Philip Morris International Inc · NYSE:PM
Philip Morris International — Investor Day (June 2012)
50 slides from Philip Morris International's investor day presentation, Jun 21, 2012
Slide 1: Investor Day – Asia Region
Investor Day – Asia Region Lausanne, June 21, 2012 Matteo Pellegrini President, Asia Region Philip Morris International
Slide 2: What Asia Offers
What Asia Offers ● Favorable operating environment ● Strong financial performance ● Innovative brand portfolio ● Long-term growth potential ● Talented organization 2
Slide 3: Regional Overview
Regional Overview 2011 Korea Japan ● 24 markets ● 3.9 billion population ● 1.2 trillion units, industry volume China Afghanistan Taiwan Pakistan Hong Kong excluding China India Bangladesh Thailand Philippines ● 313 billion units, PMI shipments Vietnam ● Adjusted OCI $4,851 million Malaysia Singapore
Slide 4: Large and Growing Population
Large and Growing Population World Population (2011) Asia Population (million) 7.0 billion 2009-2011 CAGR: 1.0% 4,000 3,910 3,873 3,836 3,799 Rest of world 44% Asia 56% 3,500 2009 2010 2011 2012 Forecast Source: Global Insights 4
Slide 5: Increasing GDP Per Capita
Increasing GDP Per Capita ($ 000) 2011 2009 65.8 Growth vs. 2009 50.6 USA US $ 48,200 +4% 46.0 European Union US $ 35,200 +6% 34.3 Asia Pacific US $ 5,500 +38% 23.1 20.3 9.6 5.4 5.0 3.5 2.4 1.6 1.4 1.2 0.7 Aus. Sing. Japan HK Kor. Taiw. Mal. China Thail. Indon. Phil. India Viet. Pak. Bangl. Note: Au
Slide 6: Consumer Confidence Above Global Average
Consumer Confidence Above Global Average Index above/below 100 indicates optimism/pessimism 130 123 118 118 110 107 107 103 Asia Average: 103 96 95 94 91 Global Average: 94 84 58 49 0 India Indon. Phil. China Thai. Mal. HK Sing. Aus. Viet. Pak. Taiw. Japan Kor. Note: Indon. is Indonesia, Phil. is Ph
Slide 7: Significant Volume Markets
Significant Volume Markets 2011 Asia(a) Industry Volume 1.2 trillion units Global (units billion) Ranking 2007 2011 CAGR % Indonesia 3 238 294 5.5 Japan 5 261 195 (7.0) India 6 108 111 0.5 Philippines 7 86 97 3.3 Korea 10 92 90 (0.5) Bangladesh 14 56 82 10.2 Vietnam 15 79 81 0.7 Other 223 210 Total
Slide 8: Positive Share Growth
Positive Share Growth (%) 30 26.0 PMI 18.2 15.7 16.9 BAT 12.4 13.7 JT 6.7 7.5 ITC KT&G 5.7 4.9 0 2007 2008 2009 2010 2011 Note: Asia excludes China Source: PMI estimates 8
Slide 9: Solidified Share Leadership Position
Solidified Share Leadership Position Market Share Variance (pp) 66.3 (2011 vs. 2007) 9.9 6.4 5.7 3.5 3.2 1.2 1.0 0.3 Taiw. Mal. Pak. Phil. Korea Japan HK Sing. Indon. Thail. Viet. Aus. (0.1) (1.7) (6.5) 2011 94.0% 19.8% 30.7% 55.8% 49.3% 31.2% 21.0% 1.6% 37.5% 6.3% 15.2% 36.8% Share Note: Phil. is P
Slide 10: Market Share: Malaysia, Taiwan and Pakistan
Market Share: Malaysia, Taiwan and Pakistan (%) (%) 17% 17 Malaysia 7% 7 Taiwan 15% 15 6% 6 Jan May Sep Jan May Jan May Sep Jan May 2011 2012 2011 2012 (%) 43% 43 Pakistan 35% 35 Jan May Sep Jan May 2011 2012 Note: Market share based on 12 month moving average Source: PMI estimates 10
Slide 11: Asia Contribution to 2011 PMI Results
Asia Contribution to 2011 PMI Results Cigarette Shipment Volume Net Revenues 34% 34% Adjusted OCI 35% Source: PMI Financials 11
Slide 12: Robust Results
Robust Results Shipment Volume Net Revenues Adjusted OCI (units billion) ($ million) ($ million) CAGR: 10.3% CAGR: 17.3% CAGR: 27.6% CAGR: 13.3% (excl. currency) CAGR: 21.0% (excl. currency) 10,705 313.3 4,851 211.5 5,648 1,831 2007 2011 2007 2011 2007 2011 Source: PMI Financials 12
Slide 13: And Momentum Continues
And Momentum Continues Shipment Volume Net Revenues Adjusted OCI (units billion) ($ million) ($ million) +12.4% +19.5% +28.5% +16.4% (excl. currency) +23.7% (excl. currency) 2,777 1,407 81.0 2,323 72.1 1,095 Q1, 2011 Q1, 2012 Q1, 2011 Q1, 2012 Q1, 2011 Q1, 2012 Source: PMI Financials 13
Slide 14: Expanding Adjusted OCI Margin
Expanding Adjusted OCI Margin (%) 55 50.7 45.3 32.4 25 2007 2011 Q1, 2012 Note: Adjusted OCI margins are calculated as adjusted OCI, divided by net revenues, excluding excise taxes Source: PMI Financials 14
Slide 15: Strategies for Growth
Strategies for Growth ● Grow talent and leaders for the future ● Obtain a fair and reasonable regulatory and fiscal environment ● Drive growth of Marlboro and local heritage brands through enhanced consumer understanding and innovation ● Investing for long-term growth 15
Slide 16: Manageable Fiscal Environment
Manageable Fiscal Environment Mixed Excise Tax Specific Excise Tax China Australia Malaysia Hong Kong Pakistan India Indonesia Japan Ad Valorem Laos Bangladesh Nepal Cambodia New Zealand Thailand Philippines Vietnam Singapore South Korea Taiwan 16
Slide 17: Illicit Trade a Significant Challenge to the Region
Illicit Trade a Significant Challenge to the Region 2011 Illicit and Non Domestic Incidence (%) 45 44 36 32 21 19 13 11 0 Australia Hong Kong Malaysia Pakistan Singapore Taiwan Vietnam Source: PMI estimates, Australia Deloitte Reports; Hong Kong Q4, 2011 Market Survey (empty pack); Malaysia TNS & Ni
Slide 18: Superior Brand Portfolio
Superior Brand Portfolio (units billion) 2011 Top 15 Brands Volume Marlboro 78 Mild Seven Gudang Garam Gold Flake Fortune 46 Sampoerna A 36 Djarum Wills PMI Dji Sam Soe 22 BAT Esse JTI Others Dunhill Pall Mall Lark 21 Marise Morven Gold 17 Note: Excludes brands from China National Tobacco Corporatio
Slide 19: Robust Marlboro Performance in 2011
Robust Marlboro Performance in 2011 (units billion) Growth Shipment Volume vs. 2010 (%) Total Asia 78.2 +8.8 Japan 26.2 +15.6 Philippines 20.6 (3.5) Indonesia 12.6 +5.2 Korea 7.8 +24.5 Thailand 1.6 +9.3 Malaysia 1.5 +5.2 Hong Kong 1.5 (2.0) Vietnam 1.3 +64.4 Singapore 0.9 +4.4 Others 4.2 +17.4 Sourc
Slide 20: And the Marlboro Momentum Continues in Q1, 2012
And the Marlboro Momentum Continues in Q1, 2012 (units billion) Growth Shipment Volume vs. 2011 (%) Total Asia 20.1 +10.0 Japan 6.2 +6.4 Philippines 5.3 (1.1) Indonesia 3.6 +21.2 Korea 1.8 +21.7 Vietnam 0.5 >100.0 Thailand 0.5 +8.6 Malaysia 0.4 +21.0 Hong Kong 0.4 (2.2) Singapore 0.2 +2.5 Others 1.2
Slide 21: Innovation Driving Marlboro Growth
Innovation Driving Marlboro Growth (units billion) Marlboro Volume Growth Marlboro Fresh Line Extension (2011 vs. 2007) Volume Growth +15.3 billion units (2011 vs. 2007) 7.4 6.2 5.9 3.6 1.7 Flavor Gold Fresh Black Menthol Ice Blast Source: PMI Financials 21
Slide 22: Success of Marlboro Black Menthol and Ice Blast
Success of Marlboro Black Menthol and Ice Blast Q1, 2012 Market Shares (%) 12.9 Marlboro Ice Blast Marlboro Black Menthol 9.8 3.7 3.0 2.6 2.2 1.3 0.4 Hong Kong Macau Singapore Malaysia Japan Philippines Korea Indonesia Source: PMI estimates, Tobacco Institute of Japan and Hankook Research 22
Slide 23: Favorable Marlboro Demographics
Favorable Marlboro Demographics 2011 Marlboro Share (%) 80 74 Share of Market LA (min. 18) – 24 Share 50 42 40 34 33 21 22 13 9 7 2 2 4 0 Hong Kong Singapore Philippines Korea Japan Australia Vietnam Source: PMI estimates, PMI Market Research, Hankook Research and Tobacco Institute of Japan 23
Slide 24: Japan: Building Off a Higher Base
Japan: Building Off a Higher Base ● Industry decline stabilizing ● Record high market share in 2011 at 30.7% with 2011 exit share of 28.2% ● Achieved YTD May, 2012 share of 28.0% ● Capitalize on innovation pipeline and product launches ● Pricing freedom key to increasing profitability ● VAT increase
Slide 25: Japan: Industry Decline Stabilizing
Japan: Industry Decline Stabilizing Industry Volume (units billion) 12 Month Moving Average 300 Price increase Underlying trend Decline forecast at 2% in 2012 100 Jan-10 Jan 2010 Jul-10 Jul 2010 Jan-11 Jan 2011 Jul-11 Jul 2011 Jan-12 Jan 2012 Jul-12 Jul 2012 Source: Tobacco Institute of Japan and PM
Slide 26: Japan: Accelerated Share Growth in 2011
Japan: Accelerated Share Growth in 2011 Exit share (Q4, 2011) (%) 50 70 64.8 65.0 65.0 64.5 59.2 59.3 55.6 JT 50 35 30.7 28.0 28.0 24.3 23.9 24.0 24.4 PMI 28.2 12.9 12.1 12.0 10.4 10.6 10.5 10.6 BAT 5 0 2007 2008 2009 2010 2011 Q1, 2012 QTD May 2012 Source: Tobacco Institute of Japan 26
Slide 27: Japan: Marlboro and Lark Driving Share Growth
Japan: Marlboro and Lark Driving Share Growth Exit share (Q4, 2011) (%) 15 13.1 12.6 12.3 11.0 12.4 9.9 9.7 8.7 8.5 8.6 6.9 6.6 5 2007 2008 2009 2010 2011 Q1, 2012 QTD May 2012 Source: Tobacco Institute of Japan 27
Slide 28: Japan: PMI Successful Innovations
Japan: PMI Successful Innovations 2011 (%) Share 20 Industry: 155 launches 16.4% PMI: 28 launches 5.7% PMI Share of New Launches: 35% 0 Jan-072007 Jan-082008 Jan-09 2009 Jan-10 2010 Jan-11 2011 Source: Tobacco Institute of Japan 28
Slide 29: Note: English: “Regular as is, crush to menthol”
Note: English: “Regular as is, crush to menthol” 29
Slide 30: ai ar
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Slide 31: Indonesia: Growth Potential
Indonesia: Growth Potential ● Record high share of 33.4% in Q1 2012 ● Third-largest cigarette market in the world after China and Russia ● Positive economic outlook ● Strong portfolio with a premium skew Source: PMI estimates 31
Slide 32: Indonesia: Positive Economic Environment
Indonesia: Positive Economic Environment GDP Growth Inflation Unemployment (%) (%) (%) 7.9 7.1 6.4 6.6 6.3 6.1 6.2 5.1 5.4 4.6 4.8 4.5 2009 2010 2011 2012 2009 2010 2011 2012 2009 2010 2011 2012 Forecast Forecast Forecast Source: Global Insights 32
Slide 33: Indonesia: Excise Tax Structure
Indonesia: Excise Tax Structure ● Moved from a multi-tier ad-valorem to a multi-tier specific excise tax system ● Ongoing gradual reduction of the number of excise tiers ● Improved measures scheduled to be effective November this year ● Further simplification along the government’s roadmap expected
Slide 34: Indonesia: Industry Volume Growth
Indonesia: Industry Volume Growth (units billion) Industry PMI 2007-2011 CAGR: Industry 5.5%, PMI 8.3% 150 294 100 100 300 270 260 247 237 77 200 69 100 92 76 79 73 67 26 21 0 00 2007 2008 2009 2010 2011 Q1, 2011 Q1, 2012 Source: PMI estimates 34
Slide 35: Indonesia: Outstanding Share Performance
Indonesia: Outstanding Share Performance Market Shares (%) 35 33.4 31.2 PMI 29.1 28.0 23.1 21.8 20.9 Guadang 20.7 Garam Djarum 19.7 19.6 20.2 20.2 7.7 7.9 7.9 7.2 BAT Nojorono 5.9 6.3 5.8 5.5 0 2007 2008 2009 2010 2011 Q1, 2012 Source: PMI estimates 35
Slide 36: Indonesia: Strong Portfolio
Indonesia: Strong Portfolio Market Shares (%) 14 13.1 11.8 12.1 Sampoerna A 9.5 8.0 7.7 7.5 7.3 Dji Sam Soe 5.6 4.5 4.7 4.0 4.3 Marlboro Sampoerna Kretek 4.0 4.0 4.1 U Mild 0.5 0.8 2.7 2.0 0 2007 2008 2009 2010 2011 Q1, 2012 Source: PMI estimates 36
Slide 37: Indonesia: Brand Leadership
Indonesia: Brand Leadership Note: “GAPAI MIMPI GO AHEAD” English: “Reach Your Dream, Go Ahead”; “LAWAN ARUS GO AHEAD” English: “Against The Current, Go Ahead”; “SETIA KAWAN GO AHEAD” English: “Be Loyal To Your Friend, Go Ahead” 37
Slide 38: Indonesia: Brand Leadership
Indonesia: Brand Leadership Note: “Inspirasi tanpa batas” English: “Inspiration without Borders”; “KEBANGGAAN ATAS KARYA SEMPURNA” English: “The Pride of Great Craftsmanship” 38
Slide 39: Philippines: Excellent Potential
Philippines: Excellent Potential ● Population of 95 million growing steadily at 1.7% annually ● Sizeable and growing industry ● Market share at 94% in 2011 ● PMI-Fortune Tobacco business combination in 2010 with cumulative synergies of $75 million Note: Filipino: “Ang yosi ng bayan!” English: “The c
Slide 40: Philippines: Favorable Socio-Economic Trends
Philippines: Favorable Socio-Economic Trends Overseas Workers GDP Growth Remittances Population (%) ($ billion) (million) 7.6 96 21 95 20 93 19 92 17 4.1 3.8 1.1 2009 2010 2011 2012 2009 2010 2011 2012 2009 2010 2011 2012 Forecast Forecast Forecast Source: Global Insights and Remittance - Bangko Sen
Slide 41: Philippines: Sizeable Industry
Philippines: Sizeable Industry (units billion) 2007-2011 CAGR: 3.3% 110 101 97 92 94 86 +7.0% 24 25 0 2007 2008 2009 2010 2011 Q1, 2011 Q1, 2012 Source: PMI estimates 41
Slide 42: Philippines: Excise Tax Proposal
Philippines: Excise Tax Proposal ● Legislation to restructure excise tax on cigarettes approved by the Lower House in June 2012 Current Structure Proposed Structure(a) Tax Share of Excise Tax Tax Share of Excise Tax PHP/pack Tier Market PHP / pack Tier Market Year 1 Year 2 1 0% 28.30 1 38% 28.30 30.
Slide 43: Korea: Share Gains and Profitability
Korea: Share Gains and Profitability ● Record market share in 2011 ● PMK increased price in February 2012 ● KT&G has not increased its prices Source: Hankook Research 43
Slide 44: Korea: Long-Term Market Share Growth
Korea: Long-Term Market Share Growth Price Increase (%) 69.1 35 70 BAT/JT PMK 63.1 29.1 58.6 59.9 KT&G 50 25 22.6 19.8 19.2 17.0 17.6 PMI 14.5 16.9 9.9 10.7 10.4 BAT 6.9 6.6 6.3 6.5 4.0 JT 00 2007 2008 2009 2010 2011 Jan Feb Mar Apr May 2012 Source: Hankook Research 44
Slide 45: Korea: Investment in New Greenfield Factory
Korea: Investment in New Greenfield Factory 45
Slide 46: Huge Opportunities: India, Vietnam and Bangladesh
Huge Opportunities: India, Vietnam and Bangladesh 2011 Industry Volume Investment PMI Volume 274 billion units (Index) (units billion) CAGR: 30.1% PMI 500 2 0.6% 410 1.7 343 1.2 226 1.0 157 0.7 0.7 0.6 100 Index 2007 = 100 0 0 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 YTD May ● Investment in
Slide 47: India & Vietnam: Huge Opportunities Ahead
India & Vietnam: Huge Opportunities Ahead India Market Share Vietnam Market Share in 3 Focus Cities (%) in 6 Key Cities (%) 6.2 3.1 1.3 0.9 May-10 May-11 May-12 May-10 May-11 May-12 Source: PMI estimates 47
Slide 48: Asia: Continues to Be the Growth Engine
Asia: Continues to Be the Growth Engine ● Economic and demographic outlook is positive ● Regulatory and fiscal regimes evolving rapidly and remain a challenge, but overall manageable ● Unmatched brand portfolio led by Marlboro and local heritage brands ● Significant upside in untapped markets ● Busi
Slide 49: Questions & Answers
Investor Day – Asia Region Lausanne, June 21, 2012 Questions & Answers
Slide 50: 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/2012InvestorDay/RecSlides
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