Matt Smith

Matt Smith inquired about the reacceleration in smoke-free volume growth beyond 2026 compared to the current year's guidance, specifically asking how the U.S. market and expansion into existing IQOS markets are factored into the new medium-term targets.

Answer

CFO Emmanuel Babeau and Group CEO Jacek Olczak explained that the reacceleration is primarily driven by the normalization of Japan's multi-step excise tax changes post-2026, which will create more fiscal symmetry between heated tobacco products and cigarettes. They also highlighted the anticipated FDA authorization for ZYN Ultra in the U.S. to address portfolio asymmetry and the non-recurring nature of combustible excise increases in markets like India and Mexico. Innovation was also cited as a key driver.

Matt Smith asked about the reacceleration in smoke-free volume growth beyond 2026 compared to the current year's guidance, specifically inquiring about the U.S. as a new market opportunity and the potential for expanding platforms into existing IQOS markets.

Answer

Jacek Olczak (Group CEO, Philip Morris International) explained that the reacceleration beyond 2026 is primarily driven by the normalization of excise tax changes in Japan (with more symmetry between HTP and cigarettes from 2027) and addressing ZYN portfolio asymmetry in the U.S. with pending FDA authorizations. Emmanuel Babeau (CFO, Philip Morris International) added that IQOS is showing strong growth in various international markets like Italy, Germany, Spain, Romania, Bulgaria, Indonesia, Philippines, Gulf, Mexico, and a promising start in Taiwan.

Matt Smith from Stifel asked for clarification on the U.S. ZYN business's expected 'best-in-class margin structure' in light of Q3's performance, specifically whether the $100 million investment was a sustained or normalized level. He also requested more detail on the drivers behind the anticipated single-digit operating profit growth in Q4, including inventory timing for IQOS and ZYN, and ongoing investment levels.

Answer

Emmanuel Babeau, Chief Financial Officer, clarified that the $100 million investment in Q3 for ZYN was a one-off, non-repeatable cost. He reiterated that ZYN is expected to maintain best-in-class margins within the group, even with a 'normal' higher level of promotional activity compared to H1. For Q4 operating profit, Babeau explained that lower growth is due to inventory adjustments for IQOS and ZYN, less favorable combustible pricing, continued high investment pace, and a significantly higher tax rate in Q4.

Matt Smith from Stifel asked for clarification on the U.S. ZYN business's expected 'best-in-class' margin structure, specifically whether the $100 million Q3 investment was a sustained or normalized level. He also inquired about the specific drivers behind the anticipated single-digit operating profit growth in Q4, including inventory timing, U.S. investment levels, and other factors.

Answer

Emmanuel Babeau, CFO, clarified that the $100 million investment in Q3 for ZYN was a one-off, non-repeatable expense. He affirmed that ZYN is expected to maintain best-in-class margins within the group, even with a new, higher 'normal' level of promotional activity compared to H1. Regarding Q4 operating income growth, he explained that while underlying business momentum remains strong, the slower growth is due to inventory adjustments for IQOS and ZYN, less favorable combustible price increases due to phasing, continued significant investment, and a substantially higher tax rate expected in Q4 to reach 22% for the full year.

Matt Smith asked about Post Holdings' expectations for the rest of the business (excluding foodservice) through the year, specifically if lower EBITDA contribution from PCB was factored into guidance. He also inquired about the stronger normalized foodservice earnings base, including timing benefits in Q1 2026 and expectations for volume progression, especially in higher value-added eggs.

Answer

Matt Mainer, CFO and Treasurer, stated that the balance of the portfolio is largely similar to initial expectations, with no material callouts. For foodservice, he explained Q1 benefits from Avian Influenza recovery and customer inventory reloading, expecting future volume growth of 3-4% with a mix benefit, aligning with historical trends.

Matt Smith asked about Post's expectations for the rest of the business through the year, excluding the strong Foodservice segment, relative to initial expectations, and if any lower EBITDA contribution from PCB is factored in. He also inquired about the drivers of stronger normalized Foodservice earnings, including timing benefits and expected volume progression, especially in higher value-added eggs.

Answer

CFO and Treasurer Matt Mainer stated that the balance of the portfolio is largely similar to the initial outlook with no material call-outs. For Foodservice, he noted year-over-year favorability due to avian influenza impacts in the prior fiscal year and customer inventory reloading in Q1, expecting future growth to align with historical 3-4% rates with a mix benefit.

Matt Smith asked about the refrigerated retail segment's performance, specifically if its 20% EBITDA margin in the quarter, which benefited from AI pricing, is sustainable at a high-teens level in a normal environment. He also sought observations on private label trends across Post's categories, questioning if consumer trading down is price gap or category dependent.

Answer

CFO and Treasurer Matt Mainer confirmed that the refrigerated retail segment's EBITDA margin was inflated by avian influenza pricing benefits that fell away. He noted that high teens is reasonable for the holiday season, but slower periods would see margins closer to 16%. President and CEO Rob Vitale stated that private label trends are primarily price gap dependent, with consumers increasingly drawn to promotional activity.

Matt Smith asked about the refrigerated retail segment's performance, specifically if its 20% EBITDA margin in the quarter, which benefited from AI pricing, is sustainable at a high-teens level in a normal environment. He also sought observations on private label trends across Post's categories, questioning if consumer trading down is price gap or category dependent.

Answer

CFO and Treasurer Matt Mainer confirmed that the refrigerated retail segment's EBITDA margin was inflated by avian influenza pricing benefits that fell away. He noted that high teens is reasonable for the holiday season, but slower periods would see margins closer to 16%. President and CEO Rob Vitale stated that private label trends are primarily price gap dependent, with consumers increasingly drawn to promotional activity.

Matt Smith asked if there was anything unique to call out on operating costs (beyond marketing being up double digits and evenly phased), and if the current level of investment allows for future SG&A leverage post-2026.

Answer

Steve Voskuil (SVP and CFO) expects operating costs to be fairly even across quarters, though R&D might build more in the back half. He stated that while investments are multi-year for future growth, they are balanced with the need for margin recovery in 2027. Hershey aims to fuel investment with productivity and savings, driving efficiencies in the supply chain and between lines, with the goal of seeing leverage across all lines over time.

Matt Smith inquired about any unique aspects of the operating cost increases expected through the year, beyond marketing being up double digits and evenly phased. He also asked if the level of investment in 2026 would allow for future leverage from SG&A as the company exits the year.

Answer

SVP and CFO Steve Voskuil stated that operating costs, including R&D, will be up across quarters, with R&D building more in the back half. He explained that while investments are multi-year to set up future growth, the company is also focused on margin recovery in 2027. Hershey aims to fuel investments with productivity and savings, driving supply chain and inter-line efficiencies to achieve leverage across all lines over time.

Matt Smith asked about the moderating price mix drag expected in North America for the second half, specifically if current year contract pricing aligns with last year's performance and if the mix impact has lessened the expected moderation from a low single-digit headwind. He also questioned the expected duration of the mixed headwind, asking if it would persist through the next fiscal year.

Answer

CFO Bernadette Madarieta confirmed expectations for moderating price mix headwinds in the second half, emphasizing that the mix impact, driven by growth in chain business and a shift from branded to private label, has been more pronounced. She stated that the mixed headwind for chain customers would continue, and for private label, it is expected to persist through the balance of the current fiscal year, requiring ongoing monitoring.

Matt Smith asked about the impact of restarting a curtailed line in Q2, specifically if it would lead to higher fixed cost absorption or a cleaner startup process compared to a new plant. He also questioned if production on this line is expected to be maintained or if it indicates a strategy of turning lines off and on based on efficiency. Additionally, he inquired about the phasing of cost savings in fiscal 2026, asking if the better-than-expected Q1 savings imply a raised full-year expectation or just an earlier flow-through, potentially from carry-in benefits.

Answer

CEO Mike Smith explained that the company had curtailed multiple lines, and this is one being brought back. He noted that restarting an existing line is easier and less costly than starting a new facility, and the company fully expects to maintain production on this line due to demand signals. He also mentioned other curtailed lines are available for future growth. CFO Bernadette Madarieta added that North America's fixed factory burden would moderate with the line startup, while international would see a larger impact from the Argentina plant startup and planned maintenance downtime. Ms. Madarieta confirmed that cost savings were realized faster, with about two-thirds of the $100 million fiscal 2026 target expected in the back half, and the company remains on track for the full-year target.

Matt Smith inquired about the impact of restarting a curtailed line in 2Q, asking if it entails higher fixed cost absorption or a cleaner startup, and if production is expected to be maintained or if lines can be efficiently turned off and on. He also asked for clarification on the phasing of fiscal 2026 cost savings, specifically if the Q1 outperformance means the full-year target is being raised or if it's a timing shift.

Answer

CEO Mike Smith explained that restarting a curtailed line is easier and less costly than a new facility, and they anticipate continuous running due to demand signals, with other curtailed lines available for future growth. CFO Bernadette Madarieta added that North America's fixed factory burden will moderate in late 2Q. Regarding cost savings, Bernadette Madarieta confirmed they drove savings faster, with two-thirds of the benefit expected in the back half, and they remain on track for the $100 million fiscal 2026 target, with two-thirds impacting gross profit and one-third SG&A.

Matt Smith asked about the underpinnings of Uncrustables' sequential acceleration in the second half, including unique comparisons and potential increased promotional support. He also inquired about the varied performance of coffee brands, specifically Dunkin's softer elasticity compared to Folgers or Bustelo, and whether this was expected.

Answer

Tucker Marshall, Chief Financial Officer, expects low double-digit growth for Uncrustables in Q3 and Q4, supported by marketing, protein innovation, distribution, and promotion, noting strong momentum in the away-from-home channel. Mark Smucker, CEO and Chair of the Board, acknowledged strong performance from Bustelo and Folgers, and while Dunkin' grew, it faced competitive pricing pressure. He stated that surgical pricing investments and innovation are ongoing, and the brand has long-term runway, expecting competitive pricing to moderate over time.

Matt Smith asked about the underpinnings of Uncrustables' sequential acceleration in the second half, including unique comparisons, pricing, and potential increased promotional support. He also inquired about the performance of the Dunkin' coffee brand, noting softer elasticities compared to Folgers or Bustelo, and if this was expected.

Answer

Tucker Marshall, Chief Financial Officer, stated that Uncrustables, which grew 7% in Q2, is anticipated to achieve low double-digit growth in Q3 and Q4, supported by marketing, protein innovation, distribution, and promotion, especially in the away-from-home channel. Mark Smucker, Chief Executive Officer and Chair of the Board, acknowledged strong performance for Bustelo and Folgers, and while Dunkin' grew, it faced competitive pricing pressure. He noted ongoing surgical pricing investments and innovation to support the brand, which is seen as having long-term runway.

Matt Smith followed up on higher promotional activity, asking whether Premier's activity will increase in frequency or depth, and if it will be focused in certain channels, particularly club promotions.

Answer

Darcy Davenport, President and CEO, BellRing Brands, confirmed an expected uptick in promotion for 2026, noting that the category is generally low-promotion (25-30% sold-on-deal). The increased promotion will primarily be in FDM channels, tied to expanded merchandising (out-of-aisle displays, singles, entry-point multi-packs) to drive trial, which often requires a temporary price reduction (TPR). Club promotions are expected to be similar to the prior year after Q1.

Matt Smith asked whether Premier Protein's anticipated higher promotional activity for the next year would focus more on frequency or depth, and if it would be concentrated in specific channels, particularly outside of club.

Answer

President and CEO Darcy Davenport confirmed an expected uptick in promotion for 2026, primarily focused on FDM channels. This is aimed at driving trial and repeat through out-of-aisle merchandising, such as singles and entry-point multi-packs, which often involve temporary price reductions (TPRs). She noted the category remains relatively low in overall promotion.

Matt Smith inquired about the strong Q3 sales performance, particularly the mix including higher welded sales and a pull-forward of Middle East orders, and how these mix effects might change in Q4. He also asked about the sustainability of shareholder distributions, specifically the current buyback level, and early thoughts on 2026 decisions.

Answer

Chairman and CEO Paolo Rocca attributed strong Q3 sales to increased OCTG welded product use in the U.S. (due to tariffs) and the completion of large pipeline deliveries in Argentina (VMOs). He expects the welded/seamless ratio to normalize in Q4. Regarding shareholder distributions, Mr. Rocca noted the board approved an interim dividend increase and that the company would complete the second tranche of its buyback, highlighting the 11% shareholder return as strong performance in a volatile environment.

Matt Smith inquired about the strong Q3 sales print, particularly the unexpected mix with increased welded sales and a pull-forward of Middle East orders, asking for reflections on these trends and expected mix changes in Q4.

Answer

Paolo Rocca, Chairman and CEO, attributed strong sales, especially welded products, to increased U.S. OCTG production (driven by tariffs) and the completion of the VMO pipeline delivery in Argentina. He expects the welded/seamless ratio to normalize in Q4, with overall sales remaining close to Q3 levels. Matt Smith also asked about the sustainability of current shareholder distributions, specifically the $1.2 billion buyback, and early thoughts on 2026 decisions given the 7% interim DPS increase. Paolo Rocca stated the company would execute the second buyback tranche and noted the board approved a dividend in line with the previous year in absolute terms but higher per share due to buyback impact, highlighting the 11% shareholder return.

Matt Smith with Stifel inquired about the drivers behind the implied Q4 earnings deceleration, beyond the share repurchase and MSA legal fee expiration, and the long-term strategy for growing smokeable OCI. He also asked about the factors contributing to the sequential moderation in the underlying cigarette industry's rate of decline.

Answer

CFO Sal Mancuso highlighted the continued monitoring of consumer spending and the dynamic marketplace, expressing satisfaction with the first nine months' financial performance and smokeable profitability, particularly Marlboro's strength. CEO Billy Gifford attributed the moderation in cigarette decline to consumers needing consistency in macroeconomic factors like gas prices and inflation, alongside increased e-vapor enforcement shifting consumers to other nicotine categories.

Matt Smith inquired about the gross margin composition in the quarter, which exceeded expectations, specifically asking for details on the international timing benefit and the phasing of inflation investment through the year. He also followed up on the North America Retail trade expense phasing.

Answer

Kofi Bruce, CFO of General Mills, attributed the better-than-expected profit to lighter inflation phasing (closer to 2% vs. 3% annual guidance) and a $20 million international trade expense timing benefit, both expected to unwind in Q2. He projected Q2 operating profit to be down more than Q1 due to higher inflation, inventory absorption headwinds, no yogurt contributions, and normalization of comp and incentive benefits. He confirmed that North America Retail trade expense would be a significant drag in Q1 and Q2, normalizing in Q3, and becoming a tailwind in Q4.

Matt Smith inquired about the gross margin performance in the quarter, including the international timing benefit and the phasing of inflation investment, and followed up on the trade expense phasing in North America Retail.

Answer

Kofi Bruce, CFO, attributed the better-than-expected profit to lighter inflation phasing (closer to 2% vs. 3% annual guidance) and a $20 million international trade expense timing benefit, both expected to unwind in Q2. He anticipated Q2 operating profit to be down more than Q1 due to higher inflation, inventory absorption headwinds, and the absence of yogurt contributions. He confirmed that North America Retail trade expense was a significant drag in Q1 and Q2, normalizing in Q3, and becoming a tailwind in Q4.

Matt Smith questioned the progress of the strategic review, specifically asking about areas showing accretive potential and the drivers of expected second-half improvement. He also inquired about the level of SKU rationalization and its sales impact.

Answer

Interim President and CEO Alison Lewis stated that progress is being made on the strategic review, with decisive actions like exiting the Yves product line and implementing continuous portfolio management reviews for SKU reduction. CFO Lee Boyce clarified that second-half improvement is driven by a combination of streamlining the portfolio, brand renovation, productivity, and revenue growth management, with SKU rationalization primarily aimed at margin improvement rather than significant sales drag.

Matt Smith asked for insights into the strategic review, specifically identifying areas of incremental confidence for value or accretive potential, and whether the expected second-half improvement relies on category trend changes or Hain's initiatives, along with quantification of sales drag from SKU rationalization.

Answer

Interim President and CEO Alison Lewis reiterated progress on the strategic review, highlighting decisive actions like exiting the EVES business and ongoing SKU reduction for portfolio simplification, alongside implementing continuous portfolio management reviews. CFO Lee Boyce stated that the expected second-half improvement is driven by Hain's initiatives, including portfolio streamlining, brand renovation, productivity, and strategic revenue growth management. He noted SKU rationalization targets a 'long tail' of small, complex SKUs for margin improvement, without providing specific sales drag quantification.

Matt Smith from Bank of America sought clarification on the Borouge Group International (BGI) floor dividend, asking if it was a fixed amount or a percentage of net income. He also asked about the drivers behind recent improvements in chemical spreads and their potential sustainability.

Answer

CFO Reinhard Florey clarified that the BGI floor dividend is a fixed amount of approximately $2.2 billion for the group, translating to about $1 billion net cash inflow for OMV. On chemical margins, Florey noted that opportunities arise from shifting the product mix towards higher-grade specialties. An executive added that OMV's integrated business model provides resilience, as weaker refining margins can lead to expanded margins for its European crackers.

Matt Smith inquired about Lemonade's long-term strategy for its homeowners insurance line, asking if it will remain a shrinking part of the business or if there are plans to reaccelerate growth once market dynamics improve.

Answer

President Shai Wininger explained that while home is an important customer need, Lemonade will be selective, using a flexible model of its own paper, reinsurance, or third-party paper to manage volatility. He noted that the company's competitive advantage is more pronounced in other products like car and pet. However, he also pointed out that Lemonade is expanding its homeowners product on its own paper in European markets like France and the U.K., where catastrophe exposure is significantly lower.