Good day, and welcome to the Philip Morris International First Quarter and 2021 Earnings Conference Call. Today’s call is scheduled to last about one hour, including remarks by Philip Morris International management and the question-and-answer session. [Operator Instructions] Media representatives on the call will also be invited to ask questions at the conclusion of the question-and-answer from the investment community. I would now like to turn the call over to Mr. Nick Rolli, Vice President of Investor Relations and Financial Communications. Please go ahead, sir.

Welcome and thank you for joining us. Earlier today, we issued a press release containing detailed information on our 2022 first quarter results. You may access the release on www.pmi.com. A glossary of terms, including the definition for reduced-risk products, or RRPs, as well as adjustments, other calculations and reconciliations to the most directly comparable U.S. GAAP measures and additional heated tobacco unit market data are at the end of today’s webcast slides, which are posted on our website. Unless otherwise stated, all references to IQOS are to our IQOS heat-not-burn products, and all references to smoke-free products are to our RRPs. Growth rates presented on an organic basis reflect currency-neutral adjusted results excluding acquisitions. Figures and comparisons presented on a pro forma basis entirely exclude PMI’s operations in Russia and Ukraine. In the third quarter of 2021, we acquired Fertin Pharma, Vectura Group and OtiTopic. On March 31, 2022, we launched a new Wellness and Healthcare business, Vectura Fertin Pharma, which consolidates these entities. The operating results of this new business are reported in the Other category. Business operations of our Wellness and Healthcare business are managed and evaluated separately from the geographical segments. Today’s remarks contain forward-looking statements and projections of future results. I direct your attention to the Forward-Looking and Cautionary Statements disclosure in today’s presentation and press release for a review of the various factors that could cause actual results to differ materially from projections or forward-looking statements. It’s now my pleasure to introduce Jacek Olczak, Chief Executive Officer, and Emmanuel Babeau, Chief Financial Officer. Over to you, Jacek. 1

Thank you, Nick, and welcome everyone. I hope you are all safe and well. Recent months have been extremely challenging for many of us given the tragic events related to the war in Ukraine. I would like to express our sadness and solidarity for the people of Ukraine. Our primary concern is for our employees and their families and we have been doing everything we can to support them, with three priorities. First, evacuating our colleagues, we have evacuated over 1,000 colleagues and family members from the country and supported more than 2,700 others to move from conflict zones to locations away from the heaviest fighting. Second, we are delivering critical aid to people that cannot leave or who decided to remain in Ukraine. And third, we are providing accommodation, immediate assistance and a path forward to those who left the country. In addition, we have already contributed around $10 million in funds and donated essential items across the country, directly to humanitarian organizations and through our own employee-led initiative, Projects With a Heart. This includes providing medicine, food, clothes, and a variety of other items to our colleagues and to the broader population, the purchase of 25 ambulances and the set-up of a mobile hospital. Based on our current visibility, we estimate an additional cost of around $25 million for additional support to employees this year. Our colleagues in neighboring countries continue to provide vital support to all people arriving from Ukraine to seek refuge. Our heartfelt gratitude goes to everyone involved in these generous efforts to help at such a difficult time. In terms of the impact on our business operations, production at our Ukraine manufacturing facility in Kharkiv remains suspended. While business activities in Eastern Ukraine have been mostly heavily impacted, we have seen some resumption in…

Thank you, Jacek. We delivered a very strong performance in Q1, with double-digit organic net revenue and currency-neutral adjusted diluted EPS growth on a pro forma basis, excluding Russia and Ukraine from both the current and prior year quarter. Overall currency-neutral results were also ahead of our expectations. Our IQOS business delivered an excellent quarter, continuing the reacceleration seen last quarter as device supply constraints continue to ease. Our IQOS user base grew by more than 1 million excluding Russia and Ukraine, marking a very strong performance. RRP pro forma net revenues grew by 23%, with pro forma smoke-free net revenues over 30% of the total company. Importantly, pro forma HTU shipment volumes grew plus 18% compared to the prior year quarter. This reflects excellent progress in the EU Region, continued growth in Japan as well as over 50% growth in low and middle income markets. PMI HTUs are now the second largest nicotine brand in markets where IQOS is present as our efforts on innovation, portfolio and geographic expansion drive consumer trial and adoption. The impressive start for IQOS ILUMA continues in Japan and Switzerland, with very encouraging initial take-up in our latest launch market of Spain. The initial success in these three very different markets reaffirms our confidence in ILUMA as an exciting future growth driver for our company. Meanwhile, our combustible business performed robustly, exceeding our objective of stable category share and delivering positive volume and organic net revenue growth. In addition to supporting strong financial performance, this also enhances our ability to maximize the switching of adult smokers to smoke-free alternatives. Overall, our business is off to a strong start and while currency is unfavorable in 2022, we expect to deliver another year of robust organic top and bottom line growth. Turning to the headline numbers,…

Thank you Emmanuel. Despite the challenges in Russia and Ukraine, we have delivered an excellent start to the year with a strong recovery in IQOS user growth, and exceptional initial results from the groundbreaking innovation of IQOS ILUMA. As we covered recently at CAGNY, we have a rich pipeline of further smoke-free innovations to expand and grow across new and existing categories and geographies. Our combustible business is now stabilizing category share, despite the impact of IQOS cannabilization, which allows us to accelerate further switching of smokers to better alternatives. We also continue to invest for long-term growth through the development of innovative wellness and healthcare products, which seek to deliver a net positive impact on society. Our 2022 fundamentals are strong, with a pro forma expectation of 4.5% to 6.5% organic net revenue growth and 9% to 11% currency-neutral adjusted diluted EPS growth. Despite the significant inflationary pressures and disruption in global supply chains affecting first half and the full year, we also expect our organic operating income margin to expand to up by 100 basis points. In addition, we have taken the conservative assumption in our reported guidance of no further contribution from Russia or Ukraine from April 1. Overall, we are very confident in the near and mid-term growth outlook and remain committed to sustainably rewarding shareholders over time as we continue our transformation. Thank you. And we are now happy to answer your questions.

Thank you. We will now conduct the question-and-answer portion of the conference. [Operator Instructions] Our first question comes from Chris Growe with Stifel. Your line is now open.

Hi, good morning.

Good morning.

Hi, Chris.

Hi. I just wanted to ask if I could, first, as I think about your IQOS guidance for the year and obviously reducing that for Russia and Ukraine, I just wanted to be sure, as you think about – the new guidance incorporates your expectations excluding Russia and Ukraine, is that the only adjustment that you’ve made for volume and that estimate the new 88 billion to 92 billion sticks, is that just taking out your expectation for Russia and Ukraine for this year?

That’s correct. We’re just talking for the entire year the volumes from Russia and Ukraine. But then, obviously, for the Q1 we recognize what have been sold in both geographies, which is 5 billion. Therefore, on a pro forma for the full year excluding Russia and Ukraine looking into 88 billion to 92 billion. But if you add back the 5 billion, which we already sold during the first period, the first quarter, that directly translates to 93 billion-97 billion, which would assume or is assuming that there is no further sales of IQOS as of April 1 in neither Russia nor Ukraine.

Got it. Thank you. And then I just wanted to understand a little bit about the second quarter, you’ve talked about higher device shipments in the quarter. I think that’ll be a stronger driver of revenue growth at the same time you have some timing differences, it sounds like at least in Japan where that will weigh on revenue overall. I think you’re expecting more like a low single-digit increase in revenue. So I just want to understand I guess to the degree you can help in terms of the magnitude of those two factors. It sounds like the Japan timing maybe a larger factor on 2Q revenue. And then just to understand also the availability of devices. Is it the second-half when that’s back to like a, I’ll call it full availability of devices? And is that a function of not having devices committed to Russia and Ukraine is providing more availability for the rest of the world, help that clear? Thanks.

Yes. Okay. So the first quarter shipments of the devices on the one hand, yes, you’re absolutely right, it contributes to the better help to the global revenue, but remember that the devices are putting a pressure on the margins, right. So that’s started between the devices and the impact on the one hand on the revenue and the margins. The big impact which we expect to have in Q2 is on the supply of the shipments of the consumables. So the heat sticks and TEREA. And as a result, among other constraints on the supply chain of stopping the investment in Russia, we need to resource that missing capacity to our locations and it will take us a while. And therefore, we expect that we will go lower with the inventories in Japan, mainly Japan in order to ensure that on the manufacturing side, the proper resourcing we will have when we expect quite a robust growth on IMS, and the market share. And I think, Emmanuel, on the slide have indicated that we should think we’re aiming at 24% – around 24% market share for the quarter in Japan. So it’s nothing on the consumer level on the offtake level, but we need to do this operations through the inventories in order to resume to the normal course of shipments in the Q3 and Q4. And hence, this will drive the better performance and stronger performance in the second half than the first half, which will be what we estimate to be impacted by the Q2 difference in the shipments. Now with regards to the devices, I mean, there is this continuous sale of the devices in the excluded geographies, right. So it’s not that we stopped selling, we stopped recognizing this whole thing due to the visibility…

And Chris maybe just to complement, I think it’s really important that everybody understand the evolution of the gross margin in Q1, Q2 and H1 versus H2. I’m sure you remember that last year, the gross margin in H1 was extremely high, we were at 70%. The gross margin was lower and probably more normative in H2. So what we have seen in Q1 was first of all facing very high comps. I think we’ve been describing in the presentation, the various driver for the 250 basis point reduction in the gross margin. What you can expect for Q2 is this element to continue knowing that the gross margin reference is 70% as well last year in Q2. And on top of it, we will have more device sales even than in Q1, which I think is good news because it shows the success of IQOS. We have increased air freight cost for the reason that we mentioned and the tension on the supply chain and that’s going to have an impact on the margin. And last element, you have this mix, which is a temporary element of course like air freight, by the way on the fact that the volume will be lower for Japan in Q2 with the recovery and the compensation in H2. And with that, you have the reason for increased pressure, gross margin pressure in Q2, but with the compensation that will come in H2.

That was great color. Thanks so much.

We’ll take our next question from Pamela Kaufman with Morgan Stanley. Your line is now open.

Hi, good morning.

Good morning.

I have a question on the 2023 outlook and how you’re thinking about your targets for next year, particularly on the HTU side, should we assume a similar reduction to your heated tobacco target as the guidance reduction for this year of about 20%? And given Russia’s significant contribution to the overall IQOS business, how are you adjusting your strategy for achieving your target for 50% of revenue coming from smoke free products by 2025? Thank you.

Well – thank you. We continue with the geographical and portfolio expansion of IQOS in the existing and the new geographies and obviously this we confronted with all the supply chain constraints and availability of devices et cetera. So I mean, we all know this. The good way or one of the way maybe to look at that 2023 target, so I believe you’re referring to the absolute volume target for IQOS is that, okay, let’s assume that we don’t have and the lowest assumptions you can make is that we will not realize any further sales as of April 1 in Russia and Ukraine and that’s essentially the floor on that thing. Where do we land? I think everyone will appreciate we need a little bit of a time to really have the full visibility what’s happening or what we will do with our business and our intentions about exiting Russia and also what’s the – whatever might be the longer term outlook for our Ukrainian et cetera. There will be a band in absolute numbers. It’s no questions about it. The way I look into this whole thing, we may be in a situation that we’ll deliver this target, but with about a 12 months delay. I mean, I am not in a position – my thinking is not changed the target just recognized that you maybe need a little bit of additional time to deliver on this target. All other parameters, the relative growth targets being the top-line, bottom-line and the relative growth of the – or relative contribution, which is very important target for us of the non-combustible to combustible business they remain as we have said before. And on that one I’m confident we should be in a position to deliver this. But in absolute volume, yes, I mean, we might have a miss. But the way again, sorry for repetition, I look at this, maybe I need a 12 months more to deliver the same target for other geographies and organic growth in existing geographies.

And Pamela, on your question on how do we get to more than 50% in 2025. I’m sure you’ve seen that in Q1, on a pro forma basis excluding Russia and Ukraine we are a bit below the full perimeter of the Group, but not that much below. So we are at 30% versus around 31%. So, yes, there is a bit more ground to cover to get to 50%. But given the dynamism that we see in our IQOS business and the opportunity we’ve been clearly showing in low-and middle-income country, we think we can catch up and deliver this more than 50%.

Thanks. And then a question on new IQOS user acquisition, you saw a good recovery this quarter, despite taking out the impact from Russia to 1 million user – over 1 million users. Do you expect to see a similar piece of new user acquisition over the course of the year? And how much of a role did ILUMA play in that, would there be any impact from the supply disruption on the TEREA consumables? Did you hear my question?

Yes, I think your question was, sorry, because we all cut half the sentence. Your question was can we expect the same dynamics of the user acquisition right going forward?

Yes.

Okay. So look, I mean, above 1 million acquisition this quarter, which show the growth sequentially above close to 1 million acquisition, the Q4. I mean that directly correlated to our availability of devices and a full portfolio of devices. As you know, we also play now the different price segments game, we have more expensive devices, mid-price devices, lower-price devices. So as long as we have availability of devices, I actually think that number, we should repeat the same sort of the rate, if not actually higher, because you could see from the conversion perspective and the consumer liking measured by NPS and other parameters what we’re offering today that is meeting the consumer expectations. So there’s also bridging somehow to the before questions that once we see the visibility on the devices, right, in the next quarter or so and all the dynamics, which we can achieve outside the Russia and Ukraine then we would be in a positions to revise what actually we will deliver in a year from now in terms of the total IQOS volume.

Thank you.

Thank you.

We will take our next question from Vivien Azer with Cowen. Your line is open.

Hi, good morning.

Hi, good morning, Vivien.

So I wanted to follow up on Japan, I’m just having a hard time reconciling two comments that you guys made. Number one that there was negative device mix in the quarter, but that you had device growth from ILUMA, because last quarter, I thought the launch of ILUMA was mix accretive in Japan, so am I misunderstanding something or did something change? Thanks.

I think that the device mix we’re talking that we’re selling three – as of now, three versions of IQOS ILUMA, you have a premium, mid and the lower price, lower price was just introduced now to the market to the consumers. So obviously in the shipments, we already had them in the Q1, because this is all recognized on the shipment. And second is that this device, I mean, the ILUMA ONE, which is the lowest price device goes at attractive price in the market, higher than the competitions, but attractive and lower than the price that we used to have on the one version of IQOS 3 before. So maybe here to Vivien we need to look into.

Yeah, Vivien if I may, Emmanuel speaking. It’s a positive in the mix within the device, because it come at a higher price. But any growth in device is negative to the mix in term of gross margin, because it’s coming with of course a much reduced gross margin versus the consumables. So the more device we sell, you have some impact on the revenue, which is positive, but it has a dilutive impact on the gross margin rate to be very clear.

Understood. I think we had sales graph was the pricing tier. So thank you both for that. For my second question, I was hoping to get some incremental color on Germany, you had meaningful share growth, both on a year-over-year and a sequential basis. Is there anything to call out there from an activation standpoint, because the results were very strong?

No, this again comes so we had post price increase, post price change environment in Germany, the one thing. And second is, again, I mean the Germany start benefiting from not the restricted access to the devices. So this again follows the same story that we have a continuous broad range availability of the devices. We can go into the portfolio again and hence the performance. And this is one additional comment I would make here Vivien is that Germany is still running on the IQOS free one version, which is a blade version and the reasons why we went for example to Switzerland with IQOS ILUMA before opening the larger market, which obviously will take a lot of volume of the device is how IQOS ILUMA would to performing in the similar sort of a geography. So I am very pleased with the success so far of IQOS ILUMA in Switzerland, especially the German speaking part, because I used this as a – we could use this as the proxy for German on acceleration of the – further acceleration of the growth in Germany. Now, nothing is certain in life. But I think this is as far as we can read through the consumer reactions in Switzerland.

Understood. Thank you very much.

We will take our next question from Bonnie Herzog with Goldman Sachs. Your line is now open.

All right. Thank you. Hi, everyone. I had a few questions on Russia, I guess, I was hoping you could share, maybe just a few more details on your exit from the country and really what the mechanics of that are? I guess, could you help us understand what’s being manufactured in the market currently? And then what about the volume your manufacturing facility in St. Petersburg exports? Can you share with us roughly what percentage of the volume is exported? And then where you plan to maybe shift that volume to and when? And I guess, I’m just trying to think about all this in terms of any costs associated with that? And then is that being reflected in your guidance?

Bonnie, Jacek here. Judging just by the number of details, you mentioned in that question you will appreciate how complex the situation is in Russia. So one by one. Russia in terms of the so far production and export allocation was not really that significant. We had a much more significant plans of expanding Russia is that one of the key suppliers of new IQOS ILUMA and hence our decision to immediately stop that investment as a result of that we created a temporary halt for the rest of the market. Partially for Russia launch of ILUMA, which we also canceled, but also that Russia was supposed to contribute to the supply of the ILUMA consumables that are HeatSticks into other markets, including in Japan. So our first priority is how we can resource that capacity there. Obviously, that capacity means that we have an equipment installed in Russia. And we can’t – so we don’t use this equipment today. What will happen to that equipment going forward? We are also working on a certain plans, but I would stop here, I will not go into more details. Now to exit Russia in the orderly manner for us that we need to reconcile the interest first of all of our shareholders, the employees in Russia. And you know that the ever-evolving legislation in Russia puts the significant risk or constraints of our ability to adhere. And this is only in the context of the very evolving regulatory environment, both on the international, it’s obviously the sanctions, but also the legislations or legislation in Russia. So if we want to, we have a significant presence in Russia, as we all know it. We’re in the market, organically built the business over the last 30 years. This is 100% business of PMI International. We don’t have any partners contributing to the core business. We obviously are connected with the local supply chains and wholesale and distribution components. But PM Izhora and Philip Morris sales and distribution is 100% Philip Morris business. We have some shareholding in addition to this, we have a key distributor in the market together along with our major tobacco company. And to unwind in orderly manner all the strengths, which we have in Russia is a complex endeavor, but we are committed to do so. Hence, in our guidance and the decisions to look at the PMI as the rest of the business, which is doing absolutely great despite all of the headwinds, which we have and so on rather than have polluted with something which we have limited visibility and ability to act accordingly. So I know that my answer have not gave you more clarity, but that is the best which we can say at this moment. I mean, we’re working on exit, but presumably, one of the most complicated transactions in the terms of the history of the group, which we’re drawing from the board.

Yes, I can only imagine. I appreciate the color. And just to be clear, just in terms of the exit. Do you have a target date, the full exit of the market that you can share?

Well, we rather not delay beyond what is necessary as long as we satisfy all the teams or the groups if you like. And again I repeat it, I mean our – we have a responsibility to shareholders. But we also have responsibility to employees in Russia. And overall, broad group of stakeholders with the various expectations and try to resolve that equation to the satisfaction of everyone that’s becoming complex exercise. But we are working relentlessly of how to move forward. I mean I would appreciate that if this was any other size of the business and presence in the market things could have looked differently. But this was a very big business for us.

And honestly, that kind of brings me to my second question, as I think about your new pro forma HTU volume guidance of 88 billion to 92 billion units for this year, which is assuming 22% growth at the midpoint. I guess, I’d like to understand the key drivers of that since the growth outlook is now I guess, above your previous guidance, but Russia really I thought was such an important driver of that and for your future. So I just kind of want to understand what gives you the confidence, especially also on top of the uncertainty related to the semiconductor chip shortage situation? Thanks.

Yes. Thank you. So obviously we need to make some or making some assumptions on the supply chain, as I said earlier. We don’t live today in a perfect visibility for all the remaining quarters of this year. But I think we have enough of the confidence to come up with this pro forma estimate or this pro forma guidance. Now, look, you see that continuous trajectory of IQOS growth in essentially in all geographies, including the geographies that historically were a bit tougher for us, where yet we had the progress, but they were not really growing at the group level of the growth and now we see that Japan, with that ILUMA and a few other locations with ILUMA already having a massive acceleration of the growth. We know what we have in our plans for this thereafter with ILUMA. We also know that IQOS [indiscernible] which is the currently the mostly sold device also continues to be very attractive. And this is continuously despite the fact that we offering our portfolio both of the devices and the consummables at a significant premium to any other market propositions. I think we’re getting this confidence that IQOS continue to grow and we’re looking forward also to the moment when it will accelerate its growth. Will IQOS in a near term excluding Russia and Ukraine, sorry, the rest of the geographies compensate the lack of Russia and Ukraine? I think over a longer period of time, we once notice, but in shorter period of time it might a bit challenging, okay. We’re not making any promises at this stage.

Okay. Thank you.

Thank you.

We’ll take our next question from Gaurav Jain with Barclays. Your line is open.

[Technical Difficulty]

Gaurav, we can’t hear you. Could you repeat the question please?

Sure. Is this better?

Yes, it’s better. Yes, thank you.

Sorry about that. So my first question is your guidance on industry volume and your own volume ex-Russia and Ukraine. So it seems to have become better. And if I look, especially at your European volumes, they are quite strong. So we have this sort of the macro pressure on consumers and inflationary pressure and Europe might be in recession, not in recession oil price impact. So my question is that why are you seeing stronger volumes? And is it that when cigarette prices historically used to be up 4 in Europe and wage growth was 1, so cigarettes are becoming less affordable and right now cigarette pricing is still 4 while wage inflation is probably 4 or 5, so cigarettes are actually becoming more affordable and that’s why you are seeing better volume trends?

Well, I think we should – I mean, we have the information of Q1 that are pointing to this evolution. It is true, Gaurav, that there are no uncertainty on what’s going to be the growth of the global economy in the coming quarters. I suppose there is some trend in the market that our underlying trends in term of demographics and behaviors. Let’s face it there is also still the contribution of rebound after the COVID. So last year was not a normal year, we are becoming much more normal. I’m not saying we’re there yet. I mean, in Duty Free, we’re not. But in other markets, we can hope that for the coming months to be more normal and that’s going to be a positive. So I don’t know what’s going to be the impact of a potential slowdown of the economy. By the way, we’re going to have an impact on volume or more on downtrading and some countries in consumer going for cheaper offering. Today what we see and we’ve been highlighting that is Marlboro recovering market share and we see Chesterfield being very successful and we see of course great success with all our IQOS brands. So that is what is driving for us this outlook for growth in volume. And of course, starting Q1 with a very nice growth, even if we flag the fact that there were some – maybe some anticipation, but I think that the Q1 numbers are there. It shows the dynamism that we are seeing in our portfolio.

Sure. And coming to the EPS guidance and the dividend. So your dividend payout ratio will now be north of 90%. So how does that impact, how you’re thinking about share repurchases? And we keep seeing the cycles with PM every three years, you have massive adverse FX and we go back 10 years, euro used to be €150, yen was JPY70, then we had one cycle in 2014 and 2017. Now we have another cycle of FX. And clearly a lot of your costs are in Swiss franc and dollar. So is there something you can do so that the cost mismatch, the transaction FX mismatch is lesser? And we again get into the situation where dividend payout ratio is becoming very tight.

Well, Gaurav, so yes, of course on the basis of the guidance that we’ve been giving, we would have a payout ratio that would significantly increase versus 2021. I think we’ve shown in the past, the capacity to grow in profit over time and reduce that. Our objective to go down over time and we didn’t give any kind of precise to go down to 75% is still there. I agree that given the adverse event that we are facing, it’s going to take a bit more time to get there. That’s the case, not so much, I mean, the currency is playing, but it’s really the accumulation of currency and Russia leaving the perimeter of the group that is driving that situation. Now on the ForEx there’s two elements. One is the pressure on margin and we continue to work on trying to equalize better the currency in which we’re investing and the currency in which we have our cost. We do that with the supply chain. There are some limitation, because there are a number of things that you buy in dollar, of course, we do that through everything we buy. But there is one element that we kind change that we have limited invoicing in dollar. So when the dollar is going up versus most of the currency that is an impact, which is mechanical and on which there is not much we can do. So we can work and I think we continue to work on the margin dimension. We cannot work on the fact that we have limited invoicing.

Sure. Thanks a lot.

Thank you.

We will take our next question from Owen Bennett with Jefferies. Your line is now open.

Owen, do you have a question?

And it appears Mr. Bennett has dropped. We will go ahead and take our next question from Jared Dinges with JPMorgan. Your line is open.

Hi guys. I just wanted to ask about the pricing environment given inflation in places like Europe is reaching levels not seen for a long time. Do you think there could be more of an opportunity to put through additional price increases given you are seeing cost inflation as well on a global basis, especially post Russia and Ukraine? Maybe we can see a bit more of a margin offset.

We’re taking a price increase and a price variance. So the opening of the – came in be better than we initially thought. We will see what the remaining part of the year and especially the second half will bring. When we look at the inflation, I mean, we also have to look of what is the inflation of the material. So like the cost of living and what is the inflation of the income, right? Because we haven’t yet seen the inflation on the income level at the concept level. So we have to find the right spot at the right balance where do we get into this. But in most of the geographies I mean the pricing environment, I would characterize it is getting positive. I mean, Emmanuel, talk about the Indonesia. On the other hand, we have a very strong rebound in volumes in Indonesia. And hopefully also Indonesia, which used to be quite important a significant contributor to the pricing will hopefully towards the end of this year or definitely 2023 will resume this pricing contribution. We had a price increase in Germany flowing through the market, the Philippines, Turkey, okay. Now Turkey goes to the hyper-inflationary accounting. We’re trying to price it widely, looking at the inflation as the pressure. But as I said, at the beginning of the year we already started with the ahead of our own expectations pricing variance. So let’s see how that this will continue through the year.

Got it. And maybe just to follow up on Southeast Asia, clearly it’s a very strong start to the year in terms of volumes, what are your expectations there on the volume side for the rest of the year?

Well, there is this continuous – remember this is the part of the world, which is still not out of the woods with regards to COVID unfortunately, right? So the situation is not really didn’t get back to the pre-COVID side. I believe there is some underlying growth opportunities just by the fact that if they continue to recover from the COVID situation, we should start seeing the continuously better volume. And as I said, I mean we took the price increase in, Philippines, we’re taking some pricing in, we’re taking the pricing a little bit accelerated in Indonesia, but on the other hand, we are still in the – as you remember, Indonesia take a couple of around steps of a price increase to pass on the beginning of the excise increase. So we still need a bit of time to go into the net margin improvement territory. But it’s very much hinges essentially to keep it short on continuous recovery and no further surprises with regards of the COVID situation.

And Jared, as we said, we expect to grow nicely revenue in the region this year, which would be a very nice evolution.

That’s correct. Thanks, guys.

Thank you.

Thank you. That was the last question, operator.

And there are no further questions on the line. I will turn the program back over to Nick Rolli for any additional or closing remarks.

I think Jacek had some closing remarks.

Okay, so thank you everyone for your attention and the patients and the quarter was pretty complex and complicated for us and since due to some technical problems the earnings call also can’t somehow adjusted to the situations in the quarter. I have one on the comment toward everyone I hope is still on the line. I would like to take this opportunity to thank Mr. Nick Rolli, outstanding contribution to PMI and our former parent company over the past 35 years and particularly as the Vice President, Investor Relations since the 2008 Philip Morris International. As you all believe will agree with me, he has been a critical contributor through the journey of our company. And I know that you, our investors and analysts will join me in congratulating Nick and to wish him all the best for his very well deserved retirement. At the same time, I would also like to congratulate James Bushnell on his new role I have a pleasure because I personally was hiring Mr. Bushnell to PMI in his new role as the successor to Nick Rolli and I believe he would receive the same support and we welcome as Nick Rolli enjoy from you for the last 35 years. So welcome James, and thank you, Nick.

Thank you, Jacek. Thank you, Emmanuel. Congratulations, James. Thank you all on the call because I know we had some long relationships with many of you and I value that relationship and thank you very much. That concludes the call. And we apologize for the technical difficulties on my last call. But we’ll will resolve everything and look forward to dealing with your follow-up questions. Thank you very much.

See you soon, guys. Thank you.

This does conclude today’s program. Thank you for your participation. You may disconnect at any time.