[Audio Gap] a strong start to the year with outstanding growth from our international smoke-free business and very robust pricing driving impressive progress despite a particularly strong prior year comparison for both the U.S. and combustibles. Income growth exceeded our expectations driving plus 10% adjusted OI growth and plus 16% adjusted diluted earnings per share growth to reach $1.96 International smoke-free delivered a striking performance with double-digit volume growth, mid-teens organic top line progression and high teens organic gross profit growth or almost plus 30% in in dollar terms. This was led by IQOS with close to plus 11% adjusted in-market sales growth alongside further multi-category accretion from ZYN [indiscernible] which reached the estimated joint #1 [indiscernible] position in Europe based on Nielsen of [indiscernible].

The financial performance of our combustible business was robust, delivering results in line with our midterm model with low single-digit organic top line growth and low to mid-single-digit organic gross profit growth. This was especially remarkable considering cigarette volume declines were at the more negative end of our expectations following a prior year period of volume growth due to a number of temporary factors. This reflects the enduring pricing power of our portfolio led by Marlboro alongside efficient cost management.

In the U.S., ZYN offtake volumes grew by plus 10% despite an even competitive landscape. As anticipated, segment financial performance was challenging due to the specific combination of impact this quarter, including increased investment and the comparison to Q1 2025 which had close to no price promotion and significant in inventory rebuild as we exited supply constraints. As we flagged last quarter, there was also a channel inventory overhang at the end of 2025, which largely normalized in Q1 and thus impacted shipments.

We continue to invest for future growth and expect U.S. performance to progressively improve over the course of 2026 as we prepare to launch ZYN Innovations and comparison normalize, notably in the second half. Overall, while the global economic outlook is uncertain, our strong financial performance in Q1 underscores our momentum and gives us confidence in delivering another year of best-in-class growth. Let's discuss our Q1 results in more detail, starting with the headline financials.

We delivered over $10 billion in net revenues, representing a plus 9% increase in reported terms and plus 2.7% organically surpassing our expectations for a broadly flat delivery. The strong performance in category portfolio more than offset the Q1 specific combination of U.S. and combustible headwinds I just mentioned. Adjusted gross profit grew by plus 10% to $6.9 billion, reflecting plus 3.8% organic growth and plus 70 basis points of organic gross margin expansion.

We achieved this through strong pricing, operating leverage and the continued benefit of smoke-free mix, partly offset by the anticipated U.S. impact driven by the same factors and partly offset by increased growth reinvestment, adjusted operating income also exceeded our forecast, growing plus 10% to $4.2 billion with close to plus 1% organic growth. Adjusted diluted earnings per share grew by an impressive plus 16% to $1.96, including an $0.18 currency tailwind supported by positive Q1 transactional impact in addition to the generally weaker U.S. dollar. Our effective tax rate was also slightly better than expected and more favorable in this quarter compared to the forecast full year rate.

Our international business delivered an outstanding quarter with both gross profit and OCI growing by around plus 10% organically and around plus 16% in dollar term. This was achieved even as we invested strongly behind our smoke-free portfolio. The excellent organic performance of smoke-free was the clear standout with plus 11.9% volume growth plus 15.8% net revenue growth and plus 19.4% gross profit growth, driving gross margin expansion of 210 basis points to 70%.

This was primarily driven by the continued broadband momentum of IQOS in addition to increasing contribution from ZYN and VEEV. Looking at PMI as a whole, our global smoke-free business delivered very solid organic net revenue growth of plus 5.3% and organic gross profit growth of plus 3.9% and despite the dynamic in the U.S. We continue to expect strong global smoke free growth for the full year, supported by high single-digit volume progression and normalizing U.S. comparison.

In international combustible, while volumes declined by 5.1%, organic net revenues grew by plus 1% and gross profit increased by plus 3.9% and with strong pricing and effective cost management outweighing volume mix headwinds. Gross margins expanded organically by 190 basis points, underscoring the resilience of this business. Turning now to volumes, where total shipments declined by 1.9% as compared to our broadly stable forecast for the full year.

Smoke-free shipments increased by a very good plus 9.1% versus prior year, in line with our full year target of high single-digit growth. This was primarily driven by plus 11% growth in HTU to 41.3 billion units, including a modest net phasing benefit of around 0.5 billion units across several markets. In addition, the stellar plus 95% growth of e-vapor largely offset a decline in oral smoke-free volume of 16%, notably reflecting the U.S. shipment and inventory headwinds previously discussed and timing dynamic in the Nordics.

Total smoke-free product in-market sales volume increased by plus 11%. Cigarette volumes declined at the high end of our expectation and above the international industry decline of 2.3%. This reflects a number of dynamics including the lapping of exceptional plus 1.1% volume growth in Q1 2025, which included inventory replacement in a few markets such as Indonesia, Russia, Italy and Spain. In addition, a challenging economic environment has contributed to higher level of illicit consumption in certain markets, while excise increases in country, most notably Mexico in January, drove a significant industry decline.

Looking ahead, we expect volume declines to moderate over the coming quarters, and we continue to forecast a cigarette volume decline of around 3% for the full year. This includes a negative industry impact in India following the introduction of new excise rates in Q1. Looking at our Q1 top line drivers, strong pricing and the positive mix impact from intentional smoke-free more than offset the negative volume and mix dynamics from the U.S. and combustible.

Pricing was the largest contributor, adding plus 5 points. This was driven by another strong quarter of combustible pricing at plus 8.5% and with international smoke repricing of plus 2.9%, led by IQOS offsetting the impact of more regular promotional activity in the U.S. compared to the very low level of Q1 2025. International smoke-free mix also made a substantial positive contribution of plus 2.7 points. This was partly offset by a 1.8 point impact from the U.S. reflecting the abnormal combination of factors outlined.

Currency added a further plus 6.4 points, resulting in reported net revenue growth of plus 9.1% for the quarter. Overall, the composition of Q1 growth closely mirror the structural driver of pricing power and smoke-free mix delivered consistently over recent years. underscoring the sustainability and consistency of our growth model. Moving now to adjusted operating income margins, which expanded by plus 40 basis points to reach over 41%.

This notably includes a positive currency impact, which enabled us to increase margin despite additional reinvestment in future growth as well as unfavorable timing and comparison effect. Gross margin expansion contributed plus 70 basis points, driven by the factors mentioned earlier, while only a small impact from disruption and cost increases related to the conflict in the Middle East. With regard to SG&A, as planned, we continue to invest in control program, scale and innovation, both internationally and in the U.S.

While Q2 is likely to see further strong year-over-year investment, we expect this to moderate in H2 and for SG&A progression to be organically at or below the level of net revenue growth for the year. Currency provided a meaningful tailwind of plus 110 basis points, supported by a favorable comparison to transactional losses in the prior year. Overall, while this quarter had the slowest expected organic growth of the year, we continue to invest in our smoke-free portfolio supported by efficient back office and manufacturing cost management, including approximately $150 million of gross cost efficiency realized in Q1.

We remain on track for full year organic margin expansion in 2026. Turning now to our worldwide smoke-free business, we delivered IMS volume growth of around plus 11% in Q1, approximately 3 percentage points above the industry smoke-free product growth rate in market and category where PMI is present. This reflects our ability to capture over 70% of industry growth in this market as compared to our share of around 60% and driven by the strength and scale of our multi-category portfolio.

We remain focused on expanding the strengths with 3 geographies, adding another category to reach 55 multi-category markets and 2 new markets for smoke-free products in total to reach 108. This includes the launch of ZYN in Portugal and Kenya and VEEV in Egypt. Within smoke-free International, IQOS delivered another strong quarter with adjusted in-market sales growth of plus 10.9%. This reflects very good and broad-based momentum across markets and regions, including Europe and Japan.

Adjusted IMS volumes outside these 2 geographies grew by plus 19%, including dynamic growth in Korea, Malaysia, Indonesia, GCC Mexico and remarkable early results in Taiwan. At this stage, following its launch in Q4 '25, Taiwan is the most successful major IQOS launch market to date with a national exit offtake share of almost 6% in March. This represents around 70% of industry [indiscernible] volume and a near doubling of our combined Taiwanese cigarette and HTU market share in the last 6 months.

Global Travel Retail also continued to post double-digit HTU growth with only a limited impact from the Middle East. Q1 adjusted in-market sales included a consumer pantry loading benefit of approximately [ 0.5 billion ] in Japan, ahead of the April 1 excise-driven price increase. Even excluding this temporary effect, growth remained strong at plus 9.4%. Importantly, IQOS profitability continues to expand as we invest consistently behind the brand, driven by a growing contribution from pricing, continued scale benefits and productivity improvements across both consumables and device costs.

Innovation remains a key enabler of legal edge nicotine consumer acceptance and retention broadening choice across test profile and price points. During the quarter, we continued to innovate on our flagship [indiscernible] consumables in addition to excellent traction from the expansion of mainstream price DELIA and tobacco-free variant, [indiscernible]. We also continue to make progress on the rollout of our alternative it not burn technology bonds by IQOS following promising results from initial key city launches in Italy, we commenced a national rollout during the quarter.

A significant proportion of consumers are entrenched traditional cigarette consumers fully line with our mission to provide better alternative, which appeal to all courts of adult smokers. The strength of IQOS continues to be illustrated by sustained offtake share gains across key cities, which act as a lead indicator for national success. This includes impressive Q1 milestones such as Tokyo surpassing 40% share for the first time Global Travel Retail at over 20%, Munich exceeding 16% and Madrid over 10%.

Coming back to Taiwan. A particular highlight was Taipei, where IQOS share reached over 7% in its second quarter post launch and exited in March at close to 8%. You will find additional market and SSP volume data in the appendix to these slides. While IQOS is a core engine of our international smoke-free business, ZYN and VEEV strengthen and complete our multi-category strategy with excellent momentum and significant global opportunities.

ZYN continued to deliver rapid growth. Modern oral shipment volumes increased by plus 7% on a comparable basis or plus 42% excluding the more mature Nordic market. On this latter scope, where the greatest opportunity lies. We estimate offtake volumes grew by well over 50% and gaining share in a dynamic category. This notably includes strong results in markets such as the U.K., Pakistan, Poland and Mexico. Volumes declined in the Nordics, primarily due to timing dynamics.

We continue to expand our portfolio to better meet the needs of legal aged smokers looking to switch by offering a broad spectrum of adult appropriate flavor and strength. This includes the rollout of our lower strength offering the XO 1.5 milligrams across a large majority of our 58 international ZYN markets, driving a significant improvement in first experienced nicotine acceptance among adult nicotine consumers. In e-vapor, VEEV continued its remarkable momentum in the quarter reinforcing its position as the fastest-growing international [indiscernible] brand among major players.

I am pleased to share that VEEV became the joint #1 close pot brand in Europe in Q4 '25, as estimated by Nielsen [indiscernible] across 19 markets, surpassing long-established players. Quarterly shipments exceeded 1 billion equivalent unit for the first time and IMS volumes almost doubled, driven by impressive growth in Italy Romania, Germany, the U.K., France, Spain and Indonesia. With an expanding footprint across 49 markets, this rapid volume growth and improving positive margin profile demonstrate its growing value within our multi-category portfolio.

This is especially clear in Europe where VEEV was an important contributor in delivering plus 12% shipment volume growth for IQOS, ZYN and VEEV in the quarter, more than offsetting the ZYN dynamic in the Nordics I covered earlier with plus 31% in growth elsewhere. IQOS adjusted IMS volume increased by plus 5.4% with a very good performance across the region, despite ongoing disruption in Ukraine and the initial impact from the implementation of the EU characterizing flavor ban in Poland. Excluding markets where the bank took CapEx in January 2025 such as Poland and Hungary.

Adjusted IMS volumes grew by around plus 8% as the brand's powerful momentum continues. Double-digit growth continued in Italy after annualizing the flavor ban, which came into effect in mid-2024. Other notable markets delivering strong growth include Spain, Germany, Greece, Romania, Serbia, Bulgaria and the Netherlands. We expect further good growth from IQOS in Europe in the remainder of the year. In Japan, the heat-not-burn category continued to grow strongly, reaching around 53% of total industry offtake volume in Q1.

IQOS adjusted IMS volumes grew plus 10.4% or around plus 6% excluding consumer pantry loading. This robust level of growth demonstrates the ongoing momentum behind the brand which delivered an impressive increase in adjusted market share to reach a record 34.9%. While competitive intensity in the category remains high, IQOS returned close to 70% of industry heat-not-burn volumes, reflecting the strength of the combined proposition of product, brand and commercial reach.

In shipment terms, Japan HTUs increased only slightly compared to the prior year period, which included a timing benefit of around 1 billion units. As we mentioned last quarter, volatility between shipment and adjusted IMS is possible over the year due to the excise changes in April and October. Indeed, we expect Q2 adjusted IMS growth to reflect the reversal of consumer pantry loading and the price increases, which took effect on April 1.

While too early to comment on the initial consumer reaction we remain confident in the growth of IQOS and the wider category in Japan over the coming years. Moving to the U.S. ZYN continues to lead the nicotine pouch category, delivering offtake growth of plus 10% in Q1, as estimated by Nielsen. This performance comes despite the competitive landscape where our portfolio does not yet address all of the most dynamic strength and flavor segments.

While offtake volume increased, Q1 shipment declined to 155 million can, reflecting the inventory dynamic explained last quarter, which I will now briefly recap. With around 40 million cans of inventory rebuild in Q1 '25, the underlying shipment base linked to consumer offtake was around 160 million can. Therefore, the underlying volume for this quarter were around 10% higher at approximately 175 million cans. As flagged at our full year results in February, we estimated around 25 million cans of surplus inventory in the downstream supply chain at the end of 2025.

As anticipated, this was largely normalized in the first quarter of 2026, resulting in lower shipment volumes compared to consumer offtake. While some quarterly shipment volatility is to be expected in any market, our base expectation is that ZYN shipments should broadly track offtake growth in future quarter against the estimated underlying 2025 basis provided in February of approximately 180 million can in Q2, 205 million cans and 200 million cans in Q4. More important than inventory movements, however, is the trajectory of offtake growth for both ZYN and the category.

To that end, alongside brand building and commercial execution, we are sharply focused on innovating and we are preparing our manufacturing and commercial operation for new product launches in the coming months. This is further investment in our U.S. manufacturing footprint with our Aurora facility progressively increasing initial operations. This brings me to our key areas of focus to drive growth and value from the leadership of this promising category.

First, we continue to invest in the ZYN brand and in the long-term growth of our U.S. business. This includes marketing, distribution and commercial activation as well as regular promotional activities which were unusually low in H1 '25. Second, we continue to navigate a complex and dynamic regulatory environment which impacts timely innovation and the switching of legal smoker to better alternative. It is clear from the science that nicotine pouches are a much better choice for those legal edge consumer we would otherwise smoke.

We also note the recently published data from the National Youth Tobacco Survey showing that underage usage of the category remained stable or slightly declining at low levels below 2% despite the strong growth of the category. The authorization of [indiscernible] via the FDA's nicotine pouch pilot program remains a priority. Our application remains under active scientific review. And we have a continued dialogue with the FDA as part of this process.

The FDA's intent for the pilot program is to increase efficiency and streamline the review process. And while it has taken longer than targeted. The science supporting our application is robust, and we are optimistic that we will be able to launch this product to consumers in the coming months. In addition, we have made a number of ZYN submission to the FDA that are at various stages of the regulatory process, and we are preparing to bring further innovation to market also in the coming months.

With regards to IQOS, we are pleased that the FDA has now reauthorized the previous version as a modified risk tobacco product. We continue to engage with the FDA with respect to the authorization of IQOS ILUMA to enable American smokers to access the world's biggest and most successful smoke-free product in achieving full switching away from cigarettes. Overall, we look forward with confidence to the future growth of our U.S. business.

Finally, moving to combustible, which once again demonstrated the resilience of our net revenue and gross profit growth model despite significant Q1 specific volume headwind which we expect to substantially ease in the balance of the year. Very strong pricing of plus 8.5% was the key driver with notable contribution from Turkey, Indonesia and Mexico. While we expect some moderation notably in the second half of the year due to timing and comparison effect, we now forecast a full year variance of more than 6%.

International combustible gross profit grew by plus 3.9% organically and plus 9.8% in dollar terms, despite strong performance in the prior year, passing us nicely on track for another year of robust delivery. Our cigarette category share declined 0.6 points to 24.8%. A strong performance in Egypt was offset by market mix and declines in Indonesia and Russia, largely reflecting pricing dynamic as well as the ongoing share recovery in Turkey.

Marlboro once again underscore the strength of its premium brand equity, reaching a record first quarter share of 10.7%, an increase of plus 0.4 points year-on-year. Our objective remains to maintain broadly stable category share over time with a clear focus on maximizing value through top and bottom line growth, while actively supporting the continued growth of smoke-free products. This brings me to our outlook for 2026.

The Middle East conflict had a small impact on our business in the first quarter, which affected shipment to global travel retail and certain markets in the region for both combustible and HTUs. While we have observed increased energy prices and some disruption in energy supply in a number of markets, this has not, at this stage, translated into a discernible shift in consumer behavior. The situation remains uncertain in both duration and potential impact, and it is difficult to assess the broader implication for the consumer or the global cost environment.

We have factored in some increases in transport, energy and other input costs. And we will continue to closely monitor development to assess the mid- to long-term impact across the main variables. Acknowledging this uncertainty and following a good start to the year in Q1, we are reconfirming the currency-neutral growth outlook we provided in February. We continue to expect broadly stable shipment volumes, organic net revenue growth of plus 5% to plus 7%.

And organic operating income growth of plus 7% to plus 9% and currency-neutral adjusted diluted earnings per share growth of plus 7.5% to plus 9.5%. While exchange rates are volatile at present, we now forecast a currency tailwind of $0.25 at prevailing rates. This result in an updated adjusted diluted EPS forecast of $8.36 to $8.51 or plus 10.9% to 12.9% growth in dollar terms. For the second quarter, we expect continued strong performance from our international business and a sequential improvement in growth with HTU shipment volume of 40 billion to 42 billion slower HTU adjusted IMS growth due to the short-term impact of excise-driven pricing in Japan and a low single-digit cigarette shipment volume decline.

We expect mid-single-digit organic net revenue growth and solid operating income progression despite another quarter of strong commercial investment. We forecast adjusted diluted EPS of $2.02 to $2.07, including a higher effective tax rate and a favorable currency variance of $0.02 at prevailing rates. This quarter also coincides with the publication of our value report 2025 which provides a comprehensive financial and nonfinancial overview of our strategy, governance and priorities for sustainable long-term value creation.

Following the completion of our 2025 road map, we highlight the progress made over the past 5 years across our most material sustainability priorities. Key achievements include the continued expansion of our smoke-free business, further strengthening underage access prevention in indirect retail, carbon neutrality in our direct operation eliminating systemic child labor from our tobacco supply chain and advancing effective anti littering initiatives. We also introduced our value plan 2030 a focus, business-driven framework across 6 priorities: Consumer, circularity, our workforce, workers in our value chain, climate and nature.

As outlined in the report, our approach to sustainable value is fully integrated with our business strategy, supporting the growth of our more transformation and reinforcing long-term resilience competitiveness and value creation. I would strongly encourage who's interested in how we are executing our transformation to review the report. I will conclude today's presentation with a few key takeaways. Our strong and resilient first quarter performance reflect the structural growth fundamentals of our business model.

Our results continue to be underpinned by 3 powerful drivers: Strong pricing, favorable mix from the ongoing shift to smoke-free product and volume growth led by IQOS, ZYN and VEEV. While we continue to invest in future growth, these drivers are profit accretive and together with pricing power and cost management, reinforce our confidence in our midterm growth targets. While the operating environment remains complex marked by macroeconomic uncertainty, we believe we are well positioned to navigate external headwinds.

Our smoke-free transformation continues to gain momentum, supported by remarkable cash generation and a strong balance sheet. Finally, we remain firmly committed to our progressive dividend policy and to returning value to shareholders as our transformation delivers sustainable long-term growth. We look ahead to the remainder of 2026 with confidence. Thank you, and we are now very happy to answer your questions.

[Operator Instructions] Our first question will come from the line of Eric Serotta from Morgan Stanley.

Next question will come from the line of Bonnie Herzog from Goldman Sachs.

Our next question will come from the line of Pallav Mittal from Barclays.

[Operator Instructions] Our next question will come from the line of Andrei Andon from Jefferies.

And our next question will come from the line of Matt Smith from Stifel.

And our next question will come from the line of [indiscernible] from UBS.

And our last question for today will come from the line of Gerald Pascarelli from Needham.

Gerald, I mean, as I explained, we see a number of ion nicotine content product and more flavor and notably fruit flavor being more dynamic part in the market today. And that's where you have the biggest dynamism. And 1 of the problem is that within, we don't have anything above 6 milligrams, and we have a limitation in terms of favors. So that could be -- again, I'm not going to say that I have any kind of [indiscernible] study to support that.

But the higher nicotine strength development could be people who are trading up a little bit from a lower nicotine content. And as they evolve in their consumption well, they may explore new flavors and that could be behind the new flavors, fruit-type development, and they may also go for higher nicotine content. Again, I'm not saying I have anything that is clearly supporting that. but that could be an intrusion or a speculation we could make. And I would now like to turn it back over to management for closing remarks.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.