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  2. Philip Gorham

Philip Gorham

Philip Gorham, CFA, FRM, is director of equity research, Greater China, for Morningstar.

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Consolidated net revenue fell by 2.6% year over year, driven by a steep 12.9% decline in smokeable segment volume. We had expected a sequential volume deterioration from the adjusted decline of 4.5% in the second quarter, due to trade inventory movements, but this was disappointing relative to our expectations of flat net revenue. However, price/mix of 10.3% and the 90 basis point year-over-year improvement in gross margin to 66.4% were both impressive, and suggest that the competitive environment became less promotional during the quarter.