in the space with the demand problem. Yeah. That's a nice problem to have. Yeah. I think maybe just the sort of the final question is around, the business has always had very strong cash generation. Gearing has been coming down consistently over the last couple of years. You look to be on track to sort of hit the 2x net debt to EBITDA. How's the board currently thinking about capital allocation priorities? The same way as the management and it is the same way as the investors. Okay, every time when you bring your balance sheet to the territory, which we've been very transparent and open, the proper conversations will be what do we do with excess available cash? As always, there is no magic, right? You don't have to use AI for this one. Either you invest or you give it back to shareholders. You know that Philip Morris was always very strong about the dividend policy. We have very nicely, over last period, brought the dividend payout ratio to the level which I believe it's a good sustainability of dividend and the progress of the dividend in terms of our growth. Now is the question, if we have a view on the permanent excess of our cash. You know what we did in the past. It was, we return it to shareholders. Shareholders? Yeah. Yeah. Okay. The board is aligned. There's no magic, right? In this whole thing. It's more the question is now about the timing- Yeah -when it's appropriate for this one. We have to remember one thing, that on the underlying basis, transformations, no transformation, PMI was always doing well. What send us out or what forced us at that time to stop the buyback, et cetera, was not that we start having underlying performance problem. It was the currency. Right? We have lost a lot of the cash flows, if you like, due to the currency conversions. Yeah. Will put us into the territories. Obviously, then you have Swedish Match acquisitions, et cetera. This was one of the key factors around our numbers. Now we're going into territories that the currency is not really the drag on us. It's actually becoming net positive. Underlying business is still delivering and actually continue growing in, I think, in a good quality manner. The path, and with the margins which we have and our cash conversion which we have, CapEx is not really the- we are not in the data centers chips type of a business. Okay? Our CapEx is 1.5, 1.4, depend on the period business. If you take the cash which the company generates versus CapEx, that's it. Minus dividend, okay, the rest is available. Yeah. There's no timing update on when the share buyback's going to recommence? No. We have regular meetings with the board. Yeah. Look, the board looks as the management at the balance sheet with the same frequency. They see whether we have said that we will bring that leverage ratio to the level where we wanted to have before the year end it seems that- Yeah. -we're landing there where we wanted to land. Those conversations are in front of us. Okay. I think that's a good place to end it. Jacek, thank you very much for your time. It's been very- Thank you.