Philip Morris International Inc · NYSE:PM
Philip Morris International — Investor Day (September 2016)
26 slides from Philip Morris International's investor day presentation, Sep 29, 2016
Slide 1: Investor Day – LA&C Region
Investor Day – LA&C Region Lausanne, September 29, 2016 Jeanne Pollès President, Latin America & Canada Region
Slide 2: Agenda
Agenda ● Regional Overview and Performance ● Regional Strategies ● Key Markets ● Conclusion 2
Slide 3: LA&C Regional Overview (2015)
LA&C Regional Overview (2015) Cigarette manufacturing sites PMI: ● SoM: 38.9% (+0.9pp vs. 2013) ● Presence in 44 markets (25 Caribbean islands) ● 11,000+ employees ● 10 PMI cigarette factories Macroeconomic & Political Outlook: ● Political instability ● Fiscal deficit mainly due to oil price Market
Slide 4: Continued Success in a Challenging Environment
Continued Success in a Challenging Environment ● Consistent share growth ● Marlboro strength and leadership ● Portfolio innovation through capsules ● Robust financial growth ● Engaged organization Source: PMI Financials or estimates 4
Slide 5: Cigarette Industry Volume
Cigarette Industry Volume (units billion) Region Key Markets (2015) CAGR: (3.9)% CAGR (2013-2015) 256 Brazil 65 (7.9)% 236 Argentina 41 (2.0)% Mexico 34 (1.4)% Canada 27 (3.9)% 2013 2015 Colombia 13 (1.2)% Source: PMI Financials or estimates 5
Slide 6: Strong Cigarette Market Share Momentum
Strong Cigarette Market Share Momentum PMI Cigarette Market Shares (2015) Variance (2015 vs. 2013) +2.0pp (4.3)pp ̶ pp +0.1pp +1.9pp +0.9pp 78.2% 69.2% 51.0% 37.3% 38.9% 17.6% Argentina Mexico Colombia Canada Brazil LA&C Region 5 markets account for 90% of our Regional volume Source: PMI Financials
Slide 7: Robust Financial Results
Robust Financial Results Cigarette Shipment Volume Net Revenues Adjusted OCI (units billion) ($ million) ($ million) CAGR (vs. 2013): Var. vs. PY: CAGR (vs. 2013): Var. vs. PY: CAGR (vs. 2013): Var. vs. PY: (2.8)% (1.9)% 11.2% 8.7% 18.5% 11.7% 3,159 92 43 1,347 1,085 453 2015 H1, 2016 2015 H1, 2016
Slide 8: Steady Adjusted OCI Margin Growth
Steady Adjusted OCI Margin Growth Adjusted OCI Margin (%) 37.2 (a) 34.3 31.7 2014 2015 H1, 2016 (a) Excluding currency Source: PMI Financials or estimates 8
Slide 9: Targets and Strategies
Targets and Strategies #1 SoM in the REGION HIGH SINGLE-DIGIT ADJUSTED OCI GROWTH(a) Grow Recover through volume Launch Pursue innovation from and sustainable and illicit trade establish pricing portfolio to the RRPs optimization legal market ENHANCE the ORGANIZATION to ENSURE OUR FUTURE SUCCESS (a)
Slide 10: Pursue Sustainable Pricing
Pursue Sustainable Pricing LA&C Region Pricing Variance as a % of PY Net Revenues 16.0% 14.3% 10.0% 8.1% 7.8% 7.6% 2012-2013 Average 2012 2013 2014 2015 YTD July 2016 Source: PMI Financials or estimates 10
Slide 11: Innovation is The Key Growth Driver
Innovation is The Key Growth Driver Capsule SoM (%) 10.9 9.3 7.1 5.3 2013 2014 2015 H1, 2016 PMI Share of Capsule Segment (%) 40.1 42.7 44.0 35.0 2013 2014 2015 H1, 2016 Note: Translation from Spanish: "Marlboro fusion blast, New Fusion of Flavor"; "Regular Flavor + Fusion Capsule + Menthol Capsule.
Slide 12: Marlboro: Reinforcing Leadership Position
Marlboro: Reinforcing Leadership Position Cigarette Market Share (%) Innovation to the Core 48.9 Marlboro 47.5 47.6 Premium SoS(a) 15.6 15.1 15.2 2013 2015 H1, 2016 (a) Includes above premium Note: Translation from Spanish: "Discover the evolution"; "3 innovations. New pack with Soft Touch. New firm
Slide 13: Below-Premium Brands: Building an International Portfolio
Below-Premium Brands: Building an International Portfolio H1, 2016 PMI Cigarette Market Shares (%) ARGENTINA Variance vs. 2013 Chesterfield 2016 Cigarette SoM (%) +0.6pp +0.1pp ̶ pp ̶ pp 5.1 11.1 3.3 2.3 1.4 7.9 April May June July Morphing to International Brands 1.5 0.6 Philip L&M Chest. Others(a)
Slide 14: Our Portfolio Strategy Going Forward
Our Portfolio Strategy Going Forward ● Grow Marlboro through relevant and proven innovation ● Streamline our entire portfolio through morphing ● Expand Chesterfield and fortify L&M to be the best alternative for adult smokers who decide to down-trade or return to the legal market Note: Pack designs
Slide 15: Making In-Roads Against Illicit Trade
Making In-Roads Against Illicit Trade ● Approximately 16% incidence in 2015 ● Major law enforcement success ● Nearly four billion illicit units seized in 2015 ● Continue to raise awareness among regulators, trade and adult consumers Note: Translation from Spanish: "Illicit Market App. Do it anonymou
Slide 16: RRPs: An Opportunity
RRPs: An Opportunity Increasing debate on harm reduction Forums & Conference in Colombia 1-2-1 allowed in all key markets Congress Public Health Public Community Opinion 2015 Cigarette Industry(a) Web users: 378 million by 2018 6% ● Diverse geographical presence Smartphone users: 40% 54% ● 228 milli
Slide 17: RRPs: Comprehensive Plans for Successful Roll-Out
RRPs: Comprehensive Plans for Successful Roll-Out ● Introduction of iQOS and Heets in five major cities in Canada Edmonton Vancouver Calgary Ottawa Toronto Note: Reduced-Risk Products ("RRPs") is the term the company uses to refer to products with the potential to reduce individual risk and populati
Slide 18: RRPs: Our Ambition
RRPs: Our Ambition Plans in place to: ● Advocate for customs classification and differentiated regulatory and fiscal frameworks ● Create innovative and viable commercial offers ● Define leanest and most effective route-to-adult consumers to ensure high level of conversion Note: Reduced-Risk Products
Slide 19: Enhance the Organization
Enhance the Organization ● Diversity and Inclusion ● Empowerment of the front line ● Instill a culture of innovation and creativity ● "Fewer, bigger, better" as a mindset to shift resources to RRPs ● Streamline the organization and leverage on our Shared Service Centers Note: Reduced-Risk Products (
Slide 20: Canada: Robust Fundamentals in Place to Continue Growing
Canada: Robust Fundamentals in Place to Continue Growing ● Inflationary tax increases PMI Cigarette Market Share (%) 38.5 ● On-going public consultation 37.2 37.6 37.3 on plain packaging ● Growing market share 2013 2014 2015 H1, 2016 ● Key brands growth in all price PMI Key Brands: Price Segment Sha
Slide 21: Mexico: Premium Segment Stabilization
Mexico: Premium Segment Stabilization ● Total cigarette industry volume Premium SoM and PMI SoS (%) 92.0 92.2 93.3 recovery PMI 90.7 SoS 63.7 ● Stable environment 59.7 57.1 57.4 ● Marlboro growing in the premium segment 2013 2014 2015 YTD July 2016 Capsule SoM and PMI SoS (%) ● Dynamic portfolio ini
Slide 22: Argentina: Portfolio in Place to Address Market Dynamics
Argentina: Portfolio in Place to Address Market Dynamics ● Retail prices increased +50%, after tax Cigarette Industry Price Segment (%) burden increased by 10.4 points to 79.6% of retail prices in May 2016 38.8 Premium 38.2 ● Resilient premium segment and down- trading mainly from mid to low price s
Slide 23: Brazil: Sustainable Cigarette Share Growth
Brazil: Sustainable Cigarette Share Growth ● Better positioned to face the PMI Cigarette Market Share (%) 18.5 challenging market environment 17.6 16.6 15.7 ● Consistent growth in all price segments ● Marlboro posting solid share growth supported by the new architecture ● Further optimization of our
Slide 24: Conclusion
Conclusion ● Complex but manageable environment ● Address challenges and opportunities in our key markets ● Superior international portfolio will fuel our market share growth ● Opportunities for geographical expansion and upgrade of our business model ● Launch and establish RRPs ● An organization op
Slide 25: Questions & Answers
Investor Day – LA&C Region Lausanne, September 29, 2016 Questions & Answers
Slide 26: Reconciliations of non-GAAP measures included in this presentation
Reconciliations of non-GAAP measures included in this presentation to the most comparable GAAP measures are provided on our website at: www.pmi.com/2016InvestorDay/RecSlides Glossary of Terms: www.pmi.com/2016InvestorDay/Glossary
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