Philip Morris International Inc · NYSE:PM
Philip Morris International — Q3 2012 Earnings Presentation
43 slides from Philip Morris International's earnings presentation, Oct 18, 2012
Slide 1: 2012 Third-Quarter Results
Exhibit 99.3 2012 Third-Quarter Results October 18, 2012
Slide 2: Introduction
Introduction Unless otherwise stated, we will be talking about results for the third- quarter 2012 and comparing them with the same period in 2011 References to PMI volumes refer to PMI shipment data, unless otherwise stated Industry volume and market shares are the latest data available from a numb
Slide 3: Forward-Looking and Cautionary Statements
Forward-Looking and Cautionary Statements This presentation and related discussion contain forward-looking statements. Achievement of projected results is subject to risks, uncertainties and inaccurate assumptions, and PMI is identifying important factors that, individually or in the aggregate, coul
Slide 4: 2012 EPS Guidance
2012 EPS Guidance Narrowed 2012 reported diluted EPS guidance range to $5.12 to $5.18, compared to $4.85 in 2011 New guidance includes: 23 cents for unfavorable currency 5 cents for tax charge 2 cents for asset impairment and exit costs Excluding the impact of currency, tax charge and asset impairme
Slide 5: Q3, 2012: Very Difficult Comparisons due to Exceptional Results in Q3, 2011
Q3, 2012: Very Difficult Comparisons due to Exceptional Results in Q3, 2011 Q3, 2011 vs. PY Growth Rates Q3, 2012 vs. PY Growth Rates (%) (%) 40 40 33.0 23.7 15.7 5.8 4.4 4.5 3.4 (1.3) (2) (2) Organic Net Adjusted Adjusted Organic Net Adjusted Adjusted Cigarette Revenues OCI Diluted Cigarette Revenu
Slide 6: YTD Sept, 2012: Volume Growth and Strong Financial Results
YTD Sept, 2012: Volume Growth and Strong Financial Results YTD Sept, 2012 vs. PY (%) 12 10.9 6.9 5.4 0.7 0 Organic Cigarette Net Adjusted Adjusted Volume Revenues(a) OCI (a) Diluted EPS(b) (a) Excluding currency and acquisitions (b) Excluding currency Source: PMI Financials 6
Slide 7: EU Region: Unemployment Depressing Cigarette Tax-Paid Volumes
EU Region: Unemployment Depressing Cigarette Tax-Paid Volumes Industry Volume Decline (%) Average Unemployment Rates in EU (%) Q3, 2012 vs. PY Gre. 10.3 10.5 (15.9) 9.7 Spa. (12.8) Ita. (10.1) Port. (8.9) Pol. (7.5) Neth. (5.9) (5.7) UK (4.6) Fra. (3.5) Cze. (2.0) Ger. August May August 2011 2012 20
Slide 8: Italy: PMI Share Growth in Cigarettes and Fine Cut
Italy: PMI Share Growth in Cigarettes and Fine Cut PMI Market Shares (%) Adult smokers switching to Total PMI Other lower-taxed fine cut, and illicit Chest. PM trade Diana Marlboro Cigarette industry volume declined by 10.1% in Q3 2012, while fine cut increased by 41% PMI share growth in cigarettes,
Slide 9: Germany: Moderate Decline in Cigarette Market
Germany: Moderate Decline in Cigarette Market PMI Market Shares (%) Cigarette industry volume Total PMI 35.2 35.2 Other decline of just 2.0% in Chest. L&M Q3, 2012, and fine cut Marlboro increased by 2.3% 10.3 10.2 Marlboro gained share in Q3, 2012 to reach 21.0% of the cigarette category 14.7 14.7
Slide 10: EU Region: Good Underlying Business Performance But Tough Economic Conditions
EU Region: Good Underlying Business Performance But Tough Economic Conditions Organic cigarette volume decline of 8.1% in Q3, 2012 Organic fine cut volume increased 15.2% Marlboro cigarette market share grew by 0.4 points to 18.4% in Q3, 2012, with gains in Belgium, Germany, Greece, Italy and across
Slide 11: Asia Region: Indonesia Volume Gains, but Difficult Comparisons in Japan and Korea
Asia Region: Indonesia Volume Gains, but Difficult Comparisons in Japan and Korea % Change vs. Prior Year Q3, 2011 Q3, 2012 Volume: Japan (47.1 )% (13.4)% Korea (22.4 )% (8.9)% Indonesia (22.5 )% (13.0)% Total Asia Region (12.6 )% (0.6)% Adjusted OCI (a) 75.1 % 1.2 % (a) Excluding currency and acqui
Slide 12: Japan: Very Difficult Comparisons in Q3, 2012
Japan: Very Difficult Comparisons in Q3, 2012 PMI Market Share (%) Industry volume declined 7.7% compared to the 27.9 27.5 27.8 Total PMI distorted Q3, 2011 7.2 6.8 7.0 Other Full-year 2012 industry volume expected to be in line with 2011 8.7 8.2 8.4 Lark PMI share of 27.5% in Q3, 2012 reflects cont
Slide 13: Indonesia: Unique Growth Opportunity for PMI
Indonesia: Unique Growth Opportunity for PMI PMI Market Share (%) Industry volume expected 31.6 3.3pp 34.9 Total PMI 4.7 Marlboro to grow 6-7% for full year 4.3 PMI volume up a further 15.1 16.5 Other Kretek 13.0% and share grew 3.3 points in Q3, 2012 12.2 13.7 Sampoerna A Decree 191 expected to be
Slide 14: Plain Packaging: Australia
Plain Packaging: Australia The High Court issued its reasoning on plain packaging law Despite the Court’s decision, 6 of the 7 judges recognized that plain packaging deprives tobacco companies of valuable intellectual property The recognition that plain packaging results in a deprivation of property
Slide 15: Plain Packaging: Other International Challenges
Plain Packaging: Other International Challenges Three countries have already initiated proceedings against Australia before the World Trade Organization PM Asia is suing the Australian government for multiple breaches of its Bilateral Investment Treaty with Hong Kong Decisions in these cases are exp
Slide 16: Latin America & Canada: Solid Share Momentum Despite Volume Decline
Latin America & Canada: Solid Share Momentum Despite Volume Decline PMI Market Shares Growth Q3, 2012 vs. PY (%) Q3, 2011 Q3, 2012 Variance 12 10.5 Argentina 73.9% 75.0% 1.1pp Brazil 13.3 14.8 1.5 7.3 Colombia 48.4 51.0 2.6 Mexico 73.2 73.6 0.4 Cigarette Volume Strong Marlboro market share Net Adjus
Slide 17: EEMA Region: Excellent Results Driven by Russia
EEMA Region: Excellent Results Driven by Russia % Change vs. Prior Year Q3, 2011 Q3, 2012 Volume: Russia (3.5)% (4.5 )% Turkey (21.6 )% (1.8)% Egypt (19.9)% (54.4 )% Total EEMA Region (5.1 )% (3.0)% Adjusted OCI(a) (13.8 )% (17.3 )% (a) Excluding currency and acquisitions Source: PMI Financials 17
Slide 18: Russia: PMI Market Share Momentum
Russia: PMI Market Share Momentum PMI Market Share (%) RUB 3/pack July tax-driven price increase +0.7pp +0.6pp Industry volume expected to be 26.5 26.2 down slightly in full-year 2012 25.8 25.6 PMI volume increased by 4.5% in Q3, 2012 PMI share momentum continued, as we leverage investments in brand
Slide 19: Russia: Excise Tax Structure Proposal (2013-2015)
Russia: Excise Tax Structure Proposal (2013-2015) Government approved amendments to Tax Code in September 2013-2014 excise tax rates for cigarettes remain as per current Tax Code Duma to review by mid-November and vote by year-end 2012 2013 2014 2015 Ad Valorem Excise Tax (% of RSP) 7.5% 8.0% 8.5% 9
Slide 20: Solid Marlboro Market Share Performance
Solid Marlboro Market Share Performance Market Shares YTD Sept 2009 2010 2011 2012 Asia(a) 5.8% 6.1% 6.4% 6.5% EEMA 6.4 6.5 6.8 7.0 EU 18.4 18.2 18.0 18.2 LA&C 13.8 14.1 13.8 14.3 Total (a)(b) 9.0 9.1 9.2 9.3 (a) Excluding China (b) Also excluding the USA Source: PMI estimates 20
Slide 21: Parliament: Double-Digit Volume Increase
Parliament: Double-Digit Volume Increase Priced at a premium to Marlboro in most markets: superior margins Parliament volume increased by 10.7% in Q3, 2012, and by 9.4% PMI Market Shares YTD September, 2012 YTD Sept, 2012 vs. PY (%) Parliament gained share in YTD Sept, 2011 YTD Sept, 2012 four of it
Slide 22: PMI Expanding its Market Share
PMI Expanding its Market Share Top 30 PMI OCI Markets (a) (%) (a) Excluding duty free Note: Historical data adjusted for pro forma inclusion of business combination with Fortune Tobacco Corporation in the Philippines and Jordan acquisition Source: PMI Financials and PMI estimates 22
Slide 23: Favorable Pricing Continued in Q3, 2012
Favorable Pricing Continued in Q3, 2012 ($ million) 1,500 Total Q3 Q2 Q1 0 Note: Variances at OCI level Source: PMI Financials 23
Slide 24: Margin Expansion
Margin Expansion Adjusted OCI Margins YTD Sept YTD Sept 2011 2012(a) Variance (a) Asia (47.2 )% 47.9 % (0.7)pp EEMA (42.3 )% 45.4 (3.1 ) EU (51.0 )% 50.2 (0.8) LA&C (32.0 )% 32.1 (0.1 ) Total (45.5 )% 46.2 (0.7 ) (a) Excluding currency and acquisitions Source: PMI Financials 24
Slide 25: Free Cash Flow Impacted by Currency and Working Capital Requirements
Free Cash Flow(a) Impacted by Currency and Working Capital Requirements ($ million) (270) 9,000 379 (1,935) (197) 75 7,052 YTD Sept Net Currency Working Capital Other YTD Sept 2011 Earnings Capital Expenditures 2012 (a) Free cash flow equals net cash provided by operating activities less capital exp
Slide 26: Very Significant Dividend Increases
Very Significant Dividend Increases +84.8% $3.40 +10.4% +20.3% +10.3% +7.4% $1.84 +17.4% 2008 Aug Sept Sept Sept Sept 2012 2008 2009 2010 2011 2012 Note: Dividends for 2008 and 2012 are annualized rates. 2008 annualized rate is based on a quarterly dividend of $0.46 per common share, declared June 1
Slide 27: Share Repurchase Program
Share Repurchase Program In Q3, 2012, PMI spent $1.5 billion to repurchase 16.7 million shares Since March 2008 spin through end of September 2012, $25.9 billion spent to repurchase 466.6 million shares, representing 22.1% of shares outstanding at that time, at an average price of $55.49 per share T
Slide 28: Conclusion
Conclusion Q3, 2012, as expected, a difficult quarter due to tough comparisons Confident to achieve 1% organic volume annual growth target for 2012 driven by strong performances in EEMA and Asia Regions Narrowed 2012 reported diluted EPS guidance range to $5.12 to $5.18, compared to $4.85 in 2011 Ex
Slide 29: Questions & Answers
2012 Third-Quarter Results Questions & Answers
Slide 30: PHILIP For Revenues
PHILIP For ($ Revenues excluding Less 5,125 5,174 2,389 % 2012 Reported Operating Companies Income 1,047 1,297 $267 6,904 19,592 1,085 3,696 inthe Change (17) Excise millions) 2011 2,918 2,413 1,562 (59) (9) Quarters Currency $MORRIS 284 $Companies Net Ne Operating 1,306 4,779 (151) (236) excluding
Slide 31: PHILIP Reconciliation For
PHILIP Reconciliation For ($ % Reported 1,047 1,297 267 2012 Adjusted Operating Companies Income excluding Currency 1,106 1,330 $294 (1) 1,085 3,696 1,236 3,966 inFor Change the (10) 909 millions) 2011 - the (24) 2,418 2,865 1,047 Quarters & excluding $MORRIS 32.3% 277 Adjusted Operating Less & -Exc
Slide 32: PHILIP For (Unaudited)
PHILIP For 2012 (Unaudited) Reported Asset Adjustments: Tax Currency Less: Adjusted the items 2011 impairment Quarters MORRIS Diluted impact 0.05 % Change - Ended (0.07) EPS EPS, and INTERNATIONAL exit $excluding September 1.38 1.32 costs $ 1.37 1.35 0.01 Currency 30, 0.7% (2.2)% 0.02 INC.$and 1.45S
Slide 33: PHILIP For (Unaudited)
PHILIP For 2012 (Unaudited) Currency Less: Reported the 2011 Quarters MORRIS Diluted impact % Change Ended (0.07) EPS EPS, INTERNATIONAL $excluding September 1.32 $ 1.35 Currency 30, (2.2)% INC.$and 1.39 Subsidiaries $ 1.35 3.0%Reconciliation of Non-GAAP Measures Reconciliation of Reported Diluted E
Slide 34: PHILIP For Less
PHILIP For ($ Less Revenues 14,256 15,668 7,073 % 2012 Reported Operating Companies Income 2,805 4,068 $753 20,654 57,651 3,232 10,858 inthe Change (59) Revenues millions) 2011 4,634 (183) 47 8,063 7,275 Nine Currency $MORRIS 812 $4,021 Net Operating Companies (306) Taxes Companies Income in excludi
Slide 35: PHILIP Reconciliation For
PHILIP Reconciliation For ($ % Reported 2,805 4,068 753 2012 Adjusted Operating Companies Income excluding Currency 2,988 4,045 $838 (1) 3,232 10,858 3,538 11,409 inFor Change the (26) 2,611 millions) 2011 - the (24) 6,604 8,452 2,805 Nine & excluding $MORRIS 779 $Adjusted Operating Less & -Excise 7
Slide 36: PHILIP For (Unaudited)
PHILIP For 2012 (Unaudited) Reported Asset Adjustments: Tax Currency Less: Adjusted the items 2011 impairment Nine MORRIS Diluted impact 0.05 %Months Change (0.02) (0.19) EPS EPS, and INTERNATIONAL Ended exit $excluding 3.99 3.92 costs September $ 3.77 3.76 0.02 Currency 5.8% 4.3% 0.03 INC. 30, $and
Slide 37: PHILIP For (Unaudited)
PHILIP For 2012 (Unaudited) Reported Currency Less: the 2011 Nine MORRIS Diluted impact %Months Change (0.19) EPS INTERNATIONAL Ended $ 3.92September $ 3.76 4.3% INC. 30, and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Reported Diluted EPS to Reported Diluted EPS, excluding Cu
Slide 38: PHILIP Reconciliation For
PHILIP Reconciliation For Reported 2011 (Unaudited) Asset Adjustments: Tax Adjusted the items impairment Year MORRIS Diluted (0.02) Ended of EPS Reported and INTERNATIONAL December exit $ 4.88 4.85 costs Diluted 31, 0.05EPSINC. to Adjusted and Subsidiaries Diluted EPS Reconciliation of Non-GAAP Meas
Slide 39: PHILIP Reconciliation Capital
PHILIP Reconciliation ($ Capital Free For September 2012 Currency Less: Net excluding (a)in Operating the cash cash millions) 2011 Quarters expenditures MORRIS provided impact flow flow, currency % 30,Change cash (Unaudited) September of $excluding and Ended 2,150 169 139 Operating INTERNATIONAL by
Slide 40: PHILIP For Revenues
PHILIP For ($ Revenues excluding Less 5,125 5,174 2,389 % 2012 Reported Operating Companies Income 1,047 1,297 $267 6,904 19,592 1,085 3,696 inthe Change (17) Excise millions) 2011 2,918 2,413 1,562 (59) (9) Quarters Currency $MORRIS 284 $Companies Net Ne Operating 1,306 4,779 (151) (236) excluding
Slide 41: PHILIP Reconciliation For
PHILIP Reconciliation For ($ % Reported 1,047 1,297 267 2012 Adjusted Operating Companies Income excluding Currency 1,106 1,330 $294 (1) 1,085 3,696 1,236 3,966 inFor Change the (10) 909 millions) 2011 - the (24) 2,418 2,865 1,047 Quarters & excluding $MORRIS 32.3% 277 Adjusted Operating Less & -Exc
Slide 42: PHILIP For (Unaudited)
PHILIP For 2012 (Unaudited) Reported Asset Adjustments: Tax Currency Less: Adjusted the items 2011 impairment Quarters MORRIS Diluted impact 0.05 % Change - Ended (0.07) EPS EPS, and INTERNATIONAL exit $excluding September 1.38 1.32 costs $ 1.37 1.35 0.01 Currency 30, 0.7% (2.2)% 0.02 INC.$and 1.45S
Slide 43: 2012 Third-Quarter Results
2012 Third-Quarter Results October 18, 2012
Philip Morris International — Q3 2012 Earnings Presentation on 6ix