Philip Morris International Inc · NYSE:PM
Philip Morris International — Q3 2015 Earnings Presentation
48 slides from Philip Morris International's earnings presentation, Oct 15, 2015
Slide 1: 2015 Third-Quarter Results
2015 Third-Quarter Results October 15, 2015 Exhibit 99.3
Slide 2: Introduction
2 Introduction ● Unless otherwise stated, we will be talking about results for the third quarter of 2015 and comparing them to the same period in 2014 ● A glossary of terms, data tables showing adjustments to net revenues and OCI for currency and acquisitions, asset impairment, exit and other costs,
Slide 3: Forward-Looking and Cautionary Statements
3 Forward-Looking and Cautionary Statements ● This presentation and related discussion contain forward-looking statements. Achievement of projected results is subject to risks, uncertainties and inaccurate assumptions, and PMI is identifying important factors that, individually or in the aggregate,
Slide 4: Q3, 2015: Favorable PMI Cigarette Volume Performance Continues
4 Q3, 2015: Favorable PMI Cigarette Volume Performance Continues ● Organic cigarette volume down by a modest 1.5%, reflecting: - Lower cigarette industry volume, primarily in the Asia Region - Partly offset by market share gains, mainly in the EEMA and LA&C Regions ● Organic cigarette volume down by
Slide 5: Q3, 2015: Strong Currency-Neutral Financial Results Growth
5 (a) Excluding currency Source: PMI Financials or estimates 5.9% 9.3% 15.8% Net Revenues Adjusted OCI Adjusted Diluted EPS Q3, 2015: Strong Currency-Neutral Financial Results Growth (Q3, 2015 vs. PY) (a) (a) (a)
Slide 6: Q4, 2015: Outlook
6 Q4, 2015: Outlook ● Incremental investment to support iQOS in Japan, Italy and Switzerland ● Accelerated spending behind planned iQOS launches in 2015/2016 ● Incremental marketing investments to further reinforce the favorable momentum of our cigarette brand portfolio Note: Reduced-Risk Products (
Slide 7: 2015 EPS Guidance: Revised and Narrowed
7 2015 EPS Guidance: Revised and Narrowed; Growth Rate of 11% to 12%, Ex-Currency ● Revised and narrowed 2015 reported diluted EPS guidance to $4.35 to $4.40, at prevailing exchange rates, for currency and improved business outlook ● Guidance now includes $1.22 of unfavorable currency at prevailing
Slide 8: Currency: Impact on PMI EPS Guidance
8 (a) Australian Dollar, British Pound, Canadian Dollar, Danish Krone, Hong Kong Dollar, Israeli Shekel, New Zealand Dollar, Norwegian Krone, Singapore Dollar, South Korean Won, Swedish Krona, Swiss Franc and U.S. Dollar (b) Includes notably the Argentine Peso, Brazilian Real, Kazakhstan Tenge, Mexi
Slide 9: Strong Pricing: Key Driver of Our Financial Performance
9 522 1,391 1,588 YTD September 2014 YTD September 2015 Strong Pricing: Key Driver of Our Financial Performance Source: PMI Financials or estimates ● Pricing variance of $522 million in Q3, 2015, reflecting higher pricing across all four Regions ● Q3, 2015 retail price increases in key markets such
Slide 10: Marlboro Driving Strong Share Growth
10 (a) Excluding China and the U.S. Source: PMI Financials or estimates Marlboro Driving Strong Share Growth ● Strong PMI share growth in EEMA and LA&C Regions in Q3, 2015 ● Marlboro was the key contributor to share growth in Q3, 2015: - Share gains across all four Regions - Benefiting from the roll
Slide 11: Strong Market Share Performance Continues: Top-30 OCI Markets
11 Strong Market Share Performance Continues: Top-30 OCI Markets Note: Excluding duty free Source: PMI Financials or estimates 37.3 37.8 Q3, 2014 Q3, 2015 +0.5pp PMI Market Share in Top-30 OCI Markets (%)
Slide 12: EU Region: Improved Cigarette Industry Full-Year Outlook
12 (a) Excluding trade inventory movements Source: PMI Financials or estimates (0.1)% (2.3)% (2.7)% EU Region: Improved Cigarette Industry Full-Year Outlook Total Cigarette Industry Volume Decline(a) (2015 vs. PY) Q1 Q2 ● Cigarette industry volume down by 1.5%(a) YTD September, 2015, mainly driven b
Slide 13: EU Region: Stable Cigarette Share Supported by Strong Brands
13 EU Region: Stable Cigarette Share Supported by Strong Brands ● Regional cigarette share down slightly in Q3, but up by 0.1 point to 39.9% YTD September, 2015 ● Solid cigarette share performances for Marlboro and L&M in Q3, 2015 ● Adjusted OCI growth of 7.4% and 8.1%, ex-currency and acquisitions,
Slide 14: Russia: Continued Strong Performance
14 Russia: Continued Strong Performance ● Cigarette industry volume down by 4.6% in Q3, 2015, and by 5.7% YTD September, 2015 ● Now forecast 2015 cigarette industry volume decline of around 7% ● Strong double-digit OCI growth, ex- currency, in Q3, 2015, driven by higher pricing ● In August, we annou
Slide 15: Turkey: Share Growth and Improved Mix
15 Turkey: Share Growth and Improved Mix ● Cigarette industry volume up by 9.6% YTD September, 2015, driven by a significant reduction in illicit trade ● Share growth in Q3, 2015, driven by L&M, Marlboro and Parliament ● Double-digit OCI growth, ex-currency, in Q3, 2015, driven by favorable volume/m
Slide 16: Indonesia: Key Brands Performing Well
16 Source: PMI Financials or estimates Indonesia: Key Brands Performing Well ● Cigarette share stable in Q3, 2015, and up by 0.4 points YTD September: - Strong performances of Dji Sam Soe and Sampoerna A ● Cigarette industry volume forecast: - 2015: flat, reflecting economic softness - Mid to long-t
Slide 17: Japan: Investing in Our Brands
17 11.6 11.3 10.0 10.0 2.3 2.3 25.9 25.3 Q3, 2014 Q3, 2015 PMI Market Share (%) (0.6)pp Source: PMI Financials or estimates and Tobacco Institute of Japan ● Cigarette industry volume down by 2.2% YTD September, 2015 ● Forecast 2015 cigarette industry volume decline of 2.5% to 3.0% ● Further investme
Slide 18: Philippines: Improving Trends with Growth of Marlboro
18 Philippines: Improving Trends with Growth of Marlboro ● Higher estimated tax declarations by local competitor ● Nielsen share growth of 1.4 points QTD August, 2015, driven by: - Adult smokers uptrading to PMI brands as a result of reduced price gaps - Success with innovative line extensions ● Imp
Slide 19: Korea: Moderating Cigarette Industry Volume Decline
19 Korea: Moderating Cigarette Industry Volume Decline ● Excise tax-driven cigarette industry volume decline moderating on a sequential basis ● Cigarette industry volume down by approximately 17% YTD September, 2015, excluding inventory movements ● Now forecast 2015 underlying cigarette industry vol
Slide 20: Reduced-Risk Products
20 Note: Reduced-Risk Products ("RRPs") is the term the company uses to refer to products with the potential to reduce individual risk and population harm in comparison to smoking combustible cigarettes
Slide 21: iQOS: Substantiating Reduced Risk
21 iQOS: Substantiating Reduced Risk Note: Reduced-Risk Products ("RRPs") is the term the company uses to refer to products with the potential to reduce individual risk and population harm in comparison to smoking combustible cigarettes Source: PMI Research & Development Post-Market Studies and Surv
Slide 22: iQOS: Three-Month Reduced Exposure Study (Japan)
22 0 400 800 1,200 1,600 2,000 (Days) 0 200 400 600 800 1,000 0 1 2 3 4 5 6 7 0 200 400 600 800 1,000 1,200 Note: Reduced-Risk Products ("RRPs") is the term the company uses to refer to products with the potential to reduce individual risk and population harm in comparison to smoking combustible cig
Slide 23: iQOS: Three-Month Reduced Exposure Study (Japan)
23 Note: Reduced-Risk Products ("RRPs") is the term the company uses to refer to products with the potential to reduce individual risk and population harm in comparison to smoking combustible cigarettes Source: PMI Research & Development (41) (48) (46) (77) (55) (50) (48) (67) (79) (91) (71) (85) (8
Slide 24: iQOS: Satisfaction In-Line With Combustible Cigarettes Over Time
24 1 2 3 4 5 6 7 0 1 2 3 4 5 30 60 90 iQOS: Satisfaction In-Line With Combustible Cigarettes Over Time Note: Reduced-Risk Products ("RRPs") is the term the company uses to refer to products with the potential to reduce individual risk and population harm in comparison to smoking combustible cigarett
Slide 25: iQOS: Assessment Status
25 Note: Reduced-Risk Products ("RRPs") is the term the company uses to refer to products with the potential to reduce individual risk and population harm in comparison to smoking combustible cigarettes iQOS: Assessment Status ● Scientific assessment of the risk profile of iQOS is well advanced ● We
Slide 26: Resilient Free Cash Flow
26 Resilient Free Cash Flow ● On track to deliver 2015 free cash flow broadly in line with last year, despite the significant currency headwind ● Prudent management of working capital and capital expenditures Source: PMI Financials or estimates 5,357 5,581 7,166 YTD September 2014 YTD September 2015
Slide 27: Returning Cash to Shareholders: Dividend
27 Returning Cash to Shareholders: Dividend ● Increased our dividend in September to an annualized rate of $4.08 per share ● Eight consecutive dividend increases since 2008, representing a total increase of 121.7% Note: Dividends for 2008 and 2015 are annualized rates. 2008 annualized rate is based
Slide 28: Returning Cash to Shareholders: Attractive Dividend Yield
28 Returning Cash to Shareholders: Attractive Dividend Yield 2.1% 3.3% 4.9% 10-Year U.S. Treasury Proxy Peer Group PMI 2.6% 3.1% 3.7% 4.0% 4.0% 4.9% JT RAI IMT Altria BAT PMI PMI Dividend Yield vs. Tobacco Peer Group (October 9, 2015) PMI Dividend Yield vs. Benchmarks (October 9, 2015) Note: Dividen
Slide 29: Conclusion: Solid Financial Performance and Outlook
29 Conclusion: Solid Financial Performance and Outlook ● Strong currency-neutral financial results ● Superior brands, supported by a superb commercial organization ● Continued progress with the commercialization and clinical assessment of iQOS ● Resilient 2015 free cash flow ● Revised and narrowed 2
Slide 30: Questions & Answers
2015 Third-Quarter Results Questions & Answers Download PMI’s Investor Relations App iOS Android
Slide 31: Glossary and Reconciliation of Non-GAAP Measures
Glossary and Reconciliation of Non-GAAP Measures
Slide 32: Glossary: General Terms
32 Glossary: General Terms ● PMI stands for Philip Morris International Inc. and its subsidiaries ● Until March 28, 2008, PMI was a wholly owned subsidiary of Altria Group, Inc. ("Altria"). Since that time the company has been independent and is listed on the New York Stock Exchange (ticker symbol "
Slide 33: Glossary: Financial Terms
33 Glossary: Financial Terms ● Net revenues exclude excise taxes ● Operating Companies Income, or "OCI", is defined as operating income, excluding general corporate expenses and the amortization of intangibles, plus equity (income) or loss in unconsolidated subsidiaries, net ● Adjusted OCI is define
Slide 34: Glossary: Industry/Market Terms
34 Glossary: Industry/Market Terms ● EEMA refers to the Eastern Europe, Middle East & Africa Region and includes our international duty free business ● EU refers to the European Union Region ● LA&C refers to the Latin America & Canada Region
Slide 35: Glossary: Reduced-Risk Products
35 Glossary: Reduced-Risk Products ● Ad libitum clinical studies: free to interact with the product / able to use as often as one would like ● Aerosol refers to a gaseous suspension of fine solid particles and/or liquid droplets ● An ambulatory study is a study carried out under real world (actual u
Slide 36: Glossary: Reduced-Risk Products
36 Glossary: Reduced-Risk Products ● Reduced-Risk Products ("RRPs") is the term the company uses to refer to products with the potential to reduce individual risk and population harm in comparison to smoking combustible cigarettes. PMI’s RRPs are in various stages of development and commercializatio
Slide 37: PMI Peer Groups
37 PMI Peer Groups (a) Effective until September 30, 2012 (b) Effective as of October 1, 2012 (c) Effective until June 12, 2015 - BAT - Bayer - Coca-Cola - Diageo - GlaxoSmithKline - Heineken - Imperial Tobacco - Johnson & Johnson - Kraft(a) - McDonald’s - Mondelēz International(b) - Nestlé - Novart
Slide 38: Reconciliation of Non-GAAP Measures
38 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reported Net Revenues Less Excise Taxes Reported Net Revenues excluding Excise Taxes Less Currency Reported Net Revenues excluding Excise Taxes & Currency Less Acquisi- tions Reported Net Revenues excluding Exci
Slide 39: Reconciliation of Reported OCI to Adjusted OCI
39 (a) For the calculation of net revenues excluding excise taxes, currency and acquisitions, refer to previous slide PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Reported Operating Companies Income to Adjusted Operating Companies Income & R
Slide 40: Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS
40 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS and Adjusted Diluted EPS, excluding Currency For the Quarters Ended September 30, (Unaudited) 2015 2014 % Change Reported Diluted EPS 1.25$ 1.38$ (9
Slide 41: Reconciliation of Reported Diluted EPS, excluding Currency
41 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Reported Diluted EPS to Reported Diluted EPS, excluding Currency For the Quarters Ended September 30, (Unaudited) 2015 2014 % Change Reported Diluted EPS 1.25$ 1.38$ (9.4)% Less: Currency impac
Slide 42: Adjustments for the Impact of Currency and Acquisitions
42 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Nine Months Ended September 30, ($ in millions) (Unaudited) Reported Net Revenues Less Excise Taxes Reported Net Revenues excluding Excise Taxes Le
Slide 43: Reconciliation of Reported OCI to Adjusted OCI (Nine Months)
43 (a) For the calculation of net revenues excluding excise taxes, currency and acquisitions, refer to previous slide PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Reported Operating Companies Income to Adjusted Operating Companies Income & R
Slide 44: Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS
44 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS and Adjusted Diluted EPS, excluding Currency For the Nine Months Ended September 30, (Unaudited) 2015 2014 % Change Reported Diluted EPS 3.62$ 3.73$
Slide 45: Reconciliation of Reported Diluted EPS, excluding Currency
45 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Reported Diluted EPS to Reported Diluted EPS, excluding Currency For the Nine Months Ended September 30, (Unaudited) 2015 2014 % Change Reported Diluted EPS 3.62$ 3.73$ (2.9)% Less: Currency im
Slide 46: Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS, FY2014
46 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS For the Year Ended December 31, (Unaudited) 2014 Reported Diluted EPS 4.76$ Adjustments: Asset impairment and exit costs 0.26 Tax items - Adjuste Di
Slide 47: Reconciliation of Operating Cash Flow to Free Cash Flow
47 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Operating Cash Flow to Free Cash Flow and Free Cash Flow, excluding Currency For the Quarters and Nine Months Ended September 30, ($ in millions) (Unaudited) (a) Operating Cash Flow For the Qua
Slide 48: 2015 Third-Quarter Results
2015 Third-Quarter Results October 15, 2015
Philip Morris International — Q3 2015 Earnings Presentation on 6ix