Philip Morris International Inc · NYSE:PM
Philip Morris International — J. P. Morgan Global Tobacco Conference 2009
75 slides from Philip Morris International's conference presentation, Jun 26, 2009
Slide 1: J. P. Morgan Global Tobacco Conference, London
Hermann Waldemer Chief Financial Officer J. P. Morgan Global Tobacco Conference London, 26 June 2009 Exhibit 99.2
Slide 2: Forward-Looking, Cautionary Statements and Use of Non-GAAP Measures
2 Forward-Looking, Cautionary Statements and Use of Non-GAAP Measures This presentation and related discussion contain statements that, to the extent they do not relate strictly to historical or current facts, constitute “forward-looking statements” within the meaning of the Private Securities Litig
Slide 3: First-Quarter 2009 Results
3 First-Quarter 2009 Results Excl. Currency 12.7% (6.3)% 0.74 Reported Diluted EPS ($ / share) 11.3% (7.5)% 0.74 Adjusted Diluted EPS ($ / share) 8.8% (7.0)% 2.4 OCI ($ billion) 6.3% (5.5)% 5.6 Net Revenues ($ billion) (c) (1.1)% (b) - % (a) 203.4 Cigarette Volume (units billion) Excl. Acquisitions
Slide 4: Key Business Drivers
4 Key Business Drivers Strong revenue growth driven by higher prices A generally manageable fiscal environment Softer overall consumption levels Slightly unfavorable product mix, reflecting some consumer down-trading in specific markets A solid share performance in our key markets Growing consumer p
Slide 5: Revenue Growth
5 Revenue Growth Since October 2008, PMI has increased prices notably in: Argentina Brazil Canada Colombia Costa Rica Dom. Rep. Mexico Australia Hong Kong Indonesia Pakistan Philippines Taiwan Thailand Kazakhstan Romania Russia Serbia Slovenia Turkey Ukraine Czech Rep. Germany Greece Italy Netherlan
Slide 6: Pricing Variance
6 Pricing Variance ($ million) Source: PMI Financials Q1, 2008 Q1, 2009
Slide 7: Spain – Pricing
7 Spain – Pricing 0.34 0.30 0.19 0.19 0.19 Tax Pass-on Note: 0.35 2.80 2.45 Next Variance New Old (RSP/pack) 0.35 2.85 2.50 L&M 0.35 3.00 2.65 Marlboro Pocket Pack 0.35 3.20 2.85 Chesterfield 0.35 3.55 3.20 Marlboro KS Source: PMI Finance
Slide 8: Pricing
8 Pricing Pricing is the key to revenue and profitability growth in developed markets where volumes are declining Pricing has also helped boost unit margins and profitability in emerging markets This year, pricing in emerging markets is also helping to partially offset the unfavorable impact of curr
Slide 9: Fiscal Environment
9 Fiscal Environment Fairer and generally more reasonable excise tax environment Balanced excise tax structures in place in essentially all our top 25 OCI markets
Slide 10: Minimum Excise Taxes in the EU
10 Minimum Excise Taxes in the EU 1976 2003 2004 1995 1980 2004 2004 2001 2004 1995 1992 2003 1992 2000 2005 2004 2005 2005 2005 2006 2006 1995 2010 (a) EU countries with Minimum Excise Taxes (a) Denmark will implement MET as of Jan 1 , 2010 st
Slide 11: Fiscal Environment
11 Fiscal Environment Higher cigarette retail prices are boosting government revenues Most governments appear to recognize that large excise tax increases tend to be counter-productive Disruptive increases this year in Brazil and Ukraine Fairer and generally more reasonable excise tax environment Ba
Slide 12: Ukraine – Excise Taxation
12 Ukraine – Excise Taxation 100.00 47.00 40.00 18.00 Min. Excise Tax (UAH/’000) 20.0% 60.00 May 16.0% 30.00 Oct Jan Jan 16.0% 12.5% Ad-valorem tax (%) 37.50 14.00 Specific tax (UAH/’000) Excise Taxes 2009 2008 Source: Ukrainian Ministry of Finance
Slide 13: Ukraine - Pricing
13 Ukraine - Pricing 4.50 6.00 6.50 8.00 11.00 May 3.00 - - - - Apr 2.90 4.40 5.00 6.50 9.00 Mar 2.20 3.60 4.00 6.00 8.00 Oct Jan Jul Feb Jan 2.50 1.60 1.55 1.45 Vatra 4.00 3.00 - 2.90 L&M 4.50 3.40 3.25 3.10 Chesterfield 6.25 - 5.00 4.75 Marlboro 8.50 7.50 - 7.00 Parliament Retail Prices (UAH/Pack)
Slide 14: Ukraine – Consumer Prices (May 2009)
14 Ukraine – Consumer Prices (May 2009) 0.32 2.55 Mineral water (0.5 liters) 0.45 3.50 Obolon beer (local) 1.78 14.00 Big Mac 0.52 4.10 Coca-Cola (0.5 liters) 0.64 5.00 Bread (500g) 1.02 8.00 Marlboro 0.72 5.66 Milk (1 liter) 2.29 18.00 Colgate toothpaste 2.79 21.90 Budweiser beer (imported) 6.36 50
Slide 15: Industry Volume
15 Industry Volume Economic crisis and unemployment, as well as higher retail prices, driving weaker industry volumes across emerging markets
Slide 16: Industry Volume
16 Industry Volume EU markets generally declining at or near underlying longer-term tendency of 2.5% to 3.0% Economic crisis and unemployment, as well as higher retail prices, driving weaker industry volumes across emerging markets Source: PMI GIMS estimates
Slide 17: Industry Volume
17 Industry Volume Spain suffered a 10.0% industry volume decline in Q1, 2009, notably due to a trade decision to reduce working capital Economic crisis and unemployment, as well as higher retail prices, driving weaker industry volumes across emerging markets EU markets generally declining at or nea
Slide 18: Industry Volume
18 Industry Volume Industry volume in Japan has recently been declining slightly faster than usual, driven by one time events and the timing of shipments Economic crisis and unemployment, as well as higher retail prices, driving weaker industry volumes across emerging markets EU markets generally de
Slide 19: Consumer Behavior
19 Consumer Behavior No broad-based trend towards consumer down- trading on a global basis Our product mix is expected to be slightly unfavorable this year Trends vary by markets: Gradual overall consumer down-trading (e.g. Russia, Spain) Strong but slightly declining premium segments (e.g. Mexico)
Slide 20: Russia – Price Segment Shares
20 Russia – Price Segment Shares 2007 2008 2009 Source: A.C. Nielsen (%) 58.5 64.1 60.0 58.3 58.3 25.0 22.0 24.0 24.9 25.0 16.5 13.9 16.0 16.8 16.7 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 April Low / Value Mid Premium & Above
Slide 21: Russia – PMI Volume by Price Segment
21 Russia – PMI Volume by Price Segment Prem. & Above Low / Value Q1, 2008 YTD May, 2009 Source: PMI Finance Mid Prem. & Above Low / Value Mid 50% 27% 23% 25% 31% 44%
Slide 22: Spain – Premium Segment
22 Spain – Premium Segment Other Marlboro (a) (a) Excludes the pocket pack. Total Marlboro market share in Spain was 15.6% in Q1, 2009. Source: PMI GIMS estimates (%) 16.1 14.7 17.8 16.1 Q1, 2008 Q1, 2009
Slide 23: Mexico – Price Segment Shares
23 Mexico – Price Segment Shares Source: PMI GIMS estimates (%) 2007 2008 2009 23.6 23.9 23.1 22.0 19.9 11.2 10.9 11.0 11.4 15.9 65.2 65.2 65.9 66.6 64.2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Apr / May Low Mid Premium
Slide 24: Turkey – Price Segment Shares
24 Turkey – Price Segment Shares Source: A.C. Nielsen (%) 2007 2008 2009 55.2 54.7 52.9 54.5 54.0 24.0 24.6 26.1 26.4 27.5 20.8 20.7 21.0 19.1 18.5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 April Low / Value Mid Premium & Above
Slide 25: Poland – Price Segment Shares
25 Poland – Price Segment Shares Source: A.C. Nielsen (%) 2007 2008 2009 57.2 57.5 58.6 57.7 57.5 29.9 29.8 29.0 30.2 30.6 12.9 12.7 12.4 12.1 11.9 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 April Low Mid Premium
Slide 26: Top International Brands (2008)
26 Top 15 International Brands (2008) (bio) Lark Parliament Chesterfield Bond Street Philip Morris L&M Marlboro Source: PMI data from Financials. Competitive data for BAT and JT International Brands derived from 2008 company reports and PMI estimates. LD Dunhill Viceroy Camel Pall Mall Kent Mild Sev
Slide 27: PMI Brand Portfolio
27 PMI Brand Portfolio Mid-Price Premium & Above Local Heritage International Low-Price
Slide 28: EEMA Market Shares
28 EEMA Market Shares (%) Source: A.C. Nielsen. Note: Ukraine shares only available through April 2009 2008 2009 Turkey Ukraine 35.8 34.7 36.4 40.8 42.7 42.4 Q1 Q2 Q3 Q4 Q1 Apr / May
Slide 29: Turkey – Parliament
29 Turkey – Parliament Pack & Tipping Paper Revamp Jun 07 Online Laser Perforation Nov Reserve Launch Oct Super Slims Launch Apr Pack Revamp Jun 2004 2005 2006 2007 2008 Q1, 04 3.6% Pack Revamp Jan 8.4% SoM (%) Q1, 09 Source: A.C. Nielsen
Slide 30: Russia – PMI Market Share
30 Russia – PMI Market Share (%) Source: A.C. Nielsen 2008 2009 25.1 25.1 24.8 Q1 Q2 Q3 Q4 Q1 April
Slide 31: Russia – Bond Street
31 Russia – Bond Street Success in keeping Russian smokers within our franchise reflects breadth of our portfolio Shipments of low-price Bond Street up 27.7% in Q1, 2009 Source: A.C. Nielsen
Slide 32: Indonesia – Market Shares
32 Indonesia – Market Shares (%) Source: A.C. Nielsen A Mild 2007 2008 2009 10.5 10.5 10.5 9.5 9.9 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 April
Slide 33: Indonesia – A Volution
33 Indonesia – A Volution A Mild’s success bolstered by the launch of A Volution First slimmer kretek, available in regular and menthol variants A Volution market share of 0.2% in April 2009 Source: A.C. Nielsen
Slide 34: Latin America Market Shares
34 Latin America Market Shares (%) (a) April 2009 data for Argentina Source: PMI GIMS estimates 2008 2009 Argentina Mexico (a) 72.6 70.7 73.6 69.2 68.9 67.0 Q1 Q2 Q3 Q4 Q1 April / May
Slide 35: Mexico – Marlboro Fresh
35 Mexico – Marlboro Fresh Marlboro market share in Mexico was 48.3% in Q1, 2009 Innovative Marlboro Fresh, with a menthol thread in the filter, reached 0.5% market share in Q1, 2009 Source: PMI GIMS estimates
Slide 36: Western Europe Market Shares
36 Western Europe Market Shares (%) Source: PMI GIMS estimates 2008 2009 Italy France Germany Apr / May Spain 41.0 40.9 41.0 53.6 54.3 54.7 32.1 31.8 31.8 38.4 35.8 35.9 Q1 Q2 Q3 Q4 Q1
Slide 37: Western Europe – Marlboro Innovation
37 Western Europe – Marlboro Innovation Marlboro resilient in Europe, supported by new initiatives Shorter Marlboro Compact , had 0.6% market share in Italy in Q1, 2009 Marlboro Pocket Pack reached 0.9% market share in Spain in Q1, 2009 Source: PMI GIMS estimates
Slide 38: Marlboro Gold – New Pack
38 Marlboro Gold – New Pack After successful test markets, new Marlboro Gold pack being rolled-out Very positive response from German adult consumers
Slide 39: Key Consumer Preferences
39 Key Consumer Preferences Lighter-tasting, smoother products Technology / innovation Slimmer diameter products Menthol
Slide 40: Turkey – Charcoal Segment
40 Turkey – Charcoal Segment Others PMI Source: A.C. Nielsen (%) 23.1 26.0 31.1 Q1, 2007 Q1, 2008 Q1, 2009
Slide 41: Poland – Slimmer Diameter Segment
41 Poland – Slimmer Diameter Segment Others PMI Source: A.C. Nielsen (%) 10.2 13.3 15.5 Q1, 2007 Q1, 2008 Q1, 2009
Slide 42: Poland – L&M Link
42 Poland – L&M Link L&M Link key driver behind our success in slims segment in Poland L&M Link achieved 3.1% total market share Q1, 2009 Source: A.C. Nielsen
Slide 43: Japan – Menthol Segment
43 Japan – Menthol Segment 2007 2008 2009 Source: Tobacco Institute of Japan Menthol Segment Share (Q1, 2009) 26.9 12.2 11.4 9.0 7.4 Marlboro Pianis. Kool Virginia Slims Lark Menthol Share of Market 20.5 21.8 22.4 Q1 Q1 Q1
Slide 44: Japan – Marlboro Black Menthol
44 Japan – Marlboro Black Menthol Launch of Marlboro Black Menthol in Japan was PMI's most successful ever Marlboro Black Menthol achieved a 1.0% market share in Japan in Q1, 2009 Marlboro family market share rose from 9.8% in Q1, 2008 to 10.4% in Q1, 2009 PMI overall share in Japan at 23.9% Source:
Slide 45: Business Perspectives
45 Business Perspectives Fundamentals of our business are in very good shape Our growth strategy going forward remains intact Marlboro is a key element of this strategy Successful innovations in framework of new Marlboro architecture
Slide 46: Marlboro Architecture
46 Marlboro Architecture “Flavor enjoyment” “Smooth taste and style” “Fresh taste sensations” Red Gold Fresh
Slide 47: TLIP MORRIS IN
TLIP MORRIS IN q Marlhorn FILTER PLUS. ONE - BBL Se tI coC HABE BLAU SER EBOET. (RIC DUT, MER MEO RL www. mhlw.go.jp/topics/tobacco/main. html FAG 12 8 U0)
Slide 48: Marlboro Filter Plus
48 Marlboro Filter Plus Source: A.C. Nielsen and PMI estimates (%) April 2009 Market Shares 0.3 0.3 2.5 1.3 2.6 1.8 0.6 0.9 0.6 Brazil Japan Kuwait Paraguay Romania Almaty Kiev Moscow St Pete.
Slide 49: Philip Morris International
PHILIP MORRIS INTERNATIONAL
Slide 50: Philip Morris International
PHILIP MORRIS INTERNATIONAL bao yy Aww § Rauchen kann tédlich sein
Slide 51: Philip Morris International
PHILIP MORRIS INTERNATIONAL Marlbora ORIGINAL
Slide 52: Marlboro Gold
51 Marlboro Gold EU Region Markets (a) Austria Norway Denmark Poland France Sweden Germany Switzerland Italy (a) Launches as of 31 May, 2009.
Slide 53: Marlboro Gold Family
52 Marlboro Gold Family
Slide 54: Marlboro Gold Advance
53 Marlboro Gold Advance Marlboro Gold Advance is a smoother, full-flavor product Launched nationally in France after successful test market
Slide 55: Marlboro Gold Touch
54 Marlboro Gold Touch Marlboro Gold Touch is a new innovative offering in an unprecedented cigarette format Launched in Austria, Greece and Italy
Slide 56: Marlboro Gold Edge
55 Marlboro Gold Edge Marlboro Gold Edge is a super-slims product, which has been launched in Hungary, Poland, Russia and Ukraine
Slide 57: Marlboro Gold Edge
56 Marlboro Gold Edge Achieved segment shares of 2.4% in Poland and 0.7% in Russia in April and PMI estimates
Slide 58: Marlboro Gold Smooth
57 Marlboro Gold Smooth Marlboro Gold Smooth is a 1mg tar product Just launched in Kuwait and Saudi Arabia, where the 1mg tar segment is growing
Slide 59: Philip Morris International
| PHILIP MORRIS INTERNATIONAL a Marlhoro FES BERL TRA OREO
Slide 60: Marlboro Fresh
59 Marlboro Fresh Black Menthol Crisp/Fresh Mint Other Menthol Source: A.C. Nielsen (%) PMI Hong Kong Market Shares 2009 11.2 11.6 11.4 10.8 10.7 2.8 2.9 2.7 2.2 2.2 0.7 2.9 14.0 14.5 14.8 15.9 15.9 3.0 January February March April May
Slide 61: Philip Morris International
PHILIP MORRIS INTERNATIONAL ee iw encom Bu
Slide 62: Marlboro Smoker Shares – EU Region (2008)
61 Marlbor o Smoker Shares – EU Region (2008) LA-24 (“YAS”) LA-64 (%) Source: PMI Global Consumer Tracking Survey Belgium Czech France Germany Greece Italy Neth. Poland Portugal Spain Switz. UK
Slide 63: Marlboro YAS Smoker Shares - Germany
62 Marlbor o YAS Smoker Shares - Germany (%) Source: PMI Global Consumer Tracking Survey 2007 2008 2009 TOTAL Red Gold Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr
Slide 64: Marlboro Smoker Shares – non-EU (2008)
63 Marlbor o Smoker Shares – non-EU (2008) (%) Source: PMI Global Consumer Tracking Survey LA-24 (“YAS”) LA-64 Egypt Russia Saudi Turkey Ukraine Indon. Japan Korea Philip. Argentina Brazil Mexico
Slide 65: Competitive Landscape (2008)
64 Competitive Landscape (2008) (a) PMI BAT JT IMT (b) Other PMI BAT JT Other Market Shares excl USA Market Shares excl. PRC & USA (a) Volumes are on a calendar basis, except for IMT, who reports on a fiscal year ending September. (b) Impact of 3.8 months of Altadis volume has been added and U.S. vo
Slide 66: Acquisitions
65 Complements organic growth Provides often unique opportunities to enter new markets or significantly step up our presence: Sampoerna in Indonesia Rothmans Inc. in Canada Acquisitions in other tobacco categories: Interval in France and other EU markets Petter es in Norway Snus joint-venture with S
Slide 67: Capital Structure
66 Capital Structure Free cash flow of $6.8 billion in 2008 (a) PMI committed to maintain strong credit ratings Bond issues for equivalent of $10.1 billion in 2008 and $3.0 billion in 2009 Well-laddered maturities and reasonable all-in long- term average interest rate of 5.6% Over $6 billion of comm
Slide 68: Shareholder Returns
67 Shareholder Returns Dividend raised by 17.4% in August 2008 to an annualized rate of $2.16 / share Willingness in 2009 to exceed our 65% dividend payout target $13 billion two-year share repurchase program initiated in May 2008 $5.4 billion of share repurchases in 2008 and similar amount anticipa
Slide 69: Summary
68 Summary Tobacco sector resilient but not immune Weaker industry volume and some consumer downtrading Prices increased to enhance profitability Manageable excise tax and regulatory environment Cost saving programs on track Substantial cash flows and excellent liquidity Dividends and share repurcha
Slide 70: Mid to Long-Term Annual Financial Growth Targets
69 Constant Currency Mid to Long-Term Annual Financial Growth Targets Targets Net Revenues 4 – 6% Operating Income 6 – 8% EPS 10 – 12% (a) Excluding excise taxes. Source: PMI Financials
Slide 71: Questions & Answers
Hermann Waldemer Chief Financial Officer J. P. Morgan Global Tobacco Conference London, 26 June 2009 Questions & Answers
Slide 72: Reconciliation of Non-GAAP Measures
71 Reconciliation of Non-GAAP Measures Reported Net Revenues Less Excise Taxes Reported Net Revenues excluding Excise Taxes Less Currency Reported Net Revenues excluding Excise Taxes & Currency Reported Net Revenues Less Excise Taxes Reported Net Revenues excluding Excise Taxes Reported Reported exc
Slide 73: Reconciliation of Non-GAAP Measures
72 Reconciliation of Non-GAAP Measures 2009 2008 % Change Reported Diluted EPS (1) 0.74 $ 0.79 $ (6.3)% Add: Currency Impact 0.15 Reported Diluted EPS, Excluding Currency 0.89 $ 0.79 $ 12.7% (1) As discussed in Note 1. Background and Basis of Presentation of our 2008 consolidated financial statement
Slide 74: Reconciliation of Non-GAAP Measures
73 Reconciliation of Non-GAAP Measures 2009 2008 % Change Reported Diluted EPS (1) 0.74 $ 0.79 $ (6.3)% Adjustments: Asset impairment and exit costs - 0.01 Adjusted Diluted EPS 0.74 $ 0.80 $ (7.5)% Add: Currency Impact 0.15 Adjusted Diluted EPS, Excluding Currency 0.89 $ 0.80 $ 11.3% (1) As discusse
Slide 75: Reconciliation of Non-GAAP Measures
74 $ 2,524 $ 2,320 Operating Income (34) (15) $ 2,369 155 661 586 $ 967 First Quarter 2009 (13) General corporate expenses (9) Amortization of intangibles 149 Latin America & Canada $ 2,546 Operating Companies Income 550 Asia 680 EEMA $ 1,167 EU First Quarter 2008 Reconciliation of Non-GAAP Measures
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