Philip Morris International Inc. (PM) Earnings Call Transcript & Summary

Good morning, everybody. My name is Gerry Gallagher. I'm a member of Deutsche Bank's European Consumer Staples team. And by function of that, a member of Deutsche Bank's Global Consumer Staples team. It's my very great pleasure to introduce you today to our 19th global Annual Consumer Conference. It's the first time we've been back in Paris for 3 years, and it's very great to be back here. To give you some context around the event. We've got close to 100 corporates attending either presenting and/or giving one-on-one meetings with investors. And in total, we have over 750 attendees at the conference over the next 3 days. So as you can see from those numbers, it continues to be one-off, if not the preeminent investor conference in terms of consumer staples. With that introduction, it's my very great pleasure to introduce you to Emmanuel Babeau, Chief Financial Officer of Philip Morris International. The format of our session this morning will be Emmanuel is going to introduce Philip Morris International, with some opening remarks over 5 minutes or so. We'll then bring it back to me for some Q&A in a fireside chat format. And at some point, through the presentation, I will open up to you guys in the audience for some questions, please don't be shy and ask any questions you may have, and we are scheduled to finish around 9:10 a.m. local time. So with that, over to Emmanuel.

Thank you, Gerry. Good morning, everybody. First of all, thank you for starting the day with Philip Morris International. It's great to be back in Paris. Of course, and it's not just because I'm a friend that I'm saying that, but it's really great to be together again and be able to meet face to face. I'm going to start with a few introductory comments. But first of all, bring your attention on the cautionary and forward-looking statements, please read them carefully. So just a few thoughts I wanted to share with you, we started the year on a strong note you've seen our Q1 were on a pro forma basis, you know that we define pro forma as a group, excluding Russia and Ukraine, where for this reason, it's more difficult in the current circumstances to give guidance and visibility. So we started Q1 with a strong growth in terms of volume, almost 5% up in terms of shipment, quite an impressive growth when you compare to the performance of the industry as a whole. We managed to generate revenue growth on an organic basis of 10%. So here again, very dynamic growth in Q1. And we had an adjusted EPS growing organically again, on a pro forma basis at 16%, 1-6 percent. So super dynamic business at the beginning of the year. And what is driving the strength of the company on this first month of 2022 is, first of all, of course, the continuation of the success of IQOS. IQOS is growing and progressing extremely well here in Europe. We see the brand doing very well in a number of countries. You have this accumulation of a big European capital now where the brand has a double-digit market share. Sometimes we are even north of 20%. So we continue with our course to be very successful in Europe. And of course, on top of that, we have been launching IQOS ILUMA that in Japan has been a great success. We've seen the market share growth accelerating in Japan. We've seen an improvement of the Net Promoter Score. So the customer being more satisfied with the new version of IQOS, which bodes very well for the overall potential of IQOS ILUMA across the geographies. We've seen the user acquisition for smokers, improving. We've seen the retention improving as well. So we see really we can assess the potential of ILUMA and that bodes, as I said, extremely well for the future. What we've seen with ILUMA in Japan has been seen in the 2 other markets in Europe where we've been launching. First of all, in Switzerland, where we've seen a dramatic acceleration of the market share for IQOS since the launch of ILUMA. We are getting close to doubling the market share, so quite impressive. And even in Spain, which has been a market where we have had some more difficulty to increase the market share of IQOS, we've seen notably in Madrid, for instance, some very nice movement upward. So that's the success of IQOS. And of course, that remains the big driver of the company. It was good to see as well in the first month of the year that our combustible business has been performing well and in line with our target, which is to maintain the share of the category for us, which is not that easy because, of course, there is cannibalization coming from IQOS. When we grow IQOS, we are growing premium brand, and therefore, there is more impact on the premium combustible brand where Marlboro is, of course, the leader. But we were -- and even a bit better than that, maintaining our share of segment in the first month of 2022. Now we signaled that Q2 would be impacted by a number of one-offs. First of all, of course, all the negative impact coming from the dramatic event and war in Ukraine, a lot of disruption in the supply chain. And that is leading us to reorganize and rearrange a number of flows with translation with some shipments, notably for heated tobacco unit being moved to the [ H2 ] for Japan, and with a significant impact on the mix as well because they are profitable, of course, volumes, and a number of reorganization that was having a material negative impact on the revenue. We also have been signaling that Q2 would be impacting by some impact on the margin. The mix is going to be negative with a lot of sale for devices. We continue to catch up after the low point of the [ H2 ] sale of device. There is also all the investment that we are making on the supply chain to try to adjust to the new situation. There is all the commercial investment that we are making in order to cope with the war that we are facing and to maximize the growth potential. And there is, of course, all the impact coming from inflation, which is impacting us, of course. But in addition to that, in order to face the disruption in the supply chain there is significant spending in air freight that is going to impact Q2. Having said that, we expect Q2 to be probably better than what we thought with a very robust, strong underlying business continuing, core business doing well, and probably some shipment of combustible cigarettes that are going to be eventually happening in Q2 when maybe we were thinking that some of them could happen in Q3. So that's going to have some positive impact on the performance of Q2 versus initial expectations. Of course, the big element of this Q2 has been our announced offer with a recommendation from the Board on Swedish Match at SEK 106. And so Gerry, we're going to talk about that. So I'm going to keep that for the Q&A because there is so many interesting things to say about that. So let's keep that for the Q&A. But we continue to develop our smoke-free product. And in the last hours, we announced an agreement with a company called Kaival, which is known as the BIDI brand in the U.S. And this company is going to license their great technology for vaping disposable device. And we are going to be licensed the technology for outside the U.S. So we're going to be able in a number of markets to start selling great disposable vaping device in the coming quarters. So it just showed that we continue, as we have already, VEEV, as you know, now that we're going to have this brand, VEEBA, for disposable device. We continue to complement our portfolio, and to broaden our offer. We've been providing even more data on our ESG KPI protocol. So how do we assess our impact and what are the key data that we are looking on. We strongly believe that when you report about sustainability and to avoid any kind of long or -- I would say, an accurate view, a lot of transparency and clarity on what is being reported? How is it measured? How is it being audited is important, and that's what we are doing. We are not providing today any update on the guidance, and we will wait for the communication of our full Q2 number to come with an update on the guidance. So that's it, Gerry, with my framing comment, but I'm sure we're going to elaborate on middle of that.

Thank you, Emmanuel. Thank you very much. So I'm going to start with -- again to trend for me anyway, at least with the very, very short term. So given the comments you've made this morning ahead of today's event, could you just give us a little bit of clarity around the -- what's driving the slightly better second quarter? To what extent is it the shipments? To what extent is it the underlying business? Can you just give us a little bit more color around the second quarter?

Well, I'm going to try, but of course, I won't enter into the detail. We need to finish the Q2 to see exactly how it ends up. I think the first message is that we see the business continuing to perform well, okay? And that's, of course, very good news. We see confirmation of the strength of IQOS, and all the good things that we've been saying. We see the continuation of a robust performance in combustible business, which is good news because really the success in combustible is helping us to be successful in our smoke-free journey. So this is really what is in an underlying manner, I would say, strengthening. On top of that, and we say exactly -- but I don't have the final visibility, what is the kind of additional, I would say, a favorable impact coming from -- favorable timing on shipment versus expectation. But I think the first news is that the underlying business is doing well.

Okay. Great. And then just touching on VEEBA. Could you talk about -- is that going to be branded VEEBA? What's the branding going to be, confirm it's outside the U.S.? And is that you guys suggesting that the vaping market and the closed environment is going down the disposable route or the [indiscernible], can you talk about that a little bit.

Yes. Sure. No, I think -- so it's going to be VEEBA. So remember, our brand for closed system is VEEV. And of course, we know we're playing on names. So the disposable device will be called VEEBA. We're really trying to offer to smoke-free nicotine consumer, a wide variety of options. That's really what we are -- we want to do. So we have obviously with IQOS as the best product for heat-not-burn. We're going to talk about Swedish Match and the possibility that it would give us to become a leading player in oral nicotine. We want to be, of course, a strong player as well in vaping. And we see the test developing, and there is clearly a trend behind disposable device. And I think we understand that it's convenient. We understand that it's easy to use. That's certainly a category on which a lot of carefulness should be put in terms of marketing, and everything should be done to avoid unintended usage and, of course, underage usage. So I think it's a category that has a potential that should be carefully handled. And we believe, we want to do that in a very responsible manner, and I think we share the same kind of culture and vision on the responsibility that this category should be receiving. So it's not the category going to switch fully to disposable, but certainly disposable will have their fair share of the category.

Okay. Great. Thank you, Emmanuel. Right. I'm now going to move on to Swedish Match, and I'm going to ask some pretty simple questions straight off. Why now? And what is really driving the acquisition? I think the majority of people in this room, if not everybody would agree that Swedish Match is a very, very strong business run by good people. Is it about the growth it provides? Is it about diluting the combustible side of the business? Is it about the U.S. dollar? Could you talk about what [indiscernible].

Yes. So I mean, fundamentally, it's a strategic deal. And it's strategically is something I'm going to try to elaborate. But with one stone we are killing many, many strategic birds with this acquisition if we finalize it. First of all, Gerry, you were asking why now? Well, M&A is about alignment of planet. And so that was just the right moment probably where we were on our side at the point where we thought it was the right timing, and probably the Swedish Match people also thought well, that's probably the right moment to combine forces and accelerate the movement of the industry towards smoke-free products. So that was the momentum, and that was existing, and we took benefit of it. As I said, first and foremost, this is a story of 2 companies that are committed to a smoke-free world. And I believe that together, they're going to be stronger. We are obviously a leader in heat-not-burn. They are a leader in oral nicotine. And together, we're going to be stronger. Back to my earlier comment on offering a broad portfolio of smoke-free product to nicotine consumer. That's going to be giving, I hope, an amazing acceleration and capacity to do that. So that's really about getting stronger, sharing the same vision, the same culture, and therefore, it makes sense to be together. Then, of course, for us, it's also to be back in the U.S., and not in a kind of de minimis manner because this is ZYN in U.S. This is the fastest growing brand in the nicotine space in the U.S. amazing roles. They are the leader, of course, of the nicotine pouch category. They have about 65% market share. They managed to defend it very well. I think it shows the superiority of the product. So it's a very successful organization, and we are acquiring a very fast, and nicely profitable business there. And obviously, that is a platform for us as well for the rest of the smoke-free portfolio. So if we have this platform in the future, we can think of bringing more product to Swedish Match organization in the U.S., and to develop a very nice smoke-free portfolio in the country. There is also the opportunity outside the U.S. because we believe that nicotine pouches is going to be a very attractive category for a number of reasons, if you give me 2 minutes to elaborate. The first reason is that one could define nicotine pouches as a kind of ultimate level in terms of tobacco harm reduction. Because you know that IQOS, so heat-not-burn, or vaping when there are good products, you reduce by about 95% the exposure to toxicant that this product present versus combustible cigarette. Here, you reduce by 100%, okay? So that is really the ultimate level in terms of tobacco harm reduction, and you enjoy nicotine, and we know that nicotine is not the reason for diseases caused by smoking. This is the smoke and the inhalation of smoke. That is the reason for the disease generated by smoking. Then on top of it, these are very special product because today, you are very restricted in the moment when you can use whether IQOS or any vaping device. No, here, in this you could not in a restaurant, in the plane, in the office. With nicotine pouches, you can enjoy your nicotine whatever you're doing in any kind of situation and moment. So we see -- and people are likely to discover that. They take a plane, they want to enjoy the nicotine, it's a 10-hour plane. They're going to try and they're going to say, whether permanently or for some moment, that is a product that makes sense for me when I want to enjoy my nicotine. So we see -- for what is a relatively nascent category. But in terms of ritual, in terms of quality, look and feel of the product, we see great potential for the category. And of course, now that it's going to be supported if we close the deal by the strength of PMI internationally, we think we can further accelerate. And therefore, for all this reason, 2 leaders getting together on smoke-free, the U.S. for us, great platform and the international potential that is a great deal. I just want to conclude by saying that on top of that, they are improving our growth profile because they are growing faster than us, and they are also a bit more profitable than we are. We are very profitable already, but they are even a bit more profitable than we are. So we are not deteriorating the profitability profile of PMI through this deal.

Thank you. Just picking up on one point, I just wanted to clarify and make one thing clear. There is clearly an issue with brand ownership, but is the possibility notwithstanding that pretty major issue? Are you launching combustible products in the U.S.?

Sure. Combustible, you mean, sorry, I thought you were on other smoke-free.

Yes.

No. To be very clear, we want to play the U.S. in the smoke-free opportunities, okay? So I want to be very clear. Of course, we're going to inherit generate from the cigar business, okay, and it is there. But we're not going to the U.S. to play on the combustible. We're going on the U.S. to play the smoke-free opportunity. The U.S. are already the first market in the world when it comes to the smoke-free category. Just the U.S. represents 60% in value of all the other market where we have access today internationally for smoke-free. So you see that in one go, we have an amazing acceleration of the reachable market for smoke-free product. And that is going to be a nicely growing business and -- versus other markets in the world, there will be one specificity for us in the U.S. when we grow the smoke-free category, and that would be the absence of cannibalization because we don't have any combustible business. So we're going to grow our smoke-free business without any negative impact in terms of numbers for an existing combustible business.

Understood. Okay. If my memory serves me correctly, in the release around the acquisition, you mentioned the lights business you didn't mention the cigar business if my memory serve me quickly. Could you just clarify where you see the cigar business sitting in the new combined Philip Morris Swedish Match?

Look, we have a very high regard for the management of Swedish Match. There are amazing people what they've been achieving is absolutely tremendous. And they did a lot of work on it. And they decided eventually for a number of reasons to keep the cigar business. So we're going to talk about that, of course, with them, but we have no reason to believe that eventually they did not take the right decision. So we will start on the assumption and basis that this is the right decision that this cigar business should stay for the time being in the portfolio.

Okay. That's very clear. I've got 2 more questions, and I'm conscious we've done half of our time on the very short term, and one transaction. But I just want to land a couple of things. Could you just clarify for us, and make it as clear as you can, where the distribution of IQOS sits post the acquisition completing, assuming it does?

Even in the U.S.?

In the U.S.

These are 2 separate things. So if we complete the acquisition, we'll have this great distribution platform in the U.S. But IQOS, we have an agreement with Altria. And of course, the agreement, as we said, is presenting a number of issues because of the ITC decision. The fact that we had to stop. We're going to restart on a different basis. And we flagged the fact that we are working on domestic production. But we have an agreement with Altria. So for the time being, we are discussing on how the agreement should be renegotiated. We discussed, reorganized, rearrange -- this is, of course, confidential. So I'm not going to elaborate on the content of the discussion. But for the time being, IQOS is with Altria.

Okay. And then just one final one. You talked about meeting the cost of capital on this transaction within 5 years. Can you tell me what the cost of capital is?

Yes. So we -- I think we signaled the fact that it was around 7%. One could argue whether for the U.S. and the Nordic country, which is most of where the business today, this could have been even a bit lower, but I think we are comfortable at the group level with 7% today. So that's what we are taking as a reference.

Okay. Thank you. I'm going to move on now from Swedish Match to possibly even bigger-picture questions. There's always been an underlying conversation, at least people I've been talking to, and that's probably been amplified by the acquisition of Swedish Match. At some point in the future, can you see a situation where Philip Morris International splits into 2 businesses, combustible and noncombustible? I appreciate things like distribution and legal structures and all that stuff that analysts, investors watch over and think it's all pretty easy, and it isn't? But is that something that you guys discussed, think about? What does the Board say? Could you just talk about that big-picture thoughts?

Well, I'm going to stay at a very general comment, Gerry, on that topic. We said it and we mean it, we are going to become a smoke-free companies. So it's not a question of -- if, it's a question of when, and one could say and how then probably. So one day, PMI will be a smoke-free company. I'm not able to give you a time line. I'm not able to tell you whether it's going to happen because we will have managed to actually put an end to the combustible cigarette at least in all the key markets or whether at a certain point in time, the combustible business being much smaller, it will maybe leave the company. But the direction is clear. We are going to be at one point in time a smoke-free company. It's just too early today to say when, an how we get there.

That raises a number of other questions.

I'm sure it does.

But I'll let it go for the sake of time. And I'm sure they may come up through the course of the days in the meetings you have with people. Staying on the big-picture point. You talked about being a wellness and health. You talk about investing in wellness and health care for further growth in many years post today. Could you talk or just clarify what wellness and health care means to you guys?

No. Sure. In fact, everything started through all the R&D, scientific work, innovation, that we've been developing when we were creating IQOS. And we really have been building a unique capacities with $1 billion of investment around inhalation, dealing with a number of components, botanical. And that is giving us a lot of capacity and legitimacy to work on 2 directions. One is to come with other products that's through whether inhalation, and now with oral, now that we've been acquiring Fertin and we have the capacity on formulation for great oral intake. How do we bring maybe other product, it could be botanical, CBD, vitamin, cafe, melatonin through inhalation, through oral intake to the consumer in a kind of wellness experience. You know that nicotine users use coin because they feel better and they feel good with nicotine. They feel less anxious, less stress. They feel more number of benefits. I think everything around better sleep, more energy, more focus, less stress. There are a number of products without nicotine on which we could develop and use the technology that we've been developing. So that is what the wellness ambition is about. Then on top of that, because we are mastering how do you create an aerosol? How do you generate the perfect inhalation in terms of dosage? How do you create the product in terms of drug device combination? We've been creating a unique expertise. And here, it's not about becoming a pharmaceutical company. So we're not going to invest billions in new molecule, but it's taking existing molecule and say, how can I through inhalation here, and work on my inhalation science? How can I bring this molecule that normally is taken through oral? And I always take a very example, which is aspirin, and bringing to inhalation. There is one benefit is that if you manage to get to the right inhalation aspirin product for a heart attack in 30 seconds, you can give the appropriate answer for heart attack. When it's 20 minutes for oral intake, and that can make a big difference. And today, I mean, you don't have this product. So this is one product on which we are working. So it just an illustration of how do we use with capitalized on the technology, on the science, on the know-how that we have acquired through our IQOS journey.

So in the context of that long-term shift movement, whatever you want to call it, at the center, you will remain an FMCG-focused business. You'll be consumer-facing not B2B, it will be a consumer-focused business, just to clarify that point.

Absolutely. So we are a consumer business. We are here to bring great experience to the consumer, call it, lifestyle and wellness. That's what we want to do. Nicotine is going to stay a big pillar, of course, certainly in the future. And I think we're going to do all the work necessary for people to better understand what nicotine is about. I said it, we see the company to enrich around nicotine, but that's what the company will be about in the future.

Okay. Thank you. I'm going to ask one more question and then see if there's any questions from the floor, given timing is moving on. And the question is this, for a decade -- for many, many decades, but particularly recently, the industry against the backdrop of low inflation has been able to put through ongoing material value-creating price increases alongside the way the tobacco model works, and maybe that was helped by the lack of inflation elsewhere in the world. That is now not the case anymore. So the question is, to what extent do you think the industry's pricing power relative and maybe in absolute terms is going to be compromised moving forward, given where inflation is and given where the macro backdrop looks like it's headed?

Look, I'm not sure that the tobacco industry is going to make a lot of difference versus other industry, probably the loyalty of the consumer is even stronger for the strong brand that we have, I mean whether IQOS, Marlboro. There is, of course, a very strong loyalty and attachment to the brand but everybody will be facing consumer under some pressure in terms of purchasing power. And therefore, at the same time, they will have some, hopefully, salary increase that's going to come with the general inflation, but maybe some limitation. Now when we look at the year, I think we are today doing a pretty good work trying to adapt to the situation. And we'll see where we finish the year, but there are certainly a few places where we are today adapting to the high inflationary environment, and where we are increasing price. I'm not sure that the industry has lost here its capacity. But of course, we're going to be impacted like everybody by this pressure on purchasing power, which means that versus other, I think we keep an advantage for the link with the brand I was describing, but we're not going to be immune of this differential between input cost and the capacity to bring that to the consumer.

Okay. Thank you. Before I move on to my next series of questions, anybody got a question from the audience? Okay. We'll carry on with me asking a series of questions. Are we close to the point where Philip Morris International is a steady -- over the medium to long term, steady volume growth business?

I think we are getting close to that, but I would say it's almost mechanical. Because as we see the weight of the smoke-free product in our portfolio growing, and whether IQOS today, our vaping product and hopefully, the Swedish Match brand tomorrow, I mean they grow fast. And of course, as the combustible weight is reduced, yes, the combustible are going to keep going down because we make sure that the combustible category is going down. But we are much more in the capacity to offset, and maybe even at some point in time, finish permanently on the net positive. That was the case. We've been growing volume in 2021. As I said, we are growing volume by 5% in Q1. We will see where we are in Q2. But certainly, for the year, we signaled the fact that we could be around flat, and maybe even a bit positive. So it shows that we are getting maybe to this pivotal point where the change in the portfolio and moving to a portfolio that is growing fast and smoke-free product is probably going to be able to compensate for the decrease in CC. And that is good news because that shows that fundamentally, we are a growth company. I think that we've been showing it on revenue and on bottom line. But if it starts with volume, it's probably even clearer. There is one thing that is sure is that when we look at the overall nicotine industry, first of all, I think it's very close to stability in terms of volume. But I would accept that it's difficult to measure the nicotine volume from one category to the other. But it is overall an industry that is growing nicely in terms of value, and continue to grow nicely in terms of value. And as we are gaining market share, of course, that means that we have a very nice growth profile ahead of us.

Okay. My next question is a little bit U.S.-centric. Forgive me for that. And even though you're acquiring Swedish Match, it's still not directly analogist to your business moving forward. The question is this, we've got the mental question in the U.S. We had the age question being raised in the U.K. following New Zealand. We've had the comments around minimally addictive nicotine resurfacing, again in the U.S. Could you talk to us a little bit about where you see the global regulatory framework for the category?

Yes. So it's, of course, difficult to say because you see countries taking very different route, and there is still a lot of misunderstanding. Because the number of organization are just creating, probably willingly, a kind of misunderstanding of the problem. So some anti-tobacco organization were at the beginning, clearly saying, well, combustible cigarettes are bad because of combustion. So now that we see that at least some players in the industry are going to a small provision very clearly say, yes, but you have the nicotine. Well, okay, let's have a debate on the addictive nature of nicotine, which is not the only additive product. By the way, I mean caffeine is addictive as well. The real debate should be, okay, there could be an addiction, but what's the real impact on health. And I think there is a total misunderstanding here because they are still creating the thing that nicotine is responsible for the disease caused by smoking, which is obviously not the case. So I think we need a clarification on, okay, what should be the debate and certainly on what the risk nicotine means for consumer and for public health. I think there should be -- once you have that clear road map to our tobacco harm reduction, and understanding of, okay, what's the difference between combustion, heat-not-burn, vaping, oral nicotine intake. And then a policy that is in terms of regulation, communication, capacity of usage, of course, taxation, making sure that they drive the right behavior and drive the consumer in the right direction to drive smoking cessation and encourage total cessation of nicotine, but at least the choice for the people to move to better alternatives if they want to continue to consume nicotine.

Okay. Probably got time for me to ask a couple more questions. The first one is based on your balance sheet. And I've got [ PMI ] pointing about this, and maybe I'm off track and nobody else thinks of this an issue. But given the nature of the category, given the way markets have moved pretty quickly towards ESG, to what extent do you see the world's debt markets beginning to question, buying your debt? Or has that just not been a problem?

Well, it's -- globally, the question has been for the tobacco industry, for some stakeholders, and I would say it has been limited to a few players or in a few countries, do I work to work with tobacco company. I mean I can understand maybe the question when company were a smoking company. But when they take the direction of, clearly, willing to become smoke-free, invest all their effort, energy, make all their investment on driving smoke-free product with a huge positive impact on public health. I think that's on the [indiscernible] of time when people are putting some exclusions on that, should come back to at least a player who are having the right behavior. So today, I don't see kind of tightness or risk of having difficulty to finance the group. But I'm hopeful that maybe some people who were not doing that could reconsider. And that's not true for lenders only. I would say that's true, hopefully, for a number of investors. And we see a number of people coming back to us and say, okay, so you've already flagged 2025, you're going to be predominantly smoke-free asking the type of question. Gerry, you were asking, when do you think you can be totally smoke-free? And therefore, we're starting a dialogue that for some of them had been disappearing.

Okay. I'm going to finish. We've got 2 minutes left. It may take you 2 seconds to answer the question, but I'll ask it and see where we go. A topic that comes up once every 18 months, and it popped into my head the other day. Canadian litigation, you took Canada out of your P&L, out of your balance sheet, maybe not the right phrase, but these inverted commas only upside. I know it's not -- that's not true, but you get the point I'm making. So could you remind us how big Canada was in your business, pre removing it from the P&L? And let's put Swedish Match to one side. And then if you've got any tracked cash in Canada that should the final resolution of this whenever that is, go the industry's way, how much comes back on your P&L and your balance sheet?

All right. So on Canada, I think it's going to take me a bit more than 2 seconds, but because the matter is complex. Well, first of all, Gerry, you will appreciate that I'm in a confidentiality here. So I cannot elaborate on any discussion. I can just confirm that the discussions are still going on. And hopefully, at this point time, there will be a positive resolution, but I cannot guarantee it, and I don't know what's going to be the outcome. I don't know whether we were disclosing Canada before we exceed the number 4%, 5%. Okay. So I wasn't there when we did consider this. So for 4%, 5% of our revenue, so it gives an idea of what it is. It's a very nice business. And therefore, as you said, Gerry, that would be very positive if there is a settlement, and then we managed to reconsolidate it. There is cash there, but you don't see it in the balance sheet. And I'm not able to comment on the cash impact because that's going depend on any kind of resolution of course. But that would be, of course, very good news to have the Canadian business back in our P&L.

Great. We have ended on a very left field -- well, not that left field, but something that doesn't get touched on many times. I've just hit 0 on the stopwatch. So with that, Emmanuel Babeau, thank you very much for your time. Thank you very much.

Appreciate it. Thank you, Gerry. Thank you.

Thank you very much.