Philip Morris International Inc · NYSE:PM
Philip Morris International — Q4 2015 Earnings Presentation
45 slides from Philip Morris International's earnings presentation, Feb 4, 2016
Slide 1: 2015 Fourth-Quarter and Full-Year Results
2015 Fourth-Quarter and Full-Year Results February 4, 2016 Exhibit 99.3
Slide 2: Introduction
2 Introduction ● Unless otherwise stated, we will be talking about results for the fourth-quarter and full-year 2015 and comparing them to the same period in 2014 ● A glossary of terms, data tables showing adjustments to net revenues and OCI for currency and acquisitions, asset impairment, exit and
Slide 3: Forward-Looking and Cautionary Statements
3 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,
Slide 4: 2015: Excellent Performance
4 Source: PMI Financials or estimates 2015: Excellent Performance ● Organic cigarette volume down by a modest 1.0%, reflecting: - Moderating cigarette industry volume declines, notably in the EU Region - Market share gains ● Our best organic volume performance since 2012 ● Marlboro and L&M cigarette
Slide 5: 2015: Excellent Performance, Ex-Currency Growth
5 (a) Excluding currency and acquisitions (b) Excluding currency Source: PMI Financials or estimates 5.8% 6.6% 12.0% Net Revenues Adjusted OCI Adjusted Diluted EPS 2015: Excellent Performance, Ex-Currency Growth (2015 vs. PY) (a) (a) (b)
Slide 6: Q4, 2015: Results Impacted by Investments
6 Source: PMI Financials or estimates Q4, 2015: Results Impacted by Investments ● Organic cigarette volume down by 2.4%, due to: - Lower cigarette industry volumes - Lower market share, notably in the Asia Region - One-time distributor inventory adjustment in Russia related to supply chain optimizat
Slide 7: 2016 EPS Guidance
7 2016 EPS Guidance ● 2015 results confirm strong business fundamentals ● Reported diluted EPS guidance for 2016 is $4.25 to $4.35 at prevailing exchange rates, compared to $4.42 in 2015: - Includes approximately 60 cents of unfavorable currency at prevailing exchange rates - Does not include any sh
Slide 8: 2016 EPS Guidance: Impact of Currency
8 ● 60 cents of unfavorable currency in our 2016 guidance, at prevailing exchange rates, is due primarily to: ● We have currently hedged approximately 72% of our 2016 forecast sales to Japan, which, at prevailing exchange rates, translates to an effective rate of 118 Yen to the U.S. Dollar (vs. 110
Slide 9: Strong Pricing in 2015
9 Strong Pricing in 2015 ● Pricing variance of $2.1 billion in 2015: - Strong pricing across all four Regions - Benefited from exceptional Q1 gain in Korea related to the January 2015 excise tax increase ● Anticipate 2016 pricing variance to be around 6% of 2015 net revenues Source: PMI Financials o
Slide 10: Improving International Cigarette Industry Volume Trend
10 Improving International Cigarette Industry Volume Trend International Cigarette Industry Volume Decline vs. PY(a) (a) Excluding China and the U.S. Source: PMI Financials or estimates (2.0)% (3.3)% (2.5)% (2.4)% (2.5)% 2013 2014 2016 Forecast 2015
Slide 11: Strong Overall Market Share Performance
11 Strong Overall Market Share Performance 38.3 EU 25.9 EEMA 24.8 Asia 38.9 LA&C 28.7 Total PMI 2015 PMI Shares (%) +0.2pp (a) Excluding China and the U.S. (b) Excluding China Source: PMI Financials or estimates Variance vs. PY: +0.1pp +0.3pp ̶ pp +0.5pp (b) (a) Regional
Slide 12: Marlboro: Key Driver of Our Share Growth
12 Marlboro: Key Driver of Our Share Growth ● Marlboro was a key driver of our share growth in 2015: - Growing or stable share in all four Regions - Benefiting from the roll-out of Architecture 2.0 (a) Excluding China (b) Also excluding the U.S. Note: Pack designs are for illustrative purposes only
Slide 13: Strong Market Share Performance: Top-30 OCI Markets
13 Strong Market Share Performance: Top-30 OCI Markets Note: Excluding duty free Source: PMI Financials or estimates 37.3 38.0 2014 2015 +0.7pp PMI Market Share in Top-30 OCI Markets (%)
Slide 14: Focus on Managing Total Cost Base
14 Focus on Managing Total Cost Base ● Target annual cost base increase of 1% to 3%, excluding RRPs and currency, over the mid-term ● In 2015, we deployed additional investments to support the strong momentum of our cigarette brand portfolio and accelerate the geographic expansion of iQOS, resulting
Slide 15: EU Region: Significant Moderation in Cigarette Industry Volume Decline
15 Source: PMI Financials or estimates (0.9)% (3.1)% (7.3)% EU Region: Significant Moderation in Cigarette Industry Volume Decline Total Cigarette Industry Volume Decline vs. PY 2013 2014 ● Cigarette industry volume down by 0.9% in 2015, benefiting from: - Improving economies, notably in Southern Eu
Slide 16: EU Region: Positive Cigarette Share Momentum Continued
16 1.8 0.9 0.8 0.6 0.3 0.3 (1.7) Poland Spain France U.K. Germany EU Region Source: PMI Financials or estimates EU Region: Positive Cigarette Share Momentum Continued Cigarette Market Shares 43.7% Italy 38.6% 8.2% 42.1% 33.5% Q4, 2015 PMI Cigarette Market Share Variance vs. PY (pp) 37.9% 53.4%
Slide 17: EU Region: Strong Share Performance from Top-Three Brands
17 EU Region: Strong Share Performance from Top-Three Brands Cigarette Market Shares (%) 18.7 18.9 2014 2015 6.8 6.9 2014 2015 5.6 5.8 2014 2015 Marlboro L&M Chesterfield +0.1pp +0.2pp +0.2pp Source: PMI Financials or estimates
Slide 18: EU Region: Currency-Neutral OCI Growth in 2015
18 (a) Excluding currency and acquisitions Source: PMI Financials or estimates EU Region: Currency-Neutral OCI Growth in 2015 ● First growth in adjusted OCI(a) since 2009, driven by: - Moderating cigarette industry volume decline - Market share gains - Strong pricing ● Forecast mid-single-digit curr
Slide 19: Russia: Excellent Share Performance
19 3.6 4.5 7.7 8.4 3.7 3.9 27.5 28.4 2014 2015 Russia: Excellent Share Performance ● Cigarette industry volume down by 6.2% in 2015, mainly due to: - Significant excise tax-driven price increases - Lower consumer purchasing power ● Market share growth driven mainly by Bond Street and Next ● In Janua
Slide 20: Turkey: Strengthening Share Led by Marlboro
20 Turkey: Strengthening Share Led by Marlboro ● Cigarette industry volume up by 9.0% in 2015, driven mainly by a significant reduction in illicit trade ● Three quarters of sequential share growth ● Marlboro cigarette volume grew by 20.6% in Q4, 2015 ● In January, we announced a price increase of TR
Slide 21: Indonesia: Continued Share Growth in 2015
21 Source: PMI Financials or estimates Indonesia: Continued Share Growth in 2015 ● Cigarette industry volume was stable in 2015, as forecast, due primarily to a soft economy ● Share growth in 2015, reflecting strong performances of Dji Sam Soe and Sampoerna A ● In January 2016, the Indonesian Govern
Slide 22: Philippines: Improved Price Gaps Driving Growth of Marlboro
22 Note: Cigarette price points represent recommended retail selling price or estimates. Pack designs are for illustrative purposes only Source: PMI Financials or estimates and Nielsen Philippines: Improved Price Gaps Driving Growth of Marlboro ● Further narrowing of price gaps in Q4, 2015, followin
Slide 23: Japan: Cigarette Market Share Under Pressure
23 Japan: Cigarette Market Share Under Pressure ● Cigarette industry volume down by 2.1% in 2015, less than anticipated, due mainly to trade inventory build- up for competitors’ recent new launches ● 2015 cigarette share performance was below our expectations 11.6 11.3 10.0 9.9 2.2 2.3 25.9 25.3 201
Slide 24: iQOS: Exciting Commercialization Progress
24 Note: Reduced-Risk Products ("RRPs") is the term the company uses to refer to products with the potential to reduce individual risk and population harm in comparison to smoking cigarettes iQOS: Exciting Commercialization Progress ● Japan: - First wave of expansion to over 60% of the adult smoker
Slide 25: iQOS: Steady HeatStick Offtake Share Growth in Japan
25 0.5% 1.7% 0.8% 1.3% 0.4% 1.1% iQOS: Steady HeatStick Offtake Share Growth in Japan Expansion Area Note: Reduced-Risk Products ("RRPs") is the term the company uses to refer to products with the potential to reduce individual risk and population harm in comparison to smoking cigarettes. Offtake sh
Slide 26: Free Cash Flow: Growth Despite Significant Currency Headwind
26 Free Cash Flow: Growth Despite Significant Currency Headwind ● Free cash flow of $6.9 billion in 2015, fueled by important working capital initiatives ● Forecast 2016 free cash flow to be broadly in line with that of 2015, despite continued currency headwind Source: PMI Financials or estimates 6,
Slide 27: Rewarding Our Shareholders: Attractive Dividend
27 Rewarding Our Shareholders: Attractive Dividend ● Dividends currently the primary use of our free cash flow ● Increased our dividend in September 2015, to an annualized rate of $4.08 per share ● Eight consecutive dividend increases since 2008, representing a total increase of approximately 122% N
Slide 28: Conclusion
28 Conclusion ● 2015 was an excellent year, reflecting improved cigarette industry volume trends and very robust business fundamentals ● Superior brands, supported by a unique commercial organization, driving strong pricing and continued market share gains ● 2.0 Architecture roll-out driving Marlbor
Slide 29: Questions & Answers
2015 Fourth-Quarter and Full-Year Results Questions & Answers Download PMI’s Investor Relations App iOS Android
Slide 30: Glossary and Reconciliation of Non-GAAP Measures
Glossary and Reconciliation of Non-GAAP Measures
Slide 31: Glossary: General Terms
31 Glossary: General Terms ● PMI stands for Philip Morris International Inc. and its subsidiaries ● Until March 28, 2008, PMI was a wholly owned subsidiary of Altria Group, Inc. ("Altria"). Since that time the company has been independent and is listed on the New York Stock Exchange (ticker symbol "
Slide 32: Glossary: Financial Terms
32 Glossary: Financial Terms ● Net revenues exclude excise taxes ● Operating Companies Income, or "OCI", is defined as operating income, excluding general corporate expenses and the amortization of intangibles, plus equity (income) or loss in unconsolidated subsidiaries, net ● Adjusted OCI is define
Slide 33: Glossary: Industry/Market Terms
33 Glossary: Industry/Market Terms ● EEMA refers to the Eastern Europe, Middle East & Africa Region and includes our international duty free business ● EU refers to the European Union Region ● LA&C refers to the Latin America & Canada Region ● Fine cut includes Make Your Own (MYO), MYO volume tobacc
Slide 34: Glossary: Reduced-Risk Products
34 Glossary: Reduced-Risk Products ● An e-vapor product is an electrical product that generates an aerosol by heating a nicotine or non- nicotine containing liquid, such as electronic cigarettes (or "e-cigarettes") ● HeatStick tobacco sticks are novel patented tobacco products specifically designed
Slide 35: PMI Company Peer Group
35 PMI Company Peer Group ● Altria ● Anheuser-Busch InBev ● BAT ● Coca-Cola ● Colgate-Palmolive ● Diageo ● Heineken ● Imperial Tobacco ● Japan Tobacco ● Johnson & Johnson ● Kimberly-Clark ● Kraft-Heinz ● McDonald's ● Mondelēz International ● Nestlé ● PepsiCo ● Procter & Gamble ● Reynolds American ●
Slide 36: Reconciliation of Non-GAAP Measures: Currency and Acquisitions, Full Year
36 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) Reported Net Revenues Less Excise Taxes Reported Net Revenues excluding Excise Taxes Less Curr
Slide 37: Reconciliation of Reported OCI to Adjusted OCI, Full Year
37 (a) For the calculation of net revenues excluding excise taxes, currency and acquisitions, refer to previous slide PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Reported Operating Companies Income to Adjusted Operating Companies Income & R
Slide 38: Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS, Full Year
38 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) 2015 2014 % Change Reported Diluted EPS 4.42$ 4.76$ (7.1)%
Slide 39: Reconciliation of Reported Diluted EPS excluding Currency, Full Year
39 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Reported Diluted EPS to Reported Diluted EPS, excluding Currency For the Years Ended December 31, (Unaudited) 2015 2014 % Change Reported Diluted EPS 4.42$ 4.76$ (7.1)% Less: Currency impact (1
Slide 40: Reconciliation of Non-GAAP Measures: Currency and Acquisitions, Quarter
40 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Quarters Ended December 31, ($ in millions) (Unaudited) Reported Net Revenues Less Excise Taxes Reported Net Revenues excluding Excise Taxes Less C
Slide 41: Reconciliation of Reported OCI to Adjusted OCI, Quarter
41 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 E
Slide 42: Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS, Quarter
42 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 December 31, (Unaudited) 2015 2014 % Change Reported Diluted EPS 0.80$ 1.03$ (22
Slide 43: Reconciliation of Reported Diluted EPS excluding Currency, Quarter
43 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Reported Diluted EPS to Reported Diluted EPS, excluding Currency For the Quarters Ended December 31, (Unaudited) 2015 2014 % Change Reported Diluted EPS 0.80$ 1.03$ (22.3)% Less: Currency impac
Slide 44: Reconciliation of Operating Cash Flow to Free Cash Flow
44 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 Years Ended December 31, ($ in millions) (Unaudited) (a) Operating Cash Flow For the Quarters E
Slide 45: 2015 Fourth-Quarter and Full-Year Results
2015 Fourth-Quarter and Full-Year Results February 4, 2016
Philip Morris International — Q4 2015 Earnings Presentation on 6ix