Philip Morris International Inc · NYSE:PM
Philip Morris International — Investor Day (September 2018)
27 slides from Philip Morris International's investor day presentation, Sep 27, 2018
Slide 1: Investor Day
Investor Day Lausanne, September 27, 2018 André Calantzopoulos Chief Executive Officer
Slide 2: PMI: Strong Business with a Strong Future
PMI: Strong Business with a Strong Future • Enormous opportunity from RRPs is undiminished • Our goal: convincing people who smoke to switch to better alternatives and governments to help • Our future: highly promising with, at this early stage, less predictability • Our strong cigarette business pr
Slide 3: PMI's Strategic Priorities
PMI’s Strategic Priorities • Convincing men and women who would otherwise continue to smoke to switch to RRPs: ⎼ Superior science and technology ⎼ Superior end-to-end consumer experience ⎼ Understanding, relevance, credibility • Demonstrate to regulators, the scientific community and NGOs that RRPs
Slide 4: PMI's Strong Combustible Business Enables the Strategy
PMI’s Strong Combustible Business Enables the Strategy • From an RRP perspective, our combustible business gives us infrastructure, consumer Combustible Price pathways and scale Variance as a % of Combustible PY Net Revenues • Maintaining our combustible category ̴ 6.5 leadership is essential, but w
Slide 5: PMI: Robust International Market Share
PMI: Robust International Market Share Total International SoM SoM where IQOS is Present 30% 35% 33.4 28.6 32.5 28.3 28.4 28.3 31.5 31.7 31.8 28.1 28.0 31.0 0.4 1.9 3.7 0.2 HTUs 0.8 1.5 28.3 28.4 28.6 Cigarettes 31.0 31.5 31.7 31.4 27.9 30.6 27.2 29.7 26.8 25% 25% 2013 2014 2015 2016 2017 YTD Aug 20
Slide 6: Strong Combustible Business with a Focused Approach
Strong Combustible Business with a Focused Approach • Superior brand portfolio • Targeted investments in combustibles are working, and freeing up resources • We have more than halved the number of new product launches since 2015 whilst achieving a significantly higher success rate • We have streamli
Slide 7: Ahead of Plan with Smoke-Free Future
Ahead of Plan with Smoke-Free Future Shipments • PMI 2014 Investor Day: PMI HTU Volume IMS (billion units) ⎼ Targeted 30 to 50 billion HTUs by 2020 (a) 44-45 assuming 3-5% SOM in scope 41-42 36 Achieved 2020 HTU volume and SOM target two years ahead 23 Expect continued strong growth in 2019 and beyo
Slide 8: RRPs: Our Future and Most Promising Growth Opportunity
RRPs: Our Future and Most Promising Growth Opportunity • 5.8 million adult smokers have quit smoking and switched to IQOS(a), with a further 2.8 million in conversion(b): ⎼ Only 4.5% of the 189 million directly addressable in current IQOS markets(c) ⎼ 1+ billion worldwide (a) Exclusive use of HnB wi
Slide 9: RRPs: Our Future and Most Promising Growth Opportunity (cont.)
RRPs: Our Future and Most Promising Growth Opportunity (cont.) • Sizing the opportunity with a realistic target for 2021 of 90 to 100 billion HTUs: ⎼ Each two million new consumers that quit smoking and switch to IQOS equate to an annualized 10 billion HTUs: • Approximately $0.9 billion in revenues
Slide 10: RRPs: Public Health at a Pivotal Moment
RRPs: Public Health at a Pivotal Moment • RRPs are an inseparable part of the solution to world’s tobacco-related public health goals • Allowing adult consumers to make informed choices is a critical need • Consumer knowledge and regulatory frameworks are now being shaped • The actions of government
Slide 11: RRPs: Public Health at a Pivotal Moment (cont.)
RRPs: Public Health at a Pivotal Moment (cont.) • Skeptics emit hypothetical scenarios that changes in initiation or quitting rates outweigh the benefits to the individual smoker • Post-market surveillance and regulatory interventions can minimize these unintended outcomes, if any • We will continue
Slide 12: The Single Most Impactful Tool in Reducing Cigarette Consumption
RRPs: The Single Most Impactful Tool in Reducing Cigarette Consumption HTUs Japan Industry Volume Cigarettes (billion units) (2.0)% (1.9)% (4.2)% (1.8)%(a) % Var. vs. PY Cigarette 200 Smoking Prevalence 25% 150 100 50 0 20% 2015 2016 2017 2018 (a) YTD August, 2018 Forecast Note: Industry volume refl
Slide 13: How is this going to convince people who smoke to change their behavior?
How is this going to convince people who smoke to change their behavior? Source: WHO (January 4, 2018) 13
Slide 14: Korea: Deceptive Statements Mislead Consumers
Korea: Deceptive Statements Mislead Consumers "Average tar containment (of IQOS HEETS) is 4.8mg, 9.1mg, 9.3mg. Most sold conventional cigarettes’ tar numbers range from 0.1mg ~ 8.0mg". ̶ Korean Ministry of Food and Drug Safety "Nicotine-Free Dry Particulate Matter (NFDPM), commonly known as ‘Tar’ is
Slide 15: The Growing Weight of Our Scientific Evidence
RRPs: The Growing Weight of Our Scientific Evidence • Robust IQOS pre-market scientific package complemented by: ⎼ 6-month clinical exposure response study ⎼ 18-month Mouse Lung Cancer Study • These complete our submissions to the U.S. FDA for IQOS MRTP applications • Awaiting FDA decisions on both
Slide 16: Evidence-based Conclusions on RRPs are Encouraging
Evidence-based Conclusions on RRPs are Encouraging • A number of key regulatory bodies and scientists have taken a more dispassionate and evidence-based view of RRPs: "There is conclusive evidence that completely substituting e-cigarettes for combustible tobacco cigarettes reduces users’ exposure to
Slide 17: IQOS Portfolio Brand Architecture
IQOS Portfolio Brand Architecture THE SCIENCE "IQOS HeatControl Technology" BRAND 1 2 3 4 PLATFORMS CONSUMABLES TM TM TM TM Note: The products depicted are subject to ongoing development and therefore the visuals are illustrative and do not necessarily represent the latest stages of product developm
Slide 18: RRPs: Key Innovation Corridors
RRPs: Key Innovation Corridors • Heating / vaporization technologies across all platforms • Product design, consumer interface, extended ecosystem, consumer care • Convergence of platforms to allow use with different IQOS consumables • Life sciences • Digital assets to increasingly replace legacy op
Slide 19: RRPs: Our Strategic Focus
RRPs: Our Strategic Focus • We lead the way in RRPs with determination but our strategy is designed to be flexible and pragmatic, as befits the less predictive nature of a new category • While other platforms have a significant role to play, the evidence continues to support the highest potential fo
Slide 20: RRPs: Our Strategic Focus (cont.)
RRPs: Our Strategic Focus (cont.) • Upfront investments, both centrally and at market level, pay back quickly and substantially • Fixed infrastructure can carry vastly higher numbers of IQOS users and HTU volumes than today, and will service all RRP platforms • A converted IQOS HTU consumer is signi
Slide 21: We Hold a Strong Interest in the E-Vapor Category
RRPs: We Hold a Strong Interest in the E-Vapor Category • Currently a rather undifferentiated category for both products and brands • PMI focused on genuine differentiation of consumer experience across all key parameters • Ability to scale at speed via our IQOS sales infrastructure and consumer pat
Slide 22: Improving Our Internal Capabilities
Improving Our Internal Capabilities • As our execution improves, so do our results • We are learning more every day • Transforming our organization to be fit for purpose is fundamental • We are building a more agile, responsive, pro-active and consumer-centric organization that will serve all of our
Slide 23: Sustainability at PMI
Sustainability at PMI • Improved performance or above average • Sustainability Report 2017: performance in key ESG ratings in 2018: (Publication in May 2018) ⎼ Dow Jones Sustainability Index ⎼ Sustainability Strategy towards smoke-free future ⎼ Sustainalytics ⎼ Business Transformation Metrics Ambiti
Slide 24: Mid-Term Performance Expectations
Mid-Term Performance Expectations • Total industry volume expected to decline at 2% to 3% CAGR • Our cigarette business is in robust shape with an unrivalled competitive position and a broadly rational excise tax environment • RRP strong growth will continue but the pace is subject to greater fluctu
Slide 25: 2019-2021: PMI Compound Annual Growth Targets
2019-2021: PMI Compound Annual Growth Targets Net Adjusted Revenues Diluted EPS ≥5 % ≥8 % CAGR CAGR ex-Currency ex-Currency Source: PMI Financials or estimates 25
Slide 26: Our Confident Outlook
Our Confident Outlook • We are still in the early stages of the RRP category’s development and of our transformation • As the category expands, there will be periods of acceleration and periods of slower growth: ⎼ RRP growth potential is enormous, and will be for many years ⎼ We are transforming to
Slide 27: Investor Day
Investor Day Lausanne, September 27, 2018
Philip Morris International — Investor Day (September 2018) on 6ix