![]() 2011 Third-Quarter Results October 20, 2011 Exhibit 99.3 |
![]() 2 Introduction Unless otherwise stated, we will be talking about results for the third-quarter 2011 and comparing them with the same period in 2010 References to PMI volumes refer to PMI shipment data, unless otherwise stated Industry volume and market shares are the latest data available from a number of internal and external sources Organic volume refers to volume excluding acquisitions Net revenues exclude excise taxes OCI stands for Operating Companies Income, which is defined as operating income before general corporate expenses and the amortization of intangibles. OCI growth rates are on an adjusted basis, which excludes asset impairment, exit and other costs Data tables showing adjustments to net revenues and OCI for currency, acquisitions, asset impairment, exit and other costs, free cash flow calculations, adjustments to EPS, and reconciliations to U.S. GAAP measures are at the end of today’s web cast slides and are posted on our web site |
![]() 3 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. Such forward-looking statements are based on current plans, estimates and expectations, and are not guarantees of future performance. They are based on management’s expectations that involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. PMI undertakes no obligation to publicly update or revise any forward-looking statements, except in the normal course of its public disclosure obligations. The risks and uncertainties relating to the forward-looking statements in this presentation include those described under Item 1A. “Risk Factors” in PMI’s Form 10-Q for the quarter ended June 30, 2011, filed with the Securities and Exchange Commission |
![]() 4 2011 Third-Quarter Results Outstanding financial performance: In the quarter, we comfortably surpassed all our mid to long-term currency neutral annual growth targets even excluding our business in Japan Q3, 2011 Results (a) Net Revenues +15.7% Adjusted OCI +23.7% Adjusted Diluted EPS +33.0% (a) All financial growth rates exclude currency. Net revenues and OCI growth rates also exclude acquisitions Source: PMI Financials |
![]() 5 2011 EPS Guidance Business outlook further improved, fully compensating recent unfavorable currency movements Allows us to narrow our 2011 reported diluted EPS guidance range to $4.75 to $4.80 (upper half of previous range) Compared to our adjusted diluted EPS of $3.87 in 2010, this translates into improved growth rates of approximately 17.5% to 19.0% excluding currency, and approximately 22.5% to 24.0% at prevailing exchange rates Source: PMI forecasts |
![]() 6 PMI Organic Cigarette Volume Growth (%) Source: PMI Financials 2011 2011 4.4 0.5 0 5 Q3 YTD Sept |
![]() 7 PMI Brand Performance % Volume Growth vs. Prior Year Q3, 2011 YTD Sept, 2011 Marlboro 3.9% 0.5% L&M 3.9 2.9 Bond Street 6.8 2.2 Fortune 10.1 9.0 (a) Philip Morris 1.8 1.0 Parliament 16.2 9.9 Chesterfield 7.0 0.4 Sampoerna A 22.8 11.7 Lark 44.1 15.3 Dji Sam Soe 12.1 10.3 (a) March through September Source: PMI Financials |
![]() 8 Marlboro Market Shares Market Shares YTD Sept, 2010 YTD Sept, 2011 Variance Asia (a) 6.2% 6.5% 0.3pp EEMA (b) 5.6 6.1 0.5 EU 18.1 17.9 (0.2) LA&C 13.8 13.5 (0.3) Total (a)(b) 8.8 9.0 0.2 (a) Excluding PRC (b) Excluding duty-free (c) Also excluding the USA Source: PMI estimates (c) |
![]() 9 Marlboro Market Shares – LA&C Region Market Shares YTD Sept, 2010 YTD Sept, 2011 Variance Argentina 23.2% 24.0% 0.8pp Brazil 6.7 7.0 0.3 Colombia 3.7 4.7 1.0 Mexico 48.9 51.8 2.9 Source: PMI estimates |
![]() 10 PMI Market Share Developments (%) Top 30 PMI OCI Markets (a) Adjusted for Philippines pro forma Jan-Feb 2010 Source: PMI Financials and estimates (a) 34.9 36.3 32 35 38 YTD Sept, 2010 YTD Sept, 2011 |
![]() 11 2011 Third-Quarter Results – by Region (a) Excluding currency and acquisitions Source: PMI Financials Q3, 2011 Results Asia EEMA LA&C EU Net Revenues (a) +39.1% +11.2% +8.3% +2.2% Adjusted OCI (a) +75.1 +13.8 +9.0 +3.1 |
![]() 12 Japan Source: PMI Financials, PMI estimates and Tobacco Institute of Japan PMI shipments up 47.1%: - Higher 2011 market share - Payback in Q3, 2010, for Q2, 2010, distributor inventory build- up September C-store consumer off-take share slightly above 30%, compared to around 26% pre-crisis Retention share only measurable in Q4, 2011, or Q1, 2012 Industry volume decline not expected to exceed 15% this year |
![]() 13 Indonesia PMI volume up 22.5% in Q3, 2011 Record market share of 31.2% in Q3, 2011 Indonesian economy remains strong and consumer purchasing power is increasing Government expected to continue to implement plans to simplify excise tax structure Source: PMI Financials and PMI estimates 2010 2011 Other Marlboro Dji Sam Soe Sampoerna A 29.2 31.2 (%) PMI Market Share Total PMI 11.2 12.1 7.9 7.7 5.7 7.2 4.2 4.4 0 35 Q3 Q3 |
![]() 14 Russia Market share up slightly to 25.8% QTD Aug, 2011, behind: - Parliament in premium - Chesterfield in mid-price, and - Bond Street in low-price segment PMI volume down 3.5% in Q3, 2011, due to: - Distributor inventory adjustments - Lower total market During Q4, 2011, Russian Parliament expected to approve new manageable road map for excise taxes Source: A.C. Nielsen, PMI Finance and Russian Ministry of Finance |
![]() 15 Turkey PMI volume up 21.6% in Q3, 2011 Strong share gains driven by: - Parliament in premium - Muratti in mid-price, and - L&M in low-price Total market had stabilized, but recently announced, very large ad-valorem excise tax increase expected to be disruptive A more balanced excise tax structure is needed Source: PMI Financials, PMI estimates and A.C. Nielsen Premium Mid-price Low-price 41.8 45.7 (%) PMI Market Share Total PMI 19.2 21.2 5.9 6.5 18.0 16.7 0 50 Q3, 2010 Q3, 2011 |
![]() 16 Germany Source: PMI Financials and PMI estimates Q3, 2010 Q3, 2011 L&M Marlboro Other (%) PMI Market Shares by Segment Germany had benefited from more robust market volume trends this year Q3, 2011, total German market volume: - Cigarettes +0.3% - Fine cut +3.8% PMI share gains in both cigarette and fine cut segments Price increase in Q2, 2011. Next tax step in Jan 2012 20.3 2.7 10.3 5.6 6.4 35.2 14.7 4.6 Cigarette Fine Cut 21.1 1.3 9.2 5.6 7.3 34.9 14.2 4.6 Cigarette Fine Cut |
![]() 17 France Great momentum in a stable market Cigarette share gain of 0.4pp to 40.4%, driven by premium Marlboro and Philip Morris Strong growth in fine cut segment since launch of Marlboro in Feb 2011 Cigarette price increase of €0.30/pack this month Source: PMI estimates Q3, 2010 Q3, 2011 40.4 Philip Morris Marlboro Other (%) PMI Market Shares by Segment 25.9 6.8 8.2 5.7 12.7 25.2 6.3 Cigarette Fine Cut 25.7 7.7 5.7 13.3 40.0 19.0 6.6 Cigarette Fine Cut |
![]() 18 Spain Very high unemployment driving decline in cigarette industry volume of at least 15% in 2011 Pricing situation was resolved in September: - Marlboro back to previous level of €4.25/pack - L&M raised to €3.75/pack Source: PMI estimates |
![]() 19 Pricing The pricing environment continues to be very favorable In 2011, PMI has implemented or announced price increases in: - Asia: Australia, Indonesia, Philippines - EEMA: Algeria, Russia, Saudi Arabia, Ukraine - EU: France, Germany, Italy, Poland, Spain - LA&C: Argentina, Brazil, Canada Source: PMI Financials ($ mio) Q3 Q1 Pricing Variance Q2 449 453 341 617 292 564 1,082 1,634 0 900 1,800 2010 2011 |
![]() 20 Costs and Margins Adjusted OCI Margins Third-Quarter 2010 2011 (a) Variance (a) Asia 37.6% 47.4% 9.8pp EEMA 45.1 46.2 1.1 EU 53.0 53.5 0.5 LA&C 32.7 32.9 0.2 Total 44.2 47.3 3.1 (a) Excluding currency and acquisitions Source: PMI Financials Stable tobacco leaf prices Moderate cost increases offset by productivity savings that will surpass $250 million in 2011 |
![]() 21 Excise Taxation Excise tax structures have improved and several countries have adopted multi-year tax plans Most governments appear to have understood that large excise tax increases are disruptive and do not improve revenue generation over mid to long-term We expect some VAT increases in 2012, but these should be manageable Every year, some governments introduce disruptive excise tax increases. This happened last week in Turkey and additional surprises remain possible |
![]() 22 Plain Packaging We oppose such measures because: - No sound evidence it would reduce consumption, smoking incidence or youth smoking, or provide any other public health benefit - Undermines public health objectives by lowering prices and increasing illicit trade - Violates intellectual property protections and breaches international trade obligations We therefore do not believe that plain packaging regulations should be widely adopted We are vigorously pursuing several legal avenues to challenge the Australian Government’s plain packaging proposal |
![]() 23 ($ million) +22.1% Currency Free Cash Flow (a) (a) Free cash flow equals net cash provided by operating activities less capital expenditures Source: PMI Financials ($ million) +25.6% Currency 2010 2011 2010 2011 9,000 2,253 2,830 214 0 1,000 2,000 3,000 Q3 Q3 7,373 478 0 3,000 6,000 9,000 YTD Sept YTD Sept |
![]() +10.3% +20.3% $3.08 $1.84 +17.4% 2008 Aug Sept Sept Sept 2011 +7.4% 24 Dividend Increases Since Spin-Off (a) (a) Dividends for 2008 and 2011 are annualized rates. 2008 annualized rate is based on a quarterly dividend of $0.46 per common share, declared June 18, 2008. The annualized rate for 2011 is based on a quarterly dividend of $0.77 per common share, declared September 14, 2011 Source: PMI Financials 2008 2009 2010 2011 +67.4% |
![]() 25 Share Repurchases and Dividends During the third quarter, PMI spent $1.4 billion to repurchase a further 21.2 million shares Since the March 2008 spin: - Over $20 billion spent to repurchase nearly 400 million shares at an average price of $50.81 per share - Over $14 billion paid out in dividends - Nearly $35 billion returned to our shareholders Source: PMI Financials |
![]() 26 Summary Outstanding third quarter: - Organic volume growth of 4.4% - Strong market share momentum and favorable pricing environment - Adjusted diluted EPS, excluding currency, increased by 33.0% - 2011 reported diluted EPS guidance range narrowed to $4.75- $4.80, with improved business outlook offsetting recent unfavorable currency movements - Compared to an adjusted diluted EPS of $3.87 in 2010, this corresponds to an increase of approximately 22.5% to 24.0% at prevailing exchange rates, and approximately 17.5% to 19.0%, excluding currency 20.3% dividend increase in September demonstrates our focus on shareholder returns and our belief in a bright future Source: PMI Financials |
![]() Questions & Answers 2011 Third-Quarter Results |
![]() 28 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures Adjustments for the Impact of Currency and Acquisitions For the Quarters Ended September 30, ($ in millions) (Unaudited) Reported Net Revenues Less Excise Taxes Reported Net Revenues excluding Excise Taxes Less Currency Reported Net Revenues excluding Excise Taxes & Currency Less Acquisi- tions Reported Net Revenues excluding Excise Taxes, Currency & Acquisitions Reported Net Revenues Less Excise Taxes Reported Net Revenues excluding Excise Taxes Reported Reported excluding Currency Reported excluding Currency & Acquisitions 8,155 $ 5,649 $ 2,506 $ 321 $ 2,185 $ - $ 2,185 $ European Union 7,045 $ 4,906 $ 2,139 $ 17.2% 2.2% 2.2% 4,921 2,711 2,210 89 2,121 13 2,108 EEMA 4,184 2,288 1,896 16.6% 11.9% 11.2% 5,143 2,344 2,799 248 2,551 2 2,549 Asia 3,629 1,796 1,833 52.7% 39.2% 39.1% 2,487 1,640 847 39 808 - 808 Latin America & Canada 2,078 1,332 746 13.5% 8.3% 8.3% 20,706 $ 12,344 $ 8,362 $ 697 $ 7,665 $ 15 $ 7,650 $ PMI Total 16,936 $ 10,322 $ 6,614 $ 26.4% 15.9% 15.7% Reported Operating Companies Income Less Currency Reported Operating Companies Income excluding Currency Less Acquisi- tions Reported Operating Companies Income excluding Currency & Acquisitions Reported Operating Companies Income Reported Reported excluding Currency Reported excluding Currency & Acquisitions 1,262 $ 105 $ 1,157 $ - $ 1,157 $ European Union 1,113 $ 13.4% 4.0% 4.0% 925 (32) 957 (13) 970 EEMA 856 8.1% 11.8% 13.3% 1,309 104 1,205 2 1,203 Asia 690 89.7% 74.6% 74.3% 255 - 255 - 255 Latin America & Canada 244 4.5% 4.5% 4.5% 3,751 $ 177 $ 3,574 $ (11) $ 3,585 $ PMI Total 2,903 $ 29.2% 23.1% 23.5% 2011 2010 % Change in Reported Operating Companies Income 2011 2010 % Change in Reported Net Revenues excluding Excise Taxes |
![]() 29 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 Ended September 30, ($ in millions) (Unaudited) (a) For the calculation of net revenues excluding excise taxes, currency and acquisitions, refer to previous slide Reported Operating Companies Income Less Asset Impairment & Exit Costs Adjusted Operating Companies Income Less Currency Adjusted Operating Companies Income excluding Currency Less Acquisi- tions Adjusted Operating Companies Income excluding Currency & Acquisitions Reported Operating Companies Income Less Asset Impairment & Exit Costs Adjusted Operating Companies Income Adjusted Adjusted excluding Currency Adjusted excluding Currency & Acquisitions 1,262 $ (11) $ 1,273 $ 105 $ 1,168 $ - $ 1,168 $ European Union 1,113 $ (20) $ 1,133 $ 12.4% 3.1% 3.1% 925 (16) 941 (32) 973 (1) 974 EEMA 856 - 856 9.9% 13.7% 13.8% 1,309 (5) 1,314 104 1,210 2 1,208 Asia 690 - 690 90.4% 75.4% 75.1% 255 (11) 266 - 266 - 266 Latin America & Canada 244 - 244 9.0% 9.0% 9.0% 3,751 $ (43) $ 3,794 $ 177 $ 3,617 $ 1 $ 3,616 $ PMI Total 2,903 $ (20) $ 2,923 $ 29.8% 23.7% 23.7% % Points Change Adjusted Operating Companies Income excluding Currency Net Revenues excluding Excise Taxes & Currency (a) Adjusted Operating Companies Income Margin excluding Currency Adjusted Operating Companies Income excluding Currency & Acquisitions Net Revenues excluding Excise Taxes, Currency & Acquisitions (a) Adjusted Operating Companies Income Margin excluding Currency & Acquisitions Adjusted Operating Companies Income Net Revenues excluding Excise Taxes (a) Adjusted Operating Companies Income Margin Adjusted Operating Companies Income Margin excluding Currency Adjusted Operating Companies Income Margin excluding Currency & Acquisitions 1,168 $ 2,185 $ 53.5% 1,168 $ 2,185 $ 53.5% European Union 1,133 $ 2,139 $ 53.0% 0.5 0.5 973 2,121 45.9% 974 2,108 46.2% EEMA 856 1,896 45.1% 0.8 1.1 1,210 2,551 47.4% 1,208 2,549 47.4% Asia 690 1,833 37.6% 9.8 9.8 266 808 32.9% 266 808 32.9% Latin America & Canada 244 746 32.7% 0.2 0.2 3,617 $ 7,665 $ 47.2% 3,616 $ 7,650 $ 47.3% PMI Total 2,923 $ 6,614 $ 44.2% 3.0 3.1 % Change in Adjusted Operating Companies Income 2010 2011 2010 2011 |
![]() 30 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) 2011 2010 % Change Reported Diluted EPS 1.35 $ 0.99 $ 36.4% Adjustments: Asset impairment and exit costs 0.02 0.01 Tax items - - Adjusted Diluted EPS 1.37 $ 1.00 $ 37.0% Less: Currency impact 0.04 Adjusted Diluted EPS, excluding Currency 1.33 $ 1.00 $ 33.0% |
![]() 31 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 Nine Months Ended September 30, ($ in millions) (Unaudited) (a) Operating Cash Flow For the Quarters Ended For the Nine Months Ended September 30, September 30, 2011 2010 % Change 2011 2010 % Change Net cash provided by operating activities (a) 3,053 $ 2,417 $ 26.3% 9,568 $ 7,856 $ �� 21.8% Less: Capital expenditures 223 164 568 483 Free cash flow 2,830 $ 2,253 $ 25.6% 9,000 $ 7,373 $ 22.1% Less: Currency impact 214 478 Free cash flow, excluding currency 2,616 $ 2,253 $ 16.1% 8,522 $ 7,373 $ 15.6% For the Quarters Ended For the Nine Months Ended September 30, September 30, 2011 2010 % Change 2011 2010 % Change Net cash provided by operating activities (a) 3,053 $ 2,417 $ 26.3% 9,568 $ 7,856 $ 21.8% Less: Currency impact 236 515 Net cash provided by operating activities, excluding currency 2,817 $ 2,417 $ 16.5% 9,053 $ 7,856 $ 15.2% |
![]() 32 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) 2010 Reported Diluted EPS 3.92 $ Adjustments: Tax items (0.07) Asset impairment and exit costs 0.02 Adjusted Diluted EPS 3.87 $ |
![]() 2011 Third-Quarter Results October 20, 2011 |