Philip Morris International Inc · NYSE:PM
Philip Morris International — FY2017 Earnings Presentation
59 slides from Philip Morris International's earnings presentation, Feb 8, 2018
Slide 1: Designing a Smoke-Free Future: 2017 Fourth-Quarter and Full-Year Results
Designing a Smoke-Free Future 2017 Fourth-Quarter and Full-Year Results February 8, 2018 Exhibit 99.3
Slide 2: Introduction
2 Introduction ● Unless otherwise stated, we will be talking about results for the fourth-quarter and full- year 2017 and comparing them to the same period in 2016 ● Unless otherwise stated, references to total industry, total market, PMI volume and PMI market share performance reflect cigarettes an
Slide 3: Forward-Looking and Cautionary Statements
3 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 mat
Slide 4: 2018: TPSAC Meeting on PMI's MRTP Applications for IQOS
4 Note: TPSAC stands for the Tobacco Product Scientific Advisory Committee. FDA stands for the U.S. Food & Drug Administration. MRTP stands for Modified Risk Tobacco Product. PMTA stands for Premarket Tobacco Application. "Reduced-risk products," or "RRPs," is the term PMI uses too refer to products
Slide 5: 2017: Landmark Year for PMI
5 Source: PMI Financials or estimates 2017: Landmark Year for PMI ● Better-than-anticipated performance for IQOS ● Encouraging early feedback regarding the scientific substantiation of IQOS ● Valuable learnings driving organizational changes to support, and accelerate, our smoke-free ambitions ● Our
Slide 6: 2017: Strongest Net Revenue Growth, ex-Currency, Since the Spin
6 9.4% Net Revenues 2017: Strongest Net Revenue Growth, ex-Currency, Since the Spin(a) (a) Also excludes acquisitions Note: Net revenues exclude excise taxes. "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 p
Slide 7: 2017: Strong Financial Results, ex-Currency
7 Source: PMI Financials or estimates 2017: Strong Financial Results, ex-Currency 9.4% 7.4% Net Revenues Adjusted OCI ● Robust adjusted OCI growth, ex- currency, driven by: - Higher net revenues - Partly offset by the adverse impact of higher sales of IQOS devices, and increased investment behind IQ
Slide 8: 2017: Strong Financial Results, ex-Currency
8 2017: Strong Financial Results, ex-Currency 9.4% 7.4% 10.0% Net Revenues Adjusted OCI Adjusted Diluted EPS Growth vs. PY Source: PMI Financials or estimates ● Negative currency impact of 21 cents: - Four cents higher vs. October forecast, notably due to the Euro and the Japanese Yen
Slide 9: 2017: Operating Cash Flow and Capital Expenditures
9 2017: Operating Cash Flow(a) and Capital Expenditures ● Full-year operating cash flow increased by 10.3% to $8.9 billion ● Excluding currency, operating cash flow increased by 5.5% ● Capital expenditures increased by $376 million to reach $1.5 billion, reflecting higher investment behind heated to
Slide 10: PMI Total Volume: Sequential Improvement Continued in Q4, 2017
10 Full-Year (2.7)% Note: Total volume reflects cigarettes and heated tobacco units Source: PMI Financials or estimates PMI Total Volume: Sequential Improvement Continued in Q4, 2017 ● PMI total volume down by 2.7% in 2017, principally due to: - Lower cigarette industry volume (notably in Indonesia,
Slide 11: PMI International Share: Sequential Growth Since Q2, 2017
11 PMI International Share: Sequential Growth Since Q2, 2017 Note: Excluding China and the U.S. Source: PMI Financials or estimates 27.7 26.4 26.9 27.7 27.5 0.3 0.5 0.7 0.9 1.2 28.0 26.9 27.6 28.6 28.7 Q4 2016 Q1 Q2 Q3 Q4 Cigarettes +0.7pp +1.0pp Heated Tobacco Units +0.1pp 2017 (%)
Slide 12: PMI International Share: Solid Performance from Premium Brands
12 Note: Excluding China and the U.S. Below-premium includes mid, low and super-low. Premium includes above-premium Source: PMI Financials or estimates PMI International Share: Solid Performance from Premium Brands +0.3pp (0.4)pp 28.1 28.0 2016 Below-Premium Brands Premium Brands 2017 (%)
Slide 13: Marlboro International Cigarette Share
13 (a) Excluding China (b) Also excluding the U.S. Note: Marlboro international cigarette share is defined as PMI total sales volume for Marlboro cigarettes as a percentage of the total industry estimated sales volume for cigarettes Source: PMI Financials or estimates Marlboro International Cigarett
Slide 14: EU Region: Stable Share in 2017, Supported by HEETS
14 Source: PMI Financials or estimates EU Region: Stable Share in 2017, Supported by HEETS ● Total industry volume down by 1.9%: - Slightly better than our full-year decline forecast of 2% to 3% ● Stable Regional share: - Gain from HEETS - Offset by the decline for our cigarette portfolio ● Adjusted
Slide 15: Russia: Challenging Pricing Environment
15 Note: Low includes super-low Source: PMI Financials or estimates, and Nielsen Russia: Challenging Pricing Environment ● Total industry volume down by 7.2% in 2017, primarily due to: - Impact of excise tax-driven price increases - Higher illicit trade ● Essentially stable share in 2017, reflecting
Slide 16: Saudi Arabia: Significant Tax-Driven Cigarette Industry Decline
16 Saudi Arabia: Significant Tax-Driven Cigarette Industry Decline ● Excise tax-driven price increase in June 2017 drove cigarette industry volume declines of: - 28% for H2, 2017 - 17% for FY, 2017 ● Significant down-trading to low-priced brands following tax increase ● Volume and share decline weig
Slide 17: Japan: Spectacular Performance of IQOS Drove 2017 Results
17 Japan: Spectacular Performance of IQOS Drove 2017 Results ● PMI total volume up by 13.1%, ex-inventory movements, driven by HeatSticks 2.9 10.8 27.1 32.1 2016 2017 PMI Market Share (%) +5.0pp Note: Translation from Japanese: "TASTE the true satisfaction" Source: PMI Financials or estimates, and T
Slide 18: Indonesia: Stable Sequential Quarterly Share in 2017
18 4.9 5.2 2016 2017 Marlboro Cigarette Market Share (%) +0.3pp Source: PMI Financials or estimates Indonesia: Stable Sequential Quarterly Share in 2017 ● Signs of economic recovery toward the end of 2017, though consumer spending remained soft ● Cigarette industry volume down by 2.6%: - Broadly in
Slide 19: Philippines: Further Profit Growth in 2017
19 29.9 32.4 31.7 32.0 35.6 68.2 65.9 66.5 68.3 69.3 Q4 2016 Q1 Q2 Q3 Q4 Source: PMI Financials or estimates Philippines: Further Profit Growth in 2017 ● Price increases at the bottom of the market narrowed price gaps between Marlboro and lower-priced brands ● Strong sequential growth for total ciga
Slide 20: LA&C Region: Strong 2017 Adjusted OCI Growth, ex-Currency
20 Source: PMI Financials or estimates LA&C Region: Strong 2017 Adjusted OCI Growth, ex-Currency ● Cigarette industry volume down by 3.8%, mainly due the impact of retail price increases in Brazil and Canada ● Adjusted OCI up by 14.3%, ex-currency, driven primarily by higher pricing, notably in Arge
Slide 21: IQOS: Strong Momentum Continues in Japan
21 IQOS: Strong Momentum Continues in Japan Source: PMI Financials or estimates, and Tobacco Institute of Japan 7.1 10.0 11.9 13.9 Q1 Q2 Q3 Q4 HeatSticks National Market Share (%) 2017
Slide 22: IQOS: Solid Performance in Sendai, Japan
Source: PMI Financials or estimates IQOS: Solid Performance in Sendai, Japan 67.3 19.9 October 8 Week Ending December 31 Q4, 2017 Weekly Offtake Data (%) PMI share of heated tobacco category HeatSticks offtake share 62.9 18.5 20% 18% 60% 70% 22
Slide 23: IQOS: Exceptional Performance in Korea
IQOS: Exceptional Performance in Korea Source: PMI Financials or estimates, and Hankook Research 23 ̶ 0.2 2.5 5.5 Q1 Q2 Q3 Q4 2017 HEETS National Market Share (%)
Slide 24: IQOS: Growing Shares Outside Asia
24 Greece Romania Portugal Italy Switzerland IQOS: Growing Shares Outside Asia Note: Underlying share data is unrounded Source: PMI Financials or estimates National SoM (%) 0.6 1.0 1.4 2.8 Q1 Q2 Q3 Q4 0.4 0.7 0.8 1.9 Q1 Q2 Q3 Q4 0.5 0.6 0.7 1.2 Q1 Q2 Q3 Q4 0.9 0.9 1.0 1.2 Q1 Q2 Q3 Q4 0.4 0.5 0.8 1.5
Slide 25: IQOS: Growing Shares Outside Asia
25 Ukraine Colombia Czech Rep. Slovakia Russia Germany Spain Focus Area (December 2017) 5 cities Bogota 9 cities 9 cities Moscow 7 cities Barcelona & Madrid 0.3 0.7 1.3 Q1 Q2 Q3 Q4 Note: Underlying share data is unrounded. Czech Rep. is Czech Republic Source: PMI Financials or estimates IQOS: Growin
Slide 26: 2018 EPS Guidance
26 2018 EPS Guidance ● Reported diluted EPS guidance is $5.20 to $5.35 at prevailing exchange rates, compared to $3.88 in 2017: - Includes approximately 16 cents of favorable currency at prevailing exchange rates - Does not include any share repurchases ● Ex-currency, our guidance represents a growt
Slide 27: 2018 EPS Guidance: Impact of Currency
27 2018 EPS Guidance: Impact of Currency ● Approximately 16 cents of favorable currency, at prevailing exchange rates, included in our 2018 guidance, is driven primarily by: ● We have currently hedged approximately 50% of our 2018 forecast sales to Japan, which, at prevailing exchange rates, transla
Slide 28: EPS Outlook for Q1, 2018
28 EPS Outlook for Q1, 2018 ● Anticipate strong net revenue growth, ex-currency ● We expect reported diluted EPS of approximately $0.87, at prevailing exchange rates, including approximately three cents of favorable currency ● Results will reflect unfavorable comparisons vs. Q1, 2017, primarily rela
Slide 29: 2018 PMI Effective Tax Rate: Impact of U.S. Corporate Tax Reform
29 2018 PMI Effective Tax Rate: Impact of U.S. Corporate Tax Reform ● We expect an effective tax rate of approximately 28% ● Difference vs. the 21% statutory rate under the new law reflects the fact that PMI operates in markets outside of the U.S., and is driven by three main factors: ● Under the ne
Slide 30: 2018 Outlook: Capital Structure and Operating Cash Flow
30 2018 Outlook: Capital Structure and Operating Cash Flow(a) ● We remain committed to restoring over time our leverage multiples to the ranges associated with our single-A credit rating ● New tax law provides us with greater flexibility on cash repatriation ● Targeting operating cash flow of over $
Slide 31: Conclusion: Robust 2017 Performance; Strong 2018 Outlook
31 Conclusion: Robust 2017 Performance; Strong 2018 Outlook ● Strong 2017 adjusted financial results, ex-currency ● IQOS performing exceptionally: - We estimate that over 4.7 million adult consumers around the world have already stopped smoking and made the change to IQOS(a) ● Effective January 1st,
Slide 32: Questions & Answers
Have you downloaded the PMI Investor Relations App yet? The free IR App is available to download at the Apple App Store for iOS devices and at Google Play for Android mobile devices iOS Download Android Download Or go to: www.pmi.com/irapp Designing a Smoke-Free Future Questions & Answers 2017 Fourt
Slide 33: Glossary and Reconciliation of Non-GAAP Measures
Glossary and Reconciliation of Non-GAAP Measures Designing a Smoke-Free Future
Slide 34: Glossary: General Terms
34 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
Slide 35: Glossary: Financial Terms
35 Glossary: Financial Terms ● Net revenues exclude excise taxes ● Net revenues, excluding excise taxes, related to combustible products refer to the operating revenues generated from the sale of these products, net of sales and promotion incentives ● "Operating Companies Income," or "OCI," is defin
Slide 36: Glossary: Reduced-Risk Products
36 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 vari
Slide 37: Glossary: Reduced-Risk Products
37 Glossary: Reduced-Risk Products ● Heated tobacco unit "offtake volume" represents the estimated retail offtake of heated tobacco units based on a selection of sales channels that vary by market, but notably include retail points of sale and e-commerce platforms ● Heated tobacco unit "offtake shar
Slide 38: PMI: New Geographic Segmentation (1/3)
38 PMI: New Geographic Segmentation (1/3) ● Andorra ● Austria ● Baltic States ● Belgium ● Bulgaria ● Canary Islands ● Croatia ● Czech Republic ● Denmark ● Finland ● France ● Germany ● Greece ● Hungary ● Iceland ● Italy ● Luxembourg ● Netherlands ● Norway ● Poland ● Portugal ● Romania ● Slovak Republ
Slide 39: PMI: New Geographic Segmentation (2/3)
39 PMI: New Geographic Segmentation (2/3) ● Algeria ● Central Africa ● Duty Free ● Eastern Africa ● Egypt ● Indian Ocean Islands ● Iraq ● Jordan ● Kuwait ● Lebanon ● Libya ● Morocco ● Other GCC & Middle East ● Other Levant ● Saudi Arabia ● Southern Africa ● Tunisia ● Turkey ● Turkish Cyprus ● UAE ●
Slide 40: PMI: New Geographic Segmentation (3/3)
40 PMI: New Geographic Segmentation (3/3) ● Afghanistan ● Bangladesh ● Cambodia ● East Timor ● India ● Indonesia ● Laos ● Maldives ● Other South Asia ● Pakistan ● Philippines ● Thailand ● Vietnam ● Argentina ● Bolivia ● Brazil ● Canada ● Caribbean ● Chile ● Colombia ● Costa Rica ● Dominican Republic
Slide 41: Reconciliation of Non-GAAP Measures: Currency and Acquisitions
41 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Years Ended December 31, ($ in millions) (Unaudited) Net Revenues Less Excise Taxes Net Revenues excluding Excise Taxes Less Currency Net Revenues
Slide 42: Reconciliation of Non-GAAP Measures: Currency and Acquisitions
42 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Years Ended December 31, ($ in millions) (Unaudited) Net Revenues Less Excise Taxes Net Revenues excluding Excise Taxes Less Currency Net Revenues
Slide 43: Reconciliation of Non-GAAP Measures: Currency and Acquisitions
43 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Years Ended December 31, ($ in millions) (Unaudited) Net Revenues Less Excise Taxes Net Revenues excluding Excise Taxes Less Currency Net Revenues
Slide 44: Reconciliation of Non-GAAP Measures: Currency and Acquisitions
44 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Years Ended December 31, ($ in millions) (Unaudited) Net Revenues Less Excise Taxes Net Revenues excluding Excise Taxes Less Currency Net Revenues
Slide 45: Reconciliation of Non-GAAP Measures: Currency and Acquisitions
45 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Years Ended December 31, ($ in millions) (Unaudited) Net Revenues Less Excise Taxes Net Revenues excluding Excise Taxes Less Currency Net Revenues
Slide 46: Reconciliation of Non-GAAP Measures: Currency and Acquisitions
46 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Years Ended December 31, ($ in millions) (Unaudited) Net Revenues Less Excise Taxes Net Revenues excluding Excise Taxes Less Currency Net Revenues
Slide 47: Reconciliation of Non-GAAP Measures: Currency and Acquisitions
47 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Years Ended December 31, ($ in millions) (Unaudited) Net Revenues Less Excise Taxes Net Revenues excluding Excise Taxes Less Currency Net Revenues
Slide 48: Reconciliation of Non-GAAP Measures: Currency and Acquisitions
48 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Years Ended December 31, ($ in millions) (Unaudited) Net Revenues Less Excise Taxes Net Revenues excluding Excise Taxes Less Currency Net Revenues
Slide 49: Reconciliation of Non-GAAP Measures: Currency and Acquisitions
49 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Years Ended December 31, ($ in millions) (Unaudited) Net Revenues Less Excise Taxes Net Revenues excluding Excise Taxes Less Currency Net Revenues
Slide 50: Reconciliation of Non-GAAP Measures: Currency and Acquisitions
50 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Years Ended December 31, ($ in millions) (Unaudited) Net Revenues Less Excise Taxes Net Revenues excluding Excise Taxes Less Currency Net Revenues
Slide 51: Reconciliation of Non-GAAP Measures: Selected Financial Data by Product Category
51 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Selected Financial Data by Product Category For the Years Ended December 31, ($ in millions) (Unaudited) (a) Net revenue amounts for our combustible products refer to the operating revenues generated from the sa
Slide 52: Reconciliation of Operating Companies Income to Adjusted OCI
52 (a) For the calculation of net revenues excluding excise taxes, currency and acquisitions, refer to slide 41 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Operating Companies Income to Adjusted Operating Companies Income & Reconciliation o
Slide 53: Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS
53 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 Years Ended December 31, (Unaudited) 2017 2016 % Change Reported Diluted EPS 3.88$ 4.48$ (13.4)
Slide 54: Reconciliation of Reported Diluted EPS, excluding Currency
54 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Reported Diluted EPS to Reported Diluted EPS, excluding Currency For the Years Ended December 31, (Unaudited) 2017 2016 % Change Reported Diluted EPS 3.88$ 4.48$ (13.4)% Less: Currency impact (
Slide 55: Reconciliation of Operating Cash Flow, excluding Currency
55 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Operating Cash Flow to Operating Cash Flow, excluding Currency For the Quarters and Years Ended December 31, ($ in millions) (Unaudited) (a) Operating cash flow For the Quarters Ended For the Y
Slide 56: Reconciliation of Non-GAAP Measures: Quarterly Currency and Acquisitions
56 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Quarters Ended December 31, ($ in millions) (Unaudited) Net Revenues Less Excise Taxes Net Revenues excluding Excise Taxes Less Currency Net Revenu
Slide 57: Reconciliation of Operating Companies Income to Adjusted OCI (Quarter)
57 (a) For the calculation of net revenues excluding excise taxes, currency and acquisitions, refer to previous slide PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Operating Companies Income to Adjusted Operating Companies Income & Reconcilia
Slide 58: Reconciliation of Reported Diluted EPS, excluding Currency (Q1 2017)
58 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Reported Diluted EPS to Reported Diluted EPS, excluding Currency For the Quarter Ended March 31, (Unaudited) 2017 Reported Diluted EPS 1.02$ Less: Currency impact - Reported Diluted EPS, exclud
Slide 59: Designing a Smoke-Free Future
Designing a Smoke-Free Future February 8, 2018 2017 Fourth-Quarter and Full-Year Results
Philip Morris International — FY2017 Earnings Presentation on 6ix