Q4 2025 British American Tobacco PLC Earnings Call

February 12, 2026

Tadeu Marroco: Good morning, everyone. I'm delighted to welcome you to our full year 2025 results presentation. With me this morning, Javed Iqbal, Interim CFO, and Victoria Buxton, Group Head of Investor Relations. I will begin with our transformation highlights. Javed will then take you through our financial results in more detail. Finally, I will return to talk more about our performance outlook and why we are confident in the pathway ahead, given the clear momentum we are driving. We will then take your questions. With that, I would like to draw your attention to the disclaimers on slides 2 and 3. So let's begin by looking at the positive transformation momentum we are driving. Starting with some key highlights. We added 4.7 million smokeless consumers, bringing our total to 34.1 million, mainly driven by our continued strong performance in Modern Oral.

With me this morning job at Bow interim CFO, and Victoria Buxton group head of Investor Relations.

I will begin with our transformation highlights.

<unk> will then take you through our financial results in more detail.

Finally, I will return to talk more about our performance outlook and why we are confident in the pathway ahead, given the clear momentum we are driving.

We will then take your questions.

With that I would like to draw your attention to the disclaimers on slides choke.

Entry.

So let's begin by looking at the positive transformation momentum we are driving.

Starting with some key highlights.

We added $4 7 million smokeless consumers, bringing our total to $34 1 million, mainly driven by our continued strong performance in modern oral.

Tadeu Marroco: This marks our strongest growth acceleration to date, and position us well for 2026. We delivered 2025 group results at the top end of guidance, driven by resilient delivery in combustibles and an excellent performance from VELO in all three regions. Our discipline focus on quality growth continues to improve returns on more targeted investments, with new category contributing now up 77% at constant rates. Alongside this, we remain committed to investing behind our premium innovation launches, supporting long-term value creation. We continue to deliver strong cash returns for shareholders. In addition to our progressive dividend, in December, we announced an increase to our share buyback to GBP 1.3 billion in 2026. Looking ahead, we are confident in returning to our midterm algorithm this year, with the accelerated momentum through the second half of 2025, positioning us well for continued delivery.

This marks our strongest growth acceleration to date and position us well for 2026.

We delivered 22.5 group results at the top end of guidance driven by resilient deliberate in combustibles and an excellent performance from Villa in all three regions.

Our disciplined focus on quality growth continuous to improve returns on more targeted investments with new category contributing now up 77% at constant rates.

Alongside these we remain committed to investing behind our premium ovation lounges supporting long term value creation.

We continue to deliver strong cash returns for shareholders. In addition to our progressive dividend in December we announced an increase to our share buyback to 1.3 billion pounds in 2026.

Looking ahead, we are confident in returning to our midterm algorithm. This year with the accelerated momentum through the second half of 2025 positioning us well for continued delivery.

Tadeu Marroco: I'm proud that we have delivered on all of our 2025 priorities, and I want to thank our teams around the world for driving these encouraging results. Our performance reflects the clear momentum we are driving as we continue to build a track record of delivery. I'd like to take a moment to highlight two areas from last year that stand out to me. First, the return to both revenue and profit growth in the US for the first time since 2022, a significant milestone driven by stronger combustibles performance, a return to revenue growth in vapor in the second half, and Modern Oral. As a result, we grew 30 basis points of combustibles value share. Second, we are delivering quality growth in new categories....

I'm proud that we have delivered on all of our 20 to 25 priorities and I want to thank our teams around the world for driving these encouraging results.

Our performance reflects the clear momentum we are driving as we continue to build the track record of delivery.

I'd like to take a moment to highlight two areas from last year's that stand out to me.

First the return to both revenue and profit growth in the U S for the first time since 2022.

A significant milestone driven by stronger combustibles performers a return to revenue growth in vapour in the second half and modern oral.

As a result, we grew 30 basis points of combustibles value share.

Second we are delivering quality grocery new categories launching premium innovations in each category, while delivering a return to double digit revenue growth in second half and category contribution growth up 77% for the full year.

Tadeu Marroco: Launching premium innovations in each category, while delivering a return to double-digit revenue growth in the second half, and category contribution growth up 77% for the full year. The progress we made in 2025 reinforces my confidence in our future delivery. And with that, I will hand over to Javed to take you through our 2025 performance in more detail.

The progress we made in 2025 reinforces my confidence in our future delivery.

And with that I will hand over to javits to take you through our 2025 performance in more detail.

Javed Iqbal: Thank you, Tadeu, and good morning, everyone. I'm pleased to share that we delivered results at the top end of guidance on a constant currency basis. The performance was driven by return to growth in the US, a robust performance in AME, and the strength of modern oral globally. Our reported numbers reflect some adjusting items, including nearly GBP 1.6 billion, mainly related to the annual amortization of our US-acquired trademarks, a net credit of GBP 524 million, following a change in the forecasted outlook for the Canadian combustible industry. We also recognized a gain of nearly GBP 900 million from the partial monetization of our ITC stake. To give you a clear view of our underlying performance, I will focus on constant currency, adjusted, and where applicable, adjusted for Canada metrics. You can find further detail on adjusting items and share data in the appendix.

Thank you <unk> and good morning, everyone I'm pleased to share that we delivered results at the top end of guidance on a constant currency basis. The performance was driven by a return to growth in the U S. A robust performance.

<unk> a M and the strength of modern oral globally. Our reported numbers reflect some are just take items, including nearly 1.6 billion pounds, mainly related to the annual amortization of our U S acquired trademarks.

Net credit of 524 million pounds. Following a change in the forecasted outlook for the Canadian combustible industry. We also recognized a gain of nearly 900 million pounds from the partial monetization of hot Itc's stake.

To give you a clear view of our underlying performance I will focus on constant currency, adjusted and where applicable adjusted for Canada mattress.

You can find further detail on adjusting items and shared data in the appendix.

Javed Iqbal: We delivered group results at the top end of guidance, supported by accelerated momentum through the second half. Group revenue increased by 2.1%, adjusted profit rose 3.4%, adjusted profit from operations grew 2.3%, and adjusted diluted EPS was up 3.4%. Let's now turn to new categories revenue, which grew by 7%, driven by outstanding growth in Modern Oral, which was up strongly by 48%, with heated products up 1%. This was partially offset by a nearly 9% decline in vapor, mainly due to continued illicit pressures in the US and Canada. Our second half new categories performance showed a clear improvement versus the mid-teens decline in H1, supported by early signs of strong enforcement activity in the US.

We delivered group results at the top end of guidance supported by accelerated momentum through the second half.

Group revenue increased by 2.1% adjusted profit Rose, 3.4% adjusted profit from operations grew two 3% and adjusted diluted EPS was up 3.4%.

Let's now turn to new categories revenue grew by 7% driven by outstanding growth in modern order, which was up strongly by 48% with heated products up 1%. This was partially offset by a nearly 9% decline in vapor mainly due to continued.

Elicit pressures in the U S and Canada our.

Our second half he was performance showed a clear improvement versus the mid teens decline in H, one supported by at least signs of strong enforcement activity in the U S.

Javed Iqbal: We continue to deliver quality growth, with gross profit up over GBP 200 million and category contribution reaching GBP 442 million. This reflects our disciplined approach to return on investment, targeted investments in high-value markets, and increasing scale benefit across our portfolio. I am proud of the progress we are making, and I'm particularly pleased with our accelerated H2 momentum, where we return to double-digit new category revenue growth. Now turning to combustible. Revenue grew 1%, with volume decline more than offset by continued robust price mix across markets. We delivered quality growth here, too. Both gross profit and category contribution increased 2.5%, driven by a strong performance in the US, positive price mix, and continued productivity and simplification gains, which I will speak to shortly.

We continue to deliver quality growth with gross profit up over 200 million pounds and category contribution reaching 442 million pounds. This reflects our disciplined approach to return on investment.

Targeted investments in high value markets, and increasing scale benefits across our portfolio.

I'm proud of the progress, we are making and I'm, particularly pleased with our accelerated H two momentum, where we return to double digit new category revenue growth.

Now turning to combustible revenue grew 1% with volume declines more than offset by continued robust price mix or cross market. We.

We delivered quality growth here too.

Both gross profit and category contribution increased 2.5% drill.

Driven by a strong performance in the U S positive price mix and continued productivity and simplification gains, which I will speak to shortly.

Javed Iqbal: Our performance highlights the breadth of our global footprint, with strong delivery in the US and AME, more than offsetting fiscal and regulatory headwinds in Bangladesh and Australia, which impacted total group revenue by around 1% and group adjusted profit from operations by around 2%. This resilience and increasing momentum in H2 reinforces our confidence in future delivery. Turning to our regions, starting with the US. In combustibles, we delivered a 4.6% increase in revenue, with our strengthened portfolio, sharper execution, and enhanced revenue growth management, driving price mix, including excise duty drawback. Value share increased 30 basis points, with volume share down 10 basis points. In new category, revenue grew nearly 20%, driven by the success of Velo+, which delivered over 300% growth.

Our performance highlights the breadth of our global footprint with strong delivery in the U S. N D. M me more than offsetting fiscal and regulatory headwinds in Bangladesh, and Australia, which impacted total group revenue by around 1% and group adjusted profit from operations by around 2%.

This.

Williams and increasing momentum in H, two reinforces our confidence in future delivery.

Turning to our regions starting with the U S. In combustibles, we delivered a full 0.6% increase in revenue with a strengthened portfolio sharper execution and enhanced revenue growth management, driving price mix, including excise duty drawback Val.

Value share increased 30 basis point with volume share down 10 basis points.

In new category revenue grew nearly 20% driven by the success of Zillow, plus which delivered over 300% growth.

Javed Iqbal: While vapor revenue was down 3.4% for the full year, we are encouraged that Vuse returned to revenue growth in H2, supported by early signs of enforcement actions. Overall, US revenue increased 5.5%, and adjusted profit grew 5.9%, mostly driven by a strong combustible performance. Importantly, VELO+ reached positive category contribution within its first year, underscoring the scalability of our modern oral business model. Tadeu will share more detail on the US shortly. In AME, we delivered another robust performance. Revenue grew over 3%, with combustible up more than 2%, supported by strong delivery in Brazil, Turkey, and Mexico, with solid pricing. New category revenue increased 4.3%, mainly driven by modern oral, which grew over 17%.

While wafer revenue was down 3.4% for the full year. We are encouraged that we used to return to revenue growth in H two supported by at least signs of enforcement actions.

Overall U S revenue increased five 5% and adjusted profit grew five 9%, mostly driven by our strong combustible performance.

Importantly, Vela plus reached positive category contribution within its first year underscoring the scalability of our modern oral business model there.

Bill will share more detail on the U S. Shortly.

In Ami, we delivered another robust performance.

Revenue grew over 3% with combustible up more than 2% supported by strong delivery in Brazil, Turkey, and Mexico with solid pricing.

New category revenue increased four 3%, mainly driven by modern oral <unk>, which grew over 17%. We are the clear modern oral readers in the region with over 60% volume share in top markets selling at a premium and strongly outperforming peers were steady.

Javed Iqbal: We are the clear modern oral leaders in the region, with over 60% volume share in top markets, selling at a premium and strongly outperforming peers, which Tadeu will expand on later. Growth was further supported by heated products, with revenue up over 6%, driven by Italy, Germany, and Ukraine. This was partially offset by competitive dynamics in Romania as we reallocated resources ahead of the Glo Hilo launch. Vapor revenue declined more than 11%, mostly impacted by the lack of illicit enforcement in Canada and regulatory and excise changes in UK, France, and Poland. Adjusted operating profit grew by nearly 10%-- 10%, driven by operating leverage and efficiency gains in combustibles and scale benefit and resource allocation, driving improved contribution across all three new categories. AME is a true multi-category region, delivering high-quality growth and demonstrating the resilience and balance of our portfolio.

<unk> will expand on later.

Growth was further supported by heated products with revenue up over 6% driven by Italy, Germany, and Ukraine. This was partially offset by competitive dynamics in Romania, as we reallocated resources ahead of the glory Halo large vapor.

Javed Iqbal: Vapor revenue declined more than 11%, mostly impacted by the lack of illicit enforcement in Canada and regulatory and excise changes in UK, France, and Poland. Adjusted operating profit grew by nearly 10%-- 10%, driven by operating leverage and efficiency gains in combustibles and scale benefit and resource allocation, driving improved contribution across all three new categories. AME is a true multi-category region, delivering high-quality growth and demonstrating the resilience and balance of our portfolio.

<unk> revenue declined more than 11%, mostly impacted by the lack of illicit enforcement in Canada, and regulatory and excise changes in UK, France and Poland.

Adjusted operating profit grew by nearly 10%, 10% driven by operating leverage and efficiency gains in combustibles.

And scale benefit and resource allocation driving improved contribution.

Across all three new categories.

<unk> is a true multi category region, delivering high quality growth and demonstrating the resilience and balance of our portfolio.

Javed Iqbal: In APMEA, growth in key markets, including Pakistan, Nigeria, and Indonesia, was more than offset by fiscal and regulatory headwinds in Bangladesh and Australia. Total revenue declined 7.2%, with combustibles down 8.3%. New category revenue was down 7.6%. Strong growth in modern oral was more than offset by heightened competitive activity in heated products in the value for money segment in South Korea and Japan, along the phase out of our Super Slim platform. Our vapor performance reflects strategic decisions taken to reduce our footprint and reallocate resources away from markets where regulation and enforcement do not support a responsible competitive landscape. Adjusted profit was down 17.9%, mainly due to challenges in Bangladesh and Australia.

And that means.

Growth in key markets, including Pakistan, Nigeria in Indonesia was more than offset by fiscal and regulatory headwinds in Bangladesh and Australia.

Total revenue declined seven 2% with combustibles down eight 3%.

New category revenue was down seven 6% strong growth in modern oral was more than offset by heightened competitive activity and heated products in the value for money segment in South Korea.

In Japan.

Along the phase out of our Super Slim platform.

Our vapor performance reflects strategic decisions taken to reduce our footprint and reallocate resources away from markets, where regulation and enforcement do not support a responsible competitive landscape.

Adjusted profit was down 17.9%, mainly due to challenges in Bangladesh and Australia.

As we continue to navigate headwinds into 'twenty 'twenty six we expect our performance to stabilize for the full year.

Javed Iqbal: As we continue to navigate headwinds into 2026, we expect our performance to stabilize for the full year, supported by Bangladesh as we lap last year's decline and with the drag from Australia becoming progressively less material year-on-year. Turning now to our group operating margin, which was broadly flat at 44%. We successfully offset inflationary and FX pressures through a strong US performance, higher profitability in new categories, and continued cost savings. Transactional FX headwinds on adjusted profit of approximately 1% were primarily driven by Turkey, Japan, and Nigeria. At current rate, operating margin expanded by close to 10 basis points. BAT has a strong track record of discipline and cost savings, and we continue to build on that foundation. Since 2023, we have delivered GBP 1.2 billion in productivity savings.

Supported by Bangladesh as we lap last year's decline.

With the drag from Australia, becoming progressively less material year on year.

Turning now to our group operating margin.

Which was broadly flat at 44%, we successfully offset infill initially and FX pressures through a strong U S performance higher profitability in new categories and continued cost savings.

Transactional FX headwinds on adjusted profit of approximately 1% were primarily driven by Turkey, Japan and Nigeria.

At current pit operating margin expanded by close to 10 basis points.

Be it he has a strong track record of disciplined.

And cost savings and we continue to build on that foundation.

Since 2023 we have delivered $1 2 billion pound and productivity savings.

Javed Iqbal: These efficiencies help us offset inflationary pressures and foreign exchange headwinds, while continue to fund innovations and growth in new categories. In 2025 alone, we absorbed around GBP 300 million of inflationary cost increases in addition to transactional effects. Looking ahead, we remain focused on simplifying Combustibles and scaling New Categories, targeting a further GBP 2 billion in productivity savings by 2030. In addition, we now expect our Fit to Win program to deliver GBP 600 million of annualized incremental savings by 2028. We expect around GBP 500 million of these savings to be delivered by 2027, with the remaining benefits realized by the end of 2028. We are committed to reinvesting these savings to support further sustainable growth initiatives. Fit to Win is a transformational project that is reinventing BAT.

These efficiencies help us offset inflationary pressures and foreign exchange headwinds, while continue to fund innovation and growth in new categories.

In 2025 alone we absorbed around 300 million pounds of inflationary cost increases in addition to transactional FX.

Looking ahead, we remain focused on simplifying combustibles and scaling new categories targeting a further 2 billion pounds and productivity savings by 2030.

In addition, we.

We now expect our fit to win program to deliver.

600 million pounds of annualized incremental savings by 2028 <unk>.

We expect around 500 million pounds of these savings to be delivered by 2027 with the remaining benefits realized by the end of 2028.

We are committed to reinvesting these savings to support further sustainable growth initiatives.

Fit to win is a transformational project that is reinventing beauty as outlined at our 2025 half year results. It is centered on optimizing processes and ways of working to create a leaner faster and more data driven organizations.

Javed Iqbal: As outlined at our 2025 half-year results, it is centered on optimizing processes and ways of working to create a leaner, faster, and more data-driven organizations. Since half-year, we have made strong progress. We have expanded the program to include organizational streamlining, to sharpen up focus and improve speed of execution, allowing us to raise total annualized savings by a further GBP 100 million. To unlock these benefits, we now expect around GBP 600 million of associated costs over the next two years. As a structured time-bound program, GBP 500 million will be treated as adjusting, including around GBP 100 million of non-cash items. As previously guided, this spend is already underway, with the majority of costs expected to be incurred this year and concluding in 2027.

Since half year, we have made strong progress we have expanded the program to include organizational streamlining to sharpen our focus and improve speed of execution.

Allowing us to raise total annualized savings by a further 100 billion pounds.

To unlock these benefits, we now expect around 600 million pounds of associated costs over the next two years.

As a structured time bound program 500 million pounds will be treated as adjusting including around 100 billion pounds of noncash items.

As previously guided this spend is already underway with the majority of cost expected to be incurred this year and concluding in 2027.

Javed Iqbal: Bringing it all together, earnings per share increased by 3.4%, as operating profit growth and lower share count was partly offset by net finance costs, our reduced share of ITC profits, and tax. Our underlying tax rate was 24.5%. Our strong cash generation continues to enhance our financial flexibility. This has enabled us to announce a 2% increase in our dividend and increase our share buyback by GBP 200 million to GBP 1.3 billion for 2026. Alongside this, we continue to deliver to 2.55x adjusted net debt to adjusted EBITDA at the end of 2025, and we remain on track to be within our 2 to 2.5x target range by year-end.

Bringing it altogether.

Earnings per share increased by three 4% as operating profit growth and lower share count was partly offset by a net finance costs are reduced share of ITC profit and tax.

Our underlying tax rate was 24, 5%.

Our strong cash generation continues to enhance our financial flexibility.

This has enabled us to announce a 2% increase in our dividend and increase our share buyback by 200 million pounds to one 3 billion pounds for 'twenty 'twenty six.

Alongside this we continue to deliver two to five five times adjusted net debt to adjusted EBITDA at the end of 2025, and we remain on track to be within our two to two five times target range by ear and.

Javed Iqbal: While our 2025 cash delivery was impacted by the CCAA upfront payment and the prior year deferral of tax payments in the US, we remain on track to deliver more than GBP 50 billion in free cash flow by the end of 2030. We continue to focus on our capital allocation priorities, which are investing in transformation, balancing deleveraging with progressive dividends and sustainable share buybacks, and selective bolt-on M&A to support our transformation. I'm excited about the future and confident in our ability to deliver our Midterm Algorithm of 3 to 5% revenue growth, 4 to 6% adjusted profit from operations growth, and 5 to 8% adjusted diluted EPS growth. Our return to this Midterm Algorithm in 2026 marks a major milestone in our transformation journey and reinforces the strength and resilience of our strategy.

While our 2025 cash delivery was impacted by the double CW upfront payment and the priority of death rule of tax payments in the U S. We remain on track to deliver more than 50 billion pound in free cash flow by the end of 2030.

And we continue to focus on our capital allocation priorities, which are investing in transformation Bell.

Balancing deleveraging with progressive dividends and sustainable share buybacks.

And selective bolt on M&A to support our transformation.

I'm excited about the future and confident in our ability to deliver our midterm algorithm off 3% to 5% revenue growth, 4% to 6% adjusted profit from operations growth and 5% to 8% adjusted diluted EPS growth.

Our return to this midterm algorithm in 'twenty 'twenty six marks a major milestone in our transformation journey and reinforces the strength and resilience of our strategy.

Javed Iqbal: Our confidence is underpinned by continued growth in the US, robust multi-category delivery in AME, low double-digit new category revenue growth led by VELO globally, a further improvement in new category contribution, and continued savings from our productivity programs. Although we still have more work to do, and it will take time to stabilize performance in APMEA, we will continue to invest in our premium innovations rollout. As a result, we expect 2026 to be at the lower end of these ranges and our profit performance to be second-half weighted, driven by the phasing of new category investment, and as Fit to Win savings built through the year. And with that, I'll hand it back to Tadeu.

Our confidence is underpinned by continued growth in the U S.

Robust multi category delivery in Ami.

Low double digit new category revenue growth led by <unk> globally.

That improvement in new category contribution.

And continued savings from our productivity programs.

Although we still have more work to do and it will take time to stabilize performance in apnea, we will continue to invest in our premium innovations rollout.

As a result, we expect 2026 to be at the lower end of these ranges and our profit performance to be second half weighted dray.

Driven by the phasing of new category investment and as fit to win savings built through the year.

And with that I'll hand, it back to the deal.

Tadeu Marroco: Thank you, Javed. So moving on now to the positive transformation momentum we are driving. In 2023, when I became chief executive, I committed to sharpening our focus and execution, guided by a refined strategy and ambition to become a predominantly smokeless business by 2035. And I'm proud to say that we have made significant progress across all three strategic pillars as we continue to build a track record of delivery. While there is still more to do, I'm confident that our focus, investment, and sharp execution are driving real momentum, as you can see from our 2025 results. Our progress underpins our confidence in sustainably delivering our Midterm Algorithm, while continuing to reward shareholders with strong cash returns. I'd now like to highlight five points that demonstrate this. First, we have successfully reset our US business, returning to revenue and profit growth in 2025.

I think a jab at so moving on now to the positive transformation momentum we are driving.

In 2023, when they became chief executive I committed to sharpening our focus and execution guided by our refined strategy and ambition to become a predominantly smokeless business by 2035.

And I'm proud to say that we have made significant progress across all three strategic pillars as we continue to build a track record of delivery.

While there is still much to do I'm confident that our focused investments in shoppers acumen are driving real momentum as you can see from our 2025 results.

Our progress underpins our confidence in sustainably delivering our mid term algren, while continue to reward shareholders with strong cash returns.

I'd now like to highlight five points that demonstrate this.

First we have successfully reset our U S business, returning to revenue and profit growth in 2025.

Tadeu Marroco: While the US macroeconomic environment remains dynamic, the pace of combustibles industry volume decline started to moderate in 2025, down 7.4%. Against this backdrop, driven by the actions we have taken to strengthen our portfolio and sharpen execution, our US combustibles business delivered strong revenue and profit growth in 2025. Driving value from our combustible business is essential to funding our transformation, and the US is a key driver of this. In line with this strategy, we gained 30 basis points of total industry value share. I'm particularly encouraged that our financial performance accelerated in the second half. This positive momentum reinforces my confidence in the resilience of our US combustible business and our ability to deliver sustainable value going forward. VELO Plus is the fastest growing modern oral brand in the largest modern oral value pool globally.

While the U S macroeconomic environment remains dynamic the pace of combustibles industry volume decline started to moderate in 2025 down seven 4%.

Against this backdrop driven by the actions we have taken to strengthen our portfolio and sharpen execution. Our U S. Combustibles business delivered strong revenue and profit growth in 2025.

Driving value from our combustible business is essential to fund the alturas formation in the U S is a key driver of this.

In line with this strategy, we gained 30 basis points of total industry value share.

I'm, particularly encouraged that our financial performance accelerates in the second half.

This positive momentum reinforces my confidence in the resilience of our U S combustible business and our ability to deliver sustainable value going forward.

Dealer pledge is the fastest growing more than auto brand in their largest modern auto value pool globally.

Tadeu Marroco: Since launch at the end of 2024, it has already reached the number 2 position in both volume and value share, gaining nearly 18 percentage points of volume share and nearly 14 points of value share. We are pleased that our share momentum has continued into the start of 2026. VELO Plus has more than doubled its consumer base and driven over 300% Modern Oral revenue growth, capturing around 70% of industry volume growth and 80% of industry value growth in December. All of this is underpinned by a consistent repurchase rate of around 70% throughout the year. Importantly, we achieved positive Category Contribution within the first 12 months of launch, fully aligned with VELO's global payback profile.

Since launch at the end of 'twenty 'twenty four it has a red Richards the number two position in both volume and value share gaining nearly 18 percentage points of volume share and nearly 14 points of value share.

And we are pleased to that's our share momentum has continued into the start of 2026.

Willow plus has more than doubled its consumer base and driven over 300% more than auto revenue growth, capturing around 70% of industry volume growth and 80% of industry value growth in December.

All of this is underpinned by a consistent repurchase rate of around 70% throughout the year.

Importantly, we achieved positive category contribution within the first 12 months of launch fully align with village global payback profile.

Tadeu Marroco: The total US Modern Oral category continues to grow strongly and has already overtaken the size of the legitimate vapor category at over GBP 2 billion of revenue in 2025. VELO Plus is a great product, and these results demonstrate this in what remains a highly dynamic category. It's impressive. Its impressive success also highlights the broader strength of our US capabilities and executional excellence, from consumer insights and branding to enhanced digital analytics and distribution, enabled by a rejuvenated Reynolds. Our performance was further enhanced by the successful launch of Grizzly Modern Oral in the summer, which achieved close to 2% volume share by year-end, taking our total volume share of US Modern Oral to 25.8%. Through this momentum, I'm delighted to announce that at the end of the year, we reached global volume share leadership in Modern Oral...

The total U S. Modern oral category continues to grow strongly and has already overtaken the size of the alleged to meet vapor category at over 2 billion pounds of revenue in 2025.

<unk> plus is a great product and these results demonstrate these in what remains a highly dynamic category.

It's impressive it's impressive success also highlights the broader strength of our U S capabilities sends us a cushion, though excellence from consumer insights and branding to enhance the digital analytics and distribution enabled by our rejuvenated railroads.

Our performance was further enhanced by the successful launch of grizzly modern Aro in the summer, which achieve its close to 2% volume share by year end take.

Taking our total volume share of U S more than <unk> 25, 8%.

Through this momentum I'm delighted to announce that at the end of the year, we reach it global void Michelle leadership in modern or measure across the top modern auto markets, representing around 90% of total industry revenue.

Tadeu Marroco: measured across the top modern oral markets, representing around 90% of total industry revenue. Second, we are premiumizing our new category portfolio. VELO is already the clear European leader, around 6 times larger than our nearest competitor. We continue to focus on consumer-led innovation to strengthen product satisfaction among adult consumers and expand VELO's success. At the start of this year, we began the nationwide rollout of our latest innovation, VELO Shift, in Sweden, following a successful pilot with key retailers and online partners. VELO Shift is reshaping the modern oral experience, featuring a new comfort pouch design, 5 distinct sensory flavors, and a differentiated X count that stands out on shelf. Trading at a premium to the core VELO range, VELO Shift is already driving incremental share in the channels where it has launched, with further market rollouts planned through 2026.

Second we are premium <unk>, our new category portfolio village, a red a clear European leader around six times larger than our nearest competitor.

We continue to focus on consumer led innovation to strengthen product satisfaction, among auto consumers and extend dealer success.

Tadeu Marroco: At the start of this year, we began the nationwide rollout of our latest innovation, VELO Shift, in Sweden, following a successful pilot with key retailers and online partners. VELO Shift is reshaping the modern oral experience, featuring a new comfort pouch design, 5 distinct sensory flavors, and a differentiated X count that stands out on shelf. Trading at a premium to the core VELO range, VELO Shift is already driving incremental share in the channels where it has launched, with further market rollouts planned through 2026.

At the start of this year, we began the nationwide rollout of our latest innovation villas shift in Sweden. Following a successful pilot with key retailers and online partners.

Bill the shift is reshaping the modern or experience featuring a new comfort Boucher design five distinct sensory flavors and the differentiated excellence that stands out on shelf.

Trading at a premium to the core bulow range below shift is a red drive incremental share in the channels, where it has launched it with further market rollouts blend it through 2026.

Tadeu Marroco: These results highlight not only the strength of VELO brand and innovation pipeline, but also the quality of our execution across European markets. We see premium vapor done right as a highly attractive, untapped segment for further value creation. Vuse Ultra is our modest, most advanced vapor device yet, driving meaningful performance improvement for Vuse in markets where we have launched, including value share gains of nearly 80 percentage points in Canada, close to 4 percentage points in Germany, and above 2 percentage points in France. As Javed highlighted, we have made proactive strategic decision to focus our execution on the largest profit pools, with more supportive regulation and enforcement. Vuse Ultra is central to this approach, and I'm encouraged by the strength of its early performance, with further launch planned in the key market in 2026.

These results highlight not only the strength of Zillow brands and innovation pipeline, but also the quality of our execution across European markets.

We see premium vapor darn bright as a highly attractive untapped segment for further value creation.

Views Ultra is our mode. This most advanced said vapor device, yet driving meaningful performance improvement for views in markets, where we have launched including value share gains of nearly 80 percentage points in Canada close to four percentage points in Germany and above two percentage points in France.

As Jarrett highlighted we have made proactive strategic decision to focus our execution on the largest profit pools with more supportive of regulation and enforcement.

Views of ultra is central to this approach and I'm encouraged by the strength of its early performance with further large blended in the key markets in 2026.

Tadeu Marroco: Our breakthrough innovation platform, glo Halo, introduced our first two-piece device and is designed to establish glo in the premium segment. While still early days, we are starting to drive encouraging results in priority launch markets, Japan, Poland, and Italy, with the majority of consumers new to glo, coming from both premium combustibles and the broader heated products category. We are also strengthening glo's overall brand equity across key consumer metrics. This consumer response is translating to early volume share momentum. We are encouraged by early trial to retention rates of around 50%, providing further confidence in the platform's potential. In 2026, our focus will be on accelerating trial among premium consumers across both combustibles and heated products, supported by target online and in-person activations.

Our breakthrough innovation plot the form glow helo introduce our first shoe piece device and is designed to establish <unk> in the premium segment.

Why it was still early days, we are starting to drive encouraging results in priority launch markets, Japan, Poland, and Italy with the majority of consumers neutral glow coming from both premium combustibles and the broader heated products category.

We are also strengthening gross overall brand equity across key consumer metrics.

This consumer response is translate into early volume share momentum.

We are encouraged by early trials to retention rates of around 50%, providing further confidence in the performance potential.

In 2026, our focus will be on accelerating trial more premium consumers across both combustibles and heated products supported by target online and in person Activations. We will continue to scale blue heeler through additional market rollouts in the largest heated product profit pools, where we can.

Tadeu Marroco: We will continue to scale Glo Halo through additional market rollouts in the largest heated product profit pools, where we can generate the strongest returns. Overall, we remain confident in the strength of this innovation platform and expect to progressively build share within the premium segment over time. As Javed highlighted, the heated products category remain highly competitive, and this has impacted our 2025 performance in the value for money segment, where we are present with Glo Hyper. Introducing Glo Halo into the premium space allow us to further differentiate our tiered portfolio. We see a clear opportunity to strengthen Glo's overall performance across both premium and value for money segments. Central to this is the launch of our next generation Glo Hyper device from Q2.

<unk> generates the strongest returns.

Overall, we remain confident in the strength of these innovation, but the former and expect to progressively build share within the premium segment overtime.

As Jarrett highlighted the heated products category remains highly competitive and this has impacted our 2025 per pharmacy in the value for ammonia segment, where we are present with glu hyper.

Introducing low helo into the premium space allow us to further differentiate our tier.

T O N.

And tier our portfolio.

We see a clear opportunity to strengthen blows over outperformance across both premium and value for money segments.

Central to this is the launch of our next generation below Hiper device from Q2.

Tadeu Marroco: The new Glo Hyper delivers a step change, offering quick start, longer-lasting session length, new connectivity, and a replaceable battery. These innovations significantly improve the consumer experience, and we are also further enhancing the consumables range. Taken together, these upgrades create a much stronger proposition designed to reinforce our competitiveness in the value for money segment. Third, I'm proud of the strong progress we have made in improving new category profitability. Since 2021, we have driven a GBP 1.4 billion improvement in category contribution, with all three new categories contributing to this momentum. Importantly, we have achieved this while continuing to invest in our transformation to drive future sustainable growth. Our new categories are meaningfully contributing to group results as we benefit from increased scale, reflecting traction in established markets, while continuing to invest in new market launches.

The new Glo hyper that delivers a step change offering quick starts longer started session length, new connectivity and replace of a battery.

These innovations significantly improve the consumer experience and we are also further enhancing the consumables range.

Taken together these upgrades create a much stronger proposition designed to reinforce our competitiveness in the value for money segment.

Third I'm proud of the strong progress we have made improving new category profitability.

Tadeu Marroco: Since 2021, we have driven a GBP 1.4 billion improvement in category contribution, with all three new categories contributing to this momentum. Importantly, we have achieved this while continuing to invest in our transformation to drive future sustainable growth. Our new categories are meaningfully contributing to group results as we benefit from increased scale, reflecting traction in established markets, while continuing to invest in new market launches.

Since 2021 we have driven a 1.4 billion pounds improvements in category contribution with all three new categories contributing to this momentum.

Importantly, we have achieved these while continuing to invest in our transformation should drive future sustainable growth.

Our new categories are meaningfully contributing to group results as we benefit from increased scale, reflecting traction established markets, while continuing to invest in new market launches.

Tadeu Marroco: This, supported by more consistent and constructive regulatory frameworks, such as those in place for Modern Oral in 24 markets, up from just four markets in 2022. We have sequentially improved our performance each year, and through our quality growth approach, we remain committed to driving sustainable profitability improvement moving forward. Fourth, I'm encouraged by the signs of positive progress we are seeing in the regulation and enforcement of new categories, especially in the US. While the vapor category continues to be impacted by the proliferation of illicit products, Vuse returned to revenue growth in the second half after 18 months of decline. This has been supported by increased state-level enforcement, with vapor director and enforcement legislation representing around 50% of tracked industry volume by year-end. In addition, Vuse's performance in the second half benefited from a competitor exit, further strengthening our market position.

This supported by more consistent and constructive regulatory frameworks such as those in place for modern oral in 24 markets up from just four markets in 2022.

We have sequentially improved our performance each year and through our quality growth approach, we remain committed to driving sustainable profitability improvement moving forward.

Fourth I'm encouraged by the signs of positive progress, we have seen the regulation and enforcement of new categories, especially in the U S.

Tadeu Marroco: While the vapor category continues to be impacted by the proliferation of illicit products, Vuse returned to revenue growth in the second half after 18 months of decline. This has been supported by increased state-level enforcement, with vapor director and enforcement legislation representing around 50% of tracked industry volume by year-end. In addition, Vuse's performance in the second half benefited from a competitor exit, further strengthening our market position.

Why are the vapor category continues to be impacted by the proliferation of illicit products views returned to revenue growth in the second half after 18 months of decline.

This has been supported by increased state level of enforcement with vapor director of any forced malaise relation representing around 50% of tracking the industry volume by year end.

In addition views performance in the second half benefited from a competitor exit further strengthening our market position.

Tadeu Marroco: Our recovery has also been supported by early signs of increased federal enforcement, targeting borders and larger distributors, resulting in high levels of seizures and fines. Looking ahead, we are encouraged by the increased focus and funding directed towards strengthening the FDA's enforcement capabilities. We were also pleased to receive a favorable initial determination on our International Trade Commission complaint from the administrative law judge, who has recommended a general exclusion order on imported illicit vapor device. We expect a final determination from the ITC in the coming weeks, which will then be subject to a 60-day presidential review. With an estimated 7% of the US vapor industry value still illicit, we are hopeful the authorities will continue with enforcement initiatives in 2026. Reynolds continues to advocate for a level playing field so that adult nicotine consumers have access to high-quality, compliant vapor products.

Our recovery has also been supported by early signs of increased federal enforcement targeting borders and larger distributors, resulting in high levels of seizures and fines.

Looking ahead, we are encouraged by the increased focus and funding directed towards strengthening the fda's enforcement capabilities.

We were also pleased to receive a favorable initial determination will now international trade Commission complain from the administrative law Judge who has recommended the general exclusion order on imported illicit vapor device.

Tadeu Marroco: We expect a final determination from the ITC in the coming weeks, which will then be subject to a 60-day presidential review. With an estimated 7% of the US vapor industry value still illicit, we are hopeful the authorities will continue with enforcement initiatives in 2026. Reynolds continues to advocate for a level playing field so that adult nicotine consumers have access to high-quality, compliant vapor products.

We expect a final determination from the ITC in the coming weeks, which will then be subject to a 60 day presidential review.

With an estimated 7% of the U S vapor industry value still release. It we are hopeful the alternatives will continue with enforcement initiatives in 2026.

Reynolds continues to advocate for a level playing field. So that all boats nicotinic consumers have access to high quality compliant vapor product.

Tadeu Marroco: Over time, we believe Vuse is well positioned to benefit from strong enforcement at both the federal and state levels. In addition, the FDA has recently recognized the positive role that nicotine pouches can play in helping adult smokers, who would otherwise continue to smoke, to transition to less risk alternatives, reinforcing their role in tobacco harm reduction. We welcome the FDA's new pilot program to streamline the PMTA review process for nicotine pouches. This is an important step towards keeping underage appealing, illicit products out of the market, while giving responsible manufacturers a more predictable path to PMTA authorization. We are confident in the strength of our science and portfolio, and we look forward to being able to complement our existing US portfolio with VELO Max, a higher moisture modern oral product in 2026, and we have increased capacity to support our sustainable growth agenda.

Overtime, we believe views is well positioned to benefit from strong enforcement at both the federal and state levels.

In addition, the FDA has recently recognized the positive role that nicotine pouches can play in helping all the smokers, who would otherwise continue smoke to transition to less risk alternatives reinforcing their role in tobacco harm reduction.

Tadeu Marroco: We welcome the FDA's new pilot program to streamline the PMTA review process for nicotine pouches. This is an important step towards keeping underage appealing, illicit products out of the market, while giving responsible manufacturers a more predictable path to PMTA authorization. We are confident in the strength of our science and portfolio, and we look forward to being able to complement our existing US portfolio with VELO Max, a higher moisture modern oral product in 2026, and we have increased capacity to support our sustainable growth agenda.

We welcomed Fda's, new pilot program to streamline the PMT a review process for nicotine pouches.

This is an important step towards keeping underage appealing illicit products out of the market.

While giving responsible manufacturers a more predictable path to PMT authorization.

We are confident in the strength of our science and portfolio and we look forward to being able to complement our existing U S portfolio with Zillow Max.

Higher moisture modern oral product in 2026, and we have increased capacity to support our sustainable growth agenda.

Tadeu Marroco: The final point I would like to highlight is that our financial flexibility continues to strengthen, and we remain on track to generate more than GBP 50 billion of free cash flow by 2030. BAT is a highly cash-generative business, delivering at least 100 operating cash conversion annually since 2020. 100% of operating cash conversion, reflecting our strong cash discipline and clear focus on returns, and enabling us to return GBP 34 billion of cash to shareholders over the same period. We remain committed to delivering sustainable shareholder returns with a 25-year track record of dividend growth and our sustainable share buyback program. I'm confident that we will sustainably deliver our Midterm Algorithm, as we are firmly committed to growing revenue sustainably and improving profitability.

And the final point I would like to highlight is that our financial flexibility continues to strengthen.

And we remain on track to generate more than 50 billion pounds of free cash flow by 2030.

B a T is a highly cash generative business delivering at least 100 operating cash conversion.

Annually since Duane Duane.

100% of operating cash conversion, reflecting our strong cash discipline and clear focus on returns and enabling us to return 34 billion pounds of cash to shareholders over the same periods.

We remain committed to delivering sustainable shareholder returns with a 25 year track record of dividend growth and our sustainable share buyback program.

I'm confident that we will sustainably deliver our midterm algorithm as we are firmly committed to growing revenue sustainably and improving profitability.

Tadeu Marroco: To conclude, we are carrying momentum into 2026, underpinned by a robust innovation pipeline, strong strategic partnerships, and confidence in our future fit capabilities. We are executing with discipline and delivering against our priorities. At the same time, we are enhancing financial flexibility, enabling continued investment in our transformation together with strong cash returns. I'm excited about the future for BAT, and believe we are well positioned to deliver long-term sustainable growth and value for our stakeholders. Thank you for listening. We will now be joined on stage by Victoria for the question and answer session.

To conclude.

We are carrying momentum into 2026 underpinned by our robust innovation pipeline strong strategic partnerships and confidence in our future fleet capabilities.

We executing with discipline and delivering against our priorities.

At the same time, we are enhancing financial flexibility, enabling continued investment in our transformation together with strong cash returns.

I'm excited about the future for <unk> and believe we are well positioned to deliver long term sustainable growth and value for all stakeholders.

Thank you for listening we will now be joined on stage by Victoria for the question and answer session.

Victoria Buxton: Thank you, Tadeo, and good morning, everyone. If you've joined us via the webcast, you can type your question directly into the online question box, or if you've joined the call, you can press star one on your telephone keypad. Tadeo and Javed will be very happy to take your questions, and I will now hand over to the conference call operator.

Thank you Jay and good morning, everyone. If he joined US via the webcast you can type your question directly into the online question box.

If he killing the core you can press star one on your telephone keypad.

Today in Japan, It will be very happy to take your questions and I will now hand over to the conference call operator.

Operator: Thank you. Our first question is from Andrei Andon-Ionita from Jefferies. Please go ahead, sir.

Thank you.

Question is from Andre and Anita from Jefferies. Please go ahead Sir.

Andrei Andon-Ionita: Good morning, Tadeu, Javed, and VBN. Thank you very much for taking my questions. First of all, two questions on Modern Oral, please. Number one, what are your expectations in terms of performance in the US in fiscal 2026 for Modern Oral, specifically? And secondly, are these expectations underpinned by the FDA approving the European Velo product for sale in the US, or are they mainly driven by the existing Velo Plus product? And perhaps finally, in terms of profitability, could you tell us a bit more about how you expect new categories profitability to evolve in fiscal 2026? Thank you.

Good morning, Corrado Javard MTBE and thank you very much for taking my questions first.

First of all two questions on modern oral please.

Number one what are your expectations in terms of performance in the U S in fiscal 'twenty six for our modern oral specifically.

And secondly are these expectations underpinned by the FDA approving the European Velo product for sale in the U S or are they mainly driven by the existing velo plus product and perhaps finally in terms of profitability could you tell us a bit more about how you expect new categories profitability to evolve in fiscal 'twenty six.

Thank you.

Tadeu Marroco: Okay, Andrei, thank you for the question. Look, we have a very strong product team with VELO Plus in the US. The levels of retention has been 70% throughout the year, which is really, really a very strong rate when you compare with other offers in the market. So basically, at the back of that, we believe that the product is competitive enough to continue growing in the US market, has all the indications from that. Today, we still have a low level of awareness in the brand around 30%. And we are present now in 150-plus thousand outlets, which accounts for something like 93% of the total oral revenue.

Okay. All right. Thank you for the question.

We have look we have a very strong product team with Villa closing day worse than the levels of retention has been 70% throughout the year, which is really really a very stronger rate when you compare.

With all the offers in the market.

So basically at the back of that.

We believe that.

The product is competitive enough to continue growing in the U S market has all of the indications for that today, we still have a low level of of AR.

Awareness and the brand around 30% and we are present now in about 150, plus our outlet thousands of outlets, which account for something like 93% of the total auto revenue. We have also seen that today average daily consumption as new products are.

Tadeu Marroco: We are also seeing that the average daily consumption, as new products start to be more satisfying for consumers in the US, is increasing. So it used to be around 2.8 pouch per day. Today, it's around 3.6 pouch per day. If you compare that with the European market, which is around 6 pouch per day, you see a lot of potential growth is still in the US, and in the Nordics, it's 12 pouch per day. So when you pull all this together, a strong product and the dynamics of the market evolving at the pace that it is in the US, the expectation is that we will continue growing. That's why we are investing capacity, like I mentioned during my presentation.

Statue to be more such fine for consumers in the U S is increasing so used to be around 2.8 boats per day. Today is around 3.6 boats per day, if you compare that with the with the European market, which is around six boats per day, you'll see a lot of potential growth is.

Two in the U S and in the Nordics is 12 boats per day. So when you pull all this together our strong product and <unk> and.

And the dynamics of the market evolving at the pace that is a it is in the U S. So that's the expectation.

It's just that we will continue to grow and Thats why we are investing capacity like a nation. During my my presentation, We mentioned Zillow, Max which as I ever higher moisture products that we have are in as part of the pilots.

Tadeu Marroco: We mentioned VELO Max, which is an even higher moisture product that we have in as part of the pilot that the FDA is running. We welcome the first of all that FDA is embracing nicotine pouch as a key category to address tobacco harm reduction in the US, because it's the lowest risk profile, if you want. There is no inhalation, there is no tobacco, there is no smell. That is much easier for consumers of cigarettes to convert into a much lower risk profile product. So they are put in place this pilot. We hope that for the next few months, we see our products, and we are, of course, that other competitors will come with other products as well.

That the Fda's Ronny, we welcomed the first of all the debt F days in brains in embracing nicotine pouch as a key category to address tobacco harm reduction day, Wes causes the lowest risk profile. If you. Once there is no inhalation there is no tobacco.

There is no smelter is a much easier for consumers of cigarettes, you convert into a much lower risk profile product. So they are putting in place. The these pilots we hope that for the next few months, we see our products and that we are cautious that other competitors will come.

With all the products as well and and photos. There is no problem with that was when I look outside the west where everyone is free to compete the leading brand outside the U S. Israel like we said in Europe we.

Tadeu Marroco: And, and for us, there is no problem with that. But when I look outside the US, where everyone is free to compete, the leading brand outside the US is Velo. Like we said, in Europe, we, our volumes in Velo are six times higher than the second-largest competitor. So what we want to see in the US is a level playing field, because in a level playing field, we know that we can win. So that's the first question on Velo. On. In terms of profitability, we have made a very strong improvement in profitability when you compare that not long ago, back in 2023, we were just reaching break even in this category, and today we have a 12% Category Contribution.

Our volumes in fuel or a six times higher than the second largest competitor.

So what we want to see in the west it's a level playing field because in a level playing field. We note that we can win.

So that's the first question on Zillow.

On the in terms of profitability, we have made a very strong profitability should improve.

Improvement in profitability when you compare that not long ago back in 2023, we're just reaching breakeven in this category and today, we have a 12% category contribution obviously I always said that this will not be linear year after year, because there'll be years, where we were going to reinvest.

Tadeu Marroco: Obviously, I always said that this will not be linear year after year, because there will be years where we're gonna reinvest back in the business at the back of exciting innovations, and 2026 is one of these years. Because as I said during my presentation, we have now premium innovation in every single of those categories. So we want to roll out glo Hilo, we want to roll out VELO Shift, we want to carry on rolling out Vuse Ultra. So we are not concerned about stipulating a specific pace of category growth year on year, because this will vary over time, but the trend is very clearly, the category will continue to grow.

In the business at the back of our exciting innovations and twenties 26 is one of these years because as I said during my presentation. We have now premium innovation in every single of those categories. So we want to rollout low helo, we want tool, which will roll out a villa shift we want to carry all rolling Alto <unk>.

Use altera. So we are not concerned about is stimulating a specific base of our category growth year on year. Because these will vary over time, but the trend is very clearly the category will continue to show it to grow.

Operator: Thank you. We'll now take our next question from Faham Baig from UBS. Please go ahead.

Thank you, we'll now take our next question.

From UBS. Please go ahead.

Faham Baig: Good morning, guys. Thank you for taking my question. The first one is on guidance for full year 2026. You've guided for the lower end of the midterm targets. Could you maybe share factors that could result in the performance, whether in 2026 or beyond that, getting you to the middle or even upper half of the range? That would be helpful. And then the second question is on heated tobacco. I guess it was a tough year in 2025 from a share perspective. How do you think about share progressing through 2026, particularly as competition in the category is intensifying?

Hey, good morning, guys. Thank you for taking my question. The first one is on guidance for full year 'twenty six.

You've guided for the lower end of the mid term targets could you maybe share factors.

That could result in the performance whether in 26 or beyond that getting Q2, two to the middle or even upper half of the range would.

It would be would be helpful.

And then and then the second question is on heated tobacco.

I guess it was a tough year in 2025 from a from a share perspective, how do you think about share progressing through through 2026.

Particularly as competition in the category is intensifying.

Tadeu Marroco: Okay, thank you, Faham. Look, I wanna start with the second one first, and then we address the guidance. Yeah, we clearly see areas of improvement in our performance in heated products. What we saw throughout 2026 is that the below WAP, which is basically where we were present until the launch of Glo Hilo later in the year, has been, you know, very competitive in some of the key markets. And that's the reason why I have just made a point today that we are coming with a revamped Hyper product that we believe that together with revamped consumables, will strengthen our position in that particular segment.

Okay take a forward look I want to start with the second one first and then we address the guidance.

Yeah, we are we clearly see areas of improvement in our performance seen heated product.

What we saw a trough 0.6 is that to the below up.

Is basically where we were present until the launch of Glo heal or later in the year is has been in there.

Competitive in some of the key markets and <unk> and <unk> and that's the reason why I have just made the point to date that we are coming with a revamp at a hyper product.

That we believe that together with the revamp that consumables will strengthening our our position in that particular segment. So we are very encourage by what we have seen of the performance of these this product and our inlet in initial test that we have been doing and.

Tadeu Marroco: So we are very encouraged by what we have seen of the performance of this product and in initial tests that we have been doing. We believe that this will support our performance moving forward. Obviously, glo Hilo will complement that, because it's the first attempt that we have done in the where 7% of the value of the category sits, which is the AWAP, the premium sec part of it, which is. We are extremely pleased with the performance. We are growing week after week with a level of retention of 50%. And this, complemented by a revamped value for money proposition, gives us the confidence that we can revert this trend and start growing from here.

We believe that this will support our performance moving forward and obviously blue heeler, we've complemented that because it's the first attempts that we have done in the aware, it's 7% of the value of the category receipts, which is the the I'll walk the premium sector part of it which is <unk> <unk>.

And and we are extremely pleased.

Pleased with the performance we are growing.

Week after week with a level of retention of 50% and <unk> and these complemented by a revamp at Verifone.

Value for money proposition gives us the confidence that we can reverse this trend and start growing thrown from from here.

Tadeu Marroco: Now, in terms of the guidance, I think that, Javed can explain a bit more about, 2026. I just want to call the attention that... After 2 years of, investing, resetting our business, the US business, our innovations pipeline, BAT is ready to go back to the, to the Midterm Algorithm that we have always had in the company around, a 3% revenue, 5% revenue, leading to a 4% to 6% operating profit, with a kick around 1% to 2% for EPS. That's the range of 5% to 8%. Obviously, our targets, have incorporated transaction effects. I always try to make this, disclaimer, about, BAT's targets.

Now in terms of the guidance I think that's a job it can explain a bit more about her twin 26, I just want to call the attention that's a.

After two years of investing in resetting our business.

The U S business, our innovation pipeline.

B a T is ready to go back to the to the midterm algorithm that we have always had in the company around the 3% revenue, 5% revenue leading to a 4% to 6% operating profits with a kick around one to two per cent for Ips. That's the range of five to eight obviously our targets have.

Incorporate the transactional FX I always try to make this disclaimer.

About a bat's targets and the but the profile of growth of these range, who different now from where we were I would say several years ago, because the new category will be even more prominent on that out of the three to five we have mentioned before that combustible.

Tadeu Marroco: But the profile of growth of this range will differ now from where we were, I would say, several years ago. Because the new category will be even more prominent on that. Out of the 3 to 5, we have mentioned before that combustibles, we expect to be delivering around 1 to 2%. With the US being, you know, in the medium term, between 0 to 1, and the rest of the group, the international part, I would say, the other two regions above 2%.

We expect to be delivering around 1% to 2% and a with a worse beam you know in the immediate term between zero to one and the rest of the group. The international part of say are the other two regions above 2% and <unk> in 2025, we have despite all the <unk>.

Tadeu Marroco: And, in 2025, we have despite all the difficulties that we face, mainly in the APMEA region, we were able to deliver 1%, and we said that Bangladesh and Australia had an impact of 1% at top line, which otherwise would be high end of this range. So I'm very confident that moving forward, we can comfortably be delivering within those range. And, and when you move to new categories, for the algorithm to work, we had to deliver double digits new category. Hasn't been the case in 2025, basically because of the headwind we face in vapor. There are a number of reasons for that, but mainly related to the illegal market in the US, that now we are seeing signs that the authorities, be federal or state level, are addressing.

Coats that we faced mainly in the App EMEA region, we were able to deliver 1% and we said that's Bangladesh in Australia had an impact of 1% that topline, which otherwise would be high end of this range. So I'm very confident that's moving forwards we can comfortably be delivering within those range and <unk>.

And when you move to two new categories for the hour into work, we had to deliver double digit new category hasn't been the case in 2025 basically because of the headwind we face in vapor there are number of reasons for that but mainly related to the legal.

Market in the west that so now we are seeing signs that the authorities be federal or state level are dressing. So we expect moving forward to have a less of a drag can eventually even a tailwind coming from from vapor that will be supportive of the category for B, a T and THP, we just saw.

Tadeu Marroco: So we expect, moving forward, to have less of a drag and eventually even a tailwind coming from vapor that will be supportive of the category for BAT. THP, we just spoke about, and we expect to accelerate our growth from now on with those offers. And obviously Modern Oral, we have a, you know, a leading brand now, and we expect to grow from strength to strength. So I'm very confident about being able to deliver the double digits new category revenue growth, to deliver 1 to 2% on the combustible side. This will flow through to the 4 to 6 in terms of increasing margins that is supported by all the productivity savings that we have rather mapped out until 2030.

Look about and we expect to accelerate our growth from now on without offers and obviously modern auto we have a you know a leading brands now and <unk> and we expect to grow from strength to strength. So I'm very confident about being able to deliver the double digit new category revenue growth.

To deliver 1% to 2% on the combustible side. These will flow through to the four to six in terms of increasing margins that is supported by all the productivity savings that we have a road map of doubt until 'twenty authority, and <unk>, <unk> and <unk> and I, specifically 26, I would like to jab at your comments about <unk>.

Tadeu Marroco: And I specifically in 2026, I would like Javed to comment about.

Javed Iqbal: Thank you, Tadeu. I think on 2026, specifically, if I go region by region, and then we can look at overall. In case of APMEA, as I highlighted, that we expect Bangladesh to be a not a big drag, but Australia still remain a meaningful drag, which is becoming smaller and smaller every year. So in 2026, Australia will still be a drag, but will be less meaningful in 2027. Having said that, also, we will continue to invest in the rollout of premium innovations in APMEA as well as you saw in terms of Glo Hyper, so that will be there as well.

Thank you to them I think on 2026, specifically if I go region by region and then we can look at overall in case of apnea as I highlighted that we expect Bangladesh to be not a big drag, but Australia still remain a meaningful drag which is becoming smaller and smaller every year. So in 'twenty to only six Australia will.

It will be a drag, but it will be less meaningful than twenty-seven having said that also we will continue to invest in the rollout of premium innovations in at me as well as you saw in terms of our glo hyper so that's where we'd be there as well. The other thing is in that area is that in case of Ami we still.

Javed Iqbal: The other thing is, in that area, is that in case of AME, we still face headwinds from the illicit environment in vapor, and also the regulation changes in Poland, which happened at the end of the year, which has made the legal vapor out of the market, which is again a drag for us. Coming to US, you have to keep in mind that comparator from 2024 to 2025, versus 2025 to 2026 is very different. We had a very good performance in 2025, so that comparatives changes. And also we are assuming for now stable volumes in Vuse in US. So we are expecting that the enforcement level, as we've seen so today, will stop the decline, but will keep the volume overall stable.

Face headwinds from the illicit environment in vapor and also the regulation changes in Poland, which happened at the end of the year, which has made the legal paper out of the market, which is again a drag for us.

Turning to U S. You have to keep in mind that the comparator from 24 to 25, what is the 25 to 26 is very different.

We had a very good performance in 25, so that comparator standard and also we are assuming for now stable volumes in views in U S. So we are expecting that the enforcement level as we've seen so today, we'll stop the decline, but we will keep us volume overall stable and lastly also.

Javed Iqbal: Lastly, also, we highlighted in our pre-close trading update that we are exiting certain geographies which are not adjusted, but they will have an impact on our numbers in 2026. So, hope this all gives you an idea of why the lower end of 2026. But having said that, we are all very proud and confident in the business that we are entering the first year of our Midterm Algorithm.

We highlighted in our pre close trading update that we are exiting certain geographies, which are not adjusted but they will have an impact on our numbers in 2026. So hold this all gives you idea of why the lower end of 'twenty 'twenty six but having said that we are all very proud and confident in the business that we are entering the first year of our mid term.

Algorithm.

Tadeu Marroco: Very comprehensive. Thank you both. Appreciate it.

Faham Baig: Very comprehensive. Thank you both. Appreciate it.

Very comprehensive thank you both I appreciate it.

Operator: Thank you. Our next question is from Ray Liam from Anchor Stockbrokers. Please go ahead.

Thank you. Our next question is from rate.

Stockbrokers. Please go ahead.

Yeah.

Rey Wium: Good day, Tadeu, Javed, Victoria. I just wanna get back to... I mean, it is quite interesting to listen to your optimism around the new categories. And I just had a quick look at the numbers. Obviously, Modern Oral is doing exceptionally well. You have the opportunity for Vapor to at least stabilize and heated tobacco. I don't know whether the jury is still out there, but I don't know if you can just talk high-level stuff here. To give us an idea, how do you... Which of these categories give you or makes you the most excited in terms of the future growth, in terms of that, I mean, especially now into 2026, we talk of a double-digit revenue growth?

Good day.

Victoria.

I just want to get back to I mean, it's quite interesting to listen to your optimism around the the new categories.

I had a quick look at the numbers.

Obviously modern auto is doing exceptionally well.

The opportunity for Pfizer to at least stabilize.

Tobacco I don't know, whether the jewelry store out there, but I didn't know if you can just talk high level stuff here to give us an idea how do you which of these categories.

Much of the Max most excited in terms of future growth in terms of that I mean, especially in 19 2026, we talk about double digit.

Our revenue growth and then just a follow up just on Australia.

Rey Wium: And then, just to follow up, just on Australia, I mean, it's quite interesting because I sit in this market. I mean, the legal market is now down to, like, 3 billion sticks or less. Now, clearly, I mean, if I look at Japan, I mean, that's basically what Japan will consume in the space of 7 days. So I mean, I struggle to understand why you say it will still be a drag. Is it not a time, you know, that you could consider to exit this market?

I mean, it's quite interesting because I was thinking this market.

I mean, the needle market is now down to like 3 billion sticks or less now.

Now clearly I mean, if I look at the Japan.

I spoke about Japan, a little confusing the spice of seven days, so I mean.

I struggled to understand why do you say it will still be a drag is that none of the time.

That.

Could consider to exit this market.

Rey Wium: ... So, yeah, I'm just curious to hear your thoughts around that. Thank you.

Curious to hear your thoughts around that.

Tadeu Marroco: Okay. Okay. On the new categories, obviously, Modern Oral is the exciting category out of the three. The pace of growth of Modern Oral around the world is very clear. And even in markets where there is no oral tradition, you take, for example, the UK, that when we launched VELO here 4 years ago, the incidence of nicotine in the oral was 0, and today is around 3%. Sporadically, it can go all the way to 4% in terms of use. And this is happening also in the likes of Poland. It's happening in emerging markets, because it's very affordable, and like Pakistan, that is doing extremely well, South Africa doing extremely well, Kenya.

Okay on the.

New categories, obviously more than Aro is the exciting category out of the three the pace of growth of modern Oreo around the world is a is a is very clear and the.

And even in markets, where there is no oral tradition.

Take for example, the U K, there's when we launched Vela here four years ago. The incidence of nicotine in the Euro was zero and today is is around 3%.

As for Ards click and go all way to 4% in terms of US and this is happening also in the likes of Poland is happening in emerging markets causes very affordable and like Pakistan that is doing extremely well in south Africa doing extremely well, Kenya. So there is a massive potential and we are very.

Tadeu Marroco: So there is a massive potential, and we are very pleased with the fact that now we have 24 markets already that have passed legislation. The last one has actually been Argentina a few weeks ago. Portugal has just passed legislation as well. So we see clearly a lot of potential in this category, and we are obviously very pleased that we have a leading brand in this category. In terms of tobacco heating product, it's a GBP 9 billion revenue category in which BAT has just below GBP 1 billion. So there is a lot of white space for us, and it has been more and more competitive, but we have now a product that is being present in the value side of the category, if you want, on the premium side.

Pleased with the fact that now we have 24 markets I'll read that have passed legislation, they're less one has actually been Argentina. A few weeks ago bought Hugo has just passed legislation as well. So we see clearly a lot of potential in this category and we are obviously very pleased that we have a leading <unk>.

<unk> in this category in terms of tobacco heating products is a 9 billion revenue category in which basically has a just below 1 billion. So there is a lot of white space photos and.

It has been more and more competitive.

But we have now a product that is being present in there in the in the value side of the category. If you want on the premium side that has never been the case before so with glor Hela. We are tapping a very very as has been in tap it sub category within the category for <unk>.

Tadeu Marroco: That one has never been the case before. So with glo Halo, we are tapping a very, very... It has been an untapped subcategory within the category for, for BAT, and we, we are extremely, excited about the, the, this possibility of, to occupy some of that, white space in a category that is still growing, not at the same rate of modern oral, obviously, but it still grows, at a mid, mid-single digit, or high single digit. So, and, and vapor is a, is a difficult category because of, of lack of enforcement and/or regulation. And, that's the reason why there is actually difficult to compete with some of these, illegal products or products that, doesn't have, concerns in terms of responsible way of doing vapor.

And we are extremely excited about the possibility of occupy some of that a white space in a category that is still growing not at the same rate of modern auto obviously, but it's still grows at a meter.

Mid single digit to high single digits, so and they're in vapor is a is a difficult category because of a lack of enforcement and or regulation and are attached. The reason why we have there is actually a difficult to compete with some of these are illegal product.

For products that doesn't have our concerns in terms of our responsible way of doing vapor. That's why we came with this campaign because you'll see a proliferation of a device with thousands of pumps that have a very different negative risk profile than the ones that we sell so there is no level, playing fields and <unk> and the <unk>.

Tadeu Marroco: That's why we came with this campaign, because you see a proliferation of device with thousands of puffs that have a very different negative risk profile than the ones that we sell. So there is no level playing field. And the reason why we are addressing a premium subcategory within vapor with the likes of Vuse Ultra is exactly our recognition of that. We are not really competing for volume. We are competing for value and offering consumers a responsible way to do vapor. And obviously, the US is the largest vapor market, so all the attention is to the FDA, that I think that has give some indications now that they understand that the root cause also of the problem is the lack of level playing field.

And why we are addressing a premium super category with eve within vapor with their lifestyle fuels Ultra is exactly a recognition of that we are not really competing for volume we are competing for value and offering consumers a responsible.

Way to do vapor and a and obviously the west is their largest vapour market. So all of the attention is to show the FDA that I think that has give some indications now that they understand that the root cause also of the problem is the lack of level, playing fields and and hopefully we can see some.

Tadeu Marroco: And hopefully, we can see some of the pilots that they are doing now in nicotine pouch into vapor in the future as well. So that's the new categories. Australia, look, Australia has, as you know, come with since the introduction of plain packaging in 2012, with very misguided and illogical regulations year after year, and increasing excise at much higher than inflation, to a point today that the average price of cigarettes legal markets in Australia is more than 20, equivalent of GBP 20, GBP 22 pounds, and whereas the illicit products is around GBP 6. So as a consequence of that, 65% of the combustible market now is illegal.

Of the pilots that they are doing now and nicotine pouch into vapor in the future as well so that's the new categories.

Australia Looker.

Australia has a as you'll know eh come up with a since the introduction of plain packaging in 2012, with a very misguided and the logical regulations ear after a year and the increase in excise.

At much higher than inflation to a points to date, that's the average price of cigarettes League.

Legal markets, India, Australia is more than 20 equivalent top 20 pounds 22 pounds and wire, whereas the illicit products is around six pounds. So as a consequence of that 65% of the combustion will market now is illegal they have in essence reduces the average price for consumers.

Tadeu Marroco: They have, in essence, reduced the average price for consumers, and for the first time in many years, we see an uptick of incidents of smokers in Australia. Not just they decimated the tax collection, but also with this illogical regulation, they are seeing now incentivizing consumers to smoke a product that is much cheaper than the legal markets, and obviously carry on with all the criminality as we know have seen in many different markets. Now, the impact for us is that has always been a very important market for BAT, and, but like Javed said, we've come to a point that becomes insignificant. So the drag in 2026 will not be the same as 2025. It's still a drag, but it's not be the same.

And for the first time in many years, we see an uptick of incidence of smokers in Australia.

Not just the decimated the tax collection, but also with these are illogical regulation. They are seen now incentivizing consumers choose to smoke a product that is much cheaper than the legal market and obviously carry on with all the criminality as we know and have seen in many.

Different markets now the impact for urgent that has always been a very important market for b, a T and Ah and but life Javid said, we've come to a point that becomes insignificant. So they're dragging 26 will not be the same as 25 is still a drag but it's not be the same and from there on <unk>.

Tadeu Marroco: And from there on, if the government carries on doing that, which seems to be heading towards 100% illegality anyway, we don't even need to take this issue lightly, because this, the direction of travel has been very clear. If you add the vapor category, that has an incidence of 9% of adult consumer and is 100% illegal today, 85% of nicotine consumption in Australia today is illegal. So it's just a question of, you know, a question of a couple of years and, to... Unless they decide to do something more reasonable, no?

The gourmet <unk> carries on doing that which seems to be heading towards 100% illegality anyway, we don't even need to tackle this issue leave because of.

These are the direction of travel has been very clear if you add the vapor category that has an incidence of 9% or about that consumer and is 100% illegal today, 85% of nicotine consumption in Australia today easy level. So it's just a question of a you know a question of couple of years in the two unless they they decide to.

To do something more reasonable though.

Yes.

Rey Wium: Thank you very much.

Thank you very much.

Operator: Okay, our next question is from Pallav Mehta from Barclays. Please go ahead.

Okay. Our next question is from allow me tell from Barclays. Please go ahead.

Tadeu Marroco: Good morning. Thanks for taking my question. So two of them. Firstly, on the US business, clearly, your Price Mix is pretty strong at 12%+.

Good morning.

Taking my question two of them.

Firstly on the U S business.

Right.

Pretty strong.

Pallav Mittal: ... Can you help us understand what percentage of your US volume portfolio is right now benefiting from the excise duty drawback? And how much score does it have to increase in the future, given your global business? That's the first one, and then secondly, appreciate all the commentary on your NGP guidance for 2026. But your low double-digit growth, it still, I mean, seems like you're factoring a pretty sharp normalization versus what we can see in data, especially on nicotine pouches and the e-vapor side of things. So can you just help us understand the moving parts for your low double-digit guidance for 2026?

Can you help us understand what percentage of your U S volume portfolio is now benefiting from the excise duty drawback.

How much does it help to increase in the future given your global business.

The first one and then secondly, appreciate all the commentary on your guidance.

And for 'twenty to 'twenty six but.

Your low double digit growth.

I mean seems like Youre factoring a pretty sharp normalization.

What we can see.

And data, especially on nicotine pouches on the EBIT side of things, but can you just help us understand the moving parts.

Low double digit guidance for 'twenty.

Tadeu Marroco: Okay, Javed, we'll cover your second question. On the duty drawback, this is a long-standing legislation in the US to incentivize local manufacturing and promote export from the US. So obviously, what we are doing is exactly that. Reynolds has invested more than $200 million in terms of manufacture over the last couple of years. We have generated more than 800 jobs, and we increased our purchase of leaf in the US by 65%, and today, Reynolds is the number one company in terms of volume of leaf purchase in the US market. So we are not making disclosures specifically about the duty drawback impact, but one data point for you to consider is the fact that our revenue in combustible would have been positive independent of the duty drawback.

Okay Java do a cover your second question on the duty drawback. This is a long standing.

Relation in the U S to incentivize, a local manufacturer and and promote export from the U S. So obviously.

What we are doing is exactly that be radars has invested more than 200 million in terms of manufacturer over the last couple of years, we had generated more than 800 jobs and we increase with our purchase of a leaf in the west by six 5% and should they raynaud's as the number one.

The company in terms of volume of leaf.

Purchase in the U S market so.

We are not making disclosures specifically about today due to claw back impact but.

One data point for you to consider is the fact that our revenue in combustible would have been positive independent of the duty drawback. So it's important to mention that because at the end of the day. If you. When you go back to what I was referring to in terms of the long term algorithm, we expect a big.

Tadeu Marroco: So it's important to mention that, because at the end of the day, when you go back to what I was referring to in terms of the long-term algorithm, we expect the US market, in terms of combustible, to be declining at rates around 6 to 7%. And this should be given the elasticity that still exists in the market, the possibility for Reynolds to get to a positive revenue around 0 to 1%. In the current years, it has been more than that, because the company is doing extremely well in terms of the strength of the portfolio, but also the Duty Drawback is helping for those in that sense as well.

The U S market in terms of combustible to be declining at a rate around 6% to 7% and these should be given the elasticity and the and.

And the debt is still exists in the market the possibility for range to get to a positive with revenue around zero to 1% in the current three years has been more than that because the company is doing extremely well in terms of the strength of the portfolio, but also the duty drawback is helping for for those.

In that sense as well, but in the opinion of the routes drawback.

Tadeu Marroco: But independent of the Duty Drawback, we are positive, and I feel very comfortable with the range that we have set ourselves for our midterm algorithm.

We are positive and I feel very comfortable with the range that we have set ourselves for our long term algorithm.

Javed Iqbal: I think on the overall new category revenue guidance of loaded double teens is one thing. A couple of points. One, in the US, even as I explained in my presentation, we had a negative number for the full year on Vuse. So what we are expecting in the Vuse numbers to be flattish, because it will require a more meaningful and more stronger enforcement, and given a very complex and long supply chain, even those measures will take time to have a meaningful impact. So even the ITC regulation, which today was talking about, if it gets passed through, it will be much later in the year when we'll see some meaningful impact.

Thank God.

Overall, new category revenue guidance of low double team. This is one thing has won a couple of points one of them in the U S.

Even ice as I explained in my presentation that we had that negative number for the full year on views. So what we're expecting in the views numbers to be flattish because it will require a more meaningful and more stronger enforcement and given a very complex and long supply chain. Even those measures will take time to have a meaningful impact so even the <unk>.

See regulation, which today was talking about if it gets passed through it will be much later in the year. When we will see some meaningful impact and having said that also as I highlighted the regulations for example in Poland in Europe, which has put a drag on the produced volume because it has made the whole it'll bleed the legal business or the negative.

Javed Iqbal: Having said that, also, as I highlighted the regulations, for example, in Poland and Europe, which has put a drag on the Vuse volume, because it has made the whole illegal business all negative in that number, so that's not possible to run, enter that market. Also the highly competitive environment we see in the BBAP segment within the heated product portfolio, as we were talking about earlier, that competitiveness will continue to be there for the short term. So if you put all these together, that's why our guidance on the low end of the teens. But having said that, we are very confident in mid-term that VELO will lead the charge of new category revenue growth, being the fastest growing brand in the fastest growing nicotine category globally, including US.

And that troubles. So that's just not possible to enter that market and also the highly competitive environment. We see in the beef segment within the heated product portfolio. As we were talking about earlier that our competitors will continue to be there for the short term. So if you put all these together that's why our guidance on the.

Low end of the teams, but having said that we are very confident in midterm that we know will lead the charge of new category revenue growth being the fastest growing brand in the fastest growing new nicotine category globally, including U S. I always said that given all these points. That's why we have guided on this front.

Javed Iqbal: But having said that, we are very confident in mid-term that VELO will lead the charge of new category revenue growth, being the fastest growing brand in the fastest growing nicotine category globally, including US. I would say that given all these points, that's why we have guided on this front as a low teens for now.

Javed Iqbal: I would say that given all these points, that's why we have guided on this front as a low teens for now.

At the low teens for now.

Pallav Mittal: Thank you.

Thank you.

Operator: Our next question is from Simon Hales, from Citi. Please go ahead.

Our next question is from Simon Hales from Citi. Please go ahead.

Simon Hales: Thank you. Morning, Tadeu, morning, Javed, morning, VV. So, a couple for me. I wonder if I could just first come back to some of those comments you just made on the US business on a go-forward basis. Javed, just back to the point in terms of the vapor performance and the flat vapor expectation for 2026. I'm still just trying to square that circle, given you've got pretty strong exit rate momentum through the second half of the year. I appreciate enforcement actions in vapor aren't a straight upward line, but we're still probably going to annualize at least through the first half some of the building enforcement we saw in 2025, and that should help the vapor category, one would imagine, or the legal vapor category in the first half.

Thank you Melissa Claiborne, Joe Good morning Brady.

So a couple from me I Wonder if I could just come back to some of those comments you just made on the U S.

It's on a go forward basis.

Java.

To the point in terms of the type of performance.

Lastly for expectation.

26, I'm still just trying to square that circle, giving you hope you've got pretty strong exit rate momentum through the second half of the year I appreciate enforcement actions and Baker on strike upward line, but we still probably going to annualize at least through the first half some of the building and of course, what we saw in 2025 and that should help with the category.

One would imagine illegal vapor category in the first half. So you therefore expecting as we come into the H two of 2026 to see your your biggest business no down year on year to get you back to that flat guidance for the year.

Simon Hales: So are you therefore expecting, in, as we come into H2 of 2026, to see your, your boost business now down year on year to get you back to that flat guidance for the year? That's the first point. And then secondly, on the US, today, you talked about 6 to 7% being the normal helpful run rate of decline on combustibles volumes. Is that something you expect to see in 2026? And could you also perhaps talk a little bit about what you're doing in discount at the moment, the performance of Doral last year and your plans on that brand going forward?

The first point and then secondly on the U S. Today, you talked about six or 7% being the normal.

Run rates of decline on combustibles volumes is that something you expect to see in 2026 and could you also perhaps talk a little bit about what youre doing in discount at the moment the homes of the ROE last year and your plans on that front going forward.

Javed Iqbal: Okay. Yeah.

Tadeu Marroco: Okay.

Javed Iqbal: So if I take the first one, so I think one thing which I have to highlight, further on the second half performance of 2025 of Vuse in US, other than the enforcement, there is also one item which will not see repetition, was the delisting of competing product in which Vuse gained. So 63% of those consumers stayed within the closed systems. And in RCS system, Vuse gained more than their fair share of our category. So that is one thing which is also boosting Vuse performance in the second half.

Okay. So if I take the first one so I think one thing, which I have to highlight further on the second half performance of 2025 of us in the U S.

Other than the enforcement. There is also one item, which will not see reputation was the delisting of competition product in which views gains of 63% of those consumers stayed within the close systems and in Rts system views gained more than their fair share of our category. So that is one thing which is also boosting views per.

Four months in the second half so I wouldn't be a super creating that second half into the full year of 2006 full year of 26 is more focused and will be more dependent upon the level of enforcement, we see and as also highlighted by the deal that although we have seen regulation covering 40% of the legal world.

Richard Felton: ... So I wouldn't be projecting that second half into the full year of 2026. Full year of 2026 is more focused and will be more dependent upon the level of enforcement we see. And as also highlighted by Tadeu, that although we have seen regulation covering 40% of the legal volume, but level of enforcement varies from state to state. So one, not having that one-off of the exit from a competitor, which we gained more than fair share, and enforcement, it still seems to be early days, so that's why our guidance on the Vuse comment was made by me.

Javed Iqbal: ... So I wouldn't be projecting that second half into the full year of 2026. Full year of 2026 is more focused and will be more dependent upon the level of enforcement we see. And as also highlighted by Tadeu, that although we have seen regulation covering 40% of the legal volume, but level of enforcement varies from state to state. So one, not having that one-off of the exit from a competitor, which we gained more than fair share, and enforcement, it still seems to be early days, so that's why our guidance on the Vuse comment was made by me.

Liam but level of enforcement varies from state to state. So one not having that one off of the exit trough of competition, which we gained more than fair share and enforcement is still seems to be early days. So that's why our guidance on the views comment was made by me.

Tadeu Marroco: Yeah, on the, on the volume side, my comment is more, I would say, hypothetical situation, no? It's not a 2026. What's happening in the US market is the following: If you go back to 2020, 54% of the nicotine users were using traditional nicotine products, combustible, traditional oral. You go now to 2025, it's 34%. So the balance is happening is-- what's happening is the transition of these consumers to either poly using or using solo users of, becoming solo users of, smokeless products, either modern oral or vapor products. So obviously, the secular decline that was related to ADC and level of incidence reducing over time, around 4%, will not be coming back. That's my point.

Yeah on the on the volume side to my comment is more.

I would say a high part have Piper Petco situation, though is not at 126, what's happening day west market as the fall. If you go back to 2020, 54% of the nicotine users were using traditional.

Nicotine products combustible traditional world. You'll go now to 22.5 is 34%. So the balance is happening is what is happening is the transition of these consumers to either poll using are using solo users or becoming a solo uses of it.

The smokeless products are either modern oro or vapor products. So obviously the secular decline that was related to a D C and level of incidents reducing overtime around 4% will not be coming back. It. That's my point, so even if you see up meaningfully.

Tadeu Marroco: So even if you see a meaningful enforcement in vapor, in disposables, that we know that has currently plays a role in terms of the level of decline of cigarettes, even if we see that, even if we see improvement in the macroeconomics in the US, it's very hard to imagine the market going back to 4% decline because of the dynamic of the poly users and solo users in new categories that I was referring to.

For submitting vapor in disposables that we note that has a currently plays a role in terms of the level of decline of cigarettes.

Even with we see that even if we see improvement in the macroeconomics in the U S is very hard to imagine the market going back to 4% declines because of the dynamic of their party use and solve your users and new categories that I was referring to.

Tadeu Marroco: So my point is that, in the long run, with a meaningful enforcement in disposable, with macroeconomics is strengthening between 6 to 7, I think that where we see today in the next couple of years, in the scenario that we are seeing, I think that the performance in 2025, around 7 to 8, is a more reasonable one to assume. So that's what I would assume. Now, obviously, this is overall market. When you separate from the overall market, the deeper discount, the deeper discount has a very different dynamic. We are seeing more activity there from competitors, and as a consequence, we saw the deeper discount growing by 10% in 2024, 4 or 5, was even higher than the 7% that they grew in 2024.

So my point is that in the long run it with a meaningful enforcement and disposable with microeconomics a strengthening bid.

Six to seven I think that we're at where we sit today in the next couple of years in the scenarios that we are see I think that there the performance and 25 around seven to eight is a more reasonable one to assume so that's what I would assume now obviously this is overall market when you. This.

When you separate from the overall market the deeper discounts.

The deeper discount has a very different dynamic.

We are seeing more activity there from competitors and as a consequence, we saw the deeper discount growing by 10% in 2020 for four or five it was even higher than the 7% that they grew in 2024. So we have been piloting doral to your question, we have been always very mindful caused.

Tadeu Marroco: So we have been piloting Doral, to your question. We have been always very mindful, because despite the fact that the deeper discount is growing as opposed to the general markets, the 95 percent of the value continues to be outside the deeper discount. So we are very mindful in terms of testing the product, in this case, Doral. We did pilots in Louisiana, in West Virginia, and what we are seeing in those pilots is suggesting that we'll be able to expand Doral for other states as well, take into consideration the source of business, the potential downtrades of our own brands. We are doing that with the value in mind. We are not doing that for the sake of market share.

Despite the fact that the deeper discount is growing as opposed to the general market Theyre 90, with 95% of the value continues to be outside the deeper discount. So we are very mindful in terms of our AV testing the product in this case. This doral, we are we do what we did.

Pilots in Louisiana in a in West Virginia.

And the and what we are seeing in those pilots is suggesting that we'll be able to expand doral for other states as well.

Taking into consideration the source of business the potential downgrades of our own brands. We are doing that with the value in mind, we are not doing that for the sake of market share. We want to have keto kept true to expand doral in the states where that makes sense from the vantage point of view.

Tadeu Marroco: We want to expand Doral in the States that makes sense from the value point of view.

Simon Hales: Got it. Thanks very much.

Got it thanks very much.

Operator: Our next question is from Richard Felton from Goldman Sachs. Please go ahead.

Our next question is from Richard Felton from Goldman Sachs. Please go ahead.

Richard Felton: Thank you. Good morning. Thanks for taking my questions. Two, please. The first one is on vapor. So, look, great news that the US is starting to take some proper enforcement action against illicit vapor. But, you know, your comments point to, I suppose, a challenging environment in markets ex-US. So thinking about those ex-US markets, are you seeing any shifts in appetite from governments or regulators to start to enforce against that illicit segment a little bit more stringently, or does that remain very challenging? Any comments on some of your top vapor markets, ex-US, on that topic would be very helpful. And then the second one, sorry to come back on the Duty Drawback question.

Thank you good morning, guys. Thanks for taking my questions T. Please and the first one is on vapor select great news that the U S. You're starting to take some proper.

Forced an action against illicit data and.

Your comments point to a spec a challenging environment in markets ex U S. So thinking about ex U S markets are you seeing any shift in appetite from governments or regulators to start to enforce against that.

And a little bit more stringently or does that remain very challenging and any collinsville familiar top David markets ex U S.

On that topic would be very helpful. And then the second one sorry to come back on the GT drove that question and I. Appreciate you don't want to give us the exact numbers for 2025.

Richard Felton: I appreciate you don't want to give us the, the exact numbers for 2025, but just sort of, I suppose from a high level perspective, thinking about Duty Drawback into 2026, is the tailwind gonna be more or less than it was in 2025, a similar level? Any high-level comments just to sort of help us triangulate on that would be very helpful. Thank you.

If I start from a high level.

<unk> perspective thinking about G. T draw back into 2026 is a tailwind can it be more or less than it was in 2025 is similar level and any high level comments just to sort of help us triangulate all that would be very helpful. Thank you. Okay. Richard look vapor is I don't think that there is a one size fits all.

Tadeu Marroco: Okay, Richard. Look, vapor is, I don't think that there is a one-size-fits-all here. There are. We know based on our own experience, that when we have geographies where we have retail license, we have proper regulation and proper enforcement. I would say, for example, France is one of the cases. You just can sell vapors in tobacconist stores, and if you are caught selling, for example, a disposable now, you have a massive fine in euros, and this helps with the discipline in the markets.

Here there are we know Beijing, our own experience that when we have geographies, where we have retail license, we have proper regulation and properly fortunate I would say for example, France is one of the case you just can sell vapors in tobacco niche stores and if you are caught selling for.

For example, disposable now you have a massive fine in euros and <unk> and this helps with the with the with the with the discipline in the market and are in the U K for example, despite the fact that we have been.

Tadeu Marroco: In the UK, for example, despite the fact that we have been asking for a retail license and we haven't seen the movement in that direction, there is a Tobacco and Vapes Bill being discussed as we speak, and hopefully they will address that. But the attempts to ban disposable has failed, because the manufacturers that are not responsible try to circumvent these regulations in the case. So 50% of the market is illegal today in vapor, and this is a demonstration of how difficult the governments find to either regulate, but more important, to enforce regulation in some markets.

Asking for a retail license in <unk>, we haven't seen the movement in that direction. There is a tobacco vape and.

Bill being discussed as we speak and hopefully they do address that but are they at the attempts to ban disposable has failed.

Because they the bond factors that I'm not responsible they try to circumvent in the in the case. These regulations. So 50% of the market is illegal today vapor and this is a demonstrates the demonstration of how difficult to their governments find.

Sure either regulate but more importantly, we enforce regulation in some markets.

Tadeu Marroco: We have, you know, in as much as we can, and we have promoted this Vapor Deserves Better campaign. We have been very vocal about what are the measures that government should be taking into consideration to try to discipline that. And this, with no surprise, you will see us talking about retail license, hefty fines if they got caught, a more stringent discussion in terms of age verification when you buy the product, and a negative list to avoid things like sucralose that in the liquids, to sweet the liquids. So there is, in our webcast and all that, plenty of. But there is still a lot of work to be done on that.

We have you know.

As much as we can and we have promoted these vapor deserves better campaign, we have been very vocal about what are the measures that government should be taken into consideration to.

To try to disciplined debt and these are with no surprise, you'll see us talking about retail license.

<unk> fines, if they got caught.

A more stringent a discussion in terms of our age verification when you buy the product and the.

Negative lease drop wide thinks like sucralose there.

In the liquids to sweep the liquid so there is a.

In our webcast and all that there is a plant of but there is still a lot of work to be done on that and as a consequence, we are trying to as part of our resource resourceful location with turnover investment mindset. There the quality growth, which is not just about top line, but also bottom line would have been focus on and more important.

Tadeu Marroco: And as a consequence, we are trying to, as part of our resource allocation, return of investment mindset, the quality growth, which is not just about top line, but also bottom line, we have been focused on more important markets, the likes of France, like I said, the likes of Germany, the likes of Italy, which is standing out from others, and then pulling back in markets like Malaysia, for example, and South Korea, and so on, so forth. So that's the situation on vapor and outside the US. In terms of duty drawback, look, we are not giving guidance specifically for the drawback. There is...

Markets are the likes of fronts like I said that the likes of Germany, the likes of Italy.

Which is our is is standing out from from others and then pulling back in markets like Malaysia for example, in South Korea, and so on so forth. So thats the situational on vapor.

And outside the U S in terms of our off duty drawback Luca.

We we I'm not giving guidance specifically for the for the drawback.

There is a we see that the benefits that we have generated for the economy. For example is the driver behind as much as we can startup.

Tadeu Marroco: We see that the benefits that we are generate for the economy, for example, is the driver behind, as much as we can start to, you know, grow employment and growing the activities in the farmers' domestic in the West. We carry on. Obviously, this is not forever. This will be, like you suggest, a peak. And in the meantime, we are strengthening our portfolio in combustible. We are seeing the overall market decline being more supportive, which is also important for the future. And more important is us being able to create a strong position outside combustible, because I understand the concern on the combustible side, but overall, nicotine in the US is growing. It's growing in value, and it's growing volume.

Growing prime enter in growing the activities and the farmers don't mess in the west we carry on obviously theres not forever. These will be like you suggest a peak and <unk> and in the meantime, we are strengthening our portfolio in combustible we are seeing the overall market decline.

Be more supportive.

Which is also important for the future and are and more importantly is us being able to create a strong position outside combustible because I understand the concern on the combustible side, but overall Nickelodeon in the U S is growing is growing value in this growing volume so despite the.

Tadeu Marroco: So despite the fact that you see consistent decline in cigarettes, you see massive increase in the Modern Oral space, you see strong increases still in Vapor, unfortunately, on the illegal side, but it's very encouraging, the signs that the new administration is giving to address that. Because in untapping this potential there, there is not much concern about the direction of the cigarette. Because what we want, in essence, is exactly to migrate smokers out of cigarette towards those products. But what is needed is a level playing field.

Fact that you seek course extent decline in cigarettes, you'll see massive increase in the modern RF space, you'll see strong inquiries are still in vapor. Unfortunately on the leg illegal side, but it's very encouraging the signs that the new administration is giving to address that caused her E ink in untapped in this.

Potential there there is no much concern about the direction of the secret because what we want in essence is exactly to migrate smokers out of cigarettes towards those products, but it is what is needed is a level playing field.

Yeah.

Operator: Thank you. Wonderful, Joanna. Our next question from Bastian Agut from Bank of America.

Thank you.

Our next question from Bastian <unk> from Bank of America.

Bastien Agaud: Good morning, Bastian from Bank of America. Thank you for taking my question. I just have a quick one on the buyback. Your net debt is close to your target, 2.5, and your free cash flow in 2025 was quite strong. So my question is, regarding the buyback, £1.3 billion for 2026, what kind of margin do you have to potentially increase it at some point or another during the year? I understand that your debt is approximately 70% in dollars, so could be quite volatile on that. So, but just to understand the moving part on your buyback for full year 2026. Thank you.

Good morning, Bastian from uncle, Sam Thank you for taking my question.

I just have a quick one on the buyback.

Your net debt is close to two your target to PON side and your free cash flow 25 was the worst quite strong. So my question is regarding the buyback when country until 2026, what kind of margin do you have to potentially.

It had some thoughts or another during the year understand that show that you're.

Approximately 70%.

So could be quite volatile in that so but just to understand the moving parts on your back.

But don't forget when shakes.

Yeah.

Javed Iqbal: I think, Bastian, thank you very much. We started a sustainable share buyback program in 2024, and we started it with GBP 700 million, and now we are at GBP 1.3 billion with an increase of GBP 200 million for 2026. We remain our focus on cash and also deliver. We have to enter into the leverage range of 2 to 2.5. We want to make sure that we continue to deliver additional incremental dividend in sterling terms, and continue our 25 years plus record on that front, and continue a sustainable share buyback. What we want to ensure is to create more optionality for capital allocation and medium to long term for the business.

I think especially in thank you very much we started a sustainable share buyback program in 2024, and we started with $700 million.

And now we are at 1.3 billion with the increase of 200 million for towards the 26.

We remain our focus on cash and also de lever we have to enter into the Algoma a range of two to 255 and also we want to make sure that we continue to deliver additional incremental dividend and the Sterling thumbs and continue our 25 years plus lab record on that front.

And continue a sustainable share buyback, what we want to ensure is to create more optionality for capital allocation and medium to long term for the business. So for now I'm very comfortable with the increase we have done of 200 million from one one to 1.3 for 'twenty 'twenty six and we keep on focusing on generating cash to bring us back into a REIT.

Javed Iqbal: What we want to ensure is to create more optionality for capital allocation and medium to long term for the business. So for now, I'm very comfortable with the increase we have done of GBP 200 million, from GBP 1.1 billion to GBP 1.3 billion for 2026, and we keep on focusing on generating cash to bring us back into our range of 2 to 2.5, and continue a sustainable buyback.

Javed Iqbal: So for now, I'm very comfortable with the increase we have done of GBP 200 million, from GBP 1.1 billion to GBP 1.3 billion for 2026, and we keep on focusing on generating cash to bring us back into our range of 2 to 2.5, and continue a sustainable buyback.

End of two to 2.5 and continue a sustainable buyback.

Bastien Agaud: Thank you very much.

Thank you very much.

Javed Iqbal: Yeah.

Operator: Thank you. Our next question is from Damian McNeila from Deutsche Numis. Please go ahead.

Thank you. Our next question is from Danielle <unk> from Deutsche and UBS. Please go ahead.

Damian McNeela: Hi. Morning, everybody. Thanks for taking the questions. First question is just on US combustible, and particularly on pricing. I was wondering if you could provide any more granularity on the pricing within the sub-segments that you operate in, and what the sort of outlook for '26 might be for pricing, given the very strong year last year? And then the second question is on CapEx. You've indicated a step up this year. I was just wondering whether that level of CapEx is what we should be expecting for out years past '26?

Hi, good morning, everybody and thanks for taking the questions. First question is just on U S combustible and particularly on pricing.

Wondering if you could provide any more granularity on the pricing within the sub segment.

That you operate in.

And what.

What sort of outlook for 'twenty six might be for pricing given the very strong year last year and then the second question is on Capex, you've indicated a step up this year and I was just wondering whether that level of capex is what we should be expecting for outer years past.

Tadeu Marroco: ... Thank you, Daniel. Look, on the CapEx side, we are increasing on the back of investments, mainly on the modern oral space. Most of the CapEx today is being reverted back to the new categories and giving the space for us to continue growing. We don't have, you know, huge expectations to be much beyond the level that is currently. And this is suiting us well, because at that level, we still can be very close to the 100% of operating conversion.

2026.

Thank you Danielle look.

On the Capex side.

We are increasing at the back of investments mainly on the modern oral space.

Most of their capex today as being reverted back to the two they are to the new categories, and our and giving the space for us to continue growing.

We don't have a.

Huge expectations should be much beyond the level that is currently and the and this is shooting as well because at that level. We still can be very close to the 100% of our operating conversion is not a limitation, but it's just the fact that with this level of Capex address the biz.

Tadeu Marroco: It's not a limitation, but it's just a fact that with this level of CapEx address the business needs, at the same time, it puts us in a strong position to continue having high levels of operating cash conversion, which is very helpful for the financial flexibility and capital allocation that Javed was referring to. On the US combustible, look, I cannot be talking about pricing, and what I can say to you is that the price elasticity is still very benign in the US, when you compare the price of cigarettes vis-a-vis the average household income.

And this leads at the same time it puts us in a strong position to continue having high levels of operating cash conversion, which is very helpful for the financial flexibility capital location. That's her job. It was referring to on the U S. Combustibles look I cannot be talking about pricing and are we what are what.

I can say to you is that the price elasticity is still very benign day, Wes when you compare the price of cigarettes visa fees.

The average.

In household income and.

Tadeu Marroco: And, obviously, there is a dynamic there because of the specific tax that when we increase the price of a pack of cigarettes, the manufacturer have a, a higher benefit than the consumer perceive as a price increase, which is also helpful. But what Reynolds has been doing is laddering some our brands. We did that very successfully with Newport. We have launched Pall Mall Select, as well, which is another laddering. And, we have now Doral, like I said, in pilot phase, that we probably expect to roll out to more states. But I cannot speculate with you about future price.

Obviously, there is a dynamic there because of this specific tax that's when we increase the price of a pack of cigarettes. The manufacturer have a higher benefit than a consumer perceive as a price increase which is also helpful and but what.

<unk> has been doing is leather and some our brands we did that to a very successfully with Newport we.

We have lodges bought more select as well, which is another lettering and we have now doral like I said in pilot phase that we probably will expect Choo Choo Choo Rollouts Shaw to more states and.

But I cannot speculate with you about the future price.

Operator: Thank you.

Thank you.

Victoria Buxton: Thank you, everyone.

Rey Wium: Thank you. It appears that was the last question today over the phone. With this, I'd like to hand the call back over to Victoria. Over to you.

Operator: Thank you. It appears that was the last question today over the phone. With this, I'd like to hand the call back over to Victoria. Over to you.

Thank you it appears.

That was the last question today over the phone.

I'd like to hand, the call back over to Victoria to you alright. Thank you very much everybody for your questions I'm afraid. That's all we have time for stay safe. He said a question into the web and the IR team will be utilized to answer question here as we can.

Victoria Buxton: Sorry. Thank you very much, everybody, for your questions. I'm afraid that's all we have time for today. If you put a question into the web, then the IR team will be delighted to answer the question as soon as we can. I'd now like to hand back to Tadeu for closing remarks.

I'd now like to hand back to today for closing remarks, okay. Thank you all for listening today and for your questions to close I'm confident we have the right building blocks in place to deliver our midterm Agua and supported by delivering 25 results at the top end of guidance, we will continue to reward our shareholders through strong.

Tadeu Marroco: Okay, thank you all for listening today and for your questions. To close, I'm confident we have the right building blocks in place to deliver our Midterm Algorithm, supported by delivering 2025 results at the top end of guidance. We will continue to reward our shareholders through strong cash returns, including our progressive dividend and sustainable share buyback, and enabling us to deliver long-term growth and value creation. Thank you again for joining us. I look forward to see many of you at the CAGNY conference next week, where we are presenting on 18 February.

Ketchup returns, including our progressive dividend as sustainable share buyback and enabling us to deliver long term growth and value creation. Thank you again for joining us I look forward to see many of you at the Cagny Conference next week, where we are presenting on the 18th of February.

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