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`EXHIBIT 5
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`Philip Morris International inc (PM) Q3 2021 Earnings Call Transcript | The Motley Fool
`Case 1:20-cv-00393-LO-TCB Document 836-5 Filed 01/21/22 Page 2 of 28 PageID# 22433
`
`Philip Morris International inc (PM) Q3 2021
`Earnings Call Transcript
`
`PM earnings call for the period ending September 30, 2021.
`
`Motley Fool Transcribers
`(MFTranscribers)
`Oct 19, 2021 at 1:30PM
`Philip Morris International inc (NYSE:PM)
`Q3 2021 Earnings Call
`Oct 19, 2021, 9:00 a.m. ET
`Contents:
`Prepared Remarks
`Quesions and Answers
`Call Participants
`Prepared Remarks:
`Operator
`Good day and welcome to the Philip Morris International Third Quarter
`2021 Earnings Conference Call. Today's call is scheduled to las about one
`hour including remarks by Philip Morris International management and the
`quesion and answer session. [Operator Insructions]
`I will now turn the call over to Mr. Nick Rolli, Vice President of Invesor
`Relations and Financial Communications. Please go ahead, sir.
`
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`https://www.fool.com/earnings/call-transcripts/2021/10/19/philip-morris-international-inc-pm-q3-2021-earning/[1/5/2022 10:36:02 AM]
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`Philip Morris International inc (PM) Q3 2021 Earnings Call Transcript | The Motley Fool
`Case 1:20-cv-00393-LO-TCB Document 836-5 Filed 01/21/22 Page 3 of 28 PageID# 22434
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`
`Nicholas Rolli -- Vice President of Invesor Relations and Financial
`Communications
`Welcome and thank you for joining us. Earlier today, we issued a press
`release containing detailed information on our 2021 third quarter results.
`You may access the release on www.pmi.com. A glossary of terms,
`including the defnition for reduced risk products or RRPs, as well as
`adjusments, other calculations and reconciliations to the mos directly
`comparable US GAAP measures and additional heated tobacco unit market
`share data are at the end of today's webcas slides, which are posed on our
`website. Unless otherwise sated, all references to IQOS are to our IQOS
`heat-not-burn products. All references to smoke-free products are to our
`RRPs.
`Growth rates presented on organic basis refect currency-neutral underlying
`results. Following the acquisitions of Fertin Pharma, OtiTopic and Vectura
`Group, PMI added the "Other" category in the third quarter of 2021.
`Business operations for the Other category are evaluated separately from
`the geographical operating segments.
`Today's remarks contain forward-looking satements 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 difer
`materially from projections or forward-looking satements. Please also note
`the additional Forward-Looking and Cautionary Statements related to
`COVID-19.
`It's now my pleasure to introduce Emmanuel Babeau, our Chief Financial
`Ofcer. Emmanuel?
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`Philip Morris International inc (PM) Q3 2021 Earnings Call Transcript | The Motley Fool
`Case 1:20-cv-00393-LO-TCB Document 836-5 Filed 01/21/22 Page 4 of 28 PageID# 22435
`Emmanuel Babeau -- Chief Financial Ofcer
`Thank you, Nick and welcome, ladies and gentlemen. I hope everyone
`lisening to the call is safe and well. Our business delivered another srong
`performance in the third quarter of 2021 coming ahead of our expectation
`to achieve a record high quarterly adjused diluted EPS of $1.58. Mos
`notable was the continued excellent growth of IQOS, driving plus 33% Q3
`organic growth in RRP net revenue and plus 7.6% for total PMI. HTU
`shipment volumes grew plus 24% compared to the same quarter las year
`to reach 23.5 billion units, with broad-based growth for both our volumes
`and the category across key geographies.
`This was delivered despite ongoing tightness in device supplies due to the
`global semiconductor shortage, which impacts IQOS user growth rates. In
`combusibles, further sequential share gains supported total PMI volume
`growth of 2.1% in Q3 and we continue to expect total cigarette and HTU
`volume growth for the year. We are frmly on track for a srong 2021
`organic growth performance, with an expected currency tailwind providing
`additional growth in dollar terms.
`We are also delighted to share outsanding initial results from IQOS ILUMA
`in Japan and growing traction for IQOS VEEV in early launch markets. In the
`quarter, we made three milesone acquisitions, as we build our business for
`the long term to include products that go beyond tobacco and nicotine.
`Our smoke-free transformation is now also refected in our fnancing with
`the launch of an indusry-frs Business Transformation-Linked Financing
`Framework, and we continue to prioritize returns to shareholders through a
`4.2% increase in the dividend and ongoing share repurchases.
`Turning to the headline numbers, our Q3 net revenues grew by plus 7.6%
`on an organic basis or plus 9.1% in dollar terms. This refects the continued
`srength of IQOS, and the recovery of the combusible business in many
`markets. We witnessed good organic growth of plus 5.4% in our net
`revenue per unit, driven by the increasing weight of IQOS in our sales mix
`and pricing on both HTUs and combusibles.
`Our adjused operating income margin decreased by 10 basis points on an
`organic basis. This refects the expected initial higher unit coss of IQOS
`ILUMA and increased commercial spend partly related to its launch,
`ofsetting the continued positive efect from the increasing weight and
`proftability of IQOS, pricing and productivity savings. Our resulting adjused
`diluted EPS of $1.58 represents plus 8.5% organic growth, and plus 11.3% in
`dollar terms, a very good performance.
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`Philip Morris International inc (PM) Q3 2021 Earnings Call Transcript | The Motley Fool
`Case 1:20-cv-00393-LO-TCB Document 836-5 Filed 01/21/22 Page 5 of 28 PageID# 22436
`Looking at year-to-date performance, our adjused net revenues grew by
`almos plus 11% in dollar terms and by plus 7.3% organically. This refects
`the consisent growth of IQOS, where progress throughout the pandemic
`has been impressive. We delivered srong organic growth of nearly plus 6%
`in our net revenue per unit, again refecting our shifting business mix and
`pricing, with pricing on combusibles at jus over 3% or around 5%
`excluding Indonesia.
`Our year-to-date adjused operating income margin increased by 280 basis
`points on an organic basis, an excellent performance driven by our top-line
`growth engines of IQOS and pricing combined with operating leverage and
`productivity savings. Our adjused diluted EPS grew plus 15.8% organically
`and plus 20.4% in dollar terms, also obviously a very srong result.
`This brings me to guidance for 2021. We are revising our organic growth
`outlook for net revenues to plus 6.5 to plus 7%, representing the upper half
`of the previous range, and reafrming the srong outlook for organic OI
`margin expansion of around 200 basis points. We also confrm our
`currency-neutral adjused diluted EPS growth forecas at the upper end of
`our previous range, refecting plus 13% to plus 14% growth, or plus 16% to
`plus 17% in dollar terms. This translate into an adjused diluted EPS range of
`$6.01 to $6.06, including an esimated favorable currency impact of $0.17 at
`prevailing rates.
`Following on from our mos recent public comments, as the tightness in
`device supply persiss, we now expect our HTU shipment volumes to be
`around 95 billion units, as we prioritize devices for user retention. Given the
`continued growth of HTUs and the need to maintain inventory duration, we
`continue to expect our full year shipments to be slightly ahead of IMS
`volumes.
`This guidance does not include any material impact of share repurchases or
`acquisitions. Share repurchases through October 15th amount to around
`$170 million, after some limitations during Q3 from blackout resrictions. In
`terms of other assumptions, we are assuming only a limited Q4 recovery in
`Duty Free following a modes improvement in Q3, with intercontinental and
`Asian travel sill very subdued. We continue to assume full year combusible
`pricing of plus 2% to plus 3%, with a softer expected Q4 refecting
`continued pandemic-related challenges in certain markets, notably in South
`& Southeas Asia, as well as tough comparisons in Germany and Ausralia.
`Lasly, in 2021, we continue to expect around $11 billion of operating cash
`fow at prevailing exchange rates, subject to year-end working capital
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`Philip Morris International inc (PM) Q3 2021 Earnings Call Transcript | The Motley Fool
`Case 1:20-cv-00393-LO-TCB Document 836-5 Filed 01/21/22 Page 6 of 28 PageID# 22437
`requirements. We also update our expectation for full-year capital
`expenditures to around $0.6 billion, refecting lates launch plans and
`pandemic-related timing factors.
`Before discussing our results in more depth, I am pleased to report some
`recent positive regulatory developments, further to those shared in previous
`quarters. For example, Switzerland adopted a new Federal Law on Tobacco
`Products and E-cigarettes, defning dedicated product categories and
`diferentiated health warnings. In New Zealand, the government has now
`published new regulations for smoke-free products which allow branded
`packaging to be reintroduced with a specifc text health warning.
`In Egypt, earlier this year, smoke-free products were clearly diferentiated
`from combusible cigarettes in both fscal and regulatory treatment. There is
`a growing body of scientifc and real-world evidence of the subsantial risk
`reduction potential of non-combusible alternatives compared with
`smoking. While fuctuations across diferent markets are to be expected, we
`continue to support regulatory and fscal frameworks that recognize this
`critical harm reduction opportunity.
`Turning back now to our quarterly results, Q3 total shipment volumes
`increased by plus 2.1%, and by plus 1.5% year-to-date. This refects
`continued srong growth from HTUs of plus 24%, driven by the EU Region,
`Japan, Russia, Ukraine and encouraging progress from recently launched
`markets in the Middle Eas. HTU shipments were around 1 billion units
`below IMS volumes for the third quarter, primarily refecting timing around
`the Augus ILUMA launch and the October tax-driven price increase in
`Japan. We expect this dynamic to reverse in Q4. The minus 0.4% decline in
`our Q3 cigarette volumes refects the continued sequential recovery of total
`indusry volumes and of our market share.
`Due to the impressive performance of IQOS, heated tobacco units
`comprised 13% of our total shipment volume year-to-date, as compared to
`11% in full year 2020, 8% in 2019, and 5% in 2018. Our sales mix is changing
`rapidly, putting us on track to achieve our aim of becoming a majority
`smoke-free company by 2025. Smoke-free products made up almos 30%
`of our adjused net revenue year-to-date, compared to 23% for the same
`period in 2020. IQOS devices accounted for over 6% of the $6.7 billion of
`RRP net revenue, with a sep-up in Q3 refecting the IQOS ILUMA launch,
`which outweighed the efect of supply consraints on other IQOS versions.
`The plus 7.3% organic growth in year-to-date net revenues on shipment
`volume growth of plus 1.5% refects the twin engines driving our top line.
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`Philip Morris International inc (PM) Q3 2021 Earnings Call Transcript | The Motley Fool
`Case 1:20-cv-00393-LO-TCB Document 836-5 Filed 01/21/22 Page 7 of 28 PageID# 22438
`The frs is pricing on combusibles and, in certain markets, on HTUs. The
`second is the increasing mix of HTUs in our business at higher net revenue
`per unit which continues to deliver subsantial growth, an increasingly
`powerful driver as our transformation accelerates.
`Let me now go into the driver of our year-to-date margin expansion,
`sarting with gross margin, which expanded by 240 basis points on an
`organic basis. While expansion was lower in Q3 as ILUMA devices were
`shipped to Japan for the launch, the multiple positive levers discussed in
`prior quarters continue. Our signifcant eforts on manufacturing and supply
`chain efciencies are also bearing fruits, with around $450 million of gross
`productivity savings delivered. This was accompanied by robus SG&A
`efciencies, with our adjused year-to-date marketing, adminisration and
`research coss 40 basis points lower as a percentage of adjused net
`revenue on an organic basis.
`This refects the ongoing digitalization and simplifcation of our business
`processes, including our IQOS commercial engine and more efcient ways
`of working, partly ofset by increased commercial invesments in Q3. With
`SG&A saving of more than $200 million, before infation and reinvesment,
`this means we have generated over $650 million in overall gross efciencies
`year-to-date. This is srong progress toward the combined target of $2
`billion for 2021, 2023.
`Moving to market share, sequential gains for both our IQOS and
`combusible portfolios give us srong momentum going into Q4 and next
`year despite an approximate 0.3 points year-over-year drag in Q3 from
`market mix. Importantly, we expect further improvements in the fourth
`quarter for HTUs with record shares across key IQOS geographies. For
`combusibles, the improving total market volume backdrop includes
`notable recovery in Indonesia, Turkey and Mexico, and close to sable Q3
`indusry volumes in the EU Region.
`Our share of the combusible category has srongly recovered on a
`sequential basis, moving us one sep closer to our target of sable share, as
`our portfolio initiatives bear fruit and pandemic-linked resrictions recede in
`many markets. In South & Southeas Asia, renewed COVID-linked measures
`have somewhat dampened the recovery, though indusry volumes have
`nonetheless improved sequentially in Indonesia and in the Philippines
`where the year-over-year trend is impacted by a challenging prior year
`comparison. Our share in the region grew sequentially, albeit less than
`expected, primarily given pandemic related developments in the
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`Philip Morris International inc (PM) Q3 2021 Earnings Call Transcript | The Motley Fool
`Case 1:20-cv-00393-LO-TCB Document 836-5 Filed 01/21/22 Page 8 of 28 PageID# 22439
`Philippines.
`Let's now turn to the tightness in device supply due to the global
`semiconductor shortage. As we communicated in September, with demand
`continuing to grow, this has already afected the availability and assortment
`of IQOS devices in certain markets in Q3, which impacts our ability to run at
`full commercial and competitive capacity, and fulfl consumer demand.
`Device shipments outside Japan were limited to a 7% year-over-year
`increase, signifcantly below the growth in HTUs.
`This resulted in slower user growth of several hundred thousand in the
`quarter, notably in Russia given limitations on the IQOS 2.4 Plus device, as
`fagged in recent communications. At this sage semiconductor supply
`forecasing remains volatile, so we assume the tight supply situation will
`persis into the frs half of 2022. We will continue to carefully prioritize
`necessary device replacement for exising users, followed by device sales
`targeted at acquisition.
`The successful sart of IQOS ILUMA in Japan confrms it will be a signifcant
`driver of acquisition and retention. Nonetheless, at the beginning it
`triggered signifcant upgrade from the exising large IQOS user base, many
`of whom don't really need to replace their devices. This is a highly desired
`consumer behavior in normal supply circumsances, but increases
`consraints in a shortage. Therefore, we now assume that additional major
`launches will only take place in the second half of next year.
`Given this evolving situation, we have continued important commercial
`invesment in key area. These include portfolio expansion and product
`launches such as IQOS ILUMA in Japan and IQOS VEEV, smoke-free
`category undersanding and awareness campaign and a number of
`commercial development projects. Including the invesments already made
`in Q3, we anticipate around $300 million of incremental H2 spending
`compared to the frs half.
`Overall, this is a temporary phenomenon and with demand remaining
`srong, we expect user growth to reaccelerate once shortages ease. We
`have a pipeline of exciting innovations on devices and consumable,
`including but not exclusive to ILUMA, and a number of new market entries
`planned. However, there are short-term shortage scenarios under which
`the transitory supply impact on user growth could result in 2022 organic
`growth below our 2021, 2023 targeted average rates for net revenues, OI
`margin expansion and adjused diluted EPS. Nonetheless, with a srong 2021
`as a base and a robus reacceleration pos-shortage, we confrm our
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`Philip Morris International inc (PM) Q3 2021 Earnings Call Transcript | The Motley Fool
`Case 1:20-cv-00393-LO-TCB Document 836-5 Filed 01/21/22 Page 9 of 28 PageID# 22440
`confdence in our 2021, 2023 growth targets.
`Moving now to IQOS performance. We esimate there were 20.4 million
`IQOS users as of September 30th, excluding the impact of international
`sanction in Belarus, this refects growth of around 0.4 million users in the
`quarter, with the rate of growth subdued by the tightness of device supply
`and the time needed to adjus our commercial programs. As demonsrated
`again by the ILUMA launch in Japan, the underlying momentum of the
`IQOS brand remain srong. Following adjusment of our program and
`assortment, we expect Q4 user growth to improve by a few hundred
`thousand compared to the growth seen in Q3. The reduced user growth for
`the second half should therefore be broadly consisent with the potential 2
`to 3 billion HTU impact fagged in recent communication. We esimate that
`73% of total users or 14.9 million adult smokers have switched to IQOS and
`sopped smoking, with the balance in various sages of conversion. The user
`growth again refect acquisition across key IQOS geographies despite
`device consraints.
`In the EU Region, third-quarter share for HEETS reached 5.3% of total
`cigarette and HTU indusry volume, plus 1.4 points higher than Q3 las year.
`As mentioned las quarter, we expected sequential share for HTUs to be
`broadly sable due to the efect of seasonality and pandemic-related
`fuctuation on the combusible market. Underlying IMS growth trends
`remain excellent, and as in the prior year, we expect a srong Q4 in both
`volume and market share terms. This very good performance include
`srong growth across the region, with Italy, Germany and Poland as notable
`contributors.
`Robus performance continued in Russia, with our Q3 HTU share up by plus
`1.1 points to reach 6.9%. While lower than Q2, notably due to the
`seasonality of the combusible market, we expect further sequential growth
`in IMS to deliver a srong quarterly share increase in Q4, as in the prior
`year. We had the larges limitation on lower-priced devices and related
`commercial programs in Russia and we have seen some increased
`consumer trial of discounted competitor ofering and disposable e-vapor
`product. However, we continue to see high interes in the category and with
`both our exising price-tiered portfolio and future innovations supporting
`our clear category leadership, we see ample room for further srong growth
`over time.
`There is also broad HTU growth across the Easern Europe region, with
`Ukraine, Kazakhsan and South-Eas Europe contributing. This slide shows
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`Philip Morris International inc (PM) Q3 2021 Earnings Call Transcript | The Motley Fool
`Case 1:20-cv-00393-LO-TCB Document 836-5 Filed 01/21/22 Page 10 of 28 PageID# 22441
`the positive overall regional growth trend in adjused IMS, albeit somewhat
`dampened on a sequential basis by the halting of shipments to Belarus due
`to international sanction, and timing factor in Kazakhsan. In Japan, the
`adjused total tobacco share for our HTU brands increased by plus 2.0
`points versus the prior year quarter to 20.8% and adjused IMS grew
`sequentially to reach a record high of 8.2 billion units, refecting the
`srength of our portfolio and the launch of IQOS ILUMA.
`Adjused sequential share fell by 0.2 points sequentially, refecting volatility
`in the total market ahead of the October 1s excise increase in addition to
`normal seasonality. While consumer pantry loading efects may weigh on
`Q4 IMS, we expect further robus underlying growth in volume and a nice
`sequential improvement in market share. The overall heated tobacco
`category continues to grow, making up almos 30% of the adjused total
`Japanese tobacco market in Q3, with IQOS maintaining a high share of
`segment and capturing the majority of the category's growth.
`In addition to srong growth in exising markets, we continue to drive the
`geographic expansion of our smoke-free product as we aim to be in 100
`markets by 2025. During the quarter, we launched IQOS in Egypt, the frs
`market in North Africa, and reached an oftake exit share of 2% in Urban
`Cairo. We also now add Norway and Iceland, where our recent acquisition
`of AG Snus gives us a presence in the snus and nicotine pouch category.
`This takes the total number of markets where PMI smoke-free products are
`available for sale to 70, of which 28 are in low and middle income market,
`which we are introducing as a more robus measure of making smoke-free
`products available to adult smokers in emerging countries. Again, we may
`have some delays in this market expansion program in the frs half of 2022.
`Given our smoke-free leadership and global reach, let me pause and share
`a few words regarding the srength of our intellectual property. Across all
`our smoke-free products, we have srong patents and have been the clear
`leading innovator in the heated tobacco category over recent years,
`invesing billions of dollars in the process. Despite attempts to disrupt our
`business through litigation by a competitor who lags behind on R&D and
`innovation, we have been universally successful in defending our product
`agains IP challenges in all eleven rulings outside of the U.S, including in the
`U.K. high court and at the European Patent ofce.
`The U.S. ITC is a federal agency, which among other things, deals with
`imports claimed to injure a domesic indusry or violate U.S. intellectual
`property rights. We also note the two patents mentioned in the ITC Final
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`Philip Morris International inc (PM) Q3 2021 Earnings Call Transcript | The Motley Fool
`Case 1:20-cv-00393-LO-TCB Document 836-5 Filed 01/21/22 Page 11 of 28 PageID# 22442
`Determination were both drafted after IQOS had been launched. The FDA
`fulflling the exclusive public interes mandate given to it by Congress for
`tobacco product, has already found that IQOS is appropriate for the
`promotion of public health and expected to beneft the health of the
`population as a whole. We are hopeful in the current Presidential Review
`Period that the U.S. Trade representative will consider the impact on current
`American IQOS users, and the many more that would be denied access.
`In the scenario, where the ITC determination is upheld, while the fnancial
`impact of the scenario is immaterial, given the early sage of the U.S. IQOS
`roll-out, this would unfortunately mean that U.S. consumer would be
`unable to buy IQOS for a period of time. Meanwhile, our contingency plans
`are underway and include domesic manufacturing. The U.S. Patent ofce is
`also reviewing certain claim of the patents in quesion with initial ruling
`expected in 2022, albeit subject to an appeal process.
`While the ITC ruling may cause near-term disruption to the U.S. availability
`of IQOS, we continue to see a large opportunity for IQOS in the United
`States over the coming years. The global IQOS innovation sory took a
`hisoric sep forward in Augus with the launch of two ILUMA devices and a
`range of TEREA HTUs in Japan. Building on the success of IQOS 3 DUO, we
`believe this simple and intuitive device will support easier switching and
`higher conversion for legal-age smoker, using Smartcore internal induction-
`heating technology.
`While sill early days with the national roll-out taking place at the sart of
`September, initial results were outsanding, with device sales well ahead of
`all comparable pas launches at the same sage, despite some limitation on
`device availability, and the proportion of new users growing to 18%. TEREA
`purchases are growing rapidly, exiting the quarter at over 10% of total PMI
`HTU oftake volume. Consumer feedback has also been very positive with
`mid-teens increases in the Net Promoter Score (NPS). Following this
`success, we plan to launch in our second market of Switzerland next month
`and look forward to additional major launches in 2022 when circumsances
`allow.
`We continue to commercialize IQOS VEEV with good progress in the frs
`group of market, where we sarted in our own channels with a limited range
`of tase variants and nicotine levels. IQOS VEEV is a premium product
`providing a superior experience and the commercial infrasructure of IQOS
`allows us to deploy efciently and at scale through a bespoke route-to-
`market approach. As we sart to expand disribution and the consumable
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`Philip Morris International inc (PM) Q3 2021 Earnings Call Transcript | The Motley Fool
`Case 1:20-cv-00393-LO-TCB Document 836-5 Filed 01/21/22 Page 12 of 28 PageID# 22443
`ofering, we see sign of increased uptake and clear positive consumer
`feedback relative to competitive product.
`We see encouraging early success in Italy where VEEV reached an
`esimated 7% national exit volume oftake share of closed sysem pods,
`despite not yet being available nationally. And in the Czech Republic with
`an esimated 8% national volume oftake exit share. We also launched in
`Croatia in Q3, Canada in October, and plan to launch in Ukraine before
`year-end. We also continue preparations to apply for a PMTA from the U.S.
`FDA in the second half of 2022.
`Turning now to our srategy to move into new business areas beyond
`tobacco and nicotine, which focuses on leveraging and complimenting our
`exising capabilities in the healthcare and wellness space. We see signifcant
`opportunity in adjacent area, with our two focus corridors of selfcare
`wellness including botanicals and inhaled therapeutics expected to have an
`addressable market of around $65 billion by 2025. The acquisitions of Fertin
`Pharma, Otitopic and Vectura enable us to more rapidly expand our
`development capabilities with over 250 scientiss, infrasructure, technology
`and expertise in innovative inhaled and oral product formulations, while
`continuing to grow CDMO activities.
`As shown on this slide, this opens up a number of highly complementary
`opportunities and new focus areas. This acquisition will fully leverage PMI's
`exising capability in life sciences, product innovation, and clinical expertise
`related to inhalation. We look forward to updating you more in the future
`on our plans and progress in these exciting new areas.
`Moving to susainability and our ESG priorities, we continue to make good
`progress toward our purpose through advancing our transformation and
`addressing our mos material impact on society. We broaden access to our
`smoke-free product by increasing the availability to adult smoker around
`the world with new product launches across a growing range of market and
`smoke-free categories. In addition, our recent acquisition build our human,
`intellectual and social capital, adding smoke-free capabilities and laying the
`foundation for a srong business in areas beyond tobacco and nicotine as
`we srive to develop commercially successful product that seek to have a
`net positive impact on society.
`I am proud to highlight the recent publication of our Business
`Transformation Linked Financing Framework and subsequent refnancing of
`our Revolving Credit Facility. The Framework, which follows ICMA principle
`and received a Second-Party Opinion from S&P, links our fnancing to
`
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`Case 1:20-cv-00393-LO-TCB Document 836-5 Filed 01/21/22 Page 13 of 28 PageID# 22444
`material susainability targets in our transformation. Las, we remain on track
`to achieve carbon neutrality of our direct operation by 2025, fve years
`ahead of our 2030 target. In addition, with the United Nations Climate
`Change conference approaching, we plan to publish a robus Low Carbon
`Transition Plan and a white paper on climate jusice which highlights the
`connectivity between Environmental and Social issues.
`Overall, we are on track for excellent top and bottom line growth
`performance in 2021, with srong underlying momentum for IQOS and
`robus cash generation. We are invesing in the broadening of our smoke-
`free product portfolio and geographic reach. This is critical as we seek to
`accelerate the number of adult smokers who switch to better alternative,
`with a growing positive impact on society.
`In addition, we are invesing in the capabilities of tomorrow, as illusrated by
`our three recently announced acquisitions, which provide a comprehensive
`development platform in selfcare wellness and inhaled therapeutics and
`srengthen our position in modern oral nicotine. We have increased cash
`returns to shareholders in Q3 through a higher dividend and our share
`repurchase program, in line with our objectives to deliver susainable value
`and return to invesors as we continue our journey toward becoming a
`majority smoke-free company.
`For 2022, we have a pipeline of exciting innovations for both devices and
`consumable and we expect IQOS user growth to reaccelerate when device
`shortages ease. We continue to see a srong future for our business and
`remain confdent in our 2021, 2023 organic growth targets.
`Thank you very much and I am now happy to answer your quesions.
`Quesions and Answers:
`Operator
`Thank you. We will now conduct a quesion-and-answers portion of the
`conference. [Operator Insructions] And we will take our frs quesion from
`Gaurav Jain from Barclays.
`Gaurav Jain -- Barclays -- Analys
`Hi, good morning. Thank you for taking my quesions. Sir, my quesion is...
`Emmanuel Babeau -- Chief Financial Ofcer
`Good morning, Gaurav.
`Gaurav Jain -- Barclays -- Analys
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`Case 1:20-cv-00393-LO-TCB Document 836-5 Filed 01/21/22 Page 14 of 28 PageID# 22445
`Hi, Emmanuel, sir. My frs quesion is on the 2022 sort of comments around
`growth rate being lower than the range you have given for 2021 to '23
`because of the issues around device supply. Now, if device supply is lower
`and you're IQOS acquisition is lower then doesn't it imply that your
`commercial invesments are also lower and so it should be benefcial to
`your EPS? Or is that a cor