Philip Morris International Inc · NYSE:PM
Philip Morris International — Investor Day (June 2012)
73 slides from Philip Morris International's investor day presentation, Jun 21, 2012
Slide 1: Investor Day – EEMA Region
Investor Day – EEMA Region Lausanne, June 21, 2012 Miroslaw Zielinski President, Eastern Europe, Middle East & Africa Region & PMI Duty Free Philip Morris International
Slide 2: What EEMA Offers
What EEMA Offers ● Favorable demographics, fast growing economies ● Up-trading to PMI brands ● Manageable tax and regulatory environment ● Efficient infrastructure, superior execution ● Accelerating, sustainable financial gains 2
Slide 3: Agenda
Agenda ● EEMA overview and results ● PMI strategic priorities: - Continuously grow and innovate our brand portfolio - Proactive tax and regulatory engagement - Pricing and price gap strategy - Grow our presence in key markets - Seize development opportunities ● Concluding remarks 3
Slide 4: Key Facts
Key Facts ● 1.2 trillion cigarettes ● 94 markets,1.7 billion people ● $80 billion retail spend ● 12,000+ PMI employees ● PMI results (2011) - Volume: 290 billion - Share: 23% - Adjusted OCI: $3.3 billion Source: Global Insight, PMI Financials and PMI estimates 4
Slide 5: Industry Volume: Top Markets (2011)
Industry Volume: Top 10 Markets (2011) (units billion) 150 400 375 PMI Ranking #1 300 #2 100 91 86 80 29 28 26 26 22 20 0 Rus. Turk. Ukr. Egypt Kaz. Alg. Saudi Rom. S.Afr. Serb. Note: Rus. is Russia, Turk. is Turkey, Ukr. is Ukraine, Kaz. is Kazakhstan, Alg. is Algeria, Saudi is Saudi Arabia, Rom. i
Slide 6: Rapid Population Growth
Rapid Population Growth CAGR 2007-2011 (%) EEMA 1.7 OECD 0.7 China 0.5 World 1.1 Source: Global Insight 6
Slide 7: Rapid Economic Growth
Rapid Economic Growth Real GDP Growth Real GDP per Capita Growth CAGR 2007-2011 CAGR 2007-2011 (%) 2.8 (%) 1.1 0.2 OECD EEMA OECD EEMA (0.5) Source: Global Insight 7
Slide 8: Adult Smokers Uptrading
Adult Smokers Uptrading (units billion) Variance 2011 vs. 2009 (units billion) 1,218 1,176 1,170 (48) Premium 197 195 206 9 Mid 323 324 333 10 Low 698 657 631 (67) 2009 2010 2011 Note: Excluding duty free Source: PMI estimates 8
Slide 9: Superior PMI Positioning
Superior PMI Positioning 2011 Volume ● PMI’s superior by Price Segment (%) positioning translates Industry into a compelling PMI (excl. PMI) advantage in revenue 12 generating power Premium 38 30 Mid 24 58 Low 38 Note: Excluding duty free Source: PMI Financials and PMI estimates 9
Slide 10: Industry Revenues
Industry Revenues ($ billion) $20.3 $19.2 $18.1 7.0 6.1 Premium 5.8 6.7 6.8 Mid 6.3 Low 6.0 6.4 6.5 2009 2010 2011 Note: Based on 26 markets, covering 81% of EEMA 2011 volume, excluding duty free Source: PMI estimates 10
Slide 11: Industry Revenues
Industry Revenues ($ billion) Variance 2011 vs. 2009 $20.3 ($ billion) $19.2 $18.1 7.0 1.2 6.1 Premium 5.8 6.7 6.8 0.5 Mid 6.3 Low 6.0 6.4 6.5 0.5 2009 2010 2011 Note: Based on 26 markets, covering 81% of EEMA 2011 volume, excluding duty free Source: PMI estimates 11
Slide 12: PMI Share of $2.2 Billion Industry Revenue Gain
PMI Share of $2.2 Billion Industry Revenue Gain Total Net Revenue Gain: +$2.2 billion Others PMI 50% 23% 2011 Volume Share 2009-2011 Revenue Gain Note: Based on 26 markets, covering 81% of EEMA 2011 volume, excluding duty free Source: PMI estimates 12
Slide 13: EEMA Contribution to 2011 PMI Results
EEMA Contribution to 2011 PMI Results Cigarette Shipment Volume Net Revenues 32% 25% Adjusted OCI 24% Source: PMI Financials 13
Slide 14: Strong Profitability Growth
Strong Profitability Growth Shipment Volume Net Revenues Adjusted OCI (units billion) ($ million) ($ million) CAGR: − % CAGR: 5.6% CAGR: 7.4% CAGR: 8.6% (excl. currency) CAGR: 13.9% (excl. currency) 7,881 3,254 2,443 290.3 290.3 6,346 2007 2011 2007 2011 2007 2011 Source: PMI Financials 14
Slide 15: Excellent First Quarter
Excellent First Quarter Shipment Volume Net Revenues Adjusted OCI (units billion) ($ million) ($ million) +3.6% +8.8% +11.9% +3.4% (excl. acq) +12.6% (excl. curr and acq) +18.0% (excl. curr and acq) 1,835 810 1,687 724 65.9 63.6 Q1, 2011 Q1, 2012 Q1, 2011 Q1, 2012 Q1, 2011 Q1, 2012 Source: PMI Finan
Slide 16: PMI Share Growth
PMI Share Growth (%) 24 23.2 23.0 22.9 22.5 22.0 21 2007 2008 2009 2010 2011 Note: Excluding duty free Source: PMI estimates 16
Slide 17: Premium Brands as a % of PMI Volume
Premium Brands as a % of PMI Volume (%) 43 39.5 38.7 37.1 35.9 35.3 30 H1 H2 H1 H2 Q1 2010 2011 2012 Note: Excluding duty free Source: PMI Financials 17
Slide 18: Expanding Adjusted OCI Margin
Expanding Adjusted OCI Margin (%) 45 44.1 41.3 38.5 35 2007 2011 Q1, 2012 Note: Adjusted OCI margins are calculated as adjusted OCI, divided by net revenues, excluding excise taxes Source: PMI Financials 18
Slide 19: Marlboro Volume Performance
Marlboro Volume Performance Volume (units billion) 110 25 7.6% 5.3% 50 10 2010 2011 Q1, 2011 Q1, 2012 Source: PMI Financials 19
Slide 20: Marlboro Continuous Innovation
Marlboro Continuous Innovation ● Marlboro Filter Plus ● Slimmer, 7.1mm formats ● Refreshing variants with capsules 20
Slide 21: Marlboro Gold Touch advertisement
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Slide 22: Marlboro Gold Touch / Fine Touch
Marlboro Gold Touch / Fine Touch Volume (million units) 800 2010 2011 New +23% 100%+ +80% +53% +24% Launch 0 Russia Iraq Kazakhstan Ukraine Saudi Arabia Serbia Source: PMI Financials 22
Slide 23: Marlboro Filter Plus advertisement
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Slide 24: Marlboro Filter Plus Volume Gains
Marlboro Filter Plus Volume Gains Volume (units billion) CAGR 4 (2008-2011) +7.4% +10.5% +7.8% +16.5% 2 2008 2009 2010 2011 Source: PMI Financials 24
Slide 25: Parliament
Parliament ● The ultimate luxury cigarette ● Above premium pricing ● Original recessed filter ● Intriguing line extensions ● Continuous enhancements 25
Slide 26: Parliament Volume Growth
Parliament Volume Growth Volume (units billion) 32 7 13.3% 12.9% 16 3 2010 2011 Q1, 2011 Q1, 2012 Source: PMI Financials 26
Slide 27: Parliament Share Growth
Parliament Share Growth Share of Market (%) Q1, 2011 8.4 Q1, 2012 7.5 4.8 4.0 2.8 3.1 3.1 2.5 1.0 0.6 Turkey Kazakhstan Russia Ukraine GCC Source: Nielsen and PMI estimates 27
Slide 28: L&M
L&M ● International brand ● Trusted quality ● Premium pack ● “Right price” ● Growing in the Balkans, Russia, Saudi Arabia and Turkey Source: PMI Financials 28
Slide 29: L&M advertisement
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Slide 30: L&M Volume Performance
L&M Volume Performance Volume (units billion) 52 12 1.1% (0.1)% 36 8 2010 2011 Q1, 2011 Q1, 2012 Source: PMI Financials 30
Slide 31: L&M Volume Performance
L&M Volume Performance Shipments (units billion) Q1, 2011 3 Q1, 2012 +7% +18% +8% +51% (20)% 0 Turkey Russia Saudi Arabia Balkans Egypt Source: PMI Financials 31
Slide 32: Chesterfield
Chesterfield ● Quality, heritage Share of Market (%) Q1, 2011 ● Distinctive modern packaging Q1, 2012 ● Top of mid price segment 7.2 7.5 ● New KS and 100s slims offers 3.4 3.4 Ukraine Russia Source: Nielsen 32
Slide 33: Chesterfield advertisement
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Slide 34: Bond Street
Bond Street ● International quality ● Affordable price ● Gains from downtraders and from uptraders ● Extending franchise reach with slims offerings 34
Slide 35: Bond Street advertisement
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Slide 36: Bond Street Volume Performance
Bond Street Volume Performance Volume (units billion) 52 11 6.3% 3.8% 36 7 2010 2011 Q1, 2011 Q1, 2012 Source: PMI Financials 36
Slide 37: Bond Street Share Performance
Bond Street Share Performance Share of Market (%) Q1, 2011 Q1, 2012 12.8 11.1 7.8 6.7 7.0 5.9 6.3 5.7 Kazakhstan Ukraine Serbia Russia Source: Nielsen 37
Slide 38: Total Tax Incidence: Marlboro
Total Tax Incidence: Marlboro (% of Recommended Retail Price) Increase vs. 2010 80.3 75.9 69.6 67.5 60.4 55.2 47.9 37.3 35.1 24.6 Turkey Rom.(a) Serbia Morocco Egypt Ukraine S.Afr. Saudi(a) Russia(b) Kazak. (a) Reduction in total tax incidence not shown (b) Assumes July 2012 tax Note: Total tax is e
Slide 39: Turkey: Excise Tax Reform
Turkey: Excise Tax Reform Jan 2010 Oct 2011 Nov 2011 Ad Valorem (% of RSP) 63% 69% 65% Minimum (TRL/pack) 2.65 2.90 2.90 Marlboro (TRL/pack) 7.00 9.00 8.00 Lark (TRL/pack) 4.50 6.50 5.50 ● Excise tax reform announced Source: Turkey Ministry of Finance and PMI estimates 39
Slide 40: Ukraine: Excise Tax Increases Have Moderated
Ukraine: Excise Tax Increases Have Moderated 2009YE 2010YE 2011YE Current Specific (UAH/000 cigarettes) 60.00 90.00 96.21 110.64 Ad Valorem (% of RSP net of VAT)(a) 20% 25% 25% 25% Marlboro (UAH/pack) 8.00 11.00 12.00 12.50 (a) Expressed as % of RSP net of VAT as of 2009. Prior to that, % of RSP net
Slide 41: Russia: Multi-year Excise Tax Legislation
Russia: Multi-year Excise Tax Legislation Jan Jul 2010 2011 2012 2012 2013 2014 Ad Valorem (% of MRSP) 6.5% 7.0% 7.5% 7.5% 8.0% 8.5% Specific (RUB/000 cigarettes) 205 280 360 390 550 800 Minimum (RUB/000 cigarettes) 250 360 460 510 730 1,040 (a) Marlboro (RUB/pack) 48.0 55.0 60.0 63.0 Bond Street (R
Slide 42: Price Gaps Continue to Narrow
Price Gaps Continue to Narrow Marlboro Price Gap vs. Leading Low-Price Brand (%) Russia Ukraine Turkey 321 155 140 109 71 60 Dec 2008 Mar 2012 Dec 2008 Mar 2012 Dec 2008 Mar 2012 Source: PMI estimates 42
Slide 43: Upside Potential: Reduce Illicit Trade
Upside Potential: Reduce Illicit Trade Romania: Illicit Trade SoM (%) ● Romania: a public / private success story 22.3 12.6 12.5 11.6 Q2 2009 Q4 2009 Q2 2010 Q4 2010 Q2 2011 Q4 2011 Turkey: Illicit Trade SoM (%) ● Turkey: currently engaging 19.8 20.0 with government 17.1 4.8 Q4 2009 Q2 2010 Q4 2010
Slide 44: Turkey: Overview
Turkey: Overview Total Industry Volume ● Industry volume stabilizing (units billion) 108 108 ● Illicit trade moderating 93 91 ● Record PMI share on gains across all key price segments 2008 2009 2010 2011 PMI Share of Market ● PMI performance driven by (%) speed to market and best- 44.8 45.0 in-class
Slide 45: Turkey: Retail Execution
Turkey: Retail Execution ● 2,000 people in field force New Product Launch: cover 145,000 points of sale Retail Distribution ● 6 hours to implement a 90% 86% price change nationwide 76% ● 4 days for 90% distribution of new products 45% Day 1 Day 2 Day 3 Day 4 Source: Nielsen 45
Slide 46: Turkey: PMI Brand Shares
Turkey: PMI Brand Shares Share of Market(a) (%) 11.4 9.3 Marlboro 8.3 Parliament 7.6 JanJan-09 2009 JulJul-09 2009 Jan 2010 JulJul-10 Jan-10 2010 Jan 2011 Jul Jan-11 2011 Jul-11 Jan 2012 Jan-12 (a) 12 months moving average Source: Nielsen 46
Slide 47: Turkey: PMI Brand Shares
Turkey: PMI Brand Shares Share of Market(a) (%) 11.4 9.3 Marlboro 8.3 Parliament 7.6 6.3 Muratti 5.3 JanJan-09 2009 JulJul-09 2009 Jan 2010 JulJul-10 Jan-10 2010 Jan 2011 Jul Jan-11 2011 Jul-11 Jan 2012 Jan-12 (a) 12 months moving average Source: Nielsen 47
Slide 48: Turkey: PMI Brand Shares
Turkey: PMI Brand Shares Share of Market(a) (%) 11.9 Lark 11.4 9.3 Marlboro 8.6 L&M 8.3 Parliament 7.6 7.2 7.2 6.3 Muratti 5.3 JanJan-09 2009 JulJul-09 2009 Jan 2010 JulJul-10 Jan-10 2010 Jan 2011 Jul Jan-11 2011 Jul-11 Jan 2012 Jan-12 (a) 12 months moving average Source: Nielsen 48
Slide 49: Turkey: PMI Volume Growth
Turkey: PMI Volume Growth (units billion) +9.7% 9.9 9.0 +17% Parliament Marlboro +4% Muratti +15% L&M +7% Lark +11% Q1, 2011 Q1, 2012 Source: PMI Financials 49
Slide 50: Ukraine: Overview
Ukraine: Overview Share of Market – Q1, 2012 (%) ● PMI #1 share position IMT BAT ● Parliament and Marlboro 21.7 15.8 25.0 Others volume and market share JT gains driving OCI growth 32.2 ● 5 of top 10 international PMI brands are PMI’s PMI Premium Shipments (units billion) +6.1% 1.6 1.5 Q1, 2011 Q1,
Slide 51: Ukraine: Strong, Broad PMI Portfolio
Ukraine: Strong, Broad PMI Portfolio Share of Market by Price Segment (%) – Q1, 2012 Low Mid Premium PMI 32.2 JT 25.0 IMT 21.7 BAT 15.8 Source: Nielsen 51
Slide 52: Saudi Arabia
Saudi Arabia Marlboro LA (min. 18) – 29 Smoker Share (%) ● Shifting adult smoker preferences 40 32 ● Marlboro new architecture is gaining momentum H1 H2 H1 H2 ● Innovative formats 2010 2011 ● Q1, 2012: - In-market Sales up 7% - Shipments up 17% Source: PMI Market Research and PMI Financials 52
Slide 53: Russia: Overview
Russia: Overview PMI Share of Market (%) ● Economy is improving and adult smokers are trading 26.2 up 25.8 25.5 25.5 ● Record PMI market share ● Q1, 2012: 2009 2010 2011 Q1, 2012 - In-market Sales up 4.1% - Shipments up 0.5% PMI In-market Sales (units billion) 21 - OCI up 10% +4.1% 19.5 18.7 18 Q1,
Slide 54: Russia: Parliament
Russia: Parliament ● Core upgraded in 2011 ● Q1, 2012 volume up 10.5% ● Fastest growing premium brand in Moscow and nationwide in Q1, 2012 Market Shares (%) Russia Moscow 8.0 3.1 7.6 2.8 Q1, 2011 Q1, 2012 Q1, 2011 Q1, 2012 Source: PMI Financials and Nielsen 54
Slide 55: Russia: L&M Volume Turnaround
Russia: L&M Volume Turnaround Volume Variance vs. Prior Year Quarter (%) 2010 2011 2012 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 18 12 (3) (8) (19) (18) (17) (24) (22) Source: PMI Financials 55
Slide 56: Russia: Bond Street
Russia: Bond Street ● Record market share Share of Market (%) 6.2 6.3 ● Opening new channels 5.6 and venues for adult 4.5 consumer activation ● New, unisex slims line 2009 2010 2011 Q1, 2012 extensions Source: Nielsen 56
Slide 57: Russia: Next
Russia: Next ● Modern, affordable Share of Market (%) 2.9 brand 2.4 2.7 2.2 1.5 Standard 1.6 ● Gains on slimmer 1.9 1.8 variants 1.1 1.4 Slims 0.3 0.6 2009 2010 2011 Q1, 2012 Source: Nielsen 57
Slide 58: Russia: PMI Growth Brands by Region
Russia: PMI Growth Brands by Region North 1.3pp Center Moscow Region 1.3pp St. Petersburg Moscow - pp Yekaterinburg Rostov-on-Don Novosibirsk South East 0.7pp 0.4pp Note: Variance is Q1, 2012 vs. Q1, 2011 Source: Nielsen 58
Slide 59: Russia: Marlboro
Russia: Marlboro Marlboro Share of Market (%) 2.6% 1.9% LTN Full Flavor Jan 2009 Jul 2009 Jan 2010 Jul 2010 Jan 2011 Jul 2011 Jan 2012 Source: Nielsen 59
Slide 60: Consumer and Trade Activation Project
Consumer and Trade Activation Project ● Pilot program, 2011 in Yekaterinburg (population 1.4 million) ● Focus on Marlboro ● Harnessing new / emerging consumer trends ● New PMI sales / marketing tool kit validated ● Immediate operating improvements Moscow Yekaterinburg 60
Slide 61: Yekaterinburg Project: Key Results
Yekaterinburg Project: Key Results (%) Smokers’ Share LA (min. 18) – 24 7.7 5.8 6.0 5.2 3.9 2.1 Mar-11 May-11 Jul-11 Sep-11 Source: PMI Market Research 61
Slide 62: Yekaterinburg Project: Key Results
Yekaterinburg Project: Key Results (%) Harsh Taste Perception Smokers’ Share LA (min. 18) – 24 LA (min. 18) – 34 7.7 5.8 6.0 11 5.2 7 3.9 2.1 Mar-11 May-11 Jul-11 Sep-11 Mar-11 Sep-11 Source: PMI Market Research 62
Slide 63: Marlboro ClearTaste: the New Marlboro in Russia
Marlboro ClearTaste: the New Marlboro in Russia 63
Slide 64: Marlboro ClearTaste: the New Marlboro in Russia
Marlboro ClearTaste: the New Marlboro in Russia ● “Clarity of taste” vs. “Clarity of choice” ● No more compromise (“Don’t be a Maybe”) Note: English translations: “May be it’s time to find your own taste. New clarity of taste”; “May be it’s time to find clarity of taste.” “May be the most convenient
Slide 65: Marlboro ClearTaste: the New Marlboro in Russia
Marlboro ClearTaste: the New Marlboro in Russia Note: English translations: “May be it’s time to say “YES”. Be Marlboro”; “May be think less, live brighter. Be Marlboro.”, “May be it’s time to decide. Be Marlboro” 65
Slide 66: Business Development Opportunities
Business Development Opportunities EEMA Total: 1.2 trillion units Market Size (units billion) PMI not Markets where present PMI SoM >20% 130 80 billion units 54 Markets 272 where PMI 22 20 billion SoM <20% 15 15 14 units Egypt Iran S.Afr. Bel. Uzb. Mor. Iraq Note: S.Afr. is South Africa, Bel. is Bel
Slide 67: Business Development: South Africa
Business Development: South Africa ● 2009 acquisition of Swedish Match South Africa ● Marlboro Blue Ice launch Marlboro Volume (units million) Other Marlboro variants Menthol Blue Ice 700 175 24% 13% 300 75 2009 2010 2011 Q1, 2011 Q1, 2012 Source: PMI Financials 67
Slide 68: Business Development: South Africa
Business Development: South Africa ● Marlboro Beyond launch ● Virginia product, charcoal filter, menthol capsule ● Start in Johannesburg ● Expand nationally 68
Slide 69: Business Development: Iraq
Business Development: Iraq PMI Volume (units billion) PMI Share of Market (2011) 3 Dohuk 2.6 North 15% Erbil Sulaymaniah Salah-Adin 1.2 Al-Anbar Baghdad 0.9 Center Al-Najaf 8% 0.2 0 2008 2009 2010 2011 South Al-Basra 4% Source: PMI estimates, PMI Financials, Retail Zoom, Distributor, Status: Februar
Slide 70: Business Development: North Africa
Business Development: North Africa PMI Shipments (units billion) 30 +8% +21% +22% +25% Marlboro L&M Other 0 2007 2008 2009 2010 2011 Note: North Africa is Algeria, Egypt, Libya, Morocco and Tunisia Source: PMI Financials 70
Slide 71: Conclusions
Conclusions ● Growing economies, favorable demographics ● PMI is growing fast in EEMA ● Excise taxation / regulation manageable ● Superior brand portfolio ● Opportunities to expand geographically ● Talented, agile, highly motivated organization focused on growth Continued robust, sustainable OCI gro
Slide 72: Questions & Answers
Investor Day – EEMA Region Lausanne, June 21, 2012 Questions & Answers
Slide 73: 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
Philip Morris International — Investor Day (June 2012) on 6ix