Philip Morris International Inc · NYSE:PM
Philip Morris International — Q3 2011 Earnings Presentation
33 slides from Philip Morris International's earnings presentation, Oct 20, 2011
Slide 1: Third-Quarter Results
Third-Quarter Results October 20, 2011 Exhibit 99.3
Slide 2: Introduction
Introduction Unless otherwise stated, we will be talking about results for the third-quarter 2011 and comparing them with the same period in References to PMI volumes refer to PMI shipment data, unless otherwise stated Industry volume and market shares are the latest data available from a number of
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: 2011 Third-Quarter Results
2011 Third-Quarter Results Outstanding financial performance: In the quarter, we comfortably surpassed all our mid to long-term currency neutral annual growth targets even excluding our business in Japan Q3, 2011 Results (a) Net Revenues +15.7% Adjusted OCI +23.7% Adjusted Diluted EPS +33.0% (a) All
Slide 5: 2011 EPS Guidance
2011 EPS Guidance Business outlook further improved, fully compensating recent unfavorable currency movements Allows us to narrow our 2011 reported diluted EPS guidance range to $4.75 to $4.80 (upper half of previous range) Compared to our adjusted diluted EPS of $3.87 in 2010, this translates into
Slide 6: PMI Organic Cigarette Volume Growth
PMI Organic Cigarette Volume Growth (%) Source: PMI Financials 4.4 0.5 Q3 YTD Sept
Slide 7: PMI Brand Performance
PMI Brand Performance % Volume Growth vs. Prior Year Q3, 2011 YTD Sept, 2011 Marlboro 3.9% 0.5% L&M 3.9 2.9 Bond Street 6.8 2.2 Fortune 10.1 9.0 (a) Philip Morris 1.8 1.0 Parliament 16.2 9.9 Chesterfield 7.0 0.4 Sampoerna A 22.8 11.7 Lark 44.1 15.3 Dji Sam Soe 12.1 10.3 (a) March through September S
Slide 8: Marlboro Market Shares
Marlboro Market Shares Market Shares YTD Sept, YTD Sept, Variance Asia (a) 6.2% 6.5% 0.3pp EEMA (b) 5.6 6.1 0.5 EU 18.1 17.9 (0.2) LA&C 13.8 13.5 (0.3) Total (a)(b) 8.8 9.0 0.2 (a) Excluding PRC (b) Excluding duty-free (c) Also excluding the USA Source: PMI estimates (c)
Slide 9: Marlboro Market Shares – LA&C Region
Marlboro Market Shares – LA&C Region Market Shares YTD Sept, YTD Sept, Variance Argentina 23.2% 24.0% 0.8pp Brazil 6.7 7.0 0.3 Colombia 3.7 4.7 1.0 Mexico 48.9 51.8 2.9 Source: PMI estimates
Slide 10: PMI Market Share Developments
PMI Market Share Developments (%) Top 30 PMI OCI Markets (a) Adjusted for Philippines pro forma Jan-Feb Source: PMI Financials and estimates (a) 34.9 36.3 YTD Sept, 2010 YTD Sept, 2011
Slide 11: 2011 Third-Quarter Results – by Region
2011 Third-Quarter Results – by Region (a) Excluding currency and acquisitions Source: PMI Financials Q3, 2011 Results Asia EEMA LA&C EU Net Revenues (a) +39.1% +11.2% +8.3% +2.2% Adjusted OCI (a) +75.1 +13.8 +9.0 +3.1
Slide 12: Japan
Japan Source: PMI Financials, PMI estimates and Tobacco Institute of Japan PMI shipments up 47.1%: - Higher 2011 market share - Payback in Q3, 2010, for Q2, 2010, distributor inventory build- up September C-store consumer off-take share slightly above 30%, compared to around 26% pre-crisis Retention
Slide 13: Indonesia
11.2 12.1 7.9 7.7 5.7 7.2 4.2 4.4 Indonesia PMI volume up 22.5% in Q3, 2011 Record market share of 31.2% in Q3, 2011 Indonesian economy remains strong and consumer purchasing power is increasing Government expected to continue to implement plans to simplify excise tax structure Source: PMI Financial
Slide 14: Russia
Russia Market share up slightly to 25.8% QTD Aug, 2011, behind: - Parliament in premium - Chesterfield in mid-price, and - Bond Street in low-price segment PMI volume down 3.5% in Q3, 2011, due to: - Distributor inventory adjustments - Lower total market During Q4, 2011, Russian Parliament expected
Slide 15: Turkey
19.2 21.2 5.9 6.5 18.0 16.7 Turkey PMI volume up 21.6% in Q3, Strong share gains driven by: - Parliament in premium - Muratti in mid-price, and - L&M in low-price Total market had stabilized, but recently announced, very large ad-valorem excise tax increase expected to be disruptive A more balanced
Slide 16: Germany
20.3 2.7 10.3 5.6 6.4 4.6 21.1 1.3 9.2 5.6 7.3 4.6 Germany Source: PMI Financials and PMI estimates Q3, 2010 Q3, 2011 L&M Marlboro Other (%) PMI Market Shares by Segment Germany had benefited from more robust market volume trends this year Q3, 2011, total German market volume: - Cigarettes +0.3% - F
Slide 17: France
25.9 6.8 8.2 5.7 12.7 6.3 25.7 7.7 5.7 13.3 6.6 France Great momentum in a stable market Cigarette share gain of 0.4pp to 40.4%, driven by premium Marlboro and Philip Morris Strong growth in fine cut segment since launch of Marlboro in Feb 2011 Cigarette price increase of €0.30/pack this month Sourc
Slide 18: Spain
Spain Very high unemployment driving decline in cigarette industry volume of at least 15% in 2011 Pricing situation was resolved in September: - Marlboro back to previous level of €4.25/pack - L&M raised to €3.75/pack Source: PMI estimates
Slide 19: Pricing
Pricing The pricing environment continues to be very favorable In 2011, PMI has implemented or announced price increases in: - Asia: Australia, Indonesia, Philippines - EEMA: Algeria, Russia, Saudi Arabia, Ukraine - EU: France, Germany, Italy, Poland, Spain - LA&C: Argentina, Brazil, Canada Source:
Slide 20: Costs and Margins
Costs and Margins Adjusted OCI Margins Third-Quarter (a) Variance (a) Asia 37.6% 47.4% 9.8pp EEMA 45.1 46.2 1.1 EU 53.0 53.5 0.5 LA&C 32.7 32.9 0.2 Total 44.2 47.3 3.1 (a) Excluding currency and acquisitions Source: PMI Financials Stable tobacco leaf prices Moderate cost increases offset by producti
Slide 21: Excise Taxation
Excise Taxation Excise tax structures have improved and several countries have adopted multi-year tax plans Most governments appear to have understood that large excise tax increases are disruptive and do not improve revenue generation over mid to long-term We expect some VAT increases in 2012, but
Slide 22: Plain Packaging
Plain Packaging We oppose such measures because: - No sound evidence it would reduce consumption, smoking incidence or youth smoking, or provide any other public health benefit - Undermines public health objectives by lowering prices and increasing illicit trade - Violates intellectual property prot
Slide 23: Free Cash Flow
($ million) +22.1% Currency Free Cash Flow (a) (a) Free cash flow equals net cash provided by operating activities less capital expenditures Source: PMI Financials ($ million) +25.6% Currency 9,000 2,253 2,830 1,000 2,000 3,000 Q3 Q3 7,373 3,000 6,000 9,000 YTD Sept YTD Sept
Slide 24: Dividend Increases Since Spin-Off
+10.3% +17.4% +7.4% +20.3% $3.08 $1.84 Aug Sept Sept Sept Dividend Increases Since Spin-Off (a) (a) Dividends for 2008 and 2011 are annualized rates. 2008 annualized rate is based on a quarterly dividend of $0.46 per common share, declared June 18, 2008. The annualized rate for 2011 is based on a qu
Slide 25: Share Repurchases and Dividends
Share Repurchases and Dividends During the third quarter, PMI spent $1.4 billion to repurchase a further 21.2 million shares Since the March 2008 spin: - Over $20 billion spent to repurchase nearly 400 million shares at an average price of $50.81 per share - Over $14 billion paid out in dividends -
Slide 26: Summary
Summary Outstanding third quarter: - Organic volume growth of 4.4% - Strong market share momentum and favorable pricing environment - Adjusted diluted EPS, excluding currency, increased by 33.0% - 2011 reported diluted EPS guidance range narrowed to $4.75- $4.80, with improved business outlook offse
Slide 27: Questions & Answers
Questions & Answers 2011 Third-Quarter Results
Slide 28: Reconciliation of Non-GAAP Measures: Currency and Acquisitions
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Quarters Ended September 30, ($ in millions) (Unaudited) Reported Net Revenues Less Excise Taxes Reported Net Revenues excluding Excise Taxes Less Cur
Slide 29: Reconciliation of Non-GAAP Measures: Operating Companies Income
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 30: Reconciliation of Non-GAAP Measures: Diluted EPS
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 September 30, (Unaudited) % Change Reported Diluted EPS 1.35 $ 0.99 $ 36.4% Adjustm
Slide 31: Reconciliation of Non-GAAP Measures: Free Cash Flow
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Operating Cash Flow to Free Cash Flow and Free Cash Flow, excluding Currency For the Quarters and Nine Months Ended September 30, ($ in millions) (Unaudited) (a) Operating Cash Flow For the Quarte
Slide 32: Reconciliation of Non-GAAP Measures: 2010 Diluted EPS
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) Reported Diluted EPS 3.92 $ Adjustments: Tax items (0.07) Asset impairment and exit costs 0.02 Adjusted Dil
Slide 33: Third-Quarter Results
Third-Quarter Results October 20, 2011
Philip Morris International — Q3 2011 Earnings Presentation on 6ix