Philip Morris International Inc · NYSE:PM
Philip Morris International — Investor Day (September 2016)
34 slides from Philip Morris International's investor day presentation, Sep 29, 2016
Slide 1: Investor Day – EEMA Region
Investor Day – EEMA Region Lausanne, September 29, 2016 Drago Azinovic President, Eastern Europe, Middle East & Africa Region & PMI Duty Free
Slide 2: Agenda
Agenda ● Overview and Key Results ● Vision and Strategic Pillars ● Cigarette Business and Performance in Key Markets ● Developing Untapped Markets ● Reduced-Risk Products ● Concluding Remarks Note: Reduced-Risk Products ("RRPs") is the term the company uses to refer to products with the potential to
Slide 3: EEMA: A Vast and Diverse Region
EEMA: A Vast and Diverse Region Cigarettes 2015 Industry Volume (units trillion) 1.1 PMI SoM 25.4% Industry Net Revenue Pool ($ billion) 21 PMI Share of Industry Net Revenue Pool 31% PMI Footprint Adjusted OCI ($ billion) 3.4 Employees 11,000+ Contribution to PMI Results PMI Cigarette Volume 33% Adj
Slide 4: EEMA: Strong Fundamentals
EEMA: Strong Fundamentals Population Growth (billion people) GDP Growth ($ billion) 2015-2018 2018-2025 2015-2018 2018-2025 CAGR: 2.0% 1.8% 2.9% 7.6% 2,167 13,543 1,799 7,402 2015 2018 2021 2025 2015 2018 2021 2025 Source: Oxford Economics (Nominal GDP) 4
Slide 5: EEMA: Delivered Double-Digit Adjusted OCI Growth, Ex-Currency
EEMA: Delivered Double-Digit Adjusted OCI Growth, Ex-Currency Industry Cigarette Volume PMI Cigarette Volume PMI Net Revenues PMI Adjusted OCI (units billion) (units billion) ($ million) ($ million) CAGR(a): (2.9)% (1.6)% 8.1% 12.4% 1,174 293.5 8,025 3,651 279.4 7,364 3,425 1,076 2012 2015 2012 2015
Slide 6: Regional Vision and Strategic Pillars
Regional Vision and Strategic Pillars GROWTH ENGINE FOR PMI DELIVERING LOW DOUBLE-DIGIT ADJUSTED OCI GROWTH(a) GROWING DEVELOPPING SUCCESSFULLY CIGARETTE BUSINESS UNTAPPED MARKETS LAUNCHING RRPs Focus behind corporate brands Entering whitespaces Attractive Region for RRPs Leverage key growth
Slide 7: Continue to Strengthen Our Share Leadership
Continue to Strengthen Our Share Leadership Share of EEMA Cigarette Market 30% Gap (PMI SoM vs. #2 Competitor) 1.7pp 2.4pp PMI 25% #2 Competitor 20% 15% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2012 2013 2014 2015 2016 Note: Excluding duty free. #2 Competitor defined as trademark owner
Slide 8: Maintain Superior Price and Growth Segment Positioning
Maintain Superior Price and Growth Segment Positioning Key Segments (H1, 2016) Volume Split by Price Segment Key Growth Segment Share 11% Premium 37% 28% Competitors Mid 23% PMI’s Regional 61% Share 24.6% Low 40% 29.4% 49.5% 24.3% 29.9% Competitors Low Tar(a) Recessed Slim(b) Capsules (a) Includes l
Slide 9: Judicious Pricing Momentum
Judicious Pricing Momentum EEMA Region Pricing Variance as % of PY Net Revenues Annual Average (2012-2015) 13.4% 9.5% 9.1% 7.4% 5.8% 2012 2013 2014 2015 Source: PMI Financials or estimates 9
Slide 10: Environment of Reasonable Affordability
Environment of Reasonable Affordability Marlboro vs. Big Mac Index in PMI’s Top Markets (% of Big Mac Price) 300 450 150 Average 0 Note: Prices are as of June 2016 Source: PMI Financials or estimates, and The Economist Big Mac Index (July 2016) 10
Slide 11: Significant Volume Potential
Significant Volume Potential Cigarette Industry Volume Reduced-Risk Products (units billion) 1,076 Not Present 134 Under-indexed 240 Over-indexed 702 2015 Note: Not present, under and over-indexed figures are based on H1, 2016 market share data, excluding duty free. Not present reflects market with
Slide 12: Focused Portfolio With Leading Brands
Focused Portfolio With Leading Brands International Brand Share of Cigarette Regional Market Shares for PMI Regional Cigarette Volume (H1, 2016) (%) Top-5 International Brand (H1, 2016) 10 5.6 5.1 78% 4.0 0 Marlboro L&M Bond Street Note: Excluding duty free. Pack designs are for illustrative purpose
Slide 13: Marlboro: Continue to Strengthen the Brand
Marlboro: Continue to Strengthen the Brand Marlboro Cigarette Market Share (%) 6.4 6.5 6.2 6.0 5.6 2012 2013 2014 2015 H1, 2016 Note: Excluding duty free. Visuals are for illustrative purposes only Source: PMI Financials or estimates 13
Slide 14: Marlboro: Innovations Delivering Strong Growth
Marlboro: Innovations Delivering Strong Growth TURKEY UAE Marlboro Touch Slim SoM (%) Marlboro Double Ice / Double Mix SoM (%) 2.2 1.2 0.4 March June December December June 2014 2016 2014 2015 2016 Note: Slim includes slims, extra slims, super slims and micro slims. Pack designs are for illustrative
Slide 15: Parliament: Strong Growth Despite Recessionary Environment
Parliament: Strong Growth Despite Recessionary Environment Parliament Cigarette Market Shares (%) EEMA Region(a) Russia Saudi Arabia Turkey Kazakhstan Variance: +0.5pp +0.7pp +1.5pp +2.6pp ̶ pp 11.6 9.0 6.9 6.9 3.9 3.1 3.2 2.6 2.5 1.0 2012 H1, 2016 2012 H1, 2016 2012 H1, 2016 2012 H1, 2016 2012 H1,
Slide 16: L&M: Continuing the Regional Success Story
L&M: Continuing the Regional Success Story L&M Cigarette Market Share (%) 5.1 4.7 4.3 4.2 3.8 2012 2013 2014 2015 H1, 2016 Note: Excluding duty free. Pack designs are for illustrative purposes only Source: PMI Financials or estimates 16
Slide 17: Bond Street: Expanding Presence with Slim Offerings
Bond Street: Expanding Presence with Slim Offerings Bond Street Slim Regional Cigarette SoM (%) 1.8 0.2 Q1 Q2 2012 2016 Note: Excluding duty free. Slim includes slims, extra slims, super slims and micro slims Source: PMI Financials or estimates 17
Slide 18: Russia: Cigarette Industry Volume Declines Subsiding
Russia: Cigarette Industry Volume Declines Subsiding Cigarette Industry Volume (% Decline vs. PY) H1 2013 2014 2015 2015 2016 (5.3) (6.4) (6.4) (7.6) (9.3) Source: PMI Financials or estimates 18
Slide 19: Russia: After Strong Growth, Temporary Tail-Off
Russia: After Strong Growth, Temporary Tail-Off PMI Cigarette Market Share (%) +2.0pp (0.6)pp 28.4 27.9 27.3 26.4 2012 2015 2015 2016 H1 Note: Pack designs are for illustrative purposes only Source: PMI Financials or estimates, and Nielsen 19
Slide 20: Russia: Growing Share in Resilient Premium Segment
Russia: Growing Share in Resilient Premium Segment Price Segment Share of Market (%) PMI Price Segment Shares (%) Premium 41.8 41.9 Premium 14.0 12.5 12.6 12.5 36.1 PMI Mid 25.2 25.5 25.9 24.7 #1 2012 2015 H1, 2016 Low 27.2 26.3 Low 60.8 62.0 61.5 62.8 23.2 PMI #1 2012 2015 2015 2016 2012 2015 H1, 2
Slide 21: North Africa: Many Years of Strong Growth, Recent Pressures
North Africa: Many Years of Strong Growth, Recent Pressures PMI Cigarette Market Share (%) 27.9 23.6 22.6 2012 2015 H1, 2016 Source: PMI Financials or estimates 21
Slide 22: North Africa: Re-instilling Passion into Marlboro in Algeria
North Africa: Re-instilling Passion into Marlboro in Algeria Key Focus Areas ● Revitalizing Marlboro brand image and product design ● REDZ adult consumer MSCAPE engagement platform launched ● Redesigning route-to-market to increase trade and adult consumer reach ROUTE-TO-MARKET SALES ACTIVATION 22
Slide 23: North Africa: Take-back and Portfolio Expansion in Morocco
North Africa: Take-back and Portfolio Expansion in Morocco MOROCCO PMI Cigarette Market Share (%) 24.8 Chesterfield 21.6 Next 19.1 18.1 L&M 15.5 Marlboro 2012 2013 2014 2015 H1, 2016 Source: PMI Financials or estimates 23
Slide 24: Turkey: Cigarette Industry Recovery and PMI Share Turnaround
Turkey: Cigarette Industry Recovery and PMI Share Turnaround Cigarette Industry Volume Change vs. PY (%) PMI Cigarette Market Share (%) 9.0 8.4 44.6 3.3 43.6 43.9 2013 2014 2015 H1, 2016 January January June (7.6) 2015 2016 2016 Source: PMI Financials or estimates, and Nielsen 24
Slide 25: Turkey: Leading Premium Segment Growth
Turkey: Leading Premium Segment Growth SoM Change Premium Segment Share (%) (H1, 2016 vs. H1, 2013) Premium 19.8 21.0 22.1 23.0 +3.2pp SoS: SoS: +2.1pp SoS: SoS: 50.4% Parliament 52.3% 48.1% 51.0% SoS: SoS: SoS: SoS: +1.3pp Marlboro 43.7% 44.7% 40.8% 41.2% H1, 2013 H1, 2014 H1, 2015 H1, 2016 Note: H
Slide 26: Saudi Arabia: Significant Share Gains Fueled by Marlboro
Saudi Arabia: Significant Share Gains Fueled by Marlboro PMI Cigarette Market Share (%) 50.7 47.4 49.0 45.1 46.2 20.8 19.8 23.1 26.3 27.4 Marlboro 2012 2013 2014 2015 H1, 2016 Source: PMI Financials or estimates 26
Slide 27: Opportunities to Develop Untapped Markets
Opportunities to Develop Untapped Markets Above EEMA-average share Below EEMA-average share Not present Note: Not present reflects market with PMI share of market below 0.1% Source: PMI Financials or estimates (H1, 2016) 27
Slide 28: Ivory Coast: Success Story
Ivory Coast: Success Story PMI Cigarette Market Share (%) 25 21.7 20 15 10 5 0 Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug 2014 2015 2016 Source: PMI Financials or estimates 28
Slide 29: Tanzania: Successful Entry into Challenging Market
Tanzania: Successful Entry into Challenging Market PMI Cigarette Volume (units million) IMS Volume ● Focus on Dar-es-Salaam 12 ● Expanding distribution 10 ● Combining PMI brand strength 8 with commercial capability of local distributors 6 4 2 0 Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun 20
Slide 30: RRPs: Very Attractive Prospects for Roll-Out in EEMA
RRPs: Very Attractive Prospects for Roll-Out in EEMA PMI RRPs Portfolio ● Strong macroeconomic Heated Tobacco Products Nicotine-Containing Products fundamentals Platform 1 Platform 3 iQOS ● Different platforms to address adult consumer needs ● By end 2017: RRPs launched in key cities in over 10 mark
Slide 31: RRPs: iQOS's Early Momentum
RRPs: iQOS’s Early Momentum 2016 Monthly Variance in HeatSticks Offtake Volume +33% Moscow, Russia Kiev, Ukraine +22% +14% +38% +74% +28% +41% +87% +50% +60% +30% +21% +60% Jan Feb Mar Apr May Jun Jul Aug Feb Mar Apr May Jun Jul Aug Note: Reduced-Risk Products ("RRPs") is the term the company uses t
Slide 32: Conclusion
Conclusion ● A growth engine for PMI, delivering low double-digit adjusted OCI growth, excluding currency and RRPs ● Robust plans to grow cigarette business: - Judicious pricing in an environment of economic recovery and reasonable affordability - Focused innovation - Leveraging superior brand portf
Slide 33: Questions & Answers
Investor Day – EEMA Region Lausanne, September 29, 2016 Questions & Answers
Slide 34: Reconciliations of non-GAAP measures
Reconciliations of non-GAAP measures included in this presentation to the most comparable GAAP measures are provided on our website at: www.pmi.com/2016InvestorDay/RecSlides Glossary of Terms: www.pmi.com/2016InvestorDay/Glossary
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