Philip Morris Worldwide (PM) This autumn 2024 Earnings Name Transcript

Philip Morris Worldwide (PM 10.70%)
This autumn 2024 Earnings Name
Feb 06, 2025, 9:00 a.m. ET

Contents:

• Ready Remarks
• Questions and Solutions
• Name Individuals

Ready Remarks:

Operator

Good day, and thanks for standing by. Welcome to the Philip Morris Worldwide fourth quarter 2024 and full 12 months outcomes convention name. [Operator instructions] Please be suggested that in the present day’s convention is being recorded. I’d now like at hand the convention over to your speaker in the present day, James Bushnell, vice chairman of investor relations and monetary communications.

Please go forward.

James Bushnell — Vice President, Investor Relations and Monetary Communications

Welcome. Thanks for becoming a member of us. Earlier in the present day, we issued a press launch containing detailed info on our 2024 fourth quarter and full 12 months outcomes. The press launch is out there on our web site at pmi.com.

I will undergo the phrases, together with the definition of smoke-free merchandise, in addition to changes, different calculations and reconciliations to probably the most instantly comparable U.S. GAAP measures for non-GAAP monetary measures cited on this presentation can be found Exhibit 99.2 to the corporate’s Type 8-Okay dated February 6, 2025 and on our investor relations web site. Immediately’s remarks include forward-looking statements and projections of future outcomes. I direct your consideration to the forward-looking and cautionary statements disclosure in in the present day’s presentation and press launch for a evaluation of the varied elements that would trigger precise outcomes to vary materially from projections or forward-looking statements.

I am joined in the present day by Jacek Olczak, chief govt officer; and Emmanuel Babeau, chief monetary officer. Over to you, Jacek.

Jacek Olczak — Chief Working Officer

Thanks, James, and welcome, everybody. We delivered an impressive efficiency in 2024 with all key parts of the enterprise contributing strongly to ship best-in-class natural prime and backside line progress. This resulted in vital acceleration in adjusted diluted earnings-per-share progress in each forex impartial and equally importantly, greenback phrases as we mitigated substantial forex headwinds. Our enterprise outperformed the trade and client packaged items total with develop throughout — with progress throughout all classes to ship our fourth consecutive 12 months of constructive volumes.

IQOS continued its robust underlying momentum with continued glorious progress in Japan, sturdy progress in Europe regardless of the EU characterizing taste ban and additional robust progress in different international markets. Importantly, the expansion of IQOS is more and more worthwhile as the advantages of scale and pricing greater than offset continued substantial progress investments, together with brand-building actions, improvements on units and consumables. ZYN as soon as once more delivered robust progress within the U.S. as 2023 demand acceleration continued in 2024.

This resulted in short-term provide challenges, which we’ve got progressively addressed all year long, working towards our objective of matching present consumer demand. As we unlock additional capability, we will likely be ready to discover the total potential of this dynamic class. Outdoors the U.S., shipments grew by 75% as we elevated our international presence in nicotine pouches to 37 markets. In e-vapor, VEEV is progressively contributing to progress with encouraging quantity momentum in closed ports and strengthening market place with a premium provide.

Our flamable enterprise carried out nicely on all metrics. We delivered double-digit gross revenue progress in quarter 4 of final 12 months and round 7% organically for the 12 months, led by robust pricing, resilient volumes in sure markets and the continuing advantages of our value actions. Total, our robust efficiency throughout all classes and areas drove significant working leverage, notably in our smoke-free enterprise alongside value effectivity initiatives throughout all the worth chain. This enabled us to ship working money move and adjusted diluted EPS above our expectations firstly of the 12 months regardless of ongoing forex and enter value headwinds.

Our transformation journey and progress drivers have glorious momentum, and we’re assured in our potential to ship sustainable progress and returns in 2025 and past. Over the previous 12 months, we achieved a number of key milestones in our smoke-free journey, together with the 10-year anniversary of IQOS and ZYN. Our smoke-free enterprise is massive, worthwhile and rising quick. Our complete smoke-free internet revenues attain virtually $15 billion in 2024.

Mixed with a robust flamable efficiency, our firm additionally surpassed $10 billion in adjusted internet earnings for the primary time. Our smoke-free enterprise reached 40% of complete PMI internet revenues within the fourth quarter and round 42% of adjusted gross revenue as our transformation turns into intrinsically worthwhile. In our prime 5 markets by working earnings, round 60% of internet revenues had been smoke-free. We’ve deployed our smoke-free multi-category technique throughout virtually half of the 95 markets with smoke-free merchandise and we closed the 12 months with over 38.5 million estimated grownup customers throughout heat-not-burn, oral and e-vapor.

Our smoke-free enterprise surpassed 1 billion cans together with 644 million tonnes of nicotine pouches. The ZYN model continues to resonate with grownup nicotine shoppers throughout the U.S., the place it’s the No. 1 smoke-free model and the fourth largest nicotine model and likewise progress Worldwide. We’re additionally very happy that the sturdy science and accountable advertising practices behind the had been acknowledged by FDA for the current advertising authorization of all at the moment commercialized U.S.

invariant, making ZYN the primary and the one licensed nicotine pouch model in the US. We stay on the forefront of the hassle to extend understanding of smoke-free merchandise and superior tobacco hurt reductions amongst shoppers and regulators. We’re inspired by the rising variety of governments adopting tobacco hurt discount insurance policies to incentive switching to scale back nicotine product as a substitute of continuous to smoke, which is a sound public well being coverage. A lot of markets are additionally transferring favorably with regards the sturdy regulation of nicotine pouches and e-vapor.

Now, regretfully, there’s additionally resistance in lots of locations, usually pushed by ideology not details and science, and due to this fact, a substantial quantity of labor remains to be in entrance of us. Whereas reaching vital milestones is agreeable after 10 years, we’re nonetheless within the early levels of trade transformation. With our robust manufacturers and our modern and industrial capabilities, we’ve got a lot of alternatives and progress forward. I stay up for sharing extra with you on the upcoming CAGNY Convention on February 19.

I’ll now hand over to Emmanuel to debate our outcomes and outlook in additional element.

Emmanuel Babeau — Chief Monetary Officer

Thanks, Jacek. I’ll begin with the headline financials for the 12 months. As Jacek mentioned, this was a really excellent 12 months of progress throughout our enterprise because the speedy progress of IQOS and U.S. ZYN was complemented by rising progress contributions from VEEV and ZYN internationally and a much-improved flamable efficiency.

We delivered in line or above our last-communicated expectations throughout key metrics. Natural internet income progress of +9.8%, adjusted IMS and shipments of HTUs, and flamable pricing of +8.7% had been robust. Wonderful complete cargo quantity progress of +2.9%, together with ZYN and flamable volumes, carried out on the prime finish of our expectations. Coupled with accelerated value efficiencies, this led to better-than anticipated +14.9% natural working earnings progress and +15.6% currency-neutral adjusted diluted EPS progress.

Our clear deal with delivering efficiency in greenback phrases was mirrored within the +9.3% progress in adjusted diluted EPS. In consequence, we achieved document working cashflow of $12.2 billion, which was considerably above each our preliminary and most up-to-date forecast, supported by glorious revenue supply and favorable working capital. Mixed with robust adjusted EBITDA, this allowed us to considerably enhance our leverage ratio, which I will come again to later. We closed the 12 months strongly in This autumn, with natural internet income progress of +7.3% regardless of the influence of timing and comparability results, most notably associated to Crimson Sea disruption, the EU Characterizing taste ban for HTUs, and pre-launch ILUMA i system shipments.

This was pushed by complete quantity progress of +2.3%, alongside constructive smoke-free combine and sturdy pricing. Mixed with working leverage and manufacturing efficiencies, we delivered near +12% natural OI progress and +10% currency-neutral adjusted diluted EPS progress. In greenback phrases, adjusted OI elevated +15% and adjusted diluted EPS grew +14% to $1.55. This features a constructive forex influence of 6 cents, which displays an unfavorable transactional influence within the prior 12 months in Argentina, in addition to the transfer to hyperinflationary accounting in Egypt, which additionally had a unfavourable influence on our natural progress of round one level on internet revenues, and two factors on OI.

The non-cash impairment of our RBH fairness funding had no influence on our adjusted financials. In future we might profit from RBH dividend earnings, however we don’t embody any influence in our 2025 forecast presently. Let’s take a step again and take into account 2024 within the context of the previous few years. Our natural top-line supply has been persistently robust because the pandemic and additional accelerated this 12 months, as each smoke-free merchandise and combustibles stepped up their trajectory.

Clearly, 2024 was additionally a stand-out 12 months for adjusted diluted EPS progress. The profitability of our smoke-free enterprise accelerated, as a result of working leverage of IQOS’ rising scale, favorable unit economics, pricing, efficiencies and the spectacular accretion from ZYN’s speedy progress at superior U.S. margins. We additionally benefited from a notably sturdy flamable efficiency, which supplies vital structural help for our transformation journey.

These dynamics are additional demonstrated by the natural top-line and gross revenue progress of each classes within the 12 months. Our smoke-free enterprise accelerated to +17% internet income progress and +23% gross revenue progress, reaching near $10 billion in gross revenue. This drove a formidable +330 foundation factors of natural gross margin growth, fueled by the elements I simply talked about. On the combustibles aspect, internet revenues and gross revenue grew organically by +6% and +7% respectively, resulting in +60 foundation factors of natural gross margin growth.

Our combustibles enterprise is as soon as once more contributing positively, with pricing and value efficiencies greater than compensating for the third 12 months of serious enter value headwinds, which we anticipate to ease in 2025. I’d additionally observe that adjusted gross margins for smoke-free merchandise had been +490 foundation factors greater than combustibles in This autumn and +270 foundation factors greater for the 12 months total at 66.6%. Whereas we proceed to focus on gross margin growth in combustibles, we anticipate this hole to develop over time as we proceed to drive worthwhile progress from smoke-free merchandise whereas investing in new markets, brand-building and innovation. Taking a more in-depth take a look at our quantity efficiency, we delivered our fourth consecutive 12 months of cargo progress, up +2.3% within the fourth quarter, and shut to three% for the total 12 months.

Together with our VEEV e-vapor enterprise in equal models, this progress was +2.4% and +3% respectively. Our complete 2024 smoke-free quantity progress together with VEEV was +13.5% or 19 billion unit equivalents, an acceleration in comparison with 2023. For IQOS, we delivered HTU adjusted IMS progress of near +13%, and cargo volumes of 139.7 billion, each broadly according to our expectations. Adjusted IMS progress accelerated in H2 to shut to +14%, primarily according to our goal of +14 to fifteen%.

This consists of dynamic progress of near +11% in Europe, with robust momentum throughout the massive majority of markets. As I touched on earlier, This autumn HTU cargo progress consists of the influence of extra shipments within the prior 12 months to organize for the EU characterizing taste ban, and the phasing impact of extra shipments to Japan in H1 notably as a consequence of Crimson Sea disruption. Our oral smoke-free enterprise grew 2024 cargo volumes by +24.6%, together with ZYN’s U.S. progress of +51% to 581 million cans.

Snus and Moist snuff volumes had been steady. Cigarette shipments grew by +0.6%, roughly according to the estimated progress of the worldwide trade. The expansion of the cigarette market might be largely attributed to progress in markets the place smoke-free merchandise usually are not permitted reminiscent of Turkey, Brazil and India. Excluding such markets, we observe a low single-digit decline, according to historic developments.

Our robust full-year top-line progress of just about +10% was once more achieved by way of a mixture of quantity progress, pricing and the constructive combine influence of the shift to smoke-free merchandise. Pricing contributed +6.2%, reflecting virtually +9% flamable pricing and +2% for smoke-free merchandise. Smoke-free additionally drove a constructive combine influence of +1.9%, as a result of greater internet income per unit of each IQOS HTUs and ZYN. Oral smoke-free merchandise contributed +2.2% to total group top-line progress for the 12 months, demonstrating ZYN’s position as a significant accelerator to our efficiency. As in prior years, geographic combine was unfavourable primarily as a consequence of combustibles, however to a lesser diploma given sturdy internet income progress in Europe.

Shifting right down to adjusted working margins, we delivered full-year natural growth of +180 foundation factors, and +100 foundation factors in greenback phrases, comfortably reaching our goal of growth on each bases. This displays a robust This autumn with OI margins increasing organically by +140 foundation factors, as gross margin growth outweighed SG&A investments. Full-year gross margins elevated organically by +160 foundation factors, and by +120 foundation factors in greenback phrases. SG&A drove +20 foundation factors of margin growth, enabled by value effectivity actions, regardless of vital reinvestment and industrial help behind our smoke-free enterprise and U.S.

capabilities, particularly in H2. We delivered over $750 million in gross value efficiencies for the 12 months, with COGS productivities throughout smoke-free and combustibles, and continued back-office financial savings. This locations us nicely on observe for our ’24-26 goal of $2 billion. Specializing in our smoke-free enterprise, we grew our estimated consumer base by over 5 million individuals in 2024, to achieve roughly 38.6 million legal-age customers as of December thirty first.

This consists of an estimated 32.2 million IQOS customers, 5.7 million Oral customers and 1.0 million VEEV customers. I am happy to report sturdy IQOS consumer progress of +3.4 million versus prior 12 months and +1.5 million throughout H2. This progress is broad-based and according to current years, regardless of restricted new market openings and the EU characterizing taste ban. Oral added +1.5 million customers year-on-year pushed by ZYN’s continued robust traction with legal-age nicotine shoppers within the U.S., regardless of provide constraints.

Zooming in now on IQOS. Robust consumer momentum is mirrored in adjusted IMS volumes with 2024 progress of over 15 billion models, according to the prior 12 months regardless of the influence of the EU taste ban. This progress can also be according to the five-year common, and greater than 1 billion models above when excluding contributions from markets launched within the present or previous 12 months. Importantly, following the roll-out of IQOS ILUMA and with the rising scale of the enterprise, the profitability of IQOS is rising strongly.

We illustrate this right here with the listed product contribution over time at fixed alternate charges. As we have defined earlier than, the upfront prices of a business-to-consumer operation leads to declining infrastructure value per consumer over time because the consumer rely grows in a market. This can be a dynamic we anticipate to proceed in future. Turning to IQOS in Europe.

As anticipated, HTU adjusted IMS progress accelerated strongly in H2 to virtually +11%, following H1 development of round 8%. This resulted in sturdy +9.4% progress total for the 12 months, regardless of the numerous disruption of the characterizing taste ban. This double-digit adjusted IMS progress in H2 was pushed by robust progress in a lot of markets, together with progress of round 20% or extra in markets reminiscent of Bulgaria, Greece, Germany, Romania and Spain, whereas progress was much less dynamic in Poland, Czech Republic and Italy. Restoration in Italy is ongoing following the disruption of the flavour ban, though at a barely slower tempo than anticipated in This autumn.

The continued momentum within the area drove This autumn adjusted share progress of +0.9 factors year-on-year to 10.6%, with adjusted IMS volumes reaching 13.5 billion models on a four-quarter transferring common. This autumn cargo volumes elevated by +6% in opposition to a previous 12 months comparability which included extra volumes associated to the implementation of the flavour ban, notably in Italy. The flavour ban is now lively in all however six EU markets, with a usually constant sample of short-term disruption adopted by a return to the pre-ban progress trajectory. Following an influence of round 2 billion models in 2024, we anticipate a 2025 influence of round 1 billion on each shipments and IMS together with annualization results, with probably the most outstanding impact within the first quarter.

We additionally proceed to roll out the ILUMA i system and new consumable variants reminiscent of DELIA and LEVIA to extra markets, offering an rising alternative of style profiles and worth factors to grownup people who smoke. Taking a look at our key metropolis offtake shares in Europe, we reached plenty of vital milestones, with Budapest reaching over 40% share, Rome over 30%, and London approaching 10%, with Madrid not far behind. Japan delivered excellent outcomes but once more, with HTU adjusted IMS progress of near +13% in each the quarter and the full-year to achieve an adjusted This autumn share of 30.6%, +3.1 factors greater year-on-year. This was supported by steady share progress of TEREA and SENTIA, in addition to the constructive traction of the IQOS ILUMA i system as we reached over 9.5 million grownup customers.

Offtake share in Tokyo for the general heat-not-burn class reached 52.8% in December, with the addition of Shizuoka and Hamamatsu to make 10 cities and 5 prefectures exceeding the 50% share threshold. On a nationwide offtake foundation, 47% of the full trade is now smoke-free. Outdoors of Europe and Japan, adjusted IMS progress continued to develop strongly in This autumn. Promising progress in plenty of markets is illustrated by key metropolis shares in Saudi Arabia, Indonesia and Mexico.

Steady innovation is a key driver of this progress, with TEREA clove variants and capsules in Indonesia driving an uplift within the quarter, and a few good preliminary outcomes from the trial of BONDS, our lower-tier providing. IQOS continues to carry out nicely in Cairo, although offtake share efficiency was impacted by the dynamics of the flamable market the place competitor provide normalized, and a really robust prior 12 months quarter following the launch of IQOS ILUMA. Our Responsibility Free HTU offtake share elevated properly, as we begin to harness the power of our multicategory portfolio to drive gross sales of IQOS, ZYN and VEEV collectively. Turning now to the U.S., the place our IQOS 3 ‘Be The First’ marketing campaign in Austin is progressing nicely and we anticipate to begin direct gross sales of units and HTUs in Austin across the finish of Q1.

We’re seeing excessive curiosity from shoppers, with over 4,000 grownup people who smoke on our waitlist. As we study from these preliminary client 10 engagements, we’re planning the rollout of pilots to different cities. As in Austin, our focus will likely be on selective grownup client engagement and constructing consciousness by way of class and model training in legal-age smoker communities. We don’t assume any vital volumes from U.S.

IQOS earlier than the at-scale launch of IQOS ILUMA, and we proceed to hope for an FDA authorization in H2, 2025. Switching classes now to ZYN, the place continued robust demand supported This autumn U.S. cargo quantity progress of +42% year-on-year to 165 million cans. Regardless of ongoing manufacturing limitations, this displays an acceleration to a near-record sequential enhance of +16 million cans vs.

Q3. On a full 12 months foundation, cargo volumes grew by +196 million cans versus 2023, highlighting each the magnitude of progress and the super efforts made to maximise our manufacturing capability. ZYN’s class share incrementally improved by way of the second half, reaching 65.9% in This autumn, as our progress in rising manufacturing additional supported the expansion of the class. Certainly, class progress slowed considerably in the course of the summer season peak of our provide constraints, as proven on this chart.

Because the state of affairs began to step by step enhance, ZYN was once more main and outpacing the class. I’m happy to share that underlying demand for ZYN from grownup shoppers continued to develop in This autumn, and was greater than beforehand assumed. We proceed to expertise some out-of-stocks at retail, and whereas manufacturing capability continues to extend, we now goal full normalization someday within the second half of 2025. We proceed to focus on round 900 million cans of capability for the total 12 months from our Kentucky facility, and as provide continues to enhance, we are going to look to additional broaden progress past our present client base to different legal-age nicotine customers.

Our greenfield website in Colorado is because of come on-line in early 2026, and we consider we’re nicely positioned to seize ZYN’s potential over the approaching years. Accountable regulation of the trade is key to supporting sustainable future progress for this dynamic class. We’re due to this fact inspired by the current FDA authorization for the advertising and sale of all ZYN nicotine pouches at the moment marketed within the U.S., following intensive scientific evaluation by the Company. As talked about, this makes ZYN the primary and solely licensed nicotine pouch out there.

Amongst a number of issues had been the considerably decrease quantities of dangerous 11 constituents versus cigarettes and different smokeless tobacco merchandise, in addition to present low youth utilization ranges. The FDA’s authorization marks an vital step within the safety of public well being by recognizing the position that ZYN can play in offering higher alternate options to cigarettes and different conventional tobacco merchandise for legal-age adults. We stay dedicated to driving trade requirements in under-21 prevention, with insurance policies and initiatives designed to assist forestall youth entry. Additional, combatting commerce in illicit tobacco and nicotine merchandise stays a core precedence, and we dedicate a big stage of sources to help these efforts.

ZYN additionally has an thrilling future exterior of the U.S. Whereas nonetheless in its very early levels, worldwide nicotine pouch shipments grew by 27 million cans, or +75%, and we already see robust quantity momentum in key worldwide markets reminiscent of Pakistan, South Africa, Mexico, the UK and World Responsibility-Free. We launched nicotine pouches in six new markets in the course of the quarter to achieve a complete of 37 worldwide, together with Italy, Romania and Thailand. Inside e-vapor, we proceed to see robust client traction behind VEEV ONE.

The model holds a prime three closed pod place in 13 European markets, and held the primary place in 5, together with Italy. VEEV performs an vital position inside our multicategory technique, as an more and more trusted alternative for smoke-free class poly customers and a supply of incremental progress with enhancing economics. Our major focus for the flamable enterprise is to maximise worth over time whereas supporting the expansion of the smoke-free enterprise. Pricing and value efficiencies are the important thing levers to drive efficiency, whereas sustaining our class management.

We delivered one other sturdy quantity quarter, with progress of +1.1%. All areas contributed to robust This autumn natural internet income progress of +6.2%, with gross revenue rising by +10.8%. Full-year pricing of +8.7% consists of robust contributions from Germany, Egypt and Turkey. We anticipate natural 2025 flamable pricing to normalize to +5 to +6%, partly reflecting Egypt’s transfer to hyperinflationary accounting in This autumn, 2024.

12 Class share was flat in This autumn, with constructive contributions from Turkey and India offset by declines in Egypt and in Indonesia, with continued progress within the beneath tier-one phase. On a full 12 months foundation we grew class share +0.1 factors, reaching all-time highs for each Marlboro and our international manufacturers total. This brings me to the outlook for 2025, the place we anticipate one other 12 months of robust progress from all classes, driving prime and bottom-line supply. We anticipate a fifth consecutive 12 months of constructive volumes, with progress of as much as +2%, notably pushed by one other 12 months of robust progress in smoke-free merchandise at round +12 to +14%.

For IQOS, we anticipate a continuation of robust momentum, with absolutely the progress in HTU adjusted IMS volumes anticipated to be at the same stage to 2024, translating into +10 to +12% progress. We anticipate cargo progress to be broadly according to this double-digit trajectory, topic to the same old inherent volatility of cargo timing and commerce stock actions. We anticipate ongoing robust progress dynamics throughout the U.S. nicotine pouch class.

Regardless of the availability constraints I discussed earlier than, we forecast a U.S. ZYN quantity cargo vary of 780-820 million cans for the 12 months, supported by capability growth. This represents one other 12 months of considerable acceleration in volumes, with an anticipated enhance of roughly 200 to 240 million cans in comparison with the 196 million can enhance in 2024. This helps a complete PMI forecast of +6% to +8% natural internet income progress.

This features a headwind of over 100 foundation factors as a consequence of hyperinflationary accounting in Egypt and the technical influence of implementing a brand new industrial mannequin within the Indonesia beneath tier-one phase. The change in Indonesia has no impact on OI. Shifting down the P&L, we anticipate ongoing smoke-free combine results, working leverage and value efficiencies to drive double-digit adjusted OI progress of +10.5 to +12.5%. This consists of robust gross revenue progress, with each gross and adjusted working margins forecast to broaden in each natural and adjusted greenback phrases, at prevailing alternate charges.

We anticipate SG&A prices to extend broadly according to internet revenues on an natural foundation, as we make investments behind our smoke-free merchandise. We forecast currency-neutral adjusted diluted EPS progress of +10.5% to +12.5%. This elements in primarily steady internet curiosity expense, and a rise in our efficient 13 company tax price to roughly 22.5 to 23.5% as a consequence of tax will increase according to OECD pillar two international minimal tax, and the combination of worldwide earnings. In greenback phrases we forecast progress of +7% to +9% to a variety of $7.04 to $7.17.

This consists of an unfavorable forecast forex influence of twenty-two cents at prevailing alternate charges, primarily pushed by the broad power of the greenback, mitigated by our hedging actions. For the primary quarter of 2025, we anticipate a robust begin to the 12 months with internet income and OI progress broadly according to our full 12 months targets, regardless of the bissextile year comparability. We forecast HTU adjusted IMS progress of round +10%, which elements within the bigger annualization influence from the EU taste ban within the quarter, with a progressive enchancment by way of the 12 months. We forecast cargo volumes of 35 to 36 billion for HTUs and 170 to 180 million cans for U.S.

ZYN. We challenge Q1 adjusted diluted EPS of $1.58 to $1.63, together with a unfavourable forex variance of 4 cents at prevailing charges, and an efficient company tax price two to 3 factors greater than the prior 12 months quarter. With our 2024 supply and 2025 outlook, we’re nicely positioned to fulfill or exceed all metrics of the 2024-26 CAGR targets introduced at our 2023 investor day. That is very true on the stage of OI progress, in addition to for EPS supply, the place our algorithm assumed fixed 2023 company tax charges.

This stage of prime and bottom-line progress displays a best-in-class progress profile throughout the context of large-cap Shopper Packaged Items. Importantly, we’re additionally nicely on observe to ship high-single-digit adjusted diluted EPS progress in greenback phrases throughout the 2024-2026 interval, at prevailing alternate charges. Certainly, we measure our cashflows in {dollars} and after a document supply in 2024 we anticipate to ship working cashflow of round $11 billion for 2025. That is broadly according to 2024, as soon as accounting for 2 non-recurring funds with a complete influence of round $1 billion.

Whereas we proceed to enchantment the German tax surcharge case we’ve got determined to make a $0.8 billion cost this 12 months, and we additionally anticipate a last transition tax cost associated to the U.S. Tax Cuts and Jobs Act. We anticipate capital expenditures of round $1.5 billion, with a big portion of this associated to ZYN, as we prioritize reinvestment behind our smoke-free portfolio. 14 Our robust 2024 money move and EBITDA progress, mixed with a good influence from our Euro steadiness sheet hedging, allowed us to scale back our internet debt to adjusted EBITDA ratio by 0.5 occasions to 2.66, forward of our expectations and representing a dramatic acceleration of our deleveraging.

We anticipate additional progress in 2025, putting us on observe for our goal ratio of round two occasions by the top of 2026. I’ll now flip it again to Jacek for concluding remarks.

Jacek Olczak — Chief Working Officer

Thanks, Emmanuel. In abstract, 2024 was a exceptional 12 months for PMI. Our monetary outcomes epitomize the power of our technique and the success of our transformation with underlying momentum throughout classes, bolstered by our proactive measures on pricing and value additions. We stay assured in our place as the worldwide smoke-free champion as we proceed to execute on our multi-category technique for main premium plans, IQOS, ZYN and VEEV.

Our key strategic precedence for 2025 are clear as we proceed to help the growth and growth of our smoke-free enterprise each within the U.S. and worldwide. We anticipate continued robust momentum in 2025, and we stay assured in our potential to ship or exceed our 2024-2026 progress goal as we progress towards our ambition of turning into considerably smoke-free by 2030. Lastly, and importantly, our robust progress outlook and extremely money common enterprise, enabling us to proceed reinvesting in our smoke-free transformation whereas returning money to shareholders.

In September, we elevated our annual dividend for the seventeenth consecutive 12 months according to our long-term dedication. Thanks. And Emmanuel and I will likely be pleased now to reply your questions.

Questions & Solutions:

Operator

[Operator instructions] And our first query in the present day comes from Matt Smith of Stifel. Your line is open.

Matt Smith — Stifel Monetary Corp. — Analyst

Hello, Jacek, Emmanuel. Thanks for taking my query. The 2025 outlook requires HTU shipments in numbers or in market gross sales progress, pretty according to what you noticed in 2024. However might you speak in regards to the composition of the expansion? If it is total in line? Are you seeing totally different contribution by geography in your outlook? And may you remind us on if there was any progress in new markets contributing to progress in 2025, or in case you’ve made any progress in these markets as you look out to your 2026.

Jacek Olczak — Chief Working Officer

No. So within the steerage, we primarily proceed seeing good progress in Japan and within the plenty of elements in Europe. I imply, Emmanuel talked about in regards to the Italy, Czech, Poland, proper, when the expansion is EBITDA beneath what we might anticipate at this stage, particularly Italy and Czech following the flavour ban. However we additionally see that there’s some restoration coming in.

So I believe, hopefully, within the second a part of the 12 months, we must always carry Italy one other geographies that half what the remainder of the Europe goes by way of. And we’ve got not within the steerage, assume a big new market opening when it comes to quantity. As you recognize, and I had it in my remarks. I imply, we’re coping with this rational work, we’re preventing with the rational work.

I hope that the newest authorizations of EBITDA following the authorizations of warmth not burn, now the pouches will likely be a great incentive encouragement by different governments, which to be very frank, to be stupidly oppose smoke-free merchandise whereas permitting cigarettes. However within the steerage, we’ve got not put any vital quantity coming from the brand new geographies. So that is all natural progress. And as you may noticed it within the third quarters of this 12 months, regardless of the very fact given in case you take a look at Japan, when virtually half of the market is already on a smoke-free merchandise, the expansion continues there.

Matt Smith — Stifel Monetary Corp. — Analyst

Thanks, Jacek. I will cross it on.

Operator

Thanks. Our subsequent query comes from Bonnie Herzog of Goldman Sachs. Your line is open.

Bonnie Herzog — Analyst

Thanks. Hello, Emmanuel, Jacek. I had a query in your margins. You are guiding robotic working leverage on a currency-neutral foundation this 12 months.

So hoping you may spotlight a number of the key drivers behind this. Additionally, type of need to confirm in case your steerage assumes a possible entry of ILUMA U.S. or simply probably continued investments with none corresponding gross sales? After which, how ought to we take into consideration the margin contribution from ILUMA within the U.S., and the way lengthy it would take after your entry out there for these margins to essentially be significant?

Jacek Olczak — Chief Working Officer

Sure. So possibly I begin Bonnie, I imply, sure, we’re searching for a sturdy margin growth this 12 months, possibly not exactly to the identical stage as we had final 12 months, however nonetheless goes to be sturdy. I believe foundation factors. So territory, that is what we’re wanting into is that combos of some elements, we’re nonetheless wanting on the pricing contributions fairly apparent.

There’s clearly constructive combine, proper, between our classes and particularly now that we’ve got a free smoke-free classes on the constructive margin path, together with the vape as very pleased that our technique of going selectively, however we’ve got the proper influence within the geographies that’s wanted to order delivering cash behind, in case you like, margin behind. So this can contribute. And we had prior to now as you keep in mind fairly the headwinds coming from COGS. And I believe these have I believe they’re behind us, OK? Then clearly, there’s all conversations today right here and they’re particularly coming from the U.S.

in regards to the tariffs and so forth. However the way in which we set up our provide chain, as you recognize, U.S. on the ZYN is basically self-sufficient. Our provide chains in Europe.

I imply — we organized our provide chain virtually by block. So I do not see at this stage that there must be an surprises approaching the tariff aspect. So I believe we’re fairly assured the place we land with the COGS for the 12 months. There’s clearly ongoing help coming from the sale of IQOS, particularly units.

When there’s — OK, there’s financial system of scale. There was robustness of the system when it comes to high quality, and many others. So we truly haven’t got need like prior to now, a little bit of a stress on the margins coming from a tool sale. So this we’ve got nicely stabilized for 2021.

It was behind the margin growth. And I believe we must always anticipate the identical and we expect the identical in ’25. now your questions as regards to ILUMA margins U.S., OK, possibly one after the other. We nonetheless anticipate that hopefully, we are going to get the authorization for IQOS across the mid of this 12 months.

Once more, on the one hand, one might learn this as an encouragement after as we mentioned, it is complete science figures, and many others., evaluation, FDA has gave authorization for all variants of ZYN. I would not be myself if I would not remark that clearly, if one thing takes 5 years, it should be thorough as a result of in any other case, I can’t clarify the size of the method, however I do hope that FDA will transfer quicker and already I might do my spending for some time. And by the way in which, when you have additionally authorization for ZYN. So the margin story, I’d repeat myself that clearly, once we begin including help behind ILUMA.

I imply, on the preliminary interval will likely be a unfavourable, proper? However in a scheme of the issues within the P&L aspect, in case you like, of our enterprise within the U.S., I do not assume it must be one thing which is that mature it. And I consider U.S. will go into related elements we had on a warmth not burn elsewhere. So two to 3 years, we must always — — IQOS must be internet contributor to the underside line.

Taking into account as all the time reminding everybody that we do not actually have the headwind of cannibalization, proper? So we do not actually — we’re in a greater beginning place, and we had a rising confidence within the IQOS ILUMA in worldwide, however we all know the place I name ILUMA merchandise in worldwide during the last three years by continued producing the expansion consumer acquisition. So I consider it is actually an excellent proposition for grownup people who smoke within the U.S.

Emmanuel Babeau — Chief Monetary Officer

Possibly simply to enhance on the margin aspect, Bonnie, as you may decide from our steerage, we’ve got vital ambition when it comes to margin enchancment in 2025. And what’s driving that’s the truth that we’re flying on a number of engine on margin enchancment and all the pieces is coming collectively positively on the identical time. So certainly, we’ve got after all, the combination evolution that may be very favorable to us with smoke-free product coming with a better margin and they’re rising very quick. Amongst these smoke-free product, we’ve got the U.S.

and ZYN that’s rising even quicker and which, as we already mentioned, is best-in-class when it comes to margin. In order that’s clearly a plus. We’re additionally rising worth. Sure, after all, we’re not going to proceed to ship 8%-plus worth enhance on flamable, however it should stay extraordinarily sturdy.

And we even have the ambition to develop our worth, not on the identical stage, however considerably on our smoke-free portfolio. After which, once we take a look at our COGS, we’re engaged on productiveness. They’ve scale impact which can be delivering positively. And as you recognize, we had been dealing with till now a big headwind on prices, notably on the flamable enterprise.

That is easing, ’25 must be higher and ’26 might be even higher than ’25, by the way in which. So we’re getting into the proper route there, and that’s making us clearly concentrating on good margin enchancment, each organically and in greenback phrases for ’25.

Bonnie Herzog — Analyst

OK. Tremendous useful. And truly, I am simply going to ask a fast follow-up since you type of touched on this, however you additionally talked about this morning about concentrating on otherwise you proceed to focus on gross margin growth in combustibles. After which, you probably did say that you simply anticipate the hole to develop relative to your smoke-free product gross margin.

So beforehand, you guys have talked about, I believe, a 10-point hole. So your gross margins broaden on combustibles. I believe what I am listening to you say is that not solely is that a chance, but additionally continued margin growth on smoke charges, which you simply talked about. So do you foresee that hole increasing? I imply, does it go to 15-point unfold or might it go 20, simply type of attempting to assume by way of that within the subsequent couple of years?

Emmanuel Babeau — Chief Monetary Officer

Look, on the consumable, we have already highlighted the truth that there was a ten share level hole, and it has been increasing in the previous few years. So certainly, we’ve got the ambition to do higher on the gross margin for flamable and we defined why. However as we proceed to progress additionally quickly on smoke-free merchandise, each with the combination impact coming from ZYN, however individually on IQOS after which we need to proceed to progress. So we’ve got certainly a spot that would proceed to broaden between smoke-free product and flamable within the coming years.

Bonnie Herzog — Analyst

All proper. Thanks. I will cross it on.

Emmanuel Babeau — Chief Monetary Officer

Thanks.

Jacek Olczak — Chief Working Officer

Thanks, Bonnie.

Operator

Thanks. Our subsequent query comes from Gaurav Jain of Barclays. Your line is open.

Gaurav Jain — Barclays — Analyst

Good morning, Emmanuel, and Jacek. Thanks for taking my questions. I’ve a few questions. One is on ZYN.

So if I take a look at the scattered knowledge, your volumes have decelerated to mid-teens progress, and your steerage is for 34%, 41% progress and then you definitely additionally talked about that the availability normalization would solely occur in 2H ’25. So I simply needed to grasp what provides us the arrogance that traders will likely be accelerating to this virtually 40% progress price once more?

Jacek Olczak — Chief Working Officer

Sure. So I’ll take it Gaurav. Good morning. So we glance additionally on how the volumes had been evolving in This autumn of the weeks of the final quarter, we see the rising velocities behind the truly, there was the one model, I believe, over the previous few weeks, which was rising within the velocities, not the remainder of the — no less than the large 4 different manufacturers or smaller however huge different manufacturers.

Look, we even have to grasp that we’re studying all this knowledge with no full provide of the availability constraint surroundings proper? So it is a bit troublesome that you simply see on the retail relies upon even by which shops you are , that’s one thing which might be considerably totally different than what we’re delivery to the commerce. However as we predicted with the elevated capability in Owensboro. We had the primary quarter with a big sequential quarter-on-quarter progress. Even when you’ll take the run price of what we see within the final weeks, and many others., I believe the steerage is by some means reflecting what we see there.

Now, our feedback that we must always — we predict that we’ll be assembly demand by about mid of this 12 months. I’ve to make one reservation is that, it is troublesome to truly learn what the demand this as a result of we all know what’s the stage of out-of-stock. We all know what’s the present customers of ZYN demand for the product and understanding that these purchases or the purchases are by some means impacted by the truth that, sadly, they’re confronted with lack of availability out of inventory. And that’s the constructive momentum, which does not has.

I consider additionally the FDA authorizations, which, on the one hand, one might learn product was in a market, so there isn’t any change. However truly, I believe it provides plenty of visibility and stability to all of the market contributors, together with the commerce. And I consider additionally the shoppers that the product now has the total fledge my language authorization in all the flavour variants. So all of this stuff are I believe, will translate into the volumes which we projections of the volumes, which had been mirrored in our steerage.

Gaurav Jain — Barclays — Analyst

Certain. And a follow-up query to that. ZYN clearly in provide scarcity. Retailers have been placing their quantity.

I believe you elevated costs at $0.30 final 12 months, whereas retail has elevated pricing by $1 or $3, $5. How do you management retail worth? And is there objective so that you can provide normalizes to scale back retail worth in order that that can even have a constructive impact in your quantity.

Jacek Olczak — Chief Working Officer

Sure. So when you have agree of the out of inventory as ZYN is experiencing, it is clearly managing the worth on the retail stage is slightly bit more difficult, proper? I imply, it is fairly apparent. However I consider with the rising demand — sorry, with the rising provide of the product, I believe this pricing will come to phrases of naturally to the normalization. I’ve to additionally admit that look, we’re very proud of the help we’re getting from retailers dealing with our merchandise.

And it is not that straightforward for them additionally to be confronted with a product, which, on the one hand, has the demand. However, they can’t notice their margins, they usually take from ZYN worth. And I hope — once more, I believe that the pricing state of affairs out there will type of by some means naturally the second when the product will likely be in full unconstrained suppliers, as we mentioned, second half of the ’25, we must always begin seeing enchancment on this.

Gaurav Jain — Barclays — Analyst

Certain. And if I might simply squeeze in a single final query on ZYN Extremely. Might you simply discuss that please? What the product is? And when do you assume we will see it out there?

Jacek Olczak — Chief Working Officer

Sure. So clearly, nicely, as we’ve got observed, proper, the ZYN authorization got here primarily final days or hours of the one administration. Now, I suppose, we’ll have performed for the brand new administration as I mentioned within the reply to the questions earlier than that I do hope that interval of 4 or 5 years ready for authorization is an excessive amount of, is simply too lengthy. And I consider that there will likely be some — I hope there will likely be some accelerations within the processing due to authorizations.

And we’ve got to additionally perceive that partially problem which the U.S. market has very a lot on the vape product is by the truth that the authorized a part of the market has not been created. So on the one hand, FDA is doing plenty of proper issues when it comes to regulation enforcement and chasing the unlawful Chinese language no matter import. However then again, there’s a demand among the many people who smoke, grownup nicotine customers for such a a product.

And except we create in a quick method, the authorized a part of that market. After which, we’re primarily losing our money and time. So I do consider that EBITDA will take this additionally into consideration that this case should not occur in our product classes. And there’s a demand for the product.

We even have curiosity in it within the traditional a part of the market after which any for the regulation enforcement and many others., and the illicit market. However you can’t simply management the illicit market if you have not offered authorized options out there, which can be found. I do consider that the IQOS as nicely, however ZYN has some pending authorizations or purposes, I ought to say. I do consider that they are going to be profiling in a quicker method than earlier than.

Gaurav Jain — Barclays — Analyst

Thanks a lot.

Jacek Olczak — Chief Working Officer

Thanks, Gaurav.

Operator

Thanks. [Operator instructions] And our subsequent query comes from Eric Serotta of Morgan Stanley. Your line is open.

Eric Serotta — Analyst

Nice. Thanks guys. Hope you give some coloration when it comes to what you are seeing in Italy. You talked about that the fourth quarter was slightly bit softer than you had anticipated after the great restoration you noticed within the third quarter from the characterizing taste ban? After which, when it comes to Poland, are you able to remind us if you anticipate to see some disruption from the ban being applied? And what kind of an influence do you anticipate when it comes to total European combustibles enterprise? After which, lastly, on FX, it looks like the FX headwind that you simply known as out for the 12 months and the steerage was a bit lower than what appears to be implied based mostly on spot charges and your typical yen hedge.

Questioning if there’s been any change within the hedging coverage or if there’s any purpose why it might be a bit decrease than anticipated.

Jacek Olczak — Chief Working Officer

Sure. So possibly I take the final one is the best one, and I come again to Italy, which is a bit an extended story. I imply, in a $0.22 at spot charges proper now, I imply, frankly talking, the largest contributor to the unfavourable is the Russian ruble, and that is nicely above the 60% of the variants. The yen truly goes in cents.

I suppose it was a recall in regards to the $0.04 in our estimates on the spot price. Clearly, everyone knows we’re residing within the fairly dime occasions as we communicate, however that is what it’s. There was a giant contribution final 12 months coming from the Egyptian pound, proper, after I imply, we needed to take successful that clearly won’t be repeated within the — won’t repeating that in ’25. Truly, this can end in a constructive forex boundaries.

However that is on forex. So frankly talking, at this stage, is the ruble and as I mentioned, $0.04 or so of the yen and the remainder is simply the blended bag as a consequence of our worldwide footprint. Emmanuel desires so as to add one thing.

Emmanuel Babeau — Chief Monetary Officer

No, I’d add one thing as a result of I believe — I imply, the volatility we’re seeing on the forex market in the present day in all probability a great torture take a look at on how issues are working for us. I ought to first remind you that we’ve got a pure vital hedging in our steadiness sheet with greater than 60% of our debt that’s in euro. And due to this fact, when we’ve got a weak point within the euro versus the greenback, which is a state of affairs we have seen just lately, after all, we’ve got a unfavourable influence on our P&L, however we’ve got additionally a lower of our debt in greenback phrases. And we’re additionally benefiting from decrease value of euro plus, after all, decrease curiosity value in euro translated into {dollars}.

In order that has been actually serving to our trajectory in ’24. And if there was continued weak point of the euro that can proceed to assist us sooner or later. In all probability what will not be absolutely captured by the market is the truth that certainly, on prime of that, we’ve got two vital hedge place, one on our publicity to the yen for 2025. We’ve round 60% of our publicity that’s lined at a price of round JPY 138 for $1.

In order that signifies that we aren’t impacted by the attainable deterioration of the yen for that a part of our publicity. And we’ve got additionally a decrease publicity to decrease hedging — sorry, on euro the place we’ve got round a bit multiple fifth — sorry, one fourth of our publicity to euro, the place we’re lined at 112, which can also be limiting a bit the influence on the P&L when the 12 months goes down. So with all the pieces I have been saying you will have all the reason as a result of what else has been sharing with you on the foreign exchange influence for us in the present day.

Jacek Olczak — Chief Working Officer

Sure. Now, on Italy. So I believe, sure, the second half was a bit weaker than we’d possibly anticipate. Italy was going as many others, not all, however many different member states of the EU to the flavour ban I believe what we see is that, OK, some people who smoke, and customers have hoped momentary, proper, however the return to cigarettes, which all the time was that danger.

In order that additionally explains in the identical geography, the cigarettes developments are barely higher than one might anticipate or might assume. There’s some polyols between the vape merchandise very a lot. And that, I consider, possibly partially additionally explains why our if proposition has superior most in Italy, proper? And this was in you recognize, in a — in a closed system very shortly after a brief time frame, leap to journey to the No. 1 proposition.

I believe we have to possibly take a look at the class of smoke-free over a time frame on a complete foundation as a result of there will likely be some poly utilization and typically pushed by the occasions like this by this taste. However we even have a geography in Europe that very shortly after the implementation of the flavors ban I imply, they really return to the expansion price which we had earlier than. So possibly Italy is our participant. We’re wanting into this battle.

However as I mentioned, a part of our multi-category methods additionally ought to there be any leakage on the warmth not burn customers, we will seize this with different proposition. After which, I suppose we’d like a bit extra time to see the stabilization. Poland, you requested in regards to the Poland, I do not assume Poland has put the stick within the floor at which second they actually need to absolutely implement the — however I believe it is going to occur. I believe someplace within the ’25 it must be, if this isn’t — if the stick has not been put within the floor, it’s extra towards the top of this 12 months.

Eric Serotta — Analyst

Nice. Thanks a lot.

Jacek Olczak — Chief Working Officer

Thanks.

Emmanuel Babeau — Chief Monetary Officer

Thanks.

Operator

Thanks. Our subsequent query comes from Faham Baig of UBS. Your line is open.

Faham Baig — UBS — Analyst

Good morning, guys. Thanks for the questions. A pair from me as nicely. Firstly, on ZYN once more within the U.S.

We observed a few your friends have launched artificial moist nicotine merchandise. And in keeping with the scanner knowledge, have seen some preliminary uptick. How do you see the moist versus dry dynamic within the U.S.? And the place do you assume the buyer might find yourself sooner or later, recognizing that in Europe, most merchandise are noise. And the second query possibly it comes again to your feedback round Italy.

However simply long run, we see the vapor class persevering with to develop fairly strongly, and we will focus on its flooring round flavors, advertising underage use, and many others. However do you see this as a headwind for the tobacco trade? Or do you consider the full pie can proceed to develop with restricted influence on tobacco?

Jacek Olczak — Chief Working Officer

Sure. So possibly the second half is, I believe the full pie grows even if the actions between the classes inside a smoke-free there’s some dynamics, proper, between a warmth not burn and e-vape and now pouches rely upon how market is organized and controlled. We additionally know that probably the most troublesome truly to learn class as a result of means the market is organized at the moment is the vape class, proper, as a result of you will have a disposables, you will have elements, you will have open tank techniques nonetheless and a few merchandise below the rules and correctly licensed is determined by the jurisdiction, some merchandise are simply popping up out there. So you may name it a special type of illicit commerce.

However I believe you see this within the U.S., but additionally in Europe, within the U.Okay. and some different locations, the regulators, governments are taking extra critical look into correctly organizing that market. I can not inform you whether or not this will likely be accomplished within the ’25. However positively, there’s the strikes — the strikes are in the proper route.

So I consider ’25, ’26, the class must be normalized by the truth that it should be correctly regulated after which we take it from there. One other one to speak in regards to the publicity, and many others., as a result of we’re you recognize our coverage, what are our views on this one. However positively, it is troublesome to regulate of the self-discipline out there in case you delink with the entire totally different emanations of the product coming primarily legally to {the marketplace} that clearly additionally enjoys the much less self-discipline commerce channels, so utterly invisible commerce channels, in case you like, and many others. In the case of your questions in regards to the artificial vent versus dry.

So simply to take it from a perspective, the way in which we take a look at the information within the U.S., for instance, this complete new issues that are coming into the market, there’s fairly an extended record of various sauces and the moist or others and the entire market — that a part of the market, why I am not mistaking transfer year-on-year by barely 20 foundation factors. So in a scale of this stuff, there’s presumably plenty of dynamics on the weak foundation, however does not appear that it has any main traction, and many others. The insights which may have once we speak or shoppers, we see — and clearly, if you learn the buyer perception, it is not a pure mathematical accuracy and the precise quantity. However I believe that moist product — moist pouch merchandise is extra interesting to the moist snuff sort of customers, proper, like snooze and many others.

Whereas what we see within the market that the dry product has extra enchantment towards the people who smoke and e-vapor. That is what I can inform you at this stage.

Faham Baig — UBS — Analyst

Thanks, guys. Actually admire that.

Jacek Olczak — Chief Working Officer

Thanks.

Emmanuel Babeau — Chief Monetary Officer

Thanks.

Operator

Thanks. Our final query in the present day comes from Philip Spain of J.P. Morgan. Your line is open.

Philip Spain — JPMorgan Chase and Firm — Analyst

Hello. Good afternoon. Thanks very a lot for taking my questions. I simply had one query, please.

It was simply on the HTU steerage. If I take a look at the place the volumes landed on the finish of ’24, after which I take a look at the vary you have — the ten% to 12%, you have guided for ’25. However then simply extrapolating that out for ’26 and your steerage there of the 180 million to 200 million of cargo quantity. Simply attempting to get a way of what provides you confidence in — by my math, that means acceleration within the progress in 2026.

I simply needed to grasp suppose what provides you that confidence that you will note a reacceleration in 2026.

Jacek Olczak — Chief Working Officer

Sure. In order I mentioned earlier, I imply, within the steerage for this 12 months for ’25, we primarily stayed very low into — we’re primarily centered on natural progress out there, present market. Clearly, we opened ’25 and past ’26, I believe it is turning into possibly extra prudent or honest to imagine that there will likely be some geographies additionally coming lastly opening the market to the brand new proposition. There’s one level which I — possibly we’ve not articulated nicely within the — in our remarks and the solutions to the questions earlier than is that there’s nonetheless about 20-or-so % of the quantity on the warmth not burn that we do not actually do.

We’d — cannot actually notice the total progress potential. And I am referring right here to the geographies of Russia and Ukraine now for apparent causes. However I used to be simply take a look at the numbers of ’24, I believe we’ve got leverage behind about 0.6, possibly much more level of progress, which we’d usually anticipate to ship, evolves markets the place topic to the identical type of market situations as different locations, proper, the ILUMA, and many others. So let’s examine how this unwind.

I believe the expansion which we projected very a lot centered on natural, which means the geographies which we’ve got in the present day available. I believe it is a good progress. Quantity phrases is basically the identical quantity progress as we used to have prior to now. But additionally in a broader sense, we an increasing number of see the potential of the multi-category and the full volumes of the smoke-free merchandise is simply the one class.

And as we all know very nicely, the margin from the margin perspective, all of them primarily create an excellent alternatives. I imply, they’re all significantly accretive to the place we’re in the present day and to — particularly to the combustibles. Second factor is, and I believe we are going to zoom slightly bit extra proper possibly the extra that is our CAGE presentation, however from the consumer’s perspective, it is truly a fairly good financial proposition as a result of we’re primarily then leveraging all of the investments by way of the consumer acquisitions, and many others. And one of many class clearly takes the burden of buying the consumer however all the opposite product classes truly very properly benefited from this complete factor.

So you’ll hear from us an increasing number of speaking, clearly, we’ll provide the granularity in regards to the warmth not burn e-vape, however I believe within the subsequent few years, the main focus will likely be an increasing number of turning into complete of a smoke-free moderately than simply the person as a result of this additionally by some means displays the consumer instructions, consumer — client dynamics.

Philip Spain — JPMorgan Chase and Firm — Analyst

Thanks very a lot.

Jacek Olczak — Chief Working Officer

Thanks.

Operator

Thanks. I am displaying no additional questions presently. I want to flip it again to James Burnell for closing remarks.

James Bushnell — Vice President, Investor Relations and Monetary Communications

Thanks. Earlier than closing our name, I would prefer to remind you that, as Jacek talked about, we will likely be presenting on the CAGNY Convention on February 19, and we hope you’ll be a part of us both in individual or just about. Thanks once more for becoming a member of us in the present day. In case you have any follow-up questions, please contact the investor relations group, and have an excellent day.

Thanks.

Emmanuel Babeau — Chief Monetary Officer

Thanks. Converse to you quickly.

Jacek Olczak — Chief Working Officer

Thanks.

Operator

[Operator signoff]

Period: 0 minutes

Name contributors:

James Bushnell — Vice President, Investor Relations and Monetary Communications

Jacek Olczak — Chief Working Officer

Emmanuel Babeau — Chief Monetary Officer

Matt Smith — Stifel Monetary Corp. — Analyst

Bonnie Herzog — Analyst

Gaurav Jain — Barclays — Analyst

Eric Serotta — Analyst

Faham Baig — UBS — Analyst

Philip Spain — JPMorgan Chase and Firm — Analyst

Extra PM evaluation

All earnings name transcripts