Philip Morris International Inc · NYSE:PM
Philip Morris International — Q1 2014 Earnings Presentation
27 slides from Philip Morris International's earnings presentation, Apr 17, 2014
Slide 1: 2014 First-Quarter Results
2014 First-Quarter Results April 17, 2014 Exhibit 99.3
Slide 2: Introduction
2 Introduction ● Unless otherwise stated, we will be talking about results for the first-quarter of 2014 and comparing them to the same period in 2013 ● References to PMI volumes are to PMI shipments ● Industry volume and market shares are PMI estimates based on the latest data available from a numb
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: 2014 EPS Guidance
4 2014 EPS Guidance ● Business results in the first quarter are in line with our February 2014 annual guidance ● Quarter impacted by a number of distortions that masked a much better performance at the net revenue and OCI level ● Reported diluted EPS guidance for 2014 revised to $5.09 to $5.19 at pr
Slide 5: First-Quarter 2014 Results: In Line with Expectations
5 First-Quarter 2014 Results: In Line with Expectations ● Cigarette volume declined by 4.4%, driven by total industry volume contraction and unfavorable inventory movements. Absent these inventory distortions, our underlying volume was down by around 2.0% ● Net revenues, excluding currency, were 1.6
Slide 6: Pricing: Key Performance Driver
6 Source: PMI Financials Pricing: Key Performance Driver ● Lower pricing variance in Q1, 2014, attributable to favorable inventory movements in Q1, 2013, particularly in the Philippines ● Price increases in a wide range of markets ● Cigarette price increase recently announced in Germany 531 406 Q1,
Slide 7: EU Region: Moderation in Cigarette Industry Volume Decline
7 EU Region: Moderation in Cigarette Industry Volume Decline ● Unemployment levels remain high ● Illicit trade appears to have stabilized ● Slower expansion of e-vapor and fine cut volume in many markets ● Still forecasting that cigarette industry volume may decline by 6% to 7% in 2014, but expect t
Slide 8: EU Region: Favorable Market Share Momentum
8 EU Region: Favorable Market Share Momentum 38.0 40.0 36.1 53.2 33.4 30.4 7.4 38.9 41.0 36.9 53.0 35.1 31.2 8.1 0 20 EU Region France Germany Italy Poland Spain UK PMI Cigarette Shares (%) Source: PMI estimates Q1, 2013 Q1, 2014 25 10 55 +0.9pp +1.0pp +0.8pp (0.2)pp +1.7pp +0.8pp +0.7pp
Slide 9: EU Region: Favorable Market Share Momentum (Brands)
9 EU Region: Favorable Market Share Momentum Source: PMI estimates EU Region Cigarette Market Shares (%) 18.7 19.1 Q1, 2013 Q1, 2014 6.6 6.9 Q1, 2013 Q1, 2014 4.3 4.9 Q1, 2013 Q1, 2014 Marlboro L&M Chesterfield +0.4pp +0.3pp +0.6pp
Slide 10: Italy: Excise Tax Reform Needed
10 Italy: Excise Tax Reform Needed ● Cigarette industry volume declined by 0.5% in the first quarter of 2014 ● Significant decline in e-vapor products and stabilization of illicit trade volumes ● Predominantly ad-valorem excise tax system has resulted in the growth of the super-low price segment and
Slide 11: Japan: New Retail Prices Approved
11 (a) 100s (b) Mainline Note: 20 cigarettes per pack Source: PMI forecasts Japan: New Retail Prices Approved ● Consumption tax increased from 5% to 8% on April 1st ● Tax pass-on of about JPY 14/pack ● Received approval to increase our average retail prices only in line with the tax increase ● Cigar
Slide 12: Japan: Market Share Under Pressure
12 Source: Tobacco Institute of Japan and PMI Financials Japan: Market Share Under Pressure ● Cigarette industry volume increased by 9.6% in the first quarter 2014, driven by trade and consumer purchases ahead of tax-driven price increases ● PMI volume decrease of 9.1% due to the adverse timing of P
Slide 13: Philippines: Market Stabilizing and PMI Regaining Share
13 Source: PMI estimates Philippines: Market Stabilizing and PMI Regaining Share ● Tax-paid cigarette industry volume increased by 25.9% in the first quarter due to a lower trade inventory build-up at the end of 2013 compared to the same period in 2012 ● Mighty brand retails at PHP 1.50/stick and Ma
Slide 14: Indonesia: Contraction of Low-Price Segment
14 Indonesia: Contraction of Low-Price Segment ● Cigarette industry volume declined by 1.0% in Q1, 2014 ● Contraction of low-price segment driven by impact of “sister company” legislation (Decree 131) and reduction in purchasing power of low-income adult smokers ● Economy softer but still resilient
Slide 15: Indonesia: PMI Market Share Impacted by Decline in Hand-Rolled Kretek
15 Note: SKT stands for hand-rolled kretek. SKM stands for machine-made kretek. FF stands for Full Flavor. LTLN stands for Low Tar/Low Nicotine. “Whites” stands for non-kretek cigarettes Source: PMI estimates 5.0 5.3 20.0 21.0 11.2 8.3 36.2 34.6 Q1, 2013 Q1, 2014 Indonesia: PMI Market Share Impacted
Slide 16: Russia: Growing Market Share and Profitability
16 Russia: Growing Market Share and Profitability ● Cigarette industry volume declined by 6.7% in Q1, 2014 ● Full-year decrease expected to reach 9% to 11% reflecting mainly the impact of higher prices and a foreseen increase in illicit trade ● Strong PMI market share performance led by Parliament a
Slide 17: Market Share: Top OCI Markets
17 Market Share: Top 30 OCI Markets 36.7% 36.5% Q1, 2013 Q1, 2014 PMI Market Share(a) (a) Excluding duty free Source: PMI estimates
Slide 18: Market Share: Marlboro Market Shares
18 Market Share: Marlboro Market Shares Q1, 2013 Q1, 2014 EU 18.7% 19.1% EEMA 7.1% 7.3% Asia(a) 6.0% 6.2% LA&C 15.0% 14.1% Total PMI(a)(b) 9.1% 9.2% (a) Excluding China (b) Also excluding the USA Source: PMI estimates
Slide 19: Cost Savings: Productivity and Global Manufacturing Footprint Optimization
19 Source: PMI forecasts Cost Savings: Productivity and Global Manufacturing Footprint Optimization ● Annual cost savings and productivity target of $300 million in 2014 ● Closure announced of manufacturing facility in Melbourne, Australia ● Consultations underway on proposal to discontinue cigarett
Slide 20: Rewarding Our Shareholders
20 Rewarding Our Shareholders ● Target dividend pay-out ratio remains an attractive 65% ● Dividend yield of 4.5% last Friday ● During the first quarter, we spent $1.25 billion to repurchase 15.4 million shares at an average price of $81.12 ● Target for share repurchases remains $4.0 billion in 2014
Slide 21: Conclusion
21 Conclusion ● Our guidance reflects a full-year growth rate of approximately 6% to 8% in adjusted diluted EPS, excluding currency and the restructuring charge ● Unfavorable volume/mix remains a challenge ● Improvement in business performance in the EU Region ● Signs of a stabilization in our under
Slide 22: 2014 First-Quarter Results Questions & Answers
2014 First-Quarter Results Questions & Answers
Slide 23: Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS
23 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS For the Year Ended December 31, (Unaudited) 2013 Reported Diluted EPS 5.26$ Adjustments: Asset impairment and exit costs 0.12 Tax items 0.02 Adjuste
Slide 24: Adjustments for the Impact of Currency and Acquisitions
24 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Quarters Ended March 31, ($ in millions) (Unaudited) Reported Net Revenues Less Excise Taxes Reported Net Revenues excluding Excise Taxes Less Curr
Slide 25: Reconciliation of Reported OCI to Adjusted OCI
25 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 E
Slide 26: Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS, excluding Currency
26 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) 2014 2013 % Change Reported Diluted EPS 1.18$ 1.28$ (7.8)%
Slide 27: Reconciliation of Reported Diluted EPS, excluding Currency
27 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Reported Diluted EPS to Reported Diluted EPS, excluding Currency For the Quarters Ended March 31, (Unaudited) 2014 2013 % Change Reported Diluted EPS 1.18$ 1.28$ (7.8)% Less: Currency impact (0
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