Philip Morris International Inc · NYSE:PM
Philip Morris International — Q2 2011 Earnings Presentation
37 slides from Philip Morris International's earnings presentation, Jul 21, 2011
Slide 1: 2011 Second-Quarter Earnings Results
Exhibit 99.3 2011 Second-Quarter Earnings Results July 21, 2011
Slide 2: Introduction
Introduction Unless otherwise stated, we will be talking about results for the second-quarter 2011 and comparing them with the same period in 2010 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 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 4: Second-Quarter 2011 Results
Second-Quarter 2011 Results Very strong financial performance: Q2, 2011 Results(a) Organic Cigarette Volume +0.1% Net Revenues +10.1% Adjusted OCI +16.5% Adjusted Diluted EPS +21.0% Key drivers: Excellent results in the Asia Region, led by Indonesia, Japan, Korea and the Philippines Higher prices in
Slide 5: Pricing Variance
Pricing Variance ($ mio) Pricing remains the key 1,200 driver of our increased 1,070 profitability During the last three 790 months, PMI implemented 617 Q2 or announced price increases in numerous 600 341 markets Pricing situation in Spain improved in July 449 453 Q1 0 2010 2011 Source: PMI Financia
Slide 6: PMI Market Share Developments
PMI Market Share Developments (%) Top 30 PMI OCI Markets 40 38.5 36.2 35 30 Q2, 2010 Q2, 2011 Source: PMI Financials and estimates 6
Slide 7: Marlboro Market Share Developments
Marlboro Market Share Developments Market Shares Q2, 2010 Q2, 2011 Variance EU 18.1 % 18.1 % - pp EEMA 6.3 6.9 0.6 Asia(a) 6.0 6.7 0.7 LA&C 13.6 13.7 0.1 Total (a)(b) 8.9 9.3 0.4 (a) Excluding PRC (b) Also excluding the USA Source: PMI estimates 7
Slide 8: L&M Market Share Developments
L&M Market Share Developments Market Share Increases (pp) Q2, 2011 vs. Q2, 2010 5 4.3 1.6 1.0 0.8 0.8 0.4 0 Turkey (a) Netherlands Germany Poland Slovakia Egypt (a) QTD May Source: A.C. Nielsen and PMI estimates 8
Slide 9: 2011 EPS Guidance
2011 EPS Guidance Reported diluted EPS guidance for 2011 is being raised by a further 15 cents to $4.70 to $4.80 Ten cents of the increase are attributable to improvements in the business, largely Japan Five cents relate to a more favorable currency outlook at prevailing exchange rates Compared to o
Slide 10: PMI Results by Region
PMI Results by Region Latin America Latin America & Canada & Canada 11% Asia 8% Asia EEMA(a) 35% EEMA(a) 36% 23% 24% 30% 33% EU EU H1, 2011 Net Revenues: H1, 2011 Adjusted OCI: $15.1 billion $6.9 billion (a) Eastern Europe, Middle East & Africa Region Source: PMI Financials 10
Slide 11: Japan
Japan PMI shipments to Japan PMI Market Share reached 19.5 billion units (%) in Q2, 2011, up 1.9 billion, 50 or 11.0% 42.0 Total PMI Second half impact subject to complex interaction of 11.2 Other multiple factors New base for industry 24.3 volume and PMI share will 6.8 14.4 Lark not be clear until
Slide 12: Indonesia
Indonesia Strong economy and PMI Market Share (%) relatively soft Q2, 2010, 30 28.6 30.2 Total PMI drove industry volume up Other 13.9% in Q2, 2011 PMI volume up 20.7% to 4.5 4.2 Marlboro 22.6 billion units in the same period 7.3 7.3 Dji Sam Soe Strong profitability growth in Asia’s second largest m
Slide 13: Korea
Korea Strong volume and share PMI Market Share (%) growth momentum 20 19.9 Total PMI continued, driven by Other 16.6 Marlboro and Parliament Innovative Marlboro menthol line extensions 6.7 Parliament contributed 1.0 share 5.5 points in Q2, 2011 PMI seeking to secure Marlboro excise tax reform 6.8 8.
Slide 14: EEMA Region
EEMA Region PMI’s organic volume declined by 3.4% due primarily to Ukraine Full-year Regional volume expected to be stable Net revenues and adjusted OCI, excluding currency and acquisitions, were up 3.6% and 4.8%, respectively in Q2 Profitability improvement driven by: Increased volumes in Turkey an
Slide 15: Russia
Russia Investments to support strong performance of Parliament, Chesterfield and Bond Street, and address Marlboro issues Market share down 0.1pp QTD May, 2011, to 25.4% PMI price increase announced earlier this month Limited consumer uptrading and expected overall market decline of 2-3% this year,
Slide 16: Ukraine
Ukraine Estimated industry volume Industry Price Segments decline of 15% distorted by (%) 100 trade loading in Q2, 2010 13.0 13.8 14.0 Premium Total market expected to stabilize during second half 39.5 Mid/Low PMI share down 3.5pp to 42.1 40.5 32.1% in the second quarter, due to under-representation
Slide 17: Turkey
Turkey Total market has stabilized PMI Market Share (%) Total PMI volume up 12.1% in Q2, 45 44.6 PMI 2011 40.8 PMI reached a market share 17.0 Premium of 44.6% in QTD May, 2011, 16.0 up 3.8pp Mid PMI share improvement in 6.2 5.8 all three price segments, led by Parliament, Muratti and L&M 21.4 Low 1
Slide 18: EU Region
EU Region Despite the issues that continued to impact Spain and to a lesser extent Greece, the results in the second quarter were more positive: - Industry volume declined by a modest 1.7% - PMI volume was 3.1% lower due to Greece, Poland and Spain - Marlboro’s Regional share was stable at 18.1% and
Slide 19: Germany
Germany Cigarettes (%) PMI Market Share Fine cut Total industry volumes of 40 35.6 35.9 cigarettes and fine cut have increased this year 14.4 14.8 PMI cigarette and fine cut market shares are growing 0 Very strong performance of H1 H1 2010 2011 L&M Unit margin-enhancing price (%) Big and Maxi Packs(
Slide 20: Spain
Spain High unemployment (%) PMI Market Share 35 Cigarette industry contracting at double-digit rate and consumer 32.6 downtrading 31.6 31.3 31.0 31.2 Price competition exacerbated in 30.4 May/June this year BUT Recent developments indicate the situation has improved 25 Q1 Q2 Q3 Q4 Q1 Q2 2010 2011 So
Slide 21: France and Italy
France and Italy Industry cigarette volume up PMI Market Shares 1.8% in France and stable in (%) 60 Italy during Q2, 2011 54.1 Total 53.4 Following entry of Marlboro, PMI PMI became market leader in fine cut in France in Q2 with a 40.8 40.9 share of 25.0%, up 5.6pp 31.1 30.7 Other 14.5 14.9 High sin
Slide 22: Greece
Greece Government has increased Marlboro Market Share Minimum Excise Tax from (%) 25 75% to 100% of excise tax on “WAP” (Weighted Average Price) Tax pass-on at bottom of the 21.7 market (€2.40/20) is almost €0.50/20 20.0 19.7 19.4 PMI has announced price 19.3 increase on L&M 25s from 18.7 €3.20 to €
Slide 23: Latin America & Canada Region
Latin America & Canada Region Mexico Regional volume down 55 (%) Marlboro Market Share 4.8%, driven by impact of 52.0 tax-driven price increases 50 in Mexico and timing of 48.2 shipments in Brazil 45 Strong Marlboro Q2 Q2 2010 2011 performance Argentina Regional net revenues (%) Marlboro Market Shar
Slide 24: Australia - Plain Packaging
Australia - Plain Packaging Australian Government appears intent on mandating the implementation of plain packaging Plain packaging will result in the illegal confiscation of our very valuable trademarks and branded assets PMI has served notice of its intention to file an arbitration claim for compe
Slide 25: Adjusted OCI Margins
Adjusted OCI Margins Second-Quarter 2011(a) 2010 Variance (a) EU 48.9 % 48.1 % 0.8 pp EEMA 42.1 41.6 0.5 Asia 46.2 39.8 6.4 LA&C 32.5 31.6 0.9 Total 44.6 42.1 2.5 (a) Excluding currency and acquisitions Source: PMI Financials 25
Slide 26: Free Cash Flow
Free Cash Flow Free Cash Flow (a) ($ million) 4,000 +19.4% 3,934 Quarterly increase of $402 236 Currency million, or 12.2%, 3,500 3,296 excluding currency 3,000 Driven mainly by our excellent business results 2,500 For the first half, free cash 2,000 flow is up more than $1 1,500 billion to nearly $
Slide 27: Share Repurchases
Share Repurchases During the second quarter, PMI spent $1.5 billion to purchase a further 22.7 million shares at an average price of $68.32 per share Since the March 2008 spin, 17.9% of shares outstanding at that time have been repurchased Source: PMI Financials 27
Slide 28: Summary
Summary Very strong second-quarter results Adjusted diluted EPS growth of 21.0%, excluding currency Outlook is promising, with strong market share and business momentum Pricing remains the key driver of profitability, with Spain a special case Very limited input cost pressures and we expect to excee
Slide 29: Questions & Answers
2011 Second-Quarter Results Questions & Answers
Slide 30: Reconciliation of Non-GAAP Measures
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Quarters Ended June 30, ($ in millions) (Unaudited) % Change in Reported Net Revenues 2011 2010 excluding Excise Taxes Reported Net Reported Net Reven
Slide 31: 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
Slide 32: 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 June 30, (Unaudited) 2011 2010 % Change Reported Diluted EPS $ 1.35 $ 1.07 26.2% Ad
Slide 33: 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 For the Quarters and Six Months Ended June 30, ($ in millions) (Unaudited) For the Quarters Ended For the Six Months En
Slide 34: 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 Six Months Ended June 30, ($ in millions) (Unaudited) % Change in Reported Net Revenues 2011 2010 excluding Excise Taxes Reported Net Reported Net Rev
Slide 35: 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 Six Months En
Slide 36: 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 For the Year Ended December 31, (Unaudited) 2010 Reported Diluted EPS $ 3.92 Adjustments: Tax items (0.07) Asset impairment and exit costs 0.02 Adjuste
Slide 37: 2011 Second-Quarter Results
2011 Second-Quarter Results July 21, 2011
Philip Morris International — Q2 2011 Earnings Presentation on 6ix