Philip Morris International Inc · NYSE:PM

Philip Morris International — Consumer Analyst Group of New York (CAGNY) Conference 2009

63 slides from Philip Morris International's conference presentation, Feb 17, 2009

1. Slide 1: Consumer Analyst Group of New York (CAGNY) Conference

   Consumer Analyst Group of New York (CAGNY) Conference 17 February, 2009 1

2. Slide 2: Forward-Looking Statements

   Philip Morris International Forward-Looking Statements This presentation and related discussion contain statements that, to the extent they do not relate strictly to historical or current facts, are not reported financial results or other historical information, are “forward- looking statements” wit

3. Slide 3: Summary

   Philip Morris International Summary ƒ PMI had an excellent year in 2008 ƒ We face currency headwinds if current rates prevail throughout 2009 ƒ We have not seen consumer downtrading in emerging markets so far ƒ We remain as committed as ever to generously rewarding our shareholders ƒ Our constant cu

4. Slide 4: Mid / Long-Term Currency Neutral Targets

   Philip Morris International Mid / Long-Term Currency Neutral Targets Growth Rates 2008 Results Cigarette Volume 1 – 2% 9 Net Revenues 4 – 6% 9 Operating Income 6 – 8% 9 EPS 10 – 12% 9 Source: PMI Financials 4

5. Slide 5: PMI Results

   Philip Morris International PMI Results % Growth 2008 vs. 2007 Excl. Curr. & (bio) Full Year 2008 Actual Acquisitions Cigarette Volume 869.8 + 2.5 % + 1.0 % Net Revenues 25.7 + 12.7 + 5.6 OCI 10.4 + 16.7 + 9.9 Source: PMI Financials 5

6. Slide 6: PMI Results

   Philip Morris International PMI Results % Growth 2008 vs. 2007 Excl. ($ / share) Full Year 2008 Actual Currency Reported EPS 3.32 + 16.1 % + 10.8 % Adjusted EPS 3.32 + 18.6 + 13.2 Source: PMI Financials 6

7. Slide 7: Share Trends

   Philip Morris International Share Trends Overall PMI Share Development(a) (%) 27 25.8 25.9 25.2 23 2007 12MM 3MM 2008 OECD/Non-OECD Share Development(a)(b) (%) OECD (%) Non-OECD 36 22 21.1 34.6 34.8 20.8 20.0 33.5 32 18 2007 12MM 3MM 2007 12MM 3MM 2008 2008 (a) Excluding PRC and USA; (b) Also exclud

8. Slide 8: Impact of Exchange Rates on 2009 EPS

   Philip Morris International Impact of Exchange Rates on 2009 EPS $ / share 2008 EPS 3.32 Business Performance 0.33 – 0.48 Currency (0.80) (a) 2009 Guidance 2.85 – 3.00 (a) Adverse currency based on exchange rates prevalent on 2 February 2009 and assuming rates remain at the same level throughout 200

9. Slide 9: Exchange Rate: Euro – USD

   Philip Morris International Exchange Rate: Euro – USD Daily Average 2007 2008 2009 1.60 1.50 1.40 1.30 1.20 01 Jan 01 Apr 01 Jul 30 Sep 30 Dec Source: Bloomberg London Close 18:00 PM 9

10. Slide 10: Exchange Rates vs. USD

    Philip Morris International Exchange Rates vs. USD Daily Average Indices Ukrainian Hryvnia Russian Ruble Turkish Lira Indo. Rupiah Mexican Peso 200 180 174 160 147 140 138 137 128 120 100 Sep 08 Oct 08 Nov 08 Dec 08 Jan 09 Feb 09 Source: Bloomberg London Close 18:00 PM 10

11. Slide 11: 2009 Guidance: Adverse Currency

    Philip Morris International 2009 Guidance: Adverse Currency EPS Impact ($ / share) Key emerging market currencies(a) (0.58) Other emerging market currencies (0.11) Euro (0.13) Other developed market currencies (0.16) Swiss Franc 0.03 Japanese Yen 0.15 Total (0.80) (a) Russian Ruble, Turkish Lira, Uk

12. Slide 12: Impact of Currency

    Philip Morris International Impact of Currency ƒ Revenues have straight line translation impact ƒ Currency impact on profitability is neither linear, simple nor consistent across our markets ƒ Elements in the cost structure that are not in local currency magnify the impact on OCI 12

13. Slide 13: Impact of Currency

    Philip Morris International Impact of Currency 25% Depreciation 25% Depreciation ($ mio) Previous 100% Local Costs 50% Local Costs Net Revenues 2,000 1,500 1,500 Costs (800) (600) (700) OCI 1,200 900 800 % OCI Change (25)% (33)% OCI Margin 60% 60% 53% 13

14. Slide 14: Hedging

    Philip Morris International Hedging ƒ PMI policy never to do net income hedges (“translation hedges”) as we do not speculate on currencies ƒ Where appropriate, PMI carries out revenue and purchasing hedges (“transaction hedges”) ƒ Transaction hedges not feasible in most emerging markets 14

15. Slide 15: PMI Cost Structure

    Philip Morris International PMI Cost Structure 2008 Total ($ bio) Tobacco Leaf 3.6 Direct Materials 2.4 Other COGS(a) 3.3 Mkting, O/H and Other Costs above 6.9 OCI TOTAL COSTS(b) 16.2 (a) Other manufacturing related costs and shipping. (b) Total costs above OCI and sales allowances. Source: PMI Fina

16. Slide 16: PMI Costs by Currency

    Philip Morris International PMI Costs by Currency 2008 Total Currency (%) ($ bio) USD EUR CHF Other Tobacco Leaf 3.6 26 48 1 25 Source: PMI Financials 16

17. Slide 17: Tobacco Leaf

    Philip Morris International Tobacco Leaf ƒ Key Sources: − Virginia: USA, Brazil − Burley: USA, Malawi, Brazil, Argentina − Oriental: Turkey, Greece ƒ US Dollar based agricultural crop ƒ PMI converts a large part of its leaf purchases into Euros for inventory and balance sheet valuation purposes 17

18. Slide 18: PMI Costs by Currency

    Philip Morris International PMI Costs by Currency 2008 Total Currency (%) ($ bio) USD EUR CHF Other Tobacco Leaf 3.6 26 48 1 25 Direct Materials 2.4 26 60 - 14 Other COGS(a) 3.3 12 27 6 55 Mkting, O/H and Other Costs above 6.9 10 26 12 52 OCI TOTAL COSTS(b) 16.2 16 36 7 41 (a) Other manufacturing re

19. Slide 19: Indonesia / Russia Costs by Currency

    Philip Morris International Indonesia / Russia Costs by Currency Currency (%) USD EUR Other Local Indonesia Total COGS 11 3 3 83 Mkting, O/H and Other − 1 1 98 Costs above OCI Total 8 2 2 88 Russia Total COGS 20 58 5 17 Mkting, O/H and Other 4 2 − 94 Costs above OCI Total 16 42 3 39 Source: PMI Fina

20. Slide 20: Currencies

    Philip Morris International Currencies ƒ Japanese Yen is the only major currency that has appreciated in value ƒ Large currency swings tend to be at least partially reversed over time ƒ We are optimistic that these strong currency headwinds will be temporary 20

21. Slide 21: Emerging Markets: Premium

    Philip Morris International Emerging Markets: Premium ƒ Continued uptrading to premium segment in emerging markets 21

22. Slide 22: Emerging Markets: Premium

    Philip Morris International Emerging Markets: Premium Premium Share of Market (a) 2008 2005 Variance Russia 17.9 % 11.9 % 6.0 pp Ukraine 14.8 8.9 5.9 Turkey 19.6 16.7 2.9 Romania 43.5 23.3 20.2 Indonesia 23.1 21.0 2.1 Mexico 65.4 62.8 2.6 Argentina 35.7 31.6 (b) 4.1 (b) (a) Including above premium (

23. Slide 23: Emerging Markets: Price Gaps

    Philip Morris International Emerging Markets: Price Gaps Russia Turkey Indonesia Mexico Premium RBL 40 TRL 4.80 RP 9,609/16 PS 28 ($1.12) ($2.92) ($1.06/20) ($1.95) Montana Mid $0.78 $1.25 $0.36 51% $0.63 2.3X 75% 48% RBL 29 TRL 3.75 RP 6,887/16 PS 22 ($0.81) ($2.28) ($0.76/20) ($1.54) Sejati Low RB

24. Slide 24: Consumer Prices: Russia

    Philip Morris International Consumer Prices: Russia Price (RBL) Price (USD) Cinema Ticket 250 6.99 Budweiser beer (imported) 120 3.36 Colgate toothpaste 70 1.96 Big Mac 63 1.76 Milk (1 liter) 50 1.40 Coca-Cola (0.5 liters) 41 1.15 Marlboro 40 1.12 Baltica Beer (local) 33 0.92 Mineral Water (0.5 lite

25. Slide 25: Emerging Markets: Premium

    Philip Morris International Emerging Markets: Premium Premium Share Growth 2008 vs. 2007 (a) Q1 Q2 Q3 Q4 Russia + 2.1 pp + 2.2 pp + 2.1 pp + 1.3 pp Ukraine 2.1 2.7 3.1 3.2 Turkey 0.8 1.4 2.1 2.1 Romania 6.8 6.3 5.1 4.6 Indonesia (0.3) (0.2) 0.9 0.8 Mexico 2.8 0.7 (0.1) (0.5) Argentina 2.5 2.7 2.5 0.

26. Slide 26: PMI Pricing

    Philip Morris International PMI Pricing ƒ Pricing contributed $1.2 billion to OCI in 2008 ƒ Higher prices already announced for 2009, notably in: EU EEMA Asia Latin America Belgium Egypt Australia Argentina Czech Romania Indonesia Colombia Italy Russia Philippines Mexico Netherlands Serbia Spain Ukr

27. Slide 27: Excise Tax Environment

    Philip Morris International Excise Tax Environment ƒ Reasonable approach being taken by governments in key markets ƒ Greater emphasis on: − Specific vs. ad-valorem − Minimum excise taxes and minimum reference price mechanisms − Reduction in loopholes 27

28. Slide 28: Top International Brands (2007)

    Philip Morris International Top 15 International Brands (2007) M arlboro Marlboro Winston M ild Seven L&M L&M Kent Pall M all PMI Camel BAT Viceroy JT Philip Philip M orris Morris Bond BondStreet Street Chesterfield Chesterfield Dunhill LD Parliament Lark (bio) 0 50 100 150 200 250 300 350 Note: PMI

29. Slide 29: Marlboro Architecture

    Philip Morris International Marlboro Architecture Red Gold Fresh 29

30. Slide 30: Marlboro Filter / Flavor Plus

    Philip Morris International Marlboro Filter / Flavor Plus ƒ Enhanced taste due to Romania Market Share tobacco plug in filter (%) Marlboro 3 Filter Plus ƒ Attractive sliding pack 2.5 ƒ 6 / 3 / 1 mg tar 0.2 0 Jan 2008 Dec Source: A. C. Nielsen 30

31. Slide 31: Marlboro Filter / Flavor Plus

    Philip Morris International Marlboro Filter / Flavor Plus ƒ Now available in 20 Key City Market Shares (Dec 2008) markets (%) 2.5 ƒ Initial focus on key cities 2.2 1.2 0.6 0.4 0.3 0 (a) Kuwait Moscow Kiev Tokyo São (b) Paulo KUW RUS UKR JAP BRA (a) November 2008 data; (b) January 2009 data Source: B

32. Slide 32: Marlboro Intense / Compact / Pocket Pack

    Philip Morris International Marlboro Intense / Compact / Pocket Pack ƒ Marlboro Intense is a shorter, flavorful variant in a red pack ƒ Marlboro Intense launched in Belgium, Germany, the Netherlands and Turkey ƒ Marlboro Compact is a lighter flavored version in (%) Market Shares (Dec 2008) Italy in

33. Slide 33: Marlboro Gold

    Philip Morris International Marlboro Gold ƒ Marlboro Gold Edge (super slims) launched in Hungary, Poland and Eastern Europe ƒ Marlboro Gold Advance (full flavor) in test market ƒ New Marlboro Gold pack in Austria and Poland 33

34. Slide 34: Menthol Segment

    Philip Morris International Menthol Segment Menthol Share of Market 2008 2005 Variance Japan 22.0 % 18.4 % 3.6 pp Hong Kong 37.5 37.2 (a) 0.3 Singapore 47.2 45.6 1.6 Colombia 19.5 18.5 (a) 1.0 Mexico 5.0 4.3 0.7 Finland 23.1 21.2 1.9 Poland 16.0 12.0 4.0 (a) 2006 data Source: A.C. Nielsen, Tobacco I

35. Slide 35: Marlboro Fresh Initiatives

    Philip Morris International Marlboro Fresh Initiatives Marlboro Share of ƒ Marlboro Crisp, Fresh Menthol Segment in Japan and Ice Mint variants 30 (%) launched in 2007 in various Asian markets 27.1 27.2 ƒ Marlboro Black Menthol in Japan since July 2008 25.1 24.7 20 Q1 Q2 Q3 Q4 2008 Source: Tobacco I

36. Slide 36: Marlboro Fresh Initiatives

    Philip Morris International Marlboro Fresh Initiatives Colombia Marlboro SoM ƒ Menthol important segment in Colombia 5 (%) 4.9 ƒ Growing off low base in 0.3 Menthol several other Latin 4.5 American markets ƒ New Marlboro menthol initiatives in second half Non- 2008 (Brazil, Colombia, menthol Mexico)

37. Slide 37: Marlboro

    Philip Morris International Marlboro ƒ Geographic expansion of innovative line extensions using our superior global infrastructure ƒ Pipeline of new products and concepts ƒ Increased vibrancy and “halo effect” ƒ Marlboro volume grew by 0.2% in 2008 following a decline the previous year ƒ Increased v

38. Slide 38: Parliament

    Philip Morris International Parliament ƒ Recessed filter, Parliament Market Shares sophisticated image and (%) 2007 2008 8 above premium pricing 7.4 ƒ Volume +20.0% in 2008 6.0 ƒ Growth driven by Korea, Russia, Turkey and Ukraine 3.3 ƒ Upscale image being 2.5 2.7 1.9 2.0 reinforced with 1.3 Parliame

39. Slide 39: Slimmer Diameter

    Philip Morris International Slimmer Diameter Slims Share of Market 2008 2005 Variance Russia 12.1 % 3.8 % 8.3 pp Ukraine 9.0 3.0 6.0 Poland 13.8 6.5 7.3 Japan 6.3 6.0 0.3 Korea 37.4 35.5 1.9 Source: Business Analytica, A.C. Nielsen, Tobacco Institute of Japan and PMI estimates 39

40. Slide 40: Virginia Slims

    Philip Morris International Virginia Slims ƒ Volume +8.2% in 2008 Virginia Slims Market Shares (2008) Uno Other ƒ Uno concept and 2.5 (%) geographic expansion 2.0 driving Virginia Slims 9% growth 1.4 1.3 20% 9% 91% 80% 91% 0.3 100% 0 Japan Rom. Russia Greece Source: Business Analytica, A.C. Nielsen,

41. Slide 41: PMI Slims Initiatives

    Philip Morris International PMI Slims Initiatives ƒ Marlboro Gold Edge in Poland and Eastern Europe ƒ Muratti Gold Slims and Silver Slims in Eastern Europe ƒ Slimmer line extensions of L&M in Poland and Eastern Europe 41

42. Slide 42: Chesterfield

    Philip Morris International Chesterfield ƒ Volume +13.7% in 2008 Chesterfield Market Shares 2007 2008 ƒ Strong gains in Italy, 12 (%) Portugal, Russia and 9.8 9.9 Ukraine 8.5 ƒ Growth more than offsetting decline in L&M 6.4 volume 3.6 3.2 3.3 2.9 2.4 2.0 0 Spain Ukr. Italy Port. Russia Source: Busin

43. Slide 43: L&M

    Philip Morris International L&M ƒ Comprehensive L&M Market Shares repositioning in key (%) Romania Ukraine 15 13.9 EEMA markets 12.6 ƒ Still under pressure in 11.0 10.2 Russia in spite of success 10 8.8 8.8 8.5 8.7 of slimmer line extensions ƒ Early signs of 5 5.0 4.7 4.8 4.5 4.1 4.0 3.7 4.0 stabili

44. Slide 44: L&M

    Philip Morris International L&M ƒ Overall volume decline of L&M Market Share Gains (2008) 4.6% in 2008 (pp) 2 1.9 1.8 ƒ EU shipment volume increased by 2.0% in the same period 0.5 0.3 0.2 0 Ger. Neth. Pol. Fra. Bel. Source: A.C. Nielsen, PMI estimates and PMI Financials 44

45. Slide 45: Low-Price International Brands

    Philip Morris International Low-Price International Brands ƒ Bond Street, Next and Market Shares (2008) Red & White collectively (%) Bond Street Next 15 gained 3.8% in volume in 12.6 2008 ƒ Bond Street and Next achieved double digit 7.8 7.4 growth in EEMA 3.6 2.0 2.1 0 Kaz. Russia Ukraine Source: A.

46. Slide 46: Local Brands

    Philip Morris International Local Brands Market Shares (%) 2007 2008 15 12.6 13.0 10.7 10.1 9.5 8.8 0 Diana A Mild Delicados (Italy) (Indonesia) (Mexico) Source: A.C. Nielsen and PMI estimates 46

47. Slide 47: PMI Brand Portfolio

    Philip Morris International PMI Brand Portfolio Mature Markets Emerging Markets Premium Mid Low 47

48. Slide 48: Volume / Mix Impact on OCI

    Philip Morris International Volume / Mix Impact on OCI ($ mio) 17 2005 2006 2007 2008 2008 (155) (198) (290) Source: PMI Financials 48

49. Slide 49: Business Development

    Philip Morris International Business Development ƒ PMI continuing to reinforce its leading position through new market entries, joint ventures and acquisitions that are strategically and financially attractive 49

50. Slide 50: Geographic Expansion

    Philip Morris International Geographic Expansion ƒ Recent entry into Algerian Market Shares and Bulgarian markets (%) 2007 2008 16 ƒ Marlboro and L&M are key 14.9 brands 10.9 10.3 4.9 0 Algeria Bulgaria Source: A.C. Nielsen and PMI estimates 50

51. Slide 51: China

    Philip Morris International China ƒ Market size of 2.2 trillion in 2008, up 3.1% ƒ PMI agreements with CNTC. Aim to be preferred partner ƒ Production of Marlboro under license in two factories started Marlboro in China in August ƒ International joint venture has successfully launched three Chinese h

52. Slide 52: Other Tobacco Products

    Philip Morris International Other Tobacco Products ƒ PMI achieved an 18% organic volume growth in OTP in 2008 ƒ Recent acquisitions have included leading fine cut brands in France and Norway ƒ Smokeless tobacco joint venture with Swedish Match Source: PMI Financials 52

53. Slide 53: Productivity and Cost Saving Programs

    Philip Morris International Productivity and Cost Saving Programs Forecast Cumulative Gross Cost Savings (2008-10) 1,550 850 450 250 ($ mio) Manufacturing G&A + Other EU Program Total Productivity Source: PMI Financials 53

54. Slide 54: Manufacturing Productivity

    Philip Morris International Manufacturing Productivity ƒ Rationalization of production within customs areas and trade zones ƒ Investments in key factories ƒ Western European factories absorbed 57 billion units in 2008, previously Izhora, Russia manufactured by PM USA ƒ Rationalization of blends and

55. Slide 55: Free Cash Flow

    Philip Morris International Free Cash Flow (a) ($ bio) 8 6.8 + 52.7% 6 4.5 4 2 0 2007 2008 (a) Operating cash flow less capital expenditures. In 2008, operating cash flow was $7,935 million and capital expenditures $1,099 million. In 2007, operating cash flow was $5,550 million and capita expenditur

56. Slide 56: Liquidity and Capital Structure

    Philip Morris International Liquidity and Capital Structure ƒ Major new factory projects completed and continued focus on working capital management ƒ Very strong balance sheet: net debt to EBITDA of 0.94 to 1 at year end 2008 ƒ Very favorable debt profile: $10.1 billion bonds issued with attractive

57. Slide 57: Shareholder Returns

    Philip Morris International Shareholder Returns ƒ Dividend raised by 17.4% in August to an annualized rate of $2.16 / share ƒ Dividend to be maintained in 2009 even if 65% payout target is exceeded ƒ $13 billion two year share repurchase program initiated in May ƒ $5.4 billion of share repurchases i

58. Slide 58: Mid / Long-Term Currency Neutral Targets

    Philip Morris International Mid / Long-Term Currency Neutral Targets Targets 2009 Forecast Cigarette Volume 1 – 2% 9 Net Revenues 4 – 6% 9 Operating Income 6 – 8% 9 EPS 10 – 12% 9 58

59. Slide 59: Conclusion

    Philip Morris International Conclusion ƒ Superior brand portfolio ƒ Strong pricing power ƒ Ambitious productivity programs in place ƒ Excellent liquidity and balance sheet ƒ Dividends and share buy-back program are enhancing shareholder value ƒ 10-14% EPS growth forecast for 2009 on a currency neutr

60. Slide 60: Adjustments for the Impact of Currency and Acquisitions

    Philip Morris International Adjustments for the Impact of Currency and Acquisitions ($ Millions) Full Year 2008 Full Year 2007 Less Revenues Less Excise Excluding Less Excise % Operating Revenues Reported Taxes Excise Taxes Currency Acquisitions Organic Reported Taxes Organic Change EU $ 30,265 $ 20

61. Slide 61: Reconciliation of Operating Companies Income to Operating Income

    Philip Morris International Reconciliation of Operating Companies Income to Operating Income 2008 2007 EU $ 4,738 $ 4,195 EEMA 3,119 2,431 Asia 2,057 1,803 Latin America 520 514 Operating Companies Income $ 10,434 $ 8,943 Amortization of intangibles (44) (28) General corporate expenses (142) (73) Ga

62. Slide 62: Reconciliation of Reported EPS to Adjusted EPS and Adjusted EPS Ex-Currency

    Philip Morris International Reconciliation of Reported EPS to Adjusted EPS and Adjusted EPS Ex-Currency 2008 2007 % Change Reported EPS $ 3.32 $ 2.86 16.1% Adjustments: Asset Impairment and Exit Costs 0.02 0.07 Tax Items (0.08) (0.03) Equity Loss from RBH Legal Settlement 0.06 Gain on Sale of Busine

63. Slide 63: Questions and Answers

    Consumer Analyst Group of New York (CAGNY) Conference 17 February, 2009 Questions and Answers 63

Philip Morris International — Consumer Analyst Group of New York (CAGNY) Conference 2009 on 6ix