Philip Morris International Inc · NYSE:PM
Philip Morris International — Shareholder Meeting (May 2010)
78 slides from Philip Morris International's shareholder meeting presentation, May 12, 2010
Slide 1: Annual Meeting of Stockholders
Annual Meeting of Stockholders New York May 12, 2010 Louis C. Camilleri Chairman and Chief Executive Officer Philip Morris International 1
Slide 2: Forward-Looking and Cautionary Statements
Forward-Looking and Cautionary Statements ● This presentation and related discussion contain statements that, to the extent they do not relate strictly to historical or current facts, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
Slide 3: Annual Meeting of Stockholders
Annual Meeting of Stockholders May 12, 2010 3
Slide 4: 2009 Highlights
2009 Highlights ● Strong financial results ● Resilient performance in part masked by significant currency headwinds ● Operating cash flow well ahead of three-year forecast made at the time of the spin ● Returned $10 billion to our shareholders through dividends and share repurchases 4
Slide 5: PMI 2009 Results
PMI 2009 Results % Growth 2009 vs. 2008 2009 Results (billion) Actual Excl. Acquisitions Cigarette Volume 864.0 - 0.7 % - 1.5 % Source: PMI Financials 5
Slide 6: PMI 2009 Share Developments
PMI 2009 Share Developments OECD markets(a) Non-OECD markets(b) (%) (%) 36 24 34.9 34.5 20.8 21.0 30 18 2008 2009 2008 2009 (a) Excluding USA and duty free (b) Excluding PRC and duty free Note: For definition of OECD countries, refer to PMI’s Registration Statement on Form 10 Information Statement (
Slide 7: PMI 2009 Results
PMI 2009 Results % Growth 2009 vs. 2008 2009 Results Excl. Currency ($ billion) Actual Excl. Currency & Acquisitions Net Revenues(a) 25.0 - 2.6 % + 7.5 % + 5.3 % (a) Excluding excise taxes Source: PMI Financials 7
Slide 8: PMI 2009 Results
PMI 2009 Results % Growth 2009 vs. 2008 2009 Results Excl. Currency ($ billion) Actual Excl. Currency & Acquisitions Net Revenues(a) 25.0 - 2.6 % + 7.5 % + 5.3 % Adjusted OCI(b) 10.4 - 1.9 % + 11.1 % + 8.7 % (a) Excluding excise taxes (b) Excludes asset impairment, exit and other costs Source: PMI F
Slide 9: PMI 2009 Results
PMI 2009 Results % Growth 2009 vs. 2008 2009 Excl. Currency Results ($) Actual Excl. Currency & Acquisitions Net Revenues(a) 25.0 - 2.6 % + 7.5 % + 5.3 % Adjusted OCI(b) 10.4 - 1.9 % + 11.1 % + 8.7 % Adjusted Diluted EPS(b) 3.29 - 0.6 % + 15.4 % (a) Excluding excise taxes (b) Excludes asset impairme
Slide 10: PMI Results vs. Mid to Long-Term Annual Growth Targets
PMI Results vs. Mid to Long-Term Annual Growth Targets Mid to Long-Term Annual Growth Targets FY, 2008 FY, 2009 Cigarette Volume(a) 1% + 1.0 % - 1.5 % Net Revenues(b)(c) 4–6% + 5.6 % + 5.3 % Adjusted OCI(c)(d) 6–8% + 9.8 % + 8.7 % Adjusted Diluted 10 – 12 % + 12.9 % + 15.4 % EPS(d)(e) (a) Excluding
Slide 11: PMI Results vs. Mid to Long-Term Annual Growth Targets
PMI Results vs. Mid to Long-Term Annual Growth Targets Mid to Long-Term Annual Growth Targets FY, 2008 FY, 2009 Q1, 2010 Cigarette Volume(a) 1% + 1.0 % - 1.5 % - 2.3 % Net Revenues(b)(c) 4–6% + 5.6 % + 5.3 % + 6.1 % Adjusted OCI(c)(d) 6–8% + 9.8 % + 8.7 % + 8.6 % Adjusted Diluted 10 – 12 % + 12.9 %
Slide 12: PMI 2010 First-Quarter Results
PMI 2010 First-Quarter Results % Growth Q1, 2010 vs. Q1, 2009 Q1, 2010 Results (billion) Actual Excl. Acquisitions Cigarette Volume 204.7 0.7 % - 2.3 % Source: PMI Financials 12
Slide 13: Top International Brands (2009)
Top 15 International Brands (2009) Marlboro M arlboro 302 Winston M ild Seven L&M 91 Pall M all Kent PMI Camel BAT Viceroy JT Bond Bond Street Street 42 Dunhill Philip M Morris orris 38 Chesterfield Chesterfield 38 Parliament Parliament 37 LD Lark Lark 31 (bio) 0 50 100 150 200 250 300 350 Source: P
Slide 14: Marlboro
Marlboro ● Only truly global cigarette New Architecture brand ● Leading 18.0% market share in EU Region in Q1, 2010 Red: ● Over 60% of Marlboro volume sold outside EU Region ● Global volume in Q1, 2010, Gold: down just 0.6%, and up by 1.4% excluding Romania and Turkey Fresh: Source: PMI Financials a
Slide 15: PMI 2010 First-Quarter Results
PMI 2010 First-Quarter Results % Growth Q1, 2010 vs. Q1, 2009 Q1, 2010 Results Excl. Currency ($ billion) Actual Excl. Currency & Acquisitions Net Revenues(a) 6.5 + 16.1 % + 8.0 % + 6.1 % (a) Excluding excise taxes Source: PMI Financials 15
Slide 16: PMI 2010 First-Quarter Results
PMI 2010 First-Quarter Results % Growth Q1, 2010 vs. Q1, 2009 Q1, 2010 Results Excl. Currency ($ billion) Actual Excl. Currency & Acquisitions Net Revenues(a) 6.5 + 16.1 % + 8.0 % + 6.1 % Adjusted OCI(b) 2.8 + 17.0 % + 8.9 % + 8.6 % (a) Excluding excise taxes (b) Excludes asset impairment, exit and
Slide 17: Adjusted OCI Margins
Adjusted OCI Margins(a) Q1, 2009 Q1, 2010 Variance EU 48.7 % 49.0 % 0.3 pp EEMA 40.4 % 45.0 % 4.6 pp Asia 41.6 % 37.8 % (3.8)pp LA & Canada 27.3 % 30.2 % 2.9 pp Total PMI 42.3 % 42.7 % 0.4 pp (a) Excluding currency impact Note: Margins are calculated as adjusted OCI, divided by net revenues, excludi
Slide 18: PMI 2010 First-Quarter Results
PMI 2010 First-Quarter Results % Growth Q1, 2010 vs. Q1, 2009 Q1, 2010 Excl. Currency Results ($) Actual Excl. Currency & Acquisitions Net Revenues(a) 6.5 + 16.1 % + 8.0 % + 6.1 % Adjusted OCI(b) 2.8 + 17.0 % + 8.9 % + 8.6 % Adjusted Diluted EPS(b) 0.90 + 21.6 % + 13.5 % (a) Excluding excise taxes (
Slide 19: Discretionary Cash Flow
Discretionary Cash Flow ($ billion) ($ billion) 10 2 1.8 8.6 Favorable 42% Currency 26% Unfavorable 1.7 Currency 6.8 1.3 33% 5% 7.1 0 0 2008 2009 Q1, 2009 Q1, 2010 Source: PMI Financials 19
Slide 20: Capital Structure
Capital Structure ● Net debt to EBITDA ratio of 1.34 to 1 on March 31, 2010 ● Over $14 billion in well-laddered bonds in three currencies with average cost of 5.5% ● A2 / A / A long-term credit ratings ● Flexibility to pursue strategically compelling and financially attractive acquisitions Source: P
Slide 21: Shareholder Returns
Shareholder Returns ● Dividend increased by 7.4% in September 2009 to an annualized rate of $2.32 per share ● $13 billion share repurchase program completed on April 30, 2010 ● New share repurchase program of $12 billion ● Since March 2008, approximately $20 billion returned to shareholders Source:
Slide 22: Cigarette Industry Volume
Cigarette Industry Volume (billion units) 3,330 +0.3% 3,339 -2.0% 3,271 +2.3% -1.9% Non-OECD(b) 2,134 2,183 2,141 -3.3% -2.2% OECD(a) 1,196 1,156 1,130 2007 2008 2009 (a) Excluding USA and duty free (b) Excluding China and duty free Source: PMI estimates 22
Slide 23: PMI Market Share Developments
PMI Market Share Developments (pp) Variance Q1, 2010 vs. Q1, 2009 4 3 2 1 Spain Germany France Turkey 0 Korea Poland Argent. Italy Russia Mexico Ukraine Japan -1 -2 Source: Hankook Research, A.C. Nielsen, Japan Institute of Tobacco and PMI estimates 23
Slide 24: Brand Portfolio
Brand Portfolio International Local Heritage Premium & Above Mid-Price Low-Price 24
Slide 25: Pricing
Pricing ● Continues to be a key driver of revenue and OCI growth ● Since October 2009, PMI has implemented price increases notably in: EU EEMA Asia LA & Canada France Romania Australia Argentina Greece Russia Indonesia Canada Italy Saudi Arabia Malaysia Dominican Rep. Poland Turkey Pakistan Mexico S
Slide 26: Productivity and Cost Savings Program
Productivity and Cost Savings Program Forecast Cumulative Gross Cost Savings (2008-2010) ($ million) 1,550 850 450 250 Manufacturing G&A + Other EU Program Total Productivity Source: PMI Financials 26
Slide 27: Key Opportunities / Challenges
Key Opportunities / Challenges ● Economic recovery ● Excise taxation ● Illicit trade ● Regulatory environment ● Business development opportunities 27
Slide 28: Economic Recovery
Economic Recovery ● Our business is resilient but not immune to economic developments 28
Slide 29: Economic Recovery
Economic Recovery ● Our business is resilient but not immune to economic developments ● Economic recovery in Asia and Latin America 29
Slide 30: Economic Recovery
Economic Recovery ● Our business is resilient but not immune to economic developments ● Economic recovery in Asia and Latin America ● Signs of an economic recovery in Eastern Europe 30
Slide 31: Economic Recovery
Economic Recovery ● Our business is resilient but not immune to economic developments ● Economic recovery in Asia and Latin America ● Signs of an economic recovery in Eastern Europe ● Uneven economic developments across the EU 31
Slide 32: Excise Taxation
Excise Taxation ● Most governments pursuing a policy of reasonable increases ● Excise tax structures globally improving 32
Slide 33: Excise Taxation: New EU Excise Tax Directive
Excise Taxation: New EU Excise Tax Directive ● Calls for reasonable increases through 2018 ● Allows for increase in weight of specific element ● Provides more effective Minimum Excise Tax tool Source: European Union Commission 33
Slide 34: Excise Taxation
Excise Taxation ● Most governments pursuing a policy of reasonable increases ● Excise tax structures globally improving ● Disruptively large increases this year in Romania, Turkey, Greece and Australia, with Japan to come Source: PMI Financials 34
Slide 35: Illicit Trade
Illicit Trade ● A very significant problem that affects both developed and emerging markets ● Illicit trade’s estimated share of consumption: - Brazil 24% - Canada 30% - Ireland 23% - Malaysia 37% - Romania 36% - Vietnam 35% Source: World Bank, Joossens Report, GFK, KPMG, Novel Research and PMI esti
Slide 36: Illicit Trade
Illicit Trade ● A very significant problem that affects both developed and emerging markets ● Growing threat to legitimate business: - Counterfeit (a) - “Illicit whites” ● Not sourced from legitimate duty free businesses (a) “illicit whites” are brands with no legitimate distribution in the destinat
Slide 37: Illicit Trade
Illicit Trade ● A very significant problem that affects both developed and emerging markets ● Growing threat to legitimate business ● Not sourced from legitimate duty free businesses ● Hurts legitimate industry, governments, public health and consumers ● Often the result of misguided policies Source
Slide 38: Illicit Trade
Illicit Trade ● A very significant problem that affects both developed and emerging markets ● Growing threat to legitimate business ● Not sourced from legitimate duty free businesses ● Hurts legitimate industry, governments, public health and consumers ● Often the result of misguided policies ● Clos
Slide 39: Regulatory Environment
Regulatory Environment ● PMI seeks comprehensive regulation based on the broader goal of harm reduction 39
Slide 40: Regulatory Environment
Regulatory Environment ● PMI seeks comprehensive regulation based on the broader goal of harm reduction ● We do not support product display bans, plain packaging and bans on the use of all ingredients 40
Slide 41: Regulatory Environment: Display Bans
Regulatory Environment: Display Bans ● PMI believes that display bans: - Impede competition - Impose significant costs and other burdens on retailers - Encourage adult smokers to choose based on price - Foster illicit trade 41
Slide 42: Regulatory Environment: Plain Packaging
Regulatory Environment: Plain Packaging ● No sound evidence that this would reduce youth smoking or provide any other public health benefit ● Nevertheless, the Australian government has announced it will seek to introduce legislation requiring plain packaging by July 2012 Source: UK Department of He
Slide 43: Regulatory Environment: Plain Packaging
Regulatory Environment: Plain Packaging ● No sound evidence that this would reduce youth smoking or provide any other public health benefit ● Nevertheless, the Australian government has announced it will seek to introduce legislation requiring plain packaging by July 2012 ● PMI is strongly opposed t
Slide 44: Regulatory Environment: Ingredients
Regulatory Environment: Ingredients ● Restrictions on use of ingredients in place for many years based on toxicity or addictiveness ● All PMI products comply with such laws 44
Slide 45: Regulatory Environment: Ingredients
Regulatory Environment: Ingredients ● Restrictions on use of ingredients in place for many years based on toxicity or addictiveness ● All PMI products comply with such laws ● PMI opposes proposals to ban all ingredients 45
Slide 46: Business Development Opportunities
Business Development Opportunities PMI expansion supported by: ● Leading brands (a) ● Global infrastructure 26.0% ● Share momentum ● Strongest cash flow 74.0% ● Best people ● Untapped opportunities (a) Excluding China and USA Source: PMI estimates 46 Source: PMI estimates based on GIMS
Slide 47: Business Development Opportunities
Business Development Opportunities Bangladesh, China, 45% India and Accessible 55% Vietnam Today International Market(a) : 5.6 trillion units (a) Excluding USA Source: PMI estimates 47
Slide 48: Business Development: Philippines
Business Development: Philippines ● 85 billion cigarette market Premium 29% Non- 50% 50% Menthol Low 53% Menthol 18% Mid Price Segments Flavor Segments Source: PMI estimates 48
Slide 49: Business Development: Philippines
Business Development: Philippines ● New company combines selected assets of Fortune Tobacco and PM Philippines ● Chaired by Mr. Lucio Tan ● Management rests with PMI ● Smooth integration ● Potential synergies in manufacturing, purchasing, sales and distribution ● Transaction expected to be mildly ac
Slide 50: Currency Neutral Mid to Long-Term Annual Growth Targets
Currency Neutral Mid to Long-Term Annual Growth Targets ● Cigarette Volume(a) 1–2% ● Net Revenues(b)(c) 4–6% ● Adjusted OCI(c)(d) 6–8% ● Adjusted diluted EPS(d) 10 – 12 % (a) Organic volume growth, that is excluding acquisitions target of 1% and total volume, that is including acquisitions, of 2% (b
Slide 51: Question and Comment Session
Annual Meeting of Stockholders May 12, 2010 Question and Comment Session 51
Slide 52: Annual Meeting of Stockholders
Annual Meeting of Stockholders May 12, 2010 52
Slide 53: Harold Brown
Harold Brown uIP MORRIS INTERNATIONAL
Slide 54: Mathis Cabiallavetta
Mathis Cabiallavetta uIP MORRIS INTERNATIONAL
Slide 55: Louis C. Camilleri
Louis C. Camilleri PHILIP MORRIS INTERNATIONAL
Slide 56: J. Dudley Fishburn
J. Dudley Fishburn PHILIP NORRIS INTERNATIONAL
Slide 57: Jennifer Li
Jennifer Li 57
Slide 58: Graham Mackay
Graham Mac kay uIP MORRIS INTERNATIONAL
Slide 59: Sergio Marchionne
Sergio Marchionne 59
Slide 60: Lucio A. Noto
Lucio A. Noto uIP MORRIS INTERNATIONAL
Slide 61: Carlos Slim Helú
Carlos Slim Helu uIP MORRIS INTERNATIONAL
Slide 62: Stephen M. Wolf
Stephen M. Wolf vise vores INTERNATIONAL
Slide 63: Annual Meeting of Stockholders
Annual Meeting of Stockholders May 12, 2010 63
Slide 64: Contributions Programs Colombia
CONTRIBUTIONS PROGRAMS COLOMBIA (4 min. 30 sec video - please stand by) 64
Slide 65: Annual Meeting of Stockholders
Annual Meeting of Stockholders May 12, 2010 65
Slide 66: Charles R. Wall
Charles R. Wall uIP MORRIS INTERNATIONAL
Slide 67: Jean-Claude Kunz
Jean-Claude Kunz uIP MORRIS INTERNATIONAL
Slide 68: G. Penn Holsenbeck
G. Penn Holsenbeck PHILIP NORRIS INTERNATIONAL
Slide 69: Annual Meeting of Stockholders
Annual Meeting of Stockholders May 12, 2010 69
Slide 70: Reconciliation of Non-GAAP Measures
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for Impact of Currency and Acquisitions For the Years Ended December 31, ($ in millions) (Unaudited) % Change in Reported Net 2009 2008 Revenues excluding Excise Taxes Reported Reported Net Reported Net
Slide 71: 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, excluding Currency and Acquisitions For the Years Ended December 31, ($ in millions) (Unaudited) % Change in Adjusted Op
Slide 72: 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 Years Ended December 31, (Unaudited) 2009 2008 % Change Reported Diluted EPS $ 3.24 $ 3.31 (2.1)%
Slide 73: 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 March 31, ($ in millions) (Unaudited) % Change in Reported Net 2010 2009 Revenues excluding Excise Taxes Reported Net Reported Net Reve
Slide 74: 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 75: 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 March 31, (Unaudited) 2010 2009 % Change Reported Diluted EPS $ 0.90 $ 0.74 21.6% L
Slide 76: Reconciliation of Non-GAAP Measures
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Operating Cash Flow to Discretionary Cash Flow and Discretionary Cash Flow, excluding Currency For the Years Ended Dec 31, ($ in millions) (Unaudited) 2009 2008 % Change (a) Net cash provided by o
Slide 77: Reconciliation of Non-GAAP Measures
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Reconciliation of Operating Cash Flow to Discretionary Cash Flow and Discretionary Cash Flow, excluding Currency For the Quarters Ended March 31, ($ in millions) (Unaudited) 2010 2009 % Change (a) Net cash provided
Slide 78: Total Debt to EBITDA and Net Debt to EBITDA Ratios
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Calculation of Total Debt to EBITDA and Net Debt to EBITDA Ratios ($ in millions, except ratios) (Unaudited) For the Year Ended March 31, December 31, 2010 2009 April ~ December January ~ March 12 months 2009 2010
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