Good day, and welcome to the Philip Morris International Fourth Quarter 2022 and Full Year 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] I will now turn the call over to Mr. James Bushnell, Vice President of Investor Relations and Financial Communications. Please go ahead, sir.

Welcome. Thank you for joining us. Earlier today, we issued a press release containing detailed information on our 2022 fourth quarter and full year results. You may access the release on pmi.com. A glossary of terms including the definition for the smoke-free products as well as adjustments, other calculations and reconciliations to the most directly-comparable U.S. GAAP measures and additional smoke-free volume and net revenue data are at the end of today's webcast slides, which are posted on our website. Growth rates presented on an organic basis reflect currency-neutral adjusted results excluding acquisitions and disposals. As such figures and comparisons presented on an organic basis exclude Swedish Match up until November 11, 2023. As mentioned previously, starting in the second quarter of 2022 and on a comparative basis, PMI excludes amortization and impairment of acquired intangibles from its adjusted results. 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. I'm joined today by Jacek Olczak, Chief Executive Officer; and Emmanuel Babeau, Chief Financial Officer. Over to you, Jacek.

Thank you, James and welcome everyone. We had a remarkable year for our smoke-free transformation in 2022. Despite the exceptional challenges of the war in Ukraine, severe supply-chain disruptions and global inflation, we delivered very strong financial performance and took two major strategic strides towards a smoke-free future. I would like to express my deepest thanks to all my colleagues who spared no effort to drive excellent business results during these unprecedented times. Our thoughts also continue to be with those affected by the war in Ukraine and the recent tragedy in Turkey and Syria. In 2022, PMI delivered its second consecutive year of total volume growth, reflecting continued IQOS progress and broadly stable cigarette volumes. Full-year smoke-free net revenues reached almost one third of total PMI and over 50% in 17 markets. This is impressive progress towards our ambition of becoming a predominantly smoke-free company by net revenues in 2025. IQOS outstanding results continued with over 21% full-year growth in both shipment volumes and in market sales excluding Russia and Ukraine. This reflects broad-based momentum in the European Union Region, Japan and emerging markets. IQOS ILUMA continues to generate excellent growth in its launch markets with upgrades from existing users and new user acquisition outperforming our initial expectations. The success is supported by the increasing deployment of a two-tier heated tobacco units portfolio providing adult smokers with an expanding range of innovative and high quality alternatives to cigarettes. In combustibles, we delivered a robust performance with a 3.7% growth in organic net revenues and 0.3 percentage points higher share of segment excluding Russia and Ukraine despite the impact of adult smokers moving to smoke-free products. We also achieved two critical strategic milestones this year, reaching an agreement to take full control of IQOS in the U.S. in 2024 and…

Thank you, Jacek. Our business driven by the strength of our innovative and expanding smoke-free portfolio generated excellent top and bottom-line 2022 growth despite a very difficult operating environment, and currency headwinds. Our full-year net revenues grew organically by plus 7.7% excluding Russia and Ukraine and by plus 7.1% for total PMI, despite the impact of hyper-inflationary accounting in Turkey. This reflect the continued strength of IQOS, accelerating pricing and the recovery of combustibles in many markets against a pandemic affected comparison, notably in H1. IQOS devices accounted for approximately 5% of our full-year smoke-free net revenue, both including and excluding Russia and Ukraine. Our net revenue per unit grew plus 4.4% organically, excluding Russia and Ukraine and by plus 5.5% in total. This was driven by combustible pricing of plus 4%, excluding Russia and Ukraine and plus 5% overall and the positive mix impact of an increasing proportion of HTUs heated tobacco unit in our overall volumes at higher net revenue per unit. Our 2022 operating income margin contracted organically by 60 basis-points, excluding Russia and Ukraine, and by 70 basis-points in total due to a number of headwinds, which I will come back to. These headwinds were partially mitigated by the growth of IQOS, pricing and ongoing cost-saving. In 2022, we delivered gross saving of $800 million, with over $1.6 billion in the first two years of our cost-efficiency program. This puts us well on track to exceed our target of $2 billion over 2021, 2023 and mitigate recent inflationary pressures. Despite margin pressures, our excellent top-line growth and diligent cost management enabled us to deliver currency-neutral adjusted diluted EPS growth of plus 11.9% to $5.34, excluding Russia and Ukraine. This includes unfavorable currency of $0.85 and a small contribution from Swedish Match net of financing cost for…

Thank you, Emmanuel. Overall, our business delivered both a strong fourth quarter and full-year performance despite many challenging headwinds. We achieved excellent top and bottomline growth with double-digit currency-neutral adjusted diluted EPS growth and almost $6 of adjusted EPS for total PMI. The consistent quality and sustainability of our organic top and bottomline delivery has been clearly demonstrated over the last three years. Most impressive was the continued outstanding performance of IQOS, which is now complemented by the remarkable growth of ZYN. Combined with Swedish Match we will have a comprehensive global smoke-free portfolio with leadership positions in heat-not-burn and the fastest-growing category of oral nicotine. We expect 2023 to be a landmark year for our smoke-free transformation with smoke-free net revenues of around $13.5 billion at constant currency, approaching 40% of our company. We have exciting opportunities for growing nicotine pouches in the U.S. and internationally, along with the U.S. commercialization of IQOS next year. We expect margin headwinds will persist in 2023 before improving in 2024. However, our underlying growth fundamentals remain strong and we look forward with - and we look forward with confidence. With an excellent performance over the past two years and our strong 2023 outlook, we expect to comfortably exceed our three year minimum CAGR targets of more than 5% organic net revenue growth, more than 9% in currency-neutral adjusted diluted EPS growth and broadly stable shipment volumes. Finally, our strong growth outlook and highly cash-generative business enables us to deleverage while maintaining our steadfast commitment to our progressive dividend policy. Thank you for your attention, Emmanuel, and I will be happy now to answer your questions.

Thank you. [Operator Instructions] We'll take our first question from Chris Growe with Stifel.

Hi, good morning.

Good morning, Chris.

Hi, Chris.

Good morning. I want to ask you first of all, you gave some great color there and detail in your remarks. As I look at the EPS growth in 2023, just understand some of the burdens on that growth and we know about $150 million of investment you've outlined for the U.S. in your health and wellness division. What are the costs do you foresee in some of the supply-chain costs and use of air-freight available, how much are those burdening your cost for the year, if you can give some color on that?

So maybe I start and Emmanuel will chip in, I guess. Yes, it's a 115 between the U.S., $115 million between the U.S. and the wellness healthcare, almost evenly spread between the two. Now, you have the air freight and this is more of the thing, which I think, we should start seeing some improvement in 2023 and especially as we go towards the second half of the year. I think, we should start normalize the use of the air freight, which will then obviously continue with the 2024. Now you have the inflationary pressure on the COGS, I think Emmanuel mentioned in his remarks, the leaf. Leaf, obviously is - due to our duration of inventories of the leaf and the way the leaf prices are rolling through the P&L is something which last usually longer right you have a three years above the duration of inventory. So, on a moving average, valuations I mean the spreads over the period of time you have energy, which is obviously the big hit across the number of directly or indirectly through the materials. Now we start seeing energy prices easing at least at this stage, but also you bind it by some contractual arrangements, et cetera. So I don't think that's helping '23, but I remain cautiously optimistic that as of '24, we should start seeing reversal of those. Obviously, you have a cost of the IQOS ILUMA roll out because we are at the year end, we've been at the 16 markets out of 73 markets total IQOS. So there is a bulk of a market in front of us in '23 and we don't want to stop or slow down the rollout of ILUMA. So obviously, you have a pressure on the margin coming from the extra sales of the devices, right, which obviously had a drag on the margins, and which essentially accelerating replacement of the devices at the existing consumers level, but with the very clear view now, that we have a very nice paper going forward with the accelerated acquisition, better consumption, better conversion rates. And that's the key items. So Emmanuel, did I miss something important.

No, I think you were very exhaustive clearly, Jacek. Just sort of couple of further detail and clearly, in '23, we've been flagging it. We expect our heat-not-burn business to contribute positively at the level of the gross margin rate evolution. So in '23 it's really inflation impacting us very negatively at the level of all cost of goods, but on combustible, we are going to increase price that is not going to be sufficient to offset this impact. And just to give you a color, Jacek was alluding to energy price. We're not talking about even the double-digit inflation, I mean energy price between '23 and '21 we are talking about close to a 3x factor. So it's a big increase with the big impact on the P&L. Over time with price increase, we're going to overcome that, but there is just a lag as we said on matching that. Then there is a big difference also on our SG&A cost evolution. In 2022, we were flat, because we've been generating a lot of efficiencies, inflation was not as others is going to be in '23 with a lot of salary increase and probably on the basis of comparison were more favorable. In '23, we expect to grow our SG&A in line with top-line, more or less which one would expect. We continue to invest a lot in order to support the growth of the business to acquire new user, digital investment. We talk about the U.S. and wellness and healthcare and there would still be efficiency, but not at the same level. Last element that I have to add, the cost of the debt, I'm not talking about the debt of acquisition of Swedish Match because for Swedish Match, we are in line with expectation i.e. low single-digit accretion on the EPS. But clearly for the existing debt, there is also an increase in the cost and that is having an impact on the evolution of the adjusted EPS. I think with that, Chris, we are giving all the information we can on what we are facing in term of evolution on our cost.

That was sure exhaustive. Thank you for that. It was very, very helpful. I had just one quick follow-up, which will be that, you have heated tobacco unit growth expectation of that 15% to 19%. I just want to get an understanding on two specs of that, is Russia, Ukraine down likely in 2023, given you're not investing there. And then, just to what degree, its capacity limited today? If you had more ILUMA capacity, could that grow even faster? Thank you for your time.

Okay, so actually the Russia and Ukraine and obviously, Russia due to its weight even more, there were drag on our performance both in '22 and will be - and it's fair to assume will be a drag in 2023. As you know is, our decision, strong decisions today investor and essentially ILUMA is for example, is the key technology advancements, which will have, which we decided not to rollout in Russia, because it has an impact right. So that, the numbers which we now just for the visibility to the investors of the business, as is today, we're including Russia and Ukraine but above five very much Russia not contributing to the growth. So one good thing opposite excluding Russia and Ukraine, our growth rates would be at a higher level, on a comparable level, capacity, we will. I think we have - we are guiding the market that we expect the better result in the second half of the year. And that's partially reflects the moment when we think, we will be beyond the bottleneck with regards to the capacity around ILUMA. So we really managing the business on a very tight supply chain for still this year, sorry 2022 and for first half of '23 and the second half of '23, we should be okay. I could actually - again - I can bridge back to the famous air freight, et cetera, because all of these things are consequences of us riding on a very, very tight supply chain.

That makes sense. Thank you.

We'll take our next question from Bonnie Herzog with Goldman Sachs.

All right, thanks, hi.

Good morning, Bonnie.

Hi Bonnie.

Good morning, I guess my question is on your op margin guidance and the implied deleverage. Maybe you could breakdown the headwinds you highlighted just a bit further and thinking about in the context of what you can control like the investments, you're making to drive future growth. Could you help frame that for us? Just trying to think through, how big of a step-up the investments will be this year versus last year? And then, how do we think about the investments required next year and beyond? I guess, I'm trying to get a sense of how much of the investments required to essentially roll-out IQOS in the U.S., it will take place this year versus next year. And I'm well aware of the investments you need to roll out ILUMA, but anything there would be helpful?

I'm please to take that one, Bonnie. So I think, on the U.S., we've been clear on the fact that we expect something like half of around $150 million, of course it's a rounding of extra investment in the U.S. as we prepare the launch of IQOS in the U.S. that is for 2023. When we have a plan for the coming years and of course, with more detail, we will of course come to you and elaborate and detail that. Now for the rest of the business, I think we are and that was the sense of my comment on SG&A evolution. On a relatively regular basis, we are investing an extra few $100 million in ILUMA to be more specific, because, of course, very sensitive information behind the acceleration of IQOS and it's going to come, of course, behind IQOS ILUMA in 2023. So the growth, when we say, we expect SG&A to grow broadly in line with topline, there is a huge impact of inflation. I mean, I don't need to explain that inflation is in most country around high single digit and we need to reflect that on salary increase. We have efficiency on cost in front of that and that is enabling us to on top of the inflation impact to keep investing on the growth of the business and we do that in a rather consistent manner, of course, very much focus behind ILUMA in 2023.

Okay, that's helpful. And then just a second question if I may, it's just related to the user growth in Q4 and IQOS, could you maybe talk through some of the puts and takes that you saw in the quarter. I mean, it seem to accelerate relative to Q3, despite some of the headwinds you had recently highlighted and then you did mention that ILUMA drives higher conversion rates than IQOS 3 DUO so, could you possibly quantify that for us? I guess, I'm trying to think through when that platform scales, do you expect your overall conversion to grow meaningfully possibly above your current 70% rate?

Yes, so I maybe take the ILUMA conversion rates in the markets at this stage, [technical difficulty] run-rate conversion rates before an IQOS blade will be somewhere up in the range of a 10 percentage points. Okay, so obviously, different markets, there is some difference between the markets, but as a rule of thumb is about the 10 percentage point, which essentially means, the way we measure conversion at 10% of the devices sold through acquisition of new users, AG Snus and they should, and they are generating the recurring demand for the consumables. So this also has the - there's a better productivity on the user acquisitions and devices sold. I want to just bridge back to the - your previous question, Bonnie, if you allow me. When we look at the U.S. investment, we've highlighted, including the wellness and healthcare, about $150 million. But we shouldn't just look at the investment from the lenses of IQOS, because part of the investments, which we already started, once we committed to make this year, I believe will also benefit further growth opportunity for ZYN, okay, for Swedish Match. So it's not that we're really running business - two separate type of a businesses. We try to look at this from the leveraging and further enhancing the capabilities of Swedish Match and I believe the opportunities for ZYN in the U.S., they had a spectacular or phenomenal growth, depends which adjective you like better. But I think, there is more to come on this one. So the way we're looking at allocating the results is that, it is not just going to prepare us for the IQOS stake back in '24, but also in the meantime, can further - can be a further boost to the ZYN. Now, to your question also about the future rollout of the IQOS alone in the U.S., I think September when we meet, I hope during the Investors Day, we will be in a positions to give a more precise plan. So we obviously taking considerations the expected timelines vis a vis from FDA. We said that we're going to file IQOS ILUMA which is our - the best flagship and the best propositions we have today. And obviously, our objective - prime objective would be to enter markets, U.S. markets with a very big momentum coming from international on the best what we have, but I think, by September, this year, we should have more details and more visibility about this.

Okay, that's super helpful. I appreciate it.

Thank you, Bonnie.

Thank you, Bonnie.

We'll take our next question from Gaurav Jain with Barclays.

Hi, good morning. So the first is on the step up in cigarette pricing, so it was 5% last years, you are saying it will be 6% in FY '23. Now Japan had 5% pricing last year, this year it will be 0, so clearly ex-Japan cigarette pricing is accelerating from four to seven approximately. So, where exactly is this biggest step-up happening in cigarette pricing?

Japan, you pretty good single out Japan in this case, right, this is the biggest pricing from the unknow, right and it's difficult to make any assumptions in Japan, but we have already this year working pretty well with the good results on the - reversing the pricing trend in Indonesia. As you may recall, and I believe we're really turning the corner in Indonesia which always due to volume underlying size of the and the weight of the business to us is very important. I think, we have a stronger Philippines, plus the European markets also come with a strong pricing. So that 6%, which we assume in the - for this year is just the reflection of this. Now depends what's happened in Japan. I mean, all of these things will be coming on the top, but actually Japan from the large geographies is the under market when visibility for obvious reason is very limited to.

Sure, thank you. And then on this EU heated tobacco flavor ban, which is expected to come later this year, how should we think about it? And how is it factored in your guidance?

I mean, it's one of the events which nobody ever experienced. We have a - some sort of similarities with the flavor bans including menthol on the combustible cigarettes you may recall few years ago. And frankly speaking, that has not had any material sort of a impact on the cigarette volume, so I think here - okay we will see, what's going to happen. We think, it's going to be manageable.

Sure, thank you so much.

Thank you, Gaurav.

We'll take our next question from Pamela Kaufman with Morgan Stanley.

Hi, good morning.

Hi Pams.

Good morning, Pam.

Can you discuss your strategy for the U.S. market this year for Swedish Match and what you - what your key priorities are? And then what are your plans for the international rollout of ZYN and the timeline?

So obviously, you know the focus is to continue and enhance the spectacular momentum of pouches, ZYN growth in the U.S. I mentioned this before answering another question that part of the investments we are allocating to U.S., I believe also will benefit the current business of Swedish Match. I think, there should be a bigger, better pricing, especially on the cigar business, although it is not really our strategic focus, but still obviously helps the overall business performance. And the strategy in terms of long-term, the big question obviously is how we will approach IQOS commercialization, the moment when we fully take it back in that in 2024. And we know what sort of actually capabilities are missing at the Swedish Match level. So we adding them. But the real big commercial spend, I mean, it will depend on the timing and the dense and the intensity of our rollout plans, which we will share, I guess, around September, during the Investors - September this year, around the Investors Day. When it comes to the pouches, on international, I think Swedish Match and us now together have a plans, how to start addressing some share pressure especially in the Nordics, okay but on the bigger international scale, we have quite a few markets, which we will start rolling out the pouches this year but for obvious reasons, I will not mention which markets. But that was the whole purpose of acquisition of Swedish Match, as you recall, leveraged the base and our growth opportunity in the U.S., is the - is a huge relief in a sense of preparedness for IQOS but also I believe the category has the - quite a potential in there or in the regions of this product space on international basis. We will have infrastructure in most of the markets, it's - I'm not releasing really - disclosing any strategic confidential matters, obviously IQOS is present in 70 plus markets. This is where the developed infrastructure is most developed and very likely, the markets for ZYN products will be - which in the list of this markets.

Thanks. And then can you just talk about your strategy with the bonds product that you launched in test markets and what your early observations are and then how are you thinking about a broader rollout over time?

Yes. I mean it's a broader rollout of the bonds is more the - we've more strategically planned for the 2024, so the next year. We will have some volume, but nothing compared to be very frank to what we have about the IQOS and ILUMA product. This is by far the prime focus. But I think, the early results, which we get from the Philippines and Colombia, I mean, they are very strong, actually they are very strong, obviously our expectations after a seven or so years of experience with IQOS products are much higher than we ever had. So BONDS have to come and meet that expectations as well. The proposition essentially, we knew that the moment when we will be going more into the emerging markets, lower-income, when the afford - consumer affordability might be at a bottleneck in achieving our smoke-free ambitions. We had to also come up with a technology both on a consumables and on the device which somehow adjust the cost of the propositions to the potential pricing we can offer to the market. So obviously, the focus will be on the emerging markets, but I do believe that that proposition also nicely will help in some developed economies because across the spectrum of the smoker's audience, obviously, they also group of people who, for whom the affordability might create some constraint. So that will be a very nice complement - complementary propositions in our portfolio. And essentially it also help IQOS to continue on its extremely successful history of occupying this premium or medium plus space. This is - this mega brand, which we're trying to build, while preparing our self that one billion plus smokers in the world, I mean they are going across the different various price segments from the premium, mid, low, super-low et cetera and we need to provide the relevant propositions there. So I think, bonds is on the track and this is how we are going to play strategically in the portfolio.

Thank you. That's very helpful.

Thank you, Pam. Thank you.

We'll take our next question from Vivien Azer with Cowen.

Thank you, good morning.

Hi Vivien

Hi. I was hoping to talk about the IQOS outlook, please, in terms of the stakes and in particular, what impact is the removal of characterizing flavors on HTUs in the EU, impacting your outlook. How are you accounting for that? And what's the expected timing of that, please. Thank you.

Yes, so I partially answered that question before, Vivien. But the characterizing flavor, we had that - we had an experience with the cigarettes - combustible cigarettes in the past and it's the only reference point we might - we have today. And as you recall, the menthol and others ban in Europe, didn't really impact in any material way the volumes of the cigarette, so I think here, one can expect a similar sort of a manageable impact if you like of that ban. The second thing, it's very - but also reminding everyone that IQOS by far today is the best tobacco flavor proposition. Yes, there are some flavors, which we have in our portfolio, in the market , that propulsions might be different, but by far, IQOS on the pure tobacco flavor and this is by the way, were the bulk of the cigarette market, the rest in essentially all geographies. I mean this is an IQOS strength, so there was a portion of a portfolio, which will be impacted. But and I think for the vast majority of the smokers existing of sorry existing comparative to IQOS users and the smokers, which are still on a combustible, I mean IQOS still offers to date best in class taste and a flavor experience which is in the core of the tobacco flavor.

Thank you for that. And I apologize if I missed this, but is there any way that you can provide an update on kind of the infrastructure build-out for IQOS in the U.S. ahead of your reacquiring the commercial rights to that proposition, both in terms of the consumables as well as the devices? Thank you.

Yes. I think there was look - there was a - we're looking also both as a - we are also looking at this, not only on IQOS on a standard basis but IQOS and the ZYN and other parts of the Swedish Match business. And I believe, the obvious, the questions of the optimal distribution and I believe this can pair very well and enhancements already to the distribution which serves not only in a future IQOS but can and will serve actually in growth opportunities today, there is the whole digital aspect, there is a better management of the pricing promotions. The whole consumer piece, right, which is so strong behind an IQOS success. I mean, that's something which we are preparing the infrastructure for.

Okay, thank you.

Thank you, Vivien.

We'll take our next question from Owen Bennett with Jefferies.

Afternoon, gents. Hope you all well.

Good afternoon, Owen.

Yes my question is more a bigger picture, longer term, one around the U.S. and the overall RRP space, now you've got control of your own destiny. I was hoping to get your thoughts on how you see RRP overall develop longer-term across the different categories? Whether you see some more attractive than all these. And do you still think you could envisage or when we introduce into the U.S., obviously bearing in mind, the limited traction it got with Altria, and then just linked to these U.S. RRP plans, any update on timing for a PMTA submission with your VEEV product. Thank you.

Yes, so I start with the last one. We plan to submit the IQOS ILUMA to PMTA to FDA in the second half of this year. Now with regards to the - to potential, look, we think that an IQOS strength, which is really if you go to the core of the smokers today, when they really enjoy this pure unaffected by any flavors et cetera, tobacco flavor and so on is undisputed. Every market you go, IQOS exactly delivers on the flavor, taste expectations to this audience. And that's also I believe a critical factor in IQOS high conversion rate. And how many people fully adopt the IQOS and not only that they are leaving cigarettes fully behind them, they don't even attempt it on occasional basis to go back to cigarettes, okay, so that's the core and I believe for the audience which with the smoking audience, which you have in the U.S., IQOS perfectly fitting into this whole thing obviously the other platforms, which offer you the different ritual, different experience, the e-cigarettes and the pouches. The e-cigarettes usually more driven by the flavors, and obviously absence the pure tobacco natural type of a flavor, it's - that's the challenge, which partially in our opinion is behind more of the dual consumption that the full conversion, but also the products are under development and they're getting better. And pouch is actually on the risk continuum of the product. I mean, it's an average important offering for the consumers, who really want to reduce significantly exposure and potentially the harm by - while enjoying the product. So I think, there is this complementary, there is this complementary role of each of these platforms with, you know, also that we're working on our platform forward because technically which is Leaf and the Viva products, the electronic cigarette segments going through this own dynamics, is this mix of the flavors, disposable et cetera, it's not necessarily great for the economics, but partially also because of the slower conversion rate compared to the other platforms. So we have said it from the very beginning of our transformation, if you follow us seven, eight years ago, I recall that the - one of the first investors conferences, when we announced the purpose of that we want to go smoke free, we have said that there is the room for every platform at the different moments for different consumers and our job is at the right time to deploy this platforms and the leverage, the opportunities and the benefit to the smokers.

Great, fantastic. And just - sorry, a follow-up, the question on the PMTA was not for ILUMA, I think previously for VEEV you said, you targeted first half of '23, just any update on VEEV, PMTA submission?.

Yes as I think, we're also thinking about the 2023, but now having also the ZYN and knowing what ILUMA can do and knowing that before we also need to make sure that we have a right PMTA submission strategy, right, it was an effort behind each of them and we need to prioritize, but the - I mean the way we are thinking, we are - sorry thinking, is more than a thinking, we are working on bringing our P4 to the U.S. as well.

Great, thanks guys, appreciate it.

Thank you, Owen.

We'll take our next question from Andrei Condrea with UBS.

Hi everyone, thank you for taking my question, just one from me.

Hi Andrei.

Sticking to – hi, sticking to U.S. IQOS. We know that the U.S. menthol ban from the FDA proposed standards allows - potentially will allow for some exceptions to it. And thinking that your IQOS has the MRTP designation, which is rather unique versus all its peers, would -- were you factoring this in when you set out your ambition of I believe 10% market share by 2030 if I'm not mistaken?

Yes, you were - I think you're quoting my words, this is Jacek here. Yes, I still do believe that IQOS by 2030 knowing how it performs on the many other international markets. The 10% is not out of - it can be a realistic ambitious - ambition or realistic dream. Now to be very frank, when we look into this, we have not been trying to factor being that there might be some flavors or menthol bans on other products. But you rightly noticed that IQOS today is two variants of IQOS outdoor iced with the menthol flavor, will this be an accelerating factor or not? Look I mean the future will tell, but I still believe that IQOS as is in the current environment due to its strength and the satisfaction it gives to smokers, et cetera has the - that big potential in from the person.

I see very clear. Thank you.

Thank you, Andrei.

We'll take our last question from Jared Dinges with JPMorgan.

Yes, thanks. Hi, guys.

Thank you, hi.

A couple from me please, first, given the CapEx, step-up in CapEx that you expect for this year, I just wanted to ask, how should we be thinking about CapEx levels beyond '23? Is next year kind of a one off given the ZYN international expansion plans?

Look I think, you should expect us of course to accompany the growth we are growing volume within more capacities, so the CapEx will reflect that. There is certainly, when it comes to ILUMA, a moment where we build the capacity for ILUMA and that is translating into a significant investment. So you see that in the 1.3. I would say, we are going to certainly regularly invest on the capacity for the Swedish Match overall business, so I'm not able to get at that stage. I'm not giving guidance on '24. I certainly believe that there is this transition moment where we are building the capacity on ILUMA then of course that will be accompanying the growth of ILUMA and - and we are very ambitious, as you know, on growing overall product. So that will come with investment, but, of course, they are not of the same magnitude as the one that we've been making in order to be the capacity on IQOS, smaller volume, smaller base. So notwithstanding back on the long-term anyway.

Okay, that's clear. And for the second one and maybe just on the Healthcare and Wellness segment, I mean, 2023 will be another investment year. I know you guys have talked about that that probably being a multiyear investment cycle. But I don't know if you can give any indication on when you think that business could potentially start to contribute to growth and maybe also, could you guys talk about your learnings so far in those businesses that you have acquired?

Yes I mean, look, they obviously, been very clear about this from the very beginning, I mean, in order to develop and bring to the market of a couple of the programs and products, which we have it in mind, I mean we have to go for the investments, we talked about us prefer also have a very promising investment in the medical of - in the medical space be cannabinoids et cetera. So all of this programs that they agree to establish milestones in terms of the - the development of these products including the series of clinicals and meeting of different regulatory expectation, so that's about what's going to be. We have said historically our ambitious target of achieving this $1 billion revenue by 2025, there is a pipeline of the product but the more interesting actually, what's going to happen with that business beyond '25, because it's the longer-term, longer-term investment. Obviously, when we allocate the capital, we look first with - we allocate the capital behind the -- those things, which are in the near and mid-term for us and it's obviously heat-not-burn and IQOS, ILUMA expansions to the US, and I can go through the long list of an opportunities but they're keeping also denied. This businesses have a quite - wellness and healthcare offers us a very interesting opportunities in the longer run, when we very well leverage both our scientific life science expertise capabilities combined with the commercial et cetera. So, this is how I would look on this thing. I think when we meet on the - in September of this year for the Investors Day, we will start, obviously opening a much more longer-term horizon, how the management, how we see the future of PMI not just in the next year or two, but with the longer time of a perspective. And this is the moment when, I guess, we will share more details, by the way, also I think we'll be able to answer more precisely your first questions to Emmanuel, about the CapEx, because obviously, we open a 10 years horizon for Philip Morris, we will have to touch upon that capital allocation component as well.

Great, that's helpful. Thank you.

Thank you.

Thank you.

It appears, we have no further questions at this time. I will now turn the program back over to management for any additional or closing remarks.

Thank you. Before closing our call, I would like to remind you that we will be presenting at the CAGNY conference on February 22. And as we mentioned earlier, we plan to host the September Investor Day, in Switzerland. We hope, you will be able to join these events, either in person or virtually. That concludes our call today. Thank you again for joining us. If you have any follow-up questions, please contact the Investor Relations team. Thank you.

Thank you. Talk to you soon.

Thank you.

That concludes today's teleconference. Thank you for your participation, you may now disconnect.