Good day, and welcome to the Philip Morris International Fourth Quarter 2015 Year-End Earnings Conference Call. Today's call is scheduled to last about one hour, including remarks by Philip Morris International management and the question-and-answer session. Media representatives on the call will also be invited to ask questions at the conclusion of questions from the investment community. I will now turn the call over to Mr. Nick Rolli, Vice President of Investor Relations and Financial Communications. Please go ahead, sir.

Welcome, and thank you for joining us. Earlier today, we issued a press release containing detailed information on our 2015 fourth quarter and full-year results. You may access the release on our website at www.pmi.com, or the PMI Investor Relations App. During our call today, we'll be talking about results for the fourth quarter and full-year 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 U.S. 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 to products with the potential to reduce individual risk and population harm in comparison to smoking 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 a review of the various factors that could cause actual results to differ materially from projections or forward-looking statements. It's now my pleasure to introduce André Calantzopoulos, our Chief Executive Officer. Jacek Olczak, our Chief Financial Officer, will join André for the question-and-answer period. André. André Calantzopoulos: Thank you, Nick, and welcome, ladies and gentlemen. 2015 was an excellent year for PMI. Moderating declines in cigarette industry volume, notably in the EU region, coupled with market share gains, enabled us to record a full-year organic cigarette shipment volume decline of only 1%, our best performance since 2012. Of particular note were the performances of Marlboro and L&M, which grew cigarette volume by 0.9% and 3.9% respectively. Strong pricing across all regions combined with substantially lower and favorable volume/mix compared to recent years resulted in net revenue and adjusted OCI growth, excluding currency and acquisitions, of…

Thank you. We will now conduct the question-and-answer portion of the conference. [Operation Instructions] Our first question comes from the line of Matthew Grainger of Morgan Stanley.

Hi. Good morning. Thank you for the question. André Calantzopoulos: Hi.

I just had two questions about pricing. I guess first, André, I wanted to ask you about the pricing environment in Japan, since Japan Tobacco has requested a price increase on Mevius. I was wondering whether you've made any similar requests on your portfolio or if you can talk us through how you're thinking about the opportunity there. André Calantzopoulos: Okay. Clearly, the move from Japan Tobacco is encouraging, but you appreciate I cannot make any further comments on pricing in Japan, for obvious reasons.

Okay. But that, I guess, would confirm that you haven't made any formal requests yet. André Calantzopoulos: I didn't say that.

Regardless of what your intentions might be. Okay. And then, I guess just a broader question then. Your comments about the expectation for a 6% pricing variance this year implies about $1.6 billion in pricing, a bit below the $1.8 billion that we would typically think of as being sort of a midterm target. And I know that Korea accounts for a portion of that gap. But if we exclude that, is there more an issue of rounding, or do you see the potential for a more moderate level of pricing across the industry this year in light of macroeconomic weakness? André Calantzopoulos: Well as you rightly said, Korea is the biggest swing because it swings about almost 1 point of pricing variance year-to-year compared to our previous year's revenues. Apart that, there is nothing particular here that we should be reading, so we're very confident about the pricing environment. I think it's very positive and the excise tax environment is also positive, so not much change compared to the previous year.

Okay. And then I guess one other quick follow-up. Just within Indonesia, you mentioned the impact of crossing some critical pricing thresholds during the fourth quarter. Is that a temporary price gap issue or something that could linger for a few quarters? André Calantzopoulos: Well, I think this is temporary because sooner or later, others are crossing the critical points. Now, that had more impact for us in this quarter. There is another phenomenon that had a lot of increased activity, I would say, towards the end of the year in Indonesia, which is a number of competitive offerings that sell essentially 20 sticks per pack at the price of 16. Now, these propositions typically are not viable longer term because if you remember, the excise tax in Indonesia is specific and on a per-stick basis. But temporarily, you have some distortions because of these launches that should ease during the year. So that's essentially what happened in Indonesia in the quarter.

Okay. Thanks and congratulations on the results this year. André Calantzopoulos: Thank you for your question.

Thanks.

Your next question comes from the line of Judy Hong of Goldman Sachs.

Thank you. Hi, everyone. André Calantzopoulos: Hi, Judy.

André, I wanted to get a little bit more color on the Russian market. Obviously, the shipment number in the fourth quarter was negatively impacted by inventory movement. But I think your share also was a little bit softer sequentially. So just wondering what's going on competitively. What are you seeing in terms of down-trading situation in terms of the consumers? And then if you look out for 2016, your view in terms of how the industry volume would look like in Russia. André Calantzopoulos: Okay. First of all, let's start with this inventory that has a little bit distorted the numbers of the fourth quarter overall, so for PMI. Essentially, it's an one-off adjustment because we decided to have our own warehouses in certain parts of the country rather than our distributor in order to facilitate distribution. And on top of it, it helps working capital. So that's the reason we implemented, but there is no swings in there. That's one-off. In terms of what's happening in the market, in terms of total market, you appreciate it's a bit difficult to forecast. Last year, we had forecasted the total market will decline by 9%. We ended up much better. We forecast again, given the magnitude of the price increases, another 9% this year. If we come out better, we'll all be very happy. That's how I see the market. Now, in terms of downtrading, clearly there is downtrading. It's not dramatic. But we see if we look at the year, 2% share shifting from the mid segment and premium segment to essentially the low-price segment, not the super-low, which is fairly stable. And we gain share in both premium, low and super-low segment. So I think we're well positioned overall in this environment. Now again, Russia, you know the economy's a bit weak. The ruble has devalued. But overall, I think in terms of portfolio position, we are in a very good place and we've already taking pricing. So I feel pretty good about Russia overall, if the ruble was a bit less volatile than it is. Have I answered your questions?

Yeah. That's helpful. And then I guess my second question is just in terms of the investments that you made in 2015 and I guess more specifically lapping of that in 2016. Because your comment that your cost base is still going up 1% year-over-year implies that the incremental investment's actually staying in the cost base in 2016 and so forth. So are these investments that you've made in 2015 still continuing as it relates to some of these iQOS commercialization? Or can you just give us a little bit sense of kind of that lapping of that and costs still going up on a year-over-year basis? André Calantzopoulos: Okay. What happened is, first of all, the direction we gave for 2016 is 1% approximately up, including reduced-risk products, where we have obviously incremental spending compared to 2015. Okay, that's the first item. And don't forget, our target is 1% to 3% per year, excluding RRP. So just to facilitate your understanding, I would say that 40% of the incremental spending in the last quarter is nonrecurring in 2016, roughly, okay? And we clearly had also quite substantial incremental spending on iQOS in the fourth quarter. Now, the nonrecurring items relate to obviously the implementation of the Tobacco Products Directive in 2016, but some of the costs have to happen in 2015. It's also some restructuring that we don't report under reported, but in the normal earnings, plus some one-off items. So in total, that's what – how I would see it. And I hope I helped you a little bit to understand.

So, I guess what you're saying is that 60% of the incremental spending is still recurring so you have that still in 2016. And then obviously, the 1% total cost base going up also still includes some of the commercialization spending related to iQOS that would be more incremental in nature. André Calantzopoulos: Exactly.

Okay. Understood. Okay. Thank you.

Your next question comes from the line of James Bushnell of Exane.

Hi. Good morning. Thanks for taking my questions. I have two, please. The first was on pricing in Europe. Obviously, you've had a good year there, and the outlook looks good in terms of OCI growth. But the pricing numbers seem to be a little softer than earlier in the year, and I just wondered if you could give us some color around that, please. And then the second question was on the retention rates you're getting in iQOS. The market share numbers you mentioned sound quite impressive, but I just wondered if the 30% retention rates you mentioned in the past was still consistent and how it was looking in Switzerland, for example, as well. Thank you. André Calantzopoulos: Okay. In Europe; pricing in Europe is unchanged. What we make some difference in the quarter is, if you remember, in Germany in 2014, we took pricing in the middle of the year toward the second half. And in 2015, we anticipated earlier. So until the third quarter, we had two overlapping annualization of pricing from the previous year, from 2014, and the pricing in 2015, which we don't have – we didn't have in the last quarter. But as you know, we announced pricing in Germany, so we are back in the normal course. Okay. That will explain this. Now, I will give much more granularity about iQOS in CAGNY. I don't want to steal the thunders of everybody, but the retention rates are much higher than the 30%. And that's very encouraging in Japan, actually.

Great. Okay. Well, look forward to CAGNY. Thanks a lot for your answer.

Your next question comes from the line of Bonnie Herzog of Wells Fargo.

Hi, André and Jacek. André Calantzopoulos: Hi, Bonnie.

Hi.

My first question is on the EU. How sustainable are the improved trends you've been seeing throughout the region? And also, you continue to highlight a lower prevalence of e-vapor products in the EU. So I'm curious how much of a factor that's been to the improved combustible cig volume; possibly these consumers have been switching back. André Calantzopoulos: Look, I hope the trends in Europe are sustainable. I mean where we forecast, it's early in the year. But from everything we know, including pricing, we think we may be a bit lower than last year, a bit higher decline but well above actually our 2% to 3% secular decline that we anticipate. So to me it looks fairly good in Europe, okay? And part of that is attributed, obviously, to a lower share of e-cigarettes but also a little bit less illicit trade. And I think maybe because the economies also are improving, higher average daily consumption, which you don't see in the trends. But that explains part of the volume, clearly.

Okay. That's helpful. And then I have a question on your share repurchase program. So if your FX headwind stays where it's at, say, for the next couple of quarters, is this an okay level for you to resume your share repurchases? Or do you need this headwind to reverse to be comfortable before you'd resume your buyback? I'm just trying to get a sense of what's going to give you comfort? Is it more visibility or a lower headwind? André Calantzopoulos: Well, a lower headwind, obviously, because at current levels, it makes no sense to resume share repurchases. So once we see reversal, then we can revisit the issue. And I hope we will see at some stage.

Yes. Agreed. If I may ask just one final quick question on your Marlboro 2.0 roll-out. Can you give us a sense of what percentage of your Marlboro 2.0 is rolled out? Is it complete, I guess? And is there typically a lag before you see the full impact of this on your overall Marlboro share? André Calantzopoulos: Well, I think we're seeing the impact already.

Yeah. André Calantzopoulos: And all the indications we have from the markets where we're already one or more years in the market is, all the fundamentals are improving; the perception is improving; the image is improving. So it has worked very well and actually beyond what I personally expected. So I don't know exactly weighted where we are. We're in 100 markets. I think it's 95% of the volume of Marlboro already or something like that. And everywhere, we've seen positive results. And if you remember, this is not just packaging. It's the whole communication of consumers, product improvement that were extremely well received by our consumers and also competitive smokers.

Okay. So trends are increasing. Thank you. André Calantzopoulos: You are welcome.

Your next question comes from the line of Chris Growe of Stifel.

Hi. Good morning. André Calantzopoulos: Good morning, Chris.

Hi. I wanted to ask, first of all, in relation to volume, which did weaken a little bit sequentially in the fourth quarter – there are some unique factors that are leading to that – and if you look at the strong performance in the first nine months. As you look – as you move into 2016, you've indicated global volumes down about the same rate as they were last year. Are there any markets in particular where we should kind of keep a watch out here? I mean we've taken out the big ones so like Russia, Indonesia. Are those the ones you see being kind of the weakest here to lead out the year but improving throughout 2016? André Calantzopoulos: Yeah. I mean if we look overall, clearly, Russia, as I said, we have to make some assumptions. Last year, we're a bit positively surprised. I hope that's going to be the case, but we have to assume some decline in Russia. So we assumed, as I said, around 9% at this stage. On the positive side, clearly, Korea, because last year we had quite impressive decline, about – apples-to-apples, I would say 20%, which this year hopefully, we're not going to see. And clearly, we see improving trends during the year. So that's on the positive side. We had a good upside in Turkey last year because of the illicit trade reduction plus increased consumption. I don't think we are going to see the same increment in Turkey this year, obviously. But as the year unfolds, we will know better. In markets where we're less impacted, clearly, is India that had a big decline last year because of excise and VAT increases. But as you know, we have minimal exposure there and Brazil. And Brazil is likely to continue this year, obviously, because we had a combination of VAT tax increases in certain states because they have autonomy to decide about the VAT rates and also an excise tax increase that comes in two tranches in Brazil; one in May and one in December. So that's where I see it. Now, Indonesia, again, is a bit early days. As you know on one side, we had a slightly soft economy. Price, the pass on of the excise tax in the previous year of about 5% of price increase equivalent. This year, it's 7.5%, not dramatic but slightly higher. And on the other side, we have – on the positive side we have minimum wage increases in the range of 11%. So how this is going to pay at the end of the year is very difficult to predict. Conservatively, we have assumed some decline, but we'll see if that materializes or not. And that's for the key markets. I don't know if I said that.

Okay. That was helpful. Thank you. I just had one quick follow-up, which is in relation to generally the global macro uncertainty, some of the risks we've seen in some of these key markets. And you have some pricing going up at a healthy rate, just due to excise tax pass-along. Are you seeing any changes in elasticity? Is it too early to tell for that? But I'm just curious if we're seeing kind of that weaker consumer reacting negatively to price increases in some of the key markets where you're taking those now. André Calantzopoulos: I mean, look, I must say that I'm positively surprised by elasticities rather than the opposite, actually. They come more on our side than I thought. So now, again, some of the emerging markets we have to watch as the economy weakens, but we don't see many – any signs – I'm sorry – of this occurring at this stage. So we'll keep you abreast of how this is going during the year. But I think we baked this in our forecast for total market for the year of to 2% to 2.5%.

Okay. That's very encouraging. Have you said what percentage of your pricing you have in place already for the year? André Calantzopoulos: I would say about 50%, slightly higher than that, at this stage.

Okay. Thank you for the time. André Calantzopoulos: You're welcome.

Your next question comes from the line of Vivien Azer of Cowen.

Hi. Good morning. André Calantzopoulos: Hi, Vivien.

So my first question has to do with Latin America in terms of the cadence of the local currency profit growth. The profit growth had been quite robust for the first nine months of the year and it did decelerate. I was wondering if you could just – and on an easy comp So I was wondering if you could just expand on that a little bit, please. André Calantzopoulos: I'm sorry. I'm not sure...

So I'm showing that you had very strong double-digit profit growth in Latin America in the first nine months of the year that ended up resulting in full-year very robust local currency profit growth. But in the fourth quarter, your local currency profit growth was plus 1%, so it kind of – it's a big difference from what we have been seeing. André Calantzopoulos: Profit, there is costs. It's more a question of costs rather than...

And Argentina. André Calantzopoulos: Yeah. And we had the Argentina devaluation as well. That was reflected in the last quarter. But in terms of pricing, there is no difference. We had regular price increases in Argentina. We're taking pricing in Mexico. But there is sometimes difference in timing of price increases, so that can explain some swings. I would not be reading these quarters with religiousness, I would say. Okay?

So the cost increase in Argentina is a one-time factor, or do we think – is that something that kind of persists for the next three quarters?

More of that – sorry – Jacek. It's more of the one factor. You should also look for the Latin comparing the Q4 of the last year, of 2014, because I think there was a different pattern of the shipment ahead of the tax price change in Mexico. André Calantzopoulos: Yeah.

So this might swing around.

Understood. Thank you very much. My second question has to do with the EU and with plain packaging. You called out some investments in the UK, but you also called out negative mix shift. So I'm wondering if you could just expand on some of the changes that you're making in terms of your go to market as well as an update on the market landscape itself, if it's downtrading just in your portfolio, or are we already starting to see downtrading in the UK? André Calantzopoulos: Well first of all in the UK in particular, we've essentially taken back our distribution from Imperial. So in the quarter we had particularly particular specific expenses due to this take-back and double cost obviously, because we're still paying material and we're building up our own distribution. I don't see any acceleration in downtrading in the UK in terms of trends. And if we try to correlate this to plain packaging, clearly there's not yet plain packaging in the UK, I would say. But in general, because I get very often this question, is UK going to become Australia. The first thing is the impact of plain packaging on Australia downtrading is extremely difficult to estimate, if any, because it's much more a question of pricing. Because if you remember, the margins at the bottom end of the market in Australia are still extremely high compared to the UK. So I personally do not see an acceleration of the trends in the UK, even if eventually plain packaging is implemented because there are already brands at very low margins at the bottom end of the market. And I don't think we'll see an acceleration of the trends. Now in the EU in general, I don't see much downtrading here. Actually, the premium segment is stable and we grew share with Marlboro. So overall, I'm very positive about the trends in the European Union. And do not forget that we have a portfolio with Marlboro, L&M and Chesterfield that covers quite comfortably all price segments. So I think we're fairly confident about the prospects of the business in the European Union.

That's very helpful. Thank you very much.

Your next question comes from the line of Michael Lavery of CLSA.

Good morning. André Calantzopoulos: Hi, Michael.

Just want to come back to Japan. Can you confirm that I'm reading this right? Your market share table in the release, that's just cigarettes; that doesn't include any sales from iQOS. That's correct? André Calantzopoulos: This is correct.

And so would it be closer to flat market share if iQOS were included? And where do you see iQOS taking share from? Is it more from your own brands or from competitors? André Calantzopoulos: Well, we would see obviously some correction. And we should not forget that in particularly in the last quarter, there were competitive introductions in the market. And clearly because of the support of iQOS as we expand it nationally, we had no activities on our portfolio of cigarettes during that quarter, okay. So that explains both the comparisons in terms of competitive pipelining and us focusing on iQOS the higher decline in the share. Now from what we know today, approximately 40% of the people that switch and adopt iQOS come from our own brands, which is higher obviously than our market share in Japan. But I hope this is correct because we are primarily targeting our own consumers as well, and it's Marlboro. So that's a little bit the proportion we see today, 40% coming from our portfolio and 60% from competitive brands.

And does having iQOS in the market influence any of your thinking on pricing on your cigarette brands and maybe give you more flexibility there? André Calantzopoulos: No. This is completely separate, okay. I don't see any.

Okay. And then just on Indonesia, the machine-made full flavor certainly has been, that segment's been gaining steam. You called out machine-made in general as part of your momentum there. But certainly in full flavor, you're underrepresented. Can you be a little more specific on any of your progress there in gaining a bigger footing in that segment? André Calantzopoulos: Well we are getting some part of the segment clearly, due to the success of Dji Sam Soe Magnum and Blue, which are in that segment. We introduced last year U Bold, which is a full-flavor extension of U Mild that is doing well in the areas that was launched and we plan to expand now nationally. And one of the things that shows the segment growing faster is that some of the introductions I've described previously, 20 packs for the price of 16, are labeled as full flavor but they are more low tar and nicotine product, okay. So there is some artificial boosting of that segment. But overall, we are making progress in that segment, and we have plans to further expand our presence in the segment, clearly.

Okay. That's helpful. Thanks. And then just lastly on margins. Obviously, two years in a row now you've had significant spending increases in the fourth quarter. Obviously, you've called out that some of the items are transitory, but can you give a sense of where margins go from here? Do you expect a return to levels two years ago anytime soon? Is there a little bit of a new normal? What's the right way to put the margin environment in context? André Calantzopoulos: Well as I said in my remarks, we expect OCI to grow above our 6% to 8% range next year. So obviously, margins will expand. And we expect and we're targeting margin expansion in every – so yes, you will see a margin increase.

And specifically you said in every region as well? André Calantzopoulos: Yes.

All right. Thank you very much. André Calantzopoulos: Thank you.

Your next question comes from the line of Bill Marshall of Barclays.

Hi. Good morning. Thank you. André Calantzopoulos: Good morning.

My first question, I just want to talk a little bit about your cash flow and allocation. As you highlighted in your prepared remarks, you've done a great job keeping your cash flow steady, despite the foreign currency headwinds. If you take the midpoint of your EPS guidance for 2016 though, your dividend payout is around 95%. So I was just curious if there's a level where you start to get a little uncomfortable; and kind of what lengths would you go to on the dividend to just ensure that you could at least maintain if not increase it slightly like we saw last year? André Calantzopoulos: Well, as I said, we will not decrease the dividend, okay? So, yes, it is a high payout ratio, undoubtedly. And given currencies, it will remain high for the next couple of years, no matter what. I hope over time as we grow profit and we grow cash flow, we'll come back to more normal levels. And if the currencies stabilize, clearly, we'll recover much faster the return to normality, I would say. But as we always said, dividends is sacrosanct and we will go to a large extent to maintain the dividend.

That's very helpful. Just out of curiosity, is the 65% payout ratio – over the long term, obviously – is that kind of still in play? Or is that something that's kind of been pushed out a little bit, just given the currency situation? André Calantzopoulos: Look, this discussion about 65%, as I said, is a bit theoretical short term because we will remain, no matter what happens, unless the currencies turn back to half of where they are today compared to...

Right. André Calantzopoulos: Dollars as to half. Once that the situation becomes a bit more clear on where we'll go directionally, then we'll revisit this payout ratio and we may want to modify it, okay. That kind of theoretical discussion today.

Okay. Yeah. Very good. Thank you. And then just finally, I just wanted to dig a little bit into the Philippines. It sounds like you're happy with the progress there. Even with volume down as much as it is for the category, it sounds like you're more than happy to trade the bottom end volume for the share gains on Marlboro and it's at the top end. So just curious if you could give a little bit of color on how you feel about the Philippines. Have we turned a corner there and we're going to continue to see improvement? Or is there still more work to do in that market? Thank you very much. André Calantzopoulos: We definitely see improvement, undoubtedly. Pricing at the bottom has increased; compliance is increasing quite significantly. The back-stops have helped. And as the – finally, as of next year, we are in the final stage of merging the two tiers. Over time, we have the possibility to unleash the profitability of the market also by growing Marlboro price. So overall the prospects are extremely good, in my view, touch wood. And it's pretty clear that with these kind of margins of price increases at the bottom, you will have some total market decline temporarily because it's 50% price increase over one-and-a-half-year period. So you would expect some market decline. But overall, I think it looks pretty good, as I said. So I'm very happy with what's happening in the Philippines.

Perfect. Thank you very much. Appreciate it. André Calantzopoulos: You're welcome.

Your next question comes from the line of Owen Bennett of Nomura.

Afternoon, guys. Just a quick one from me. I was just wondering in terms of projections for Indonesian industry volumes next year because I know you were saying 1% to 3% over the medium term. I was just wondering if you could be a bit more specific now and for fiscal year 2016. Thank you. André Calantzopoulos: Yes. As I said, it's a slightly different forecast Indonesia at the beginning of the year. My view is, yes, there is a little bit of pricing, higher pricing this year because of a higher tax. Last year, we had a 5% tax pass on. This year, we're 7.5%. The economy is a bit softer, but on the other side, minimum wages went up 11%. So how this is going to unfold is difficult for me to forecast. We have assumed conservative some slight market decline. Whether this materializes or not, we'll know over the few months as the pass on of the prices evolves. And that's how I see the total market for the month.

Okay. Cool. Thanks very much. André Calantzopoulos: Long term, you're right. That's the way we look at the market, 1% to 3% growth.

Cool. Thank you. André Calantzopoulos: You're welcome.

Your next question comes from the line of Jon Leinster of Berenberg.

Good morning, gentlemen. Just a question on costs. I think you mentioned earlier on that there was some favorable leaf costs, tow acetate and packaging. In dollar terms, could you give some indication of where those major costs are actually headed? André Calantzopoulos: Well, I think overall, we see stability in leaf prices. And on clove prices, we have some favorability year-to-year, but we should not forget that we run longer inventories. So on average, you see the impact in the years to come. So the outlook there in terms of leaf and clove is pretty good. And the clove crops were fairly large, so we could secure sufficient inventories at lower prices. Our overall cost, as I said, only including RRPs, should be in the range of 1%, probably slightly below. So we see a moderation clearly in the cost going forward. Now 1% of the total cost base based on 2015 – sorry – is $150 million. That's what it is, okay?

And secondly, on the iQOS, clearly, when you launched in Japan and Italy, you'd managed to secure somewhat favorable tax treatment of HeatSticks, vis-à-vis combustible cigarettes. And I was wondering, given your recent launches, have you managed to achieve a similar sort of negotiated settlement with Switzerland and Russia and various other countries you've launched into? André Calantzopoulos: Switzerland, for sure. Russia is still in discussion. But in the vast majority of the markets we have launched, it's lower rates than cigarettes.

And is that actually – are you now actually pricing those HeatSticks below cigarettes, or are you still actually pricing at the same level in those markets? André Calantzopoulos: At this stage, we price parity with Marlboro, except for Switzerland, where we are slightly lower. And in Russia, where we use Parliament and Marlboro, and we're about the normal Parliament price. So we work with different pricing models and different go-to-market models of this type and clearly, with larger tool of best practices so we accelerate future deployment and also improve cost efficiency as we become a bit more intelligent about how these products with the markets.

Thanks. And lastly, just can you give us a update on where the legal challenges are to plain packaging? And indeed, is there any update on the Ukrainian-led WTO dispute? André Calantzopoulos: Okay. Basically, this year is an important year because as you have mentioned of the pending cases, we have WTO; that the decision should come towards the second half of the year. And we have the UK High Court, which should rule before May, maybe earlier. So we'll know these important outcomes in the course of this year. So that's where we stand in terms of the pending cases at this stage.

Okay. But is there anything to add to the sort of WTO dispute? Has that been taken forward? André Calantzopoulos: Sorry?

Is there anything to add with regards to the WTO dispute? Has there been any particular... André Calantzopoulos: Well, it's a normal process that is followed.

Right. André Calantzopoulos: There is a lot of interest from what we understand, but we're not in the proceedings, obviously, because it's between Member States, so...

Okay. André Calantzopoulos: So we'll see how this unfolds.

Okay. Thank you very much. André Calantzopoulos: You're welcome.

Your final question comes from the line of Erik Bloomquist of Haitong Securities. Erik A. Bloomquist - Haitong Securities (UK) Ltd. Hi. I was wondering if you could just comment on the outlook in Australia. I mean the Prime Minister's been talking about continuing the 12.5% excise tax increases that have dented Australian volumes. Does that sound like a real risk, or will there be some fiscal sensibility in the light of rising illicit trade in your view? Thanks. André Calantzopoulos: Look, there are discussions of this nature and clearly, our explanations to the government is that they should put some stop in this out-of-cycle excise tax increases. This year, we have the last one. Now, despite all this tax increases which, as you know are pretty substantial because sometimes they are more than one Australian dollar per pack on 20s equivalent, the total market was down only 2.6% in 2015. And I think that has remarkable elasticity. Now, downtrading has continued, although recently at a lower pace. And as far as we are concerned, our share has stabilized finally. We have increased our segment share for the discount segment, so we're in a position to influence the segment. And essentially, I believe – I mean we also announced a price increase today in Australia. So the way I see Australia is, it has been a slight drag on our OCI this year, much, much less than last year. Conservatively, we forecast another small drag next year but we'll see now how this pricing unfolds. So that's the situation in Australia. Obviously, our objective is not to have the excise tax increase out of the normal ones that are the CPI indexation. Erik A. Bloomquist - Haitong Securities (UK) Ltd. Great. Thank you.

Thank you. I will now return the call to management for any additional or closing remarks.

Well thank you very much. That concludes our call today. If you have any follow-up questions, please reach out to the Investor Relations team. We're currently in Switzerland. And as André mentioned earlier, next presentation will be at the Cagney Consumer Conference on Wednesday, February 17, and that will be webcast as well. Thank you all for joining us. Have a great day.

Thank you. That does conclude the Philip Morris International Fourth Quarter 2015 Year-End Earnings Conference Call. You may now disconnect.