Philip Morris International Inc · NYSE:PM
Philip Morris International — Q2 2012 Earnings Presentation
42 slides from Philip Morris International's earnings presentation, Jul 19, 2012
Slide 1: 2012 Second-Quarter Results
Exhibit 99.3 2012 Second-Quarter Results July 19, 2012
Slide 2: Introduction
Introduction Unless otherwise stated, we will be talking about results for the second- quarter 2012 and comparing them with the same period in 2011 References to PMI volumes refer to PMI shipment data, unless otherwise stated Industry volume and market shares are the latest data available from a num
Slide 3: Forward-Looking and Cautionary Statements
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, coul
Slide 4: Strong Underlying Business Results in Q2, 2012
Strong Underlying Business Results in Q2, 2012 Organic cigarette volume down by 1.2% Organic cigarette volume, excluding Japan hurdle, up by 1.4% Organic OTP volume up by 11.8% Note: OTP stands for other tobacco products, including cigars, cigarillos, fine cut, pipe tobacco and snus. Fine cut conver
Slide 5: Strong Underlying Business Results in Q2, 2012
Strong Underlying Business Results in Q2, 2012 Organic cigarette volume down by 1.2% Organic cigarette volume, excluding Japan hurdle, up by 1.4% Organic OTP volume up by 11.8% Net revenues, excluding currency and acquisitions, up by 2.9% Adjusted OCI, excluding currency and acquisitions, up by 3.5%
Slide 6: Strong Underlying Business Results in Q2, 2012
Strong Underlying Business Results in Q2, 2012 Organic cigarette volume down by 1.2% Organic cigarette volume, excluding Japan hurdle, up by 1.4% Organic OTP volume up by 11.8% Net revenues, excluding currency and acquisitions, up by 2.9% Adjusted OCI, excluding currency and acquisitions, up by 3.5%
Slide 7: Excellent First-Half 2012 Results
Excellent First-Half 2012 Results Growth H1, 2012 vs. H1, 2011 (%) 15 13.3 8.3 6.5 1.8 0 Organic Cigarette Net Adjusted Adjusted Diluted Volume Revenues (a) OCI(a) EPS(b) (a) Excluding currency and acquisitions (b) Excluding currency Source: PMI Financials 7
Slide 8: 2012 EPS Guidance
2012 EPS Guidance These results confirm our expectation of solid organic cigarette volume growth in 2012 Continued strong pricing and a favorable product mix only partially offset by an unfavorable geographic mix At current prevailing exchange rates, forecast currency headwind slightly above the 25
Slide 9: 2012 EPS Guidance
2012 EPS Guidance Reported diluted 2012 EPS guidance range reaffirmed at $5.10 to $5.20, compared to $4.85 in 2011 On a currency-neutral basis, our guidance implies a forecast growth rate of approximately 10% to 12%, compared to adjusted diluted EPS of $4.88 in 2011 Source: PMI forecasts 9
Slide 10: EU Region: Cigarette Industry Volume Under Considerable Pressure
EU Region: Cigarette Industry Volume Under Considerable Pressure % Change Q2, 2012 H1, 2012 Greece (16.8) (18.9) Hungary (16.0) (10.9) Spain (18.0) (10.0) Italy (10.5) (8.5) Netherlands (5.7) (6.0) EU Region (9.7) (5.8) France (5.9) (4.0) Poland (7.7) (3.7) Czech Republic (4.2) (3.6) UK (6.0) (3.1)
Slide 11: EU Region: Deteriorating Job Market
EU Region: Deteriorating Job Market Variance in Unemployment Rates (pp) (%) Unemployment Rates (May 2012) May 2012 vs. June 2011 5 25 20 15 10.3 10 0.7 5 Cze. Ger. 0 0 Gre. Spa. Ita. Neth. EU Fra. Pol. UK Hun. Spa. Gre. Hun. EU Ita. Fra. Pol. UK Cze. Ger. Neth. (a) Avg. (a) (b) Avg. (b) (1) (a) Marc
Slide 12: EU Region: Resilient Cigarette Market Shares
EU Region: Resilient Cigarette Market Shares Variance vs. PY Q2, 2012 H1, 2012 Q2, 2012 H1, 2012 Total PMI 38.5% 37.9% (0.2)pp (0.4)pp Marlboro 18.4 18.0 ()0.3 0.1 ()pp L&M 6.6 6.6 (0.2) (- )pp Chesterfield 3.5 3.4 ()0.3 0.4 (p Source: PMI estimates 12
Slide 13: EU Region: PMI Gaining Share in Expanding Fine Cut Category
EU Region: PMI Gaining Share in Expanding Fine Cut Category Variance vs. PY Q2, 2012 H1, 2012 Q2, 2012 H1, 2012 Industry Volume (units billion) 30.9 59.3 ( 7.9% 7.7% PMI Share (%) 14.1 14.0 (1.4pp ( 1.7pp Note: Fine cut converted to cigarette equivalents based on conversion ratio of 1 unit = 0.75g S
Slide 14: Italy: Increased Pressure due to Weak Economy
Italy: Increased Pressure due to Weak Economy Cigarette industry volume Variance Market Shares vs. PY declined by 10.5% in Q2, Q2 H1 2012: 2012 2012 Q2 H1 Cigarettes - Reduced consumer purchasing power Marlboro 23.0% 22.6% 0.3( pp ( -)pp - Impact of price increases Chesterfield 3.5% 3.5% (0.2)pp (0.
Slide 15: Germany: Positive PMI Share Momentum
Germany: Positive PMI Share Momentum PMI Cigarette Market Share (%) Cigarette industry volume declined 36.1 Total PMI 36.4 by 5.1% in Q2, 2012: Other - Recent price increases 10.4 L&M 10.5 - Lower consumer confidence - Difficult comparison with 2011 21.1 Marlboro 21.4 - Some timing issues Cigarette
Slide 16: EU Region: Weaker Results in Q2, 2012
EU Region: Weaker Results in Q2, 2012 Variance vs. PY Q2, 2012 H1, 2012 Q2, 2012 H1, 2012 Cigarette Volume (units billion) 51.8 99.6 (9.4)% (5.8)% OTP Volume (units billion) 4.7 9.1 18.2 ()% 23.1 ()% (a) (a) Net Revenues ($ billion) 2.3 4.3 (0.7)% 2.0 ()% (a) (a) Adjusted OCI ($ billion) 1.1 2.1 (2.
Slide 17: EEMA Region: Another Very Strong Quarter
EEMA Region: Another Very Strong Quarter Variance vs. PY Q2, 2012 H1, 2012 Q2, 2012 H1, 2012 (a) (a) Cigarette Volume (units billion) 79.2 145.1 4.9% (4.2% (b) (b) Net Revenues ($ billion) 2.2 4.0 12.7 12.6 (b) (b) Adjusted OCI ($ billion) 0.9 1.8 22.9 20.6 (a) Excluding acquisitions (b) Excluding c
Slide 18: EEMA Region: Positive Pricing and Volume/Mix
EEMA Region: Positive Pricing and Volume/Mix Q2, 2012 ($ million) 125 114 104 0 Pricing Volume/Mix Variance Variance Note: Variances at OCI level Source: PMI Financials 18
Slide 19: EEMA Region: Growth of Key Brands
EEMA Region: Growth of Key Brands Volume Growth (Q2, 2012 vs. Q2, 2011) (units million) 1,200 800 400 Chest. 0 Marlb. Bond L&M Parl. Lark Optima Next Muratti Apollo - Street Soyuz (400) Note: Marlb. is Marlboro, Parl. is Parliament and Chest. is Chesterfield Source: PMI Financials 19
Slide 20: Russia: Market and Share Growth
Russia: Market and Share Growth PMI Market Share (%) Total market grew slightly 26.1 +0.7pp during first half of 2012 25.4 PMI volume increased by 8.7% in Q2, 2012 Adult smokers continue to uptrade gradually Q2 (a) Q2 (a) 2011 2012 PMI market share gains QTD Price Segments (%) May thanks to Parliame
Slide 21: Russia: Marlboro ClearTaste Launched
Russia: Marlboro ClearTaste Launched 21
Slide 22: Asia Region: Japan Hurdle Masks Another Very Strong Quarter
Asia Region: Japan Hurdle Masks Another Very Strong Quarter Variance vs. PY Q2, 2012 H1, 2012 Q2, 2012 H1, 2012 Cigarette Volume (units billion) 83.5 164.5 (0.7)% (5.4 )% Cigarette Volume ex. Japan Hurdle (7.4 )% (9.8)% (a) (a) Adjusted OCI ($ billion) 1.4 2.8 (2.6)% (8.9 )% (a) Excluding currency a
Slide 23: Japan: Resilient Share Performance
Japan: Resilient Share Performance Industry volume should be stable in 2012 and underlying trend remains a moderate decline of 1-2% per year PMI Q2, 2012 market share slightly down due to acceleration in new launches by Japan Tobacco PMI Market Share (%) Marlboro Black Menthol Edge launched in Q2, 2
Slide 24: Indonesia: PMI Momentum Continues
Indonesia: PMI Momentum Continues PMI Market Share (%) Industry volume growth of +3.1pp 6.9% in Q2, 2012 PMI volume increased by 17.8% in second quarter Adult smokers uptrading in strong economy PMI share up 3.1 points to Price Segments (%) 33.5% in Q2, 2012: Premium(a) Strongest and broadest portfo
Slide 25: Favorable Pricing Continued in Q2, 2012
Favorable Pricing Continued in Q2, 2012 ($ million) Note: Variances at OCI level Source: PMI Financials 25
Slide 26: Strong Brand Performance Continues
Strong Brand Performance Continues Volume Growth (H1, 2012 vs. H1, 2011)(a) (units billion) 5.0 2.5 0 (a) Excluding Japan hurdle Source: PMI Financials 26
Slide 27: PMI Expanding its Market Share
PMI Expanding its Market Share Top 30 PMI OCI Markets (a) (%) (a) Excluding duty free Note: Historical data adjusted for pro forma inclusion of business combination with Fortune Tobacco Corporation in the Philippines and Jordan acquisition Source: PMI Financials and PMI estimates 27
Slide 28: Free Cash Flow Impacted by Currency and Working Capital Requirements
Free Cash Flow(a) Impacted by Currency and Working Capital Requirements ($ million) (a) Free cash flow equals net cash provided by operating activities less capital expenditures Source: PMI Financials 28
Slide 29: Share Repurchase Program Further Extended
Share Repurchase Program Further Extended In Q2, 2012, PMI spent $1.5 billion to repurchase 17.8 million shares New three-year $18 billion share repurchase program to start in August when funds from previous authorization fully utilized Target for 2012 remains $6 billion in share repurchases Since s
Slide 30: Conclusion
Conclusion Underlying business momentum remains strong Very strong results in EEMA and Asia Regions offset unusually weak industry volume in EU Region and the Japan hurdle Breadth of footprint, superior brand portfolio and continued strong pricing environment driving growth Net revenues and adjusted
Slide 31: Questions & Answers
2012 Second-Quarter Results Questions & Answers
Slide 32: Reconciliation of Non-GAAP Measures
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Quarters Ended June 30, ($ in millions) (Unaudited) % Change in Reported Net Revenues 2012 2011 excluding Excise Taxes Reported Net Reported Net Reven
Slide 33: 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 34: 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) 2012 2011 % Change Reported Diluted EPS $ 1.36 $ 1.35 0.7% Adj
Slide 35: Reconciliation of Non-GAAP Measures
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) 2012 2011 % Change Reported Diluted EPS $ 1.36 $ 1.35 0.7% Less: Currency impact (0.10)
Slide 36: 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 2012 2011 excluding Excise Taxes Reported Net Reported Net Rev
Slide 37: 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 38: 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 Six Months Ended June 30, (Unaudited) 2012 2011 % Change Reported Diluted EPS $ 2.60 $ 2.42 7.4% A
Slide 39: Reconciliation of Non-GAAP Measures
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) 2012 2011 % Change Reported Diluted EPS $ 2.60 $ 2.42 7.4% Less: Currency impact (0.1
Slide 40: 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) 2011 Reported Diluted EPS $ 4.85 Adjustments: Asset impairment and exit costs 0.05 Tax items (0.02) Adjuste
Slide 41: 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 42: 2012 Second-Quarter Results
2012 Second-Quarter Results July 19, 2012
Philip Morris International — Q2 2012 Earnings Presentation on 6ix