Good day and welcome to the Phillip Morris International Third Quarter 2015 Earnings Conference Call. Today’s call is scheduled to last about one hour including remarks by Phillip Morris International Management and the question-and-answer session. [Operator Instructions]. I will now turn the call over to Nick Rolli, Vice President of Investor Relations and Financial Communications. Please go ahead, sir.

Welcome and thank you for joining us. Earlier today, we issued a press release containing detailed information on our 2015 third quarter results. You may access the release on our website at www.pmi.com. During our call today, we will be talking about results for the third quarter of 2015 and comparing them to the same period in 2014 unless otherwise stated. A glossary of terms, adjustments and other calculations as well as reconciliations to US GAAP measures are at the end of today’s webcast slides which are posted on our website. Reduced risk products or RRPs is the term we use to refer the products with the potential to reduce individual risk and population harm in comparison to smoking combustible cigarettes. 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 review the various factors that could cause actual results to differ materially from projections or forward-looking statements. My pleasure to introduce Jacek Olczak, our Chief Financial Officer.

Thank you, Nick and welcome, ladies and gentlemen. Our strong performance in the first half of the year continued in the third quarter. Organic cigarette volume declined by a modest 1.5% reflecting global cigarette industry volume primarily in the Asia region partly offset by market share gains mainly in the EEMA region and Latin America and Canada region. The cigarette volumes of Marlboro and L&M our two largest brands increased by 2.1% and 9.3% respectively in the quarter. On a September year-to-date basis, our organic cigarette volume declined by 0.6% or by approximately 1.1% excluding estimated inventory movement. For 2015, we continue to forecast an organic cigarette volume decline in the range of 1% to 1.5%. Net revenues and adjusted OCI in the quarter grew by 5.9% and 9.3% respectively excluding currency. This growth was driven by strong pricing across all the regions partly offset by the impact of lower volume mainly in the Asia region. Adjusted diluted EPS excluding currency grew by 15.8% to $1.61. Our strong currency neutral result in the third quarter has derived September year-to-date adjusted diluted EPS growth of 15.8% to $4.62 on the same basis. As previously disclosed our fourth quarter results will be impacted by incremental investments to support the expansion of iQOS including accelerated spending behind planned launches in 2015 and 2016 and to further reinforce the favorable momentum of our cigarette brand portfolio. As announced in our earnings release this morning, we are revising a narrowing our 2015 reported diluted EPS guidance to a range of $4.35 to $4.40 at prevailing exchange rate to reflect a slightly more unfavorable currency impact largely offset by an improved business outlook driven mainly by the EU and EEMA regions. At prevailing exchange rate, our guidance now includes a full year unfavorable currency impact of…

Thank you. [Operator Instructions]. Your first question comes from Vivien Azer of Cowen.

Hi, good morning.

Good morning, Vivien.

As we look to the fourth quarter considering the very strong year-to-date results that we've seen the implied guidance for the fourth quarter clearly reflecting the incremental investment spending effect that you just called out. Can you help dimensional the size of those investment if possible as well? Can you address any trade inventory timing issues that might way on the fourth quarter?

I think that most of the performance in that Q4 the fourth quarter will be driven by our accelerated and being pre-investments behind iQOS and combustible cigarettes. I think as we look at this today differential it should translate that will be slightly below the fourth quarter of last year maybe at par the fourth quarter of last year. So yes there will be a quite investments step up as I said mainly behind the iQOS and the combustible business.

Okay, fair enough. Thank you. And as we look at the EU and the increasingly more favorable volume dynamics that we seeing, I know you guys called out production in illicit as well as reduced uptake and -- but can you comment on the evolution of price elasticities in that market because the volume trajectory looks particularly impressive giving the pricing that we are seeing in the region?

The volumes trajectory is impressive and there is also the reason and also there isn't why as you remember we're revising the outlook for the total industry volume in the year. I think it is the second or third time actually I think this year and it has also led us to increase our overall EPS guidance for this year. Our elasticity is now turning over some period into their more attractive territory why could call it like this, that's for us always elasticity in the range of -0.3 to -0.5, this is what we think is the source of the underlying elasticity for the tobacco category and we observe essentially in the most of the countries including the Southern Europe. Hence the very strong performance coming from Spain, Italy. Obviously Italy will have their own challenges with Marlboro closing 5 Euro price point. But overall I think the industry is pretty strong and our volumes obviously are pretty strong as well. I think that many of this positives for the Europe adult from the overall better volume trends to some extend depends on a geography supported by a more attractive elasticity all the reduction in illicit trade should continue to the 2016 so the way we look at this and I know that everyone is now puzzled with Q4 performance but we actually our focus is already on 2016 and how much of these are very positive momentum for the industry but very much for us will continue into the 2016.

Perfect. That’s helpful. Thank you.

Thank you.

Your next question comes from Matthew Grainger of Morgan Stanley.

Hi. Good morning, everyone.

Good morning, Matthew.

Thanks. Yeah just first on Indonesia we’ve seen continued deceleration in shipments in consumption this year which seems more linked to the economic environment than pricing but it’s hard to separate out how all of these factors maybe impacting margins and OCI for the Asia region so when you take into account all these various factors pricing, weaker consumption some of the investments you’ve made in selling infrastructure are you comfortable with how the profitability and margins of the Indonesian business have been progressing year-to-date?

Yes, I am very comfortable I mean what we have seen in Indonesia was more in the I think event of the third quarter where we’ve been also adjusting capacity and it resulted in some extra cost which we had to incur but overall I am not that much worry of the shorter trend of the industry volume if you look at the smoking incidents in Indonesia it’s relatively flat as you remember Indonesia is the market when you have a relatively high incidence of stick sales individual stick sales and obviously this allows the consumers to adjust a little bit faster if there is softening on the macro side. I think so we observing a slight decline in a daily consumption but as I said in my remarks I think if you look at the overall positive demographics of Indonesia and growing the income level et cetera I am still confident 1% to 3% growth outlook for the total industry in the longer term is absolutely attainable pricing is very strong we still obviously don’t know how the tax discussions in Indonesia will unfold for the next year. I think on a positive note is that since the government is recognizing that there was the issue which they inflated tax base due to the change in a payment terms for this year so conferring on a collection side from a government perspective 14 months to 12 months. Let’s remain hopeful that the rate announced for the next year will take this into consideration at least to some extent we’ll have to see. But in terms of a bottom-line growth of Indonesia I am very confident we’ll have infrastructure brand portfolio is very strong, share for the year looks, market share development looks very attractive and I think Indonesia is the market in which we obviously have the high expectations of a high growth. So I don’t think it’s anything which would worry me at this stage why this should change.

Okay. And then just one clarification just in terms of the bottom-line growth for Indonesia and long-term expectations there, is that consistent with how the businesses performing this year are you seeing growth or is this better characterized as the year where you are reinvesting a bit back into the market?

Well, I mean we have been investing in Indonesia last and this year is behind deployment of a commercial organization as you know it’s a large country there is a very large sales force retail selling universe is one of the largest in the world. So that obviously requires some appropriate investments if we want to continue to have the right support behind the brands. We have the market in other parts of the world which also on an emerging side if you like and volumes are actually a little bit developing versus I may say versus Indonesia and we can drive the double-digit bottom-line growth. So I think you cannot ever extrapolate directly for one country to another but I think Indonesia is in a good shape to deliver a very solid OCI growth bottom-line growth and remains one of the key contributors to Asia and PNR [ph].

Okay. Thanks Jacek. And then just one question on the regulatory side, just wanted to get your thoughts on the draft version of the PPP agreement which I know right now is sort of under negotiation and on hold. But assuming this is going to be negotiated and will go forward. What do you see is the practical impact of the tobacco carve out if it stays in and is there still a realistic potential for it to be negotiated out.

Well as far as the PPP has no impact on a pending paces right. So it's mainly Australia, UK. But we'll have to see how PPP will be adopted by the rectified by the signature is. And if I may say on my side just say there is unfortunately there is negotiation during the negotiations people who are participating can traded away furnace and access to adjust this for all investors and instead they embrace the discrimination against the one single industry. I'm not sure that people have worried a doubt of the five or six countries actually more than a six countries reported cases when there was a state investors dispute on the -- related to tobaccos. So I think the whole process went in a completely wrong direction. What important for us is that it hasn't deteriorate our position is that we defending very much the trademarks around the plain packaging and does not impact any of our pending cases and we sure that PPP adopt.

Okay, great. Thanks guys.

Thanks.

Your next question comes from Judy Hong of Goldman Sachs.

Thank you. Good morning.

Good morning Judy.

So just and thinking about 2016, I know it's a little bit too early but you talked about how you focused on continuing to growth in 2016. So as we look at this year obviously 11% to 12% expects currency growth above your kind a near to medium-term target that you lead out at your Investor Day in 2014. So given the momentum you have in EU, you're lapping the incremental spending behind the iQOS. Just any reason to think that that kind of above average or above near to medium-term growth in 2016 can continue at this point?

Look Judy the outlook for the tobacco market has improved has improved this year. For us in particular in terms of the volume ex-pricing and overall profit growth. So I mean a many of the project its which will have offset this year which will have businesses this year in our opinion should continue in the 2016. I think it's a pretty much sure at this stage to talk about the specific guidance for 2016. Our target of 8% to 10% on EPS I think seems obtainable. But we need the more information to come up with the formal guidance for next year. I think in February we will be in a good positions to talk about. But yes that the trends from the Europe to Russia all the way still repeated Russia remains in our worse place. The headline macros are not extremely positive although of the tobacco market size and the cigarette market side I mean that seems that consumer so far are navigating the pretty strongly. You will have to also understand that this year we're very pleased we're very happy with the performance of this year but not necessarily we've had the most challenging performance like the year before. Correspondingly we'll have to see how the 2016 will compared to 2015. So I mean I remains very optimistic we've been I have to admit surprise ourselves by this strong performance of the EU region. I am very glad that it comes from the number of markets being total markets but also strong pricing and the markets trend. EEMA is very strong, Latin America is very strong. Asia we know that we have a couple of issues, mainly in Japan which I have to admit is a disappointing and below our expectations with regards to market share. But overall we look very optimistically into the 2016.

Okay. And then just one quick follow-up on FX. So I think I have it in my notes, I think earlier in the year you hedged about I can't remember the 60% on the Yens and the effective hedge rate was one-tenth or around that level. So can you just update on how you are hedged at this point and what the effective rate is?

We don't talk that way at the beginning of the year we only give the hedge coverage ratio for the current year. So in February we are giving currency the guidance, we said that we will hedge up to 60%, obviously there were few moments during a year when the Yen strengthen at least for the short period of time. So we took advantage of that. If you remember our policies to look at have 12 to 18 months. So we prefer to assume that we have already have hedged some of our cash flow from Japan going in 2016. We've already disclosed this number when we will give the guidance in February next year. When it comes to effective rate just to help a little bit to estimate the currency impact in Q3 within our effective Yen, effective rate of Yen to the Dollar for us was 111 slightly above 111 which comprise to about 98 Yen in Q3 of past year. So you could see for the hedging strategy we had about 9-10 Yen below the current spot rates of Yen.

Okay, that's helpful. Thank you.

Thank you.

Your next question comes from James Bushnell of Exane.

Hi, good morning or good afternoon in Switzerland.

Good afternoon, good morning.

Thank you. I have two questions please. The first one is just around pricing in Europe. You have pricing around 5% which is a little bit softer than the first two quarters of the year. I just wonder if those anything specific you call out there or if that strictly a mathematical effects and then my second -- sorry, I'll let you answer the first question.

No, this is mainly I guess the due to the timing of implementation. You might have never will have the perfect type of timing alignment. So some of the pricing which were taking in 2014 to some of the -- in 2015 depends on the counterfeit. It's nothing specific, nothing which is -- I think the pricing in the Europe is here so far and this full year is going to be very strong and a much stronger than we had in the past year.

Okay, thank you and then just to drill in a bit more on Italy. You obviously have good pricing this year. I wondered if you could comment on what the outlook might be for the tax policy in 2016 and now that Marlboro is really above that ramp upfront which is hurt you on the share basis? Are you comfortable that moving it out further will not have similar effect? How are you thinking about the share loss of Marlboro in Italy?

Well, I mean it's not anything which comes by surprise. I mean them usually when we cross their importance from psychological perspective one price point. Marlboro usually is a first brand in the market to do this. It's not really as I said surprised that the Marlboro has a bit of a headwind at that time. I think we -- I'm happy that the prices went up in Italy. There was a small reduction in the price -- I mean that's very helpful. You cross that price points and later on consumer is to be less sensitive with the next price increases. I think it's good that Marlboro is behind the price point. Let's put it that way.

And is there any due from the Italian government in terms of what might happen to taxes next year?

No, we'll have to see. I mean usually these discussions are taking place literally almost around the year end or beginning of the year. So for Italy we'll have to see how they want to approach. If they make the very good move as you remember at the beginning of this year. Let's hope that they will continue with this direction in 2016.

Okay. Thank you very much.

Thank you.

Your next question comes from Chris Growe of Stifel.

Hi, good morning.

Good morning Chris.

Good afternoon to you. Thank you. Two question for you if I could, the first would be that if your volume performance again this quarter was better than what I expected and you had some improvements in the EU and Russia in particular, little software in Indonesia in terms of your outlook there. So as you look at the overall line performance being stronger than certainly I thought for the quarter and we're just talking for like 1 to 1.5% decline in volume for the year we just push more towards the lower end of that range or just wanted to get some color around some of the big markets that are improving how that’s helping your overall volume performance.

Look, I would still confirm it will be somewhere in the range of a 1% to 1.5% I don’t think we are in a position now to speculate we’ll be closer to 1%. As you know Q4 is always there a quarter when you have some distortions coming from a fact that end of the year or beginning of the year the tax increases, price changes et cetera. So I think for a cost of doubt for 1% to 1.5% is pretty realistic, EU has a good volume it’s no question about it, Russia we are rolling out the 5 rubles per pack price increase so some of this prices already will roll through the market we’ll see how that’s going impact the overall industry and our shipments volume that from the we have a sequential good performance in Korea, Philippines there is a good performance overall see how we close but it looks good and as I said before I think some of the positive industry trends and this is not just the quarter-on-quarter but longer term I think they should continue to happen in the 2016.

Okay. Just one other question probably which is around the Asia division overall and we talk last quarter on the call about the Asia division approaching in your mid-term guidance sort of range for profitability this quarter and I think year-to-date you are up around 4% I guess so relate to that should we expect a stronger fourth quarter in that Asia region and then related to that should we see any inventory adjustments occurring in Japan in this fourth quarter it’s been kind of an up and down pattern for those this year.

No we are taking the inventory adjustment are related to the lower than expected market share so obviously we don’t want to – high inventories and try to have something which reflects the at least short-term forecast. So depends how we perform in Q4 I mean there might be some inventory movement we are also comparing Q4 to the distorted Q4 last year when we are going to shutting down the factory in Holland in Europe, which ship most of the product to Japan used to be shipped from this factory. So we are building some inventory to be on a safer side. If you go to the overall performance of the Asia region Asia is a recipient of increased investment this year behind iQOS and also behind the combustible cigarette because we are investing obviously Japan is in a full fledge rollout to about 60% of the total market we started in September we have not deployed all tools behind iQOS in the market we will be gearing up to opening more iQOS flagship stores is obviously is going to have a cost impact there was an increased investment behind the cigarette category in Philippines behind the very strong momentum and the narrowing of the price gaps continue investment in Indonesia. So Asia will not have a spectacular performance this year better than the last year but we will not have a spectacular performance this year.

Okay. Thank you for your time.

Thank you.

Your next question comes from Bonnie Herzog of Wells Fargo.

Good morning.

Good morning, Bonnie.

I have a question on iQOS in Italy and the draft tobacco products directive are you broadly happy with the directive and as it written such that you will be able to ultimately make reduce risk claims on iQOS? And then could you update us on any new product and or technology innovation behind iQOS and when you might be ready to roll something out?

I think we are pleased with the development of the tobacco product directive so far is being transport into the Italian legislation I think critical for us is and therefore we announced publicly today the results of our 90 days or three months exposure study because that’s one of the key elements of us discussing with regulatory bodies on the claims and we’re going to maybe about the products so that will be positive. We're now at this stage when we fine tuning of finalizing the claims as seems them we have customers so we will not have as well achieve the proper understanding. As I think we have a pretty solid evidence at this stage to progress and support iQOS rollouts with the reduced at least exposure claims at this stage. In terms of the new innovations, yes there is a pipeline of a new developments behind iQOS for obvious reasons Bonnie I can't tell you at this stage, but yes I mean I believe that pretty strong innovations that which will come into the market for this year and that to the new market as the large group of the new markets next year when they will see the further enhanced the improved versions of iQOS in terms of HeatSticks. And the variety of the blend type directions which we can offer as well as iQOS is the device in terms of attached field more user friendly electronics and so on. So as you remember [indiscernible] was launched in the pretty industrial I would say high performance iQOS device. But you are all in these the new version much more modern and a much more I believe actually to smokers to adult smokers. And I think we'll be deploying more of these innovations as we speak.

Okay thanks. And then I just have sort of big picture question as you think about your business overall, can you identify for us markets for you're seeing the biggest improvements and down trending pressures easing or moderating just in summary?

Well I think EU overall is the holds very well actually improved very well. To the extent that the mix essentially issue for us does not exists in the EU market. But that's very good. You have in EEMA region you will have the strong performance we've up trading in the big part of the North Africa. Turkey holds very well I mean despite the fact that total industry volumes up and obviously some of this early stage recoveries usually initially fuel the bottom part of the market, but if I look at the parliament and the Marlboro share performance despite the strong market. I mean it's pretty -- it's very solid. You have obviously big up trading in Philippines right as a result above a closure of --. And well it's very important to us is that it's not the one product variance of Marlboro which takes the benefit of the up trading is across all variance of Marlboro we see the up trading. So that's important, but as we said we'll have to see how the pricing further unfolds in Philippines, but so far year it is that clears as we initially planned despite the fact that as you remember we had a couple of difficult years in Philippines but the recoveries is on a good track.

All right. Thank you.

Thank you.

Your next question comes from the Bill Marshall of Barclays.

Hi. Good morning.

Good morning Bill.

Just kind of building off with that question actually. I want to talk about trade because it feels like you mentioned a quite a bit in the press release today mostly on the positive side particularly in the EU and EEMA. A little bit more negative it sounded like in Asia with some increases in listed trade. Has this become more of a cyclical factor for you guys and kind of again going back to last question indicative of up trading and down trading? Or is it something that some governments are starting to take an even harder line and you're seeing some improvement there.

No just to clarify I think the only market which we have a well sharp growing at least way at this stage is Australia. Okay, it would be something in Pakistan but the adjust [ph] is a little long. You have generally we can observe a better illicit or lower illicit trade levels in EU in the number of markets not just the one particular. And that's the product that's I think this is strongly supporting the total industry recovery or better trends. We have Philippines alone with the higher declarations coming from a mighty I mean that's clearly the recovery of that tax not paid volumes and Turkey has the extremely strong recovery. I think usually I think as its highest level if I recall Turkey was about 20% of the listed trade penetration and I think recently shrink to about 11%. So that's really lowest over the long period of time incidence of the listed trade in Turkey. If you pay net-net that's about 10 points of a straight recovery and you see year-to-date market in Turkey about 10%, there was underlying growth, secular growth in Turkey. But still 10% only can be explained by the recovery of the listed trade. So we see it in the number of geographies. Now we have invested also a lot of efforts manpower effort behind engaging with the government, engaging with the key stakeholders being the custom law enforcement etcetera international organization. I think it's finally I'm going to start bringing a very good fruit and that's thing that many of this positive development of the listed trade. So my opinion continues at least in the near future.

Okay, great. Thank you and then just a point of clarification when we talk about this spending particularly behind iQOS, did you push any of that spending from the third quarter into the fourth quarter? And if so could you quantify any of that spending for us and what this could mean as we look forward to that push into 2016 at all or is this kind of your on track for the plan how do you saw it earlier in the year? Thank you.

I think we have a more of the push from a 2016 and in 2015 as we revised our plans and we rolled-out iQOS to the more geographies that we have initially planned at the beginning of the year. You might have some distortion, the timing in fact between Q3 and Q4 because once we accelerated our plans for deployment I mean as far as you need to have a plans developed on a solid when you come spending. So usually spending follows a little bit after the plans are discussed approved and released to the market ready to go. But I think it's the more of the 2016 going to 2015 in terms of iQOS over an acceleration than just the Q3 to Q4 and if I remember we have been indicating that on the back half of the year we will have that we expect the higher spending on iQOS and throughout the list that as we observe during the first three quarters of the year much stronger momentum behind the cigarette business which have also step up some investment behind that cargo of our portfolio.

Perfect. Thank you very much.

Thank you.

Our next question comes from Michael Lavery of CLSA.

Good morning, good afternoon.

Good morning.

I just wanted to follow up on Vivien's question first and clarify make sure I call what you said, you said that it might you are talking about 4Q, you are talking about parity to last year’s 4Q or maybe slightly below, was that on EPS basis?

Yes, this was on EPS basis. Thanks for helping to clarify. I said this would be can't be slightly below last year maybe as parity. But this is on EPS currency to be to formally drive.

Also then if you've guessed, if my math is right you've got $3.61 for the 9 months-to-date this year. It looks like that would mean a 74 to 79 in fourth quarter for your full year guidance. But I reconcile it with slightly below last year? It felt like that's quite a bit below even with currency included.

Well, I mean I think you mark these both right. I think the guidance it depends on which point of a new guidance you are going to base the calculation to take out what we had in the Q4 and that's the -- about the results.

Okay and then just what maybe to dig into that a little bit more and get some color on as a spending you've got year-to-date and average quarterly organic growth rate of around 6.5% and organic EBIT growth around the 11% average, last year’s 4Q organic EBIT growth was down 12. So it's your easiest comparison and you have a lot of momentum this year. How much could you possibly spend in that? I mean it looks like you might need $300 million to $400 million of incremental investments to get to the kind a numbers you're talking about. Do you even have the abilities to spend that much in an effective way in one quarter?

We have a very large organization. I think twice the sizeable brand iQOS itself. I think 400 is on a high side but I think it will be an obviously substantially do the comps. When you do the comps you have to just notice the one thing that growth on those CI level last year versus lowering the EPS level I mean it's slightly different. We have the few items that's below their CI level. But it will still stay with my maps in on an EPS in the Q1 and on an ex-currency basis we put the below what have last year.

Okay now that's very helpful. Thanks. And then just touching back on Indonesia, you're saying that you think the category volumes probably are going to be about flat this year. But with the last two quarters down over 4%. It looks like that would be, meaning about a 3% gain in 4Q or about 7 point improvement. Obviously there is some macro pressure there that's helping the inflation side because inflation is moderating. But is there any particular catalyst for why the category might accelerate that rapidly for 4Q or maybe we're missing.

Well this is a cigarette industry estimate on the quarterly basis. And I said that in one of the previous calls I wouldn't pay that much attention how the estimate is being done and what the numbers are on the quarterly basis. I think for the full year I think it seems that Indonesia based on our outlook Indonesia will turn to be a flattish or flat versus last year. You might have some movement between the quarters. It's marginally the consumption level of the industry shipments volumes so will have to both into the timing of the price changes in the market and what's happened last quarter versus during the fourth quarter of last year. And what expect at this -- expect it will happen in a fourth quarter of this year. I think for this year yes I mean you have the softer end of volumes in Indonesia I mean that's slightly a lower sort of a performance. But as I said in my remarks, it hasn't nothing really comes in Indonesia which will trouble us in our view then in the longer term the market is potential to grow with the 1% to 2% range. It's critical for us is to know whether the tax rate for the next year and then we done have the better estimate have Indonesia market will perform good. We think is that the pricing is very strong I think a lot of investments which we have made behind the commercial organization as well as the capacity restructuring between handmade and hand -- all than the machine by cigarette is done. There is solid performance next year.

Okay now that's helpful. And then just on Australia you've mentioned the strong pricing there and the gains in bond street and some other positives. Just on a total view that certainly was a big issue last year it seems like it's at the minimum now getting the same attention because it's improved a good bit. Can you just put that total your total business there in context and how you see the maybe next rest of the year or beyond in terms of outlook for that?

Well I don't think we've -- with Australia yet okay. This year Australia by far less of a drop for our Asia and the total PMI performance that was last year. But we cannot say -- here that this kind of segments are moderated to muted its growth compared to how fast the segment was growing essentially all quarters of last year. We are much more presenting the segment with bond street I mean enhance the significant share advancement. We still observe quite a level of a discounting in the market. So I mean now the market the total market size is a bit distorted because the just after the tax change tax exchange. We'll have to see I think we've did and before coming tax changes we should hopefully see moderation of the heavy discounting that very much at the bottom of the market and we’ll have to see the trends are slightly better but it’s I wouldn’t call that Australia is behind.

Okay. That’s very helpful. Thank you.

Your next question will come from Phil Quorum [ph] of Morningstar.

Hi everyone. Thanks for taking the call. Jacek you are building a compelling case behind iQOS my question is how would you characterize your confidence at this that – that will be the category that emerges with the highest acceptance rate among consumers? And then what’s the implication of that on other categories, would it still make sense to spend behind platforms three and four for example? Thanks.

I maybe start with the second part of your question I think it makes sense to continue our investment in terms of a product development and its assessment scientific assessment behind the other platforms because we think that there is a market for both fully electronic cigarette as well as the products which are based on a – heat not burg, heat not burn today offers consumers what we observe in the market a level of a satisfaction which is very comparable to the combustible cigarette. Knowing that the evidence which we have presented also today makes us confident that this is a product which significantly reduces the risk profile of the consumers versus continuing smoking combustible cigarette I think we will be in a position to demonstrate based again on our studies and the whole portfolio of evidence that the product is reducing significantly the risk for smoking versus the traditional combustible product. Acceptance is a very important component also in a few of our strategy of not only demonstrating that we can reduce the harm to individual but we can reduce the harm to population, because you might have a great product which is accepted which is of a reduce which has a reduced risk profile but is not accepted by consumers and frankly speaking you not address the problem the issue. So yes we remain very confident that the current product which we have iQOS has a big potential but we also think that consumers not all consumers will like to stay within tobacco based products and they may for variety of reasons they may elect to go into the straight non-tobacco based but nicotine based electronic cigarette as with – initial high interest in many markets including UK and some others in the Europe or the U.S. so yes we will continue investing behind all four platforms as we believe there is a room and a potential for each of these platforms going forward.

Okay, great. Thanks Jacek.

Thank you.

Your next question comes from Adam Spielman of Citi.

Hello. Thank you for taking my question. On the reduced risk products can you tell me who will give you permission to make the claims either reduced exposure or reduced risk claims is that national versus in every country would it require EU central permission from Brazil for EU countries? Thank you.

Well in the case of the United States that’s clearly FDA in the case of the EU the way that European tobacco product directive is being transferred it is being delegated to the individual member state. So we will have to have well the first we’ll have to determine what sort of a process individual member states wants to have in the territory to allow for the claims et cetera. But it’s very, very specific or very different country by country and market by market there are some markets today where we can go and make claims already as we say today.

And just follow-up. Within the markets that you also currently we’re currently talking about which I guess is the European markets particularly Italy, Switzerland which is obviously non-EU, Japan wherever countries where you have the best dialog and you think you got the best chance of making a health claimer or reduced risk reduced exposure claim.

I think you know the countries we have a good engagement. The critical is that we need to support the discussions the engagement with the [indiscernible]. And therefore it was very critical for us that we progressing as per plan in the conducting this started as we announced today. The 90 days starter which was important I know beyond the one piece of EBITDA which you are bringing to the table. Obviously the more evidence you have at the table the more constructive discussions you have. As I think we’re on a good path in each of this country despite the fact that they have some differences in the regular projects.

Okay. Thank you very much.

Thank you.

We have time for one more question. Your final question comes from Russo from Russo Guard [ph]. Q – Unidentified Analyst: Hi. Congratulations on wonderful numbers keep up the good work. I was curious I may have missed the comments on that Transpacific partners backed up forward revising legislations. And wondered what comments you may have made or what you might make on that.

So thank you very much for congratulations. On the PPP I've made two comments one is that PPP is no impact on a pending phases which you have. So it's been most importantly the case which we have in Australia will not be impacted by the PPP. Going forward, we'll have to see solid PPP is going to be primarily adopted by the individual signatures of the street. As I hear I mean in the US in particular although we're seeing some other places is not necessary that it receives enormous reception. For obvious reasons which I mentioned because the net of – have things allows one in Australia and if you look at the statistics of all the investors states disputes so far, it will bit more going to be see this comes with dispute between the investors and the days and on the two of the business relates to tobacco. So difficult to find the logic while industry is convert. It was all about the later of what we called treatment it will access adjusted and some negotiators have violated or forgot about that principle. It's a sad story but as I said at this stage I don't think it impact on our abilities to defend our positions with regards to protecting our trade more. Q – Unidentified Analyst: Thank you. And so did you will challenged because its present issue and arbitrary and we don't think it happen might this year is that cause of action regarding Australia.

That's correct. Q – Unidentified Analyst: Thank you.

This concludes the question-and-answer session in today's conference. I will now turn the floor back over to management for any closing remarks.

Thank you very much. This ends the call if you have any follow up calls the Investor Relations team is in Switzerland and we'll happy to take your call. Thank you very much. Have a great day.