Philip Morris International Inc · NYSE:PM
Philip Morris International — Q1 2010 Earnings Presentation
41 slides from Philip Morris International's earnings presentation, Apr 22, 2010
Slide 1: First-Quarter Earnings Results
First-Quarter Earnings Results April 22, 2010 Exhibit 99.3
Slide 2: Introduction
Introduction Unless otherwise stated, we will be talking about results in the first quarter 2010 and comparing them with the same period in References to PMI volumes refer to shipment data Industry volume and market shares are the latest data available from a number of internal and external sources
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: PMI Results
PMI Results Strong financial performance in Q1, 2010 In line with or above all our constant currency mid to long- term annual growth targets: Growth Targets (c) Q1, Results (c) Net Revenues 4 – 6% + 6.1% Adjusted OCI (a) 6 – 8% + 8.6% Adjusted Diluted EPS (b) 10 – 12% +13.5% (a) OCI stands for Opera
Slide 5: PMI Results
PMI Results Source: PMI Financials 204.7 Q1, 2010 Results (units billions) (2.3)% 0.7% Cigarette Volume Excl. Acquisitions Actual % Growth Q1, 2010 vs. Q1, 2009
Slide 6: Business Outlook
Business Outlook Economic environment Adult consumer behavior Excise taxation Competitiveness
Slide 7: Economic Environment
Economic Environment Emerging markets in Asia continue to grow Improved outlook in Latin America Some signs of stabilization in Eastern Europe Economic conditions in EU remain difficult
Slide 8: Adult Consumer Behavior
Adult Consumer Behavior Growing premium volume in several emerging markets, such as Algeria, Argentina, Indonesia and Mexico Consumer downtrading moderating in Russia Price sensitivity remains high in EU markets Improvement in employment levels key to global resumption in consumer uptrading Illicit
Slide 9: Excise Taxation
Excise Taxation Most governments are continuing to pursue a policy of reasonable increases Excise tax structures are globally improving
Slide 10: New EU Excise Tax Directive
New EU Excise Tax Directive Premised on gradual tax increases Three important structural improvements: - Increase in maximum specific-to-total ratio from 55% to 76.5% - Gradual reduction in gap between tax rates on fine cut and cigarettes - Elimination of previous 100% of MPPC cap on Minimum Excise
Slide 11: Excise Taxation
Excise Taxation Most governments are continuing to pursue a policy of reasonable increases Excise tax structures are globally improving Large disruptive excise tax increases in January 2010 in Romania and Turkey: - Double-digit industry volume declines - Significant increase in illicit trade in both
Slide 12: Excise Taxation
Excise Taxation Most governments are continuing to pursue a policy of reasonable increases Excise tax structures are globally improving Large disruptive excise tax increases in January 2010 in Romania and Turkey Greek Government decreased the Minimum Excise Tax, at the same time as it increased the
Slide 13: Excise Taxation
Excise Taxation Most governments are continuing to pursue a policy of reasonable increases Excise tax structures are globally improving Large disruptive excise tax increases in January 2010 in Romania and Turkey Greek Government decreased the Minimum Excise Tax, at the same time as they increased th
Slide 14: PMI Competitiveness
PMI Competitiveness PMI continues to grow share across wide range of developed and emerging markets Markets where PMI’s smoker share among Legal Age (min. 18) – 24 year olds is at least 5 share points higher than among Legal Age (min. 18) – 64 year olds include: - OECD: Austria, Belgium, France, Hun
Slide 15: Marlboro
Marlboro Volume Strong performance in Q1, 2010, with total volume down just 0.6% and up 1.4% excluding Romania and Turkey Asia: volume up 7.4% Latin America & Canada: volume up 1.5% Source: PMI Financials
Slide 16: Marlboro
Marlboro Volume Strong performance in Q1, 2010, with total volume down just 0.6% and up 1.4% excluding Romania and Turkey Asia: volume up 7.4% Latin America & Canada: volume up 1.5% EEMA: volume down 1.2%, in spite of strong performance in North Africa and improved duty-free sales EU: volume down 6.
Slide 17: Marlboro
Marlboro Innovation Roll-out of new architecture Innovative line extensions: - Marlboro Filter Plus (2.8% share in Kuwait) - Marlboro Gold Touch (1.4% share in Italy) - Marlboro Black Menthol (1.3% share in Japan) Incremental volume and reinforcement of equity of the overall Marlboro franchise Note:
Slide 18: Superior Brand Portfolio
Superior Brand Portfolio Mid-Price Premium & Above Local Heritage International Low-Price
Slide 19: PMI Market Share Developments: EU Region
18.3 5.2 38.6 18.0 5.7 38.4 Total PMI PMI Market Share Developments: EU Region Source: PMI Estimates (%)
Slide 20: PMI Market Share Developments: Asia Region
5.8 4.0 13.8 7.0 5.7 17.4 Total PMI 10.4 6.5 23.9 10.8 6.7 24.2 Total PMI PMI Market Share Developments: Asia Region Source: Tobacco Institute of Japan and Hankook Research (%) (%) Japan Korea
Slide 21: PMI Market Share Developments: Russia
PMI Market Share Developments: Russia PMI share up 0.5pp to 25.6% in Q1, 2010 Bond Street key driver of PMI share gains and fastest- growing brand on the market Parliament in above premium segment is stable Chesterfield in mid-price segment is gaining share Source: A.C. Nielsen
Slide 22: PMI Share Developments: Emerging Markets
PMI Share Developments: Emerging Markets (0.1) 29.0 Indonesia (a) 0.9 74.5 Argentina N.A. c.90 (March) Philippines 0.4 69.6 Mexico (1.5) 40.9 Turkey 0.4pp 36.2 Ukraine Variance Q1, 2010 vs. Q1, 2009 Q1, 2010 Market Shares a) Latest available data for the quarter through end February Source: A.C. Nie
Slide 23: Pricing
Pricing In last six months, PMI has implemented price increases notably in: Pricing variance was $449 million in Q1, 2010 Argentina Canada Dominican Rep. Mexico Australia Indonesia Malaysia Pakistan Romania Russia Saudi Arabia Turkey Ukraine France Greece Italy Poland Spain UK LA & Canada Asia EEMA
Slide 24: PMI Results
PMI Results Source: PMI Financials. See reconciliations to U.S. GAAP measures at the end of this presentation 6.5 Q1, 2010 Results ($ billions) 6.1% 16.1% Net Revenues Excl. Currency and Acquisitions Actual % Growth Q1, 2010 vs. Q1, 2009
Slide 25: PMI Results
PMI Results (a) Excludes asset impairment and exit costs Source: PMI Financials. See reconciliations to U.S. GAAP measures at the end of this presentation 2.8 6.5 Q1, 2010 Results ($ billions) 8.6 % 17.0% Adjusted OCI (a) 6.1% 16.1% Net Revenues Excl. Currency and Acquisitions Actual % Growth Q1, 20
Slide 26: Adjusted OCI Margins
Adjusted OCI Margins (a) 0.4 42.7 42.3 Total PMI 2.9 30.2 27.3 LA & Canada (3.8) 37.8 41.6 Asia 4.6 45.0 40.4 EEMA 0.3pp 49.0% 48.7% EU Variance Q1 Q1 (a) Excluding currency impact Note: Margins are calculated as adjusted OCI, divided by net revenues, excluding excise taxes Source: PMI Financials. S
Slide 27: Productivity and Costs
Productivity and Costs $200 million tobacco leaf cost increase forecast for 2010 Will be largely offset by productivity savings in manufacturing On track to realize $500 million of productivity and cost savings in 2010 and $1.5 billion on a cumulative basis for the period 2008-2010 Source: PMI Finan
Slide 28: PMI Results
PMI Results 0.90 Q1, 2010 Results ($) 13.5% 21.6% Adjusted Diluted EPS (a) Excl. Currency Actual % Growth Q1, 2010 vs. Q1, 2009 (a) Excludes asset impairment and exit costs Source: PMI Financials. See reconciliations to U.S. GAAP measures at the end of this presentation
Slide 29: Operating Cash Flow
1,427 1,974 2,500 Q1 Q1 Source: PMI Financials. See reconciliations to U.S. GAAP measures at the end of this presentation Operating Cash Flow ($ millions)
Slide 30: Operating Cash Flow
Operating Cash Flow Increase in operating cash flow in Q1, 2010, driven mainly by: Higher net earnings Stricter forestalling regulations Working capital improvement program Source: PMI Financials
Slide 31: Free Cash Flow
1,282 1,824 2,500 Q1 Q1 (a) Free cash flow equals net cash provided by operating activities less capital expenditures. Source: PMI Financials. See reconciliations to U.S. GAAP measures at the end of this presentation Free Cash Flow (a) ($ millions)
Slide 32: Corporate Financing
Corporate Financing $1.0 billion 10 year bond with 4.5% coupon issued in March 2010 $2.5 billion three-year bank revolver established to replace two facilities maturing this year Over $14 billion in well-laddered bonds in three currencies issued since spin with attractive average cost of 5.5% Total
Slide 33: Shareholder Returns
Shareholder Returns $1.8 billion spent in Q1, 2010, to purchase 36.1 million shares $257 million remained on current share repurchase plan, which will be completed by end April New share repurchase program of $12 billion May 2010 through April 2013 Dividend yield on 19 April 2010 was an attractive 4
Slide 34: Summary
Summary Strong financial results Pricing power remains intact Superior brand portfolio Innovation success Market share gains Tremendous cash flow Some road bumps from excise taxation Improved economic outlook Good business momentum Impact of Japan excise tax increase uncertain
Slide 35: 2010 EPS Guidance
2010 EPS Guidance PMI is reaffirming its 2010 reported diluted EPS guidance of $3.75 - $3.85 Guidance represents a reported diluted EPS growth rate of 16% to 19% Exchange rates more favorable today than in February More cautious stance being taken on Japan in light of recent developments On a consta
Slide 36: Questions & Answers
Questions & Answers 2010 First-Quarter Earnings Results
Slide 37: Reconciliation of Non-GAAP Measures
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for Impact of Currency and Acquisitions For the Quarters Ended March 31, (in millions) (Unaudited) Reported Net Revenues Less Excise Taxes Reported Net Revenues excluding Excise Taxes Less Currency Repo
Slide 38: 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 Ended
Slide 39: 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) % Change Reported Diluted EPS 0.90 $ 0.74 $ 21.6% Less: Asset
Slide 40: 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 Reconciliation of Operating Cash Flow to Operating Cash Flow, excluding Currency For the Quarters Ended March 31, (in m
Slide 41: First-Quarter Earnings Results
First-Quarter Earnings Results April 22, 2010
Philip Morris International — Q1 2010 Earnings Presentation on 6ix