Philip Morris International Inc · NYSE:PM
Philip Morris International — Investor Day (June 2012)
40 slides from Philip Morris International's investor day presentation, Jun 22, 2012
Slide 1: Investor Day Lausanne, June 22, 2012
Investor Day Lausanne, June 22, 2012 Hermann Waldemer Chief Financial Officer Philip Morris International
Slide 2: Agenda
Agenda ● Guidance and currencies ● Key growth drivers ● Tremendous cash flow ● Solid capital structure ● Generous cash returns to shareholders ● Superior shareholder returns ● PMI continues to be a very attractive investment 2
Slide 3: Updated 2012 EPS Guidance
Updated 2012 EPS Guidance ● Change in guidance due to an additional 10 cents in unfavorable currency ● Forecast currency headwind of 25 cents at prevailing exchange rates ● Strength of underlying business remains fully intact ● Updated reported diluted EPS guidance for 2012 is $5.10 to $5.20, which,
Slide 4: Recent Currency Volatility
Recent Currency Volatility (€/USD) 1.40 1.30 1.26 1.20 January-12 Jan 2012 February-12 Feb 2012 March-12 Mar 2012 April-12 Apr 2012 May-12 May 2012 June-12 Jun 2012 Source: Bloomberg through June 15, 2012 4
Slide 5: Recent Currency Volatility
Recent Currency Volatility RUB/USD MXN/USD (RUB/USD) (MXN/USD) 35.00 15.00 32.50 13.90 30.00 13.50 25.00 12.00 January-12 Jan 2012 February-12 Feb 2012 March-12 Mar 2012 April-12 Apr 2012 May-12 May 2012 June-12 Jun 2012 Source: Bloomberg through June 15, 2012 5
Slide 6: Broad Basket of Currencies
Broad Basket of Currencies Other Emerging Euro Euro 13% 26% 32% Other Key 29% 48% Emerging(a) 8% 32% 12% CHF Other Developed USD 2011 Net Revenues: 2011 Total Costs(b): $31.1 billion $18.8 billion (a) Includes the Russian Ruble, the Ukrainian Hryvna, the Turkish Lira, the Indonesian Rupiah, the Phil
Slide 7: Currencies: Longer Term Perspective
Currencies: Longer Term Perspective Adjusted Diluted EPS ($/share) ● Broad currency basket provides, to some extent, 4.88 a natural hedge (0.07) ● Always some favorable or unfavorable movements 2.15 ● Since 2007 pro forma, cumulative currency impact has been rather 2.80 insignificant 2007 Business C
Slide 8: Updated 2012 EPS Guidance
Updated 2012 EPS Guidance ● On a currency-neutral basis, our updated reported diluted EPS guidance maintains a forecast growth rate of approximately 10% to 12%, compared to adjusted diluted EPS of $4.88 in 2011 ● Guidance takes into account Q2 “hurdle” from exceptional circumstances last year in Jap
Slide 9: Key Growth Drivers
Key Growth Drivers ● Our superior geographic footprint 9
Slide 10: Key Growth Drivers
Key Growth Drivers ● Our superior geographic footprint ● Superior brand portfolio and geographic diversity 10
Slide 11: Key Growth Drivers
Key Growth Drivers ● Our superior geographic footprint ● Superior brand portfolio and geographic diversity ● Favorable pricing and reasonable excise tax environment 11
Slide 12: Key Growth Drivers
Key Growth Drivers ● Our superior geographic footprint ● Superior brand portfolio and geographic diversity ● Favorable pricing and reasonable excise tax environment ● Cost controls and productivity gains 12
Slide 13: Strong Operating Cash Flow Generation
Strong Operating Cash Flow Generation ($ billion) 12 10.5 9.4 7.9 7.9 5.6 0 2007 2008 2009 2010 2011 Source: PMI Financials 13
Slide 14: Reduction in Working Capital Requirements
Reduction in Working Capital Requirements ● $1 billion three-year program initiated in November 2009 ● Program completed ahead of schedule by end 2010 ● Key focus: - Leaf inventories - Finished goods inventories Source: PMI Financials 14
Slide 15: Leaf Inventory Durations Reduced
Leaf Inventory Durations Reduced (Months) 20 17.5 16.3 15.2 13.9 10 Dec 31 Dec 31 Dec 31 Dec 31 2008 2009 2010 2011 Source: PMI Financials and PMI forecasts 15
Slide 16: Finished Goods Inventories Reduced
Finished Goods Inventories Reduced Finished Goods Inventories ($ billion) 5 4.6 3.7 3.5 3.0 0 Dec 31 Dec 31 Dec 31 Dec 31 2008 2009 2010 2011 Source: PMI Financials 16
Slide 17: Growing Free Cash Flow at Double-Digit Rate
Growing Free Cash Flow at Double-Digit Rate CAGR 2007-2011: 21.1% ($ billion) 10 9.6 8.7 7.2 6.8 4.5 0 2007 2008 2009 2010 2011 Source: PMI Financials 17
Slide 18: Q1, 2012 Free Cash Flow Impacted by Working Capital Requirements
Q1, 2012 Free Cash Flow Impacted by Working Capital Requirements ($ million) 2,236 245 (742) (68) 1,671 Q1 Net Working Capital Capital Q1 2011 Earnings and Other Expenditures 2012 Source: PMI Financials 18
Slide 19: Transforming Greater Portion of Net Revenues into Free Cash Flow
Transforming Greater Portion of Net Revenues into Free Cash Flow Free Cash Flow as a % of Net Revenues (%) 35 32.1 31.0 28.6 26.6 19.6 15 2007 2008 2009 2010 2011 Source: PMI Financials 19
Slide 20: Superior Transformation of Net Revenues into Free Cash Flow
Superior Transformation of Net Revenues into Free Cash Flow Peer Group Tobacco Sector PMI 29.2% BAT 25.7% PMI 29.2% Pfizer 25.3% Roche 24.8% Lorillard 28.5% Novartis 21.3% GlaxoSmithKline 21.0% Johnson & Johnson 20.0% BAT 25.7% Vodafone 17.4% McDonald's 16.6% Altria 20.0% Coca-Cola 16.4% Diageo 16.1
Slide 21: Very Solid Capital Structure
Very Solid Capital Structure ● Growing cash flow underpins our strong balance sheet ● Long-term credit ratings: A2 / A / A ● Short-term credit ratings: P-1 / A-1 / F1 ● Over $17 billion in well-laddered bonds ● Attractive weighted-average all-in financing costs of 4.4% in 2011 ● Total available and
Slide 22: Taking Advantage of Strong Credit Rating
Taking Advantage of Strong Credit Rating Long Term Debt Interest and Time to Maturity Time to Maturity of Total Long Term Debt (Years) Average Coupon of Total Bond Portfolio (%) (%) (Years) 5.8 5.8 12 5.5% 5.4% 9.5 8.2 7.1 7.0 4.8% 4.5% 4.0 4.0 0 2009 2010 2011 2012 YTD May Note: Average Coupon of T
Slide 23: Recent Very Attractive Bond Issues
Recent Very Attractive Bond Issues ● November 2011 issue: - $750 million 10-year 2.900% coupon - $750 million 30-year 4.375% coupon ● May 2012 issue: - €750 million 7-year 2.125% coupon - €600 million 12-year 2.875% coupon Source: PMI Financials 23
Slide 24: Very Well-Laddered Bond Portfolio
Very Well-Laddered Bond Portfolio Bond Maturity Profile Year-End 2012(a) ($ billion) 3.0 3.0 2.5 2.5 CHF CHF 2.0 2.0 USD 1.5 1.5 USD USD 1.0 1.0 USD USD USD 0.5 0.5 EUR EUR EUR USD CHF EUR USD USD USD USD 0.0 0.0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2038 2041 2042 (a) Year-end
Slide 25: Net Debt to EBITDA
Net Debt to EBITDA Peer Group Tobacco Sector Imperial Tobacco 3.0x Kraft 3.0x Imperial Tobacco 3.0x Diageo 2.5x Heineken 2.4x Altria 1.3x PepsiCo 1.8x McDonald's 1.7x Vodafone 1.6x BAT 1.3x Unilever 1.4x BAT 1.3x PMI 1.2x Bayer 1.2x Coca-Cola 1.2x PMI 1.2x Reynolds American 0.4x Novartis 1.0x Roche
Slide 26: Focused Use of Cash Flow to Enhance Shareholder Returns
Focused Use of Cash Flow to Enhance Shareholder Returns 2008-2011 Free Cash Flow Net Debt Issuance and Other $32.4 billion $9.9 billion Cash Available $42.3 billion Dividends(a) Share Acquisitions Repurchases $18.6 billion $21.4 billion $2.3 billion 44% 51% 5% (a) Including dividend of $3.0 billion
Slide 27: Listening to our Shareholders
Listening to our Shareholders Capital Deployment Preferences (2009-2011 Average) Sustain a High 92% Dividend Payout Repurchase Shares 74% Source: Rivel Research Group 27
Slide 28: Very Significant Dividend Increases
Very Significant Dividend Increases +67.4% $3.08 +20.3% +10.3% +7.4% $1.84 +17.4% 2008 Aug Sept Sept Sept 2011 2008 2009 2010 2011 Note: Dividends for 2008 and 2011 are annualized rates. 2008 annualized rate is based on a quarterly dividend of $0.46 per common share, declared June 18, 2008. The annu
Slide 29: Superior Dividend Growth (Since 2008)
Superior Dividend Growth (Since 2008) Peer Group Tobacco Sector McDonald's 86.7% PMI 67.4% Japan Tobacco 85.2% BAT 51.1% Imperial Tobacco 49.1% Lorillard 68.5% Nestlé 39.3% Roche 36.0% Coca-Cola 34.2% PMI 67.4% Heineken 33.9% Johnson & Johnson 32.6% BAT 51.1% PepsiCo 26.5% Unilever 26.2% Vodafone 25
Slide 30: Attractive Dividend Yield
Attractive Dividend Yield June 15, 2012 Vodafone 5.5% GlaxoSmithKline 4.9% Novartis 4.4% Roche 4.3% Imperial Tobacco 4.2% BAT 4.1% Pfizer 3.9% Unilever 3.8% Johnson & Johnson 3.7% PMI 3.5% Nestlé 3.5% PepsiCo 3.1% McDonald's 3.1% Bayer 3.1% Kraft 3.0% Coca-Cola 2.7% Diageo 2.6% Heineken 2.2% Note: D
Slide 31: Substantial Share Repurchase Programs
Substantial Share Repurchase Programs 24.2 447.1 21.2 YTD June 33.1 1.6 15, 2012 2.8 80.5 3.8 2011 5.4 97.1 4.6 2010 5.0 129.7 6.1 2009 5.5 2008 5.4 106.8 5.1 Cumulative Amount Shares Shares Outstanding at Spin ($ billion) (million) (%) Note: The outstanding PMI shares at the time of the spin were 2
Slide 32: New $18 Billion Share Repurchase Program
New $18 Billion Share Repurchase Program ($ billion) 20 18.0 13.0 12.0 0 Start May 2008 May 2010 Aug 2012 Finish April 2010 Jul 2012 Jul 2015 Source: PMI Financials 32
Slide 33: Over $40 Billion Returned to Shareholders
Over $40 Billion Returned to Shareholders Through 15 June 2012 ($ billion) 44 42.4 36.9 5.5 10.2 10.2 26.7 9.4 9.4 9.4 17.3 9.8 9.8 9.8 9.8 7.5 7.5 7.5 7.5 7.5 7.5 0 2008 2009 2010 2011 YTDJun YTD 2012 15 2012 Note: Totals may not add due to rounding Source: PMI Financials 33
Slide 34: Superior Shareholder Returns
Superior Shareholder Returns March 28, 2008 – June 15, 2012 PMI 107.4% Tobacco Peer Group 55.8% Company Peer Group 26.9% S&P 500 11.0% (11.1)% FTSE 100 Note: Peer groups represent the market weighted average return of the group. PMI pro forma for additional $0.46 per share dividend paid in April 200
Slide 35: Valuation: Further Room for Improvement
Valuation: Further Room for Improvement 2012 P/E Coca-Cola 18.7x PepsiCo 17.0x Nestlé 16.8x PMI 16.7x Diageo 16.5x McDonald's 16.2x Procter & Gamble 15.8x Unilever 15.7x Kraft 15.4x Altria 15.3x BAT 14.7x Lorillard 14.7x Reynolds American 14.5x Heineken 13.4x Japan Tobacco 13.0x Johnson & Johnson 12
Slide 36: Valuation: Further Room for Improvement
Valuation: Further Room for Improvement Market Cap. to 2012 P/E Free Cash Flow(a) Ratio Coca-Cola 18.7x Nestlé 35.4x PepsiCo 17.0x Diageo 27.4x Nestlé 16.8x Coca-Cola 26.1x PMI 16.7x Kraft 24.6x Diageo 16.5x PepsiCo 23.4x McDonald's 16.2x Altria 21.0x Procter & Gamble 15.8x McDonald's 20.8x Unilever
Slide 37: Valuation: Further Room for Improvement
Valuation: Further Room for Improvement Market Cap. to PEG(b) 2012 P/E Free Cash Flow(a) Ratio (LT EPS Growth Rate) Coca-Cola 18.7x Nestlé 35.4x Pfizer 4.2x PepsiCo 17.0x Diageo 27.4x Vodafone 4.2x Nestlé 16.8x Coca-Cola 26.1x PepsiCo 3.5x PMI 16.7x Kraft 24.6x Novartis 2.6x Diageo 16.5x PepsiCo 23.
Slide 38: Why We Believe We Are an Attractive Investment
Why We Believe We Are an Attractive Investment ● Strong business fundamentals built on: - Superior brand portfolio, led by a re-invigorated Marlboro - Share leadership in both OECD and non-OECD markets - Favorable pricing and excise tax environment - Productivity initiatives and cost controls - Exce
Slide 39: Questions & Answers
Investor Day Lausanne, June 22, 2012 Questions & Answers
Slide 40: Reconciliations of non-GAAP measures
Reconciliations of non-GAAP measures included in this presentation to the most comparable GAAP measures are provided on our website at: www.pmi.com/2012InvestorDay/RecSlides
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