Welcome. Thank you for joining us. Earlier today we issued a press release containing detailed information on our 2026 first quarter results. The press release is available on our website at PMI.com. A glossary of terms including the definition for smoke-free products as well as adjustments, other calculations and reconciliations to the most directly comparable U.S. GAAP measures for non-GAAP financial measures cited in this presentation are available in the exhibits to the company's Form 8K dated on today's date and on our Investor Relations website. 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 Emmanuel Babot, Chief Financial Officer. Over to you, Emmanuel.

Thank you, James, and welcome, everyone. We delivered a strong start to the year with outstanding growth from our international smoke-free business and very robust pricing driving impressive progress, despite a particularly strong prior comparison for both the U.S. and combustibles. Organic top-line and operating income growth exceeded our expectations, driving plus 10% adjusted OI growth and plus 16% adjusted diluted earning pressure growth to reach $1.96. In 2006, International Smokefree delivered a striking performance with double-digit volume growth, mid-teens organic top-line progression, and high-teens organic growth profit growth or almost plus 30% in dollar terms. This was led by ICOs with close to plus 11% adjusted in-market sales growth, alongside further multi-category accretion from ZIN and VIV, which reached the estimated joint number one closed poll position in Europe based on Nielsen of stake data. The financial performance of our combustible business was robust, delivering results in line with our mid-term model with low single-digit organic top-line growth and low-to-mid single-digit organic growth profit growth. This was especially remarkable considering cigarette volume declines were at the more negative end of our expectations following a prior period of volume growth due to a number of temporary factors. This reflects the enduring pricing power of our portfolio led by Marlboro alongside efficient cost management. In the US, thin off-tech volumes grew by plus 10% despite an uneven competitive landscape. As anticipated, segment financial performance was challenging due to the specific combination of impact this quarter, including increased investment and the comparison to Q1 2025, which had close to no price promotion and a significant ZIN inventory rebuild as we exited supply constraints. As we flagged last quarter, there was also a channel inventory overhang at the end of 2025, which largely normalized in Q1 and thus impacted shipments. We continue to invest for future growth and expect U.S. performance to progressively improve over the course of 2026, as we prepare to launch ZIN Innovations and Comparison Normalize, notably in the second half. Overall, while the global economic outlook is uncertain, Our strong financial performance in Q1 underscores our momentum and gives us confidence in delivering another year of best-in-class growth. Let's discuss our Q1 results in more detail, starting with the headline financials. We delivered over $10 billion in net revenues, representing a plus 9% increase in reported terms and plus 2.7% organically, surpassing our expectation for a broadly flat delivery. The strong performance of ICOs and our multi-category portfolio more than offset the Q1-specific combination of U.S. and combustible headwinds I just mentioned. Adjusted gross profit grew by plus 10% to $6.9 billion, reflecting plus 3.8% organic growth and plus 70 basis points of organic gross margin expansion. We achieved this through strong pricing, operating leverage, and the continued benefit of smoke free mix, partly offset by the anticipated US impact. Driven by the same factors and partly offset by increased gross reinvestment, Adjusted operating income also exceeded our forecast, growing plus 10% to $4.2 billion with close to plus 1% organic growth. Adjusted deleted earnings per share grew by an impressive plus 16% to $1.96, including an 18-cent currency tailwind, supported by positive Q1 transactional impact in addition to the generally weaker U.S. dollar. Our effective tax rate was also slightly better than expected and more favorable in this quarter compared to the forecast full year rate. Our international business delivered an outstanding quarter with both gross profit and OCI growing by around plus 10% organically and around plus 16% in dollar term. This was achieved even as we invested strongly behind our smoke-free portfolio. The excellent organic performance of smoke-free was the clear standout with plus 11.9% volume growth, plus 15.8% net revenue growth, and plus 19.4% growth profit growth, driving gross margin expansion of 210 basis points to 70%. This was primarily driven by the continued growth-based momentum of ICOs, in addition to increasing contributions from ZIN and BEEV. Looking at CMI as a whole, our global smoke-free business delivered very solid organic net revenue growth of plus 5.3% and organic gross profit growth of plus 3.9%, despite the dynamic in the US. We continue to expect strong global smoke-free growth for the full year, supported by high single-digit volume progression and normalizing U.S. comparison. In international combustible, while volumes declined by 5.1%, organic net revenues grew by plus 1% and gross profit increased by plus 3.9%, with strong pricing and effective cost management outweighing volume-mix headwinds. Gross margins expanded organically by 190 basis points, underscoring the resilience of this business. Turning now to volumes, where total shipments declined by 1.9% as compared to our broadly stable forecast for the full year. smoke-free shipments increased by a very good plus 9.1 percent versus prior year in line with our full year target of high single digit growth this was primarily driven by plus 11 percent growth in htu to 41.3 billion units including a modest net phasing benefit of around 0.5 billion units across several markets in addition the stellar plus 95 percent growth of e-vapor largely offset a decline in oral smoke-free volume of 16 percent notably reflecting the u.s shipment and inventory headwind previously discussed and timing dynamic in the nordics total smoke-free product in-market sales volume increased by plus 11%. Cigarette volumes declined at the high end of our expectation and above the international industry decline of 2.3%. This reflects a number of dynamics, including the lapping of exceptional plus 1.1% volume growth in Q1 2025, which included inventory replenishment in a few markets, such as Indonesia Asia, Russia, Italy, and Spain. In addition, a challenging economic environment has contributed to a higher level of illicit consumption in certain markets, while excise increases in a few countries, most notably Mexico in January, drove a significant industry decline. Looking ahead, we expect volume declines to moderate over the coming quarters, and we continue to forecast a cigarette volume decline of around three percent for the full year. This includes a negative industry impact in India following the introduction of new excise rates in Q1. Looking at our Q1 top line drivers, strong pricing and the positive mix impact from intentional smoke-free more than offset the negative volume and mix dynamics from the US and combustible. Pricing was the largest contributor, adding plus 5 points. This was driven by another strong quarter of combustible pricing at plus 8.5%, with international smoke-free pricing of plus 2.9%, led by ICOs, offsetting the impact of more regular promotional activity in the U.S. compared to the very low level of Q1 2025. International smoke-free mix also made a substantial positive contribution of plus 2.7 points. This was partly offset by a 1.8-point impact from the U.S., reflecting the abnormal combination of factors outlined. currency added a further plus 6.4 points resulting in reported net revenue growth of plus 9.1% for the quarter overall the composition of q1 growth closely mirror the structural driver of pricing power and smoke-free mix delivered consistently over recent years underscoring the sustainability and consistency of our growth model moving now to adjusted operating income margins which expanded by plus 40 basis points to reach over 41% this notably includes a positive currency impact which enables us to increase margin despite additional reinvestment in future growth as well as unfavorable timing and comparison effect gross margin expansion contributed plus 70 basis points driven by the factors mentioned earlier while only a small impact from disruption and cost increases related to the conflict in the middle list with regard to sgna as planned we continue to invest in commercial program scale and innovation both internationally and in the us While Q2 is likely to see further strong year-over-year investment, we expect this to moderate in H2 and for SG&A progression to be organically at or below the level of net revenue growth for the year. Currency provided a meaningful tailwind of plus 110 basis points, supported by a favorable comparison to transactional losses in the prior year. Overall, while this quarter had the slowest expected organic growth of the year, we continue to invest in our Smokery portfolio, supported by efficient back-office and manufacturing cost management, including approximately $150 million dollar of gross cost efficiency realized in q1 we remain on track for full year organic margin expansion in 2026. turning now to our worldwide smoke-free business we delivered ims volume growth of around plus 11 percent in q1 approximately three percentage points above the industry smoke-free product growth rate in market and category where PMI is present. This reflects our ability to capture over 70% of industry growth in this market as compared to our share of around 60% driven by the strength and scale of our multi-category portfolio. We remain focused on expanding the strength with three geographies adding another category to reach 55 multi category markets and two new markets for smoke-free products in total to reach 108 this includes the launch of ZIN in Portugal and Kenya and VIV in Egypt within the smoke-free international Icos delivered another strong quarter with adjusted in-market sales growth of plus 10.9%. This reflects very good and broad-based momentum across markets and regions, including Europe and Japan. Adjusted IMS volumes outside these two geographies grew by plus 19%, including dynamic growth in Korea, Malaysia, Indonesia, Asia, GCC, Mexico, and remarkable early results in Taiwan. At this stage, following its launch in Q425, Taiwan is the most successful major high-cost launch market to date, with a national exit-of-stake share of almost 6% in March. This represents around 70% of industry heat node bond volume and a near doubling of our combined Taiwanese cigarette and HTU market share in the last six months. Global travel retail also continued to post double-digit HTU growth with only a limited impact from the Middle East. Q1 adjusted in-market sales included a consumer pantry loading benefit of approximately 0.5 billion stick in Japan ahead of the April 1st excise driven price increase even excluding this temporary effect growth remains strong at plus nine point four percent importantly I cause profitability continues to expand as we invest consistently behind the brand driven by a growing contribution from pricing, continued scale benefits, and productivity improvements across both consumables and device costs. Innovation remains a key enabler of legal-edge nicotine consumer acceptance and retention, broadening choice across test profile and price points. During the quarter, we continued to innovate on our flagship, Terrea Consumables, in addition to excellent traction from the expansion of mainstream price Delia and tobacco-free variant Livia. We also continue to make progress on the rollout of our alternative Eat Not Burn technology bonds by ICOS. Following promising results from initial key city launches in Italy, we commence a national rollout during the quarter. A significant proportion of consumers are entrenched traditional cigarette consumers, fully aligned with our mission to provide better alternatives which appeal to all cohorts of adult smokers. The strength of ICOs continues to be illustrated by sustained off-tech share gains across key cities, which act as the lead indicator for national success. This includes impressive Q1 milestones such as Tokyo surpassing 40% share for the first time, global travel retail at over 20%, Munich exceeding 16% and Madrid over 10%. Coming back to Taiwan, a particular highlight was Taipei where Ico's share reached over 7% in its second quarter post-launch and exited in March at close to 8%. You will find additional market and SFP volume data in the appendix to these slides. While ICOS is a core engine of our international smoke-free business, ZIN and DEVE strengthen and complete our multi-category strategy with excellent momentum and significant global opportunities. ZIN continue to deliver rapid growth, modern oral shipment volumes increased by plus 7% on the comparable basis, or plus 42%, excluding the more mature Nordic markets. On this latter scope, where the greatest opportunity lies, we estimate off-tech volumes grew by well over 50%, gaining share in a dynamic category. This notably includes strong results in markets such as the UK, Pakistan, Poland and Mexico. Volumes decline in the Nordics, primarily due to priming dynamics. We continue to expand our portfolio to better meet the needs of legal-edge smokers, looking to switch by offering a broad spectrum of adult-appropriate flavors and strengths. This includes the rollout of our lower-strength offering, Zine X-Law 1.5 mg, across a large majority of our 58 international Zine markets, driving a significant improvement in first-experienced nicotine pouch acceptance among adult nicotine consumers. In eVapor, Veve continued its remarkable momentum in the quarter, reinforcing its position as the fastest-growing international closed-spot vague brand among major players. I am pleased to share that these became the joint number one closed-court brand in Europe in Q425, as estimated by Nielsen of TechData across 19 markets, surpassing long-established players. Quarterly shipments exceeded 1 billion equivalent units for the first time, and IMS volumes almost doubled, driven by impressive growth in Italy, Romania, Germany, the UK, France, Spain, and Indonesia. With an expanding footprint across 49 markets, these rapid volume growth and improving positive margin profile demonstrates its growing value within our multi-category portfolio. This is especially clear in Europe where VIV was an important contributor in delivering plus 12% shipment volume growth for ICOS, ZIN and VIV in the quarter more than offsetting the ZIN dynamic in the Nordics I covered earlier with plus 31% ZIN growth elsewhere. ICOS adjusted IMS volume increased by plus 5.4% with a very good performance across the region, despite ongoing disruption in Ukraine and the initial impact from the implementation of the EU characterizing flavor ban in Poland. Excluding markets where the ban took effects in January 2025, such as Poland and Hungary. Adjusted IMS volumes grew by around plus 8% as the brand's powerful momentum continues. Double-digit growth continued in Italy after analyzing the flavor ban, which came into effect in mid-2024. Other notable markets delivering strong growth include Spain, Germany, Greece, Romania, Serbia, Bulgaria, and the Netherlands. We expect further good growth from ICOS in Europe in the remainder of the year. In Japan, the eat not burn category continued to grow strongly, reaching around 53% of total industry of tech volume in Q1. ICOS adjusted IMS volumes grew plus 10.4% or around plus 6% excluding consumer pantry loading. This robust level of growth demonstrates the ongoing momentum behind the brand, which delivered an impressive increase in adjusted market share to reach a record 34.9%. While competitive intensity in the category remains high, ICOs retained close to 70% of industry heat-not-burned volumes, reflecting the strength of the combined proposition of product, brand, and commercial reach. In shipment terms, Japan HTUs increased only slightly compared to the prior year period, which included a timing benefit of around 1 billion units. As we mentioned last quarter, volatility between shipment and adjusted AMS is possible over the year due to the excise changes in April and October. Indeed, we expect U2 adjusted AMS growth to reflect the reversal of consumer pantry loading and the price increases which took effect on April 1st. While too early to comment on the initial consumer reaction, we remain confident in the growth of FICOS and the wider category in Japan over the coming years. To the US, ZIN continues to lead the nicotine pouch category, delivering off-tech growth of plus 10% in Q1, as estimated by Nielsen. This performance comes despite a competitive landscape where our portfolio does not yet address all of the most dynamic strength and flavor segments. While off-tech volume increased, Q1 shipments declined to 155 million can, reflecting the inventory dynamic explained last quarter which i will now briefly recap with around 40 million cans of inventory rebuild in q125 the underlying shipment days linked to consumer of tech was around 160 million cans therefore the underlying volume for this quarter were around 10 percent higher at approximately 175 million cans. As flagged at our full year result in February, we estimated around 25 million cans of surplus inventory in the downstream supply chain at the end of 2025. As anticipated, this was largely normalized in the first quarter of 2026, resulting in lower shipment volumes compared to consumer offtake. While some quarterly shipment volatility is to be expected in any market, our base expectation is that ZIN shipments should broadly track off-stake growth in future quarter against the estimated underlying 2025 basis provided in February of approximately 180 million cans in Q2, 205 million cans in Q3, and 200 million cans in Q4. More important than inventory movements, however, is the trajectory of off-tech growth for both ZIN and the category. To that end, alongside brand building and commercial execution, we are sharply focused on innovating and we are preparing our manufacturing and commercial operation for new product launches in the coming months. This includes further investment in our US manufacturing footprint with our Aurora facility progressively increasing initial operations. This brings me to our key areas of focus to drive growth and value from the leadership of this promising category. First we continue to invest in the Zine brand and in the long term growth of our US business. This includes marketing, distribution and commercial activations as well as regular promotional activities which were usually low in H-125. Second, we continue to navigate the complex and dynamic regulatory environment which which impacts timely innovation and the switching of legal-age smokers to better alternatives. It is clear from the science that nicotine pouches are a much better choice for those legal-age consumers who would otherwise smoke. We also note the recently published data from the National Youth Tobacco Survey showing that underage usage of the category remains stable or slightly declining at low levels below 2% despite the strong growth of the category. The authorization of ZIN-ULTRA via the FDA's Nicotine Porch Pilot Program remains a priority. Our application remains under active scientific review and we have a continued dialogue with the FDA as part of this process. The FDA's intent for the pilot program is to increase efficiency and streamline the review process and why it has taken longer than targeted, the science supporting our application is robust and we are optimistic that we will be able to launch this product to consumers in the coming months. In addition, we have made a number of ZIN submissions to the FDA that are at various stages of the regulatory process and we are preparing to bring further innovation to market also in the coming months. With regards to ICOs, we are pleased that the FDA has now reauthorized the previous version as a modified risk tobacco product. We continue to engage with the FDA with respect to the authorization of ICOs Iluma to enable American smokers to access the world's biggest and most successful smoke-free product in achieving full switching away from cigarettes. Overall, we look forward with confidence to the future growth of our U.S. business. Finally, moving to combustible, which once again demonstrated the resilience of our net revenue and gross profit growth model, despite significant Q1-specific volume-ed wins, which we expect to substantially ease in the balance of the year. Very strong pricing of plus 8.5% was the key driver with notable contribution from Turkey, Indonesia and Mexico. While we expect some moderation notably in the second half of the year due to timing and comparison effect, we now forecast a full year variance of more than 6%. International combustible growth profit grew by plus 3.9% organically and plus 9.8% in dollar terms, despite strong performance in the prior year, placing us nicely on track for another year of robust delivery. Our cigarette category share declined 0.6 point to 24.8 percent. A strong performance in Egypt was offset by market mix and declines in Indonesia and Russia, largely reflecting pricing dynamic as well as the ongoing share recovery in Turkey. Marlboro once again underscores the strength of its premium brand equity, reaching a record first quarter share of 10.7%, an increase of plus 0.4 points year on year. Our objective remains to maintain broadly stable category share over time with a clear focus on maximizing value through top and bottom line growth while actively supporting the continued growth of smoke-free product. This brings me to our outlook for 2026. The Middle East conflict had a small impact on our business in the first quarter, which affected shipment to global travel retail and certain markets in the region for both combustible and HTUs. While we have observed increased energy prices and some disruption in energy supply in a number of markets, this has not, at this stage, translated into a discernible shift in consumer behavior the situation remains uncertain in both duration and potential impact and it is difficult to assess the broader implication for the consumer or the global cost environment we have factored in some increases in transport energy and other input costs and we will continue to closely monitor development to assess the mid to long-term impact across the main variables Acknowledging this uncertainty and following a good start of the year in Q1, we are reconfirming the currency neutral growth outlook we provided in February. We continue to expect broadly stable shipment volumes, organic net revenue growth of plus 5 to plus 7 percent, organic operating income growth of plus 7 to plus 9 percent, and currency neutral adjusted deleted earning pressure growth of plus 7.5 to plus 9.5. While exchange rates are volatile at present, we now forecast a currency tailwind of 25 cents at prevailing rates. This results in an updated adjusted deleted EPS forecast of $8.36 to $8.51 or plus 10.9 to plus 12.9 growth in the last term. For the second quarter, we expect continued strong performance from our international business and a sequential improvement in growth with HTU shipment volume of 40 to 42 billion, slower HTU adjusted IMS growth due to the short-term impact of excise-driven pricing in Japan and a low single digit cigarette treatment volume decline. We expect mid-single digit organic net revenue growth and solid operating income progression despite another quarter of strong commercial investment. We forecast adjusted deleted EPS of $2.02 to $2.07, including a higher effective tax rate and a favorable currency variance of two cents at prevailing rates. This quarter also coincides with the publication of our Value Report 2025, which provides a comprehensive financial and non-financial overview of our strategy, governance and priorities for sustainable long-term value creation. Following the completion of our 2025 roadmap, we highlight the progress made over the past five years across our most material sustainability priorities. Key achievements include the continued expansion of our smoke-free business, further strengthening underage access prevention in indirect retail, carbon neutrality in our direct operation, eliminating systemic child labor from our tobacco supply chain and advancing effective anti-littering initiatives we also introduce our value plan 2030 plus the focus business driven framework across six priorities consumer circularity our workforce workers in our value chain climate and nature as outlined in the report our approach to sustainable value is fully integrated with our business strategy, supporting the growth of our small tree transformation and reinforcing long-term resilience, competitiveness, and value creation. I would strongly encourage those interested in how we are executing our transformation to review the report. I will conclude today's presentation with a few key takeaways. Our strong and resilient first-quarter performance reflect the structural growth fundamentals of our business model. Our results continue to be underpinned by three powerful drivers, strong pricing, favorable mix from the ongoing shift to small free product, and volume growth led by Icos, Zin and Veeve. While we continue to invest in future growth, these drivers are profit accretive and together with pricing power and cost management reinforce our confidence in our midterm growth targets. While the operating environment remains complex, marked by macroeconomic uncertainty, we believe we are well positioned to navigate external headwinds. Our smoke-free transformation continues to gain momentum, supported by remarkable cash generation and a strong balance sheet. Finally, we remain firmly committed to our progressive dividend policy and to returning value to shareholders as our transformation delivers sustainable long-term growth. We look ahead to the remainder of 2026 with confidence. Thank you, and we are now very happy to answer your questions.

Thank you. At this time, we'll conduct a question-and-answer session As a reminder, to ask a question, you will need to press star 1-1 on your telephone and wait for a name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. One moment for our first question. Our first question will come from the line of Eric Sirota from Morgan Stanley. Your line is open.

Great. Thank you. And good morning, good afternoon, Emmanuel.

Good morning, Eric.

Mike. So starting with smoke-free or international smoke-free, your profit performance or gross margins over 70%, very impressive. You guys have spoken in the past that, well, you're still in the early innings of the optimizing the supply chain and really harvesting gross margin across international ICOS. As you look ahead, how much of a priority is that with your margins at very high levels and a lot of growth potential ahead? And then the other question was on U.S. ZIN. You know, your price gaps have certainly widened back out. They're not that far from where they were when Jacek called them out last September as being, you know, wider than you'd like. Has there been any sort of strategic change in terms of how you're thinking about what you're, you know, sort of the trade-off between pricing and market share that you're willing to, you know, that you're willing to balance in terms of US then?

Thank you, Eric. So, first of all, on smoke-free international margin, I mean, you're right, we continue to improve. And I would say it's a combination, first and foremost, you said it, ICO, that continue to do well. We've been increasing price in a number of markets. We're close to 3% on price increase on smoke-free. And of course, ICO is the biggest contributor to that. To be clear, that's not the top priority because we've been in many occasions explaining the fact that on ICOS and on our smoke-free portfolio globally, we are benefiting from a higher margin than on combustible, which is very nice. But also in dollar term, we are significantly above, you know, more than two times in terms of dollar per unit for revenue but also for gross profit so maximizing volume of course is a big objective but as we are building the portfolio we are building a very attractive brand with icos very differentiated but look at what we're doing with vive so they are coming more like wing brands if you want these and in international they are much smaller than icos at this stage but we are also working on the profitability of these two brands but i cause here is the big driver we do i would say the best possible job to optimize the profit per unit but we don't lose track from the fact that here the name of the game is to maximize volume because that is very powerfully contributing to our overall profitability now your second question on zine in the us i think to a large extent the premium versus competition remains the same as a few months ago let's not forget that it is a moving target because of course competition is also evolving their price and we've seen globally in the market a lot of i would say commercial aggressiveness on on on pricing Fundamentally, ZIN is the leader of the market. If you look at the brand power, ZIN stands really out versus any other brand in the market in terms of differentiation, in terms of brand strength. And this is, as a leader, a brand that will remain as the more premium brand in the market. And it's our intention that it's going to be the case. Of course, we need to permanently monitor are we, you know, with the right level of premium versus competition. And at the end of the day, while, again, we're not going to lose our compass, which is to develop a leading brand with a very nice premium and profitable positioning, we need to ensure that we have the best pricing for that and that we optimize all the parameters, including pricing, to achieve this objective. Now, of course, I'm not going to elaborate more on pricing. This is a very sensitive matter. But at the end of the day, you should just have in mind that our objective is to keep Zinn as the leading brand, a premium brand, making a big difference versus competition. And then, you know, we'll navigate the parameters to achieve that.

Thank you so much. I'll pass it on.

Thank you. Thank you. One moment for our next question. our next question I'm coming from the line Bonnie Herzog from Goldman Sachs your line is open

alright thank you hi Emmanuel good morning I maybe wanted to do a follow up question on Zinn in the US you know you did mention you expect performance to improve over the course of the year so maybe I'd like to better understand what gives you the confidence in this and curious to hear you know how much you're willing to to, I guess, continue to sacrifice short-term profitability to drive volume growth. And then finally, we all know you've been at a disadvantage given the FDA's failure to fast-track reviews of the NIC pouch applications. So curious if you'd consider just rolling out some of the innovation you have that you mentioned without approval.

Yes, sure, Benny. So happy to take this one. i'm going to repeat what i've just been saying on what is our uh objective on on zin fundamentally in in the us but i'm certainly happy to elaborate on why we expect a much more positive dynamic in the second part of the year first of all allow me to spend a few seconds on q2 so remember last year we still have a little bit of market reloading in Q2, much more moderate than in Q1. But that means that we don't have a fully underlying performance as a basis of comparison for Q2. Second, you will remember that last year in Q2, there was, again, almost no promotional activity, which means that we had an abnormally high level of revenue per can. And therefore, in Q2, we will be facing what is the growth of ZIN in the market. And every week you can track the Nielsen and that giving some views. I'm not saying it's scientifically precise, but it's giving some view on the ZIN performance. And you will have this impact on invoicing and revenue per cap. Then, in the second part of the year, that's when we get to normalization of the basis of comparison in terms of revenue per can. We should have, as well, in terms of shipment, something that is more underlying in terms of reference. There will be, of course, in Q3, this one-off operation last year of the free can that will have to be taken into account but as you know it also impacted negatively our financial performance in Q3 so that's a negative element that is not going to impact and then as we said we are expecting innovation to come in the coming months I'm not going to be able to say exactly when it's gonna it's gonna come and when it's gonna play but of course when we say we expect to be able to launch innovation in the coming months, that means that we expect innovation to positively impact our second part of the year. We'll see exactly when this is going to happen. So if you take all these elements, the capacity that we expect to have to come with innovation, to be benefiting from some of the dynamic category, the comparisons that were difficult in H1 in terms of shipment and in terms of revenue per can, all that is going to be more favorable in the second part of the year. So, I think that explains why we expect this dynamic. I'm not going to elaborate on innovation verbally and what we intend to launch. I'm sure you appreciate that this is extremely sensitive, and we're not going to share on that. But I think we're clear on our ambition to come with innovation, which is what a leader like Zinn deserves.

No, fair enough, and I appreciate that color. And then, if I may, just a question on ICOS. You know, your Q1 results came in better than your expectations, and, you know, key driver of this really was the strength behind ICOS. And, Emmanuel, you did touch on this, but I guess hoping for, you know, some more color on the drivers behind the strength and maybe what exactly came in better than your expectations. Also, I did want to just clarify if there were any timing benefits in Q1 on ICOS, I guess, just that might reverse. And then finally, as it relates to profitability on ICOS, you know, your margins continue to expand and, you know, as you mentioned, you continue to invest. So, I wanted to understand just the key drivers of profitability growth moving forward, whether it's between pricing and productivity improvements. Thank you.

Well, thank you, Bonnie, for giving me another opportunity to speak about ICOs because I understand why, you know, Zin is of interest and why we spend a lot of time on Zin. But clearly, we want to make sure that people understand that the biggest driver for performance globally on smoke-free international and U.S. combined is ICOs. I mean, I don't think you have any equivalent in the smoke-free space in the world to ICOs. you know, this multi-billion dollar brand, I mean, much north of 10 billion. This is a unique proposition. This is a brand that has been consistently owning around 75% of the category, which, you know, when we talk about innovation is really unusual. There is a differentiation that is very clear for the consumer. And now, of course, as we talk about the 10 billion plus brand, And this is coming with a unique brand franchise and a unique impact. So, at the end of the day, the success is explained by the fact that Icos is a great product that is meeting smokers' requirements and expectations. And that is making a clear differentiation on any other competing product. So, that is what is behind the Icos success. I mean, if I was to take one market to illustrate that, and I think it's quite remarkable in this quarter, is Italy back to a strong double-gid growth? Okay, Italy has been clearly disrupted by the flavor ban, and it took a few months, you know, to adjust. But we're back to this double-gid growth in Italy. We are reaching, you know, in some TCT, very high share in the north of 20%. And we're coming with innovation. So, you know, as I was talking about innovation for Zin a few minutes ago, a leading brand has to innovate. And I think no one is matching ICO's in terms of innovation. Terea, what we do with Delia, what we do with Livia, we are launching Bonds, and Bonds is having some very good steps in Italy very interesting to watch. I think this is the DNA of a leading, powerful brand, and that is really what is behind the success of IKOS. On the margin improvement, it's price. So, you know, we are increasing price. Not, of course, it's a very different, as I explained, it's a very different story versus combustible, but we are increasing price on IKOS and on IKOS consumability in a number of markets. We keep, of course, working on the efficiency of the supply chain, the cost of electronics of the device. We are working on our supply chain on productivity to consistently and constantly improve the cost of the consumable. So that's another driver. That is really what is behind ICO's success. I mean, I could speak for, you know, many, many minutes about the reason for ICO's success. that could have been mentioned in Taiwan, of course. I mean, it's quite impressive, you know, in a few months to reach 6% market share in Taiwan, March 8% in Taipei. And the brand was not present. So I think it just showed that even in markets where Icos is not present, the brand does exist already with a strong image. I think it's a tribute to what Icos is today.

All right. Thank you so much.

Thank you.

Thank you. One moment for our next question. Our next question will come from the line of Pallad Mittal from Barclays. Your line is open.

Good morning. Thanks for taking my questions, three of them, and I'll take it one by one. So firstly, on nicotine pouches in the U.S., can you help us understand the excise tax environment? We have seen some proposals from a few states planning to increase excise taxes, And then earlier this month, in Canada, I think the pricing for the entire category accelerated significantly. So is there something which is changing on the tax front? And how is the industry responding to those tax increases and discussions?

Yeah, but I'm happy to take this one. Look, of course, as in all of us, we are hearing in a few states, not everywhere, but in a few states, discussion about putting some excise duty on nicotine pouch. Let's be cautious, you know. I will be much more comfortable to comment things when they happen because it's difficult to comment on projects, speculation. You know, we're not saying that nicotine pouch should have no taxation as a general rule. I'm not here talking only about the U.S. I think we believe there should be, in the continuum of risk, some very differentiated taxation between smoke-free products and combustible, and nicotine pouch, you know, being, of course, at a very well location in the continuum of risk should be particularly well-treated in terms of low level of fixed duty. So, for us, that should be the general behavior of regulators worldwide, and that should enable the smokers and the consumer to go toward the better product with more purchasing power. In the US, I would say this comment can be also valid because you have a regulator, the FDA that is clearly, I think, saying that these products are a much better product than a combustible cigarette that is working to accelerate a number of PMTA because they believe that consumers should have the choice between product to maybe maximize the chance of switching away from combustible cigarettes. And I believe that, you know, putting high taxes in that context is going against the intention and the vision of the FDA. So I think that would be a pity and that will not go in the right direction very clearly.

Sure. And this, again, on nicotine pouches in the U.S., if I look at ZIN volume trends, based on what Nielsen data is suggesting, it might soon become a slattish volume or maybe even a declining volume number, assuming there are still delays in ZIN Ultra if I extrapolate the current trend. And clearly the PNTA timing is not in control. But what gives you the confidence that Zim Ultra, once it comes into the market, it can accelerate the growth again, any particular market from where you get this confidence? And then just also on the innovations that you are highlighting, I'm not asking you to comment on what that exactly is. But is the timing of those innovations and getting those products in the market, again, dependent on the FDA, TMDA process? Or is it something which is under your control?

Yeah, first on this one, on innovation, of course, you know, we follow the processes. So, again, for obvious reasons, I won't comment further on when this would come, but there is a process in the U.S. and we are following it extremely diligently. I'm stating the obvious here. On the Zyn volume evolution, so, yes, we are in the last 1,000,000, around 5%, 6% growth. I'm talking about the last weeks, you know. We'll see what is the evolution in the coming weeks, so I'm not going to speculate. But obviously, our expectation is that Zyn Ultra is going to come with a proposal. We think it's a great product, and it's going to come with a proposal that will be matching areas of strong dynamism in the nicotine pouch market today in the U.S. And therefore, we expect Zine Ultra to be able to bring some renewed momentum to the Zine brand in the coming months. That's our expectation.

Sure. And then just very quickly on ICOS, so looking at the growth in Europe, around 5.5%, is it a bit lower than what you were expecting? Because historically, the growth in Europe has been high single-digit, low double-digit. And how do you plan to accelerate that 5%, 6% growth back to the high single-digit number?

No, the growth actually is very good in Europe because if you exclude the market that has been growing recently through the flavor ban, you are at around 8% growth. So, I would say, of course, you know, in absolute level, it would be even higher because you have a higher base, but it's very much in line with what you've seen in the past quarter. So, I would say if you put aside these two markets and Poland is a significant one plus a few disruption in Ukraine. I mean, we have ongoing disruption in Ukraine but there was a number of impact during the quarter. The rest of the market is staying extremely dynamic and we expect Poland and Hungary of course to go through this disruption and put that behind them in the coming quarters as we did in other countries

in Europe. Great, thank you. Thank you. Thank you. And as a reminder that's star one one for questions, star one one. Our next question comes from the line of Andre Anden from Jefferies. Your line is open. Hi, good morning Emmanuel and James. Thank

you for getting my questions. Firstly, in heated tobacco, could you tell us a bit more about the early trends you're detecting in Japan after the XI tax increase on the 1st of April. And then secondly, in combustibles, you mentioned in the release that in Germany you have been seeing a discernible volume decline. Is that market share driven or is the industry itself seeing a slowdown in early 2026? And then finally, perhaps a bit more of a technical question, we noticed corporate expenses registered a significant year-on-year decline. could you tell us what it's attributable to and whether you expect that to persist

into q2 and and beyond thank you yeah uh please take this one so on japan um look if you uh uh the comments you know we at that stage of course we're not making any comment uh it was only a fortnight ago or a bit more than the the the price increase was implemented in Japan, it's too early to say. The only thing I'm going to share is the fact that there is nothing in what we see in the first days that would, I would say, contradict what I mentioned about our confidence in the continuation of on the long term of a strong growth of the category and of the success of ICOs in Japan. But look, let's look at what's going to be the disruption in Q2, I think we explained the reversal we expect, and in a few weeks and in a couple of months, we'll be much more able to comment on the trend in Japan after this excise duty increase. In combustible in Germany, I think there was both, there is a market that is a bit weak, but the industry as well is a big week and you have some decline. So it's a combination of both, I would say, with the German consumer probably a bit under pressure. And on the corporate expense, it's largely technical. It's currency losses and transactional losses in the Q125 because that's where we are putting transactional losses. and it's by comparison effect it looks better. So that's really what is behind. But it's a Q1 event, to be clear. It doesn't mean that for the rest of the year we're not expecting things to be much more in line year-on-year on corporate expenses.

Understood. Thank you very much.

Thank you. Thank you. And our next question will come from the line of Matt Smith from Stifel. Your line is open.

Hi, Emmanuel. a follow-up on some of your commentary regarding ICOS by Bonds. It's launching nationally in Italy. Can you talk about the incrementality you're seeing from that offering versus trade down and the profitability today for ICOS by Bonds compared to ICOS and how you expect that to evolve and what type of scale you need for that evolution of profitability?

Good morning, Matt. Yeah, happy to take this one. So bonds by ICOS is, you know, as I mentioned, a very nice evolution in line with what a leader should provide to the market. I think that after now several years, we see a number of smokers who, despite the fact that ICOS is available and has been available for a while in the market, they haven't decided yet to switch to ICOS. so we came to the conclusion that there was obviously something that was not fully matching their requirement and we see the profile of this population which are very often entrenched smokers loving the kind of rough feeling coming with uh with with smoking and therefore we've been developing this bonds offering and sometime or you know in number of important number of occasion, there are people that are more looking for a mid-price positioning rather than expensive or more premium product. So we've been elaborating bonds and the consumables that come with bond, blends, exactly with this objective. And the first step in Italy and a few other markets seem to be confirmed that there is something clearly of interest for this entrenched smoker and that we could convince some of them that so far have not been switching to it not burn to switch to a better it not burn product with bonds. And in terms of profitability, as you would expect, the name of the game is that it has to be at the level of combustible as a minimum. If we can do better, we'll look at it. But certainly, it's not coming at a lower margin than our combustible business.

Thank you for that. And a follow-up on the dynamics in Japan regarding ICOS inventories. I think you laid out the 2Q expectation pretty clearly. But as we look ahead to a second excise tax-driven price increase later in the year, was the inventory dynamic in the first quarter entirely driven by consumer pantry loading? Are there mechanisms in place to keep the wholesalers from stocking up on inventory? Just how do you think about that potential impact between the third and the fourth quarter and the second half of the year?

Look, we see exactly – it's too early to talk about October. You could have some similar features that will depend, of course, on what each player is going to do in terms of price increase, and I certainly won't comment at that stage. So, you know, we'll see.

It's not impossible that there will be a similar impact, but it's too early to say.

And allow me to come back on this question later this year when we'll have a better visibility.

Thank you, Manuel.

Thank you, Matt.

Thank you. And our next question will come from the line of Faham Baig from UBS. Your line is open.

Hi, Manuel. Well, thanks for inviting me in, hey, I'll take two questions please, both of them on SYN in the US or the nicotine pouches category. I guess the first question I have is on the category, if we look at recent scanner data, US nicotine pouch volume growth, a bit of moderated over the past three to six months. From your perspective, what are the key factors do you think that are driving this is the first one? The second one, coming back to Zyn Ultra, not really asking for timings, but how are you thinking about potential regulatory concerns around higher nicotine strengths and a broad flavor range, particularly in relation to the category attracting non-nicotine users.

Yes, I guess on this one, and maybe I'm going to start with that, you are probably referring to this article which, you know, was largely speculation. I think we stated very clearly that there is a very clear scientific fact that are supporting that these products are much better than smoking. You have this NYTS survey that is showing that there is no increase, there was even slight decrease in the underage usage in the U.S. according to this study. So, you know, it's difficult to see anything that has changed from the FDA perspective. And they've been giving to another product, I think it was in December, so not that long ago, which is coming with a higher nicotine content, higher than what Zin has today. And I think, you know, if they had an issue with flavor and with higher nicotine content, I doubt they would have been giving this authorization only a few months ago. So I'm not too sure what was behind this article, but for me, these are largely speculation. And I guess regarding your question on whether there is an issue with flavor and higher strength, well, they've been giving a few weeks ago approval for more flavor and higher strength. So I don't think this is something that is today a problem. On the global U.S. nicotine pouch category, look, it's very difficult to comment. Year on year, it's still growing, I think, around 25%. So, it's still extremely dynamic, incredibly dynamic. There could be some seasonality impact. Let's not be also too much impacted by the percentage because when you are having with high percentage you are having growth properly with high percentage of growth well obviously the percentage is declining but it still means that in terms of absolute number of nicotine pouch level it's still growing at the same time or even faster so let's not lose track of the real underlying growth and then And maybe as we see some new consumer to the category, there could be a question mark on at least at the beginning, and very often they are poly-user when they start using nicotine pouch, what is the average daily consumption of the new user? And maybe one of the reasons for some, you know, very slight softening of the trend in the past months may have been the fact that some of the newcomers for the time being are coming with the lower ADC but frankly beyond that I'm not sure I can

I like anything then can I squeeze in a sneaky one I guess we have this high

single-digit apologies we're actually running out of time we just want to to squeeze in one more analyst after you, but we'll follow up with you after. Thank you.

Thank you. Our last question for today will come from the line of Gerald Pascarelli from Needham. Your line is over.

Great. Thank you very much. I just wanted to ask a follow-up. How are you doing? I just wanted to ask a follow-up on the last question just on USGIN and nicotine pouch consumer dynamics. Just as the category continues to grow, it's also matured. And I guess, are we at a point now where you are seeing evidence of, I don't know, higher per capita consumers graduating from three to six milligram pouches into higher nicotine content pouches, like nine milligrams, maybe at a faster rate than we've seen in the past? And that's obviously asked in the context of Zin Ultra and whether or not by just the simple nature of having a higher nicotine content pouch on the market to compete with is enough to drive a reacceleration in volumes. Just would love your thoughts there.

Look, Gerald, I mean, as I explained, we see a number of higher nicotine content products and, you know, more flavor and notably fruity flavor being a more dynamic part in the market today. and that's where you have the biggest dynamism and one of the problem is that within we don't have anything above six milligrams and we have a limitation in terms of of flavors so that could be again you know i'm not going to say that i'm have any kind of strong reliable study to support that but the higher nicotine strength development could be people who are trading up a little bit from a lower nicotine content and as they evolve in their consumption but they may explore new flavors and that could be behind the new flavors fruity type development and they may also go for higher nicotine content again i'm not saying i have anything that is clearly supporting that that could be an intuition or a speculation we could make got it uh thanks very much for the

color thank you thank you thank you now now turn it back over to management for

clean remarks thank you for your participation in today's conference this

does include the program you may never disconnect everyone have a great day