Philip Morris International Inc · NYSE:PM
Philip Morris International — Q2 2009 Earnings Presentation
40 slides from Philip Morris International's earnings presentation, Jul 23, 2009
Slide 1: 2009 Second-Quarter Results
2009 Second-Quarter Results 23 July 2009 Exhibit 99.3
Slide 2: Introduction
Morris International Introduction Introduction Unless otherwise stated, we will be talking about results in the second quarter 2009 and comparing them with the same period in 2008 References to PMI volumes refer to shipment data Industry volume and market shares are sourced from A.C. Nielsen, other
Slide 3: PMI Financials: Net Revenues and Adjusted OCI
Morris International PMI Financials PMI Financials 9.5 6.1 % Q2 % Variance vs. 2008 excl. Currency & Acquisitions 5.0 11.7 H1 7.5 2.6 Adjusted OCI (b) 5.1 % 6.1 ($ billion) Net Revenues (a) H1 Q2 2009 Results (a) Excluding excise taxes (b) Less asset impairment and exit costs Source: PMI Financials
Slide 4: PMI Financials: Adjusted Diluted EPS
Morris International PMI Financials PMI Financials ($ / share) 17.2 Q2 % Variance vs. 2008 excl. Currency 1.56 H1 14.4 0.83 Adjusted Diluted EPS H1 Q2 2009 Results Source: PMI Financials
Slide 5: PMI Volume
PMI Volume PMI Volume % Variance vs. 2008 2009 Results - % Reported H1 - % Reported Q2 (1.1) % (1.1) % 426.5 223.2 Ci g arette Volume Organic (a) Organic (a) H1 Q2 (units billion) (a) Excludes acquisitions Source: PMI Financials
Slide 6: Asia Region
Asia Re g ion Asia Re g ion Volume increased in Indonesia, Korea and Pakistan Increased profitability net of currency in almost all our main markets in Asia Marlbor o turnaround in Japan Source: PMI Financials and Tobacco Institute of Japan
Slide 7: Japan – Market Shares
Morris International Japan – Japan – Market Shares Market Shares (%) Q2, 2008 Q2, 2009 Marlboro Black Menthol Source: Tobacco Institute of Japan Marlboro Marlboro 9.8 23.9 10.6 24.0 Total PMI Total PMI
Slide 8: Korea – Market Shares
Morris International Korea – Korea – Market Shares Market Shares (%) Q2, 2008 Q2, 2009 Source: PMI GIMS estimates Marlboro Marlboro Parliament Parliament 3.3 4.8 11.8 4.0 5.6 13.7 PMI PMI
Slide 9: Argentina – Market Shares
Morris International Argentina – Argentina – Market Shares Market Shares (%) Q2, 2008 Q2, 2009 Source: PMI GIMS estimates Marlboro Marlboro Philip Morris Philip Morris 22.8 33.1 70.2 23.1 36.4 73.0 PMI PMI
Slide 10: Mexico – Market Shares
Mexico – Mexico – Market Shares Market Shares (%) Q2, 2008 Q2, 2009 Source: PMI GIMS estimates Delicados Delicados Benson & Hedges Marlboro Benson & Hedges Marlboro 9.7 53.9 67.2 11.2 54.1 69.0 Premium PMI Premium PMI
Slide 11: Russia
Russia Russia Consumer downtrading Product mix has deteriorated Shipments declined by 1.3% in Q2, 2009 Oil prices and banking sector stability key to business outlook Source: PMI Financials and A.C. Nielsen
Slide 12: Russia – Market Shares
Russia – Russia – Market Shares Market Shares (a) April / May Source: A.C. Nielsen (%) Premium Mid Low / Super-low (a) (a) 10.2 11.3 8.2 7.8 6.3 6.1 24.7 25.2 Q2, 2008 Q2, 2009
Slide 13: Ukraine
Ukraine Ukraine Difficult economic and political environment Tax-driven retail price increases of 22% – 50% this May Product mix remains relatively stable so far PMI shipments down 14.1% in Q2, 2009 Our market share in the April/May period was up 1.0 pp at 36.2% Market evolution in the second half i
Slide 14: EEMA Region
EEMA Re g ion EEMA Re g ion Net revenues increased by 8.5% excluding currency and acquisitions in Q2, 2009 OCI up 10.7% excluding currency and acquisitions in Q2, 2009 PMI gained market share in Q2, 2009, across the Region: – notably in Algeria, Bulgaria, Egypt, Romania, Russia, Turkey and Ukraine S
Slide 15: EU Region
EU Re g ion EU Re g ion The situation in the EU Region is clearly improving PMI gained market share in 15 out of the top 20 EU Region markets in Q2, 2009: notably in France, Germany and Spain Marlboro share in EU Region remained stable at 18.9% in Q2, 2009 PMI volume declined by 3.0% in Q2, 2009 Sou
Slide 16: Spain
Spain Spain Economic recession and rising unemployment Industry volume declined by 6.2% in Q2, 2009 Minimum Excise Tax increased in May PMI implemented a €0.35 / pack price increase across its cigarette portfolio, thus generating higher unit margins Source: PMI GIMS estimates
Slide 17: Marlboro Shipment Volume by Region
38.3% 26.4% 22.6% 12.7% Morris International Marlbor o Marlbor o Shipment Shipment Volume Volume by by Region Region EU LA & Canada Asia EEMA Q2, 2009 Volume: 78.3 billion (Down 1.1% vs. Q2, 2008) Source: PMI Financials
Slide 18: Marlboro Architecture
Marlbor o Marlbor o Architecture Architecture “Flavor enjoyment” “Smooth taste and style” “Fresh taste sensations” Red Gold Fresh
Slide 19: Red Line: Marlboro Filter Plus / Flavor Plus
Morris International Red Line : Red Line : Marlboro Filter Plus / Flavor Plus Marlboro Filter Plus / Flavor Plus 1.4 0.7 1.0 2.4 2.5 1.3 Lithuania Slovakia Kazakhstan Kuwait Romania Paraguay Market Shares Q2, 2009 (a) (a) Kazakhstan, Kuwait and Paraguay are April / May Source: PMI GIMS Estimates, Bu
Slide 20: Gold Line: Marlboro Gold Touch / Gold Edge
Gold Line : Marlboro Gold Touch / Gold Edg e Gold Line : Marlboro Gold Touch / Gold Edg e Marlboro Gold Touch Marlboro Gold Edg e
Slide 21: Fresh Line: Marlboro Black Menthol
Fresh Line : Marlboro Black Mentho l Fresh Line : Marlboro Black Mentho l 1.3% market share in Japan in Q2, 2009, including recent line extension into 1 mg flavor segment 3.1% market share in Hong Kong in June, three months after launch Introduced in Indonesia Such innovative new products are boosti
Slide 22: Pricing
Pricing Pricing Revenue growth significantly more than offsetting volume softness and slightly unfavorable product mix Pricing variance was $549 million in Q2, 2009 In last twelve months, PMI has increased prices notably in: Argentina Brazil Canada Dominican Rep. Mexico Australia Indonesia Pakistan
Slide 23: Germany / Spain – Pricing
Germany / Spain – Germany / Spain – Pricing Pricing 2.85 2.50 L&M 3.20 2.85 Chesterfield € 3.45 € 3.10 Marlb o r o 4.25 4.35 € 4.70 New Prices (a) (per 19) New Prices (per 20) Old Prices (per 20) Spain 3.80 3.60 L&M 3.90 3.70 F6 € 4.20 € 4.00 Marlb o r o Current Prices (per 17) Old Prices (per 17) G
Slide 24: Fiscal Environment
Fiscal Environment Fiscal Environment Higher retail prices resulting in higher government revenues Fiscal environment remains reasonable: – key exceptions are Brazil and Ukraine
Slide 25: Productivity and Brand Building
Productivity and Brand Building Productivity and Brand Building On track to deliver $500 million in productivity improvements and cost savings in 2009 None of the savings are coming from reduced marketing expenditures We continue to invest appropriately behind our brands Source: PMI Financials
Slide 26: Share Repurchases
Share Repurchases Share Repurchases Two-year $13 billion share repurchase program In Q2, 2009, $1.4 billion spent to buy 34.7 million shares at average price of $40.33 per share Source: PMI Financials
Slide 27: Acquisitions
Acquisitions Acquisitions Strategically and financially attractive deals South Africa: acquisition of pipe tobacco and nasal snuff business for some $222 million Colombia: acquisition of Protabaco for $452 million Transactions expected to close in Q4, 2009, subject to regulatory approval Source: PMI
Slide 28: Cash Flow
Cash Flow Cash Flow Free cash flow reached $4.25 billion during the first half of 2009 in spite of: – $730 million negative currency impact on net earnings – $241 million increase in pension fund contributions PMI has returned $12.4 billion in cash to its shareholders since becoming an independent c
Slide 29: 2009 EPS Guidance
2009 EPS Guidance 2009 EPS Guidance Previous 2009 EPS guidance, established in February, of $2.85 – $3.00 per share included 80 cents in unfavorable currency Unfavorable currency in the first half of the year was 35 cents During the second half, we expect a further 20 cents in unfavorable currency b
Slide 30: Philip Morris International
ey PHILIP MORRIS INTERNATIONAL KN
Slide 31: Reconciliation of Non-GAAP Measures: Net Revenues, Quarter
Morris International PHILIP MORRIS INTERNATIONAL INC. (in millions) (Unaudited) For the Quarters Ended June 30, and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions Reported Net Revenues Less Excise Taxes Reported Net Revenues excluding Excise
Slide 32: Reconciliation of Non-GAAP Measures: Operating Companies Income, Quarter
(1) Represents 2009 Colombian investment and cooperation agreement charge (2) Represents 2008 equity loss from RBH legal settlement (3) For the calculation of net revenues excluding excise taxes and currency, refer to Slide Reported Operating Companies Income Less Asset Impairment/ Exit Costs and Ot
Slide 33: Reconciliation of Reported to Adjusted Diluted EPS, Quarter
Morris International % Change Reported Diluted EPS 0.79 $ 0.80 $ (1.3)% Adjustments: Colombian investment and cooperation agreement charge 0.04 - Asset impairment and exit costs - 0.01 Equity loss from RBH legal settlement - 0.06 Adjusted Diluted EPS 0.83 $ 0.87 $ (4.6)% Add: Currency Impact 0.19 Ad
Slide 34: Reported Diluted EPS Excluding Currency, Quarter
% Change Reported Diluted EPS 0.79 $ 0.80 $ (1.3)% Add: Currency Impact 0.19 Reported Diluted EPS, Excluding Currency 0.98 $ 0.80 $ 22.5 % Reconciliation of Reported Diluted EPS to Reported Diluted EPS, Excluding Currency For the Quarters Ended June 30, (Unaudited) PHILIP MORRIS INTERNATIONAL INC. a
Slide 35: Reconciliation of Non-GAAP Measures: Net Revenues, Six Months
(in millions) For the Six Months Ended June 30, and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions (Unaudited) PHILIP MORRIS INTERNATIONAL INC. (1) As discussed in Note 1. Background and Basis of Presentation of our 2008 consolidated financia
Slide 36: Reconciliation of Non-GAAP Measures: Operating Companies Income, Six Months
As discussed in Note 1. Background and Basis of Presentation of our 2008 consolidated financial statements which appears in our Annual Report on Form 10-K, prior to 2008, certain of our subsidiaries reported their results up to ten days before the end of December, rather than on December 31. During
Slide 37: Reconciliation of Reported to Adjusted Diluted EPS, Six Months
% Change Reported Diluted EPS 1.52 $ 1.59 $ (4.4)% Adjustments: Colombian investment and cooperation agreement charge 0.04 - Asset impairment and exit costs - 0.02 Equity loss from RBH legal settlement - 0.06 Adjusted Diluted EPS 1.56 $ 1.67 $ (6.6)% Add: Currency Impact 0.35 Adjusted Diluted EPS, E
Slide 38: Reported Diluted EPS Excluding Currency, Six Months
% Change Reported Diluted EPS 1.52 $ 1.59 $ (4.4)% Add: Currency Impact 0.35 Reported Diluted EPS, Excluding Currency 1.87 $ 1.59 $ 17.6 % Reconciliation of Reported Diluted EPS to Reported Diluted EPS, Excluding Currency For the Six Months Ended June 30, (Unaudited) PHILIP MORRIS INTERNATIONAL INC.
Slide 39: Calculation of Total Debt to EBITDA and Net Debt to EBITDA Ratios
Calculation of Total Debt to EBITDA and Net Debt to EBITDA Ratios (in millions, except ratios) (Unaudited) PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures For the Year Ended June 30, December 31, July~December January~June 12 months rolling Earnings before incom
Slide 40: 2009 Second-Quarter Results
2009 Second-Quarter Results 23 July 2009
Philip Morris International — Q2 2009 Earnings Presentation on 6ix