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    Investor Day – OperationsLausanne, June 26, 2014

    Antonio MarquesSenior Vice President, OperationsPhilip Morris International

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    Agenda

    ● Operations Overview

    ● Focused Innovation● Performance and Sustainability● Cost Management● Organizational Engagement● Conclusions

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    Operations Objectives

    ● Manufacture superior quality products in a safe, cost effective and sustainmanner

    ● Contain annual cost of goods sold increases in the range of 1% to 3%,excluding currency, volume/mix and costs related to RRPs, through supplchain management, productivity improvements and cost savings

    ● Drive innovation to enhance margins and gain market share

    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 Financials

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    Operations Scope

    ● People (over 55,000):- 17,000 in machine-made operations- Nearly 27,000 in hand-rolled operations in Indonesia- Over 11,000 in fixed manufacturing and support functions

    ● Cigarette volume: 913 billion units● Over 4,000 products on market● COGS: $10.4 billion (61% of PMI’s total cost base)

    Note: Products on market may include several SKUs with different pricing, stick counts or temporary packaging optionsSource: PMI Financials

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    PMI Operates Cigarette and Non-Cigarette ManufacturingFacilities Worldwide

    Note: 2013 year-end. 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 Operations

    RR(u

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    Focused Innovation

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    Volumes of Innovative Formats are Growing

    765 672

    116

    176

    3432

    2833

    944913

    2011 2013

    52%

    15%

    (3)%

    (5)%

    (12)%

    (units billion)

    Traditional

    Innovative

    Hand-RolledOTP

    (% change)

    Note: Volume includes TPMs. Traditional format: Pack type: Box, Round-Corner Box and Soft / Diameter: Regular / Length: Regular Size, Long Size, King Size and 100mm . OTP inclufor RYO and MYO cigarettes, pipe tobacco, cigars and cigarillos converted into cigarette equivalent. 2011 sales volume were restated to reflect the new conversion rates for OTP. Totals mdue to roundingSource: PMI Financials

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    ● Component pipeline:- Derived from adult smoker insights- Six-month cycle of concept evaluation- Continuously filled and refined pipeline with rolling 2-5 year horizon

    ● Product pipeline:- Rigorous concept evaluation of component combinations- Best concepts selected for pilot test in lead markets- Enables rapid deployment of relevant innovation to multiple markets- Continuously filled and refined pipeline with 1-3 year horizon

    Source: PMI Operations

    Adult SmokerPreferences

    TranslationInto Product

    ConceptsConcept

    ValidationComponent

    DevelopmentComponentVerification

    IndustrialSolution

    PrVeri

    Focused Innovation

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    Specification Rationalization Program

    ● Supports focused commercial approach to sales and elimination ofunnecessary complexity in production

    ● Global program for specifications and POM rationalization:- More than 500 products delisted or morphed- Over 300 new introductions- Net 6% reduction in global product portfolio- 7% reduction in blends

    - 12% reduction in filter specifications● Minimum target of 5% reduction per year (2014-2016)

    Note: Products on Market ("POM") may include several SKUs with different pricing, stick counts or temporary packaging optionsSource: PMI Operations

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    PMI Continues to Deliver Innovation

    Chesterfield Progressive Line Marlboro Eco Zip P

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    PMI Continues to Deliver Innovation

    ● Innovative premium p● 90mm cigarette with 7

    diameter ● "Bevel edge" pack● Diamond cut copy lin

    frame

    Parliament Carat

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    PMI Continues to Deliver Innovation

    Marlboro Premium Black ● Innovative "SmartSeal" p

    ● Successful GCC launch● Further roll-out planned

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    New Packing Technology to Address Format Complexity

    ● Investment in flexible packing machines to accelerate the launch of innovpacks into the market

    Source: PMI Operations

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    24%

    20%

    11%

    Note: Other Operations includes ongoing maintenance and replacements, as well as investments made to meet regulation or compliance-driven initiatives Reduced-Risk Products ("RRPs

    we use to refer to products that have the potential to reduce individual risk and population harmSource: PMI Financials

    35%

    4%

    Capital Investments to Support Innovation, Growth and RRPs

    2011 PMI CAPEX

    31%

    30%

    2013 PMI CAPEX

    RRPs

    InformationServices, G&A,

    Marketing & Sales

    OtherOperationsInnovation

    & Growth

    RRPs

    InformationServices, G&A,

    Marketing & Sales

    OtherOperations

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    RRPs Footprint in Bologna, Italy

    ● Bologna home to our state-filter factory and the first Rplant

    ● Region provides great infra

    ● Access to qualified workfo

    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. Visual execution is for illustrative pur

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    Performance & Sustainability

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    7% 7%20% 11% 16%

    73% 82% 84%

    2010 2011 2012

    Note: As of 2011, PMI changed the methodology for the Market Visual Quality Index to a stricter definitionSource: PMI Operations; 2,572 brand comparisons (~170,000 packs), PMI vs. competition

    PMI Outperforms Competition: Visual Quality in Key Markets

    % of Audited Markets

    Green: PMI outperforms competition Yellow: PMI is statistically not different than competitionRed: Competition outperforms PMI

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    Our Commitment to Our People: Outstanding Safety inManufacturing

    Source: PMI Operations

    Lost-Time Injury Rate / 200,000 hours

    0.220.17

    0.13

    2010 2011 2012

    (7

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    Our Commitment to Sustainability: Tobacco Production

    ● Achieve safe and fair working conditions on all farms from which PMI sotobacco

    ● Progressively eliminate child labor and other labor abuses● Training sessions provided to more than 3,700 field technicians and ALP

    communicated to almost 98% of our 500,000 farmers● While we are pleased with our results so far, much more remains to be do● First two progress reports are published on PMI’s website

    Note: ALP stands for Agricultural Labor Practices ("ALP")Source: PMI Operations

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    Our Commitment to Sustainability: Manufacturing Environment

    Source: PMI Operations

    794727

    634

    2010 2013 2015

    5.34.7

    2010 2013

    kg CO 2 per million cigarettes equivalent m 3 water per million cigarettes

    (8)% (20)%

    On track to achieve 2015 targets

    (13)%

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    Our Commitment to Sustainability: Climate Change

    2012Disclosure

    2013Disclosure

    PMI 91% 97%JT 83% 96%BAT 86% 94%

    Imperial 75% 83% Altria 71% 75%Reynolds 63% 70%

    Carbon Disclosure Project S&P/Global 500 Tobacco Sector Results

    Source: Carbon Disclosure Project

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    Cost Management

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    (a) Conversion, fixed manufacturing expenses and other costsSource: PMI Financials

    Cost of Goods Sold

    31%

    27%

    31%

    8%

    3%

    Shipping &Distribution

    OthersincludingLabor (a)

    Tobacco Leaf

    Direct Materials

    Clove

    COGS (2013): $10.4 billion

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    Tobacco Strategy

    ● Secure quality tobacco at predictable prices● Drive programs which make tobacco production sustainable while increas

    farmer income● Develop more innovative and efficient production approaches

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    Source: PMI Operations

    Vertical Integration and SuppliersSuppliers

    2013 Tobacco Sourcing Model

    30% of tobacco sourcedthrough vertical

    integration

    Vertical Integration

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    Source: PMI Operations

    Tobacco Leaf Purchase Price Evolution

    5.69 5.585.81

    6.17

    4.0

    8.0

    2010 2011 2012 2013

    Tobacco Leaf Price Evolution (average $ per packed kg)

    CAGR 2010 -2014F: 0.9%

    (1.9)% 6.1% (4.4)%4.2%

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    Tobacco Leaf Crop Usage Illustration

    10%

    50%40%

    90%

    50%60%

    Year 1 Year 2 Year 3

    Source: PMI Operations

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    The Kretek Cigarette

    ● Kretek: a blend of tobacco and clove

    ● Accounted for 93% of the Indonesian tobacco industry in 2013

    +

    Tobacco Clove

    Source: PMI Operations

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    100

    160

    220

    280

    340

    2005 2006 2007 2008 2009 2010 2011 2012 2013 20

    Clove Crop Size Cig. Market Size Average Est. Price

    Source: PMI estimates

    Clove Crop and Price vs. Cigarette Market Evolution

    (units billion) Avera

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    Note: GAP stands for Good Agricultural Practices

    Clove Supply Key Strategies

    Short-term:

    ● Extend network of technical assistance and buying centers with fieldtechnicians to work with farmers

    ● Improve yields through introduction of GAP and use of fertilizers

    ● Increase clove plants distribution to farmers

    Long-term:● Application of innovative technologies for industrial clove production

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    Direct Materials Strategy

    ● A competitive supplier base across the categories● Economies of scale● Centrally managed● Viable and balanced supply chain base across all regions● Anticipation of implications of regulation and industry volume evolution

    Source: PMI Operations

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    Source: PMI Operations

    0.4%

    3.7%

    1.6%

    (0.8)%

    2010 2011 2012

    CAGR 2010 -2014F: 1.2%

    2013

    Direct Materials Price Index Evolution

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    Supply Security

    ● Comprehensive risk evaluation and mitigation:- Addresses the global footprint including warehousing and logistics

    - Integral part of the annual strategy cycle● Business continuity:

    - Business continuity plans in place for identified risks- Special situations management system for potential risks

    Source: PMI Operations

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    39.9

    52.9

    27.330.9

    42.6

    55.2

    35.132.0

    PMI EEMA Asia LA&C

    +7%

    Labor Productivity of Machine-Made Cigarettes and OTP Production

    Machine-Made Cigarettes and OTP Production per Headcount2011 2013

    (units million)

    Note: OTP was converted to cigarette equivalent

    Source: PMI Operations

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    Manufacturing Facilities Footprint Optimization (2012-2014)

    • Closures and Consolidations• Under Consultation/Planned

    Source: PMI Operations

    2013 Gross Productivity and

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    Cost Savings over $300 million (Pre-Tax)

    Operations

    IndirectMaterials

    & Services

    Note: Indirect Materials & Services mainly includes marketing & sales, facility services and supplies, logistics, professional services, fleet & travel and information services

    Source: PMI Financials and PMI Operations

    Operations ContribuTotal

    Procurement

    Manufacturingperformance

    Others

    Sourcing

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    Target Annual COGS Increase in the Range of 1% to 3%

    3.8%

    2013 vs. 2012 2015-2017Target

    1% - 3%

    Note: 2015-2017 target excludes Reduced-Risk Products ("RRPs") related costs. RRPs is the term we use to refer to products that have the potential to reduce individual risk and populati2013 vs. 2012 cost of goods sold variance excludes the impact of currency movements ($95 m illion) and changes in volume/mix ($266 m illion)

    Source: PMI forecasts

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    100.0% 100.0%93.4%

    78

    Tobacco Leaf Regular Finished Goods

    Inventory Duration Development

    Year-End Inventory Duration2010 2014 Forecast

    Source: PMI Financials and PMI Operations

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    O i P f d E

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    Source: PMI Operations

    Operations Performance and Engagement

    OPEN is the way we conduct business in Oper

    57%

    69%

    69%76%

    Managerial Effectiveness

    Employee Engagement

    Operations Population (% favorable)Employee Opinion Survey Results: Progression

    OPEN D i P f

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    Source: PMI Operations

    OPEN Drives Performance

    Portugal:Equipment Performance Improvement

    Intertaba (Italy):Direct Material Waste Ev

    OPEN CULTURE

    57.8%

    61.0%

    62.9% 63.0%63.7%

    827

    1,600

    600

    800

    1000

    1200

    1400

    1600

    1800

    2000

    55%

    65%

    2010 2011 2012 2013 2014 Uptime # brand changes

    9.2%

    6.2%

    5.1%

    25%

    2010 2011 2012 2010.0000

    0.0100

    0.0200

    0.0300

    0.0400

    0.0500

    0.0600

    0.0700

    0.0800

    0.0900

    0.1000

    DM Waste Format complexit

    C l i

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    Conclusions

    ● Leverage our superb workforce● Maintain industry leadership in safety, quality and sustainability

    ● Innovate to enhance portfolio, margins and gain market share● Build capacity to fulfill RRPs demand● Contain annual cost of goods sold increases in the 1% to 3% range exclud

    currency, volume/mix and costs related to RRPs

    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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    Investor Day – OperationsLausanne, June 26, 2014

    Questions & Answers

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

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