Philip Morris International Inc · NYSE:PM
Philip Morris International — Q3 2013 Earnings Presentation
35 slides from Philip Morris International's earnings presentation, Oct 17, 2013
Slide 1: 2013 Third-Quarter Results
2013 Third-Quarter Results October 17, 2013 EXHIBIT 99.3
Slide 2: Introduction
2 Introduction ● Unless otherwise stated, we will be talking about results for the third quarter of 2013 and comparing them to the same period in 2012 ● References to PMI volumes refer to PMI shipments ● Industry volume and market shares are the latest data available from a number of internal and ex
Slide 3: Forward-Looking and Cautionary Statements
3 Forward-Looking and Cautionary Statements ● This presentation and related discussion contain forward-looking statements. Achievement of projected results is subject to risks, uncertainties and inaccurate assumptions, and PMI is identifying important factors that, individually or in the aggregate,
Slide 4: Q3, 2013: Improved Adjusted Diluted EPS Growth Rate
Q3, 2013: Improved Adjusted Diluted EPS Growth Rate 4 8.8 0.7 10.9 0 12 Q1 Q2 Q3 Adjusted Diluted EPS Growth Rates(a) (%) (a) Excluding currency Source: PMI Financials 2013
Slide 5: Q3, 2013: Continued Market Share Growth Momentum Outside of Asia
Q3, 2013: Continued Market Share Growth Momentum Outside of Asia 5 9.2 9.3 Q3 2012 Q3 2013 Total Marlboro Market Share (%)(b) Regional PMI Market Shares (%) (a) Excluding China (b) Excluding China, the Philippines and the USA Source: PMI estimates +0.1pp Q3 2012 Q3 2013 Q3 2012 Q3 2013 Q3 2012 Q3 20
Slide 6: Q3, 2013: Strong Pricing and Improved Margins
Q3, 2013: Strong Pricing and Improved Margins 6 (a) Excluding currency Source: PMI Financials 488 1,337 1,518 YTD Sept 2012 YTD Sept 2013 46.3% 45.2% 45.8% 47.5% 2012 2013 2012 2013 Pricing Variance ($ million) Adjusted OCI Margin(a) Q3 H1 Q3
Slide 7: 2013 EPS Guidance
Source: PMI forecasts and PMI Financials ● Anticipate a strong fourth quarter ● July reported diluted EPS guidance for 2013 was $5.43 to $5.53 ● Today’s guidance includes: - Two additional cents in unfavorable currency, at prevailing exchange rates, bringing the full-year impact to 33 cents - Approx
Slide 8: EU Region: Moderating Cigarette Industry Volume Decline
(5.4)% (8.0)% (10.6)% EU Region: Moderating Cigarette Industry Volume Decline 8 10.2 10.4 10.5 10.7 10.9 10.9 10.9 Q1 Q2 Q3 Q4 Q1 Q2 Q3 EU Unemployment (%)(a) (a) Seasonally adjusted (b) July – August Source: Eurostat and PMI estimates Total Cigarette Industry Volume Decline (2013 vs. PY) Q1 Q2 Q3 2
Slide 9: EU Region: Strong Share Momentum
13.4 14.4 YTD Sept 2012 YTD Sept 2013 Note: Fine cut includes Make Your Own (MYO), MYO volume tobacco and Roll Your Own (RYO) Source: PMI estimates EU Region: Strong Share Momentum 39.5 35.8 53.0 35.6 30.3 6.7 40.2 36.0 53.3 35.9 31.2 7.1 0 20 France Germany Italy Poland Spain UK PMI Fine Cut Share
Slide 10: EU Region: Strong Share Momentum
6.5 6.9 +0.4pp Source: PMI estimates EU Region: Strong Share Momentum 18.7 18.8 EU Region Cigarette Shares (%) 3.9 4.0 1.7 1.9 Q3 2012 Q3 2013 +0.1pp +0.1pp +0.2pp Marlboro L&M Chesterfield Philip Morris Q3 2012 Q3 2013 Q3 2012 Q3 2013 Q3 2012 Q3 2013 10
Slide 11: EU Region: Tobacco Products Directive (TPD)
EU Region: Tobacco Products Directive ("TPD") 11 ● European Parliament Plenary Session amended the proposal as follows: - 65% health warning (vs. 75% proposed) - Flavored cigarettes, such as menthol, banned after a transition period of 5+ years - Slim cigarettes permitted - E-cigarettes to be regula
Slide 12: EU Region: Tobacco Products Directive (TPD)
EU Region: Tobacco Products Directive ("TPD") 12 ● European Parliament Plenary Session amended the proposal as follows: - 65% health warning (vs. 75% proposed) - Flavored cigarettes, such as menthol, banned after a transition period of 5+ years - Slim cigarettes permitted - E-cigarettes to be regula
Slide 13: EU Region: Tobacco Products Directive (TPD)
EU Region: Tobacco Products Directive ("TPD") 13 ● European Parliament Plenary Session amended the proposal as follows: - 65% health warning (vs. 75% proposed) - Flavored cigarettes, such as menthol, banned after a transition period of 5+ years - Slim cigarettes permitted - E-cigarettes to be regula
Slide 14: Russia: Lower Volume but Higher Profitability
Note: MRSP stands for Maximum Retail Selling Price. VAT stands for Value Added Tax Source: PMI estimates, PMI forecasts, PMI Financials and Nielsen Russia: Lower Volume but Higher Profitability 14 ● PMI increased its prices by RUB 4/pack in June/July on most brands ● Cigarette industry volume declin
Slide 15: Turkey: Strong PMI Fundamentals
(a) Includes super-low Source: PMI estimates, PMI forecasts and Nielsen Turkey: Strong PMI Fundamentals 15 ● Cigarette industry volume declined by an estimated 5% in Q3, 2013 ● Our full-year forecast is for an industry volume decline of around 7-8% ● Strong performance of Parliament in premium and M
Slide 16: Philippines: Under-Declaration by Main Local Competitor Remains the Key Issue
(a) QTD August Note: The term adult refers to Legal Age (minimum 18) – 64 year old smokers Source: PMI estimates, PMI Market Research, Nielsen and the Philippines Bureau of Internal Revenue 0.2 0.6 0.7 1.0 1.2 1.2 1.3 1.4 1.5 1.9 2.5 2.2 2.2 2.3 2.6 2.8 Jan Feb Mar Apr May Jun Jul Aug Philippines: U
Slide 17: Japan: Moderate Industry Volume Decline but Market Share under Pressure
Source: Tobacco Institute of Japan and PMI forecasts Japan: Moderate Industry Volume Decline but Market Share under Pressure ● Cigarette industry volume down by 1.2% in Q3, 2013. On track to decline by about 2% for the full year ● Two key objectives: - Reinforce our leadership in the growing menthol
Slide 18: Indonesia: Slower Industry Volume Growth but PMI Gaining Share
Source: PMI estimates and PMI forecasts 3.5% 1.4% 0.3% (7.6)% Premium Mid Total Indonesia: Slower Industry Volume Growth but PMI Gaining Share 18 ● Economic slowdown and increased cost of basic foods and fuel ● Cigarette industry volume up by 0.3% in Q3, 2013. Forecast for full-year growth of about
Slide 19: Business Development: Mexico and Algeria
Business Development: Mexico and Algeria 19 Mexico ● Purchase of remaining 20% interest closed in September for $703 million ● Marginally accretive as of the fourth quarter this year Algeria ● Purchase of 49% stake in Arab Investors-TA closed in September for $625 million ● Expected to be accretive
Slide 20: Strong Focus on Shareholder Returns
Strong Focus on Shareholder Returns 20 ● Free cash flow up strongly in the quarter ● Dividend increased by 10.6% in September to an annualized rate of $3.76 per share; more than double the rate at the time of the spin ● Target dividend payout ratio remains 65% ● Our dividend yield is currently aroun
Slide 21: Conclusion: Remain Confident That We Will Deliver Solid Financial Results in 2013
Source: PMI Financials and PMI forecasts Conclusion: Remain Confident That We Will Deliver Solid Financial Results in 2013 21 ● Solid business fundamentals ● Steadfast commitment to reward our shareholders ● Persistent difficult macro-economic conditions ● Third-quarter results in line with expectat
Slide 22: Questions & Answers
Questions & Answers 2013 Third-Quarter Results
Slide 23: Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS, Q1
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS and Adjusted Diluted EPS, excluding Currency For the Quarters Ended March 31, (Unaudited) 23 2013 2012 % Change Reported Diluted EPS 1.28$ 1.25$ 2.4% A
Slide 24: Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS, Q2
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 June 30, (Unaudited) 24 2013 2012 % Change Reported Diluted EPS 1.30$ 1.36$ (4.4)%
Slide 25: Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS, Q3
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 September 30, (Unaudited) 25 2013 2012 % Change Reported Diluted EPS 1.44$ 1.32$ 9.
Slide 26: Calculation of Adjusted Operating Companies Income Margins, excluding Currency
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Calculation of Adjusted Operating Companies Income Margins, excluding Currency ($ in millions) (Unaudited) 26 European Union 2,147$ -$ 2,147$ (155)$ 2,302$ 13,750$ 9,412$ 4,338$ (249)$ 4,587$ 50.2% EEMA 1,758 - 1,7
Slide 27: Calculation of Adjusted Operating Companies Income Margins, excluding Currency
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Calculation of Adjusted Operating Companies Income Margins, excluding Currency ($ in millions) (Unaudited) 27 European Union 1,085$ -$ 1,085$ (151)$ 1,236$ 6,904$ 4,779$ 2,125$ (334)$ 2,459$ 50.3% EEMA 1,047 - 1,04
Slide 28: Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS, 2012
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS For the Year Ended December 31, (Unaudited) 28 2012 Reported Diluted EPS 5.17$ Adjustments: Asset impairment and exit costs 0.03 Tax item 0.02 Adjust i
Slide 29: Adjustments for the Impact of Currency and Acquisitions, Quarters
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Quarters Ended September 30, ($ in millions) (Unaudited) 29 Reported Net Revenues Less Excise Taxes Reported Net Revenues excluding Excise Taxes Less
Slide 30: Reconciliation of Reported Operating Companies Income to Adjusted, Quarters
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 Ende
Slide 31: Adjustments for the Impact of Currency and Acquisitions, Nine Months
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Nine Months Ended September 30, ($ in millions) (Unaudited) 31 Reported Net Revenues Less Excise Taxes Reported Net Revenues excluding Excise Taxes Le
Slide 32: Reconciliation of Reported Operating Companies Income to Adjusted, Nine Months
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 Nine Months E
Slide 33: Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS, Nine Months
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 Nine Months Ended September 30, (Unaudited) 33 2013 2012 % Change Reported Diluted EPS 4.02$ 3.92$
Slide 34: Reconciliation of Operating Cash Flow to Free Cash Flow
34 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 For the Nine Months Ended September 30, ($ in millions) (Unaudited) For the Quarters Ended For the Nine Months Ended
Slide 35: 2013 Third-Quarter Results
October 17, 2013 2013 Third-Quarter Results
Philip Morris International — Q3 2013 Earnings Presentation on 6ix