Philip Morris International Inc (PM) — Q1 2017 Transcript

Welcome, and thank you for joining us. Earlier today, we issued a press release containing detailed information on our 2017 first quarter results, and you may access the release on www.pmi.com, or the PMI Investor Relations app. During our call today, please note the following unless otherwise stated. First, we'll be talking about results for the first quarter of 2017, and comparing them to the same period in 2016. Second, all references to total industry, PMI volume, and PMI market share performance now reflect cigarettes and PMI’s heated tobacco units for those markets that have commercial sales of IQOS. A glossary of terms, adjustments, and other calculations, as well as reconciliations to the most directly comparable 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 that present, are likely to present, or have the potential to present less risk of harm to smokers who switch to these products versus continued smoking. Today's remarks contain forward-looking statements and projections of future results, and 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 Jacek Olczak, our Chief Financial Officer.

Thank you, Nick, and welcome ladies and gentlemen. As announced this morning, while increasing our 2017 reported diluted EPS guidance at the prevailing exchange rate for $0.04 to a range of $4.84 to $4.99 for a favorable tax item only. Our guidance continues to include $0.08 of unfavorable currency. Excluding currency and the tax item, our guidance represents a growth rate of approximately 9% to 12% compared to our adjusted diluted EPS of $4.48 in 2016. As a reminder, we expect that our currency-neutral financial growth will be skewed towards the second half of 2017, notably reflecting increased heated tobacco unit capacity and improving returns on our RRP investments as the year unfolds. Let me now thank you for our first quarter results beginning with our combined cigarette and heated tobacco unit shipment volume which declined by 9.4% or 7.8% excluding estimated inventory movement. The decline was due primarily to the impact of lower cigarette industry volume partly reflecting the microeconomic environment in Indonesia, Pakistan, the Philippines, and Russia as well as the high prevalence of illicit trade in Pakistan and the Philippines. As seen on the left side of the slide, over half of the total decline consisted of low price segment volume, some of which contributed very little, if any, unit margin. This limited the impact on our profitability and differs dramatically from the overall price segment split of our premium position portfolio as shown on the right. Our first quarter volume decline was slightly larger than anticipated, due essentially to the lower industry volume in Pakistan and the Philippines as well as the magnitude of unfavorable inventory movements in Italy and Spain. For the full year, we expect a combined decline of 3% to 4% broadly in line with last year. The expected improvement over the balance of 2017 is supported by three main factors: the lapping of challenging first half comparisons versus 2016 in select geographies such as Argentina, the EU region, and Turkey; a lower impact of estimated unfavorable inventory movements on a full-year basis; and significantly higher heated tobacco unit volume. Despite the cigarette-driven volume decline, net revenues in the first quarter increased by 1.7% excluding currency. This growth reflected favorable pricing particularly in Asia and EEMA regions as well as higher heated tobacco unit and IQOS device sales. For the year, we continue to anticipate currency-neutral net revenue growth above 6%. Adjusted OCI declined by 1.7% excluding currency primarily reflecting lower cigarette volume as well as significantly higher investments behind the commercialization of IQOS notably in the EU region and Japan. Adjusted diluted EPS were flat at $0.98 with no currency impact, as the favorable effect of currency such as the Indonesian rupiah, Japanese yen, Russian ruble, and Swiss franc were offset by the negative effect related to the Egyptian pound, Mexican peso, and Turkish lira. Our strong pricing variance represents 6.7% of first quarter 2016 net revenues and included positive contributions from all four regions. During the quarter, we announced or implemented price increases in a number of markets, notably Argentina, Germany, Indonesia, and Turkey, as well as others shown on the slide. Our first quarter markets, excluding China and the U.S., declined by 0.9 points to 26.8% due principally to brands in the below premium price segment such as low price Morven Gold in Pakistan, Fortune and Jackpot in the Philippines, and Next Global in Russia. Our premium brands performed well in the quarter contributing 0.2 points of market share growth driven by the strong performance of our heated tobacco brand. I will now discuss a few of our key geographies, beginning with the origin. Industrial volume declined by 2.8% in the quarter, consistent with the secular decrease in the market and our full-year decline forecast of 2% to 3%. Our volume was down by 7.1% but was impacted by estimated unfavorable distributor cigarette inventory movements notably related to the implementation of the tobacco products directive in France, Italy, and Spain. Excluding this event from movement, our volume declined by 2.9%, broadly in line with the industry. Our regional market share was essentially flat in the quarter with growth in markets such as France, Germany, Poland, and the UK, offset by declines notably in Italy and Spain. In Italy, the share decline was due mainly to Philip Morris reflecting the growth of the super-low price segment as well as Marlboro, which is the only major cigarette brand above their own €5 per pack price point. Marlboro was also impacted by the TPD's ban on pack sizes of 10 cigarettes, which contributed approximately 12% of the brand cigarette volume prior to the ban. On a sequential basis, our total share in Italy was slightly up versus the fourth quarter supported by the growth of fees. In Spain, the share decline was due principally from Marlboro cigarettes, notably reflecting the brand's passing of around €5 per pack price point in the vending channel, which accounts for nearly 30% of Marlboro cigarette volume. Moving to Russia, industry volume declined by 7.9% in the quarter due primarily to the impact of excise pack delivery price increases. For the full year, we expect the decline to moderate to a range of 5% to 6%. In our February quarter-to-date, cigarette share declined by 0.4 points versus the same period last year due mainly to the slower penetration of competitors' price increases. However, our share has increased sequentially over the past few quarters driven by low price above three as well as Philip Morris, which benefited in part from the consolidation of certain local brands in the Philip Morris trademark. As evidenced by the brand driving our sequential cigarette share performance, we are serving further down trading in Russia. While the presence of big packs has declined following the ban of production as of July last year, residual volumes remain in the supply chain, and we are continuing to witness price competition around limited pack editions with discounts equivalent to the per-stick price of big packs. Importantly, we are effectively balancing our market share and profitability growth in Russia. Turning now to the Philippines. We continue to prioritize the growth of our premium portfolio's profitability over the defense of low margin volume and share. Higher pricing and favorable portfolio mix reflecting the strong performance of Marlboro drew profitability growth in the quarter despite the cigarette industry volume decline of 15.6%. Marlboro cigarette share increased by 5 points to 32.5% driven by switching from lower-priced brands. To further highlight Marlboro's strength, the sequential share has now increased for 11 straight quarters. Our total cigarette share decline in the quarter was due mainly to the timing of competitor's price increases as well as continued competitor discounting at the bottom of the market. This led to widened price gaps notably compared to Fortune and Jackpot. We are therefore encouraged by the government's renewed focus on addressing illicit trade, including excise stock stamp compliance. We are hopeful for sustained enforcement to address the usual long term which we believe should ensure that prices at the bottom of the market reflect full excise stocks payment. In Indonesia, cigarette industry volume declined by 5.5% in the quarter reflecting the continued soft economic environment and above-inflation tax-driven retail price increases. While history shows that quarterly trends in the market can be volatile, we anticipate the decline of 1% to 2% for the full year in line with 2016. Our cigarette markets declined by 0.5 points in the quarter due mainly to Sampoerna A, our leading lighter-tasting machine-made exotic brand, as well as Marlboro in the white segment following its passing of the 20,000 rupiah per pack price point. The decline was partly offset by the growth of full-flavor machine-made kretek offers such as U Bold and Marlboro Filter Black. The latter has been gradually expanded, and since its initial launch in 25 cities last September, it has reached 1% international share in the first quarter. In Japan, the strong performance of IQOS continues to be the primary driver of our results. Market share increased by 5.4 points in the quarter to 30% driven mainly by the growth of Marlboro HeatSticks. Marlboro share, including cigarettes and HeatSticks, increased by 5.7 points to 17.1%. Industrial volume declined by 7.4% or by 4.3% excluding inventory movement. The strong performance of IQOS in Japan is further evidenced by the weekly uptick shares for Marlboro HeatSticks. As seen on this chart, the brand closed the quarter with a weekly uptick share of 9.6% nationally, 11.6% in Tokyo, and 14.9% in Sendai. We believe that the strong uptick performance in Sendai in particular clearly demonstrates the growing potential of the heated tobacco category in Japan. Turning to the commercialization of IQOS more broadly, we have now launched IQOS in key cities in 24 markets globally, following city launches in Colombia and Lithuania during the first quarter and in Poland and Serbia earlier this month. By year-end, we continue to expect IQOS to be in key cities nationwide in a total of 32 to 35 markets, subject to capacity. Importantly, our heated tobacco portfolio is beginning to achieve strong international market share growth sequentially in some of our early launch markets beyond Japan. For example, in Italy, Switzerland, and Portugal, our national share reached 0.5%, 0.9%, and 0.4%, respectively in the first quarter of 2017. These results have been achieved despite IQOS focus area representing less than 35% of cigarette industry volume in each market. Our share performance in Germany is also worth highlighting. Given the limited focus area and relatively brief period since launch, national market share data are not yet meaningful. However, heats have recorded strong sequential uptick share growth in Berlin, Frankfurt, and Munich, reaching a combined share of 0.6% in the first quarter and 0.8% in the last week of March. Let me now provide an update on our heated tobacco unit capacity. We entered 2017 with approximately 15 billion units of installed annual capacity and continued to anticipate approximately 50 billion units of such capacity at the year-end. This translates to over 32 billion units in expected total capacity available for commercialization in 2017. As additional capacity has come online this year, we have begun to gradually increase the number of IQOS devices available for sale in Japan and will continue to do so as the year unfolds. In addition, we have started to implement our plans to reach installed annual capacity of 100 billion units by the end of 2018. As a result, we expect to have approximately 75 billion units in total capacity available for commercialization in 2018. In support of this plan, we recently announced our decision to convert our cigarette factory in Greece to heated tobacco unit production. Consequently, we are increasing our plant capital expenditures in 2017 to $1.6 billion from the $1.5 billion previously communicated. We continue to target operating cash flow of $8.5 billion this year. In conclusion, our first quarter results generally came in as expected. Our cigarette volume was lower than anticipated. Our key assumptions for the full year remain intact, namely currency-neutral net revenue growth of about 6%, supported by favorable pricing as well as higher heated tobacco unit and IQOS device sales. To build up on the exceptional performance of IQOS, we are making significant investments behind both commercialization and the expansion of heated tobacco unit capacity. Importantly, we currently estimate that approximately 1.8 million adult consumers have already quit smoking cigarettes and switched to IQOS. Finally, the full-year outlook for our business remains strong. Our 2017 EPS guidance reflects a growth rate of approximately 9% to 12% excluding currency and the favorable tax item compared to an adjusted diluted EPS of $4.48 in 2016. Thank you and I will be happy now to answer your questions.

Hi.

Hi Chris. Good morning.

Hi Jacek. How are you? Thank you. I just want to ask you two questions if I could. I just want to get a sense of you have this IQOS available in 24 markets today. There have been some comments saying it's going to go into France and there are more markets still to come throughout the year. As you look at your capacity development throughout the year, you've given the numbers clearly what's available for the year, but you're having a pretty quick uptake obviously in Japan. I mean, you need more and more volume for that market. I just want to get a sense of is it more important now to have this available in more markets or to make it more widely available in the existing markets in which you're in? Do you have the capacity to do both of those in 2017?

Okay, it takes a bit of time in each market to build the necessary capacity infrastructure in order for national expansion. So, what we have learned so far from the experience we had with the commercialization of IQOS is that it starts always with one or two cities and begins building the expansion based on what we had learned and what we have installed in these cities. This requires quite significant employment of additional sales force but also the creation and establishment of IQOS stores, boutiques, Brexit stores, etc. So, we always will need that runway and opening in these markets earlier does not put at this stage that much of a constraint on available capacity, but allows us to build broader much faster ahead of 2018 or 2019. This is how we look at this thing. And as you might have noticed Chris, we also have made the decision to take this theoretical capacity expansion of 4 billion per month which we announced half a year ago that we had that option; we decided to essentially implement this plan. So, we are already committing ourselves to this 100 billion year-end capacity next year to essentially accelerate our plans.

Okay. And do you still expect IQOS to achieve break-even profitability in 2017?

Absolutely.

Okay, and one quick one if I could on the volume performance for the underlying business and it was obviously weaker than we thought. Obviously weaker than we had thought. And there are obviously some adjustments from inventory and timing changes, and you gave some color around that, but going forward, you'd expect a pretty significant improvement in the underlying volume performance of the business. I just want to get a sense of, so we look across a lot of the markets. Is there some pretty significant market share declines in some markets? Do those start to narrow or is it more about IQOS developing and contributing to your overall volume? I just want to get a sense of that balance you expect for the rest of the year.

Look, I mean, at some markets, we have posted in the quarter some more sizable market share losses, which we highlighted in my remarks. So, in both markets we can see the improvements Q1 and Q4 or the sequential within a quarter, etc. So, I think we keep that strong grip on the conventional business in the market where we for whatever reasons are under pressure. I mean, Italy is a little bit more complicated because on the one hand, we are focusing on the combustible business while also building the base for the IQOS. But there are some problems in Italy which frankly speaking are beyond our power to execute. As we noted, the tax structuring in Italy is not very supportive for narrowing the price gaps. Marlboro is above the €5 price point in the conventional business, and Marlboro in conventional cigarettes sits above the €5 price point. I guess there will be some pressure on Marlboro in Italy in conventional business continuing for the year. But on the other hand, Germany continues to be on the strong term, and France, despite the fact that we have the first quarter, I know it’s a bit early of the plain pack implementation. France posted very good results in the quarter.

Okay. That was very good color. Thanks for your time.

Thank you.

Hi, good morning.

Good morning, Vivian.

So, just to follow up on Chris's question. So, if we're still looking to break even in '17, Jacek, given the momentum that the business is seeing, year on balance it would seem that you're still on track to generate incremental profits from IQOS in 2018. But how are you thinking about the need for reinvestment spending given your first mover advantage in the traction that you're seeing from the product? Would you be able to offer any kind of order of magnitude guidance around what that level of profitability might look like? Thanks.

Look, we have said it I guess earlier this year that we look and we can reconfirm this here from today, we are looking at revenue growth above 6%. Earlier we have said that we are still looking at margin, operating profit margin expansion somewhere in the tune of 10 to 20 points. Clearly we could say that to achieve better margin expansion but it is not factored in increase investments namely behind the IQOS. This is both on the OpEx and operating costs, and I announced as we announced today also on the CapEx to prepare the capacity. So, I think we well invested frankly speaking on both sides, both on combustible, although there is some reallocation or allocation of the resources from combustible business to reduce these products, but I think we feel pretty comfortable with the investment which we plan to make this year as I said to support the revenue growth above 6%.

That's helpful. And just in terms of the longer-term outlook for 2020, Olczak, you pointed to a higher profit number when you spoke at the Cage Conference. Can you just offer a little bit of context on what the implied HeatSticks volumes would be for that 1.4 billion to 1.5 billion in incremental profit? Thanks.

Yes, a number of times recently I've been confronted with this question, Vivian. Yes, we gave that outlook I guess three years ago or so. And I have already admitted, maybe I shouldn’t, I have acknowledged I think at the Cage Conference a few weeks ago that both numbers seem to be wrong. Either 2020 was wrong and we are going to keep the target well ahead of this deadline, or definitely the volume number was wrong. I mean, you could see at the pace which we are cruising today, we see the penetrations in the markets are in Japan; it goes well above the 3% to 5% which we marked the target for 2020. So, you have to give us the time to really put our brace around what the actual size of that opportunity today. Clearly, it's a much bigger opportunity than we saw two years ago but I'll refrain from giving a new target at this stage. We have also said to investors that sometime in 2018 we'll try to come up with a new improved version for PMI and I guess this would be the best timing to put some milestones for what we want to achieve with our big objective to go to this smoke-free future as PMI.

That's helpful. Thank you very much.

Thank you, good morning.

Good morning, Judy.

So, first in Japan, there have been some press reports about PM planning to take some pricing on your combustible business. So, can you confirm whether you filed for price increase applications in Japan and combustibles?

Judy, you will appreciate, but I can’t comment on our future pricing decisions, at least at this stage. So, we will have to leave it as it is now.

But when you kind of think about your full year guidance at this point, does that include any of the potential price increase in Japan?

Judy, please I can’t comment on our future pricing.

That’s fine. Alright. And then I guess staying in Japan, so obviously you've seen pretty strong share gains even in Sendai as your competitor have launched in that market. So, how do you sort of look at that market and kind of what are the lessons learned in looking at that market and applying kind of a similar share performance to the broader Japanese market, or your ability to kind of defend your share as your competitors begin to expand more nationally in Japan?

We have some concerns about the reliability of data from Sendai, both for us and our competitors. In the recent quarter, it seems that the total heat-not-burn category may have surpassed a 20% market share in Sendai. From our perspective, there appears to be a strong demand for devices like IQOS, which is currently not fully met due to limited availability. I wouldn't be surprised if the heat-not-burn category in Sendai reaches a 30% share of the total market by the end of the year. There is a growing word-of-mouth effect among adults who have successfully transitioned from smoking to heat-not-burn products and are sharing their experiences with others. This category is gaining recognition for both its existence and benefits. While it’s uncertain how long this growth will continue or what the ultimate market size will be, it’s clear that this industry isn’t particularly innovative compared to others. Historically, changes in cigarette styles have taken years, but perhaps we are on the brink of a similar shift now. Japan, in particular, has better marketing opportunities than some other markets, but it could take one or two more years for the product to reach a significant number of consumers.

Okay, got it. And then just lastly on the capacity related question. So, with the €300 million investment that you've talked about for the Greece plant, that gives you 20 billion additional fixed from an IQOS HeatSticks perspective. So, that would be 50 billion plus 20 billion, 70 billion. So, would there be incremental CapEx if you were to get to a 100 billion capacity by the end of 2018 and should we take that into consideration just from a CapEx for an '18 perspective?

Well, there won't be an impact on CapEx in '18. We have not announced the number of the CapEx for '18. So, we have to wait a bit until the thing which we have. The Greek numbers, which your or number for the Greece conversion, Greek factory conversion is included in my 1.6 for this year as CapEx impact on the cash flow. And I guess we will have other factory conversions, and capacity expansion capacities, which will be announced as the year unfolds in order to build up that 100 billion. Okay, because always is the question of the machinery and equipment and is obviously the questions of where we're going to host and when we're going to locate that manufacturing capacity, especially as we're thinking in context of converting existing combustible assets.

Alright, okay, thank you.

Thank you.

Hi, Olczak.

Hi, Bonnie.

Hi. I have a couple of quick questions on IQOS. Could you give us an update from your test for platform two? I believe you were testing that in the first quarter and if so could you again give us an update on how that performed and any plans to roll that out?

Bonnie, we remember, kept on these two many occasions. We haven’t tested platform two in the first quarter. We have said we're going to test it later this year.

Okay.

We have P3 and the P4 as well in some cities or in some locations, but we have not done this test yet.

Okay. So, it's on task then to be tested this year still.

Oh, right.

And then question on your tax benefit for IQOS. I guess I'd like to better understand these tax benefits in the market share and so on average are you still seeing around a 20% benefit across all of these markets? And then curious, what are the economics on IQOS in markets where there is no tax benefit? Could you still generate profits on IQOS that would be comparable to your combustible cig business?

To my first to think the IQOS lower talks on heat-not-burn category is by first country-by-country, but it would be better or a higher benefit than a 20%. I guess, Japan is in about plus/minus 20% benefit. That's one. Second is, from my knowledge, frankly speaking, I don’t recall a country in which we have commercialized about, frankly speaking to commercialize in which the heat-not-burn category is not classified as a lower, with a lower tax benefit.

Alright.

I might be wrong, but I don’t think we have any single country in their market today, where we wouldn’t have applicable lower tax classification.

That's what I thought, Olczak. But what about a scenario where fast-forward several years where some of these governments might change the tax benefits which we can argue why that should be the case. But just let's think about a worst-case scenario. So, I guess I'm trying to get a sense of the economics on IQOS if you had no tax benefit. There must help us understand that and how you think about that.

Okay. Well, IQOS saw the HeatSticks are sold at a price of a premium segment, right, on the market.

Right.

So, that’s even excluding the tax benefit, we are premiumizing our portfolio, and we're operating with the positive mix product mix category territory. Secondly, as we roll out and build up the capacity, we also are gradually lowering the manufacturing costs. So, as we have said from the very beginning of our journey in this new category, we would one should expect that one day the consumerables, the HeatSticks will be manufactured at the very close unit cost to the conventional cigarette. So, I have a cost approaching the conventional cigarette and I am operating at the margin level of the premium segment. So, it would be equal if I would have a rapid expansion of Marlboro volumes across the geographies. So, at least from a mix perspective, I am better off. At these margins, clearly market-by-market are better than my other profit margins or unit margins on my entire portfolio.

Okay, that's helpful. Okay, and then just a last quick question, certainly your conversion rates with IQOS and HeatSticks have been very high, which is great. But I'm curious to hear about trial. How has that been building in some of your IQOS markets in terms of just essentially recruiting new users to try this technology?

In Japan, the trial is somewhat restricted because it depends on the number of devices we allow to be sold. The exact number isn't available, but there are many people lined up to buy the devices. In other markets, the trial rates are similar to what we experienced mid-term in Japan. When we transitioned from a 60% coverage to national expansions, we increased both the trial rates and conversion rates across all markets. Most markets are currently showing comparable statistics and key performance indicators. It's important to note that our product is only meant for adult smokers, so we don't see much interest from non-smokers. We need to ensure that we don't create unintended consequences for those who have quit smoking or for individuals who have never smoked.

Right, okay. Thank you.

Thank you.

Thank you. So, I'm a little bit confused about your attitude towards market share in the conventional business. When I look at the sequential market share, so I'm looking at the market share you place in Q1 versus what you placed in Q4. Outside Europe, you've seen declines in pretty much every geography that you've listed in the press release. As in my question, but which is worrying to me, the listeners who've attended your prepared remarks, you imply that this is roughly in line with expectations or not a big concern. So, am I wrong to read that there has been a decline sequentially since 4Q outside Europe? And how concerned are you about the market share trends in conventional?

Adam, I very gladly have to unconfuse you.

Thank you.

We will have to go geography-by-geography and how we look at this trends. If I take the significant market share erosions which we observed, one obvious case comes for example, Philippines; very sizeable market and we have total significant share losses, and it obviously weighs on total PMI volume and share performance. But we have highlighted very much that instead of protecting low margin volumes in absence of proper law enforcement when it comes to compliance regarding the tax takers, we just about two years ago changed the strategy and what goes on managing more growth, the price reduction of the price gap and so far the strategy is very successful. Marlboro grows significant market share despite the fact that there is some down trading in the market. Secondly, we in a double-digit bottom-line policy either of territory. Then you have some markets where the trends are okay. Indonesia is as we know is the continuous shift between the hand roll to machine-made, etc. I mean, in the recent launches we have made in the machine-made segment including the Marlboro Black kretek, which quarter in a market not in a full even distribution has achieved a very strong 1% market share. So, that by Indonesian standard is very strong. And also both the initiatives, etc. I think so far have gone well. While we grow the market share in Indonesia, I feel as well positive about this one. The market is experiencing a typical first-quarter distortion due to price increase patterns, particularly in Mexico. The timing of these price increases can vary from year to year, leading to different purchasing behaviors in trade and possible fluctuations. We are closely monitoring the performance of the combustible business and, as always, keeping a keen eye on the markets that are performing well. I have noted the performance in Italy, which I believe will remain challenging for some time due to structural market issues, including a significant price gap and a lack of effective tax solutions at the lower end of the market. The recent elimination of packs of 10 cigarettes may help to some extent, but Marlboro has considerable exposure in this area. In Spain, there tends to be a softer response when prices reach certain points, often requiring a couple of quarters for the market and consumers to adjust. On a positive note, Marlboro's high price point in France continues to grow. I hope this clarifies the situation for you.

And just with, first of all, thank you because you have. And second of all just to sort of throw the comments forward. You say that in the full-year even I expect to see -3% and -4% volume declines on a total basis. My guess is that's going to be how can we put it; it is going to be somewhat weak in the second quarter and gradually improve to that -3% to -4% both, I'm guessing is conventional business is less paired and as the HeatSticks picks up. Is that how we should think about it sequentially?

We should have, well, maybe I'll turn it to the other. And I think as of Q2, we should expect much more robust revenue growth, which is a combination of pricing better volume makes. Frankly speaking, we didn’t talk about the mix plus a 50 in the quarter by mixing the Q1 are much better or much lower than the mixing in the Q1 last year. So, some of the – as I said as of Q2 we should see much stronger volume of revenue growth on the rate to achieve that of 6% for the full year net of currency revenue growth.

And can I ask if a very quick follow up somewhat technical question. When you quote Q6 market share in Europe I’m thinking about in Italy and Switzerland for example, is this off-take market share or is this shipment market share?

This will be off-take market share. It depends on the market we state are available, but we usually refer to what we call market sales, so it’s not asked to the distributor but it is distributor sales. It may not in our markets be of the retail but to retail now depends. I understand, thank you very much.

Thank you very much. That concludes our call for today. If you have any follow-up questions, you can contact the Investor Relations team. We're back here in Switzerland. Thank you very much. Have a great day.