We’ve described the fact that the margin of ZYN in the U.S. is best-in-class among our portfolio of products. And therefore, make no mistake, even if indeed, we’re going to continue to invest in the U.S., the U.S. is going to be super nicely accretive in all parameters of our P&L at the level of the, of course, revenue growth but also at the level of the margin evolution and at the level of the operating income. And we reflect the fact that we talk about double-digit growth and very strong double-digit growth. U.S. is a very powerful contributor to our financial performance.
Bonnie Herzog: Okay. Emmanuel, if I may just clarify something then. For this year, you are expecting gross margin and possibly op margin expansion? Based on your guidance, it implies op margin.
Jacek Olczak: Yes. We do absolutely, Bonnie. Yes.
Bonnie Herzog: Okay. All right. Thank you.
Operator: We’ll go next to Gaurav Jain with Barclays.
Gaurav Jain: Hi, good morning. Two questions from me. One is just to clarify the Argentinian peso impact. So you have a $0.19 impact this year, which is linked to balance sheet revaluation. And on the slide, you are using the Argentinian peso rate, which is equal to the spot rate. So there shouldn’t be any further balance sheet revaluation down, which means that there is an automatic $0.19 benefit to EPS. Isn’t that the way the math works?
Jacek Olczak: Look, of course, we cannot speculate on any further devaluation of the peso. The reality is that the amount in dollar terms has been significantly reduced by the last devaluation. So a further devaluation would impact to a much lower amount. Now I don’t know whether more devaluation could come. Frankly, we’re not able to anticipate this kind of thing. What you have to take into account is that the basis has been — in fact, as basically with the devaluation in December. So any further devaluation would apply to a lower base in Argentinian peso.
Gaurav Jain: Sure. Maybe I can ask it separately. And my second question is around ZYN. We are hearing a lot of statements. We had a statement by Chuck Schumer. A lot of investors are concerned, they think that regulation is coming on, then flavors will get banned. So how do you plan to get ahead of this entire potential controversy that could emerge around ZYN?
Jacek Olczak: Yes. So we observed over the last few weeks, I heard a lot of conversations around Brazil in social media and generally Internet and media. I think, look, ZYN is in the U.S. market for 10 years, okay? And if you look at the numbers, CDC latest data on the underage usage, et cetera, it stays very below. I think it’s 50% which is the lowest from any product nicotine and also other products where there’s some major restrictions applied. I think we know what about the Swedish Match marketing practices, and we were taking this very seriously during the acquisition of the (inaudible). We have said that the alignment with Service Match was not only that they were pursuing the smoke-free trajectory, but also that they have a very responsible and a disciplined approach to the marketing as we are on — with IQOS, with heat-not-burn and the international.
We have reached out to the few people who have been the most vocal too in these conversations with general consumer, but also to FDA and I think the facts are different than sometimes it is being — trying to be the positions in the media. So the product is helping adult smokers with very strict with the age verifications. Obviously, when it comes to the conversations among the adults in the social media, that’s going a little — well, going anticipating, frankly speaking, in the territories we wouldn’t have a control. ZYN is not using any paid ambassadors or whatever this is being called in the social media. So we think what we’re doing is put the right product from the potential of the reduction of the harm where the product is based on science position and the risk reduction continuum, frankly speaking, it is the best nicotine alternative to any another nicotine product, very much obviously versus the cigarette.
We have a pending PMTA with FDA and feel the science is very strong and very conclusive on the site. So I feel very confident. From the very beginning of our transformation, solid Swedish Match, we put the marketing team and very much the protection of the youth very, very high on our agenda. So I think it gives me the confidence that, as I said earlier to Bonnie’s question, we have a progress, phenomenal growth on the products, which are delivered in a very sustainable manner to adult smoker.
Operator: We’ll go now to Pamela Kaufman with Morgan Stanley.
Pamela Kaufman: Good morning. I have a question about ZYN as well. It’s seen phenomenal growth in the U.S. Can you talk about what’s driving the acceleration in growth in ZYN in the U.S.? And are there any particular regions where you’re seeing stronger growth? And just on the ZYN guidance, it implies about 35% growth in U.S. shipments, but that seems conservative given the strength that we’ve seen. So is there anything that would temper ZYN’s growth outlook relative to what we’re observing?
Jacek Olczak: Yes. So the ZYN, as you might remember from our Investors Day, the profile of the ZYN, when it comes toward the smoke or where the adults are coming from, there is any sourcing very nicely from a combustible cigarette, obviously, serves from the overall categories, including the tobacco-containing pouches, Swedish snus or similar products, but also resourcing from the vape category. So it is being recognized by the growing number of adults, the convenience of usage of Brazil. It is — another way of looking at ZYN, it is a natural innovation or extension of the Swedish snus product, the tobacco-containing pouches. Obviously, as we know them, some people were not maybe comfortable of having a tobacco in the pouch.
