Philip Morris International Inc · NYSE:PM
Philip Morris International — Q2 2014 Earnings Presentation
35 slides from Philip Morris International's earnings presentation, Jul 17, 2014
Slide 1: 2014 Second-Quarter Results
2014 Second-Quarter Results July 17, 2014 Exhibit 99.3
Slide 2: Introduction
2 Introduction ● Unless otherwise stated, we will be talking about results for the second quarter of 2014 and comparing them to the same period in 2013 ● A glossary of terms, data tables showing adjustments to net revenues and OCI for currency, asset impairment, exit and other costs, free cash flow
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 Second Quarter: Strong Results as Expected
4 (a) Excluding currency Note: PMI Financials 2014 Second Quarter: Strong Results as Expected (2.7)% 4.5% 9.5% 20.0% Net Revenues Adjusted OCI Adjusted Diluted EPS Variance (Q2, 2014 vs. PY) (a) (a) (a) Cigarette Volume
Slide 5: 2014 First Half: Solid Performance
5 (a) Excluding currency Note: PMI Financials 2014 First Half: Solid Performance (3.5)% 1.5% 3.2% 12.4% Net Revenues Adjusted OCI Adjusted Diluted EPS Variance (H1, 2014 vs. PY) (a) (a) (a) Cigarette Volume
Slide 6: 2014 EPS Guidance
6 Note: PMI forecasts and PMI Financials 2014 EPS Guidance ● PMI 2014 reported diluted EPS guidance is $4.87 to $4.97, versus $5.26 in 2013 ● Our guidance includes: - An unfavorable currency impact, at prevailing exchange rates, of approximately $0.61 per share for the full-year 2014 - An after-tax
Slide 7: Japan: Trade De-Stocking Impacting Volume and Share
7 Source: Tobacco Institute of Japan Japan: Trade De-Stocking Impacting Volume and Share ● Cigarette industry volume declined by 14.4% in Q2, 2014, reflecting the de-stocking of trade inventories. Decline of 2.8% in H1, 2014 ● Improved sequential share in Q2, 2014, attributable to different patterns
Slide 8: Indonesia: Market Share Impacted by Decline in Hand-Rolled Kretek Segment
8 Indonesia: PMI Market Share Impacted by the Decline in the Hand-Rolled Kretek Segment ● Cigarette industry volume rebounded during Q2, 2014, with an increase of 4.9%. Increase of 2.0% in H1, 2014 ● Full-year forecast for industry volume growth remains at up to 1% ● PMI market share continues to be
Slide 9: Philippines: Mighty Corporation Under-Declaration Continues
9 13.3 12.5 13.1 13.3 13.0 H2 H1 H2 Q1 Q2 (a) QTD May Source: PMI estimates and PMI Market Research Philippines: Mighty Corporation Under-Declaration Continues ● Total estimated tax-paid cigarette industry volume down by 13.4% in Q2, 2014, but consumption remains resilient ● Estimated 20% increase i
Slide 10: Australia: Acceleration of Down-Trading
10 Source: PMI estimates and InfoView Technologies Pty Ltd. 31.4 36.8 Q2 Q2 11.2 14.5 Q2 Q2 Australia: Acceleration of Down-Trading ● Super-low price segment growth impacted by plain packaging, large excise tax increases and heavy price discounting ● Gap in effective retail price between super-low a
Slide 11: Russia: PMI Gaining Share While Increasing Prices
11 Russia: PMI Gaining Share While Increasing Prices ● Strong market share gains, with QTD May, 2014, up by 0.9 points to 26.8% ● Cigarette industry volume decline of around 10% in Q2, 2014 ● May 2014 price increase of RUB 4/pack to impact adult smokers later this month ● Full-year cigarette industr
Slide 12: Turkey: Parliament Reached a Record Market Share in Q2, 2014
12 Turkey: Parliament Reached a Record Market Share in Q2, 2014 ● Cigarette industry volume increased by an estimated 2.5% in Q2, 2014, and was slightly up in H1, 2014 ● Stable underlying trend in industry volume expected to continue ● Specific and minimum excise tax increase of 5.1% as of July 2014
Slide 13: EU Region: Moderating Cigarette Industry Volume Decline
13 Note: Fine cut includes Make Your Own ("MYO"), MYO volume tobacco and Roll Your Own Source: Eurostat, PMI estimates and PMI forecasts EU Region: Moderating Cigarette Industry Volume Decline ● Unemployment remains high ● Slight decline in illicit trade ● Slow-down in the growth of e-vapor products
Slide 14: EU Region: Favorable Market Share Momentum
14 EU Region: Favorable Market Share Momentum 39.5 40.5 37.6 53.3 38.3 31.8 6.7 40.4 41.4 36.9 55.3 40.4 32.0 7.8 0 21 EU Region France Germany Italy Poland Spain UK PMI Cigarette Market Shares (%) Q2, 2013 Q2, 2014 30 10 +0.9pp +0.9pp (0.7)pp +2.0pp +2.1pp +0.2pp +1.1pp 55 Source: PMI estimates
Slide 15: EU Region: Favorable Market Share Momentum
15 EU Region: Favorable Market Share Momentum Source: PMI estimates Cigarette Market Shares (%) 19.3 19.4 Q2, 2013 Q2, 2014 6.9 7.2 Q2, 2013 Q2, 2014 4.4 5.8 Q2, 2013 Q2, 2014 Marlboro L&M Chesterfield +0.3pp +1.4pp +0.1pp
Slide 16: EU Region: Strong First Half
16 EU Region: Strong First Half ● In the first half of 2014, our cigarette volume was essentially stable at 91.6 billion units ● Volume was the key driver of the improvement in our adjusted OCI, ex-currency ● Pricing variance was lower in H1, 2014, than in recent years ● Impact of Italy tax-related
Slide 17: Pricing: Key Driver of Higher Adjusted OCI
17 Pricing: Key Driver of Higher Adjusted OCI 531 406 499 494 1,030 900 2013 2014 ● Pricing variance of $900 million YTD June, 2014, in line with our historical average of $1.8 billion ● Our strong second-quarter pricing variance was led by Indonesia and Russia, but was partially offset by unfavorab
Slide 18: Margins: Higher Adjusted OCI Margin in the Second Quarter
18 Margins: Higher Adjusted OCI Margin in the Second Quarter Adjusted OCI Margin Q2, 2013 Q2, 2014(a) Variance(a) EU 49.0% 49.4% (0.4)pp EEMA 43.3% 49.1% (5.8)pp Asia 42.1% 41.7% (0.4)pp LA&C 30.4% 34.8% (4.4)pp Total PMI 43.1% 45.2% (2.1)pp (a) Excluding currency Source: PMI Financials
Slide 19: Market Share: Top OCI Markets
19 Market Share: Top 30 OCI Markets 37.1% 37.3% Q2, 2013 Q2, 2014 PMI Market Share(a) (a) Excluding duty free Source: PMI estimates +0.2pp
Slide 20: Market Share: Marlboro Market Shares
20 Market Share: Marlboro Market Shares Q2, 2013 Q2, 2014 EU 19.3% 19.4% EEMA 7.0% 7.3% Asia(a) 6.0% 5.7% LA&C 14.7% 14.8% Total PMI(a)(b) 9.1% 9.2% (a) Excluding China (b) Also excluding the USA Source: PMI estimates
Slide 21: Rewarding Our Shareholders
21 Rewarding Our Shareholders ● Dividend yield of 4.4% last Friday ● During the second quarter, we spent $1.0 billion to repurchase 11.6 million shares at an average price of $86.13 ● Target for share repurchases remains $4.0 billion in 2014 Note: Dividend yield represents the annualized dividend on
Slide 22: Conclusion
22 Source: PMI Financials and PMI forecasts Conclusion ● Strong second quarter: - Favorable comparison with last year - Some ongoing challenges in the Asia Region - Very strong results in the EEMA and Latin America & Canada Regions, driven by pricing - Better volumes in the EU Region ● Solid busines
Slide 23: 2014 Second-Quarter Results Questions & Answers
2014 Second-Quarter Results Questions & Answers
Slide 24: Glossary and Reconciliation of Non-GAAP Measures
Glossary and Reconciliation of Non-GAAP Measures
Slide 25: Glossary: General Terms
25 Glossary: General Terms ● PMI stands for Philip Morris International Inc. and its subsidiaries ● Until March 28, 2008, PMI was a wholly owned subsidiary of Altria Group, Inc. ("Altria"), since that time the company has been independent and is listed on the New York Stock Exchange (ticker symbol "
Slide 26: Glossary: Financial Terms
26 Glossary: Financial Terms ● Adjusted OCI is defined as reported OCI adjusted for asset impairment, exit and other costs ● EPS stands for Earnings per Share ● Net revenues exclude excise taxes ● Operating Companies Income, or "OCI", is defined as operating income, excluding general corporate expen
Slide 27: Reconciliation: Adjustments for Impact of Currency and Acquisitions (Quarter)
27 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Quarters Ended June 30, ($ in millions) (Unaudited) Reported Net Revenues Less Excise Taxes Reported Net Revenues excluding Excise Taxes Less Curre
Slide 28: Reconciliation of Reported OCI to Adjusted OCI (Quarter)
28 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 29: Reconciliation of Reported to Adjusted Diluted EPS (Quarter)
29 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) 2014 2013 % Change Reported Diluted EPS 1.17$ 1.30$ (10.0)%
Slide 30: Reconciliation of Reported Diluted EPS excluding Currency (Quarter)
30 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 June 30, (Unaudited) 2014 2013 % Change Reported Diluted EPS 1.17$ 1.30$ (10.0)% Less: Currency impact (0
Slide 31: Reconciliation: Adjustments for Impact of Currency and Acquisitions (Six Months)
31 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) Reported Net Revenues Less Excise Taxes Reported Net Revenues excluding Excise Taxes Less Cur
Slide 32: Reconciliation of Reported OCI to Adjusted OCI (Six Months)
32 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
Slide 33: Reconciliation of Reported to Adjusted Diluted EPS (Six Months)
33 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) 2014 2013 % Change Reported Diluted EPS 2.35$ 2.58$ (8.9)
Slide 34: Reconciliation of Reported Diluted EPS excluding Currency (Six Months)
34 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Reported Diluted EPS to Reported Diluted EPS, excluding Currency For the Six Months Ended June 30, (Unaudited) 2014 2013 % Change Reported Diluted EPS 2.35$ 2.58$ (8.9)% Less: Currency impact (
Slide 35: Reconciliation of Reported to Adjusted Diluted EPS (Year 2013)
35 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
Philip Morris International — Q2 2014 Earnings Presentation on 6ix