Philip Morris International Inc · NYSE:PM
Philip Morris International — Investor Day (June 2010)
69 slides from Philip Morris International's investor day presentation, Jun 23, 2010
Slide 1: Investor Day – Asia Region
Investor Day – Asia Region Lausanne, June 23, 2010 Matteo Pellegrini President, Asia Region Philip Morris International
Slide 2: Agenda
Agenda ● Operating environment ● PMI strategic priorities in Asia ● Brand portfolio and innovations ● Key Asia markets: highlights ● Questions & Answers 2
Slide 3: Operating Environment 2009
Operating Environment 2009 • Population : 3.8 billion Korea Japan • Cigarette Volume: 3.4 trillion China Taiwan Cigarette Volume: Pakistan Hong Kong 1.2 trillion units (Excl. – China) Others India 15% Bangladesh Indonesia Thailand Philippines 22% Vietnam Bangladesh 6% Malaysia Pakistan Singapore 6%
Slide 4: GDP Per Capita in Key Markets
GDP Per Capita in 15 Key Markets ($ 000) 50 43.9 39.9 36.4 30.4 USA US $ 46,300 European Union US $ 33,100 Asia Pacific US $ 4,000 17.2 16.5 7.0 Asia: $ 4.0 3.9 3.5 2.3 1.8 1.1 1.0 0.9 0.6 0 Malaysia Japan Hong Kong Indonesia India Australia Pakistan Vietnam Thailand Singapore China Bangladesh South
Slide 5: GDP Growth and Unemployment Rates
GDP Growth and Unemployment Rates (%) Japan (%) Australia 7 7 7 7 5.1 4.7 4.1 3.8 4.0 5.6 5.2 4.8 2.0 2.3 2.0 4.4 4.2 2008 2009 4.7 3.3 0 0 2.6 2.4 2006 2007 2010 F (1.2) 1.3 (5.2) (7) (7) 0 0 GDP Growth Rate 2006 2007 2008 2009 2010 F Unemployment Rate (%) Indonesia (%) Philippines 12 12 12 12 10.3
Slide 6: Asia Region Results
Asia Region Results Shipment Volume Net Revenues 2005 - 2009 CAGR = 6.9% 2005 - 2009 CAGR = 7.2% (billions units) ($ million) 6,528 6,185 5,505 5,648 224 226 212 4,941 193 173 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Growth (%) Growth (%) 21.7 11.6 9.4 5.8 1.1 32.6 11.4 2.6 9.5 5.5 Source:
Slide 7: Asia Region Results
Asia Region Results Operating Companies Income 2005 - 2009 CAGR = 7.8% ($ million) 2,436 2,057 1,801 1,847 1,803 2005 2006 2007 2008 2009 Growth (%) 38.8 2.6 (2.4) 14.1 18.4 Source: PMI Financials 7
Slide 8: Asia Region Q1, 2010 Results
Asia Region Q1, 2010 Results Shipment Volume Net Revenues Operating Companies Income Growth: +11.4% +17.8 % +9.5 % + 0.6% (excl. acquisitions) +2.3 % (excl. curr & acq) (2.0) % (excl. curr & acq) (billion units) ($ million) ($ million) 100 2,000 1,873 850 724 1,590 661 63.2 56.8 0 0 0 Q1 2009 Q1 201
Slide 9: PMI Regional Market Share
PMI Regional Market Share Lakson PMFTC (%) 25 21.1 19.2 16.8 0 2006 2007 2008 2009 2010 Q1 Note: PMI market share includes FTC contribution in the Philippines in Q1, 2010. Asia excludes PRC, North Korea and Myanmar Source: PMI estimates 9
Slide 10: Regional Market Share Changes in Q1, 2010
Regional Market Share Changes in Q1, 2010 Impact from Business Combination 7.1 Share growth in the majority of markets in Q1 3.5 3.5 1.8 1.5 1.5 0.3 0.3 0.3 0.1 ID PK PH KR HK AU SG TW JP TH MY VN (0.2) (0.5) 2010 Q1 SoM PH KR HK AU SG TW JP TH MY VN ID PK 39.9 17.4 53.3 39.8 48.1 7.0 24.2 20.4 14.5
Slide 11: Asia Region Contribution to 2009 PMI Results
Asia Region Contribution to 2009 PMI Results Cigarette Shipment Volume Asia 26% Net Revenues Operating Companies Income Asia Asia 26% 24% Source: PMI Financials 11
Slide 12: Strategic Priorities
Strategic Priorities ● Marlboro and the new architecture ● Innovation pipeline 12
Slide 13: Strategic Priorities
Strategic Priorities ● Marlboro and the new architecture ● Innovation pipeline ● Regulatory and fiscal environments 13
Slide 14: Strategic Priorities
Strategic Priorities ● Marlboro and the new architecture ● Innovation pipeline ● Regulatory and fiscal environments ● Investing for growth: - Philippines - India 14
Slide 15: Marlboro Architecture
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Slide 16: Marlboro Black Menthol
Marlboro Black Menthol Marlboro Black Menthol Share of Market (%) Q1, 2010 2.9% 2.5% 1.3% 0.8% 0.6% 0.2% Hong Macau Japan(a) Malaysia Phil. Indonesia Kong Marlboro Black Menthol launched across Asia (a) Includes the performance of Marlboro Black Menthol One Source: A.C. Nielsen, Tobacco Institute of
Slide 17: Marlboro Ice Blast
Marlboro Ice Blast Marlboro Ice Blast SoM (%) April 2010 4.3% 2.9% Singapore Hong Kong Source: A.C. Nielsen and PMI estimates 17
Slide 18: Marlboro Performance 2009
Marlboro Performance 2009 Shipment Volume Growth vs. (billion units) 2008 Total Asia 69.8 +4.3% Japan 24.8 +0.8% Philippines 19.0 +5.1% Indonesia 11.7 +7.3% Korea 5.6 +22.4% Thailand 1.4 (6.5)% Malaysia 1.4 (14.8)% Hong Kong 1.3 (16.6)% China 1.3 +87.7% Singapore 0.8 +9.2% Others 2.5 (4.7)% 0 5 10 1
Slide 19: Marlboro Performance Q1, 2010
Marlboro Performance Q1, 2010 Shipment Volume Growth vs. (billion units) Q1 2009 Total Asia 18.2 +7.4% Japan 6.4 (1.0)% Philippines 5.2 +21.9% Indonesia 2.9 +0.0% Korea 1.4 +12.0% Thailand 0.4 +16.2% Malaysia 0.4 +1.7% Hong Kong 0.3 (6.4)% China 0.2 +100% Singapore 0.2 +8.9% Others 0.8 +2.5% 0 1 2 3
Slide 20: Japan
Japan ● Sizeable but declining market: - 25% smoking incidence - Average consumption of 20 cigarettes / day - Aging population ● Strong and balanced portfolio across the main price segments ● Continued innovation pipeline ● Strong Marlboro share growth momentum ● Pricing freedom key to increasing pr
Slide 21: Japan – Industry Volume
Japan – Industry Volume (billions units) 2000-2009 CAGR = (3.6)% 327 321 314 302 294 286 274 261 249 236 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Tobacco Institute of Japan 21
Slide 22: Japan – Taxation and Pricing
Japan – Taxation and Pricing ● 40% excise tax increase unprecedented ● Significant market contraction anticipated ● Based on JT’s price submission to the Ministry of Finance, significant unit margin increases expected for the industry 22
Slide 23: Japan – Taxation and Pricing
Japan – Taxation and Pricing ● 40% excise tax increase unprecedented ● Significant market contraction expected ● Based on JT price submission to MOF, significant unit margin increases expected for the industry ● Ministry of Finance approved PMJ’s request to increase prices in June: - Important step
Slide 24: Japan – Market Shares
Japan – Market Shares (%) 72 70.7 69.4 67.9 67.0 66.6 65.8 65.0 64.8 65.0 65.0 64.8 JT 23.6 24 24.4 24.8 24.7 24.3 23.9 24 24.2 21.4 22.5 PMI 9.1 9.9 10.4 10.6 10.5 10.5 7.8 8.0 8.2 8.7 8.6 BAT 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Q1 Source: Tobacco Institute of Japan 24
Slide 25: Japan – Marlboro
Japan – Marlboro (%) Marlboro Share of Market 11 10.8 10.5 10.1 9.9 9.9 9.7 9.2 8.9 8.4 8.0 7.0 6 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Q1 Source: Tobacco Institute of Japan 25
Slide 26: Japan – New Brand Introductions
Japan – New Brand Introductions December 2009 Share: (%) 17.9% 20 2009 30 Launches 4.6% 2008 31 Launches 3.8% 28 Launches 2007 2.6% 37 Launches 2006 3.8% 51 Launches 2005 3.1% 0 Jan Jan Jan Jan Jan Dec 2005 2006 2007 2008 2009 2009 Highly Competitive Marketplace Source: Tobacco Institute of Japan 26
Slide 27: Japan – Recent PMJ Launches
Japan – Recent PMJ Launches ● PMJ launched attractive new offerings ● Cumulative market share of PMI’s 2009 launches April 2010 YTD: 1.7% Positive consumer response to PMI’s innovative product offerings Source: Tobacco Institute of Japan 27
Slide 28: Australia
Australia ● 25% excise tax increase effective April 30, 2010 ● Plain packaging initiative announced by government ● Continue to engage government and relevant stakeholders 28
Slide 29: Australia – Market Shares
Australia – Market Shares (%) 50 46.0 45.5 45.4 45.4 43.2 BAT 37.7 37.9 39.8 PMI 36.2 37.2 17.7 17.2 16.7 16.6 16.9 IMT 10 2006 2007 2008 2009 2010 Q1 Business performing well Source: PwC Data Exchange 29
Slide 30: Australia – PMI Brand Shares
Australia – PMI Brand Shares (%) 36.2 37.2 37.7 37.9 39.8 PMI 16.5 16.5 16.3 16.1 16.9 Longbeach 14.4 Peter 14.5 14.3 13.9 14.3 Jackson Z 3.6 choice 3.0 2.4 2.3 2.5 2.5 Marlboro 2.4 2.2 2.2 2.2 2.2 2.2 2.2 Alpine 0.5 1.5 2006 2007 2008 2009 2010 Q1 Source: PwC Data Exchange 30
Slide 31: Indonesia
Indonesia ● Sampoerna continues to be the market leader ● Strong and balanced portfolio: - A Mild the leading franchise since Q1, 2009 - Number of other strong local offerings ● Record Marlboro volume in 2009 ● Continued industry growth Source: A.C. Nielsen and PMI Financials 31
Slide 32: Indonesia – Industry Volume
Indonesia – Industry Volume (billion units) 2005-2009 CAGR = 4.6% 260 247 237 229 217 2005 2006 2007 2008 2009 Source: PMI estimates 32
Slide 33: Indonesia – Market Shares
Indonesia – Market Shares (%) 32 29.5 PMI / 29.1 28.8 Sampoerna 28.3 28.0 27.4 25.3 26.4 23.1 Gudang 22.0 21.3 21.4 Garam 21.2 20.2 19.7 19.6 19.5 Djarum 18.1 BAT / 7.7 8.3 7.9 8.4 Bentoel 6.4 5.7 0 2005 2006 2007 2008 2009 2010 Q1 Source: A.C. Nielsen 33
Slide 34: Indonesia – Price Segmentation
Indonesia – Price Segmentation (%) 39.7 37.4 36.4 35.8 33.9 32.6 High 25.4 Low 23.2 23.8 22.5 22.9 21.7 20.8 20.7 23.7 23.8 Premium 21.1 21.5 19.9 20.3 18.6 18.6 18.2 Mid 17.5 2005 2006 2007 2008 2009 2010 Q1 Low-price segment continues to grow Source: A.C. Nielsen 34
Slide 35: Indonesia – Excise Tax Structure
Indonesia – Excise Tax Structure ● Follow Government “Industry Roadmap” ● Further simplify current multi-tier structure ● Maintain preferential tax treatment for hand-rolled products to protect employment Machine-Made Kretek (SKM) White (SPM) Hand-Rolled Kretek (SKT) Volume Tier Vol. Tier 1 Vol. Tie
Slide 36: Indonesia – PMI Brand Shares
Indonesia – PMI Brand Shares (%) 29.5 29.1 28.8 Total PMI 28.3 28.0 26.4 11.6 11.9 A Mild Z 10.2 10.6 9.4 9.5 8.2 8.2 8.1 8.0 7.7 7.3 Dji Sam Soe 5.5 5.6 5.1 4.2 4.5 4.5 Marlboro 4.4 Sampoerna 3.7 3.6 4.0 4.0 3.7 Hijau 2005 2006 2007 2008 2009 2010 Q1 Source: PMI estimates 36
Slide 37: Indonesia – Recent Launches
Indonesia – Recent Launches Premium Mid Low 37
Slide 38: Korea
Korea ● Sizeable, uptrading and dynamic market ● Tremendous growth momentum 38
Slide 39: Korea
Korea ● Sizeable, uptrading and dynamic market ● Tremendous growth momentum ● Strong and balanced portfolio: - Marlboro: No.1 brand in Legal Age (min.19) to 24 - Parliament: Fastest growing brand in the market - Virginia Slims: > 50% of above premium segment Source: PMI Financials, General Consumer
Slide 40: Korea
Korea ● Sizeable, uptrading and dynamic market ● Tremendous growth momentum ● Strong and balanced portfolio: - Marlboro: No.1 brand in Legal Age (min.19) to 24 - Parliament: Fastest growing brand in the market - Virginia Slims: > 50% of above premium segment Volume (billion units) 13.6 21% 11.3 24%
Slide 41: Korea – Market Shares
Korea – Market Shares (%) 71.2 69.1 66.0 62.3 60.1 KT&G Z 16.9 17.0 17.1 17.3 17.4 PMI 14.4 BAT 11.8 15.4 9.9 8.6 7.0 6.0 JTI 4.9 4.0 3.3 2006 2007 2008 2009 2010 Q1 Source: Hankook Research 41
Slide 42: Korea – Marlboro
Korea – Marlboro (%) 2009 Marlboro Share of Market (%) 26.6 8 7.0 5.9 5.9 4.2 SoM LA (Min 19)-24 3.0 Smoker share 2.0 1.9 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 (%) 2007 Q1 22.4 4.2 SoM LA (Min 19)-24 Smoker share Source: Hankook Research and GCTS 2009 42
Slide 43: Korea – Parliament
Korea – Parliament (%) 2009 Parliament Share of Market 12.4 (%) 7 5.7 4.3 4.3 SoM LA (Min 19)-24 Smoker share 1.9 0.5 0.1 0.2 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 (%) 2007 Q1 5.0 1.9 SoM LA (Min 19)-24 Smoker share Source: Hankook Research and GCTS 2009 43
Slide 44: Korea – New Factory
Korea – New Factory ● Support growth of portfolio ● Regulatory requirement for primary facility (tobacco processing) in Korea ● Factory to be fully operational in 2012 44
Slide 45: India
India ● World’s second most populous country: - 1.2 billion people ● 100+ billion unit cigarette industry ● Joint venture with Godfrey Phillips India - Provides platform for PMI to continue growing business in one of the major cigarette markets in the world - Leverage each partner’s strengths in ord
Slide 46: India – Marlboro Gold Advance
India – Marlboro Gold Advance Catering to local taste preferences 46
Slide 47: Philippines
Philippines ● Continued population growth: - 90 million people ● 85 billion unit cigarette market in 2009 ● Completed new business structure: - Announced on February 25, 2010 - PMI management control and close cooperation with business partner - Synergies - Complementary product portfolios ● PMFTC I
Slide 48: Philippines – Brand Board
Philippines – Brand Board PMFTC Others Premium (27.6%) 21.9% 5.7% SoM SoM Mid (17.8%) 7.1% 1.9% 1.0% 3.8% 0.3% SoM SoM SoM SoM SoM Low (54.6%) 40.0% 9.4% 0.6% 0.6% SoM SoM SoM SoM Source: PMI estimates for Q1,2010 48
Slide 49: Conclusion
Conclusion ● Economic outlook for Asia remains positive ● Dynamic brands and strong portfolio via the new Marlboro architecture and other portfolio innovations ● Regulatory and fiscal regimes evolving rapidly and remain a challenge ● Business and organization well-positioned across the region in ord
Slide 50: Questions & Answers
Investor Day – Asia Region Lausanne, June 23, 2010 Questions & Answers
Slide 51: 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 52: Glossary of Terms
Glossary of Terms ● References to PMI volumes refer to shipment volume, unless otherwise stated ● Industry volume and market shares are from a number of internal and external sources ● Organic volume refers to volume excluding acquisitions ● Net revenues exclude excise taxes ● Operating Companies In
Slide 53: 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 2010 2009 Revenues excluding Excise Taxes Reported Net Reported Net Reve
Slide 54: 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, excluding Currency and Acquisitions For the Quarters Ended March 31, ($ in millions) (Unaudited) % Change in Adjusted Op
Slide 55: 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) 2010 2009 % Change Reported Diluted EPS $ 0.90 $ 0.74 21.6% L
Slide 56: 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 March 31, ($ in
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, excluding Currency and Acquisitions For the Years Ended December 31, ($ in millions) (Unaudited) % Change in Adjusted Op
Slide 58: Reconciliation of Non-GAAP Measures
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for Impact of Currency and Acquisitions For the Years Ended December 31, ($ in millions) (Unaudited) % Change in Reported Net 2009 2008 Revenues excluding Excise Taxes Reported Reported Net Reported Net
Slide 59: 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) 2009 2008 % Change Reported Diluted EPS $ 3.24 $ 3.31 (2.1)%
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, excluding Currency and Acquisitions For the Years Ended December 31, ($ in millions) (Unaudited) % Change in Adjusted Op
Slide 61: Reconciliation of Non-GAAP Measures
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for Impact of Currency and Acquisitions For the Years Ended December 31, ($ in millions) (Unaudited) % Change in Reported Net Revenues 2008 2007 excluding Excise Taxes Reported Net Reported Net Reported
Slide 62: 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, excluding Currency and Acquisitions For the Years Ended December 31, ($ in millions) (Unaudited) % Change in Adjusted Op
Slide 63: Reconciliation of Non-GAAP Measures
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for Impact of Currency and Acquisitions For the Years Ended December 31, ($ in millions) (Unaudited) % Change in Reported Net Revenues 2007 2006 excluding Excise Taxes Reported Reported Net Reported Net
Slide 64: Reconciliation of Non-GAAP Measures
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for Impact of Currency and Acquisitions For the Years Ended December 31, ($ in millions) (Unaudited) % Change in Reported Net Revenues 2006 2005 excluding Excise Taxes Reported Reported Net Reported Net
Slide 65: Reconciliation of Non-GAAP Measures
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for Impact of Currency and Acquisitions For the Years Ended December 31, ($ in millions) (Unaudited) % Change in Reported Net Revenues 2005 2004 excluding Excise Taxes Reported Reported Net Reported Net
Slide 66: Reconciliation of Non-GAAP Measures
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Calculation of Total Debt to EBITDA and Net Debt to EBITDA Ratios ($ in millions, except ratios) (Unaudited) For the Year Ended March 31, December 31, 2010 2009 April ~ December January ~ March 12 months 2009 2010
Slide 67: Reconciliation of Non-GAAP Measures
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Calculation of Total Debt to EBITDA and Net Debt to EBITDA Ratios ($ in millions, except ratios) (Unaudited) March 31, 2008 April ~ December January ~ March 12 months 2007 2008 rolling Earnings before income taxes
Slide 68: Reconciliation of Non-GAAP Measures
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Reported Operating Income to Reported Operating Companies Income Reconciliation of Reported Operating Companies Income to Adjusted Operating Companies Income For the Years Ended December 31, ($ in
Slide 69: Investor Day – Asia Region
Investor Day – Asia Region Lausanne, June 23, 2010
Philip Morris International — Investor Day (June 2010) on 6ix