Philip Morris International Inc · NYSE:PM
Philip Morris International — Q2 2016 Earnings Presentation
37 slides from Philip Morris International's earnings presentation, Jul 19, 2016
Slide 1: 2016 Second-Quarter Results
2016 Second-Quarter Results July 19, 2016 Exhibit 99.3
Slide 2: Introduction
2 Introduction ● Unless otherwise stated, we will be talking about results for the second quarter of 2016 and comparing them to the same period in 2015 ● A glossary of terms, adjustments and other calculations, as well as reconciliations to the most directly comparable U.S. GAAP measures, are at the
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: Raising 2016 EPS Guidance for Currency Only
4 Source: PMI Financials or estimates Raising 2016 EPS Guidance for Currency Only ● Raising 2016 reported diluted EPS guidance to $4.45 to $4.55, at prevailing exchange rates, compared to $4.42 in 2015; revision driven solely by currency ● Full-year business outlook remains strong ● Guidance now inc
Slide 5: Currency Impact on PMI EPS Guidance vs. PY
5 Source: PMI Financials or estimates Currency Impact on PMI EPS Guidance vs. PY February 2016 Guidance April 2016 Guidance July 2016 Guidance July vs. April Guidance Russian Ruble (0.16) (0.11) (0.09) 0.02 Egyptian Pound (0.03) (0.04) (0.05) (0.01) Kazakhstan Tenge (0.04) (0.03) (0.04) (0.01) Mexic
Slide 6: Q2, 2016: PMI Organic Cigarette Volume
6 Source: PMI Financials or estimates Q2, 2016: PMI Organic Cigarette Volume ● Organic cigarette volume down by 4.8%, or by 4.3% excluding estimated inventory movements ● Decline due in large part to decreases in low-margin volume in Pakistan and the Philippines
Slide 7: Q2, 2016: Financial Results Growth
7 Q2, 2016: Financial Results Growth (Q2, 2016 vs. PY)(a) (a) Excluding currency Source: PMI Financials or estimates 1.4% 1.8% 1.7% Net Revenues Adjusted OCI Adjusted Diluted EPS
Slide 8: Q2, 2016: Favorable Pricing in All Regions
8 Q2, 2016: Favorable Pricing in All Regions Source: PMI Financials or estimates ● Favorable pricing variance of $344 million, reflecting positive contributions from all Regions, particularly EU and EEMA ● Favorable pricing in the Asia Region driven by Indonesia and the Philippines, partly offset by
Slide 9: PMI and Marlboro International Cigarette Market Shares
9 (a) Excluding China and the U.S. Source: PMI Financials or estimates PMI and Marlboro International Cigarette Market Shares(a) 9.4 9.5 Q2, 2015 Q2, 2016 Marlboro +0.1pp 28.7 28.3 Q2, 2015 Q2, 2016 PMI (0.4)pp
Slide 10: EU Region: Resilient Cigarette Industry Volume
10 Source: PMI Financials or estimates 0.4% 0.1% (0.8)% (3.1)% (7.3)% H1 Q2 EU Region: Resilient Cigarette Industry Volume Cigarette Industry Volume Variance vs. PY 2013 2014 ● Cigarette industry volume down by a modest 0.3% in Q2, 2016, excluding estimated inventory movements, primarily reflecting:
Slide 11: EU Region: Profitability Growth Continued in Q2, 2016
11 Source: PMI Financials or estimates ● Regional cigarette market share down by 0.2 points ● Marlboro grew cigarette market share in four of the top six markets by industry volume ● Adjusted OCI up by 3.5%, ex- currency, driven by: - Higher pricing - Resilient cigarette industry volume ● Target hig
Slide 12: EEMA Region: Strong Overall Results in Q2, 2016
12 Source: PMI Financials or estimates, and Nielsen EEMA Region: Strong Overall Results in Q2, 2016 ● Adjusted OCI up by a strong 10.1%, ex-currency, driven by Russia, Saudi Arabia and Turkey ● Russia: higher pricing drove double-digit OCI growth, ex-currency; cigarette market share down due mainly
Slide 13: LA&C Region: Strong Cigarette Market Share Growth in Q2, 2016
13 LA&C Region: Strong Cigarette Market Share Growth in Q2, 2016 ● Regional cigarette market share growth driven by: - Brazil and Canada - Supported by Marlboro ● Adjusted OCI down by 7.1% in Q2, 2016, ex-currency, due to: - Cigarette industry volume decline in Argentina following a significant exci
Slide 14: Asia Region: Currency-Neutral Adjusted OCI Decline
14 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 cigarettes Source: PMI Financials or estimates Asia Region: Currency-Neutral Adjusted OCI Decline, Reflecting an Unfavor
Slide 15: Asia Region: Favorable Developments in Key Markets in Q2, 2016
15 (a) Excluding estimated impact of inventory movements Source: PMI Financials or estimates, and Tobacco Institute of Japan Asia Region: Favorable Developments in Key Markets in Q2, 2016 ● Stable price gaps between Marlboro and lower-priced brands, representing a significant narrowing vs. Q2, 2015
Slide 16: iQOS: Strong HeatSticks Share Growth Continues in Japan
16 1.6 2.7 iQOS: Strong HeatSticks Share Growth Continues in Japan 2016 Weekly Market Share (%) Mid-April June 0.8 2.2 Q1 Q2 2016 Quarterly Market Share (%) +1.4pp Note: Reduced-Risk Products ("RRPs") is the term the company uses to refer to products with the potential to reduce individual risk and
Slide 17: iQOS: Growing Adult Smoker Conversion in Japan
17 iQOS: Growing Adult Smoker Conversion in Japan 20% 10% 9% 9% 8% 8% 9% 9% 8% 28% 39% 45% 48% 52% 54% 55% 59% 62% 48% 70% Sept Oct Nov Dec Jan Feb Mar Apr May Note: Reduced-Risk Products ("RRPs") is the term the company uses to refer to products with the potential to reduce individual risk and popu
Slide 18: iQOS: Encouraging HeatSticks Offtake Volume Trends
18 146 354 227 168 290 578 0 100 200 300 400 500 600 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 cigarettes. Italy refers to the Expansion Area (Bologna, Milan, Modena
Slide 19: iQOS: Commercialization is Progressing Well
19 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 cigarettes. Italy refers to the Expansion Area (Bologna, Milan, Modena, Rome and Turin). Switzerland refers to the Launc
Slide 20: Conclusion: Outlook for 2016 Remains Strong
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 cigarettes Source: PMI Financials or estimates Conclusion: Outlook for 2016 Remains Strong ● Q2, 2016 results generally
Slide 21: Questions & Answers
2016 Second-Quarter Results Questions & Answers Download PMI’s Investor Relations App iOS Android
Slide 22: Glossary and Reconciliation of Non-GAAP Measures
Glossary and Reconciliation of Non-GAAP Measures
Slide 23: Glossary: General Terms
23 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 24: Glossary: Financial Terms
24 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 25: Glossary: Industry/Market Terms
25 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 ● North Africa: Algeria, Egypt, Libya, Morocco and Tunisia
Slide 26: Glossary: Reduced-Risk Products
26 Glossary: Reduced-Risk Products ● An e-vapor product is an electrical product that generates an aerosol by heating a nicotine or non-nicotine containing liquid, such as electronic cigarettes (or "e-cigarettes") ● HeatStick tobacco sticks are novel patented tobacco products specifically designed b
Slide 27: Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS
27 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) 2015 Reported Diluted EPS 4.42$ Adjustments: Asset impairment and exit costs 0.03 Tax items (0.03) Adjus
Slide 28: Adjustments for the Impact of Currency and Acquisitions
28 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Quarters Ended June 30, ($ in millions) (Unaudited) Net Revenues Less Excise Taxes Net Revenues excluding Excise Taxes Less Currency Net Revenues e
Slide 29: Reconciliation of Operating Companies Income to Adjusted OCI
29 (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 Operating Companies Income to Adjusted Operating Companies Income & Reconcilia
Slide 30: Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS, excluding Currency
30 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 June 30, (Unaudited) 2016 2015 % Change Reported Diluted EPS 1.15$ 1.21$ (5.0)%
Slide 31: Reconciliation of Reported Diluted EPS, excluding Currency
31 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 June 30, (Unaudited) 2016 2015 % Change Reported Diluted EPS 1.15$ 1.21$ (5.0)% Less: Currency impact (0.
Slide 32: Adjustments for the Impact of Currency and Acquisitions (Six Months)
32 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Six Months Ended June 30, ($ in millions) (Unaudited) Net Revenues Less Excise Taxes Net Revenues excluding Excise Taxes Less Currency Net Revenues
Slide 33: Reconciliation of Operating Companies Income (Six Months)
33 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Operating Companies Income to Adjusted Operating Companies Income & Reconciliation of Adjusted Operating Companies Income Margin, excluding Currency and Acquisitions For the Six Months Ended Ju
Slide 34: Reconciliation of Diluted EPS, excluding Currency (Six Months)
34 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 Six Months Ended June 30, (Unaudited) 2016 2015 % Change Reported Diluted EPS 2.13$ 2.37$ (10.1
Slide 35: Reconciliation of Reported Diluted EPS, excluding Currency (Six Months)
35 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Reported Diluted EPS to Reported Diluted EPS, excluding Currency For the Six Months Ended June 30, (Unaudited) 2016 2015 % Change Reported Diluted EPS 2.13$ 2.37$ (10.1)% Less: Currency impact
Slide 36: Reconciliation of Operating Cash Flow to Free Cash Flow
36 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 Six Months Ended June 30, ($ in millions) (Unaudited) (a) Operating Cash Flow For the Quarters
Slide 37: 2016 Second-Quarter Results
2016 Second-Quarter Results July 19, 2016
Philip Morris International — Q2 2016 Earnings Presentation on 6ix