Philip Morris International Inc · NYSE:PM
Philip Morris International — Q1 2019 Earnings Presentation
35 slides from Philip Morris International's earnings presentation, Apr 18, 2019
Slide 1: Delivering a Smoke-Free Future: 2019 First-Quarter Results
Exhibit 99.3 Delivering a Smoke-Free Future 2019 First-Quarter Results April 18, 2019
Slide 2: Introduction
Introduction • A glossary of key terms and definitions, including the definition for reduced-risk products, or "RRPs," as well as adjustments, other calculations and reconciliations to the most directly comparable U.S. GAAP measures, are at the end of today’s webcast slides, which are posted on our
Slide 3: Forward-Looking and Cautionary Statements
Forward-Looking and Cautionary Statements • This presentation and related discussion contain projections of future results and other forward-looking statements. Achievement of future results is subject to risks, uncertainties and inaccurate assumptions. In the event that risks or uncertainties mater
Slide 4: Promising Start to 2019
Promising Start to 2019 • Positive momentum for our combustible tobacco and smoke-free product portfolios • Strong adjusted financial results, ex-currency • Now reached the important milestone of over 10 million IQOS users globally(a) (a) Total IQOS users. See Glossary for definition Source: PMI Fin
Slide 5: Revising 2019 EPS Guidance
Revising 2019 EPS Guidance • Revising reported diluted EPS guidance to be at least $4.87, at prevailing exchange rates, compared to $5.08 in 2018 • Change vs. previous guidance: ($/share) April 18th March 22nd Change RBH: - Loss on deconsolidation of RBH (0.12) (0.10) (0.02)(a) - Canadian tobacco li
Slide 6: 2019 EPS Guidance
2019 EPS Guidance Full-Year ($/share) 2019 Adjusted Forecast 2018 Growth Reported Diluted EPS ≥ $4.87 (a) $5.08 - 2018 Tax items ̶ 0.02 - 2019 Asset impairment and exit costs 0.01 ̶ - 2019 Canadian tobacco litigation-related expense 0.09 0.22 ̶ - 2019 Loss on deconsolidation of RBH 0.12 ̶ Adjusted D
Slide 7: Select 2019 Guidance Assumptions
Select 2019 Guidance Assumptions Industry % PMI Total % Total Volume(a) (2.5)-(3.0) Shipment Volume (1.5)-(2.0) % Net ≥5.0 Adjusted Operating ≥100 bps Revenues Income Margin Growth, ex-Currency Growth, ex-Currency Operating ̴ $9.5 Capital ̴ $1.1 Cash Flow(b) Expenditures Billion Billion (a) Excludin
Slide 8: Q1, 2019: Strong Total PMI Shipment Volume Growth
Q1, 2019: Strong Total PMI Shipment Volume Growth (billion units) Ex-Inventory Total Volume Movements 180 +1.1% 175.8 +1.7% 173.8 9.6 HTUs 11.5 +20.2% +34.6% 164.3 Cigarettes 164.3 Stable (0.2)% 140 Q1, 2018 Q1, 2019 Note: Totals may not add due to rounding Source: PMI Financials or estimates 8
Slide 9: Q1, 2019: Strong Adjusted Financial Results
Q1, 2019: Strong Adjusted Financial Results Growth vs. PY • Net revenue growth, ex-currency, driven by: (ex-currency) ⎼ Higher HTU shipment volume ⎼ Favorable pricing for combustible tobacco portfolio • Adverse impact to net revenue growth, ex-currency, of: ⎼ Approximately 1.9 points from the challe
Slide 10: Q1, 2019: Combustible Tobacco Pricing Intact
Q1, 2019: Combustible Tobacco Pricing Intact • Pricing variance of nearly 4%: ⎼ Adversely impacted by a partial excise tax absorption in Turkey and the shift to highly inflationary accounting in Argentina • Underlying fundamentals supporting our strong historical pricing remain intact, notably: ⎼ Br
Slide 11: Q1, 2019: Strong Adjusted Financial Results
Q1, 2019: Strong Adjusted Financial Results Growth vs. PY • Net revenue growth, ex-currency, driven by: (ex-currency) ⎼ Higher HTU shipment volume ⎼ Favorable pricing for combustible tobacco portfolio • Adverse impact to net revenue growth, ex-currency, of: ⎼ Approximately 1.9 points from the challe
Slide 12: Q1, 2019: Strong Adjusted Financial Results
Q1, 2019: Strong Adjusted Financial Results Growth vs. PY • Net revenue growth, ex-currency, driven by: (ex-currency) ⎼ Higher HTU shipment volume ⎼ Favorable pricing for combustible tobacco portfolio • Adverse impact to net revenue growth, ex-currency, of: ⎼ Approximately 1.9 points from the challe
Slide 13: Q1, 2019: PMI International Share Growth
Q1, 2019: PMI International Share Growth Total SoM(a) 30% +1.0pp 28.4 27.4 HTUs 2.0 1.5 Cigarette Only(b) SoM: 25.9 Cigarettes 26.4 +0.7pp to 27.1% 20% Q1, 2018 Q1, 2019 (a) Sales volume of PMI cigarettes and HTUs as a percentage of the total industry sales volume for cigarettes and HTUs (b) Sales v
Slide 14: Q1, 2019: PMI Total Share Growth in Five of Six Regions
Q1, 2019: PMI Total Share Growth in Five of Six Regions Variance vs. PY +1.9pp +2.0pp +1.4pp +0.7pp EA&A(b) +0.1pp EU EE ME&A(a) S&SA LA&C (1.3)pp SoM: 38.9% 27.6% 24.1% 23.8% 26.6% 39.0% (a) Includes duty free (b) Excludes China Note: Reflects cigarettes and HTUs Source: PMI Financials or estimates
Slide 15: Over 10 Million IQOS Users as of Q1, 2019
Over 10 Million IQOS Users as of Q1, 2019 (in millions) 10.4 9.6 8.8 8.3 7.6 6.9 5.2 4.1 Total IQOS users(a) 2.9 Estimated users who have stopped smoking 70% 71% 71% 68% 67% 67% 67% 69% 70% and switched to IQOS(a) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2017 2018 2019 (a) See Glossary for definition Source: PMI
Slide 16: Japan: IQOS Initiatives Starting to Pay Off
Japan: IQOS Initiatives Starting to Pay Off (%) IQOS Device Ownership 32.7 33.7 IQOS Past 7-Day Use 28.8 Heated Tobacco Category Offtake Share 29.9 PMI HTU Offtake Share 26.3 22.8 24.3 23.7 18.5 15.6 15.9 17.4 13.3 11.0 6.2 Dec 2016 Dec 2017 Dec 2018 Mar 2019 Note: All numbers reflect a three-month
Slide 17: Japan: Return to Sequential PMI HTU Share Growth
Japan: Return to Sequential PMI HTU Share Growth Adjusted SoM(a): 15.5% 16.6% 16.9% 15.8% 15.5% 15.5% 15.2% 13.9% 11.9% 10.0% 7.1% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2017 2018 2019 (a) Excluding the estimated impact of trade inventory movements Source: PMI Financials or estimates 17
Slide 18: Japan: PMI HTUs Drove Category Share Growth in Q1, 2019
Japan: PMI HTUs Drove Category Share Growth in Q1, 2019 22.7% Adjusted Heated Tobacco +1.2pp 21.5% Category SoM(a) 19.9% 16.6% Adjusted (a) 15.7% 15.5% +1.1pp PMI HTU SoM Q1 Q2 Q3 Q4 Q1 2018 2019 (a) Excluding the estimated impact of trade inventory movements Source: PMI Financials or estimates 18
Slide 19: Korea: Stable Adjusted HEETS Share
Korea: Stable Adjusted HEETS Share Adjusted SoM(a): 7.8% 7.8% 8.5% 8.0% 7.3% 7.4% 7.3% 5.5% 2.5% 0.2% ̶ Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2017 2018 2019 (a) Excluding the estimated impact of trade inventory movements Source: PMI Financials or estimates 19
Slide 20: EU Region: HEETS Sequential Share Growth Continues
EU Region: HEETS Sequential Share Growth Continues 2.1% 1.7% 1.2% 1.0% 0.8% 0.6% 0.3% 0.2% 0.1% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2017 2018 2019 Source: PMI Financials or estimates 20
Slide 21: Russia: Continued Strong HEETS Performance
Russia: Continued Strong HEETS Performance 1.4 1.1 3.1% 0.7 0.5 0.2 0.1 <0.1 0.1 0.1 HEETS IMS Volume 1.8% (billion units) 1.1% 0.8% 0.5% 0.2% 0.1% 0.1% 0.1% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2017 2018 2019 Note: Includes Parliament HeatSticks through Q3, 2018 Source: PMI Financials or estimates 21
Slide 22: Promising Start to 2019
Promising Start to 2019 • Fundamentals supporting our strong combustible tobacco portfolio remain intact: ⎼ Stable cigarette shipment volume and growth in cigarette share in Q1, 2019 • Favorable momentum for IQOS across geographies: ⎼ HTU share growth in Q1, 2019 ⎼ Now reached over 10 million IQOS u
Slide 23: Questions & Answers
Delivering a Smoke-Free Future 2019 First-Quarter Results Questions & Answers Have you downloaded the PMI Investor Relations App yet? iOS Download Android Download The free IR App is available to download at the Apple App Store for iOS devices and at Google Play for Android mobile devices Or go to:
Slide 24: Delivering a Smoke-Free Future 2019 First-Quarter Results
Delivering a Smoke-Free Future 2019 First-Quarter Results April 18, 2019
Slide 25: Glossary of Key Terms and Definitions, and Reconciliation of Non-GAAP Measures
Glossary of Key Terms and Definitions, and Reconciliation of Non-GAAP Measures 25
Slide 26: Glossary: General Terms
Glossary: General Terms • "PMI" refers to 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 "PM
Slide 27: Glossary: General Terms (cont.)
Glossary: General Terms (cont.) • "EU" is defined as the European Union Region • "EE" is defined as the Eastern Europe Region • "ME&A" is defined as the Middle East & Africa Region and includes PMI's duty free business • "S&SA" is defined as the South & Southeast Asia Region • "EA&A" is defined as t
Slide 28: Glossary: Financial Terms
Glossary: Financial Terms • Net revenues related to combustible products refer to the operating revenues generated from the sale of these products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes. PMI recognizes revenue when contro
Slide 29: Glossary: Reduced-Risk Products
Glossary: Reduced-Risk Products • "Reduced-risk products," or "RRPs," is the term PMI uses to refer to products that present, are likely to present, or have the potential to present less risk of harm to smokers who switch to these products versus continued smoking. PMI has a range of RRPs in various
Slide 30: Glossary: Reduced-Risk Products (cont.)
Glossary: Reduced-Risk Products (cont.) • "Total IQOS users" means the estimated number of Legal Age (minimum 18-year-old) IQOS users that used PMI HTUs for at least 5% of their daily tobacco consumption over the past seven days • "Converted IQOS Users" means the estimated number of Legal Age (minim
Slide 31: Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Reported Diluted EPS to Reported Diluted EPS, excluding Currency, and Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS, excluding Currency (Unaudited) Quarters Ended March 31, 2019 2
Slide 32: Adjustments of Net Revenues for Currency and Acquisitions
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments of Net Revenues for the Impact of Currency and Acquisitions ($ in millions) / (Unaudited) Net Net Revenues Excluding Net Revenues Quarters Ended Net Excluding Currency Acquisitions excluding Total Curre
Slide 33: Reconciliation of Operating Income to Adjusted Operating Income
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Operating Income to Adjusted Operating Income, excluding Currency and Acquisitions ($ in millions) / (Unaudited) Adjusted Adjusted Operating Asset Excluding Adjusted Operating Income Asset Adjuste
Slide 34: Reconciliation of Adjusted Operating Income Margin
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Adjusted Operating Income Margin, excluding Currency and Acquisitions ($ in millions) / (Unaudited) Adjusted Adjusted Adjusted Adjusted Adjusted Net Operating Adjusted Operating Net Operating Adju
Slide 35: Delivering a Smoke-Free Future 2019 First-Quarter Results
Delivering a Smoke-Free Future 2019 First-Quarter Results April 18, 2019
Philip Morris International — Q1 2019 Earnings Presentation on 6ix