My Emotion is My Data

"Your emotion is your data, trust it, act upon it."

I absolutely love this sentence just after hearing it in a podcast that I listened to early this morning.  

 
It is coming to the end of the summer, and I had enough time to listen to myself and notice the trends within myself. Especially, in the evenings when my son went to bed, it was “me time” which means the escape time to read, write and charge the soul before the winter. I know “winter is coming” or as recently called by Jerome Powell, “pain is coming” so that I did my best to understand my pain points and to serve for it. 

This content is created in a coffee-shop

 
What does Volkan feel and want? 
 
Let’s start with the fact that it might be so personal. Everybody is unique with their own dreams, desires, pains, problems, so on and so forth. As a father responsible for his family, the economic crisis in Turkey is a heavy load that I lift. I need to make financial plans, calculate their potential risks and benefits to create passive income against the increasing impacts of inflation. This can be sometimes so tiring, but it is a fact that I feel I need to deal with. Thanks God, I am working for a multinational company (Philip Morris International) but the life in Turkey is relatively hard for everyone. In order to increase my level of financial literacy, I spent some quality time reading and watching videos to learn from others’ learnings. Now I have new plans to fight against inflation but when you are responsible for not only yourself but the whole family you need to bear in mind this responsibility for every penny that you risk.  
 
Secondly, I found much more time to follow up how my son develops, what makes him motivated, what makes him unsatisfied and even tired throughout this summer. Working remotely enables me to work from away and this opens the summer houses of our families to stay. Within office hours spent at family houses, my son spends time on robotic coding, mainly learned (or we can say increased his level of proficiency in) robotic programming languages like Scratch, Thinkercad. He attended online courses, watched YouTube videos, and brought some products into life. As his parents, the time he spent on such activities is highly motivating for us. As a supporter of digitalization in my business life, seeing him spending time on such activities when he is just 8 years old makes me so “delighted”. On the other hand, seeing his interest and abilities makes me feel alarmed that I need to take further steps to support him towards this area. As his parents, we should provide the resources that he needs. Do I clearly know about it? I have some estimates, but I am not sure about them. Finding a low-budget Udemy course for Scratch or a free learning program by municipalities are what we have done so far but maybe he needs more in the upcoming period because the world is changing so quickly, and more professional support may be needed. I am not a hundred percent sure, but this also has financial costs like private school support. So far, I have heard that private schools have such coding classes, but government schools do not. And as you may guess, the prices of these private schools skyrocketed, and I don’t prefer it in his early ages but later may be too late for him. Spending the budget in these early years may open some new doors but what about the opportunity cost for future investments on him? 
 
The last feeling is about the next step in my career. Taking further steps in my career path always motivates me. Two years ago, I got the title: Finance Manager and working in Duty Free affiliate which was highly impacted by pandemic made me learn a lot. I am working with great people, and I love the people and company. On top of this, dreams never end. I keep on dreaming: hopefully, one day I will work in a foreign country with much more responsibility than today. In order to reach this objective, I am investing in myself. One of these investments is English conversation lessons in Rosetta Stone. In each one-to-one class, as an icebreaker, lecturer asks me the reason for attending the class and I describe my motivation towards working in a foreign country. I tell about the economic problems in Turkey and education opportunities for my son. I repeat this every lecture (Yes, I noticed that I repeated it once again) and working for it. On the other hand, I see that the number of international assignments decrease as remote work and digitalization enables us to do our responsibilities all around the world but who knows, maybe one day… The critical thing is being ready for that opportunity if it comes one day. 
 
I described my three major emotions above and how they make me think and act. At least, I had the chance to notice them, think about them and act about them. Let’s see what time will bring… Stay tuned for the updates and always follow up your feelings because they are your data. 

I feel good if I am writing

Books (especially e-books) are my resources

Leadership Award for Forward Looking

I am humbled and honored to receive the Leadership Award for Forward Looking from Philip Morris International (PMI).

This award is a result of dedication to digitalization and as a Digital Workplace Champion in PMI, I see that Philip Morris International is going through a digital transformation and wants to become a digital leader. The company has embraced technology to drive efficiency and change how it develops and markets new products.

I am glad to share that my initiative to transform the hard copy stamp tax table for contracts into digitalized contract management tool with MS List is recognized as the winner in R2R category in the Innovator’s Club by IBS Global Finance. What makes me more satisfied is that there is a plan to use my notes to share with other colleagues – which means a lot for me in terms of exercising Empowering People and Meaning Creator leadership skills.

Ooops, even Philip Morris International noticed this content after I tweeted:

Dufry Accelerates in HY 2022

Today (9 August 2022, Tuesday) Dufry AG announced its interim consolidated financial statements for the period ended June 30, 2022. According to the CEO of Dufry, Xavier Rossinyol, there is a positive momentum over the recent months, reflected in solid performance for June of 85.5% and for July of already around 90% of 2019 turnover levels in constant currency. Regions like North America, Central America and the Caribbean, as well as some of the Southern European and Mediterranean countries perform in line or above 2019.

About Dufry AG

Dufry AG (the “Company”) is a publicly listed company with headquarters in Basel, Switzerland. The Company is the world’s leading travel retail company. It operates in more than 2,300 shops worldwide. The shares of the Company are listed on the SIX Swiss Exchange in Zürich.

Dufry AG and Autogrill S.p.A. Combination

On July 11, 2022, Dufry AG and Autogrill S.p.A. announced the combination of the two groups. The current majority shareholder of Autogrill (Edizione) will transfer its 50.3% stake in exchange of Dufry AG shares. The transfer is expected to close in first quarter 2023, subject to regulatory and shareholder approvals.

Xavier Rossinyol , Dufry AG’s CEO commented that they have extensively engaged with their employees and stakeholders following the announcement on Dufry joining forces with Autogrill to redefine the boundaries of the industry and to enrich the passenger journey by providing unique integrated and digitalized offerings for travellers across Travel Retail and Food & Beverage. Xavier states that they are more than ever excited about the opportunities ahead of them, as they are progressing with the transaction as planned.

What does Dufry Group CFO say about H2 Results?

Yves Gerster, CFO of Dufry Group, added that with half-year 2022, they introduce an EBITDA concept and related performance indicators on top of their IFRS results. Those core figures consider all their concession fees and corresponding payments as a part of their operational activities. Therefore, they better reflect the actual performance of their business, the reality of their concession contracts and are best equipped to follow and evaluate their performance, while they are continuing with their IFRS reporting.

What about Seasonality?

Usually Dufry has its strongest months of net sales and operating profit between July and September corresponding to the summer time in the Northern hemisphere, whereas the first quarter is the weakest. These seasonality effects are more prominent on the operating profit level than in net sales.

And the Financials for 2022 H2

In the first half-year 2022, Dufry has seen gradual improvements in nearly all its operations in line with the easing of travel protocols, with a pick up especially since the second quarter of the year. Turnover reached CHF 2,922.5 million, representing growth of 146.2%, of which 147.2% organic compared to the same period 2021, and reaching a level of 75.5% of 2019 turnover in constant currency (69.9% in reported currency). In HY 2022, the FX effect on Turnover was -1.0% versus HY 2021, and -5.9% versus HY 2019, mainly related to the effects of the stronger key currencies USD, EUR and GBP. 

Looking at IFRS results, Operating Profit reached CHF 152.4 million in HY 2022, an improvement from CHF -368.5 million in HY 2021. 

Recent Developments

Dufry estimates July net sales performance at a level of 90% of 2019, in constant currency. As per end of June, around 2,078 shops and as per end of July, more than 2,091 shops globally were open, representing above 90% of sales capacity.

Dufry sees strong demand and positive trends on all key indicators; however, they remain vigilant given limited visibility regarding the geo-political environment, pandemic-related developments, the economic situation, and consumer sentiment going forward.

More Information Needed?

If you want to have more information about Dufry’s 2022-H2 results, press release and financial tables, I highly recommend you visitDufry AG’s Investor website:

Dufry’s Half Year 2022 Results | Dufry

Zaman Geçiyor, Bazı Şeyler Tekrar Edermiş Gibi Yapıyor

Bu yaz fena sıcak yaptı. Klişeleşen sıcak muhabbetini burada sürdürecek değilim ancak dün gece (6 Ağustos 2022 Cumartesi) Beşiktaş’ın son dakikalarda gelen galibiyetinden sonra keyifle twitter’da takıldıktan sonra 1 gibi uyudum. Birkaç günlüğüne ailece annemin İzmir Hatay’daki evinde konuk olduğumuz için, çocukken karanlık oda dediğimiz, pek hava almayan odada yatmak durumunda kaldım. Malum sıcaklar fena seyrettiği için kaliteli uyuyamadım ve sabah 6’da uyandım. Kaldığım yerden yani twitter’dan devam edip, biraz alışveriş sitelerini gezdikten sonra madem bugün günlerden Pazar deyip, şampiyon kahvaltısının malzemelerini almaya, yani boyoz, gevrek ve açma almak için Hatay caddesine indim. Aslında evin yakınında da fırın vardı ama maksat biraz da hamur işlerine yer açmak olunca yolu uzatıp yürümeyi tercih ettim.

Hatay caddesine inerken ilk dikkatimi çeken şey altında mayosu ve parmak arası terliği, sırtında çantası olan gençler oldu. Metro istasyonuna veya otobüs durağına giden gençler belli ki Pazar sabahının 8’inde yazlık bir yerlere gidip denize girecekti. Bu tablo bana rahmetli babamla çocukluk yıllarıma götürdü. İlkokul çağlarındayken, biz de yazın Pazar sabahları erkenden çantalarımızı arabaya indirir, bir askeri kampa giderdik. O kamplarda geçen vakit belki hayatımın en keyifli, en eğlenceli dönemi değildi belki ama bugün geriye dönüp baktığımda şezlongda saatlerce güneşlenmem, öğlen hamburger almak için sırada beklemem, denizden deniz kabuğu veya şekilli taşlar toparlayıp onları eve getirmem hep hoş hatıralar olarak hafızama kazınmış. Çok şükür ki ben de oğlumun böyle hatıralar biriktirebilmesine vesile oluyorum.

İşte onlardan biri de dündü. Biz de o çocukken gittiğimiz askeri tesislerden birini ailece gittik. Bize Urla’ya gitmez zaten başlı başına iyi gelen bir şey ama bu kez yoluna sonuna kadar gidip Çeşmealtı’ndaki askeriye gittik. İçerideyken, belki de babamın vefatının sene devri yaklaştığı için (10 Ağustos) hep geçmişle kıyasladım içeriyi. Hele ki öğlen hızlı yemek (evet, fast food’u askeriyede bu şekilde çevirmişler) kuyruğunda Okan ile beklerken “ne yemek istersin?” diye sorduğumda “hamburger” demesi, “istersen köfte, pizza, pide vs. de yiyebilirsin” dememe “yine de hamburger ya” diye cevap vermesi bir ara beni yaklaşık bir 30 yıl önceye ışınladı. Babasının oğlu deyip konuyu daha da dramatize etmeyeyim.

Zaman hızla akıyor derken ciddiydim

Diyeceğim o ki, hepinizin bildiği gerçek, zaman hızlı geçiyor ve geçen zaman da geri gelmiyor. Bu sabah Hatay Caddesi’ndeki bir parfümeri dükkanının camında “20-40 yaş arası eleman alınacaktır” yazıyordu. Yakında parfümeri kariyerine başlamanın zamanını kaçıracağım. O zaman bugünün tadını çıkaralım. Neyse ki bu satırları Sığacık Teos’ta güzel bir esinti eşliğinde yazıyorum. Vahşi sıcağa inat keyifle… 

Strong Underlying Momentum towards Smoke Free Future: PMI's 2022-Q2 Results

Philip Morris International stock rose 4.2% on Thursday, July 21 just after Q2 2022 results were released. In this content, I will review PMI’s 2022 second quarter results and I will share some key financials and more about their drivers to make the numbers more meaningful. Since I am an employee of PMI, I prefer to use “we”, “our” and “Emmanuel” (for our CFO Babeau) in some parts of the below content.

The data used in this content are all publicly available and it does not include any investing recommendation.

Q2 2022 results reflect the exceptional one-off events that have impacted PM this year, notably the loss of earnings from Russia and Ukraine and the sharp appreciation of the U.S. dollar. Excluding these, the underlying drivers behind PM’s businesses have remained strong, and full-year 2022 outlook has been raised on an organic basis.

Before the highlights, we need to remember the announcement that PMI intends to exit the Russian market in an orderly manner, as the complexities of continuing to operate in Russia increase, such as supply chain challenges and financial and banking sector restrictions.

PMI demonstrated strong underlying momentum in the second quarter of 2022 with another quarter of positive volume supporting better-than-expected growth. Most impressive was the continued excellent IQOS performance and strong Q2 user growth of more than 1.1 million, demonstrating further acceleration compared to Q1 as device limitation and COVID restrictions continue to ease. This reflects strong momentum in the EU region, Japan and developing markets.

The proposed addition of Swedish Match would further boost our future financial profile. This is a value-creating offer for both sets of shareholders with a compelling strategic and cultural fit, providing an additional opportunity to accelerate our smoke-free future.

During Q2 2022, PMI had good volume growth and good currency-neutral revenue growth. However, EBIT growth was weaker due to margin contraction and, including currency, both revenues and EBIT fell year-on-year.

Volume growth would have been stronger except for supply chain constraints, and the margin contraction was also due to one-off factors.

Let’s dive deep into the stories behind these numbers and ratios.

In 2021, Ukraine accounted for around 2% of PMI’s total cigarette and heated tobacco unit shipment volume and under 2% of PMI’s total net revenues.

In 2021, Russia made up almost 10% of total shipment volumes and around 6% of PMI net revenues.

Despite the impact of war in Ukraine, PMI increased its shipment volume by 1.1% compared to previous year.

Net revenues increased by 5.3% and this has mainly two drivers. The first one is the continued strong growth of IQOS and the second one is ongoing recovery of the combustible business. Here it is critical to keep in mind that the recovery is realized against a pandemic-affected comparison.

When we look at the revenue per unit, we see an increase by 4.1% in total. This increase is especially important because this year there is a delayed timing of shipments, as the company manages the cancellation of planned heated tobacco unit manufacturing in Russia and company faces disruptions in global supply chains generally.

Our operating income margin declined, and this reflected:

Firstly, the investment to further expand and match the speed of PMI's smoke-free portfolio growth, including the initial higher cost of ILUMA devices and heated tobacco units, and the replenishment of distribution channels as device constraints ease to support re-accelerating IQOS user growth;

Secondly, the impact of supply chain extra costs, notably due to the war in Ukraine; and

Thirdly, cost inflation driven by the global pandemic recovery and by the war in Ukraine, notably for certain direct materials, wages, energy and transportation costs.

Lastly, the decline also reflected a challenging prior year comparison, which included productivity savings.

When we look at the assumptions for the next two quarters;

In the third quarter, it is expected that IQOS and combustible volume trends will lead the top line growth.

There are some temporary headwinds which not only impacted PMI but also the whole World and the expectation is that these will ease in third quarter.

And in the last quarter of this year, HTU capacity problems will be better, so shipment volumes for HTU will increase as well.

One of the key updates in last quarter for PMI was its interest in Swedish Match.

Philip Morris International is in takeover talks with Swedish Match over a multibillion-dollar deal that would expand its smoke-free business.

In May, 2022, Philip Morris Holland Holdings B.V. (PMHH), an affiliate of PMI, announced a recommended public offer to the shareholders of Swedish Match to tender all shares in Swedish Match to Philip Morris Holland Holdings at a price of almost 16 billion USD in cash.

This alignment is strategic because it has the potential to create a global smoke free champion with PMI’s leading heated tobacco and Swedish Match’s oral nicotine brands. It will also open US market for PMI with nicotine pouch which has long term opportunities for smoke free categories. But the deal is not completed yet and PMI announces that the transaction is expected to close in the last quarter of this year.

To sum up:

Across H1 as a whole, total shipment growth was strong.

IQOS’ growth was helped by the new ILUMA device.

Combustible products perform well to support smoke-free transformation.

PMI is focused on its smoke free portfolio. IQOS will continue its dominance of the Heat-Not-Burn ("HNB") category, to grow strongly in Europe and remain at least stable in Japan. PMI has also launched its own e-vapor products since 2020 and has entered the nicotine pouch market with its own products on a limited scale.

Management comments reiterated their “unwavering” commitment to the dividend and hinted at the possibility of increasing it with cashflows from Swedish Match after deal close.

In conclusion, PMI provides positive updates for its investors which make the share prices increase.

Smart investors and analysts are focused on how to earn returns and how to cash out. 

Investors and analysts make decisions by asking critical Questions. That’s why I prefer to give a special part for Q&A session from the Investors’ Meeting. The key Questions are on IQOS new user momentum, Swedish Match acquisition, OI Margin decrease, menthol ban in Heat Not Burn Products and reintroducing IQOS in the US market.

The first question is about the strong IQOS new user momentum.

According to Emmanuel, our CFO, People realize all the benefits they can get by switching from combustible cigarettes to the IQOS product.

Emmanuel also states that we are enlarging the choice and that makes IQOS even more desirable and attractive.

Additionally, Emmanuel highlights that launching ILUMA is the second stage of the rocket in the various countries to sell IQOS even higher, so it brings momentum. This can also easily be seen in the above graph.

The second question is about Swedish Match transaction and other potential acquisitions.

Emmanuel highlights that we continue to expect the closing of the transaction in Q4, of course, subject to Swedish Match shareholder acceptance.

He also mentions that the priority and the focus in terms of acquisitions is on Swedish Match for the time being.

The third question is about the decrease in the margins and its relationship with the higher costs of ILUMA and HTUs and if this situation will continue or not.

Our CFO says that inflation is one of the headwinds on the margin. Also, there are costs that are coming from the disruption in the supply chain, notably coming from the war in Ukraine.

Moreover, there is a temporary acceleration of air freight charges. Emmanuel mentions that We're not going to keep air shipping on the long term.

In conclusion, inflation and other headwinds seen in Half One are temporary from PMI perspective.

The fourth question is about the full availability of devices when there is chip shortage.

Emmanuel states that it is crucial for smokers to have Access to IQOS device in order to get converted. He mentions that we see a rapid replacement of existing IQOS blade device by IQOS ILUMA in the markets where ILUMA is launched. So, the main objective is to equip the core consumer with new devices. According to Emmanuel, this temporary shortage will finalize so its temporary impact on the margin will be cleared.

The fifth question is about the impact of the proposed elimination of menthol variants in the EU for heat-not-burn products.

Emmanuel highlights the facts that this plan needs to be approved by the Parliament and by the European Council. Emmanuel reminds that it already has happened on a combustible business with almost no impact or very limited impact. So, it isn't clear that this will have a meaningful impact if it happens on our heat-not-burn business.

The sixth question is about the timing of reintroducing IQOS into the marketplace in the US.

For those who are not aware of the latest IQOS situation in the US market, in November 2021, PM USA had to remove IQOS from the market due to an import ban and (cease-and-desist) orders from the U.S. International Trade Commission (ITC). Altria, which runs Philip Morris USA, announced it “does not expect to have access to IQOS devices” in 2022, but “remains focused on returning IQOS to the market and is working on re-entry plans.” 

Emmanuel only shares with the analysts that we expect to be in a position to introduce IQOS in H1 of 2023.

The last question is about Russia, mainly exporting IQOS devices to Russia and taking cash out of Russia for dividend payments are questioned.

Our CFO shares that there is no sanction for device export to Russia. Thus, although there are some limitations coming from supply chain related problems, exportation is not impacted.

For dividend Payment, it is not exercised by PMI so Emmanuel could not provide an answer about it. On the other hand, intercompany payments and royalties are paid without any problem.

All these announcements, investments and financials support PMI’s ambition to become a majority smoke-free product company by 2025, building on its 2016 commitment to a smoke-free future.