Nick Rolli - Vice President, Investor Relations and Financial Communications Jacek Olczak - Chief Financial Officer

Chris Growe - Stifel Bonnie Herzog - Wells Fargo Matthew Grainger - Morgan Stanley Judy Hong - Goldman Sachs Michael Lavery - CLSA Limited Vivien Azer - Cowen and Company Bill Marshall - Barclays Capital

Good day and welcome to the Philip Morris International First Quarter 2015 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. [Operator Instructions] 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 first quarter results. You may access the release on our website at www.pmi.com. During our call today, we’ll be talking about results for the first quarter of 2015, and comparing them to the same period in 2014, unless otherwise stated. A glossary of terms, data table showing adjustments to net revenues and OCI for currency and acquisitions, asset impairment, exit and other costs, and adjustments to earnings per share or EPS, 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 to 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 a variety 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. Jacek?

Thank you, Nick, and welcome ladies and gentlemen. I’m pleased to report that PMI is off to an excellent start in 2015 with robust fundamentals driving a strong business performance that is benefitting from our investments last year. As announced in our earnings release this morning, we’re raising our 2015 reported diluted EPS guidance at prevailing exchange rates by $0.05 to a range of $4.32 to $4.42. This increase reflect a better than expected volume and share performance in the first quarter and an improved outlook for the balance of the year. Our guidance continues to include approximately $1.15 per share of unfavorable currency at prevailing exchange rates. Excluding the impact of currency, our 2015 guidance represents a growth rate of 9% to 11% compared to our adjusted diluted EPS of $5.02 in 2014. Although the total estimated unfavorable currency impact on our revised guidance remains unchanged versus our February guidance, there has been a shift since then in its composition. The positive impact of the appreciation of the Russian ruble and the depreciation of the Swiss franc has been offset by the unfavorable impact of a further strengthening of the US dollar versus most other currencies, particularly the euro. As exchange rates remain volatile, we do not foresee any share repurchases in 2015 and this is reflected in today’s guidance. Let me now take you through our first quarter results. Organic cigarette volume grew by 1.4%, driven by market share gains across all four regions and favorable inventory movements, notably in Italy, Spain and other markets supplied by manufacturing facilities in the EU region. This growth was partly offset by lower cigarette industry volume, principally in Japan, Korea and Russia. Excluding inventory movements, organic cigarette volume declined by an estimated 0.5%. Net revenues and adjusted OCI, excluding currency and acquisitions, were up by 9.1% and 16.3% respectively, driven by strong pricing across all regions and favorable volume mix in the EU and EEMA regions. Adjusted diluted EPS of $1.16 in the quarter grew by 23.5% excluding currency. Our performance in the quarter was flattered by a favorable comparison versus the challenging first quarter of 2014. As we have mentioned previously, the second half of the year will include incremental spending primarily behind the deployment of iQOS. Strong pricing was the key driver of our financial performance. Our quarterly pricing variance reached $552 million and included a gain from inventories that we were able to build in Korea prior to the recent tax change. Importantly, our first quarter pricing was strong across all four regions. We’re well positioned to achieve a full year pricing variance broadly in line with our historical annual average of approximately $1.8 billion. Our results were supported by solid market share gains. We performed very well in our top 30 OCI market, increasing share by 1.2 percentage points to 38.1%. Share growth was flat in 22 of these markets. Our share gains were geographically broad-based and driven by a range of brands, including Marlboro. The brand share grew by 0.1 point in the EU, 0.4 points in EEMA and 0.5 points in Latin America and Canada. Turning now to our regions, we continued to perform extremely well in EEMA, which was the largest contributor to our strong currency neutral results in the quarter. Regional market share increased by 0.7 points, driven by the success of Parliament, Marlboro and the L&M. We gained share in the key geographies of North Africa, Russia and Saudi Arabia. Excluding currency and acquisitions, net revenues and adjusted OCI grew by 13.9% and 24.2%, respectively. This growth was driven by higher pricing notably in Russia, Egypt and the Middle East, and favorable volume mix in nearly all of our markets outside Eastern Europe. In Russia, our performance was outstanding. We achieved double digit OCI growth, excluding currency, despite the 9.3% decline in cigarette industry volume. Our strong brand portfolio helped drive market share gains and higher local currency unit margins through net pricing. February quarter to date market share reached 27.7%, an increase of 0.9 share points versus the same period last year. Parliament grew 0.5 points, which drove an increase in our premium segment share of 3.5%. Low-price Bond Street grew by 0.9 points. Despite significant excise tax driven price increases and the weakening of consumer purchasing power, we have not observed any material shift in price segment trends. However, as I mentioned at the CAGNY Conference in February, the macroeconomic environment in Russia continues to be fragile. We recently announced a further increase in retail selling prices of 4 rubles per pack across the majority of our portfolio, although this will not be reflected in the market until later this quarter. In the EU region, first quarter cigarette industry volume declined by 1.6%, or an estimated 2.7% after adjusting for favorable trade inventory movements. For the year, we forecast cigarette industry decline of approximately 4% as we expect the recently implemented price increases to impact adult smoker demand over the balance of the year. We maintained our regional cigarette share momentum in the first quarter with a gain of 0.4 points to 39.6%. This increase reflected share growth in the five largest markets by cigarette industry volume as well as the positive performance of our three largest brands in the region, Marlboro, L&M and Chesterfield, which all gained share. We achieved adjusted OCI growth in the EU region of 12.9%, excluding currency and acquisitions, driven by higher pricing across most markets as well as favorable volume mix notably in Southern Europe. On the same basis, we expect the region to be a positive contributor to PMI’s adjusted OCI growth this year. I’ll now cover our Asia region beginning with Japan. Cigarette industry volume declined by 13.9% in the first quarter, due mainly to the impact of retail trade and consumer purchases last year in anticipation of the consumption tax-driven retail price increases effective April 1, 2014. After adjusting for these distortions, the decline was an estimated 3.5%. We forecast an industry decline for the year in the range of 2.5% to 3%, as the trend should improve now that we have the April 2014 price increases. Our market share increased by 0.1 point in the quarter. However, after adjusting for the aforementioned distortions, it declined moderately, due mainly to the timing of competitive brand launches. We expect our full year share to benefit from the recent roll out of the Marlboro 2.0 Architecture across all three pillars and strong pipeline of innovation. In the Philippines, we’ve made further retail price increases at the low end of the market in the first quarter. This has restored positive unit margins in the super-low price segment, while price gaps have narrowed and driven Marlboro’s share growth. We believe that the competitive environment is being improved by the recent introduction of tax spends. Despite significant price increases in this important market, smoking prevalence has remained stable. The reduction in average daily consumption has been due mainly for adult smokers of brands at the low end of the market. We attribute the decrease in large part to sticker shock following price increases for super-low priced brands of approximately 27% on average since October of last year. We expect average daily consumption to largely recover as the year unfolds and adult smokers adjust to new price levels. We’re pleased by our positive momentum in the first quarter and are optimistic about the improving OCI outlook in the Philippines. In Indonesia, first quarter cigarette industry volume grew by 5.9%. Quarterly volume result in the market can be volatile and thus may not be representative of the annual trend. For the year, we forecast growth of approximately 2%. Our market share grew by 0.8 points to 35.4%, mainly due to strong performances in the growing machine-made kretek segment by Dji Sam Soe Magnum and Magnum Blue, as well as our flagship in the segment Sampoerna A. However, our hand-rolled kretek brands remained under pressure as adult smokers continued to switch to machine-made products. This marked our fourth consecutive quarter of sequential share growth and we’re well positioned for further gains. We recently launched U Bold in the rapidly growing full flavor machine-made kretek segment where we’re currently underrepresented, but are gaining share. The Indonesian market offers exceptional long term prospects, thanks to its growing adult population and a favorable economic environment. We believe that we are best positioned within our industry to benefit from this trend. In the Latin America and Canada region, adjusted OCI grew by 35.1%, excluding currency and acquisitions, driven by pricing in Argentina, Canada and Mexico. This impressive OCI growth enabled the region to be an important contributor to PMI’s results despite its small relative base. Our share in the region grew by 0.9 points to 38.3%, driven mainly by Marlboro. Argentina and Brazil recorded strong share performances with growth of 1.4 and 2.4 points respectively. Turning now to our RRP portfolio, the performance of our iQOS pilot launches is in line with or exceeds our expectation. In both Nagoya and Milan sales of key stakes are growing sequentially. More importantly, the launches have provided valuable learnings that are being incorporated into our plans for future roll out and cover areas such as the flagship store concept, the logistics chain, after sales support, channel strategy as well as consumer communication and engagement. We remain on track to commence national expansion in Japan and Italy as well as pilot or national launches in additional markets later this year. Let me also quickly highlight that we launched the e-vapor product Solaris last month in Spain. We remain steadfast in our determination to offer an attractive dividend to our shareholders. At the close last Friday, our dividend yield was 5.1%. This was significantly above that of our proxy peer group and 10-year US Treasury notes. It was also well above the dividend yield of our main international tobacco competitors. In conclusion, we achieved strong currency neutral results in the first quarter, driven by robust business fundamentals that are underpinned by our investments last year. Our superior brand portfolio supported by a superb commercial organization is driving positive market share momentum and strong pricing. We continue to focus vigorously on our cost and for 2015 anticipate the total company cost base increase, excluding RRPs and currency, of approximately 1%. The iQOS pilot launches are performing well and we’re on track with our plans for national expansion and additional launches later this year. We’re managing our cash flow prudently in order to provide a generous dividend and an attractive yield. Despite our free cash flow decline in the first quarter, due mainly to currency and temporary working capital movements, we forecast 2015 free cash flow to be broadly in line with last year’s level. Overall, we’re off to an excellent start in 2015 and are optimistic of our business outlook. We’re raising our 2015 reported diluted EPS guidance which on a currency neutral basis reflects a growth rate of 9% to 11% versus 2014 adjusted diluted EPS of $5.02. Thank you. And I’ll now be happy to answer your questions.

[Operator Instructions] Our first question comes from the line of Chris Growe of Stifel.

Just I’d say two questions for you. If I can ask the first one, as you saw the better volume performance here in the first quarter, even excluding the inventory movements, it was much better than I expected. Do you think this is going to hold for the year? Do you have an updated forecast for the industry overall? Are there areas of certain regions where you’re seeing this improvement maybe more than others and just curious how much that can hold through the year?

As we said in the remarks that we expect the EU to be above the 4%. There are very strong volumes in the EU in the first quarter. Obviously, as you’ve noticed, also in our remarks we said there were some movements in – held by some inventory movements associated with the last quarter closure of the factory in Holland, which is the main supplier, but still excluding for those movements, I think we had a strong start. I think in a view of the pricing which we’re taking in EU, I think is prudent at this stage to hold that for a cusp of 4%, but we see – as with volume momentum in a number of markets, very importantly Southern Europe, but also other markets. And the rest of the world, I think general for the full year, the outlook is that the industry volume should be better than last year. It’s difficult very precisely to quantify now, but we could feel that volumes in the EEMA region, Asia, Latin America, there’s more of the structural improvement going forward. So I think we remain optimistic about the volume outlook for the full year for the industry and obviously for us.

And just a follow on question in relation to your earnings guidance for the year, you had a much stronger first quarter performance than I think a lot of us had modeled and I’m sure what you’ve modeled as well. So I’m just curious with the increase in guidance for the year being less than the first quarter earnings be, I’m just wondering if there’s an incremental level of reinvestment, is there some conservatism built in, just how you look at the rest of the year and some of the areas you could use this flexibility to reinvest?

I think the investment plan in terms of cost which we plan to spend for this year, I mean, the pricing of tax rate as per the plan, so I don’t think at this stage that we need to go back and reinvest. The brands and the commercial organization is well invested, the proper resources are allocated behind iQOS, that’s obviously going to be a second part of the year, end of Q3, more Q4 type of a spend. So this will impact obviously our results in the quarters. As I said, yes, the first quarter was somehow hedged by the inventory and as I mentioned Korea pricing, so this boosted the better performance. But even if I were to exclude this inventory movements and the Korea one-off pricing, we would have a very strong double digit growth in the quarter. We don’t see at this stage that we need to go and to change our investment plan. As you noticed, we reconfirmed that we expect the total cost base ex RRP to stay in the range of 1% ex currency obviously. But we’re pretty confident that we will fund it.

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

My first question is your Q1, it was clearly very strong, but I guess I was hoping you could maybe summarize what are the key items that give you the confidence to raise your full year guidance so early in the year?

I think the confidence is coming – I mean, the one-offs which took place in Q1, I mean, they were all well estimated by us in the original guidance. I think this underlying momentum continuing from the last year which gives you more confidence that you can raise the guidance. So even as I said before, even exclude Korea and some inventory distortion, the underlying business in the EU but also in EEMA very much, as I give you that support, in your thinking, in your estimates for the full year, which prompted us to increase the guidance by $0.05. Nothing what we have been working on very hard last year, since that this was a temporary type of a solution, I mean, the permanent improvements in Philippines, we hold the share in Japan despite some blips in the quarter, EU is continuously delivering. So I mean the things that we spend our time and our efforts in the organization last year properly, so I think we build a solid base for this year. This is what it is.

And then in terms of Marlboro, your volume has rebounded and were strong in the quarter, so I was hoping you could drill down a little more on this, especially in light of your Marlboro 2.0 roll out? And then I’d like to hear from you how sustainable you think this is.

Marlboro, as I said it on a number of occasions I think CAGNY, at the CAGE most recently, Marlboro is in a good shape. I mean, I think the way we improve the equity of the brand over the last two or so years, helped by the commercial [indiscernible] Marlboro Gold, now going to Marlboro 2.0 Architecture, I mean, all these components, I think, the things together, and Marlboro is responding in a number of geographies, it’s not just one or two places where we see the Marlboro uptake. The Marlboro 2.0 is just at this stage roll out in about 48 markets and we foresee that by the year end we should be in about 100, a bit more than 100 markets. So that’s an effort which we’ll continue. So I think Marlboro is receiving continued support in terms of Marlboro 2.0, plus market by market with a pipeline of innovations which is going to hit also later the year the market. So I’m confident about the Marlboro performance this year.

And then just my final question is on your RRP portfolios, first on iQOS, I was hoping you could talk further about some of the learnings you mentioned. And then second on Solaris, given the vapor slowdown, why was the timing right to roll out Solaris?

Maybe I’ll start with Solaris, I think I mentioned this before. The reason we went with Solaris into the market first, I think the Altria product is compared to what you have available in the market, a very good product. And more importantly for us is also to go and test and learn how they’re selling the cigarettes, how a commercial organization should be adjusted, how you handle the trade, the supply chain, the communication with consumers, et cetera. I think before you start engaging larger geographies it’s just simply smart to go and test the waters in a more contained geographies, in this case Spain, and apply this learning which should greatly help us with the resource management going forward. Now, coming back to the iQOS, look, as I said, whatever we see – obviously there are differences between Milan and Nagoya and the differences are driven by the distribution spread, as much outlets handling iQOS in Milan than in Nagoya, there is a big difference in the communication possibilities, marketing possibilities, it’s much more open and broader reach which we can get in Japan. Obviously, this is reflected with their awareness levels to start which are about twice as high in Nagoya than in Milan. But if I drill it down to the number of consumers who have already purchased iQOS and the acceptance levels, how many have already adopted iQOS as a permanent product, as a main product, how many still are in between using about half of an iQOS, half of a combustible cigarette, and obviously there is a growth which using iQOS very rarely, occasionally and still stays with a combustible cigarette, this results are at least as far, if not better, which [indiscernible]. So if you go back to our test results, which I think we showed with investors during the Investor Day last year, we’re showing well above the 30% or above 35% adoption, I mean, the full adoption of iQOS today among those who have purchased it. And as I indicated, the uptake volume of the HeatSticks is in a continuous growth. I can’t remember how many weeks essentially since the launch, we can observe the sequential growth in HeatSticks. But obviously, adoption takes time, this is a new technology, it’s not something which the consumers are so broadly familiar, so it’s a lot of work to be done. But we’re very enthusiastic and optimistic based on the result which we see in this market.

Your next question comes from the line of Matthew Grainger of Morgan Stanley.

First, I just want to clarify two things you said earlier, you mentioned that if you were to exclude the Korea pricing benefit and the inventory timing issues in the EU, you still would have had double digit constant currency growth, that’s in EPS, not operating income, correct?

Yeah, that’s correct. This is on EPS.

And the volume impact should be, to whatever extent there is a reversal of that, that should be concentrated in the second quarter?

From the volumes, actually as much as they’re related to the typical timing differences between Q1 and Q2, which is mainly associated with the timing of the Easter holiday in various geographies, I think most of the volume are locked in Q1 and you will not have that, we shouldn’t have an impact of those volumes going into Q2.

And then just two market-specific questions. On Asia first, could you just give us an update on market in competitive conditions in Australia? I know you called out positive share, but what are you seeing in terms of the industry volume reaction to the latest excise tax increases and the pricing headwinds that you faced in the market there?

Due to the excise tax increase in the industry, we increased the prices, so there was a net price increase. Maybe it’s too early to call it, but I think what we can see in Australia at least for the first two months of current trading conditions is that the dynamics of the segment growth, mainly the discount segment, have somehow slowed down. I wouldn’t call it a success, but if I compare sequential quarter development last year versus if I take the Q3, very much Q4 and the beginning of the year, you could see some stabilization or signs of stabilizations in terms of growth of the discount segment. So that’s obviously very helpful. I think this is a result of maybe a different pricing, maybe per discounting strategies adopted by the players. So yes, I think we’re growing our share, share in the quarter was somehow flattered by the comps because we had the opening of the last year, but I think that Australia for 2015, I mean, it clearly is less of the size of the drag which we had last year. So I think we slowly, month by month, we are moving there in the right direction.

One last question just on Japan, this is lots of areas of strength in the quarter, this is one where performance still seems a bit soft. I was surprised to see your volume still down double digits since you didn’t seemingly have the same inventory benefit last year that your competitors did. How does the double digit decline compare to how you see consumption on your brands during the quarter and is it just the roll out of 2.0 that gives you confidence that things improved through the year?

As far as inventory, I think our shipments in the first quarter was just better than the total market. I think you could see these distortions which we had in Q1 last year somehow clearing – was cleared in Q1 of this year. Now, frankly speaking, the marginal share movement in Japan knowing that the market is very sensitive on a short term basis, like quarterly basis, the pipelining of the product with the competition for the new product introductions, I wouldn’t pay that much attention. We’re watching obviously the situation closely, but I think Japan has enough of the initiatives, including Marlboro 2.0, but also a pipeline of our new products to the market that we should see the share coming stronger in other part of the year. So I personally, we don’t think that this quarterly reading from Japan is a red slot which we should we worried about.

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

I guess a few questions on Russia, number one, just in terms of clarification on the inventory movement, is it your expectation that that was really – and I think you maybe talked about this on the context of the total company impact, but in 2Q, does the inventory movement in Q1 help come out in 2Q for Russia?

No, I think the inventory adjustments in Russia, I think, they just corrected, the inventories at the distributor level which is more corresponding to the outlook for the total market and more importantly for the share which we have in Russia. So maybe there are some smaller distortions of this shipment, but I don’t think anything of the magnitude which we should expect, nor this was a payback from the last year. I think it’s just the normal course of the business, however, this was more connected with that recovering of recouping the inventories to the right level.

And then just maybe underlying trend in Russia, just what you’re seeing in terms of the elasticity to the price increases that happened in December, the fact that you’re taking another pricing, does that imply that the impact on volume has been more favorable? And in the context of just competitive environment, obviously you’re gaining a lot of market share, what do you anticipate in terms of how the competitive dynamics play out in that market?

Look, I think so far if you look at the current performance of the business and the way we look at the industry, I think the market holds very well. I mean, obviously, you have a high 9% sort of the volume declines for the total industry, but this has to be read in comparisons to the very high pricing the industry is taking, or we’re taking. So the elasticity is so far okay. We have this disconnect in terms of the macros reading from Russia, but as I mentioned, we looked very carefully into the price segments that will augment over the very recent period. And you essentially have to split in total to start concluding that you have acceleration of growth of the bottom of the market or down trading et cetera. Not at this stage, but as I said, Russia is something which presumably will remain on the watch list for the full year. Having our share growth and pricing, we grew our share for Parliament, so clearly this is not just share in the premium or above premium segment, other brands obviously contributed as well. We just announced another price increase. As you know, Russia on an ex currency looks very good. Obviously, currency has put a dent on the results, that’s very clear. And inflation is high and I think this was the reason why we decided to go now with the price. But so far, elasticity is working as per the expectations, we’re talking 3.4 type elasticity if you take the price increases versus the market decline.

And then just lastly on the yen hedging, can you just update on where you are today versus the last guidance you’ve given?

Judy, we usually don’t update what we do with regards to the hedging during a year. I can just maybe help you that if I take a $1.15 impact on our results with the previous guidance, I’ll confirm today in the $1.15, yen just moves in that guidance by $0.01. I said a $0.13 impact last guidance, and I have now $0.14 impact this guidance. So this is not the yen, clearly I think the hedge in place, they’re all in that same, but also I have to admit volatility on the yen is lower than we used to have it at the beginning of the period. Ruble, which I listed in my remarks, improved a lot, because the ruble is just $0.13 now in my guidance and it used to be $0.48, so this is a big improvement. Swiss francs was negative and turned positive in the guidance to $0.10. And there is a whole list of other currencies, obviously euro plays a role, but the yen was – yen played just a one role. Ruble was $0.35 in the guidance, 30% of the entire guidance is the major contributor to that balancing and us holding the $1.15 guidance.

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

I just wanted to come back to Korea. You talked about the benefit from the inventory, I assume by that you mean that you were able to pull inventory ahead of January 1 so that you could sell product in this quarter with last year’s lower tax, is that correct?

That’s correct.

And how long does that benefit last? Is the shelf life typically it’s close to six months maybe, will that benefit continue in 2Q or have you exhausted that inventory yet?

It’s very much a function of how long your inventories you manage to be, obviously there are some limitations, some restrictions in the market, how much you can be, so we don’t have a free ride on this one. But I think mostly that benefit, at least in our case, should be attributed to the Q1, mostly, there might be some slip over going to Q2, but it’s mostly a Q1 event.

And then just looking at your guidance obviously you’re much more confident and it is early, how much volumes are far less predictable, but how much of the pricing that you're expecting that's reflected in your guidance, have you already realized or been able to take?

Because we’re a bit deeper in the year, we usually at this year don’t give a number how much the pricing we have realized, but you might remember and initial guidance in February when we were announcing full year results, we have said that for the current 2015 year, we have 70% pricing realization. And there were a number of markets which we have taken the pricing since then. So clearly we are higher than 70%.

So you can't say by how much?

No. For competitive reasons, et cetera, I can’t.

Okay, that's fine. Then just on Egypt, you called out higher manufacturing costs that came from the new business structure, but you also talked about favorable impacts from the new business structure as well. Can you just give a little summary of the puts and takes there and how that nets out?

That’s the impact which we are carrying from Q2 last year – actually from mid of Q1 last year. So this is a quarter where we’re lapping that thing, so with very marginally, but still had an impact in Q1. It doesn’t impact your bottom line very much other than organic growth in the business, it just impacts that your revenues are slightly up and your costs are slightly up versus how we were reporting reflecting our business structure in 2013. So we’re comparing 100% apples to apples.

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

My first question has to do with EU profitability. You guys have previously indicated that you expect to generate local currency profit growth in the EU given the strong start to the year and I recognize you have the offset later on on the national launch of iQOS, but can you give us a better sense of how strongly profits might inflect in the EU?

Clearly, we’ve had a good start of the year, so that – obviously the different pace is going to continue for the Q2, Q3, because there was an underlying strength coming from top line. I think initially for the year, I think we said that we expect EU to contribute in the low single digit. I think I’m definitely confident that they can achieve this one. So let me make the statement at this stage.

In terms of the rollout of iQOS later on in the year you noted the potential for other pilots and/or national launches. Can you give us a little bit more color on what you're looking for in order to make a determination around that? Is it an accommodative regulatory landscape from a tax perspective, is it supply chain, just any other color around that would be helpful?

Clearly we’re looking into the market which give us the volume and margin opportunity, so for obvious reasons, I can’t share with you today the details. But as I said, it’s the consumer base, it’s our position in the market, it’s the margin structure, so these are the key components which we’re looking into. We have said from the very beginning that initially we will go to the market where the margins will be rather accretive to the rest of our business.

And my last question, any comment or update on Platform 2, please?

Platform 2, we started [indiscernible] in Spain – sorry, Platform 2 – Solaris, Platform 2 goes on plan. So it’s nothing really to update versus what we have said before.

Your final question comes from the line of Bill Marshall of Barclays Capital.

I just had one quick question for you. So I believe on earlier calls you guys have kind of left the door open for share repurchases this year. It sounds like from your comments earlier that's probably off the table for 2015. So I was just wondering in the context of your very strong quarter what kind of milestones could you point to that would make you feel more comfortable about buying back stock as we look forward maybe past 2015 into 2016.

Look, we have not updated, unfortunately, we’re not in a position to update the currency guidance and this is the component or element which impact our reported numbers and cash flow very much, okay. So buyback or suspension of the buyback for this year is the outcome of that. I mean, we’ll have to see the improvement in the currency outlook is very much [indiscernible] versus all others to be able to go back to that share buyback. So yes, obviously the guidance increase – the outlook for the year increase helps, but this is still, I have to admit, overshadowed by the strong negative currency which we are confronted this year. So we need to wait, what’s going to happen with the currencies in order to take back the discussion on the – come back to the discussion on buyback.

At this time, there are no further questions. I’ll now return the call to management for any additional or closing remarks.

Thank you very much. That concludes our call for today. If you do have follow-up questions, the Investor Relations team will be here in Switzerland and available. Thank you again and have a nice day.

Thank you for participating in the Philip Morris International First Quarter 2015 Earnings Conference Call. You may now disconnect.