Philip Morris International Inc · NYSE:PM
Philip Morris International — Q3 2014 Earnings Presentation
37 slides from Philip Morris International's earnings presentation, Oct 16, 2014
Slide 1: 2014 Third-Quarter Results
2014 Third-Quarter Results October 16, 2014 Exhibit 99.3
Slide 2: Introduction
2 Introduction ● Unless otherwise stated, we will be talking about results for the third quarter of 2014 and comparing them to the same period in 2013 ● A glossary of terms, data tables showing adjustments to net revenues and OCI for currency and acquisitions, asset impairment, exit and other costs,
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: Solid Results in Q3, 2014
4 (0.4)% 4.0% 4.3% 10.4% Net Revenues Adjusted OCI Adjusted Diluted EPS (a) Excluding currency and acquisitions (b) Excluding currency Source: PMI Financials Solid Results in Q3, 2014 Variance (Q3, 2014 vs. PY) (a) (a) (b) Organic Cigarette Volume
Slide 5: More Challenging Comparison in Q4, 2014
5 More Challenging Comparison in Q4, 2014 ● Q4, 2014 adjusted diluted EPS growth rate, ex-currency, will be impacted by: - More challenging year-on-year comparison (19.4% growth rate in Q4, 2013) - Greater weighting of expenses this year to the remainder of the year - Investments in the commercializ
Slide 6: 2014 EPS Guidance
6 Source: PMI forecasts and PMI Financials 2014 EPS Guidance ● Revised reported diluted EPS guidance for 2014 to $4.76 to $4.81 at prevailing exchange rates, compared to $5.26 in 2013 ● Revised guidance reflects: - 72 cents of unfavorable currency at prevailing exchange rates (versus 61 cents previo
Slide 7: EU Region: Moderating Cigarette Industry Volume Decline
7 EU Region: Moderating Cigarette Industry Volume Decline ● Cigarette industry volume declined by 3.4% in Q3, 2014 ● Our updated full-year cigarette industry volume forecast is a decline of approximately 4% Source: PMI estimates and PMI forecasts (7.9) (9.5) (4.2) (6.8) (10.7) (11.8) (12.5) (3.4) (5
Slide 8: EU Region: Strong Market Share Performance
8 Note: SoM stands for Share of Market Source: PMI estimates EU Region: Strong Market Share Performance ● Regional market share up by 1.2pp in Q3, to 39.7%, and by 1.0pp YTD Sept, 2014, to 39.8% ● Share growth in all six of the largest EU Region markets by industry volume YTD Sept, 2014 1.4pp ̶ pp 0
Slide 9: Japan: Share Stabilization
9 26.9 25.9 25.9 25.9 YTD Sept Q4 Q3 YTD Sept Note: Translation from Japanese: "Regular as is, Crush for Menthol" Source: Tobacco Institute of Japan and PMI forecasts Japan: Share Stabilization ● Cigarette industry volume declined by 3.2% YTD September, 2014, in line with our forecast decline of aro
Slide 10: Philippines: Resilient Consumption but Mighty Corporation Under-Declaration Continues
10 Source: PMI estimates and PMI Market Research 49.8 50.2 YTD Aug 2013 YTD Aug 2014 Adult Smoking Incidence (%) 12.6 13.1 YTD Aug 2013 YTD Aug 2014 Adult Daily Consumption (Avg. cigarettes per day) Philippines: Resilient Consumption but Mighty Corporation Under-Declaration Continues ● Tax-paid ciga
Slide 11: Indonesia: Sequential Market Share Improvement
11 Note: Translation from Indonesian: "MAGNUM BLUE. STYLE WITHOUT BORDERS". "Whites" stands for non-kretek cigarettes Source: PMI estimates and PMI forecasts Indonesia: Sequential Market Share Improvement ● Cigarette industry volume increased by 4.9% in Q3, 2014 ● Full-year forecast for industry vol
Slide 12: Russia: PMI Gaining Share While Increasing Prices
12 Note: MRSP stands for Maximum Retail Selling Price Source: Nielsen, PMI estimates and PMI forecasts ● YTD August, 2014, share up by 0.9 points to 27.0% ● Cigarette industry volume decline of 9.4% YTD September, 2014 ● Full-year cigarette industry volume decline expected to be in a range of 9% to
Slide 13: EEMA Region: Strong Engine of PMI OCI Growth
13 5 (24) (4) 871 848 YTD Sept 2013 Russia Turkey Middle East North Africa Others YTD Sept 2014 EEMA Region: Strong Engine of PMI OCI Growth PMI Regional Market Share (%) Source: PMI estimates and PMI Financials EEMA Region Cigarette Industry Volume (units billion) 25.0 25.1 YTD Sept 2013 YTD Sept 2
Slide 14: Marlboro Market Shares
14 Market Share: Marlboro Market Shares Q3, 2013 Q3, 2014 Variance EU 18.9% 19.1% 0.2 pp EEMA 7.4% 7.6% (0.2)% Asia(a) 6.3% 6.3% ̶% LA&C 14.4% 14.7% 0.3% Total PMI(a)(b) 9.5% 9.6% 0.1% (a) Excluding China (b) Also excluding the USA Source: PMI estimates
Slide 15: Strong Performance of Parliament
15 Strong Performance of Parliament 11.8 12.9 Q3 2013 Q3 2014 Total Volume (units billion) Source: PMI Financials +9.3%
Slide 16: Pricing: Key Driver of Higher Adjusted OCI
16 491 1,518 1,391 YTD Sept 2013 YTD Sept 2014 Pricing: Key Driver of Higher Adjusted OCI Source: PMI Financials and PMI forecasts ● Pricing variance of $491 million in Q3, 2014 and $1.4 billion YTD Sept, 2014. Boosted by new business structure in Egypt, partially offset by Italy ● We increased pric
Slide 17: iQOS advertisement
17 Note: Translation from Japanese: “iQOS, The advanced tobacco heating technology"
Slide 18: RRPs: iQOS Pilot Launch in Nagoya, Japan
18 Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products with the potential to reduce individual risk and population harm in comparison to smoking combustible cigarettes. Visuals are for illustrative purposes only. 20 HeatStick tobacco sticks per pack RRPs: iQOS Pilot Launch i
Slide 19: Continued Focus on Returning Cash to Shareholders
19 Continued Focus on Returning Cash to Shareholders ● Dividend increased by 6.4% in September to an annualized rate of $4.00 per share ● Target dividend payout ratio of 65% will be exceeded in 2014 ● Dividend yield of 4.7% as of last Friday ● During the third quarter, we spent $750 million to repur
Slide 20: Conclusion
20 (a) Excluding acquisitions Source: PMI Financials and PMI forecasts Conclusion ● Third-quarter and year-to-date 2014 results, as well as market-level trends, slightly above our expectations. Much more challenging comparison in Q4 ● Revised 2014 reported diluted EPS guidance of $4.76 to $4.81. On
Slide 21: 2014 Third-Quarter Results Questions & Answers
2014 Third-Quarter Results Questions & Answers
Slide 22: Glossary and Reconciliation of Non-GAAP Measures
Glossary and Reconciliation of Non-GAAP Measures
Slide 23: Glossary: General Terms
23 Glossary: General Terms ● PMI stands for Philip Morris International Inc. and its subsidiaries ● Until March 28, 2008, PMI was a wholly owned subsidiary of Altria Group, Inc. ("Altria"). Since that time the company has been independent and is listed on the New York Stock Exchange (ticker symbol "
Slide 24: Glossary: Financial Terms
24 Glossary: Financial Terms ● Adjusted OCI is defined as reported OCI adjusted for asset impairment, exit and other costs ● EPS stands for Earnings per Share ● Net revenues exclude excise taxes ● Operating Companies Income, or "OCI", is defined as operating income, excluding general corporate expen
Slide 25: Glossary: Industry/Market Terms
25 Glossary: Industry/Market Terms ● EEMA refers to the Eastern Europe, Middle East & Africa Region ● EU refers to the European Union Region ● LA&C refers to the Latin America & Canada Region ● Middle East: Bahrain, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, the Palestine Authority Area ("PA
Slide 26: Glossary: Reduced-Risk Products
26 Glossary: Reduced-Risk Products ● HeatStick tobacco sticks are novel patented tobacco products specifically designed by PMI for use with PMI’s iQOS system. The tobacco in the HeatStick is heated by our iQOS technology to provide adult smokers with real tobacco taste and satisfaction without combu
Slide 27: Adjustments for the Impact of Currency and Acquisitions (Quarter)
27 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Quarters Ended September 30, ($ in millions) (Unaudited) Reported Net Revenues Less Excise Taxes Reported Net Revenues excluding Excise Taxes Less
Slide 28: Reconciliation of Reported OCI to Adjusted OCI (Quarter)
28 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 29: Reported Diluted EPS to Adjusted Diluted EPS (Quarter)
29 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 September 30, (Unaudited) 2014 2013 % Change Reported Diluted EPS 1.38$ 1.44$ (4
Slide 30: Reported Diluted EPS to EPS excluding Currency (Quarter)
30 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 September 30, (Unaudited) 2014 2013 % Change Reported Diluted EPS 1.38$ 1.44$ (4.2)% Less: Currency impac
Slide 31: Adjustments for the Impact of Currency and Acquisitions (Nine Months)
31 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Nine Months Ended September 30, ($ in millions) (Unaudited) Reported Net Revenues Less Excise Taxes Reported Net Revenues excluding Excise Taxes Le
Slide 32: Reconciliation of Reported OCI to Adjusted OCI (Nine Months)
32 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 Nine Month
Slide 33: Reported Diluted EPS to Adjusted Diluted EPS (Nine Months)
33 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 Nine Months Ended September 30, (Unaudited) 2014 2013 % Change Reported Diluted EPS 3.73$ 4.02$
Slide 34: Reported Diluted EPS to EPS excluding Currency (Nine Months)
34 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Reported Diluted EPS to Reported Diluted EPS, excluding Currency For the Nine Months Ended September 30, (Unaudited) 2014 2013 % Change Reported Diluted EPS 3.73$ 4.02$ (7.2)% Less: Currency im
Slide 35: Reported Diluted EPS to Adjusted Diluted EPS (Q4 2013)
35 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) 2013 2012 % Change Reported Diluted EPS 1.24$ 1.25$ (0.
Slide 36: Reported Diluted EPS to Adjusted Diluted EPS (Year 2013)
36 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) 2013 Reported Diluted EPS 5.26$ Adjustments: Asset impairment and exit costs 0.12 Tax items 0.02 Adjuste
Slide 37: 2014 Third-Quarter Results
2014 Third-Quarter Results October 16, 2014
Philip Morris International — Q3 2014 Earnings Presentation on 6ix