Philip Morris International Inc · NYSE:PM
Philip Morris International — Barclays Back-to-School Consumer Conference 2012
37 slides from Philip Morris International's conference presentation, Sep 5, 2012
Slide 1: Barclays Back-to-School Consumer Conference
Barclays Back-to-School Consumer Conference Boston, September 5, 2012 Jacek Olczak Chief Financial Officer Philip Morris International
Slide 2: 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 ● PMI’s business risks include: significant increases in cigarette-related taxes; th
Slide 3: PMI Results
PMI Results Growth H1, 2012 vs. H1, 2011 Mid to Long- Excluding Term Annual H1, 2012 Currency & Currency-Neutral Results Actual Acquisitions Growth Targets Cigarette Volume (units billion) 457.4 1.8 % 1.8 %(a) 1 %(a) Net Revenues ($ billion) 15.6 3.3 % 6.5 % 4-6 %(b) Adjusted OCI ($ billion) 7.2 4.5
Slide 4: Organic Cigarette Volume: Very Strong Asia and EEMA Results
Organic Cigarette Volume: Very Strong Asia and EEMA Results More Than Offsetting Weakness in the EU PMI Organic Cigarette Volume Growth (H1, 2012 vs. H1, 2011) (%) 6 5.4 4.2 1.8 LA&C EU Asia EEMA Total PMI (0.1) (6) (5.8) Source: PMI Financials 4
Slide 5: Indonesia: PMI Outperforming in a Growing Market
Indonesia: PMI Outperforming in a Growing Market ● Industry volume growth of 8.9% in H1, 2012 ● PMI volume up 21.2% in H1, 2012 ● Premium Sampoerna A and broad portfolio driving PMI Market Share strong market share growth 35 (%) +3.3pp 33.6 Total PMI 30.3 ● Industry volume expected 8.5 Other 6.8 to
Slide 6: Japan: Reinforcing Our Higher Share Base
Japan: Reinforcing Our Higher Share Base ● Industry volume grew by 3.2% YTD July, 2012, and is expected to be stable for the full year ● PMI has retained nearly all the share gained in the PMI Market Share second half of last year: (%) 30 28.1 27.9 Total PMI - Lark is resilient 24.5 7.2 6.9 Other -
Slide 7: Russia: Share Gains and Increased Investments
Russia: Share Gains and Increased Investments ● Industry volume grew slightly during first half of 2012 and is expected to be stable for the full year ● PMI volume increased by 5.0% in H1, 2012 ● PMI gaining market share behind Parliament, L&M, Bond Street PMI Market Share (%) and Next 27 ● Launch o
Slide 8: Turkey: PMI Momentum Continues
Turkey: PMI Momentum Continues PMI Market Share (%) ● Industry volume up 4.7% +0.6pp 45.2 during first half of 2012, as 44.6 illicit trade declined slightly ● PMI volume grew by 9.2% in H1, 2012 ● Adult smokers are uptrading YTD July YTD July ● PMI share gains driven by 2011 2012 Price Segments (%)
Slide 9: EU Region: Industry Volume Under Pressure
EU Region: Industry Volume Under Pressure from High Unemployment and Consumer Uncertainty Unemployment Rates (June 2012) Industry Volume Decline (%) (%) H1, 2012 25 Greece (18.9) % Hungary (16.6) 20 Portugal (13.4) Spain (9.9) 15 Italy (8.5) 10.4 EU Region (5.9) 10 France (4.0) Poland (3.7) 5 Czech
Slide 10: Italy: Increased Pressure Due to Weak Economy
Italy: Increased Pressure Due to Weak Economy ● Cigarette industry volume declined by 8.1% YTD July, 2012, due to: - Reduced consumer purchasing power - Impact of price increases - Substitution by fine cut - Increase in illicit trade ● Marlboro holding its own despite PMI Cigarette Market Share pres
Slide 11: Germany: PMI Share Growing in Cigarette and Fine-Cut
Germany: PMI Share Growing in Both the Cigarette and Fine-Cut Categories ● Total cigarette industry volume declined by 0.7% in the first seven months of 2012 ● PMI cigarette and fine cut market shares are growing (%) PMI Market Share Cigarettes ● Marlboro gained share in 40 36.0 36.4 Fine cut both t
Slide 12: PMI Leadership in OECD Markets
PMI Leadership in OECD Markets(a) Share of Market (H1, 2012) (%) 74 75 Others IMT PMI 53 45 40 35% 36 35 30 28 BAT 20 7 JT 0 Top 10 OECD Markets Japan Turk. Korea Italy Ger. Spain Pol. Fra. UK Mex. #2 #1 #2 #1 #1 #2 #1 #1 #1 (a) Top 10 ranked by 2011 industry volume, excluding the USA and duty free
Slide 13: PMI Leadership in Non-OECD Markets
PMI Leadership in Non-OECD Markets(a) Share of Market (H1, 2012) (%) 75 100 93 90 PMI 50 Others 27% 37 34 32 26 16 BAT 14 IMT 3 JT <1 <1 Top 10 Non-OECD Markets 0 Rus. Indon. India Phil. Brazil Ukr. Bangl. Viet. Egypt Pak. #2 #1 #1 #2 #1 #2 #2 (a) Top 10 ranked by 2011 industry volume, excluding Chi
Slide 14: PMI is Expanding Its Global Market Share
PMI is Expanding Its Global Market Share Top 30 PMI OCI Markets (%) 38.0 38 37.0 36.8 36.6 36.2 32 32.0 YTD July YTD July July 12 mm July 12 mm 2011 2012 2011 2012 Source: PMI Financials and estimates 14
Slide 15: Strong Brand Performance Continues
Strong Brand Performance Continues Volume Growth (H1, 2012 vs. H1, 2011)(a) (units billion) 5.0 2.5 0 0.0 (a) Excluding Japan hurdle Source: PMI Financials 15
Slide 16: Solid Marlboro Market Share Performance
Solid Marlboro Market Share Performance Market Shares YTD July YTD July 2011 2012 Asia(a) 6.4% 6.4% EEMA 6.8 6.9 EU 17.9 18.2 LA&C 13.5 14.2 Total(a)(b) 9.2 9.2 (a) Excluding China (b) Also excluding the USA Source: PMI estimates 16
Slide 17: Innovation Reinforcing Brand Performance – Marlboro
Innovation Reinforcing Brand Performance – Marlboro Worldwide 2.3 billion units 2.8 billion units 3.6 billion units(a) 6% of Marlboro volume in H1, 2012 (a) Includes other Marlboro menthol capsule brands Source: PMI Financials 17
Slide 18: Innovation Reinforcing Brand Performance – L&M
Innovation Reinforcing Brand Performance – L&M Poland Core Super-slims Menthol capsule 9.1% market share 5.3% market share 1.2% market share 15.6% market share in H1, 2012 (+0.8pp vs. H1, 2011) Source: PMI estimates 18
Slide 19: Rational Excise Tax Environment
Rational Excise Tax Environment ● No disruptive excise tax Excise Specific-to- increases in 2012 Total Tax Ratio on Cigarettes (weighted average for EU Region) ● Philippines a concern: Senate reviewing House of 32.4% Representatives proposal for very large excise tax increases ● Favorable structural
Slide 20: Regulatory Environment: Plain Packaging
Regulatory Environment: Plain Packaging ● Australian High Court ruled plain packaging law does not violate Australian constitution. Consequently, plain packaging will come into effect in Australia this December ● Laws in countries other than Australia may provide greater protection against the expro
Slide 21: Regulatory Environment: Plain Packaging
Regulatory Environment: Plain Packaging ● Public comment phase of UK consultation on packaging completed. We are waiting for the Government to clarify its intentions ● Plain packaging is one of the many measures being considered as part of the revision of the EU Tobacco Products Directive 21
Slide 22: Favorable Pricing Variance Key Driver of Increased Profitability
Favorable Pricing Variance Key Driver of Increased Profitability ● Positive volume variance Pricing Variance ($ million) offset by negative 2,000 H2 1,894 geographic mix H1 1,662 ● Price increases in 2012, notably in Argentina, Australia, Brazil, Germany, Indonesia, Italy, Korea, Mexico, the Philipp
Slide 23: Margin Expansion
Margin Expansion Adjusted OCI Margins H1, 2011 H1, 2012(a) Variance(a) Asia 47.4% 48.6% (1.2)pp EEMA 42.1 45.1 (3.0) EU 51.1 50.2 (0.9) LA&C 32.3 32.0 (0.3) Total 45.6 46.4 (0.8) (a) Excluding currency and acquisitions Source: PMI Financials 23
Slide 24: Free Cash Flow in H1, 2012 Impacted by Currency and Working Capital
Free Cash Flow in H1, 2012 Impacted by Currency and Working Capital Requirements ($ million) 6,170 382 (439) (1,158) (147) 94 4,902 H1 Net Currency Working Capital Other H1 2011 Earnings Capital Expenditures 2012 Source: PMI Financials 24
Slide 25: Attractive Bond Issues in August
Attractive Bond Issues in August ● $2.25 billion in USD denominated debt, evenly split between: - 5-year 1.125% coupon - 10-year 2.500% coupon - 30-year 3.875% coupon ● CHF 325 million 8-year bond with a coupon of 1.0% ● Strong investor interest ● Lowest coupons ever for PMI in each respective tranc
Slide 26: Share Repurchase Program Further Extended
Share Repurchase Program Further Extended ● New three-year $18 billion share repurchase program started in August after completion of the three-year $12 billion program ahead of schedule ● Target spending of $6 billion in total for 2012 ● Since March 2008 spin through end of June 2012, $24.4 billion
Slide 27: Conclusion
Conclusion ● We expect to deliver strong business results again this year: - Solid organic volume growth, driven by Asia and EEMA - Generally rational excise tax environment - Favorable pricing environment - Limited input cost increases, offset by productivity ● Continued investment behind innovatio
Slide 28: Questions & Answers
Barclays Back-to-School Consumer Conference Boston, September 5, 2012 Jacek Olczak Chief Financial Officer Philip Morris International QUESTIONS & ANSWERS
Slide 29: Barclays Back-to-School Consumer Conference Boston
Barclays Back-to-School Consumer Conference Boston September 5, 2012
Slide 30: Glossary and Reconciliation of Non-GAAP Measures
Glossary and Reconciliation of Non-GAAP Measures
Slide 31: Glossary
Glossary ● PMI stands for Philip Morris International Inc. and its subsidiaries ● Unless otherwise stated, we will be talking about results in the first half of 2012 and comparing them to the same period in 2011 ● References to PMI volumes refer to PMI cigarette shipment data, unless otherwise state
Slide 32: Glossary
Glossary ● EEMA refers to the Eastern Europe, Middle East & Africa Region ● EU refers to the European Union Region ● LA&C refers to the Latin America & Canada Region ● Fine cut includes Roll Your Own, Make Your Own, and additionally pipe tobacco in Poland and Spain ● Fine cut converted to cigarette
Slide 33: Reconciliation of Non-GAAP Measures
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Six Months Ended June 30, ($ in millions) (Unaudited) % Change in Reported Net Revenues 2012 2011 excluding Excise Taxes Reported Net Reported Net Rev
Slide 34: 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 35: 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 36: 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 Six Months Ended June 30, ($ in millions) (Unaudited) For the Six Months Ended June 30, 2012 2011 % Change Net
Slide 37: Barclays Back-to-School Consumer Conference
Barclays Back-to-School Consumer Conference Boston, September 5, 2012 Jacek Olczak Chief Financial Officer Philip Morris International
Philip Morris International — Barclays Back-to-School Consumer Conference 2012 on 6ix