Philip Morris International Inc · NYSE:PM
Philip Morris International — Investor Day (September 2018)
26 slides from Philip Morris International's investor day presentation, Sep 27, 2018
Slide 1: Investor Day
Investor Day Lausanne, September 27, 2018 Martin King Chief Financial Officer
Slide 2: Agenda
Agenda • Revised 2018 EPS guidance • 2019-2021 growth targets • 2019 outlook 2
Slide 3: 2018: Revising and Narrowing EPS Guidance for Currency-Related Items
2018: Revising and Narrowing EPS Guidance for Currency-Related Items • Revising and narrowing 2018 reported diluted EPS guidance to a range of $4.97 to $5.02, at prevailing exchange rates, compared to $3.88 in 2017 • Primarily reflects two items, at prevailing exchange rates: 1. Currency: approximat
Slide 4: 2018: PMI Outperforming Industry Volume Decline
2018: PMI Outperforming Industry Volume Decline Forecast (Variance vs. PY) Industry(a) • Decline primarily reflects lower cigarette Industry(a) PMI(b) volume, notably in: ⎼ Brazil, Japan, Korea, Russia, Saudi Arabia and Ukraine ⎼ Partly offset by Pakistan and Turkey • Partly offset by the growth of
Slide 5: 2018: Reaffirming PMI HTU Volume Outlook
2018: Reaffirming PMI HTU Volume Outlook 2018 Forecast (billion units) Shipments • Anticipated distributor net inventory 44 to 45 reduction of approximately 3 billion units 41 to 42 (vs. 13 billion increase in 2017), reflecting an estimated: ⎼ 4 billion unit reduction in Japan ⎼ 1 billion unit incre
Slide 6: 2018: Revising Net Revenue Growth Target
2018: Revising Net Revenue Growth Target • Revising for impact of Argentine peso devaluation under highly inflationary accounting • Full-year growth target driven by: ~3% Growth Strong RRP Partly offset by ex-Currency combustible pricing volume growth cigarette volume decline • Anticipate combustibl
Slide 7: 2018: Net Revenue Growth Phasing for H2
2018: Net Revenue Growth Phasing for H2 2017 % Variance vs. PY (ex-currency) 2018 18.8 9.0 9.4 8.3 4.4 ̴2 ̴3 Forecast Forecast Forecast ̴ (5) H1 Q3 Q4 FY Source: PMI Financials or estimates 7
Slide 8: 2018: Strong Cash Flow Despite Unfavorable Currency
2018: Strong Cash Flow Despite Unfavorable Currency Continue to Target Operating Cash Flow(a) ̴ $9 … subject to further currency movements and year-end working capital requirements billion Capital Expenditures ̴ $1.5 … of which around 60% are RRP-related billion (a) Net cash provided by operating ac
Slide 9: Agenda
Agenda • Revised 2018 EPS guidance • 2019-2021 growth targets • 2019 outlook 9
Slide 10: 2019-2021: PMI Compound Annual Growth Targets
2019-2021: PMI Compound Annual Growth Targets Net Adjusted Revenues Diluted EPS ≥5% ≥8 % CAGR CAGR ex-Currency ex-Currency Source: PMI Financials or estimates 10
Slide 11: 2019-2021: Industry Volume In-Line with Historical Trends
2019-2021: Industry Volume In-Line with Historical Trends 5-Year CAGR 3-Year CAGR Forecast (2013-2018 Forecast) (2019-2021) (2)% ̴ (2.5)% (3)% Note: Excludes China and the U.S. Reflects cigarettes and heated tobacco units Source: PMI Financials or estimates 11
Slide 12: 2019-2021: Net Revenue Growth Target
2019-2021: Net Revenue Growth Target • Driven by: ⎼ Continued strong pricing ≥5% ⎼ Higher volume for IQOS devices and HTUs ⎼ Partly offset by lower cigarette volume, reflecting: • Switching to RRPs CAGR • Impact of lower cigarette consumption, net of market share gains ex-Currency • Strong pricing o
Slide 13: 2019-2021: Stable Unit Cost of Goods Sold
2019-2021: Stable Unit Cost of Goods Sold Cigarettes • Unit COGS expected to be relatively stable, reflecting productivity improvements and limited input cost pressure HTUs • Unit COGS should remain in-line with those for equivalent cigarette products IQOS Devices • No significant changes in unit CO
Slide 14: 2019-2021: Targeting Over $1 Billion in Cost Efficiencies
2019-2021: Targeting Over $1 Billion in Cost Efficiencies • Stepping up the pace of cost efficiencies through: ⎼ Increased manufacturing performance and better asset utilization ⎼ Productivity initiatives ⎼ Shift to project-based organization model ⎼ New zero-based budgeting initiative • Savings fro
Slide 15: 2019-2021: Adjusted Diluted EPS Growth Target
2019-2021: Adjusted Diluted EPS Growth Target • Assumes over the period: ⎼ An effective income tax rate of approximately 24% ≥8% ⎼ Relatively stable net interest expense • Assumes no share repurchases CAGR ex-Currency Source: PMI Financials or estimates 15
Slide 16: 2019-2021: Continued Cash Flow Growth
2019-2021: Continued Cash Flow Growth • Expect operating cash flow(a) to grow broadly in line with net earnings • Remain focused on managing our working capital judiciously, and will target further improvements • Anticipate annual capital expenditures of $1.2-$1.3 billion (a) Net cash provided by op
Slide 17: 2019-2021: More Efficient Manufacturing Investment
2019-2021: More Efficient Manufacturing Investment • Projected RRP capital expenditures primarily reflect investments behind HTU manufacturing • To date, HTU manufacturing investment has consisted of: ⎼ Bologna Greenfield site / expansion ⎼ Full and partial conversions of existing cigarette manufact
Slide 18: Improving Leverage Metrics
Improving Leverage Metrics Net Debt ($ billion) Net Debt to Adjusted EBITDA Ratio Moody’s S&P 27.8 Long-Term 25.5 25.1 24.8 25.9 25.1 Credit Rating A2 A 19.9 2.2 Outlook Stable Stable 2.1 2.1 2.1 16.0 1.95 13.9 14.8 1.7 Adjusted Adjusted Ratio Total Debt Net Debt 10.4 1.3 to EBITDA to EBITDA 1.3 1.2
Slide 19: 2019-2021: Leverage Strategy
2019-2021: Leverage Strategy • Remain committed to restoring our leverage multiples to the ranges associated with our current credit rating • Last year’s corporate tax reform in the U.S. provides us with greater flexibility on cash repatriation and capital structure optimization • Our current rating
Slide 20: Well-Laddered Bond Portfolio
Well-Laddered Bond Portfolio CHF ($ billion) Bond Maturity Profile as of June 30, 2018 EUR 4.5 USD 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2033 2036 2037 2038 2041 2042 2043 2044 Source: PMI Financials or estimates 20
Slide 21: Debt Financing at Increasingly Attractive Terms
Debt Financing at Increasingly Attractive Terms Weighted-Average All-in Weighted-Average Time to Maturity Financing Cost of Total Debt (%) of Total Long-Term Debt (years)(a) 5.0 10.8 10.8 10.5 10.6 10.1 4.4 9.4 9.6 4.0 8.2 3.5 7.0 3.2 3.0 2.8 2.6 2.5 2010 2011 2012 2013 2014 2015 2016 2017 2018 2010
Slide 22: Generously Rewarding Shareholders over the Long Term
Generously Rewarding Shareholders over the Long Term PMI Dividend • Dividends are our primary way of CAGR: 9.5% returning cash to shareholders $4.56 • Increased dividend by 6.5% in June 2018: ⎼ Eleventh consecutive year with a dividend increase ⎼ Total increase of approximately 148% since 2008 • Exp
Slide 23: Agenda
Agenda • Revised 2018 EPS guidance • 2019-2021 growth targets • 2019 outlook 23
Slide 24: 2019: Anticipate Better Business Performance
2019: Anticipate Better Business Performance Key Factors Supporting Outlook • Combustible business: better volume performance • Saudi Arabia: adverse impact of the 2017 excise tax increase fully lapped • Investments: lower incremental RRP investments vs. 2018 • Japan: HTU inventory rightsizing addre
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Slide 26: Investor Day
Investor Day Lausanne, September 27, 2018
Philip Morris International — Investor Day (September 2018) on 6ix