Philip Morris International Inc · NYSE:PM
Philip Morris International — Q4 2009 Earnings Presentation
39 slides from Philip Morris International's earnings presentation, Feb 11, 2010
Slide 1: Fourth-Quarter and Annual Earnings Results
Fourth-Quarter and Annual Earnings Results February 11, 2010 Exhibit 99.3
Slide 2: Introduction
Introduction • Unless otherwise stated, we will be talking about results in the fourth quarter or the full-year 2009 and comparing them with the same period in 2008 • References to PMI volumes refer to shipment data • Industry volume and market shares are the latest data available from a number of i
Slide 3: Forward-Looking and Cautionary Statements
Forward-Looking and Cautionary Statements 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 Litigation Reform Act of 1995. Su
Slide 4: Mid to Long-Term Annual Growth Targets
Mid to Long-Term Annual Growth Targets Growth Targets (d) 2009 Results Organic Volume (a) 1% - 1.5% Net Revenues 4 – 6% + 5.3% OCI (b) 6 – 8% + 8.7% EPS (c) 10 – 12% + 15.4% (a) Organic volume growth, that is excluding acquisitions (b) OCI stands for Operating Companies Income, which is defined as o
Slide 5: PMI Results
PMI Results Source: PMI Financials - 1.5% - 0.7% + 0.4% + 0.5% Cigarette Volume Excl. Acquisitions Actual Excl. Acquisitions Actual Full Year 2009 Fourth Quarter 2009 (% Growth vs. same period in 2008)
Slide 6: PMI Share Developments
PMI Share Developments (a) Excluding USA and duty-free (b) Excluding PRC, USA and duty-free Note: For definition of OECD countries, refer to PMI’s Registration Statement on Form 10 (page 68) dated March 5, 2008. Source: PMI Estimates OECD markets (a) Non-OECD markets (b) (%) (%) 34.5 34.9 35.2 Q4 20
Slide 7: Premium Segment Shares
Premium Segment Shares 0.7 0.6 48.3 48.7 Greece (0.1) 0.7 35.6 36.8 Argentina 0.5 (0.3) 12.9 12.9 Ukraine 0.9 (0.3) 20.9 20.7 Turkey 0.6 0.4 23.9 24.4 Indonesia 2.3 2.5 81.2 82.7 Korea 0.9 1.1 13.0 13.4 Poland (2.2) (3.5) 37.9 36.7 Germany (0.1) (1.0) 16.4 15.9 Russia (2.5) pp (2.3) pp 16.7% 15.8% S
Slide 8: Marlboro
Marlboro • Disciplined roll-out of new brand architecture • Marlboro volume down 2.8% in 2009, reflecting market contractions primarily in the EU and Eastern Europe • Marlboro volume up 4.3% in 2009 in Asia Source: PMI Financials and PMI estimates
Slide 9: Marlboro
Marlboro • Early positive signs from new architecture • Demographic profile responding • Marlboro gained share in 2009, notably in: - Italy, Japan, Korea, the Netherlands, Portugal and Greece - Argentina, Brazil, Indonesia, the Philippines, Romania, Algeria, Morocco and Poland Source: PMI Financials
Slide 10: Strong performance, particularly in Q4
L&M • Strong performance, particularly in Q4 • In EU Region, L&M ’ s volume grew by 9% in 2009 and by 17% in Q4 • L&M ’s volume gains more than offset the decline of Marlboro in the EU Region in Q4 • L&M ’s volume was stable in Q4 in the EEMA Region Source: PMI Financials and PMI estimates
Slide 11: PMI Results
PMI Results Source: PMI Financials + 5.3% - 2.6% + 7.2% + 9.7% Net Revenues Excl. Curr. & Acquisitions Actual Excl. Curr. & Acquisitions Actual Full Year 2009 Fourth Quarter 2009 (% Growth vs. same period in 2008)
Slide 12: PMI Results
PMI Results + 8.7% - 1.9% + 8.9% + 10.0% Adjusted OCI + 5.3% - 2.6% + 7.2% + 9.7% Net Revenues Excl. Curr. & Acquisitions Actual Excl. Curr. & Acquisitions Actual Full Year 2009 Fourth Quarter 2009 (% Growth vs. same period in 2008) Source: PMI Financials. See reconciliations to U.S. GAAP measures a
Slide 13: Adjusted OCI Margins
Adjusted OCI Margins 4.3 32.1 LA & Canada 1.4 34.9 Asia 1.9 43.5 EEMA 1.1 50.7 EU 1.4 pp 42.8% PMI Variance vs. 2008 Source: PMI Financials. See reconciliations to U.S. GAAP measures at the end of this presentation.
Slide 14: Pricing, Volume/Mix
Pricing, Volume/Mix • Key driver of constant currency OCI growth was pricing • Approximately $2 billion in 2009 and $500 million in Q4 • Adverse volume/mix variance of approximately $570 million in 2009 and $90 million in Q4 • Pricing offset volume/mix variance by 3.5:1 in 2009 and 5.2:1 in Q4 Sourc
Slide 15: PMI Results
PMI Results + 15.4% - 0.6% + 15.5% + 14.1% Adjusted diluted EPS + 8.7% - 1.9% + 8.9% + 10.0% Adjusted OCI + 5.3% - 2.6% + 7.2% + 9.7% Net Revenues Excl. Currency Actual Excl. Currency Actual Full Year 2009 Fourth Quarter 2009 (% Growth vs. same period in 2008) Source: PMI Financials. See reconciliat
Slide 16: Adjusted Diluted EPS Bridge
Adjusted Diluted EPS Bridge (a) – (a) On a constant currency basis Source: PMI Financials 0.47 0.19 0.02 (0.17) $3.82 $3.31 Operations Share Repurchases Interest Costs Taxes
Slide 17: Adjusted Diluted EPS Bridge
Adjusted Diluted EPS Bridge (a) – Q4, 2009 (a) On a constant currency basis Source: PMI Financials $0.71 0.09 0.06 $0.82 (0.04) Operations Share Repurchases Interest Costs
Slide 18: Discretionary Cash Flow
Discretionary Cash Flow (a) +26% vs. 2008 ($ billions) +4.9% 1.5 6.8 7.1 8.6 Actual Actual Excluding Currency (a) Discretionary cash flow equals net cash provided by operating activities less capital expenditures. In 2009, net cash provided by operating activities was $7,884 million and capital expe
Slide 19: Shareholder Returns
Shareholder Returns • Dividend increased by 7.4% to $2.32 per share on an annualized basis • $5.5 billion spent to purchase 6.5% of shares outstanding on January 1, 2009 Source: PMI Financials
Slide 20: Business Outlook
Business Outlook • 2009 was a very solid year • Employment recovery remains uncertain and currency could be volatile in 2010 • Organic volume performance projected to be similar to that of 2009 • Strong financial results expected Source: PMI Forecasts
Slide 21: 2010 EPS Guidance
2010 EPS Guidance • At prevailing exchange rates, reported EPS guidance for 2010 is $3.75 to $3.85, versus $3.24 in 2009 • Reported growth rate of some 16% to 19%, or 12% to 15% excluding currency • Growth rate of approximately 14% to 17%, or 11% to 14% excluding currency, versus adjusted diluted EP
Slide 22: Pricing
Pricing • Pricing will continue to be key driver of PMI’s earnings growth • Secured two-thirds of pricing that is embedded in EPS guidance to-date
Slide 23: Excise Taxation
Excise Taxation • Disruptive excise tax increases remain a risk • Significant tax increases in Greece, Turkey and Romania • Tax structures continue to be rational
Slide 24: Japan
Japan • A 70 Yen per pack, or 40%, increase in excise taxes proposed for October 2010 • Parliamentary approval expected by end March 2010 • Revenue-neutral pass-on per unit implies price increase of 82 Yen per pack • Impact on industry volumes will be severe • Pricing freedom necessary Source: PMI F
Slide 25: Business Outlook
Business Outlook • Premium segment in select markets will continue to be under pressure if unemployment does not improve • Widespread market share growth anticipated Source: PMI Financials and Forecasts
Slide 26: Business Outlook
Business Outlook • Productivity savings of $500 million in 2010 • Improvements in working capital • Discretionary cash flow expected to grow at a faster pace than earnings Source: PMI Financials and Forecasts
Slide 27: Share Repurchases
Share Repurchases • New share repurchase program of $12 billion • May 2010 through April 2013 • Total 2010 spending expected to be $4 billion • Strikes optimal balance between rewarding shareholders and retaining financial flexibility Source: PMI News Release
Slide 28: Conclusion
Conclusion • Delivered solid results in 2009 • Met or exceeded principal financial targets • Enter 2010 with significant momentum Source: PMI Forecasts
Slide 29: Questions & Answers
Questions & Answers 2009 Fourth-Quarter and Annual Earnings Results
Slide 30: Reconciliation of Non-GAAP Measures: Currency and Acquisitions (Quarter)
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for Impact of Currency and Acquisitions For the Quarters Ended December 31, (in millions) (Unaudited) Reported Net Revenues Less Excise Taxes Reported Net Revenues excluding Excise Taxes Less Currency R
Slide 31: Reconciliation of Non-GAAP Measures: Operating Companies Income (Quarter)
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 For the Quarters Ended December 31, (in
Slide 32: Reconciliation of Diluted EPS to Adjusted EPS (Quarter)
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 December 31, (Unaudited) % Change Reported Diluted EPS 0.80 $ 0.71 $ 12.7% Less: As
Slide 33: Reconciliation of Diluted EPS Excluding Currency (Quarter)
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 December 31, (Unaudited) % Change Reported Diluted EPS 0.80 $ 0.71 $ 12.7% Less: Currency Impact (0.01) Repo
Slide 34: Reconciliation of Non-GAAP Measures: Currency and Acquisitions (Year)
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for Impact of Currency and Acquisitions For the Years Ended December 31, (in millions) (Unaudited) Reported Net Revenues Less Excise Taxes Reported Net Revenues excluding Excise Taxes Less Currency Repo
Slide 35: Reconciliation of Non-GAAP Measures: Operating Companies Income (Year)
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 For the Years Ended December 31, (in mi
Slide 36: Reconciliation of Diluted EPS to Adjusted EPS (Year)
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 Years Ended December 31, (Unaudited) % Change Reported Diluted EPS 3.24 $ 3.31 $ (2.1)% Less: Colo
Slide 37: Reconciliation of Diluted EPS Excluding Currency (Year)
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Reported Diluted EPS to Reported Diluted EPS, Excluding Currency For the Years Ended December 31, (Unaudited) % Change Reported Diluted EPS 3.24 $ 3.31 $ (2.1)% Less: Currency Impact (0.53) Report
Slide 38: Calculation of Total Debt to EBITDA and Net Debt to EBITDA Ratios
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Calculation of Total Debt to EBITDA and Net Debt to EBITDA Ratios (in millions, except ratios) (Unaudited) For the Year Ended For the Year Ended December 31, December 31, Earnings before income taxes 9,243 $ 9,937
Slide 39: Fourth-Quarter and Annual Earnings Results
Fourth-Quarter and Annual Earnings Results February 11, 2010
Philip Morris International — Q4 2009 Earnings Presentation on 6ix