asia region - lausanne, 27 june 2014

8/19/2019 Asia Region - Lausanne, 27 June 2014

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Investor Day

Lausanne, June 27, 2014

Jacek Olczak

Chief Financial Officer

Philip Morris International


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Agenda

● 2014 EPS guidance

● Key drivers of future profit growth● Reduced-Risk Products

● Cash flow and balance sheet management

● Returning cash to our shareholders

● Outlook for growth and conclusion

Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm


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2014 EPS Guidance

● Revised reported diluted EPS guidance for 2014 is $4.87 to $4.97 exchange rates, compared to $5.26 in 2013. This includes:

- A pre-tax charge related to the contemplated decision to discontinue cigaretBergen op Zoom, in the Netherlands, of approximately 24 cents per share. Tthis charge is expected to be recorded in the second quarter of 2014

- The 1 cent per share charge recorded as asset impairment and exit costs in quarter of 2014 relating to the decision to cease cigarette production in Melb Australia, by the end of this year

- An unfavorable currency impact, at prevailing exchange rates, of approximafor the full-year 2014

● Our revised 2014 guidance represents a growth rate of approxima8%, excluding currency and these restructuring charges, comparedadjusted diluted EPS of $5.40 in 2013.

Source: PMI forecasts and PMI Financials


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(a) Excluding China and the USASource: PMI estimates and PMI forecasts

Key Drivers: Industry Volume Trends

(3)% (2)% to (3)%

(1)% t

International Cigarette Industry Volume Decline Rate(a)

2013 2014 Forecast 2015 F


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Key Drivers: Market Share Momentum

35.7%

37.0%

2010 12mm May2014

+1.3pp

(a) Excluding duty freeSource: PMI estimates

Top 30 PMI OCI Markets(a)


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(a) Excluding China

Note: Data based on historical viewSource: PMI estimates

Key Drivers: Market Share Momentum

Regional PMI Market Shares (%)

38.538.9

2010 12mm May

23.4

24.8

2010 12mm May

24.5 24.9

2010 12mm May

36

201

+0.4pp

EU

+1.4pp

EEMA

+0.4pp

Asia(a)

201420142014


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PremiumShare of Market Share

201012mm May

2014 Variance12

Argentina 35.7% 38.5% 2.8 pp

Brazil 22.2 27.1 4.9

Egypt 7.4 9.7 2.3

Indonesia 35.5 37.3 1.8

Mexico 61.3 61.4 0.1

Philippines 26.4 19.1 (7.3)Poland 13.5 14.5 1.0

Russia 13.4 13.6 0.2

Turkey 17.8 21.0 3.2

Vietnam 2.6 5.6 3.0

(a) 12mm April

Note: Premium includes above premiumSource: PMI estimates and Nielsen

Key Drivers: Adult Smokers Trading-Up to Premium Brands

(a)


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Key Drivers: An Invigorated Marlboro

18.5 19.0

2010 12mm May

Marlboro Market Shares (%)

6.47.2

2010 12mm May

6.2 6.1

2010 12mm May

14

201

+0.8pp

EEMA

(0.1)pp

(a) Excluding ChinaSource: PMI estimates

+0.5pp

EU

201420142014

Asia(a)


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Note: Pack designs are for illustrative purposes only


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Key Drivers: Pricing

1,223

1,984

1,662

1,8941,759

2,

2008 2009 2010 2011 2012 2

Source: PMI Financials

Pricing Variance ($ million)


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Key Drivers: Rational and Reasonable Fiscal Environment

● Disruptive excise tax increases have become less frequent

● Improved excise tax structures:

- Increase in relative importance of specific elements

- Reinforced minimum excise taxes

- Compensation for VAT increases

- Elimination of discriminatory elements

- Gradual harmonization of cigarette and fine cut excise taxes

- Indexation- Multi-year programs

● Provide greater visibility and predictability for governments and the


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Key Drivers: Margin Expansion Through Cost Savings and

Productivity Improvements

41.4 41.742.3

44.145.4

2008 2009 2010 2011 2012

(a) Excluding currencySource: PMI Financials

Adjusted OCI Margins (%)


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(a) Excluding currency where data is availableNote: PMI is not included in the Tobacco Peer Group and Compensation Survey Group averages. Figures are for the 12 month period ending December 31, 2013 or ne

the companies in the tobacco peer and compensation survey groups is available in the glossarySource: FactSet and company filings, compiled by Centerview

Superior PMI Margins

46.0

34.5

24

PMI Tobacco Peer Group Average

CompensaGroup A

2013 Adjusted OCI Margin (%)(a)

4.6pp 5.4pp 1.0Increase vs. 2008:


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Outlook: A Return to Our Revenue and OCI Growth Algorithm

● As of 2015, we target mid to long-term currency-neutral annual gro4% to 6% for net revenues and 6% to 8% for adjusted OCI:

- An improved performance in challenging markets

- Better volume trends

- Improved product mix

- Strong pricing

- Limited cost increases

Source: PMI forecasts


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Reduced-Risk Products: Assessing the Potential

● For the initial five years, the markets in scope for our launches repconsumption of about one trillion units

● Potential annual volume evaluated at 30-50 billion units

● Potential incremental margin estimated at $720 million to $1.2 billioover time assuming pricing, manufacturing costs and excise taxes combustibles

Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harmSource: PMI estimates and PMI forecasts


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Reduced-Risk Products: Assessing the Potential

2014 2015 2016

iQOS City Tests National Geographic Expan

Platform 2Final Phase ofDevelopment

Clinical Trials City Tests N

Platform 4(current generation)

Altria / Nicocigs Geographic Expansion

Platforms 3 and 4

(next generation)Product Development Comm



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Free Cash Flow: Key Drivers

Variance:

Net Earnings

Currency

Working Capital

Others, net

Total


6.8

8.9

2008 2013

Free Cash Flow ($ billion)

CAGR: 5.5%


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Free Cash Flow as a % of Net Revenues (2008 – March 31, 2014)

Note: Free cash flow as a percentage of net revenues is defined as total 2008 – March 31, 2014 period free cash flow over total 2008 – March 31, 2014 period net reven

and net revenues for the period were $50.1 billion and $178.6 billion, respectively. Nearest comparable period is used where the 2008 – March 31, 2014 comparison is nSource: Company filings, compiled by Centerview

4.6%

8.3%

8.7%

9.1%

9.4%

12.2%

14.2%

14.9%

16.1%

16.8%

16.9%

19.8%

20.0%

20.1%

25.5%26.0%

27.1%

28.1%

Mondelēz

Bayer

Unilever

PepsiCo

Nestlé

Heineken

Imperial Tobacco

Vodafone

McDonald's

Diageo

Coca-Cola

Johnson & Johnson

Novartis

GlaxoSmithKline

BATRoche

Pfizer

PMI

13.4%

14.2

14.

Japan Tobacco

Altria

Lorillard

BAT

PMI

Compensation Survey Group Tobacco Peer Grou

Imperial Tobacco

Reynolds American


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10.4

13.9 14.816.0

19.9

25.5

0.9

1.31.2

1.1

1.3

1.7

2008 2009 2010 2011 2012 2013 Q

Credit Rating, Earnings and Debt

Note: EBITDA calculation method changed in 2013 and amounts restated back to 2008 to adjust for extraordinary, unusual or non-recurring expenses, netSource: PMI Financials

Net Debt to EBITDA ($ billion, except ratios)


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Very Well-Laddered Bond Portfolio

USD

USD

USD

USD

USDUSD

USDUSD USD

EUREUR

EUR

EUR EUR

USDEUR

EUR

USD

EUR

EUR

USDUSD

CHF

CHF

CHF

CHF

EUR

CHFCHF

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2029 2033 2038

3.5

3.0

2.0

1.5

1.0

0.5

2.5

($ billion)

0

Bond Maturity Profile as of May 31, 2014


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Focused Use of Cash Flow to Enhance Shareholder Returns

(a) Including dividend of $3.0 billion paid in April 2008 to Altria Group, Inc.Source: PMI Financials

Free Cash Flow:$49.6 billion

Strategic BusinessDevelopment Initiatives:

$4.6 billion

Dividends(a):$29.7 billion

Share Rep$33.9

Net Debt Issuance$18.6 bill

43% 507%

Cash Available:$68.2 billion

2008-2013

Returning Cash to Our Shareholders: Dividend Pay Out Target


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Returning Cash to Our Shareholders: Dividend Pay-Out Target

Ratio of 65%

Note: 2008 annualized rate is based on a quarterly dividend of $0.46 per common share, declared June 18, 2008Source: PMI Financials

56%

69%

62%58%

63%

6

2008 2009 2010 2011 2012 2

Dividend Pay-Out


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Returning Cash to Our Shareholders: Dividend Increase and Yiel

NA

(18.8)%

22.5%

38.6%

42.6%

43.5%

44.9%

48.1%

50.0%

52.2%

53.6%

54.1%

56.0%

60.5%

70.1%

81.3%

104.3%

116.0%

Mondelēz

Novartis

GlaxoSmithKline

Diageo

Heineken

Vodafone

Unilever

Bayer

Johnson & Johnson

Nestlé

PepsiCo

Roche

Coca-Cola

BAT

Imperial Tobacco

PMI

McDonald's

Dividend Growth: Compensation Survey Group(2008 – June 24, 2014)

Dividend Yield: Compensation S(June 24, 2014)

Pfizer

Note: PMI reflects absolute growth in annualized announced dividends from time of first PMI dividend of $0.46 in June 2008 through June 24, 2014. Companies in the Cabsolute growth from FY 2008 dividends or Q2, 2008 annualized dividend through current last twelve months dividends or current last quarter annualized dividerepresents the annualized dividend on June 24, 2014, over the closing share price on that date. The share price for PMI was $89.37 as of June 24, 2014. The annualreflect calendar year figuresSource: FactSet and company filings, compiled by Centerview

1.5%

1.7%

2.0%

2.7%

2.7%

2.9

2.9

3.

3.

3

Mondelēz

Heineken

Bayer

Diageo

Johnson & Johnson

Coca-Cola

Roche

PepsiCo

Novartis

Nestlé

McDonald's

Unilever

Pfizer

BAT

PMI

Imperial Tobacco

GlaxoSmithKline

Vodafone

Returning Cash to Our Shareholders: Substantial Share


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Note: The outstanding PMI shares at the time of the spin were 2,109 millionSource: PMI Financials

Returning Cash to Our Shareholders: Substantial Share

Repurchase Programs

Cumulative Amount Shares Shares Outst($ billion) (million) (%

35.1 27571.6

PMI Share Repurchase Programs (2008 – Q1, 2014)


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From OCI to EPS: Key Considerations and Outlook

● Fully committed to our share repurchase program. Target spendingbillion in 2014 and approximately $2-3 billion a year in 2015 and 20

● Investments required to support the commercialization of RRPs

● For 2015 and 2016, we target a growth in currency-neutral adjusteEPS in a range of 8% to 10%

● An improved operating environment, additional business developminitiatives and the geographic expansion of RRPs could provide an

beyond this period

Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harmSource: PMI forecasts


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PMI Outlook is Very Promising

● Superior brand portfolio, led by an invigorated Marlboro

● Optimized global footprint and infrastructure

● Sustainable strong pricing power based on our brands

● Limited cost increases and significant productivity improvement op

● Best-in-class R&D capabilities

● Tremendous potential for our Reduced-Risk Products

● Talented and highly motivated employees



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Investor Day

Lausanne, June 27, 2014


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Reconciliation of non-GAAP measures included in this presto the most comparable GAAP measures are provided on owebsite at: www.pmi.com/2014InvestorDay/RecSlides

Glossary of Terms: www.pmi.com/2014InvestorDay/Glossa

asia region - lausanne, 27 june 2014

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