Philip Morris International Inc · NYSE:PM
Philip Morris International — Q2 2013 Earnings Presentation
31 slides from Philip Morris International's earnings presentation, Jul 18, 2013
Slide 1: 2013 Second-Quarter Results
2013 Second-Quarter Results July 18, 2013 Exhibit 99.3
Slide 2: Introduction
2 Introduction ● Unless otherwise stated, we will be talking about results for the second quarter of 2013 and comparing them to the same period in 2012 ● References to PMI volumes refer to PMI shipments ● Industry volume and market shares are the latest data available from a number of internal and e
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: Financials Challenging Second Quarter
Source: PMI Financials 4 Challenging Second Quarter ● Adjusted diluted EPS up slightly, excluding currency ● Cigarette volume declined by 3.9%: - Lower industry volume, notably in the EU Region, Russia, Turkey and the Philippines - Inventory movements in Japan and Russia ● Pricing remained strong ●
Slide 5: 2013 Outlook: We Expect a Better Second Half
Source: PMI forecasts 5 2013 Outlook: We Expect a Better Second Half ● Business fundamentals remain solid ● Ex-currency guidance unchanged since February ● Evolution of tax-paid cigarette industry volume is a key variable and our main challenge ● We expect a better second half of the year, with a pa
Slide 6: 2013 EPS Guidance: Change Solely Reflects the Impact of Currency Volatility
Source: PMI forecasts and PMI Financials 6 2013 EPS Guidance: Change Solely Reflects the Impact of Currency Volatility ● Currency volatility: our guidance now includes 31 cents in unfavorable currency for the full year (vs. 19 cents previously) ● Revised reported diluted EPS guidance for 2013 is $5.
Slide 7: PMI Cigarette Volume Declined
7 PMI Cigarette Volume Declined ● Cigarette volume declined by 2.6% in Q2, 2013, excluding the Philippines ● Unfavorable volume developments: - Decline in cigarette industry volume in the EU Region - Impact of tax-driven price increases in Russia - Difficult comparison due to the inventory replenish
Slide 8: Q2, 2013 Key Drivers
8 Q2, 2013 Key Drivers ● Net revenues, excluding currency, stable as favorable pricing offset unfavorable volume/mix ● Adjusted OCI, excluding currency, declined by 3.4% due to: - Unfavorable volume/mix - Higher production costs, notably related to cloves and tobacco in Indonesia - Investments in in
Slide 9: Pricing: Over $1 Billion in the First Half of 2013
Note: Variances at OCI level Source: PMI Financials Pricing: Over $1 Billion in the First Half of 2013 9 ● Favorable pricing environment backed by the strength of our broad brand portfolio and supported by a rational excise tax environment ● Prices increased in Germany by €0.20/pack in May ● Price i
Slide 10: EU Region: Increasing Unemployment Impacting Cigarette Industry Volume
EU Region: Increasing Unemployment Impacting Cigarette Industry Volume 10 (a) Seasonally adjusted Source: Eurostat, PMI estimates and PMI Financials 11.3 12.2 May 2012 May 2013 EU Unemployment (%)(a) Cigarette and Fine Cut Volume Variances (%) (Q2, 2013 vs. PY) 4.3 (0.8) (5.9) (8.0) PMI Industry PMI
Slide 11: EU Region: Strong PMI Share Performance
Source: PMI estimates EU Region: Strong PMI Share Performance 11 38.6 39.3 Q2 2012 Q2 2013 18.9 19.4 Q2 2012 Q2 2013 13.7 14.9 Q2 2012 Q2 2013 Cigarette Shares (%) Total PMI Marlboro +0.7pp Fine Cut Share (%) +1.2pp +0.5pp
Slide 12: Germany: Strong Marlboro Share Performance
12 Germany: Strong Marlboro Share Performance ● Cigarette and fine cut industry volume declined by 7.0% and 0.7%, respectively, in Q2, 2013 ● Underlying cigarette industry decline of 2.8%, after elimination of estimated trade inventory fluctuations ● PMI cigarette share increased by 1.2 points in Q2
Slide 13: Italy: PMI Business Fundamentals Remain Strong
Italy: PMI Business Fundamentals Remain Strong 13 ● Cigarette industry volume declined by 7.2% in Q2, 2013, as unemployment continued to increase ● PMI underlying business fundamentals remain strong behind the continued momentum of Marlboro ● Government decision to postpone the planned VAT increase
Slide 14: Spain: Tax Reforms Aimed at Enhancing Predictability and Stability of Excise Tax Revenues
● Modification of excise taxes as of June 29: ● This should help address the market situation whereby cigarette industry volume declined by 12.0% in H1, 2013, while fine cut industry volume increased by 26.4% ● PMI cigarette market share increased by 2.3 points to 31.9% during Q2, 2013 Specific Exci
Slide 15: Russia: Higher Prices But Lower Volume
Source: PMI estimates, Nielsen and PMI forecasts Russia: Higher Prices But Lower Volume 15 ● Industry volume declined by an estimated 6.4% in Q2, 2013 ● Volume was impacted by price increases of RUB 6-7/pack (equivalent to 9-22%) in January ● Resilient market share with slight decline attributable t
Slide 16: Turkey: Lower Share But Improving Mix
Turkey: Lower Share But Improving Mix 16 ● Cigarette industry volume declined by an estimated 11% in Q2, 2013, due to a resurgence of illicit trade ● Our full-year forecast is for an industry volume decline of 7-9% ● PMI brand mix improving thanks to strong performance of Parliament in premium and M
Slide 17: Asia Region: PMI Volume Growth (Excluding the Philippines)
60.6 61.5 Q2, 2012 Q2, 2013 17 Asia Region: PMI Volume Growth (Excluding the Philippines) PMI Cigarette Volume Growth (%)(a) (a) Excluding the Philippines Source: PMI Financials +1.5%
Slide 18: Japan: Market Share under Pressure
Source: Tobacco Institute of Japan, PMI forecasts and PMI Financials Japan: Market Share under Pressure 18 ● Cigarette industry volume declined by 2.0% in Q2, 2013 ● We forecast a similar rate of decline for the full-year ● PMI volume decreased by 10.2% in Q2, 2013, due to the inventory replenishmen
Slide 19: Indonesia: Continued PMI Share Growth
Indonesia: Continued PMI Share Growth 19 ● Industry volume increased by 3.5% in Q2, 2013, while our volume grew by 6.0% ● Industry volume growth for the full-year forecast at approximately 4%, consistent with historical average ● Continued PMI share growth driven by Sampoerna A, U Mild and Marlboro
Slide 20: Philippines: Volume Decline Has Moderated
Source: PMI estimates, PMI forecasts and PMI Financials Philippines: Volume Decline Has Moderated 20 ● Tax-paid industry volume decline moderated to 7.0% in Q2, 2013 ● The widespread availability of non-tax-paid domestic cigarettes remains a critical issue ● Increased PMI investments to seek to achi
Slide 21: Top 30 PMI OCI Markets: Market Share Growth Momentum
(a) Excluding the Philippines and duty free Note: Historical data adjusted for Jordan acquisition in 2011 Source: PMI Financials and PMI estimates 33.3 34.0 34.3 34.4 32 35 2011 2012 12mm 3mm PMI Market Share Growth Momentum (%) June 2013 21 Top 30 PMI OCI Markets(a)
Slide 22: Confident That We Will Deliver Solid Financial Results in 2013
Source: PMI forecasts and PMI Financials 22 Confident That We Will Deliver Solid Financial Results in 2013 ● Cigarette industry volumes remain the key challenge ● We expect to achieve solid market shares and higher prices ● Our revised reported diluted EPS guidance is $5.43 to $5.53 at prevailing ex
Slide 23: Questions & Answers
Questions & Answers 2013 Second-Quarter Results
Slide 24: Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS (2012)
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS For the Year Ended December 31, (Unaudited) 24 2012 Reported Diluted EPS 5.17$ Adjustments: Asset impairment and exit costs 0.03 Tax item 0.02 Adjust i
Slide 25: Adjustments for the Impact of Currency and Acquisitions (Quarters)
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Quarters Ended June 30, ($ in millions) (Unaudited) 25 Reported Net Revenues Less Excise Taxes Reported Net Revenues excluding Excise Taxes Less Curre
Slide 26: Reconciliation of Reported OCI to Adjusted OCI (Quarters)
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 Ende
Slide 27: Reconciliation of Reported Diluted EPS to Adjusted, excluding Currency (Quarters)
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 June 30, (Unaudited) 27 2013 2012 % Change Reported Diluted EPS 1.30$ 1.36$ (4.4)%
Slide 28: Adjustments for the Impact of Currency and Acquisitions (Six Months)
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Six Months Ended June 30, ($ in millions) (Unaudited) 28 Reported Net Revenues Less Excise Taxes Reported Net Revenues excluding Excise Taxes Less Cur
Slide 29: Reconciliation of Reported OCI to Adjusted OCI (Six Months)
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 Six Months En
Slide 30: Reconciliation of Reported Diluted EPS to Adjusted, excluding Currency (Six Months)
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 Six Months Ended June 30, (Unaudited) 30 2013 2012 % Change Reported Diluted EPS 2.58$ 2.60$ (0.8)
Slide 31: 2013 Second-Quarter Results
July 18, 2013 2013 Second-Quarter Results
Philip Morris International — Q2 2013 Earnings Presentation on 6ix