Philip Morris International Inc · NYSE:PM
Philip Morris International — Q3 2010 Earnings Presentation
38 slides from Philip Morris International's earnings presentation, Oct 21, 2010
Slide 1: 2010 Third-Quarter Earnings Results
Exhibit 99.3 2010 Third-Quarter Earnings Results October 21, 2010
Slide 2: Introduction
Introduction Unless otherwise stated, we will be talking about results in the third 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 number
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: Q3, 2010, Highlights
Q3, 2010, Highlights As anticipated, third quarter results adversely impacted by various timing issues, in particular relating to Japan Payback for the previously disclosed build-up of stocks at our distributor in Japan during the second quarter this year Difficult environment in Greece and Turkey,
Slide 5: 2010 EPS Guidance
2010 EPS Guidance We are raising and narrowing our reported diluted EPS guidance for 2010 to a range of $3.90 to $3.95 This reflects an improved business performance, more favorable exchange rates and a lower tax rate This represents a reported diluted EPS growth of approximately 20% to 22%, compare
Slide 6: PMI Volume
PMI Volume (units billion) Results Variance % Change Q3, 2010 Cigarette Volume 229.2 9.9 4.5 % Organic Cigarette Volume 213.0 (6.3) (2.9)% YTD Sept, 2010 Cigarette Volume 674.9 29.1 4.5 % Organic Cigarette Volume 635.3 (10.5) (1.6)% Source: PMI Financials 6
Slide 7: PMI Financial Results
PMI Financial Results Q3, 2010 YTD Sept, 2010 (% Change) Results(a) Results(a) Net Revenues (0.2)% 3.6 % (a) Excluding currency and acquisitions Source: PMI Financials 7
Slide 8: PMI Financial Results
PMI Financial Results Q3, 2010 YTD Sept, 2010 (% Change) Results(a) Results(a) Net Revenues (0.2)% 3.6 % Adjusted OCI(b) (1.7)% 4.5 % Adjusted Diluted EPS 5.4 % 12.5 % (a) Net revenues and adjusted OCI exclude currency and acquisitions. Adjusted diluted EPS excludes currency. (b) OCI stands for Oper
Slide 9: Pricing
Pricing Recently implemented price increases in Argentina, Indonesia, Italy, Japan, Russia and the UK Announced a 30 Euro cent price increase in France, as well as higher prices in Poland Filed with the customs authorities for a price increase in Portugal Will substantially benefit in the fourth qua
Slide 10: PMI Business Momentum
PMI Business Momentum Good market share momentum across all Regions: - PMI and Marlboro share up 0.2 points in Q3, 2010, in the EU Region - PMI gained share year-on-year or sequentially in a wide range of markets, including Algeria, Argentina, Egypt, Greece, Indonesia, Korea, Mexico, the Netherlands
Slide 11: Marlboro Architecture
Marlboro Architecture Flavor Line “Flavor enjoyment” Gold Line “Smooth taste and style” Fresh Line “Fresh taste sensations” 11
Slide 12: Marlboro Market Shares: EU Region
Marlboro Market Shares: EU Region Market Shares Q3, 2010 Q3, 2009 Variance Belgium 24.6 % 24.2 % 0.4 pp France 25.7 26.2 (0.5) Germany 21.1 21.8 (0.7) Greece 20.0 22.1 (2.1) Italy 23.2 23.1 0.1 Netherlands 34.6 33.2 1.4 Poland 11.0 9.5 1.5 Spain 16.3 15.3 1.0 Total EU Region 18.4 18.2 0.2 Source: PM
Slide 13: L&M Market Shares: EU Region
L&M Market Shares: EU Region Market Shares Q3, 2010 Q3, 2009 Variance Belgium 14.9 % 14.2 % 0.7 pp Czech Rep. 7.6 7.3 0.3 Germany 9.2 8.3 0.9 Greece 5.1 0.6 4.5 Netherlands 8.7 7.0 1.7 Poland 16.0 14.6 1.4 Portugal 6.4 5.9 0.5 Slovakia 18.8 13.6 5.2 Spain 6.4 6.6 (0.2) Total EU Region 6.3 5.7 0.6 So
Slide 14: Marlboro Market Shares: EEMA, Asia and LA&C
Marlboro Market Shares: EEMA, Asia and LA&C Market Shares Q3, 2010 Q3, 2009 Variance Algeria 20.2 % 11.5 % 8.7 pp Argentina 23.9 23.5 0.4 Egypt 6.1 4.9 1.2 Japan 11.0 10.6 0.4 Korea 6.9 6.0 0.9 Mexico 49.7 48.4 1.3 Serbia 9.1 8.7 0.4 Turkey 9.5 11.1 (1.6) Ukraine(a) 5.6 5.4 0.2 a) QTD August Source:
Slide 15: EU Region
EU Region Industry volume down by 5.5% in Q3, 2010, driven by declines in Greece, Poland and Spain Source: PMI estimates 15
Slide 16: EU Region
EU Region Industry volume down by 5.5% in Q3, 2010, driven by declines in Greece, Poland and Spain PMI market share up 0.2 points in the quarter to 39.1%: Market Shares Q3, 2010 Q3, 2009 Variance France 40.0 % 40.1 % (0.1)pp Germany 34.9 35.3 (0.4) Italy 54.1 54.5 (0.4) Netherlands 45.5 42.4 3.1 Pol
Slide 17: Greece
Greece PMI market share sequentially improving: Market Shares Q3, 2010 Q2, 2010 Q1, 2010 Marlboro 20.0 % 19.3 % 21.7 % Assos 6.8 6.8 6.7 L&M 5.1 4.0 0.4 Other 8.2 9.1 9.0 Total PMI 40.1 39.2 37.8 Expect Greek market to continue to act as a drag on our regional profitability growth into the beginning
Slide 18: Russia
Russia PMI volume grew by 1.4% in Q3, 2010, to a record level of 25.4 billion units Strong performance driven by: - Parliament - Chesterfield - Bond Street and Next PMI implemented retail price increases of two to three Rubles per pack in July Market stabilizing and consumer downtrading continues to
Slide 19: Ukraine
Ukraine Industry volume in Q3, 2010, down by around 15%, due to: - Trade purchases in June ahead of tax increase - Market contraction due to continuous price increases Shares gains for premium Marlboro and mid-price Chesterfield, more than offset by share losses in low-price segment Pricing and mix
Slide 20: Turkey
Turkey Total market estimated to be down about 6% in Q3, 2010 PMI market share improving: Market Shares Q3, 2010 Q2, 2010 Q1, 2010 Marlboro / Parliament 16.7 % 16.0 % 17.1 % Muratti 5.8 5.7 5.2 Lark 13.5 13.3 12.2 Other 5.8 5.9 6.6 Total PMI 41.8 40.9 41.1 Source: PMI estimates and A.C. Nielsen 20
Slide 21: Japan
Japan PMI shipments down 3.5 billion units in Q3, 2010, while sales by our distributor to the trade rose by 4.0 billion units We estimate there was a build-up of stock of some ten days at retail trade and three weeks with consumers Consumer reaction to price increases uncertain: (Marlboro, Yen/pack)
Slide 22: Indonesia
Indonesia Industry volume estimated to be up 3.9% in Q3, 2010 PMI shipment volume increased by 3.1% in Q3, 2010 Market Shares Q3, 2010 Q3, 2009 Variance A Mild 11.1 % 11.8 % (0.7)pp Dji Sam Soe 7.8 7.8 - Marlboro 4.4 4.5 (0.1) Other 5.7 5.1 0.6 Total PMI 29.0 29.2 (0.2) A Mild temporarily under shar
Slide 23: Korea
Korea PMI shipment volume increased by 9.7% in Q3, 2010 Market Shares Q3, 2010 Q3, 2009 Variance Marlboro 6.9 % 6.0 % 0.9 pp Parliament 5.7 4.5 1.2 Virginia Slims 3.3 3.0 0.3 Lark 1.1 1.1 - Total PMI 17.0 14.6 2.4 As elsewhere in the world, PMI continues to advocate for adoption of system of regular
Slide 24: Latin America & Canada Region
Latin America & Canada Region Overall industry volume in key markets stable Volume decline in Q3, 2010, of 1.7% PMI and Marlboro market share increased in both Argentina and Mexico: Market Shares Q3, 2010 Q3, 2009 Variance Argentina – PMI 75.1 % 73.3 % 1.8 pp Argentina – Marlboro 23.9 23.5 0.4 Mexic
Slide 25: Cash Flow
Cash Flow Operating Cash Flow Free Cash Flow (a) ($ million) ($ million) 3,000 3,000 2,417 2,253 +30.9% +33.6% 2,000 2,000 1,846 1,686 1,000 1,000 Q3 Q3 Q3 Q3 2009 2010 2009 2010 (a) Free cash flow equals net cash provided by operating activities less capital expenditures Source: PMI Financials 25
Slide 26: Cumulative Operating Cash Flow (2008-2010)
Cumulative Operating Cash Flow (2008-2010) 23.7 ($ billion) 21.7 7.9 YTD Sept Full Year 7.8 2010 7.9 7.3 2009 2008 7.9 6.6 March 2008 Actual Forecast Results Source: PMI Financials 26
Slide 27: Shareholder Returns: Share Repurchases
Shareholder Returns: Share Repurchases $5 billion allocated for share repurchases for full year 2010, $1 billion above level originally foreseen $1.1 billion spent in Q3, 2010, to purchase 20.7 million shares $3.9 billion spent September YTD to purchase 78.5 million shares Source: PMI Financials 27
Slide 28: Shareholder Returns: Dividends
Shareholder Returns: Dividends Quarterly dividend increased in September by 10.3% to $0.64 ($2.56 annualized) Since March 2008 spin, dividend has been raised in total by 39% Dividend yield currently at 4.5% Source: PMI Financials 28
Slide 29: Summary
Summary Strong business momentum going into Q4, 2010 2010 EPS guidance raised and narrowed to a reported diluted range of $3.90 to $3.95, representing a growth rate of approximately 20% to 22% compared to 2009 Market leadership and growing volume and share in emerging markets(a) Marlboro performing
Slide 30: Questions & Answers
2010 Third-Quarter Earnings Results Questions & Answers
Slide 31: Reconciliation of Non-GAAP Measures
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Quarters Ended September 30, ($ in millions) (Unaudited) % Change in Reported Net Revenues 2010 2009 excluding Excise Taxes Reported Net Reported Net
Slide 32: 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 33: 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 September 30, (Unaudited) 2010 2009 % Change Reported Diluted EPS $ 0.99 $ 0.93 6.5
Slide 34: 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 Nine Months Ended September 30, ($ in millions) (Unaudited) % Change in Reported Net Revenues 2010 2009 excluding Excise Taxes Reported Net Reported N
Slide 35: 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 Nine Months E
Slide 36: 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 Nine Months Ended September 30, (Unaudited) 2010 2009 % Change Reported Diluted EPS $ 2.96 $ 2.44
Slide 37: 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 September 30, (
Slide 38: 2010 Third-Quarter Earnings Results
2010 Third-Quarter Earnings Results October 21, 2010
Philip Morris International — Q3 2010 Earnings Presentation on 6ix