Financial Data and Key Metrics Changes - The company reported record net revenues of $4 billion from its smoke-free portfolio in Q2 2025, contributing to strong double-digit adjusted diluted EPS growth in both constant currency and dollar terms [6][10] - Q2 shipment volume growth was 1.2%, with organic top-line growth of 6.8%, reaching over $10 billion in quarterly net revenues for the first time [10][11] - Adjusted diluted EPS increased by 20% to $1.91, reflecting strong top-line momentum and positive margin evolution [11][12] Business Line Data and Key Metrics Changes - The smoke-free business saw a 13% growth in shipment volumes, with heated tobacco unit (HTU) shipment volume growing by 9.2% to 38.8 billion units in Q2 [12][16] - ZYN experienced a significant acceleration in U.S. consumer offtake growth, reaching 26% for Q2 and 36% in June [7][35] - E-vapor shipments more than doubled year-on-year, contributing to gross margin expansion [8][16] Market Data and Key Metrics Changes - In Europe, the smoke-free product market is recovering from the characterizing flavor ban, with notable growth in Italy and other markets [7][25] - The U.S. market for ZYN is showing strong recovery, with shipments increasing by 41% year-on-year [36][37] - Combustible net revenues increased by 2.9%, with robust pricing contributing to gross profit growth despite volume declines [17][41] Company Strategy and Development Direction - The company is focused on maximizing the growth of its smoke-free products, particularly IQOS, ZYN, and VIVE, while maintaining a resilient combustible business model [24][48] - Continuous innovation in devices and consumables is a key pillar for growth, with the rollout of Illumi Eye technology and new product variants [25][30] - The company aims to achieve a fifth consecutive year of total volume growth, driven by its smoke-free portfolio [15][42] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong fundamentals of the business, raising the adjusted diluted EPS full-year forecast to 13% to 15% growth [10][42] - The company anticipates continued strong momentum in smoke-free products, while acknowledging potential challenges in combustible volumes [14][88] - Management highlighted the importance of addressing the illicit trade issue in the EU, which poses a risk to market growth [24][64] Other Important Information - The company achieved over $500 million in gross cost savings year-to-date through efficiency initiatives [20] - The regulatory environment is seen as a key enabler for smoke-free growth, with positive developments in several markets [22][24] - The company is on track to meet its three-year CAGR targets, demonstrating strong financial performance across all categories [46][48] Q&A Session Summary Question: ZYN restocking and future growth expectations - Management acknowledged that restocking was lower than expected but emphasized the strong momentum in ZYN's growth, with June showing 36% consumer offtake growth [53][60] Question: EU tax proposals and updates - Management refrained from elaborating on specific tax proposals, noting that the process is in its early stages and requires further clarity [62][64] Question: IQOS ILUMA U.S. approval timing - Management remains hopeful for a second-half approval but acknowledged the heavy workload at the FDA, which could delay the timeline [71][73] Question: Combustible volume expectations - Management confirmed a target of around a 2% decline in combustible volumes for the year, aligning with long-term trends [77][78] Question: Increase in underlying guidance - Management indicated that the second half is expected to align with previous expectations, despite some phasing and comparison dynamics affecting performance [83][90]

Financial Data and Key Metrics Changes - The company reported record net revenues of $4 billion from its smoke-free portfolio, contributing to strong double-digit adjusted diluted earnings per share growth in both constant currency and dollar terms [6][10]. - Adjusted diluted EPS reached $1.91, reflecting a growth of 20%, with a favorable currency variance impacting the results [11][12]. - Total shipment volumes grew by 2.5% in H1, with organic net revenues increasing by 8.4% [11][12]. Business Line Data and Key Metrics Changes - The smoke-free business saw a 13% growth in shipment volumes, with heated tobacco unit (HTU) shipment volume growing by 9.2% in Q2 [12][15]. - ZYN experienced a significant acceleration in U.S. consumer offtake growth, reaching 26% in Q2 and 36% in June [7][34]. - E-vapor shipments more than doubled year-on-year, contributing to gross margin expansion [8][16]. Market Data and Key Metrics Changes - In Europe, the smoke-free business showed broad-based growth, particularly in Italy, as the impact of the flavor ban receded [7][25]. - The U.S. market for ZYN saw a recovery in offtake growth, with shipments increasing by 41% year-on-year [34][35]. - The international market for nicotine pouches grew by 65%, nearly tripling outside the Nordics [7][27]. Company Strategy and Development Direction - The company aims to maximize the growth of IQOS while expanding the presence of ZYN and VIVE under its multi-category strategy [24][25]. - Continued investment in smoke-free brands is prioritized, with a focus on expanding production capacity and market access [21][23]. - The company is committed to addressing the regulatory environment to support smoke-free growth, particularly in the EU [24][62]. Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong momentum of smoke-free products continuing into H2, despite expected modest declines in combustible volumes [10][15]. - The company raised its adjusted diluted EPS full-year forecast to a growth range of 13% to 15% [10][42]. - Management acknowledged the challenges posed by the illicit trade and regulatory changes but remains optimistic about the overall growth trajectory [24][46]. Other Important Information - The company achieved over $500 million in gross cost savings year-to-date through efficiency initiatives [21]. - The smoke-free user base grew by approximately 5 million, reaching around 41.5 million as of June 30 [22]. - The company is on track to meet its three-year CAGR targets, demonstrating strong financial growth [46]. Q&A Session Summary Question: Regarding ZYN's restocking and future growth expectations - Management clarified that the restocking was slightly lower than expected, but emphasized the strong momentum in ZYN's growth, with June showing a 36% increase in consumer offtake [52][58]. Question: Update on EU Tobacco Excise Directive proposals - Management noted that the initial proposal includes differentiation between smoke-free and combustible products regarding minimum taxation, but further clarity will be provided as the legislative process unfolds [62][64]. Question: Timing for IQOS ILUMA U.S. approval - Management remains hopeful for a second-half approval but acknowledged the heavy workload at the FDA, which could delay the timeline [70][72]. Question: Drivers of IQOS reacceleration and sustainability - Management highlighted the waning effects of the flavor ban in Europe and strong performance in markets like Japan and global travel retail as key drivers for IQOS growth [72][74]. Question: Combustible volume expectations - Management confirmed a target of around a 2% decline in combustible volumes for the year, aligning with long-term trends [76][78]. Question: Increase in underlying guidance and second-half considerations - Management explained that the second half is expected to maintain strong momentum in smoke-free products, despite anticipated declines in combustibles [81][85].