Philip Morris International Inc · NYSE:PM
Philip Morris International — J. P. Morgan Global Tobacco Conference 2009
74 slides from Philip Morris International's conference presentation, Jun 26, 2009
Slide 1: J. P. Morgan Global Tobacco Conference
Hermann Waldemer Chief Financial Officer J. P. Morgan Global Tobacco Conference London, 26 June 2009
Slide 2: Forward-Looking, Cautionary Statements and Use of Non-GAAP Measures
Forward-Looking, Cautionary Statements and Use of Non-GAAP Measures 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 Litig
Slide 3: First-Quarter 2009 Results
First-Quarter 2009 Results Growth Q1, 2009 vs. Q1, 2008 Increase / Excl. Q1 2009 (Decrease) Acquisitions Cigarette Volume (units billion) 203.4 - %(a) (1.1)%(b) Excl. Currency Net Revenues ($ billion)(c) 5.6 (5.5)% 6.3% OCI ($ billion) 2.4 (7.0)% 8.8% Reported Diluted EPS ($ / share) 0.74 (6.3)% 12.
Slide 4: Key Business Drivers
Key Business Drivers Strong revenue growth driven by higher prices A generally manageable fiscal environment Softer overall consumption levels Slightly unfavorable product mix, reflecting some consumer down-trading in specific markets A solid share performance in our key markets Growing
Slide 5: Revenue Growth
Revenue Growth Since October 2008, PMI has increased prices notably in: EU EEMA Asia LA & Canada Czech Rep. Kazakhstan Australia Argentina Germany Romania Hong Kong Brazil Greece Russia Indonesia Canada Italy Serbia Pakistan Colombia Netherlands Slovenia Philippines Costa Rica Spain Turkey Taiwan
Slide 6: Pricing Variance
Pricing Variance ($ million) 358 269 Q1, 2008 Q1, 2009 Source: PMI Financials 6
Slide 7: Spain – Pricing
Spain – Pricing Note: Tax (RSP/pack) Old New Variance Pass-on Marlboro KS 3.10 3.45 0.35 0.19 Chesterfield 2.85 3.20 0.35 0.19 Marlboro Pocket Pack 2.65 3.00 0.35 0.19 L&M 2.50 2.85 0.35 0.30 Next 2.45 2.80 0.35 0.34 Source: PMI Finance 7
Slide 8: Pricing
Pricing Pricing is the key to revenue and profitability growth in developed markets where volumes are declining Pricing has also helped boost unit margins and profitability in emerging markets This year, pricing in emerging markets is also helping to partially offset the unfavorable impact of
Slide 9: Fiscal Environment
Fiscal Environment Fairer and generally more reasonable excise tax environment Balanced excise tax structures in place in essentially all our top 25 OCI markets 9
Slide 10: Minimum Excise Taxes in the EU
Minimum Excise Taxes in the EU 1995 EU countries with Minimum Excise Taxes 2003 2010(a) 2005 1992 2004 1980 1992 2001 2004 1976 1995 1995 2004 2006 2004 2005 2003 2005 2006 2005 (a) Denmark will implement MET as of Jan 1st, 2010 2000 2004 10
Slide 11: Fiscal Environment
Fiscal Environment Fairer and generally more reasonable excise tax environment Balanced excise tax structures in place in essentially all our top 25 OCI markets Higher cigarette retail prices are boosting government revenues Most governments appear to recognize that large excise tax increase
Slide 12: Ukraine – Excise Taxation
Ukraine – Excise Taxation 2008 2009 Jan Oct Jan May Excise Taxes Specific tax (UAH/’000) 14.00 30.00 37.50 60.00 Ad-valorem tax (%) 12.5% 16.0% 16.0% 20.0% Min. Excise Tax (UAH/’000) 18.00 40.00 47.00 100.00 Source: Ukrainian Ministry of Finance 12
Slide 13: Ukraine - Pricing
Ukraine - Pricing 2008 2009 Jan Feb Jul Oct Jan Mar Apr May Retail Prices (UAH/Pack) Parliament 7.00 - 7.50 8.00 8.50 9.00 - 11.00 Marlboro 4.75 5.00 - 6.00 6.25 6.50 - 8.00 Chesterfield 3.10 3.25 3.40 4.00 4.50 5.00 - 6.50 L&M 2.90 - 3.00 3.60 4.00 4.40 - 6.00 Vatra 1.45 1.55 1.60 2.20 2.50 2.90 3.
Slide 14: Ukraine – Consumer Prices (May 2009)
Ukraine – Consumer Prices (May 2009) Price (UAH) Price (USD) Cinema Ticket 50.00 6.36 Budweiser beer (imported) 21.90 2.79 Colgate toothpaste 18.00 2.29 Big Mac 14.00 1.78 Marlboro 8.00 1.02 Milk (1 liter) 5.66 0.72 Bread (500g) 5.00 0.64 Coca-Cola (0.5 liters) 4.10 0.52 Obolon beer (local) 3.50 0.4
Slide 15: Industry Volume
Industry Volume Economic crisis and unemployment, as well as higher retail prices, driving weaker industry volumes across emerging markets 15
Slide 16: Industry Volume
Industry Volume Economic crisis and unemployment, as well as higher retail prices, driving weaker industry volumes across emerging markets EU markets generally declining at or near underlying longer-term tendency of 2.5% to 3.0% Source: PMI GIMS estimates 16
Slide 17: Industry Volume
Industry Volume Economic crisis and unemployment, as well as higher retail prices, driving weaker industry volumes across emerging markets EU markets generally declining at or near underlying longer-term tendency of 2.5% to 3.0% Spain suffered a 10.0% industry volume decline in Q1, 2009, notab
Slide 18: Industry Volume
Industry Volume Economic crisis and unemployment, as well as higher retail prices, driving weaker industry volumes across emerging markets EU markets generally declining at or near underlying longer-term tendency of 2.5% to 3.0% Spain suffered a 10.0% industry volume decline in Q1, 2009, notab
Slide 19: Consumer Behavior
Consumer Behavior No broad-based trend towards consumer down- trading on a global basis Our product mix is expected to be slightly unfavorable this year Trends vary by markets: ‐ Gradual overall consumer down-trading (e.g. Russia, Spain) ‐ Strong but slightly declining premium segments (e.g. M
Slide 20: Russia – Price Segment Shares
Russia – Price Segment Shares Low / Value Mid Premium & Above (%) 100 13.9 16.0 16.8 16.7 16.5 22.0 24.0 24.9 25.0 25.0 64.1 60.0 58.3 58.3 58.5 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 April 2007 2008 2009 Source: A.C. Nielsen 20
Slide 21: Russia – PMI Volume by Price Segment
Russia – PMI Volume by Price Segment Prem. & Low / Prem. & Low / Above Value Above Value 25% 23% 44% 50% 27% 31% Mid Mid Q1, 2008 YTD May, 2009 Source: PMI Finance 21
Slide 22: Spain – Premium Segment
Spain – Premium Segment (%) 17.8 16.1 Other 16.1 14.7 Marlboro(a) Q1, 2008 Q1, 2009 (a) Excludes the pocket pack. Total Marlboro market share in Spain was 15.6% in Q1, 2009. Source: PMI GIMS estimates 22
Slide 23: Mexico – Price Segment Shares
Mexico – Price Segment Shares Low Mid Premium (%) 100 64.2 66.6 65.9 65.2 65.2 15.9 11.4 11.0 10.9 11.2 19.9 22.0 23.1 23.9 23.6 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Apr / May 2007 2008 2009 Source: PMI GIMS estimates 23
Slide 24: Turkey – Price Segment Shares
Turkey – Price Segment Shares Low / Value Mid Premium & Above (%) 100 18.5 19.1 21.0 20.7 20.8 27.5 26.4 26.1 24.6 24.0 54.0 54.5 52.9 54.7 55.2 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 April 2007 2008 2009 Source: A.C. Nielsen 24
Slide 25: Poland – Price Segment Shares
Poland – Price Segment Shares Low Mid Premium (%) 100 11.9 12.1 12.4 12.7 12.9 30.6 30.2 29.0 29.8 29.9 57.5 57.7 58.6 57.5 57.2 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 April 2007 2008 2009 Source: A.C. Nielsen 25
Slide 26: Top 15 International Brands (2008)
Top 15 International Brands (2008) Marlboro 311 Winston M ild Seven L&M 92 Kent Pall M all PMI Camel BAT Chesterfield 41 JT Bond Street 39 Viceroy Philip Morris 38 Parliament 37 Dunhill LD Lark 26 (bio) 0 50 100 150 200 250 300 350 Source: PMI data from Financials. Competitive data for BAT and JT In
Slide 27: PMI Brand Portfolio
PMI Brand Portfolio International Local Heritage Premium & Above Mid-Price Low-Price 27
Slide 28: EEMA Market Shares
EEMA Market Shares (%) 45 42.4 42.7 Turkey 40.8 36.4 Ukraine 35.8 34.7 30 Q1 Q2 Q3 Q4 Q1 Apr / May 2008 2009 Source: A.C. Nielsen. Note: Ukraine shares only available through April 2009 28
Slide 29: Turkey – Parliament
Turkey – Parliament SoM (%) Q1, 09 2004 2005 2006 2007 2008 8.4% Reserve Online Laser Launch Perforation Oct 07 Nov 06 Pack Revamp Pack & Tipping Jan 06 Paper Revamp Jun 07 Q1, 04 3.6% Super Slims Pack Launch Revamp Apr 04 Jun 04 Source: A.C. Nielsen 29
Slide 30: Russia – PMI Market Share
Russia – PMI Market Share (%) 30 25.1 25.1 24.8 20 Q1 Q2 Q3 Q4 Q1 April 2008 2009 Source: A.C. Nielsen 30
Slide 31: Russia – Bond Street
Russia – Bond Street Success in keeping Russian smokers within our franchise reflects breadth of our portfolio Shipments of low-price Bond Street up 27.7% in Q1, 2009 Source: A.C. Nielsen 31
Slide 32: Indonesia – Market Shares
Indonesia – Market Shares (%) 12 A Mild 10.5 10.5 10.5 9.9 9.5 6 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 April 2007 2008 2009 Source: A.C. Nielsen 32
Slide 33: Indonesia – A Volution
Indonesia – A Volution A Mild’s success bolstered by the launch of A Volution First slimmer kretek, available in regular and menthol variants A Volution market share of 0.2% in April 2009 Source: A.C. Nielsen 33
Slide 34: Latin America Market Shares
Latin America Market Shares (%) 75 73.6 (a) 72.6 Argentina 70.7 70 69.2 68.9 Mexico 67.0 65 Q1 Q2 Q3 Q4 Q1 April / May 2008 2009 (a) April 2009 data for Argentina Source: PMI GIMS estimates 34
Slide 35: Mexico – Marlboro Fresh
Mexico – Marlboro Fresh Marlboro market share in Mexico was 48.3% in Q1, 2009 Innovative Marlboro Fresh, with a menthol thread in the filter, reached 0.5% market share in Q1, 2009 Source: PMI GIMS estimates 35
Slide 36: Western Europe Market Shares
Western Europe Market Shares (%) 55 54.7 54.3 Italy 53.6 40.9 41.0 41.0 France 38.4 Germany 35.9 35.8 31.8 31.8 32.1 Spain 25 Q1 Q2 Q3 Q4 Q1 Apr / May Source: PMI GIMS estimates 2008 2009 36
Slide 37: Western Europe – Marlboro Innovation
Western Europe – Marlboro Innovation Marlboro resilient in Europe, supported by new initiatives Shorter Marlboro Compact, had 0.6% market share in Italy in Q1, 2009 Marlboro Pocket Pack reached 0.9% market share in Spain in Q1, 2009 Source: PMI GIMS estimates 37
Slide 38: Marlboro Gold – New Pack
Marlboro Gold – New Pack After successful test markets, new Marlboro Gold pack being rolled-out Very positive response from German adult consumers 38
Slide 39: Key Consumer Preferences
Key Consumer Preferences Lighter-tasting, smoother products Technology / innovation Slimmer diameter products Menthol 39
Slide 40: Turkey – Charcoal Segment
Turkey – Charcoal Segment (%) 31.1 26.0 Others 23.1 PMI Q1, 2007 Q1, 2008 Q1, 2009 Source: A.C. Nielsen 40
Slide 41: Poland – Slimmer Diameter Segment
Poland – Slimmer Diameter Segment (%) 15.5 13.3 10.2 Others PMI Q1, 2007 Q1, 2008 Q1, 2009 Source: A.C. Nielsen 41
Slide 42: Poland – L&M Link
Poland – L&M Link L&M Link key driver behind our success in slims segment in Poland L&M Link achieved 3.1% total market share Q1, 2009 Source: A.C. Nielsen 42
Slide 43: Japan – Menthol Segment
Japan – Menthol Segment Menthol Share of Market Menthol Segment Share (Q1, 2009) 26.9 21.8 22.4 20.5 12.2 11.4 9.0 7.4 Q1 Q1 Q1 Marlboro Pianis. Kool Virginia Lark 2007 2008 2009 Slims Source: Tobacco Institute of Japan 43
Slide 44: Japan – Marlboro Black Menthol
Japan – Marlboro Black Menthol Launch of Marlboro Black Menthol in Japan was PMI's most successful ever Marlboro Black Menthol achieved a 1.0% market share in Japan in Q1, 2009 Marlboro family market share rose from 9.8% in Q1, 2008 to 10.4% in Q1, 2009 PMI overall share in Japan at 23.9% So
Slide 45: Business Perspectives
Business Perspectives Fundamentals of our business are in very good shape Our growth strategy going forward remains intact Marlboro is a key element of this strategy Successful innovations in framework of new Marlboro architecture 45
Slide 46: Marlboro Architecture
Marlboro Architecture Red Gold Fresh “Flavor “Smooth taste “Fresh taste enjoyment” and style” sensations” 46
Slide 47: Marlboro Filter Plus
PHILIP MORRIS INTERNATIONAL Marlboro Filter Plus ~ Marlbora FILTER PLUS ONE Blt AKIKO CHHAEe Bi(LAvoeRt eaves. (Hicou Tis. MESBEDR-L-A-F y www.mhlw.go.jp/topics/tobacco/main. htm! eC BARK ES)
Slide 48: Marlboro Filter Plus
Marlboro Filter Plus April 2009 Market Shares (%) 3 2.6 2.5 1.8 1.3 0.9 0.6 0.6 0.3 0.3 0 Brazil Japan Kuwait Paraguay Romania Almaty Kiev Moscow St Pete. Source: A.C. Nielsen and PMI estimates 48
Slide 49: Marlboro Red Family
FILTER CIGARETTES Marlhorn Eary PuSenje | a R Rauchen Rauchen bia i i wat kann tédlich kann tédlich J | 09 sein sein
Slide 50: Marlboro Red – New Pack
Marlboro Red – New Pack 50
Slide 51: Marlboro Gold
Marlboro Gold EU Region Markets(a) Austria Norway Denmark Poland France Sweden Germany Switzerland Italy (a) Launches as of 31 May, 2009. 51
Slide 52: Marlboro Gold Family
PHILIP MORRIS INTERNATIONAL Marlboro Gold Family Ma rlhor Ma Marlhory
Slide 53: Marlboro Gold Advance
Marlboro Gold Advance Marlboro Gold Advance is a smoother, full-flavor product Launched nationally in France after successful test market 53
Slide 54: Marlboro Gold Touch
Marlboro Gold Touch Marlboro Gold Touch is a new innovative offering in an unprecedented cigarette format Launched in Austria, Greece and Italy 54
Slide 55: Marlboro Gold Edge
Marlboro Gold Edge Marlboro Gold Edge is a super-slims product, which has been launched in Hungary, Poland, Russia and Ukraine 55
Slide 56: Marlboro Gold Edge
Marlboro Gold Edge Achieved segment shares of 2.4% in Poland and 0.7% in Russia in April and PMI estimates 56
Slide 57: Marlboro Gold Smooth
Marlboro Gold Smooth Marlboro Gold Smooth is a 1mg tar product Just launched in Kuwait and Saudi Arabia, where the 1mg tar segment is growing 57
Slide 58: Marlboro Fresh
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Slide 59: Marlboro Fresh
Marlboro Fresh (%) PMI Hong Kong Market Shares 2009 20 15.9 15.9 14.5 14.8 14.0 Black 0.7 2.9 3.0 Menthol 2.8 2.9 2.7 Crisp/Fresh 2.2 2.2 Mint Other 11.2 11.6 11.4 10.8 10.7 Menthol 0 January February March April May Source: A.C. Nielsen 59
Slide 60: Marlboro Fresh
PHILIP MORRIS INTERNATIONAL Marlboro Fresh
Slide 61: Marlboro Smoker Shares – EU Region (2008)
Marlboro Smoker Shares – EU Region (2008) (%) LA-24 (“YAS”) 50 LA-64 0 Belgium Czech France Germany Greece Italy Neth. Poland Portugal Spain Switz. UK Source: PMI Global Consumer Tracking Survey 61
Slide 62: Marlboro YAS Smoker Shares - Germany
Marlboro YAS Smoker Shares - Germany (%) 30 20 TOTAL Red 10 Gold 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr 2007 2008 2009 Source: PMI Global Consumer Tracking Survey 62
Slide 63: Marlboro Smoker Shares – non-EU (2008)
Marlboro Smoker Shares – non-EU (2008) (%) LA-24 (“YAS”) 70 LA-64 0 Egypt Russia Saudi Turkey Ukraine Indon. Japan Korea Philip. Argentina Brazil Mexico Source: PMI Global Consumer Tracking Survey 63
Slide 64: Competitive Landscape (2008)
Competitive Landscape (2008)(a) Market Shares excl USA Market Shares excl. PRC & USA PMI Other Other PMI 15.6% 15.6% 25.8% 25.8% BAT 12.8% 9.3% 39.3% 11.0% IMT(b) 21.0% 5.7% JT 18.1% BAT CNTC IMT(b) JT (a) Volumes are on a calendar basis, except for IMT, who reports on a fiscal year ending September
Slide 65: Acquisitions
Acquisitions Complements organic growth Provides often unique opportunities to enter new markets or significantly step up our presence: ‐ Sampoerna in Indonesia ‐ Rothmans Inc. in Canada Acquisitions in other tobacco categories: ‐ Interval in France and other EU markets ‐ Petterøes in Norway
Slide 66: Capital Structure
Capital Structure Free cash flow of $6.8 billion in 2008(a) PMI committed to maintain strong credit ratings Bond issues for equivalent of $10.1 billion in 2008 and $3.0 billion in 2009 Well-laddered maturities and reasonable all-in long- term average interest rate of 5.6% Over $6 billion o
Slide 67: Shareholder Returns
Shareholder Returns Dividend raised by 17.4% in August 2008 to an annualized rate of $2.16 / share Willingness in 2009 to exceed our 65% dividend payout target $13 billion two-year share repurchase program initiated in May 2008 $5.4 billion of share repurchases in 2008 and similar amount ant
Slide 68: Summary
Summary Tobacco sector resilient but not immune Weaker industry volume and some consumer downtrading Prices increased to enhance profitability Manageable excise tax and regulatory environment Cost saving programs on track Substantial cash flows and excellent liquidity Dividends and sha
Slide 69: Constant Currency Mid to Long-Term Annual Financial Growth Targets
Constant Currency Mid to Long-Term Annual Financial Growth Targets Targets Net Revenues 4 – 6% Operating Income 6 – 8% EPS 10 – 12% (a) Excluding excise taxes. Source: PMI Financials 69
Slide 70: Questions & Answers
Hermann Waldemer Chief Financial Officer J. P. Morgan Global Tobacco Conference London, 26 June 2009 Questions & Answers
Slide 71: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency For Quarters Ended March 31, % Change on Reported (in millions) Net Revenues excluding 2009 (Unaudited) 2008 (1) Excise Taxes Reported Reported Net Reported Net Revenues Net Revenues excluding Revenues Reported Less excluding
Slide 72: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Reconciliation of Reported Diluted EPS to Reported Diluted EPS, Excluding Currency For Quarters Ended March 31, (Unaudited) 2009 2008 % Change Reported Diluted EPS(1) $ 0.74 $ 0.79 (6.3)% Add: Currency Impact 0.15 Reported Diluted EPS, Excluding Currency $ 0.89 $
Slide 73: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS and Adjusted Diluted EPS, Excluding Currency For Quarters Ended March 31, (Unaudited) 2009 2008 % Change Reported Diluted EPS(1) $ 0.74 $ 0.79 (6.3)% Adjustments: Asset impairment and exit costs - 0.01
Slide 74: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Reconciliation of Operating Companies Income to Operating Income For Quarters Ended March 31, (in millions) (Unaudited) First Quarter 2009 First Quarter 2008 EU $ 967 $ 1,167 EEMA 586 680 Asia 661 550 Latin America & Canada 155 149 Operating Companies Income $ 2,3
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