Philip Morris International Inc · NYSE:PM
Philip Morris International — Q2 2010 Earnings Presentation
37 slides from Philip Morris International's earnings presentation, Jul 22, 2010
Slide 1: Second-Quarter Earnings Results
Second-Quarter Earnin g s Results July 22, 2010 Exhibit 99.3
Slide 2: Introduction
Introduction Unless otherwise stated, we will be talking about results in the second-quarter 2010 and comparing them with the same period in 2009 References to PMI volumes refer to PMI shipment data, unless otherwise stated Industry volume and market shares are the latest data available from a numbe
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: PMI Results
PMI Results Strong financial performance in Q2, 2010 Results in line with, or above, all our constant currency mid to long-term annual financial growth targets: Growth Q2, 2010 H1, 2010 Targets (b) Results (b) Results (b) Net Revenues 4 – 6% 5.3% 5.7% Adjusted OCI (a) 6 – 8% 7.4% 8.0% Adjusted Dilut
Slide 5: 2010 EPS Guidance
2010 EPS Guidance On 23 June, PMI established a 2010 reported diluted EPS guidance of $3.70 to $3.80, based on then prevailing exchange rates Since then, the Euro has strengthened against the US Dollar At currently prevailing exchange rates, we expect to achieve a 2010 reported diluted EPS of $3.75
Slide 6: PMI Results
PMI Results Source: PMI Financials 445.7 241.0 2010 Results (units billions) 0.3 % 8.0 % - Second Quarter (1.0) 4.5 - First Half Cigarette Volume: Excl. Acquisitions Actual % Growth 2010 vs. 2009
Slide 7: Japan – Timing of Shipments
Japan – Timing of Shipments Shipments in Q2, 2010, boosted by build-up of stocks at our distributor in Japan Inventories at distributor were approximately 3.4 billion units higher at end of June 2010 compared to prior year Current stock levels sufficient to meet forecasted higher demand ahead of the
Slide 8: PMI Leading International Brands
Note: The top ten PMI international brands also include Muratti and Red & White Source: PMI Financials PMI Leading International Brands (% volume variance Q2, 2010 vs. Q2, 2009) Mid-Price Premium & Above Low-Price +2.3% +6.2% +16.4% -0.5% -0.1% +6.6% +7.4% +16.2%
Slide 9: PMI Market Share Trends
PMI Market Share Trends OECD markets (a) Non-OECD markets (b) (%) (%) (a) Excluding USA and duty-free (b) Excluding PRC and duty-free Note: For definition of OECD countries, refer to PMI’s Registration Statement on Form 10, Information Statement (page 68) dated March 7, Source: PMI estimates 20.8 21
Slide 10: Russia
Russia PMI market share up 0.2pp to 25.5% in Q2, 2010 versus previous year: - Parliament stable share / volume up - Chesterfield gained 0.3pp - Bond Street up 1.3pp Bond Street now mostly gaining share from competitive brands in same price segment PMI volume grew by 4.9% in Q2, 2010 Total market sta
Slide 11: Russia – Downtrading Moderating
Russia – Downtrading Moderating PMI Premium Volume ex-Distributor vs. PY Source: PMI distributor 17.3 14.7 10.9 4.4 -4.3 -11.5 -13.0 -13.3 -12.3 -3.3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Slide 12: Global Market Trends
Global Market Trends PMI growing premium volume in several emerging markets Improvements in emerging economies faster than in Europe Increased employment levels key to global resumption in consumer uptrading Illicit trade attracting price sensitive consumers
Slide 13: Pricing
Pricing In 2010, PMI has implemented price increases notably in: Pricing variance was $341 million in Q2, 2010 Argentina Brazil Canada Ecuador Mexico Australia Indonesia Pakistan Singapore Algeria Egypt Romania Russia Turkey Ukraine Greece Poland Portugal Spain Switzerland UK LA & Canada Asia EEMA E
Slide 14: Japan – Pricing
Japan – Pricing Ministry of Finance has approved Japan Tobacco’s price increase submission JT to increase retail prices of key brands by 100-140 Yen per pack in October Excise tax pass-on is 82 Yen per pack PMI’s distributor has submitted a new price list request to the Ministry of Finance Source: J
Slide 15: Taxation and Pricing
Taxation and Pricing Higher taxes in Australia and Spain more than offset by pricing Reinforced Minimum Excise Tax system introduced in Italy Source: PMI Financials
Slide 16: Taxation and Pricing – Greece
Taxation and Pricing – Greece Unfavorable tax structure resulted in partial absorption of tax increases in Greece on Marlboro : Marlboro nevertheless under pressure Re-launched L&M reached 6.1% market share in June Greece a considerable drag on PMI’s EU Region OCI Source: PMI Finance and PMI estimat
Slide 17: PMI Results
PMI Results 13.6 7.1 2010 Results ($ billions) 5.3 % 15.1 % - Second Quarter 5.7 15.6 - First Half Net Revenues: Excl. Currency and Acquisitions Actual % Growth 2010 vs. 2009 Source: PMI Financials
Slide 18: PMI Results
PMI Results Adjusted OCI: (a) 7.4 % 13.3 % 3.0 - Second Quarter 8.0 15.1 5.7 - First Half 13.6 7.1 2010 Results ($ billions) 5.3 % 15.1 % - Second Quarter 5.7 15.6 - First Half Net Revenues: Excl. Currency and Acquisitions Actual % Growth 2010 vs. 2009 (a) Excludes asset impairment, exit and other c
Slide 19: EU Region
EU Region Net revenues down 1.2%, excluding currency OCI down 0.3%, excluding currency Cigarette volume down 6.2%, of which over three quarters is attributable to lower total markets Key business drivers: Market decline and partial tax absorption in Greece Continued double-digit market decline and d
Slide 20: EEMA Region
EEMA Region Cigarette volume up 1.6% Net revenues up 8.2%, excluding currency and acquisitions OCI up 16.9%, excluding currency and acquisitions Key business drivers: Higher volumes, shares and prices in Russia Strong business momentum in North Africa Impact of large tax-driven price increases in Tu
Slide 21: Asia Region
Asia Region Cigarette volume up 5.2%, excluding acquisitions Net revenues up 11.5%, excluding currency and acquisitions OCI up 14.7%, excluding currency and acquisitions Key business drivers: - Philippines business combination - Inventory build-up in Japan - Pricing in many key markets - Strong busi
Slide 22: LA&C Region
LA&C Region Cigarette volume up 0.9% Net revenues up 6.1%, excluding currency Adjusted OCI (a) up 0.5%, excluding currency Key business drivers: - Lower contraband in Canada - Strong share performance in Argentina and Mexico - Higher leaf and manufacturing costs (a) Excluding Colombian investment an
Slide 23: PMI Results
PMI Results Reported Diluted EPS: 31.6 35.4 1.07 - Second Quarter 23.7 29.6 1.97 - First Half 1.90 1.00 Results($) 16.9 % 20.5 % - Second Quarter 16.0 21.8 - First Half Adjusted Diluted EPS: (a) Excl. Currency Actual % Growth 2010 vs. 2009 (a) Excludes asset impairment, exit and other costs, as well
Slide 24: Cash Flow
Cash Flow (a) Free cash flow equals net cash provided by operating activities less capital expenditures Source: PMI Financials Operating Cash Flow Free Cash Flow (a) ($ millions) ($ millions) +10.1% +11.1% Currency Currency 2,968 3,296 2,000 4,000 Q2 Q2 3,146 3,465 2,000 4,000 Q2 Q2
Slide 25: Shareholder Returns
Shareholder Returns $13 billion two-year share repurchase program completed on time at end of April New three-year share repurchase program of $12 billion through April 2013 initiated $1.0 billion spent in Q2, 2010, to purchase 21.7 million shares Dividend yield on 20 July 2010 was 4.6% Source: PMI
Slide 26: Summary
Summary Strong financial results driven by: - Improved volume performance - Superior brand portfolio - Pricing power, due to brand leadership and broad portfolio - Productivity savings Second-half volume expected to be unfavorably impacted by this quarter’s inventory build-up at our distributor in J
Slide 27: Questions & Answers
Questions & Answers 2010 Second-Quarter Earnin g s Results
Slide 28: Reconciliation of Non-GAAP Measures
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Quarters Ended June 30, ($ in millions) (Unaudited) Reported Net Revenues Less Excise Taxes Reported Net Revenues excluding Excise Taxes Less Currency
Slide 29: Reconciliation of Non-GAAP Measures
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
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) % Change Reported Diluted EPS 1.07 $ 0.79 $ 35.4% Adjustments:
Slide 31: Reconciliation of Non-GAAP Measures
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) % Change Reported Diluted EPS 1.07 $ 0.79 $ 35.4% Less: Currency Impact 0.03 Reported D
Slide 32: Reconciliation of Non-GAAP Measures
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 Curren
Slide 33: Reconciliation of Non-GAAP Measures
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures (1) Represents the business combination in the Philippines (2) Represents 2009 Colombian investment and cooperation agreement charge (3) For the calculation of net revenues excluding excise taxes, currency and acqu
Slide 34: Reconciliation of Non-GAAP Measures
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) % Change Reported Diluted EPS 1.97 $ 1.52 $ 29.6% Adjustment
Slide 35: Reconciliation of Non-GAAP Measures
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) % Change Reported Diluted EPS 1.97 $ 1.52 $ 29.6% Less: Currency Impact 0.09 Reported
Slide 36: Reconciliation of Non-GAAP Measures
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 Reconciliation of Operating Cash Flow to Operating Cash Flow, excluding Currency For the Quarters Ended June 30, (in mi
Slide 37: Second-Quarter Earnings Results
Second-Quarter Earnin g s Results July 22, 2010
Philip Morris International — Q2 2010 Earnings Presentation on 6ix