Philip Morris International Inc · NYSE:PM
Philip Morris International — Q1 2011 Earnings Presentation
30 slides from Philip Morris International's earnings presentation, Apr 21, 2011
Slide 1: 2011 First-Quarter Earnings Results
Exhibit 99.3 2011 First-Quarter Earnings Results April 21, 2011 1
Slide 2: Introduction
Introduction Unless otherwise stated, we will be talking about results for the first- quarter 2011 and comparing them with the same period in 2010 References to PMI volumes refer to PMI shipment data, unless otherwise stated Industry volume and market shares are the latest data available from a numb
Slide 3: Forward-Looking and Cautionary Statements
Forward-Looking and Cautionary Statements This presentation and related discussion contain statements that, to the extent they do not relate strictly to historical or current facts, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Su
Slide 4: First-Quarter 2011 Results: Financial performance
First-Quarter 2011 Results Very strong financial performance: Q1, 2011 Results (a) Net Revenues +2.7% Adjusted OCI +8.0% Adjusted Diluted EPS +14.4% The events in Japan and North Africa only caused temporary disruptions that were not material to our financial results (a) All financial growth rates e
Slide 5: First-Quarter 2011 Results: Volume performance
First-Quarter 2011 Results Volume performance: Q1, 2011 Results Cigarette Volume +1.6% Organic Cigarette Volume -3.3% Lower organic volume driven by Japan, Mexico, Pakistan, Spain and Ukraine, as well as events in North Africa All other markets, representing over 80% of our volume base, grew at an o
Slide 6: 2011 EPS Guidance
2011 EPS Guidance Reported diluted EPS guidance for 2011 is being raised by 20 cents to $4.55 to $4.65 Compared to an adjusted diluted EPS of $3.87 in 2010, this corresponds to a growth rate of approximately 17.5% to 20% at prevailing exchange rates, and approximately 12.5% to 15% excluding currency
Slide 7: Japan
Japan Japan Tobacco facing significant supply disruptions in its home market PMI has sufficient in-market inventories Difficult to determine extent of likely uplift in PMI sales Second quarter will allow us to have better read on total consumption levels and extent to which consumers return to prior
Slide 8: Japan - PMI Market Shares
Japan - PMI Market Shares (%) 30 24.2 25.6 Total PMI Other PMI Brands 10.8 11.7 Marlboro 0 Q1 Q1 2010 2011 Source: Tobacco Institute of Japan 8
Slide 9: Pricing Assumptions
Pricing Assumptions Continued economic difficulties and consumer affordability issues in certain markets, such as Greece, Spain and Ukraine Reaction to competitive price moves, such as selective tax absorption, brand repositioning, discounting and delays in the implementation of tax-driven price inc
Slide 10: Asia Region
Asia Region PMI regional volume increased by 14.0% in Q1, driven by the business combination in the Philippines, though down 1.7% on an organic basis Marlboro volume in Asia increased by 0.7% overall and by 5.5% excluding Japan Strong volume and share performance in Indonesia, Korea and the Philippi
Slide 11: Australia - Plain Packaging
Australia - Plain Packaging The Australian Government has released an exposure draft of the bill, which would mandate plain packaging in 2012 There is a public consultation through June 6 PMI is firmly opposed to such a measure because: - there is no credible evidence that it will reduce smoking rat
Slide 12: Latin America & Canada Region
Latin America & Canada Region Marlboro Mexico - Market Share Impact of disruptively large (%) 55 tax/price increase in Mexico (+8 Pesos/pack of 20): 50.3 50 48.7 - Underlying industry volume decline estimated at 14% 45 - Resilience of Marlboro and 40 Benson & Hedges Q1 Q1 Marlboro market share up in
Slide 13: EU Region
EU Region Weak economies in Southern Europe driving industry volume decline and consumer downtrading Situation exacerbated in Spain by the introduction of a total indoor smoking ban, higher prices, a reduction in trade inventories and an increase in contraband. Full-year decline forecast at around 1
Slide 14: EU Region
EU Region PMI regional net revenues down 3.5% and adjusted OCI 2.3% lower in Q1, excluding currency, due to lower industry volume and a Regional share decline Structural excise tax improvements in 2011 in France, Greece, the Netherlands, Sweden and the UK Multi-year excise tax programs in Germany an
Slide 15: EU Region
EU Region (%) (%) 40 Italy – Marlboro 10 France – Philip Morris brand YAS 12 mm Share (a) Market Share 8.2 7.6 6.9 6.4 34 33 29 25 0 (b) 1 2 3 4 1 2 3 4 Q1 Q1 Q1 Q1 Q1 2009 2010 2011 2008 2009 2010 2011 (a) Young Adult Smokers: Legal Age (minimum 18)-24 years old; 12 mm: 12 months moving average (b)
Slide 16: EEMA Region
EEMA Region PMI volume decreased by 0.8% driven by Ukraine and North Africa, partly offset by favorable comparisons in Romania and Turkey Strong premium portfolio performance with higher Marlboro and Parliament volumes Russian market impacted by rampant food price inflation and cigarette price incre
Slide 17: EEMA Region
EEMA Region Market contraction and polarization in Ukraine with premium and super-low segments growing PMI share loss of 3.6 points in Ukraine through end February, driven by under-representation at the bottom end of the market PMI volume increased by 10.4% in Turkey during the first quarter, driven
Slide 18: PMI Market Share Developments
PMI Market Share Developments (%) Top 30 PMI OCI Markets 37 35.8 35.3 34.6 32 Q1, 2009 Q1, 2010 Q1, 2011 Note: Historical data adjusted for pro-forma inclusion of business combination with Fortune Tobacco in the Philippines Source: PMI estimates 18
Slide 19: Marlboro – Market Share
Marlboro – Market Share Marlboro Global Share of Market (a) – 12 Months Moving Average (%) 9.2 9.1 9.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2009 2010 2011 (a) Excluding China and USA Source: PMI estimates 19
Slide 20: Tobacco Leaf and Direct Materials
Tobacco Leaf and Direct Materials Stable tobacco leaf prices expected in 2011, mainly due to a larger crop in Brazil Direct material costs stable Manufacturing costs expected to increase in line with inflation this year, partly offset by our $250 million annual productivity and cost reduction target
Slide 21: Adjusted OCI Margins
Adjusted OCI Margins First-Quarter 2011(a) 2010 Variance EU 49.3 % 48.6 % 0.7 pp EEMA 42.9 44.1 (1.2) Asia 46.4 38.7 7.7 LA&C 33.2 31.3 1.9 Total 44.9 42.7 2.2 (a) Excluding currency and acquisitions Source: PMI Financials 21
Slide 22: Free Cash Flow
Free Cash Flow Free Cash Flow (a) ($ million) 2,500 Increase driven by higher +22.6% 2,236 net earnings, lower pension contributions and 2,000 1,824 lower cash exit costs We continue to focus on 1,500 reducing inventory levels Year-end working capital 1,000 requirements remain subject to tax/price 5
Slide 23: Share Repurchase Program
Share Repurchase Program During the first quarter, PMI spent some $1.36 billion to purchase 22.2 million shares at an average of $61.21 Full-year 2011 share repurchases expected to total around $5 billion 23
Slide 24: Conclusions
Conclusions Strong first-quarter results Business outlook is favorable Positive impact of Japan difficult to measure Increased investment behind our portfolio of leading brands Slightly more conservative pricing assumptions 2011 reported diluted EPS guidance raised by 20 cents to $4.55 to $4.65: - T
Slide 25: 2011 First-Quarter Results: Questions & Answers
2011 First-Quarter Results Questions & Answers 25
Slide 26: Reconciliation of Non-GAAP Measures
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Quarters Ended March 31, ($ in millions) (Unaudited) % Change in Reported Net Revenues 2011 2010 excluding Excise Taxes Reported Net Reported Net Reve
Slide 27: Reconciliation of Non-GAAP Measures
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Reported Operating Companies Income to Adjusted Operating Companies Income & Reconciliation of Adjusted Operating Companies Income Margin, excluding Currency and Acquisitions For the Quarters Ende
Slide 28: Reconciliation of Non-GAAP Measures
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 March 31, (Unaudited) 2011 2010 % Change Reported Diluted EPS $ 1.06 $ 0.90 17.8% A
Slide 29: Reconciliation of Non-GAAP Measures
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 Ended March 31, ($ in millions) (Unaudited) 2011 2010 % Change (a) Net cash provided by operating acti
Slide 30: 2011 First-Quarter Results
2011 First-Quarter Results April 21, 2011 30
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