Philip Morris International Inc · NYSE:PM
Philip Morris International — Q2 2017 Earnings Presentation
40 slides from Philip Morris International's earnings presentation, Jul 20, 2017
Slide 1: 2017 Second-Quarter Results
2017 Second-Quarter Results July 20, 2017 Exhibit 99.3
Slide 2: Introduction
2 Introduction ● Unless otherwise stated, we will be talking about results for the second quarter of 2017 and comparing them to the same period in 2016 ● Unless otherwise stated, references to total industry, total market, PMI volume and PMI market share performance reflect cigarettes and PMI’s heat
Slide 3: Forward-Looking and Cautionary Statements
3 Forward-Looking and Cautionary Statements ● This presentation and related discussion contain projections of future results and other forward-looking statements. Achievement of future results is subject to risks, uncertainties and inaccurate assumptions. In the event that risks or uncertainties mat
Slide 4: Q2, 2017: Highlights
4 Q2, 2017: Highlights ● Strong currency-neutral financial results, including growth in adjusted diluted EPS of 8.7% ● Sequential improvement in our total shipment volume decline vs. Q1 ● Marlboro market share growth across a broad range of geographies ● Continued positive momentum for IQOS, notably
Slide 5: Revising 2017 EPS Guidance for Currency Only
5 Revising 2017 EPS Guidance for Currency Only ● Revising 2017 reported diluted EPS guidance, for currency only, to $4.78 to $4.93 at prevailing exchange rates, compared to $4.48 in 2016: - Now includes approximately 14 cents of unfavorable currency at prevailing exchange rates (vs. 8 cents previous
Slide 6: Currency Impact on EPS
6 Currency Impact on EPS 6 Note: Currency impact represents the variance vs. prior year Source: PMI Financials or estimates 2017 Guidance April 20th July 20th Variance Japanese Yen 0.01 (0.04) (0.05) Russian Ruble 0.10 0.06 (0.04) Egyptian Pound (0.03) (0.05) (0.02) Euro (0.07) (0.05) 0.02 Turkish L
Slide 7: PMI Volume: Q2, 2017 Decline Driven Mainly by the Industry
7 Note: Figures do not sum due to rounding Source: PMI Financials or estimates PMI Volume: Q2, 2017 Decline Driven Mainly by the Industry ● PMI volume down by 5.0%, due mainly to lower cigarette industry volume in: - Asia Region: Indonesia, Pakistan and the Philippines - EEMA Region: Russia and Turk
Slide 8: PMI Volume: Sequential Improvement in Q2, 2017
8 PMI Volume: Sequential Improvement in Q2, 2017 (9.4) (7.1) (10.2) (11.1) (9.7) (5.0) (0.6) (5.4) 1.4 (9.8) Asia LA&C Source: PMI Financials or estimates Volume Variances vs. PY (%) EU EEMA Q1, 2017 Q2, 2017 FY, 2017: Anticipate total volume decline of 3% to 4%, broadly in line with 2016
Slide 9: Q2, 2017: Strong Financial Results, ex-Currency
9 Q2, 2017: Strong Financial Results, ex-Currency Source: PMI Financials or estimates 7.0 5.9 8.7 Net Revenues Adjusted OCI Adjusted Diluted EPS Growth vs. PY (%)
Slide 10: Q2, 2017: Strong Sequential Growth Trend in RRP
10 Q1 Q2 Q3 Q4 Q1 Q2 55 123 212 343 435 615 Q2, 2017: Strong Sequential Growth Trend in RRP Net Revenues Note: "Reduced-risk products," or "RRPs," is the term PMI uses to refer to products that present, are likely to present, or have the potential to present less risk of harm to smokers who switch t
Slide 11: PMI: Pricing Variance
11 ● Q2, 2017: pricing variance supported by all Regions ● H1, 2017: pricing variance represents 6.1% of our H1, 2016 net revenues, despite no net pricing in Russia PMI: Pricing Variance Source: PMI Financials or estimates 272 408 344 367 616 775 H1, 2016 H1, 2017 Pricing Variance ($ million) Q2 Q1
Slide 12: PMI: Market Share Growing Sequentially
12 PMI: Market Share Growing Sequentially 12 Note: Excluding China and the U.S. Source: PMI Financials or estimates 26.3 26.9 0.5 0.7 26.8 27.6 Q1, 2017 Q2, 2017 Cigarettes PMI International Market Share (%) +0.8pp Heated Tobacco Units
Slide 13: EU Region: Sequential Improvement in Industry Volume vs. Q1, 2017
13 Source: PMI Financials or estimates EU Region: Sequential Improvement in Industry Volume vs. Q1, 2017 ● Total industry volume down by 1.0% in Q2, 2017: - Sequential improvement vs. Q1, 2017 - Full-year 2017 decline forecast of 2% to 3% ● Regional share down in Q2, 2017, mainly due to: - Germany,
Slide 14: Russia: Solid Share Performance in Increasingly Competitive Environment
14 Note: Low includes super-low Source: PMI Financials or estimates, and Nielsen Russia: Solid Share Performance in Increasingly Competitive Environment ● Total industry volume down by 6.2% in Q2, 2017: - Primarily reflecting excise tax-driven price increases - Full-year 2017 decline forecast of 5%
Slide 15: Philippines: Strong Performance of Marlboro Continued in Q2, 2017
15 Source: PMI Financials or estimates Philippines: Strong Performance of Marlboro Continued in Q2, 2017 ● Profitability growth driven by higher pricing and favorable portfolio mix ● Marlboro cigarette share growth, driven by in-switching from lower- priced brands ● Sequential improvement vs. Q1: -
Slide 16: Indonesia: Weaker Cigarette Industry Volume in Q2, 2017
16 Source: PMI Financials or estimates Indonesia: Weaker Cigarette Industry Volume in Q2, 2017 ● Cigarette industry volume down by 11.6%, impacted by: - Unfavorable inventory movements related to the timing of Ramadan - Above-inflation tax-driven retail price increases - Higher utility prices ● Full
Slide 17: Japan: Spectacular Growth from HeatSticks in Q2, 2017
17 Japan: Spectacular Growth from HeatSticks in Q2, 2017 ● HeatSticks continued to drive our results: - Volume up by 37% vs. Q1, 2017 - Over 40% of our total shipments in Japan ● Total industry volume down by 3.2%, excluding inventory movements: - Consistent with secular decline rate for cigarettes
Slide 18: IQOS: HeatSticks Offtake Share Growth Continues in Japan
18 IQOS: HeatSticks Offtake Share Growth Continues in Japan Week ending: Sep-6 Apr-24 Jan-29 Apr-2 Jul-2 Variance Jul-2 vs. Apr-2 Fukuoka 0.3 2.7 7.4 8.9 11.4 +2.5pp Sendai 0.5 5.1 12.9 14.9 17.1 +2.2pp Tokyo 0.4 4.0 9.5 11.6 14.8 +3.2pp National n/a 2.2 7.6 9.6 12.7 +3.1pp Weekly Offtake Shares (%)
Slide 19: O/ aA
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Slide 20: IQOS: Growing Heated Tobacco Unit National Market Shares
20 Japan Italy Switzerland Portugal Romania National SoM (%) Focus Area (June 2017) National 5 cities 6 cities Lisbon 16 cities Approximate Weighted Distribution Coverage(a) 92% 64% 42% 34% 11% (a) Portion of the national cigarette distribution coverage in which heated tobacco products are also sold
Slide 21: IQOS: Growing Heated Tobacco Unit Offtake Shares
21 Germany Greece Russia Spain Ukraine Offtake SoM (%) Focus Area (June 2017) Berlin, Frankfurt & Munich Athens Region Moscow Barcelona & Madrid 5 cities Focus Area Cigarette Industry Volume Coverage(a) 8% 30% 7% 26% 24% (a) Portion of cigarette industry volume covered by IQOS focus area in each mar
Slide 22: Conclusion: Outlook Remains Strong for Full-Year 2017
22 Conclusion: Outlook Remains Strong for Full-Year 2017 ● Robust Q2, 2017 results, reflecting sequential improvements in total volume and market share ● Strong currency-neutral net revenue growth in Q2, driven by continued momentum of IQOS and favorable pricing: - Now expect full-year 2017 currency
Slide 23: Questions & Answers
Lorem ipsum sit amet dolor donec 2017 Second-Quarter Results Questions & Answers Have you downloaded the PMI Investor Relations App yet? The free IR App is available to download at the Apple App Store for iOS devices and at Google Play for Android mobile devices iOS Download Android Download Or go t
Slide 24: Glossary and Reconciliation of Non-GAAP Measures
Glossary and Reconciliation of Non-GAAP Measures
Slide 25: Glossary: General Terms
25 Glossary: General Terms ● "PMI" refers to 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 26: Glossary: Financial Terms
26 Glossary: Financial Terms ● Net revenues exclude excise taxes ● Net revenues, excluding excise taxes, related to combustible products refer to the operating revenues generated from the sale of these products, net of sales and promotion incentives ● "Operating Companies Income," or "OCI," is defin
Slide 27: Glossary: Reduced-Risk Products
27 Glossary: Reduced-Risk Products ● Reduced-risk products," or "RRPs," is the term PMI uses to refer to products that present, are likely to present, or have the potential to present less risk of harm to smokers who switch to these products versus continued smoking. PMI has a range of RRPs in vario
Slide 28: Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS
28 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) 2016 Reported Diluted EPS 4.48$ Adjustments: Asset impairment and exit costs - Tax items - Adjuste Dilut
Slide 29: Adjustments for the Impact of Currency and Acquisitions
29 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) Net Revenues Less Excise Taxes Net Revenues excluding Excise Taxes Less Currency Net Revenues e
Slide 30: Reconciliation of Operating Companies Income to Adjusted OCI
30 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures (a) For the calculation of net revenues excluding excise taxes, currency and acquisitions, refer to previous slide Reconciliation of Operating Companies Income to Adjusted Operating Companies Income & Reconcilia
Slide 31: Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS, excluding Currency
31 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) 2017 2016 % Change Reported Diluted EPS 1.14$ 1.15$ (0.9)%
Slide 32: Reconciliation of Reported Diluted EPS, excluding Currency
32 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 June 30, (Unaudited) 2017 2016 % Change Reported Diluted EPS 1.14$ 1.15$ (0.9)% Less: Currency impact (0.
Slide 33: Selected Financial Data by Product Category 2016
33 First Second Third Fourth Quarter Quarter Quarter Quarter Full-Year Net Revenues Combustible Products(a) 16,732$ 18,917$ 19,721$ 18,844$ 74,214$ Reduced-Risk Products(b) 56 124 214 345 739 (c) PMI Total 16,788$ 19,041$ 19,935$ 19,189$ 74,953$ Net Revenues excluding Excise Taxes(e) Combustible Pro
Slide 34: Selected Financial Data by Product Category, Quarters Ended March 31
34 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Selected Financial Data by Product Category For the Quarters Ended March 31, ($ in millions) (Unaudited) (a) Net revenue amounts for our combustible products refer to the operating revenues generated from the sa
Slide 35: Selected Financial Data by Product Category, Quarters Ended June 30
35 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Selected Financial Data by Product Category For the Quarters Ended June 30, ($ in millions) (Unaudited) Net Revenues(a) Less Excise Taxes(c) Net Revenues excluding Excise Taxes Less Currency Net Revenues excludi
Slide 36: Adjustments for the Impact of Currency and Acquisitions, Six Months
36 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) Net Revenues Less Excise Taxes Net Revenues excluding Excise Taxes Less Currency Net Revenues
Slide 37: Reconciliation of Operating Companies Income, Six Months
37 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures (a) For the calculation of net revenues excluding excise taxes, currency and acquisitions, refer to previous slide Reconciliation of Operating Companies Income to Adjusted Operating Companies Income & Reconcilia
Slide 38: Reconciliation of Diluted EPS, Six Months Ended June 30
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 Six Months Ended June 30, (Unaudited) 2017 2016 % Change Reported Diluted EPS 2.17$ 2.13$ 1.9%
Slide 39: Reconciliation of Reported Diluted EPS, excluding Currency, Six Months
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 Six Months Ended June 30, (Unaudited) 2017 2016 % Change Reported Diluted EPS 2.17$ 2.13$ 1.9% Less: Currency impact (0.
Slide 40: 2017 Second-Quarter Results
2017 Second-Quarter Results July 20, 2017
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