Philip Morris International Inc · NYSE:PM
Philip Morris International — Investor Day (September 2016)
30 slides from Philip Morris International's investor day presentation, Sep 29, 2016
Slide 1: Investor Day – Asia Region
Investor Day – Asia Region Lausanne, September 29, 2016 Martin King President, Asia Region
Slide 2: Asia Region: Target and Strategies
Asia Region: Target and Strategies Target: ● Annual average currency-neutral adjusted OCI growth, excluding RRPs, of high- single digit over the mid to long-term ● RRPs will provide opportunity for additional growth for Asia Strategies for Growth: ● Seek to obtain a fair and reasonable fiscal and re
Slide 3: Regional Overview (2015)
Regional Overview (2015) Population Cigarette Industry Volume(a) PMI Cigarette Volume 4.1 billion 1.1 trillion units 281 billion units Adjusted OCI • 9 cigarette manufacturing facilities • 42,000+ employees • $2.9 billion 5 PMI-owned and 38 third-party hand-rolled facilities • 41,000+ third-party ha
Slide 4: GDP Growth Outperforming the World
GDP Growth Outperforming the World Annual GDP Growth (%) World Asia 4.9 4.4 4.4 4.3 4.3 4.4 2.7 2.9 2.6 2.6 2.4 2.1 2013 2014 2015 2016 2017 2018 Forecast Source: Oxford Economics 4
Slide 5: Capitalizing on Promising Non-OECD Markets in the Asia Region
Capitalizing on Promising Non-OECD Markets in the Asia Region Non-OECD Markets 2015 PMI Asia SoM(a) Disposable Cigarette Income CAGR(a) Industry Volume(a) (units billion) CAGR: 0.7% Total Asia 24.9% 5.6% 855 826 4.6% Non-OECD 24.9% OECD 24.7% 2010-15 2016-18 2010 2015 Forecast (a) Excluding China No
Slide 6: Financial Results
Financial Results Shipment Volume(a) Net Revenues Adjusted OCI (units billion) ($ million) ($ million) CAGR (vs. 2010): Var. vs. PY: CAGR (vs. 2010): Var. vs. PY: CAGR (vs. 2010): Var. vs. PY: ̶ % (6.4)% 5.2% (0.3)% 5.5% (7.9)% 281.7 8,203 2,886 H2 H1 145.4 4,300 1,731 1,527 136.1 4,101 2015 H1, 201
Slide 7: Recovering Adjusted OCI Margin Growth
Recovering Adjusted OCI Margin Growth Adjusted OCI Margin (%) 38.7 (a) 37.2 35.2 2010 2015 H1, 2016 (a) Excluding currency Source: PMI Financials or estimates 7
Slide 8: Long-Term Pricing Sustainability
Long-Term Pricing Sustainability Gross Revenues(a) ($/‘000 units) Nominal GDP Index (2010=100) 76 Inflation Index (2010=100) 44 2010 2011 2012 2013 2014 2015 H1, 2016 2017 2018 Forecast (a) PMI revenues at H1, 2016 exchange rates, excludes sales allowances Note: Solid nominal GDP and inflation index
Slide 9: Superior Brand Portfolio with Strong Local Heritage Offerings
Superior Brand Portfolio with Strong Local Heritage Offerings 2015 Cigarette Volume (units billion) Competition’s Top International Brands 101 95 Parliament Camel Lark Dji Sam Soe Winston Kent Fortune Dunhill Marlboro Mevius Sampoerna A Pall Mall BAT JT Source: PMI data from PMI Financials. Competit
Slide 10: Meeting Adult Smokers’ Preferences
Meeting Adult Smokers’ Preferences Segment Shares (%)(a) Low Tar(b) Slims(c) Cigarette Industry Cigarette Industry +1.8pp +6.6pp Variance +3.6pp +11.5pp 44.5 34.8 36.6 36.6 33.0 30.0 15.0 11.4 2010 2015 2010 2015 2010 2015 2010 2015 (a) Excluding China (b) Includes low tar nicotine (LTN), ultra LTN
Slide 11: Growing Presence in the More Profitable Price Segments
Growing Presence in the More Profitable Price Segments PMI Asia Markets(a) PMI Asia Non-OECD Markets(a) Segment Shares (%) Cigarette Volume (units billion) Premium(b) Mid-Price Premium(b) Mid-Price +2.1pp +2.0pp Variance +8% +29% 44.6 106 42.5 98 16.2 41 14.2 31 2010 2015 2010 2015 2010 2015 2010 20
Slide 12: Marlboro’s Strong Growth Momentum
Marlboro’s Strong Growth Momentum Marlboro’s Cigarette Volume 2.0 Architecture (units billion) and SoM(a) 6.7% 6.4% Marlboro SoM 6.0% 71.4 73.5 Marlboro Marlboro Filter Black H2 New Taste Dimensions (Kretek) H1 37.4 36.9 38.3 2014 2015 H1, 2016 (a) Marlboro cigarette volume includes China and Marlbo
Slide 13: International Trademark Expansion
International Trademark Expansion ● Strengthened our portfolio by expanding international trademarks into the mid and low-price segments Note: Pack designs are for illustrative purposes only 13
Slide 14: Invest and Expand into New and Emerging Geographies
Invest and Expand into New and Emerging Geographies Vietnam PMI Cigarette Volume (units million) ● Distribution expansion beyond six cities Vietnam India Bangladesh CAGR: 27% CAGR: 33% CAGR: 34% ● Introduced Champion in the below- premium segment 2,553 India ● Strong growth momentum of Marlboro 962
Slide 15: This Changes Everything!
This Changes Everything! 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. Pack designs are for illustrative purposes only 15
Slide 16: Japan: HeatSticks Share Growth Continues
Japan: HeatSticks Share Growth Continues ● Completed expansion of Weekly Offtake Shares(a) (%) (September 2015 – September 18, 2016) iQOS nationally in April 2016 7.0 Tokyo ● Steady increase in national offtake share(a) to 5.2% as of week starting September 18, 5.2 National 4.0 2016 ● The growth of
Slide 17: Japan: Promising iQOS Conversion Share Growth
Japan: Promising iQOS Conversion Share Growth Adult Smoker Conversion to iQOS 62% 64% 65% Converted 28% 55% 59% 48% 52% 54% (≥95% iQOS) 39% 45% Predominant 20% (70%-95% iQOS) 10% 9% 9% 8% 8% 9% 9% 8% 9% 8% Sept Oct Nov Dec Jan Feb Mar Apr May Jun Jul 2015 2016 Note: Reduced-Risk Products ("RRPs") is
Slide 18: Japan: Stabilizing Cigarettes Share and Growing with RRPs
Japan: Stabilizing Cigarettes Share and Growing with RRPs ● Lower HeatSticks cannibalization rate PMI Cigarette Market Share (%) 25.3 24.9 24.9 25.2 ● YTD August, 2016 combined in-market sales growth of 2.3% driven by HeatSticks ● 28% monthly compound HeatSticks in-market sales growth between March
Slide 19: F-F RV-KIFR
F-F RV-KIFR % RIEL 5: THAD Et | RAD-—DEsNET. | RPI MEK LSe RIERA: SUC TORI NEEM TCE WEE IS dee It TRAD RAD—DE% aI A HENCE: BQHB ld HEIL C2 THA DRAO—DEB!) DARE ARO ERIE? HES BSUS RES DOES. REG OBUBS MERIC TS BRE ECA ORE EW DET. HUOAD SHO SNTH RUT EtA. HAO RIES LORS BEPPEORAO-DEGNEF, als)
Slide 20: ScVRAR™I4NI—T
ScVRAR™I4NI—T MADES, ae AYU —Jb, runs 72h 490) BAKES HEE CITHIPAD DEE) DERE - AAO EE? Hie BCS tS RIES BOES. RREB ORB S RIM T SBE CIE CAORGE LW ROES, AUDA SMHOSNTH RUTMITUIFEtA, MLW RE REV ETH CAFUCL READ RED EVET. 20
Slide 21: IKBRSIXAYY Ibe
IKBRSIXAYY Ibe a Marlboro DRY menthol ——— DBTSBSY HSA.
Slide 22: Indonesia: Recent Developments
Indonesia: Recent Developments ● Favorable market demographics over the long term ● Target double-digit OCI growth in 2016, ex-currency ● PMI market share showing signs of a sequential stabilization, reflecting growth in new launches Industry Segmentation (%) PMI Market Share (%) Machine-Made 34.9 3
Slide 23: Indonesia: Positive Results From Recent New Launches
Indonesia: Positive Results From Recent New Launches ● Promising performance of our latest Avolution 20’s U Bold 12’s launches and geographical expansions in the machine-made kretek segment ● Market share of Avolution reached 0.8% in August 2016 ● National distribution expansion of U Bold 12’s drivi
Slide 24: Australia: Growth of the Super-Low Price Segment Driven by Affordability
Australia: Growth of the Super-Low Price Segment Driven by Affordability Index of Tobacco Prices and Per Capita PDI Industry Price Segmentation (%) Average Tobacco Prices Index (2012=100) 13.1 10.4 9.6 Premium Personal Disposable Income Index (2012=100) 17.5 15.8 127 33.1 30.4 Mid 38.7 119 45.7 49.7
Slide 25: Australia: Key Trends
Australia: Key Trends ● Relatively resilient total industry Total Industry Volume Evolution(a) volume supported by growing roll- CAGR: (4.1)% CAGR: (3.4)% your-own segment(a) 23.7 21.8 21.8 19.6 ● Gradually closing price gaps with higher price increases at the bottom of the market 2010 2012 2012 201
Slide 26: Philippines: Growth of the Premium Segment Driven by Reducing Price Gaps
Philippines: Growth of the Premium Segment Driven by Reducing Price Gaps ● Narrowing price gaps ● Decline in cigarette industry volume continues ● YTD August, 2016, premium segment share grew by 9.1 points to 29.3% ● PMI market share led by the growth momentum in Marlboro PMI Market Share (%) Excise
Slide 27: High Quality and Caliber Organization
High Quality and Caliber Organization ● Diverse, talented and committed organization ● Steadfast commitment to recruiting, developing and retaining the best talent ● Development and internship programs to build future leaders ● Improving diversity and gender mix 27
Slide 28: Asia Region Mid to Long-Term Success Drivers
Asia Region Mid to Long-Term Success Drivers ● Positive economic and demographic outlook ● Leading brand portfolio ● Sustainable pricing ● Investments to unlock long-term growth potential ● Tremendous opportunity for Reduced-Risk Products ● Highly motivated and focused organization Note: Reduced-Ris
Slide 29: Questions & Answers
Investor Day – Asia Region Lausanne, September 29, 2016 Questions & Answers
Slide 30: 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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