Philip Morris International Inc · NYSE:PM

Philip Morris International — Shareholder Meeting (May 2011)

61 slides from Philip Morris International's shareholder meeting presentation, May 11, 2011

  1. Slide 1: Annual Meeting of Stockholders

    Annual Meeting of Stockholders New York May 11, 2011 Louis C. Camilleri Chairman and Chief Executive Officer Philip Morris International

  2. Slide 2: 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.

  3. Slide 3: Annual Meeting of Stockholders

    Annual Meeting of Stockholders May 11, 2011

  4. Slide 4: 2010 PMI Highlights

    2010 PMI Highlights ● A challenging year due to: - Unprecedented excise tax increases - High and rising unemployment - Increased illicit trade ● Robust financial results, solid EPS growth and very strong increase in cash flow ● Dividend increased by 10.3% and $5.0 billion spent to repurchase 97.1 mi

  5. Slide 5: PMI 2010 Results

    PMI 2010 Results % Change 2010 vs. 2009 2010 Results Actual Excl. Acquisitions Cigarette Volume (billion) 899.9 4.1 % (2.5)% Source: PMI Financials 5

  6. Slide 6: PMI 2010 Results

    PMI 2010 Results % Change 2010 vs. 2009 Excluding 2010 Currency & Results Actual Currency Acquisitions Net Revenues ($ billion) 27.2 8.7 % 5.9 % 3.4 % Source: PMI Financials 6

  7. Slide 7: PMI 2010 Results

    PMI 2010 Results % Change 2010 vs. 2009 Excluding 2010 Currency & Results Actual Currency Acquisitions Net Revenues ($ billion) 27.2 8.7 % 5.9 % 3.4 % Adjusted OCI ($ billion) 11.5 10.3 % 7.0 % 5.8 % Source: PMI Financials 7

  8. Slide 8: PMI 2010 Results

    PMI 2010 Results % Change 2010 vs. 2009 Excluding 2010 Currency & Results Actual Currency Acquisitions Net Revenues ($ billion) 27.2 8.7 % 5.9 % 3.4 % Adjusted OCI ($ billion) 11.5 10.3 % 7.0 % 5.8 % Adjusted Diluted EPS ($ / share) 3.87 17.6 % 14.0 % Source: PMI Financials 8

  9. Slide 9: PMI Q1, 2011 Results

    PMI Q1, 2011 Results % Change Q1, 2011 vs. Q1, 2010 Q1, 2011 Results Actual Excl. Acquisitions Cigarette Volume (billion) 207.9 1.6 % (3.3)% Source: PMI Financials 9

  10. Slide 10: PMI Market Share Developments

    PMI Market Share Developments Top 30 PMI OCI Markets (%) 37 35.8 35.3 34.6 32 Q1, 2009 Q1, 2010 Q1, 2011 Note: 2009 and 2010 data adjusted for pro-forma inclusion of business combination with Fortune Tobacco in the Philippines Source: PMI estimates 10

  11. Slide 11: Marlboro – Market Share

    Marlboro – Market Share Marlboro Global Share of Market(a) – 12 Months Moving Average (%) 9.2 9.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2009 2010 2011 (a) Excluding China and USA Source: PMI estimates 11

  12. Slide 12: PMI Q1, 2011 Results

    PMI Q1, 2011 Results % Change Q1, 2011 vs. Q1, 2010 Excluding Q1, 2011 Currency & Results Actual Currency Acquisitions Net Revenues ($ billion) 6.8 4.5 % 4.3 % 2.7 % Adjusted OCI ($ billion) 3.1 11.4 % 8.8 % 8.0 % Source: PMI Financials 12

  13. Slide 13: Adjusted OCI Margins

    Adjusted OCI Margins First-Quarter 2011(a) 2010 Variance EU 49.3 % 48.6 % 0.7 pp EEMA 42.9 44.1 (1.2) Asia 46.4 38.7 7.7 LA&C 33.2 31.3 1.9 Total 44.9 42.7 2.2 (a) Excluding currency and acquisitions Source: PMI Financials 13

  14. Slide 14: PMI Q1, 2011 Results

    PMI Q1, 2011 Results % Change Q1, 2011 vs. Q1, 2010 Excluding Q1, 2011 Currency & Results Actual Currency Acquisitions Net Revenues ($ billion) 6.8 4.5 % 4.3 % 2.7 % Adjusted OCI ($ billion) 3.1 11.4 % 8.8 % 8.0 % Adjusted Diluted EPS ($ / share) 1.06 17.8 % 14.4 % Source: PMI Financials 14

  15. Slide 15: 2011 EPS Guidance

    2011 EPS Guidance ● On April 21st, we increased our reported diluted EPS guidance for 2011 by 20 cents to a range of $4.55 to $4.65 ● This increased guidance was driven by our improved business outlook and more favorable exchange rates ● Compared to an adjusted diluted EPS of $3.87 in 2010, this cor

  16. Slide 16: PMI Results vs. Mid to Long-Term Annual Growth Targets

    PMI Results vs. Mid to Long-Term Annual Growth Targets Mid to Long-Term FY FY FY Q1 Annual Growth Targets 2008 2009 2010 2011 Organic Volume 1% 1.0 % (1.5)% (2.5)% (3.3)% Net Revenues(a) 4–6% 5.6 % 5.3 % 3.4 % 2.7 % Adjusted OCI(a) 6–8% 9.8 % 8.7 % 5.8 % 8.0 % Adjusted Diluted EPS(b) 10 – 12 % 12.9

  17. Slide 17: Cigarette Industry Volume Trends 2007-2010

    Cigarette Industry Volume Trends 2007-2010(a) (units billion) CAGR 2007-2010: (1.2)% 3,330 3,211 0.3% (1.6)% (2.2)% 2007 2008 2009 2010 (a) Excluding China, USA and duty-free Source: PMI estimates 17

  18. Slide 18: Key Business Drivers

    Key Business Drivers ● Superior brand portfolio ● Global infrastructure ● Business development ● Pricing ● Tobacco leaf and direct material costs ● Productivity and cost savings 18

  19. Slide 19: Brand Portfolio

    Brand Portfolio International Local Heritage Premium & Above Mid-Price Low-Price 19

  20. Slide 20: Top International Cigarette Brands (2010)

    Top 15 International Cigarette Brands (2010) (units billion) Marlboro Marlboro 297 Winston Mild Seven L&M L&M 89 Pall Mall Kent PMI Dunhill JT Bond BondStreet Street 44 BAT Viceroy Camel PhilipMorris Philip Morris 39 Chesterfield Chesterfield 36 LD Parliament Parliament 35 Lark Lark 29 0 50 100 150

  21. Slide 21: Marlboro Architecture

    Marlboro Architecture Flavor Line “Flavor enjoyment” Gold Line “Smooth taste and style” Fresh Line “Fresh taste sensations” Note: Pack designs for illustrative purposes only 21

  22. Slide 22: Parliament

    Parliament (%) 8 Market Shares - Q1, 2011 7.5 6.0 4.5 2.9 2.5 2.3 0 Tur. Korea Kaz. Rus. Ukr. Japan Note: Tur. is Turkey, Kaz. is Kazakhstan, Rus. is Russia, Ukr. is Ukraine Source: A.C. Nielsen, Hankook Research, PMI estimates and Tobacco Institute of Japan 22

  23. Slide 23: Chesterfield

    Chesterfield (%) 18 Market Shares - Q1, 2011 15.5 11.4 8.1 7.2 3.6 3.4 0 Por. Aus. Spain Ukr. Italy Rus. Note: Por. is Portugal, Aus. is Austria, Ukr. is Ukraine, Rus. is Russia Source: PMI estimates and A.C. Nielsen 23

  24. Slide 24: L&M Market Share Variances

    L&M (pp) 5 Market Share Variances Q1, 2011 vs. Q1, 2010 3.9 2.0 0.9 0.9 0.9 0.2 Rus. Ukr. 0 Tur. Gre. Bra. Ger. Rom. Tha. -0.4 -1 -0.8 Note: Tur. is Turkey, Gre. is Greece, Bra. is Brazil, Ger. is Germany, Rom. is Romania, Tha. is Thailand, Rus. is Russia, Ukr. is Ukraine Source: A.C. Nielsen and PM

  25. Slide 25: PMI Leadership in Non-OECD and OECD Market Shares

    PMI Leadership in Non-OECD and OECD(a) Market Shares - Q1, 2011 Others PMI IMT 9.0% PMI 26.4% Others 12.5% 33.8% 38.2% 17.2% 20.9% BAT 10.8% 27.5% 3.7% BAT IMT JT JT Top 10 Non-OECD Markets Top 10 OECD Markets (a) Top 10 Non-OECD and OECD markets ranked by 2010 industry volume, excluding China, USA

  26. Slide 26: Pricing Variance

    Pricing Variance ($ million) 1,984 2,000 1,662 1,223 0 2008 2009 2010 Note: Pricing variance is at OCI level Source: PMI Financials 26

  27. Slide 27: Tobacco Leaf and Direct Materials

    Tobacco Leaf and Direct Materials ● Significant increase in tobacco leaf prices in 2008 due to global under-supply ● Immediate impact on cash flow and gradual flow through the P&L, mainly in 2009 and 2010 ● PMI is seeking to ensure that the sustainability of the price/quality equation is enhanced th

  28. Slide 28: Agricultural Labor Practices

    Agricultural Labor Practices ● Sustainable tobacco growing is also about protecting the environment and ensuring labor practices that promote the safety, well-being and social and economic security of tobacco farmers and workers ● We are implementing a strong, comprehensive Agricultural Labor Practi

  29. Slide 29: Productivity and Cost Savings Program

    Productivity and Cost Savings Program ● PMI completed its three-year $1.55 billion productivity and cost savings program by the end of 2010 Cumulative Gross Cost Savings Program (2008-10) ($ million) 1,550 850 450 250 Manufacturing G&A + Other EU Program Total Productivity Source: PMI Financials 29

  30. Slide 30: Key Challenges

    Key Challenges ● Excise taxation ● Regulatory environment 30

  31. Slide 31: Excise Taxation

    Excise Taxation ● Most governments have implemented reasonable increases ● Mexico only major market with a disruptively large excise tax increase in 2011 ● Structural excise tax improvements this year in France, Greece, the Netherlands, Sweden and the UK ● New multi-year excise tax programs in the C

  32. Slide 32: Regulatory Environment

    Regulatory Environment ● PMI seeks comprehensive regulation based on the broader goal of harm reduction ● PMI has successfully managed regulatory challenges in the past: - Public smoking restrictions - Marketing constraints - Graphic health warning labels - Ban on descriptors (e.g. “Lights”) 32

  33. Slide 33: Regulatory Environment

    Regulatory Environment ● We do not support regulation that prevents adults from buying and using tobacco products or that imposes unnecessary impediments to the operation of the legitimate tobacco market ● Emerging regulatory challenges: - Product display bans - Bans on the use of ingredients - Plai

  34. Slide 34: Australia – Plain Packaging

    Australia – Plain Packaging ● The Australian Government has released an exposure draft of a bill that would mandate plain packaging in 2012 ● There is a public consultation through June 6 ● PMI is firmly opposed to such a measure because: - There is no credible evidence that it will reduce smoking r

  35. Slide 35: Cumulative Operating Cash Flow (2008-2010)

    Cumulative Operating Cash Flow (2008-2010) ($ billion) 25.2 21.7 9.4 2010 7.8 7.9 7.3 2009 7.9 6.6 2008 March 2008 Actual Forecast Results Source: PMI Financials 35

  36. Slide 36: Working Capital Reduction Program

    Working Capital Reduction Program ● Three-year working capital reduction target of $750 million to $1 billion established in November 2009 ● Key areas of focus: tobacco and finished goods inventories ● $15 million investment in systems ● Working capital reduced by approximately $1 billion by the end

  37. Slide 37: Dividend Increases Since Spin

    (a) Dividend Increases Since Spin +39% $2.56 +10.3% +7.4% +17.4% $1.84 2008 Aug Sep Sep 2010 2008 2009 2010 (a) Dividends for 2008 and 2010 are annualized rates. 2008 annualized rate is based on a quarterly dividend of $0.46 per common share, declared June 18, 2008. 2010 annualized rate is based on

  38. Slide 38: Share Repurchase Programs

    Share Repurchase Programs 17.3 355.7 16.9 2011 22.2 1.1 1.4 Q1 97.1 4.6 2010 5.0 2009 5.5 129.7 6.1 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 2,109 million. Totals may not add due to ro

  39. Slide 39: PMI Stock Performance vs. S&P 500

    PMI Stock Performance vs. S&P 500 Close Apr 29 150 S&P 500 Close PMI Close +36.0% + 3.7% 100 50 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 YTD 2008 2009 2010 2011 Spin (as of Mar 28) Source: Bloomberg 39

  40. Slide 40: Total Shareholder Return – Weighted Average

    Total Shareholder Return ($) – Weighted Average March 28, 2008 – April 30, 2011 January 1, 2011 – April 30, 2011 PMI 57.7% PMI 19.8% Tobacco Tobacco Peer Group 23.6% 14.4% Peer Group Company 18.8% FTSE 100 10.9% Peer Group Company S&P 500 11.0% 10.3% Peer Group FTSE 100 0.4% S&P 500 9.1% Note: Peer

  41. Slide 41: Question and Comment Session

    Annual Meeting of Stockholders May 11, 2011 Question and Comment Session

  42. Slide 42: Annual Meeting of Stockholders

    Annual Meeting of Stockholders May 11, 2011

  43. Slide 43: Harold Brown

    Harold Brown uIP MORRIS INTERNATIONAL

  44. Slide 44: Mathis Cabiallavetta

    Mathis Cabiallavetta uIP MORRIS INTERNATIONAL

  45. Slide 45: Louis C. Camilleri

    Louis C. Camilleri PHILIP MORRIS INTERNATIONAL

  46. Slide 46: J. Dudley Fishburn

    J. Dudley Fishburn PHILIP NORRIS INTERNATIONAL

  47. Slide 47: Jennifer Li

    Jennifer Li PHILIP MORRIS INTERNATIONAL

  48. Slide 48: Graham Mackay

    Graham Mac kay uIP MORRIS INTERNATIONAL

  49. Slide 49: Sergio Marchionne

    Sergio Marchionne PHILIP MORRIS INTERNATIONAL

  50. Slide 50: Lucio A. Noto

    Lucio A. Noto PHILIP NORRIS INTERNATIONAL

  51. Slide 51: Carlos Slim Helú

    Carlos Slim Helu uIP MORRIS INTERNATIONAL

  52. Slide 52: Stephen M. Wolf

    Stephen M. Wolf uIP MORRIS INTERNATIONAL

  53. Slide 53: Annual Meeting of Stockholders

    Annual Meeting of Stockholders May 11, 2011

  54. Slide 54: Glossary and Reconciliation of Non-GAAP Measures

    Glossary and Reconciliation of Non-GAAP Measures

  55. Slide 55: Glossary

    Glossary ● PMI stands for Philip Morris International Inc. and its subsidiaries ● References to PMI volumes refer to PMI cigarette shipment data, unless otherwise stated ● Industry volume and market shares are the latest data available from a number of internal and external sources ● Organic volume

  56. Slide 56: 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 March 31, ($ in millions) (Unaudited) % Change in Reported Net Revenues 2011 2010 excluding Excise Taxes Reported Net Reported Net Reve

  57. Slide 57: 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

  58. Slide 58: 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 March 31, (Unaudited) 2011 2010 % Change Reported Diluted EPS $ 1.06 $ 0.90 17.8% A

  59. Slide 59: 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 Years Ended December 31, ($ in millions) (Unaudited) % Change in Reported Net Revenues 2010 2009 excluding Excise Taxes Reported Net Reported Net Reve

  60. Slide 60: 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 Years Ended D

  61. Slide 61: 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 Years Ended December 31, (Unaudited) 2010 2009 % Change Reported Diluted EPS $ 3.92 $ 3.24 21.0% A

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