“We expect this dynamic to be less impactful in 2024 than last year.”

In context

“duct. As mentioned, volume grew by plus 3.2%. Pricing contributed plus 6 points of growth, including plus 8.3% pricing on combustible and around plus 2% on smoke-free. Smoke-free category mix added plus 2.5 points to the top-line, reflecting the higher net revenue per unit of IQOS and ZYN. While it’s still small, VEEV also contributed positively to the overall mix. I also note that oral smoke-free product added plus 2 points to organic net revenue progression, underlying the continued accretion from the Swedish Match acquisition. As in recent quarters, geographic mix was negative. This is primarily due to combustible where volumes increasingly skew to lower margin markets, where smoke-free alternatives are small or not available, with higher margin markets over-indexed to cannibalization. We expect this dynamic to be less impactful in 2024 than last year. Now let's focus on the mechanics behind our H1 margin delivery. Gross margin increased organically by 140 basis points and by 80 basis points in dollar terms. This was driven by our higher margin smoke-free business, pricing and ongoing productivity saving across the value chain. As expected, SG&A cost growth stepped-up in Q2, increasing 9.8% organically after a very modest increment in Q1 due to planned phasing of commercial spend. The resulting 5.8% organic increase in H1 was below the rate of top-line growth, driving plus 1 percentage point of margin expansion with our successful back-office cost program able to mitigate some of the investment step up. With a range of important commercial activities in Q3, we expect SG&A to remain elevated but continue to target an organic increase bel”