Philip Morris International Inc · NYSE:PM
Philip Morris International — Investor Day (September 2016)
27 slides from Philip Morris International's investor day presentation, Sep 29, 2016
Slide 1: Investor Day – EU Region
Investor Day – EU Region Lausanne, September 29, 2016 Frederic de Wilde President, European Union Region
Slide 2: Agenda
Agenda ● Underlying Business ● Strategic Pillars ● Evolution to Multi-category Management: - RRP Portfolio: iQOS is the Growth Catalyst ● Concluding Remarks Note: Reduced-Risk Products ("RRPs") is the term the company uses to refer to products with the potential to reduce individual risk and populat
Slide 3: EU Regional Overview (2015)
EU Regional Overview (2015) EU Political Area + Non EU Markets Cigarettes Contribution to PMI Industry Volume (units billion) 509 PMI Volume 195 23% PMI SoM 38.3% PMI Cigarette Volume Other Tobacco Products (OTP) OTP Industry (units billion eq.) 155 Fine Cut Industry (units billion eq.) 144 33% PMI
Slide 4: Better Macroeconomics and Stronger Consumer Confidence Providing Improved Operating Environment in EU Region
Better Macroeconomics and Stronger Consumer Confidence Providing Improved Operating Environment in EU Region # of EU Markets Within GDP Growth Brackets <0% 0%-1.5% >1.5% 2.4% Real Disposable Income 1.6% 1.8% 1.7% 1.6% 1.6% GDP 1.1% Growth 0.3% (0.3)% (5.2) Consumer (0.2)% 25 (0.4)% Confidence 22 (9.
Slide 5: EU Region: Recent Turn Around & Growth Contributor to PMI
EU Region: Recent Turn Around & Growth Contributor to PMI (%) Total Cigarette Industry PMI Adjusted OCI Volume Variance vs. PY Cigarette Market share Variance vs. PY(a) 2012 (5.5) 36.8 (0.6) 2013 (7.3) 37.2 (1.1) 2014 (3.1) 38.2 (1.3) 2015 (0.8) 38.3 4.6 H1, 2016 0.4 38.5 3.5 (a) Excluding currency
Slide 6: TPD2 Sets Regulatory Environment for the Years to Come
TPD2 Sets Regulatory Environment for the Years to Come Cigarettes and Fine Cut ● 65% combined health warnings (both front & back of pack) ● Minimum pack size: 20 cigarettes or 30 grams for fine cut ● Ban on characterizing flavors: - Grace period until 2020 for menthol ● Segments with largest potenti
Slide 7: Extreme Regulation: Plain Packaging Update
Extreme Regulation: Plain Packaging Update United Kingdom ● France, Hungary, Ireland and the U.K. adopted ● Plain pack to be fully present in market by legislation May 2017 ● A few additional countries considering extreme ● Chesterfield established prior to regulation implementation ● We continue to
Slide 8: Strategic Pillars and Growth Catalysts
Strategic Pillars and Growth Catalysts REINVIGORATED GROWTH CONTRIBUTOR: EU REGION COMBUSTIBLE BUSINESS TPD / Regulations RRP PORTFOLIO Mid-Single-Digit Incremental Adjusted OCI Growth(a) OCI Catalyst Leverage our superior cigarette Simplification of Accelerate iQOS commercialization brand portf
Slide 9: Focused Portfolio and Innovation Pipeline in a Post-TPD2 Environment
Focused Portfolio and Innovation Pipeline in a Post-TPD2 Environment EU Region: Top-4 Brands’ Share of PMI Share of Key Cigarette Growth Segments (2015) PMI Regional Cigarette Volume (H1, 2016) 48.7% 9.3% 7.3% Segment SoM 91% 40.3% Adult Smoker- Local 31.9% PMI SoS 30.2% Relevant Innovations "Champi
Slide 10: Marlboro: Excellent Momentum in our Premium Cigarette Offering
Marlboro: Excellent Momentum in our Premium Cigarette Offering Marlboro Cigarette Market Shares (%) 2012 2015 25.9 24.8 21.3 22.1 18.0 18.8 17.0 14.3 11.3 11.4 ● New brand architecture rolled out successfully across all pillars ● Significantly reinvigorated brand and its relevance to adult smokers F
Slide 11: Growing in the Below-Premium Segment
Growing in the Below-Premium Segment L&M, Chesterfield & Philip Morris Cigarette Market Shares (%)(a) Combined Share of Below-Premium Segment (%)(a) +0.5pp +2.4pp +0.8pp 2012 2015 6.9 31.0 6.4 5.6 23.8 23.5 20.6 20.0 21.5 19.0 19.8 3.2 15.1 2.7 1.9 6.7 0.7 2.3 2012 2015 2012 2015 2012 2015 EU German
Slide 12: Rational Excise Environment & Improving Tax Structures
Rational Excise Environment & Improving Tax Structures EU Region: Specific Excise-to-Total ● Current excise environment rational Tax Ratio on Cigarettes (%)(a) +4.2pp 35.1 ● Advocate for reasonable excise 30.9 taxes: - Regular, reasonable increases - High proportion of specific elements in January 2
Slide 13: Judicious and Broad Based Pricing Momentum
Judicious and Broad Based Pricing Momentum Annual EU Region Pricing Variance as a % of PY Net Revenues Average (2012-2015) 5.3% 4.8% 4.5% 4.0% 3.9% 1.5% 2012 2013 2014 2015 H1, 2016 Source: PMI Financials or estimates 13
Slide 14: Illicit Trade: Effective Law Enforcement Yielding Positive Results
Illicit Trade: Effective Law Enforcement Yielding Positive Results Counterfeit & Contraband ● Improved coordination between key Incidence (%) stakeholders and increased awareness 15.5 ● Illicit trade now on agenda of Bulgaria governments 11.7 ● Cooperation with national and international law enforce
Slide 15: Maintaining Robust Operating Margins
Maintaining Robust Operating Margins Adjusted OCI Margin (%) Robust margins driven by: +1.6pp (ex-currency) ● Top-line growth 49.2 48.6 ● Disciplined cost base management ● Simplification of processes and portfolio ● Continued focus on productivity initiatives and further optimization of manufacturi
Slide 16: Key Market Highlights in the EU
Key Market Highlights in the EU 16
Slide 17: Germany: Growing Cigarette Market Share
Germany: Growing Cigarette Market Share PMI Cigarette Market Share (%) ● Cigarette industry volume essentially 36.6 37.2 37.8 35.8 36.2 flat in H1, 2016: - Lower illicit trade - Impact from immigration 11.8 11.9 11.9 10.5 10.9 ● Solid cigarette market share momentum 22.8 ● Marlboro reinvigorated and
Slide 18: Italy: Growing Presence in Below-Premium Segment
Italy: Growing Presence in Below-Premium Segment Below-Premium Cigarette SoM and PMI SoS (%) ● Cigarette industry volume up by 1.2% 75.2 72.9 in H1, 2016: Below- 68.5 Premium 66.7 66.8 - Lower illicit trade SoM 36.7 38.9 39.5 ● PMI cigarette share under pressure: PMI SoS 32.2 32.5 - Down by 1 point
Slide 19: France: Well Positioned for More Restrictive Regulatory Environment
France: Well Positioned for More Restrictive Regulatory Environment PMI Cigarette Market Share (%) 42.1 ● Cigarette industry volume flat in 41.0 41.6 39.6 40.2 H1, 2016: - Lower illicit trade 8.3 9.1 9.4 9.5 10.1 ● At present, limited plain packs visible in market ● Focused and well recognized 24.8
Slide 20: RRP Portfolio: Key Growth Catalyst for the EU Region
RRP Portfolio: Key Growth Catalyst for the EU Region ● Exciting proposition and high adult smoker interest Platform 1: iQOS ● Multi-category approach ● Ambitious commercialization plans in place ● New ways of conducting business for PMI: - Innovative offers and product pipeline - New and evolving ch
Slide 21: RRPs: Advocating for Ability to Communicate Reduced-Risk Claims
RRPs: Advocating for Ability to Communicate Reduced-Risk Claims ● Majority of EU Member States have transposed TPD2 on a one-to-one basis ● Leverage scientific filings with the EU and several national regulators in Member States: - Pursuant to the TPD2 Novel Tobacco Product provisions ● Standards fo
Slide 22: iQOS: Executing Our Ambitious Commercialization Plan
iQOS: Executing Our Ambitious Commercialization Plan ● Now present in key cities in eight markets across the EU Region: - Italy, Switzerland, Portugal, Romania, Denmark, Germany, Greece and Monaco ● Solid knowledge to leverage based on key learnings: - Guided trial driving high conversion rates acro
Slide 23: iQOS: Performance in Italy and Switzerland
iQOS: Performance in Italy and Switzerland HeatSticks Offtake Share and iQOS Offtake Penetration Ratio Offtake SoM (Launch Area) Penetration Ratio (Launch Area) ITALY 1.3% SWITZERLAND 4.5% 3.7% 2.6% 0.7% 1.8% 0.4% 1.1% 0.9% 0.6% 0.7% 0.5% 0.2% 0.3% Q4 Q1 Q2 QTD Sept Q4 Q1 Q2 QTD Sept 2015 2016 2015
Slide 24: iQOS: Rollout in Additional Geographies with Promising Results
iQOS: Rollout in Additional Geographies with Promising Results Lisbon HeatSticks Offtake Share and iQOS Offtake Penetration Ratio ● Doubled penetration ratio to 1.4% Offtake SoM Penetration Ratio reaching a 0.3% SOM ● Conversion ratio of 68% LISBON 1.4% Bucharest 0.7% 0.5% ● Promising results with p
Slide 25: EU Region: Reinvigorated Growth Contributor for PMI
EU Region: Reinvigorated Growth Contributor for PMI ● Strong underlying cigarette business: - Improved macroeconomic environment and positive consumer sentiment - Moderating total industry volume providing positive lift - Superior cigarette brand portfolio and undisputed market share leadership - Su
Slide 26: Questions & Answers
Investor Day – EU Region Lausanne, September 29, 2016 Questions & Answers
Slide 27: Reconciliations of non-GAAP measures included in this presentation
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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