UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 19, 2009

 

 

Philip Morris International Inc.

(Exact name of registrant as specified in its charter)

 

 

 

   Virginia    1-33708    13-3435103   
  

(State or other jurisdiction

of incorporation)

   (Commission File Number)   

(I.R.S. Employer

Identification No.)

  

 

   120 Park Avenue, New York, New York    10017-5592   
   (Address of principal executive offices)    (Zip Code)   

Registrant’s telephone number, including area code: (917) 663-2000

(Former name or former address, if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Item 7.01. Regulation FD Disclosure.

On November 19, 2009, Philip Morris International Inc. (the “Company”) is hosting a live webcast presentation at the Morgan Stanley Global Consumer & Retail Conference where the Company’s Chairman and Chief Executive Officer, Mr. Louis C. Camilleri, will address investors. In connection with the presentation, the Company is furnishing to the Securities and Exchange Commission the following documents attached as exhibits to this Current Report on Form 8-K and incorporated by reference herein: the text of Mr. Camilleri’s remarks attached as Exhibit 99.1 hereto and the presentation slides attached as Exhibit 99.2 hereto.

In accordance with General Instruction B.2 of Form 8-K, the information in Item 7.01 in this Current Report on Form 8-K, including Exhibits 99.1 and 99.2 hereto, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth in such filing.

 

Item 8.01. Other Events.

On November 19, 2009, Chairman and Chief Executive Officer, Mr. Louis C. Camilleri, will address investors at the Morgan Stanley Global Consumer & Retail Conference. In connection with Mr. Camilleri’s remarks, the Company has issued a press release announcing the key highlights of the presentation. The press release is attached as Exhibit 99.3 hereto and is incorporated herein by reference.

The information on the Company’s website referenced in the press release, including the presentation at the Morgan Stanley Global Consumer & Retail Conference, is not, and shall not be deemed to be, part of this Form 8-K (Item 8.01) or incorporated into any filing the Company makes with the Securities and Exchange Commission, except as expressly set forth in such a filing.

 

Item 9.01. Financial Statements and Exhibits.

 

(d)   Exhibits

 

99.1      Remarks by Louis C. Camilleri, Chairman and Chief Executive Officer, Philip Morris International Inc., dated November 19, 2009 (furnished pursuant to Item 7.01).
99.2      Philip Morris International Inc. Presentation Slides, dated November 19, 2009 (furnished pursuant to Item 7.01).
99.3      Philip Morris International Inc. Press Release, dated November 19, 2009.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

PHILIP MORRIS INTERNATIONAL INC.  
By:   /s/ G. PENN HOLSENBECK  
Name:   G. Penn Holsenbeck  
Title:   Vice President & Corporate Secretary  

DATE:  November 19, 2009


INDEX EXHIBIT

  99.1      Remarks by Louis C. Camilleri, Chairman and Chief Executive Officer, Philip Morris International Inc., dated November 19, 2009 (furnished pursuant to Item 7.01).
  99.2      Philip Morris International Inc. Presentation Slides, dated November 19, 2009 (furnished pursuant to Item 7.01).
  99.3      Philip Morris International Inc. Press Release, dated November 19, 2009.

Exhibit 99.1

REMARKS BY LOUIS C. CAMILLERI

CHAIRMAN AND CEO

PHILIP MORRIS INTERNATIONAL INC.

MORGAN STANLEY GLOBAL CONSUMER

AND RETAIL CONFERENCE

NOVEMBER 19, 2009

 

(SLIDE 1.)

Thank you David and good afternoon everyone. It is a pleasure to be here at the Morgan Stanley conference in New York.

(SLIDE 2.)

The presentation today contains forward-looking statements and, accordingly, I direct your attention to the Forward-Looking and Cautionary Statements slide for a review of various factors that could cause actual results to differ materially from forward-looking statements. Reconciliations of non-GAAP measures included in this presentation to the most comparable GAAP measures are provided either at the end of this presentation or are already available on our web site. Unless otherwise stated, I will be comparing results with those of the same period in the preceding year.

(SLIDE 3.)

Today, I will cover our performance against our growth targets, explain why we believe that these growth targets remain realistic, review our key strategies and growth opportunities, and our strong cash flow that underpins our ability to enhance shareholder returns.

(SLIDE 4.)

These are our mid to long-term annual growth targets:

 

 

volume growth of 1% a year organically and 2% including acquisitions;

 

growth in net revenues, after excise taxes, of 4-6% a year, excluding currency and acquisitions;

 

growth in operating companies income of 6-8% a year, excluding currency and acquisitions; and

 

1


 

growth in EPS of 10-12% a year, excluding currency.

(SLIDE 5.)

In 2008, we achieved our 1% annual organic volume growth target. This was a significantly better performance compared to previous years, reflecting the strength of our brand portfolio and our growing exposure to expanding emerging markets.

(SLIDE 6.)

We delivered the high end of our net revenue target and exceeded adjusted OCI and diluted EPS objectives as a result of our volume growth, favorable product mix, higher prices, productivity and cost savings and our share repurchase program.

(SLIDE 7.)

Compared to most consumer categories, cigarettes have proven to be relatively resilient to the economic downturn. Nevertheless, our industry is not immune, particularly to sharp increases in unemployment and consequent decreases in consumer spending. As a result, our volume is down by 2.1% year-to-date September and we expect a similar level of decline for the year as a whole.

(SLIDE 8.)

Very importantly, however, we have more than offset this with strong pricing across a multitude of markets, underscoring our pricing power and our focus on net revenue growth. Indeed our average quarterly pricing variance this year has delivered $500 million versus an average of $305 million in 2008, an increase of 64%.

(SLIDE 9.)

Our pricing actions delivered net revenue growth, excluding currency and acquisitions, of 4.7% and we again exceeded our OCI and EPS growth objectives fueled, in part, by our vigorous cost control and productivity enhancement measures, and our uninterrupted share repurchase program.

(SLIDE 10.)

Our results were driven by solid performances across all our geographic regions, as illustrated by the strong increase in our OCI margins, which averaged 1.6 percentage points, to an industry leading 44.2%.

 

2


(SLIDE 11.)

In light of this robust financial performance, the strength of our underlying business and a more favorable currency environment, we increased our reported diluted EPS guidance for 2009 last month to a narrowed range of $3.20 to $3.25. Based on October results and the current outlook for our business and currencies for the remainder of this year, we now expect to reach the upper end of this range.

(SLIDE 12.)

Looking beyond 2009, we believe that we can continue to deliver against our mid to long-term annual growth targets. While it would be hazardous of me to predict the shape and timing of an eventual employment-led economic recovery, we remain confident in our ability to meet our two most important financial metrics, which, in my mind at least, are EPS and free cash flow. Our confidence rests on our momentum and the inherent favorable characteristics of our industry. Our ability to meet our volume targets remains dependent on a sustained recovery in employment levels and, accordingly, we may face headwinds on this front next year. Nevertheless, while volume performance is an important metric, it is, in our eyes at least, not the most critical one.

(SLIDE 13.)

Some have expressed skepticism that our volume target over the mid to long-term is no longer realistic. In view of what appears to be a somewhat disproportionate focus on this sole metric by the investment community, let me attempt to convince you otherwise.

Our future volume performance will clearly be a function of several parameters that include total consumption trends, geographic mix, market share growth, and other key factors such as absolute and relative retail prices, excise tax levels, consumer disposable income and demographic trends, as well as developments on the regulatory front and their impact on societal attitudes to smoking.

(SLIDE 14.)

Let me start with total cigarette industry volume. In 2008, excluding China, the USA and duty-free, worldwide industry volume was estimated at 3.3 trillion units. Since 2004, industry volume has grown at an estimated compound average growth rate of 0.2%. Industry volume in OECD markets declined on average by 2.5% over this period, while it grew on average by 1.9% in non-OECD markets.

 

3


(SLIDE 15.)

This year, total industry volume is projected to erode by 2.4%, as a result of the economic recession, with OECD and non-OECD markets down by 3.4% and 1.9%, respectively.

(SLIDE 16.)

We believe that the principal drivers of the historical growth in industry volume, notably the growth in emerging market adult populations and the increase in consumer purchasing power that should occur once the current economic crisis is behind us, will allow for the resumption of historic trends.

(SLIDE 17.)

One key factor that could disrupt such a scenario is the potential for significant, widespread, and sustained excise tax hikes. We believe that such a risk is manageable for several reasons. The evidence suggests that extreme increases in excise tax levels remain isolated rather than the norm. Indeed, the vast majority of governments worldwide understand that sharp increases lead to huge volatility in revenues and can spur unintended consequences in the form of illicit trade, thereby putting in jeopardy the predictability and sustainability of this important revenue source. Therefore, in recent years, governments have focused much of their attention on tax structures to enhance revenues and improve their predictability.

(SLIDE 18.)

A trend towards more regulation is, we believe, inevitable and, in most instances, the measures proposed have our full support to the extent that such regulation does not penalize the legitimate industry compared to the illegal market and is based on sound science. One key measure that has, and continues to be promulgated, is public smoking restrictions. They are now in place in most major markets of the world and, accordingly, their one-time adverse impact on consumption levels of between 1% and 3% is largely behind us.

(SLIDE 19.)

In consideration of all these and other factors that either support consumption growth or hamper it, we believe that worldwide industry volume, post the current economic crisis, is likely to be in an annual range of plus to minus 0.5%.

(SLIDE 20.)

To achieve our annual 1% organic growth target within this range will require us to gain between 0.1 and 0.4 share points a year, a share growth objective that we believe is realistic. Indeed, in 2008, we grew our share by 0.2 points in a year when industry volume grew by 0.2%. We believe that we can do at least as well

 

4


going forward given our greater exposure to faster growing emerging markets and strong share momentum across a wide range of geographies.

(SLIDE 21.)

Our regional volume mix has changed in a manner that is conducive to a stronger volume and global share performance going forward. The EU Region, where industry volume has been declining, accounted for 28% of our volume in 2008 compared to 36% in 2004. The share of our volume in the Asia Region grew during the same period from 19% to 26%.

(SLIDE 22.)

Within the Asia Region itself, fast growing Indonesia accounted for 33% of our volume in 2008, compared to just 6% in 2004. The corollary is the reduction in our volume dependence on the declining Japanese market from 52% in 2004 to 26% in 2008.

(SLIDE 23.)

We have been expanding our share at a rapid pace in major emerging markets. We have gained on average at least one share point a year in such varied and large markets as Russia, Turkey, Indonesia, Korea and Mexico.

(SLIDE 24.)

Based on data from the markets in which we operate, we are gaining overall share in both OECD and non-OECD markets. It is noteworthy that the three-month moving shares are above our twelve-month moving ones.

(SLIDE 25.)

Accordingly, it is our belief that a 1% annual organic volume growth rate remains both realistic and achievable in a mid to long-term time frame.

Nevertheless, our key focus will be to achieve our net revenue target. Pricing and product mix, offset by adverse geographic mix, will be the key drivers of our growth in net revenues. This year, pricing was the key component and more than offset the recession’s impact on total consumption levels and product mix.

(SLIDE 26.)

In both 2008 and 2009, our price increases were well-balanced across our regions. The slightly lower share of the EU Region in our price variance year-to-date September mainly reflects the fact that price increases in the two key

 

5


markets of Germany and Spain took place in the middle of this year, and our price increase in France is being implemented this month.

(SLIDE 27.)

A key component of our income growth will continue to be our ability to improve our cost effectiveness. In March 2008, we outlined our productivity and cost savings program, which has the objective of generating more than $1.5 billion in cumulative gross cost savings over the period 2008 through the end of 2010. We are fully on track to realize these savings.

(SLIDE 28.)

The growth strategies that have driven our results continue to underpin our business model. Let me review some of them and explain why we believe they will generate growth going forward.

(SLIDE 29.)

Let me start with the successful reinforcement of our position in profitable consumer segments and the growth of our leading brand portfolio through enhanced consumer understanding and innovation.

(SLIDE 30.)

We have a wealth of formidable brands with seven of the top 15 international brands by volume, led by Marlboro , the only truly global cigarette brand.

(SLIDE 31.)

Our brand portfolio is strong and broad. Marlboro is by far the leader in the premium segment, where it is complemented by Parliament . L&M and Chesterfield are leading mid-price brands. Bond Street is the best selling low-price brand in Eastern Europe.

(SLIDE 32.)

Over the last two years, we have significantly enhanced our understanding of adult consumer preferences, increased our innovation efforts and improved our speed to market. This has enabled us to address the issue of increased consumer fragmentation and significantly expand our product offers.

(SLIDE 33.)

The development and gradual roll-out of the new Marlboro architecture is a powerful tool for the brand’s renewal and re-invigoration. The three differentiated

 

6


pillars provide us with an opportunity to more broadly address adult consumer preferences.

(SLIDE 34.)

The new Marlboro Red line currently comprises Marlboro Red , Marlboro Mx4 Flavor , and the Marlboro Filter Plus and Marlboro Flavor Plus variants.

(SLIDE 35.)

The packaging of Marlboro Red has been upgraded. So far, the new pack is available in four markets in Europe and will be expanded geographically next year.

(SLIDE 36.)

Initial adult consumer research in France on the new pack shows that it is preferred to the old one across a wide range of attributes, including modernity, premiumness and innovation.

(SLIDE 37.)

Marlboro Filter Plus and Marlboro Flavor Plus are very innovative products with a multi-chambered filter including a tobacco plug and an elegant new sliding pack. The brand, which is now available in 34 markets, has achieved strong results across many markets.

(SLIDE 38.)

Consumer research in Romania confirms that the successful launch of Marlboro Filter Plus , which in the third quarter this year achieved a 2.4% market share, has created a positive “halo” effect for the Marlboro Red family. Our research shows improved scores across almost all brand attributes in 2008 for Legal Age to 24 year old smokers.

(SLIDE 39.)

Traditionally, Marlboro Gold was the lower tar and nicotine version of Marlboro Red . With its now separate identity, we are able to extend the Marlboro Gold franchise up and down the tar and nicotine taste ladder. This is the current Marlboro Gold line, which comprises Marlboro Gold Original , the full flavor Marlboro Gold Advance , the slightly slimmer Marlboro Gold Touch , the super-slims Marlboro Gold Edge and Marlboro Gold Smooth 1mg .

 

7


(SLIDE 40.)

The new Marlboro Gold Original pack is modern and elegant. The new pack was carefully tested prior to roll-out and we received overwhelmingly positive consumer reactions. It is now available in 18 markets in the EU Region and 12 markets elsewhere.

(SLIDE 41.)

Marlboro Fresh ’s role has been enlarged beyond its previous role as menthol line extensions of Marlboro Red and Marlboro Gold . The new line-up focuses on a range of different refreshing taste sensations, delivered through innovative technological approaches, including high mentholation, mentholated threads in the filter, capsules, and different types of menthol flavors.

(SLIDE 42.)

Our most successful new Marlboro Fresh offering is Marlboro Black Menthol , first launched last year in Japan and now successfully expanded to four other Asian markets, with more to come.

(SLIDE 43.)

Naturally, a strong recession is not the period when the results of our new Marlboro launches in the premium segment are likely to be the most immediate. We have nevertheless witnessed very positive results, both in terms of improved share performance in certain key markets and segments, and in terms of consumer perception and brand demographics. Let me illustrate this for you with some examples.

(SLIDE 44.)

In Italy, Marlboro ’s market share has increased to 23.1% in the third quarter this year, compared to 22.6% in the same period last year, benefiting from the success of Marlboro Gold Touch , which was launched in May this year and achieved a 1.4% share of market in the third quarter.

(SLIDE 45.)

In Japan, the launch of Marlboro Black Menthol , and its subsequent line extension into the 1 mg segment, has enabled us to restore Marlboro to share growth.

(SLIDE 46.)

However, as mentioned, innovation is not only about incremental volume, but also about reinforcing adult consumers’ perception of the entire brand family. We launched Marlboro Filter Plus in Korea during the fourth quarter of 2006. Since

 

8


then, Marlboro ’s growth has accelerated and the brand has gained 2.6 share points over three years, even though our innovative line extension has achieved a modest 0.2 share points. Furthermore, Marlboro ’s smoker share amongst Legal Age to 24 year olds has increased by 6.7 share points to 22.4%, which augurs very well for the continued growth of the brand.

(SLIDE 47.)

The strong potential of the Marlboro brand is demonstrated by its positive demographics. This chart shows the difference between the smoker share for Marlboro among Legal Age to 24 years old and among Legal Age to 64 years old in the EU Region. The difference is positive in ten of the twelve EU Region markets shown here, led by Italy with 8.5 points. In Germany, while the difference remains negative, it is an improvement over 2008 when the gap was minus 4.4 points and our latest research exhibits a growing trend for the parent Marlboro Red brand.

(SLIDE 48.)

Another good example of an improved Legal Age to 24 year old Marlboro smoker share and an increasing positive gap is Portugal. Since February 2008, we have launched several variants of the new brand architecture and, despite the impact of pricing in mid-2008, we have increased our smoker share in the Legal Age to 24 category by 5.2 share points and further increased the gap to 9.7 points.

(SLIDE 49.)

The best demographic data for Marlboro is in Korea with plus 15.5 points, and Japan with a 9.8 points difference. It is no surprise that these are two of the main markets where Marlboro has gained significant share so far this year.

(SLIDE 50.)

To complement Marlboro in the premium and above price category, we have Parliament , the prestige brand with a recessed filter, which is generally sold at a higher price than Marlboro and outsells Marlboro in Russia. Parliament ’s worldwide volume grew by 20% in 2008 and, in spite of the recession, is slightly ahead of last year after three quarters.

(SLIDE 51.)

Over a two year period, the brand has increased its share in all its main markets except Japan, with a particularly strong performance in Korea and Turkey where it has gained more than two share points.

 

9


(SLIDE 52.)

Marlboro and Parliament , as well as Virginia Slims , have been line extended into the 1mg segment, where we were previously under-represented.

(SLIDE 53.)

Since 2007, we have expanded our share in this segment, which is particularly important in Japan and Korea, and also growing rapidly off a low base in several markets in the Middle East, such as Saudi Arabia.

(SLIDE 54.)

Our largest mid-price brand is L&M , where there is a very different story to tell depending on geography. As adult consumers had moved towards lighter tasting and smoother cigarettes in Eastern Europe, Romania and Turkey, we re-engineered the cigarette and the filter in 2007 in order to provide a smoother and lighter taste, modernized the packaging and modified the communications platform. At that time, we said we expected it would take approximately two years to stabilize the brand’s performance. While we have not yet been fully successful, L&M ’s share decline in these EEMA markets has moderated this year compared to 2008.

(SLIDE 55.)

In the EU Region, however, where L&M was already the second best selling cigarette brand after Marlboro , the brand has been performing very strongly, gaining share across a very wide range of markets, including Germany, the Czech Republic, Spain and Poland.

(SLIDE 56.)

L&M ’s performance has been particularly strong in Germany. Year-to-date September, the brand has gained 1.4 share points to reach 8.1% and has provided us with a strong second leg in this important market. Its demographic profile is attractive with a share amongst smokers aged Legal Age to 24 at 15.7%, close to double its market share.

(SLIDE 57.)

L&M ’s super-slims variants, called L&M Link , have been a tremendous success in Poland.

 

10


(SLIDE 58.)

The super-slims segment has continued to grow in Poland to over 10% of the total market and we have gained nearly 15 segment share points over two years to reach 40.3% in the third quarter of this year.

(SLIDE 59.)

Let me now review our progress to expand geographically and discuss the opportunities that lie ahead.

(SLIDE 60.)

Within the last couple of years, we penetrated the Algerian and Bulgarian markets with Marlboro , L&M and Muratti and have significantly expanded our share in both markets. Over the period, Marlboro has gained 3.8 share points in Algeria and 2.6 share points in Bulgaria.

(SLIDE 61.)

We complement our organic growth with acquisitions, where and when strategically and financially interesting targets are available. We are reaping significant benefits from our acquisition in 2005 of Sampoerna in Indonesia. This close to $5 billion investment represents our most successful acquisition to date in emerging markets. Since the acquisition, Sampoerna has become the leading cigarette company in Indonesia with a 29.0% market share year-to-date September in a growing market of over 250 billion units.

(SLIDE 62.)

Our largest acquisition since the spin-off was the $1.9 billion purchase in 2008 of Rothmans Inc., which gave us 100% of Rothmans Benson & Hedges. Canada is a very profitable 29 billion unit tax-paid cigarette market, with potential to grow strongly if contraband products, estimated to account for more than one third of the cigarette market, are eliminated. In fact, year-to-date September, the tax paid cigarette market is up by 1.6%, reflecting some initial measures taken by the Canadian authorities against contraband. We acquired a growing 33.4% share of the cigarette market and key brands such as Canadian Classics , Number 7 , Accord and Belmont . The integration of Rothmans Inc. into PMI is now complete and our volume and profitability are ahead of our internal projections.

(SLIDE 63.)

In 2008, we had a 15.6% share of the world market excluding the USA and duty-free and 25.8% also excluding China. A quarter of the world market excluding China, the USA and duty-free remains outside the hands of the top four international companies and presents a significant potential opportunity for us to further expand our share through both organic growth and acquisitions.

 

11


(SLIDE 64.)

This year, for example, we entered India and launched locally manufactured Marlboro through a joint-venture that we control and strengthened our presence and infrastructure in South Africa through the acquisition of a business that has close to a 30% share of the total tobacco market.

(SLIDE 65.)

And then there is China, which accounts for nearly 40% of the world market excluding the USA and duty-free. We have a license agreement for the local manufacture and sale of Marlboro and volumes, while very modest, have been increasing at a brisk pace. We have a joint-venture outside China with the China National Tobacco Corporation. The performance of the joint-venture brands has been very positive. RGD for example achieved a 2.0% market share in the Czech Republic in the third quarter this year and 0.6% in Poland. We and our Chinese partners are pleased with the progress of our long-term strategic cooperation.

(SLIDE 66.)

Let me now turn to cash flow.

(SLIDE 67.)

In March 2008, we projected that cumulative operating cash flow would total $21.7 billion over a three year period.

(SLIDE 68.)

In 2008, we generated $7.9 billion in operating cash flow and, in the first nine months of this year, a further $6.4 billion, for a cumulative total of $14.3 billion. This puts us ahead of schedule and was achieved in spite of a negative impact on net earnings due to currency of some $800 million.

(SLIDE 69.)

Comparing ourselves with our peers in terms of free cash flow, that is operating cash flow less capital expenditures, as a percentage of net revenues, we are nearly top in class, with 29% of our net revenues, excluding excise taxes, transformed into free cash flow. We are surpassed only by Pfizer.

 

12


(SLIDE 70.)

Perhaps even more importantly, given the well-known cash generating characteristics of our industry, we have clearly outperformed all the other major international tobacco companies, as you can see on this chart.

(SLIDE 71.)

But we can do better and are focusing in particular on optimizing our working capital, which, in 2008, averaged $4.8 billion and was mainly composed of $2.9 billion in receivables and $9.1 billion in inventories, partly offset by $7.5 billion in payables.

(SLIDE 72.)

We recently carried out a benchmarking survey to determine those areas where improvements could be made and additional cash generated. We studied other consumer products companies and our key competitors with a particular focus on different business models, each company’s greater or lesser emphasis on direct distribution and vertical integration, as well as geographic and product mix.

(SLIDE 73.)

Our study revealed that there exists a number of opportunities to improve our working capital, particularly with regard to inventories. We have initiated a comprehensive program across the company, which we believe will generate incremental cash flow of some $750 million to $1 billion over the next three years.

(SLIDE 74.)

Accordingly, we remain confident that our free cash flow growth rate will exceed that of our net earnings.

(SLIDE 75.)

Let me conclude with an overview of how we have deployed our cash resources and how we intend to do so going forward.

Our cumulative operating cash flow of $14.3 billion was supplemented with incremental financing of $4.8 billion net of the first quarter 2008 special dividend of $3.0 billion paid by PMI to Altria Group, Inc. ahead of the spin.

(SLIDE 76.)

We deployed $4.2 billion, or 22% of our cumulative cash resources of $19.1 billion to support our business growth in the form of capital expenditures and acquisitions. These funds were primarily spent on the construction of new

 

13


manufacturing facilities in Greece and Indonesia and to support our productivity and product innovation initiatives, as well as on several acquisitions, the largest of which was the purchase of Rothmans Inc. in Canada.

(SLIDE 77.)

As a testament to our commitment to enhance shareholder value, nearly 80% of the funds available were returned to our shareholders in the form of dividends for a total of $5.3 billion, and through share repurchases totaling $9.6 billion.

(SLIDE 78.)

We increased our quarterly dividend by 17.4% in August 2008 and by a further 7.4% in September 2009 to an annualized level of $2.32. At the closing stock price on November 13 th , this translated into an attractive dividend yield of 4.6%.

(SLIDE 79.)

As you can see on this chart, we have consistently provided our investors with a dividend yield that is at the high end of our peer group and above that of all the other major international tobacco companies.

(SLIDE 80.)

We have persisted with our two-year, $13 billion share repurchase program throughout the economic and financial crisis, while many other companies put their programs on hold. As of September 30 th , we spent $9.6 billion to purchase 209.6 million shares at an average price of $45.81 per share, and have $3.4 billion left in the program that runs through the end of April next year.

(SLIDE 81.)

While we started our existence as an independent company with a pristine balance sheet, we have increased our leverage since then. Our net debt to EBITDA increased from 0.6 at the end of March 2008 to 1.2 at the end of September 2009. This puts us on a similar level to companies such as McDonalds and Unilever.

(SLIDE 82.)

Our goal going forward is to preserve our current excellent credit ratings and retain the necessary flexibility to make acquisitions as opportunities arise. We therefore intend to maintain our leverage within the constraints of these credit ratings and any future recommendations by management to the Board regarding further share repurchase programs will be based on this philosophy.

 

14


(SLIDE 83.)

So far this year, we have returned $7.4 billion to shareholders through dividends and share repurchases. Since the March 2008 spin-off, $15 billion has been returned to shareholders, representing more than 15% of our current market capitalization.

(SLIDE 84.)

As PMI was spun off only a short time before some of the worst ever turbulence on the world stock markets, our total shareholder return has been 6.4%. This compares favorably with our tobacco peers, company peer group and the wider market benchmarks, especially when translated into US Dollar terms.

(SLIDE 85.)

It also compares very well with the leading companies that are included in our peer group. In US Dollar terms, only McDonalds, Novartis and GlaxoSmithKline have done better, and we have outperformed our tobacco peers and many leading consumer products companies.

(SLIDE 86.)

Our key objective going forward is to continue our steadfast commitment to provide superior returns to our shareholders. Our business fundamentals are in very good shape. We expect to continue to consistently meet our mid to long-term constant currency financial targets and, as I explained, we are optimistic that we can again achieve our organic volume growth target once there is an employment-led recovery. We are generating tremendous cash flows, which we will further enhance through measures to optimize working capital. We are comfortable with our current credit ratings and we intend to predominantly use our cash for dividend and share repurchases.

(SLIDE 87.)

Thank you. I will now be happy to take your questions.

 

15

Louis C. Camilleri
Chairman and Chief Executive Officer
Morgan Stanley Global Consumer & Retail Conference
New York, 19 November 2009
Exhibit 99.2


2
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-K for the year ended
December 31, 2008, and Form 10-Q for the quarter ended September 30,
2009, filed with the Securities and Exchange Commission
Reconciliations of non-GAAP measures included in this presentation to
the most comparable GAAP measures are provided either at the end
of
this web cast or are already available on our web site
Forward-Looking, Cautionary Statements and Use of
Non-GAAP Measures


3
Agenda
Performance against our growth targets
Why we believe these growth targets remain realistic
Key strategies and growth opportunities, and the
strong cash flow that underpins our ability to enhance
shareholder returns


4
Cigarette Volume
(a)
1 –
2%
Net Revenues
(b)(c)
4 –
6%
Operating Companies Income
(c)
6 –
8%
EPS
(d)
10 –
12%
(a)
Organic volume growth (that is, excluding acquisitions) target of 1%
(b)
Excluding excise taxes
(c)
Excluding currency and acquisitions
(d)
Excluding currency
Currency Neutral Mid to Long-Term
Annual Growth Targets


5
2008 PMI Results
1
Mid to
Long-Term
Target
1.0
0.6
3.2
0.3
(0.2)
Organic Cigarette
Volume
(a)
Full
Year
Q4
Q3
Q2
Q1
(% growth)
(a)
Excluding acquisitions
Source: PMI Financials


6
2008 PMI Results
10-12
6-8
4-6
1
Mid to
Long-Term
Target
12.9
12.5
9.0
10.0
23.7
Adjusted Diluted
EPS
(d)(e)
9.8
5.5
7.1
9.2
19.4
Adjusted OCI
(c)
5.6
5.6
7.2
4.0
5.5
Net Revenues
(b)(c)
1.0
0.6
3.2
0.3
(0.2)
Organic Cigarette
Volume
(a)
Full
Year
Q4
Q3
Q2
Q1
(% growth)
(a)
Excluding acquisitions
(b)
Excluding excise taxes
(c)
Excluding currency and acquisitions
(d)
Excluding currency
(e)
Compared to pro forma 2007 results
(f)
Please see relevant reconciliations to most comparable GAAP measures posted on our web site or at the end of this presentation
Source: PMI Financials
(f)
(f)
(f)
(f)
(f)


7
2009 PMI Results
(a)
Excluding acquisitions
Source: PMI Financials
1
Mid to
Long-Term
Target
(2.1)
(4.0)
(1.1)
(1.1)
Organic Cigarette
Volume
(a)
YTD
Sept
Q3
Q2
Q1
(% growth)


8
Pricing Variance
($ million)
Source: PMI Financials
2008
2009
277
248
305
393
358
549
590
0
600
Q1
Q2
Q3
Q4
Q1
Q2
Q3


9
2009 PMI Results
(a)
Excluding acquisitions
(b)
Excluding excise taxes
(c)
Excluding currency and acquisitions
(d)
Excluding currency
(e)
Please
see
relevant
quarterly
reconciliations
to
most
comparable
GAAP
measures
posted
on
our
website
Source: PMI Financials
10-12
6-8
4-6
1
Mid to
Long-Term
Target
15.4
18.3
17.2
11.3
Adjusted Diluted
EPS
(d)
8.6
10.6
9.5
5.3
Adjusted OCI
(c)
4.7
4.1
6.1
3.9
Net Revenues
(b)(c)
(2.1)
(4.0)
(1.1)
(1.1)
Organic Cigarette
Volume
(a)
YTD
Sept
Q3
Q2
Q1
(% growth)
(e)
(e)
(e)
(e)


10
PMI Adjusted OCI Margins
(a)
1.6
44.2
42.6
PMI
7.2
32.7
25.5
LA & Canada
2.4
37.3
34.9
Asia
2.0
44.8
42.8
EEMA
0.8pp
51.7%
50.9%
EU
Variance
YTD Sept
2009
YTD Sept
2008
(%)
(a)
Excluding currency. Please see relevant reconciliations to most comparable GAAP measures posted on our web site
Source: PMI Financials


11
2009 Reported Diluted EPS Guidance
2009 reported diluted EPS guidance: $3.20 -
$3.25
Based on October results and current business and
currency outlook for the remainder of the year, we
expect reported diluted EPS for 2009 to be at the
upper end of this range
Source: PMI Financials


12
Future Prospects
Beyond 2009, we believe we can continue to deliver
against our mid to long-term annual growth targets
Difficult to predict shape and timing of employment-
led economic recovery
Confident we can meet EPS and free cash flow
targets, which we believe are the two most important
metrics
Ability to meet our volume targets depends on
sustained recovery in employment levels


13
PMI Organic Volume Drivers
Total consumption trends
Geographic mix
PMI market share growth
Other factors


14
Total Cigarette Industry Volume
(a)
(a)
Excluding China, USA and duty-free
Note: Organization for Economic Co-operation and Development (OECD)
Source: PMI estimates
(billion units)
0.2%
CAGR
(2.5)%
CAGR
1.9%
CAGR
Non-OECD
OECD
1,170
2,172
3,342
1,297
2,017
3,314
2004
2008


15
Total Cigarette Industry Volume
(a)
Non-OECD
OECD
(2.4)%
Var.
(3.4)%
Var.
(1.9)%
Var.
Forecast
(a)
Excluding China, USA and duty-free
Note: Organization for Economic Co-operation and Development (OECD)
Source: PMI estimates
0.2%
CAGR
(2.5)%
CAGR
1.9%
CAGR
(billion units)
1,170
1,130
2,172
2,131
3,342
3,261
1,297
2,017
3,314
2004
2008
2009


16
Key Industry Volume Drivers
Demographics
Consumer purchasing power


17
Key Industry Volume Drivers
Demographics
Consumer purchasing power
Excise taxation


18
Key Industry Volume Drivers
Demographics
Consumer purchasing power
Excise taxation
Regulatory environment
Social trends


19
Key Industry Volume Drivers
Demographics
Consumer purchasing power
Excise taxation
Regulatory environment
Social trends
Expected industry volume trend post economic crisis:
annual range of +/-
0.5%
Source: PMI estimates


20
PMI Share Growth Targets
To achieve 1% organic volume growth within this
industry volume range, PMI needs to gain between
0.1 and 0.4 share points
Organic share gain of 0.2 points in 2008 (with 0.2%
industry volume growth)
PMI should be able to do at least as well going
forward benefiting from:
-
Greater exposure to faster growing emerging markets
-
Strong share momentum across a wide range of geographies
Source: PMI estimates


21
PMI Regional Volume Mix
EU
LA &
Canada
Asia
EEMA
2004 Volumes:
762 billion units
Source: PMI Financials
EU
EEMA
Asia
LA &
Canada
2008 Volumes:
870 billion units
36%
35%
19%
10%
28%
35%
26%
11%


22
PMI Asia Region Volume Mix
Japan
Other
Asia
Indonesia
Source: PMI Financials
Japan
Indonesia
Other
Asia
2004 Volumes:
142 billion units
2008 Volumes:
224 billion units
26%
33%
41%
42%
52%
6%


23
PMI Market Share Growth
1.8
1.6
1.3
1.1
1.0
1.2
1.0
(b)
1.9pp
Avg. Annual
Share Growth
2004-09 YTD
69.2
63.5
60.1
Mexico
73.3
66.3
65.1
Argentina
14.0
8.6
7.4
Korea
29.0
28.3
23.5
Indonesia
35.8
33.1
31.0
Ukraine
42.8
43.6
36.9
Turkey
25.3
22.2
N/A
(a)
Russia
15.9%
10.2%
6.4%
Egypt
YTD Sept
2009
2006
2004
(a)
No comparable data for 2004 due to change of service provider
(b)  Average growth rate for 2006 through 2009 YTD
Source: A.C. Nielsen, Korea Research Center and PMI estimates


24
PMI Market Share Development
(a)
OECD
Non-OECD
(a)
YTD Sept 2009 data based on 94 key markets in which PMI operates
Note: Organization for Economic Co-operation and Development (OECD)
Source: PMI estimates
(%)
Sept 2009
Sept 2009
34.2
33.6
34.6
34.8
23.4
24.4
24.6
25.0
20
40
2007
2008
12mm
3mm
2007
2008
12mm
3mm


25
PMI Net Revenue Growth
We believe 1% annual organic volume growth rate
remains achievable in mid to long-term
Prime focus is net revenue growth excluding currency
and acquisitions of 4-6%, driven by:
-
pricing
-
product mix
-
geographic mix
Note: Net revenues exclude excise taxes


26
PMI Pricing Variance by Region
EU
LA &
Canada
Asia
EEMA
EU
LA &
Canada
Asia
EEMA
2008:
$1.2 billion
2009 YTD Sept:
$1.5 billion
Source: PMI Financials
26%
40%
20%
14%
31%
41%
17%
11%


27
($ million)
Forecast Cumulative Gross Cost Savings (2008-10)
Productivity and Cost Savings
450
250
1,550
850
Manufacturing
Productivity
G&A + Other
EU Program
Total


28
Strategies for Growth
Reinforce our position in profitable consumer
segments
Drive growth of our leading brand portfolio through
enhanced consumer understanding and innovation
Expand geographically
Effectively utilize our strong and growing cash flow to
increase shareholder returns
Pursue opportunities for margin improvement
Boost organizational effectiveness and generate
productivity savings
Obtain a fair and reasonable regulatory and fiscal
environment
Attract, motivate and retain the best global talent


29
Strategies for Growth
Reinforce our position in profitable consumer
segments
Drive growth of our leading brand portfolio through
enhanced consumer understanding and innovation
Expand geographically
Effectively utilize our strong and growing cash flow to
increase shareholder returns
Pursue opportunities for margin improvement
Boost organizational effectiveness and generate
productivity savings
Obtain a fair and reasonable regulatory and fiscal 
environment
Attract, motivate and retain the best global talent


30
Top 15 International Brands (2008)
Lark
Parliament
Chesterfield
Bond Street
Philip Morris
L&M
Marlboro
Source: PMI data from Financials. Competitive data for BAT and JT derived from 2008 company reports and PMI estimates
(billion)
26
37
38
39
41
92
311
0
50
100
150
200
250
300
350
LD
Dunhill
Viceroy
Camel
Pall Mall
Kent
Mild Seven
Winston
PMI
BAT
JT


31
Brand Portfolio
Mid-Price
Premium &
Above
Local Heritage
International
Low-Price


Enhanced Consumer Understanding and Innovation
Enhanced Consumer Understanding and Innovation


33
Marlboro
Architecture
“Flavor
enjoyment”
“Smooth taste
and style”
“Fresh taste
sensations”
Red
Gold
Fresh


Marlboro Red
Marlboro Red
Line
Line



36
New Marlboro Red
Pack Perception -
France
Beautiful
In the spirit
of the times
High-
end
Modern
Innovative
Worth its price
Proud to show
:
Significant
difference
at
95%
confidence
level
:
:
New Pack
(n=100)
Old Pack
(n=100)
Source: PMI market research in France (POS study 2 months after launch in Montpellier)
0
1
2
3
4
5
6
7
8
9
10
Masculine
That I like
That goes well with me
Original
Elegant/chic
Refined
Feminine
Lets me stand out
That lacks character



38
Marlboro Red
Perception -
Romania
2008 vs. 2007 LA -
24
2007
2008
Note: LA stands for Legal Age (min 18).  An index of 100 is equal to the average score obtained across all brands for the item
Source: Strategic Group Research Consulting, market research in Romania
-40
10
60
110
160
210
For people like me
Understands and offers what I want
Worth its price
Regularly launches appealing new products
Fun
Talks credibly about its products
Premium / worth paying for
Growing in popularity
Stylish / elegant
Advertising / communication appealing to me
For people my age
Stands test of time
Prestigious
Authentic
Highly visible
Modern
Classic / timeless
Would smoke on special occasions only
Very masculine
Feminine


Marlboro Gold Line





Marlboro
Marlboro
Innovation
Innovation


44
Marlboro
Market
Share
Italy
Gold Touch
2008
2009
Source: PMI estimates
(%)
22.6
22.1
21.9
22.7
23.1
1.4
15
25
Q3
Q4
Q1
Q2
Q3


45
Marlboro
Market
Share
Japan
Black
Menthol
2007
2008
2009
Source: Tobacco Institute of Japan
(%)
0.8
10.1
10.2
10.6
1.4
0
12
Q3
Q3
Q3


46
Marlboro
Market Share –
Korea
Filter /
Flavor
Plus
2005
2007
2009
2008
2006
Source: Korea Research Center
(%)
3.0
3.4
4.1
4.8
6.0
0
6
Q3
Q3
Q3
Q3
Q3


47
Marlboro
Smoker
Share
EU
Region
(pp)
(Difference LA-24 vs. LA-64)
Italy
Belgium
Greece
Sweden
Neth.
Czech
France
UK
Poland
Spain
Germany
Note: LA stands for Legal Age (min 18).  All data are 2009 preliminary, except Italy, Poland and Spain, which are 2008 data
Source: PMI Market Research (General Consumer Tracking Survey)
Austria
(3.6)
8.5
-4
-2
0
2
4
6
8
10


48
Marlboro
Smoker
Share
Portugal
9.7pp
7.9pp
(%)
Note: LA stands for Legal Age (min 18)
Source: PMI Market Research (General Consumer Tracking Survey)
28.9
21.5
24.8
28.7
34.1
21.0
18.3
21.4
21.6
24.4
15
35
Feb-08
May-08
Oct-08
Feb-09
Sep-09
LA-24
LA-64


49
Marlboro
Smoker
Share
Other
Regions
(Difference LA-24 vs. LA-64)
Korea
Japan
Ukraine
Mexico
Turkey
Romania
Russia
Egypt
Indon.
Arg.
Note:
LA
stands
for
Legal
Age
(min
18).
All
data
are
2009
preliminary,
except
Egypt,
Romania,
Russia,
Saudi
Arabia
and
Ukraine,
which
are
2008
data.
Source: PMI Market Research (General Consumer Tracking Survey)
Saudi
15.5
(pp)
9.8
-2
0
2
4
6
8
10
49



51
Parliament
Share
Variances
(Q3, 2009 vs. Q3, 2007)
(pp)
Korea
Turkey
Kazakhstan
Ukraine
Russia
Japan
Source: Korea Research Center, A.C. Nielsen, Business Analytica and Tobacco Institute of Japan
2.3
2.2
1.0
0.9
0.4
(0.2)
-1
0
1
2
3


1mg Segment


53
PMI 1mg Segment Shares
(%)
Q3-07
Q3-08
Q3-09
Q3-07
Q3-08
Q3-09
Q3-07
Q3-08
Q3-09
Source: Tobacco Institute of Japan, Korea Research Center and A.C. Nielsen
19.7
9.8
8.8
19.3
11.2
12.5
20.5
13.5
15.6
0
25
Japan
Korea
Saudi Arabia


54
L&M
Old Line-up
New Line-up


55
L&M
Market
Share
Variances
EU
Region
(Q3, 2009 vs. Q3, 2007)
(pp)
Germany
Source: A.C. Nielsen and PMI estimates
Czech
Neth.
Sweden
Spain
Poland
Belgium
France
3.0
2.6
2.3
2.3
2.1
1.4
1.0
0.4
0
3



L&M Link
(super-slims)


58
(%)
Super-Slims Segment –
Poland
(%)
Q3-07
Q3-08
Q3-09
Source: A.C. Nielsen
Segment Share of Market
PMI Share of Segment
Q3-07
Q3-08
Q3-09
6.5
8.2
10.3
0
12
25.7
35.8
40.3
0
50


59
Strategies for Growth
Reinforce our position in profitable consumer
segments
Drive growth of our leading brand portfolio through
enhanced consumer understanding and innovation
Expand geographically
Effectively utilize our strong and growing cash flow to
increase shareholder returns
Pursue opportunities for margin improvement
Boost organizational effectiveness and generate
productivity savings
Obtain a fair and reasonable regulatory and fiscal 
environment
Attract, motivate and retain the best global talent


60
Organic Market Entry and Expansion
(%)
PMI Market Share
Algeria
Bulgaria
L&M
Marlboro
Source: A.C. Nielsen and PMI estimates
Other
Marlboro
Muratti
7.7
9.0
11.5
3.3
5.3
5.9
3.5
5.7
10.1
1.4
3.1
3.3
5.0
5.4
11.2
14.7
21.6
6.6
11.7
14.4
0
25
Q3-07
Q3-08
Q3-09
Q3-07
Q3-08
Q3-09


61
Acquisitions –
Indonesia
PMI
Gudang
Garam
Djarum
Market Shares
(%)
Source: PMI estimates based on A.C. Nielsen
26.4
29.0
27.4
21.2
19.6
21.2
15
30
2005
2006
2007
2008
2009
Sept
YTD


62
Acquisitions -
Canada
Rothmans Inc.
PMI purchased 60% not owned for $1.9 billion
Market size:
28.6 billion in 2008
1.6% growth YTD Sept
PMI market share:
33.4% in 2008
0.5 pp share growth YTD Sept
Source: PMI estimates


63
PMI
BAT
JT
IMT
(b)
Other
PMI
BAT
JT
Other
Market Shares excl. USA and duty-free
Market Shares excl. China, USA and duty-free
(a)
Volumes are on a calendar basis, except for IMT, which reports on a fiscal year ending September.
(b)
Impact of 3.8 months of Altadis volume has been added and U.S. volume has been excluded to determine full year share.
Source: Company reports and PMI estimates
IMT
(b)
CNTC
Competitive Landscape (2008)
(a)
9.3%
18.1%
25.8%
21.0%
25.8%
39.3%
15.6%
15.6%
12.8%
11.0%
5.7%


64
Geographic Expansion
India: launch of locally manufactured Marlboro
through a PMI controlled joint-venture
South Africa: acquisition of business that has close to
30% of tobacco market


65
China
Nearly 40% of the world cigarette market excluding
the USA and duty-free
PMI has license agreement for production and sale of
Marlboro
and joint-venture for international markets
China National Tobacco Corporation the key partner
Marlboro
sales remain modest but are increasing
International joint-venture brands performing well
Tremendous long-term potential
Source: PMI estimates


66
Strategies for Growth
Reinforce our position in profitable consumer
segments
Drive growth of our leading brand portfolio through
enhanced consumer understanding and innovation
Expand geographically
Effectively utilize our strong and growing cash flow to
increase shareholder returns
Pursue opportunities for margin improvement
Boost organizational effectiveness and generate
productivity savings
Obtain a fair and reasonable regulatory and fiscal 
environment
Attract, motivate and retain the best global talent


67
Cumulative Operating Cash Flow
(2008-2010)
Source: PMI Financials
($ billion)
2008
2009
2010
6.6
7.3
7.8
21.7
March 2008


68
Cumulative Operating Cash Flow
2008
2009
2010
YTD Sept
(2008-2010)
Source: PMI Financials
($ billion)
6.6
7.9
7.3
6.4
7.8
21.7
14.3
March 2008
Actual


69
Free Cash Flow as a % of Net Revenues –
Peer Group
2008 FY –
Sept 30, 2009 YTD
Note:
Free
Cash
Flow
as
a
%
of
Net
Revenue,
excluding
excise
taxes,
is
defined
as
total
Free
Cash
Flow
during
the
2008
Sept
30,
2009
YTD
period
($12,772
million)
over
the
total
revenue
during
the
same
period
($44,023
million).
Free
Cash
Flow
is
defined
as
Operating
Cash
Flow
($14,354
million)
less
Capital
Expenditures
($1,582
million).
Nearest
comparable
period
is
used
where
the
2008
Sept
30,
2009
YTD
comparison
is
unavailable
Source: Centerview Partners from Company filings
4.3%
6.7%
7.4%
7.8%
8.0%
10.7%
15.7%
17.0%
18.2%
18.9%
19.3%
19.4%
19.9%
21.9%
23.1%
23.3%
33.7%
29.0%
Heineken
Nestle
Kraft
Bayer
Unilever
PepsiCo
Diageo
McDonalds
Vodafone
Coca-Cola
Imperial Tobacco
Novartis
Johnson & Johnson
Roche
BAT
GlaxoSmithKline
PMI
Pfizer


70
Free Cash Flow as a % of Net Revenues –
Tobacco
2008 FY –
Sept 30, 2009 YTD
Note:
Free
Cash
Flow
as
a
%
of
Net
Revenue,
excluding
excise
taxes,
is
defined
as
total
Free
Cash
Flow
during
the
2008
Sept
30,
2009
YTD
period
($12,772
million)
over
the
total
revenue
during
the
same
period
($44,023
million).
Free
Cash
Flow
is
defined
as
Operating
Cash
Flow
($14,354
million)
less
Capital
Expenditures
($1,582
million).
Nearest
comparable
period
is
used
where
the
2008
Sept
30,
2009
YTD
comparison
is
unavailable
Source: Centerview Partners from Company filings
5.7%
13.3%
13.4%
16.8%
19.3%
23.1%
23.7%
29.0%
Japan Tobacco
Reynolds American
Swedish Match
Altria
Imperial Tobacco
BAT
Lorillard
PMI


71
Working Capital
Average quarterly working capital in 2008:
$ billion
-
Receivables
2.9
-
Inventories
9.1
-
Other
0.3
-
Payables
(7.5)
-
Total
4.8
Source: PMI Financials


72
Working Capital –
Benchmarking
Objective was to determine areas where improvements
could be made to generate additional cash
Comparisons made with other consumer products
companies and our key competitors


73
Working Capital –
Benchmarking
Objective was to determine areas where improvements
could be made to generate additional cash
Comparisons made with other consumer products
companies and our key competitors
Opportunities identified, particularly inventories
Comprehensive program initiated
Expect to generate $750 million to $1 billion in incremental
cash flow over period 2010-2012


74
Working Capital –
Benchmarking
Objective was to determine areas where improvements
could be made to generate additional cash
Comparisons made with other consumer products
companies and our key competitors
Opportunities identified, particularly inventories
Comprehensive program initiated
Expect to generate $750 million to $1 billion in incremental
cash flow over period 2010-2012
Confident our free cash flow growth rate will
exceed our net earnings growth rate


75
Available Funds: Jan 2008 –
Sept 2009
Operating
Cash Flow
Incremental
Financing
+
$14.3 billion
$4.8 billion
(a)
Total Funds:
$19.1 billion
(a)
Net of Q1, 2008, special dividend paid by PMI to Altria Group, Inc. of $3.0 billion
Source: PMI Financials


76
Use of Funds: Jan 2008 –
Sept 2009
Operating
Cash Flow
Incremental
Financing
Capital
Expenditures
Acquisitions
+
$14.3 billion
$4.8 billion
(a)
Total Funds:
$19.1 billion
$1.6 billion
(8%)
$2.6 billion
(14%)
(a)
Net of Q1, 2008, special dividend paid by PMI to Altria Group, Inc. of $3.0 billion
Source: PMI Financials


77
Use of Funds: Jan 2008 –
Sept 2009
Operating
Cash Flow
Incremental
Financing
Capital
Expenditures
Acquisitions
Dividends
Share
Repurchases
+
$14.3 billion
Total Funds:
$19.1 billion
$1.6 billion
(8%)
$2.6 billion
(14%)
$5.3 billion
(28%)
$9.6 billion
(50%)
$4.8 billion
(a)
(a)
Net of Q1, 2008, special dividend paid by PMI to Altria Group, Inc. of $3.0 billion
Source: PMI Financials


78
Dividends
March 2008, established at $1.84 per share on
annualized basis
Increased by 17.4% in August 2008 and 7.4% in
September 2009
Current level of $2.32 per share on an annualized
basis equates to a yield of 4.6%
Source: PMI Financials


79
Dividend Yield
Note:
Dividend
yield
represents
the
annualized
dividend
at
Mar
28,
2008,
and
Nov
13,
2009,
over
the
closing
share
price
on
those
dates,
respectively
Source: Centerview Partners based on company filings and FactSet
March 28, 2008
November 13, 2009
1.9%
2.7%
2.9%
2.9%
2.9%
3.1%
3.2%
3.5%
3.5%
3.6%
3.7%
3.7%
3.8%
4.3%
4.5%
4.6%
4.8%
5.7%
Heineken
Bayer
Coca-Cola
PepsiCo
Nestle
Roche
Johnson & Johnson
McDonalds
Diageo
Pfizer
Unilever
Novartis
Imperial Tobacco
Kraft
BAT
PMI
GlaxoSmithKline
Vodafone
1.8%
2.1%
2.2%
2.4%
2.5%
2.6%
2.7%
2.7%
3.0%
3.1%
3.2%
3.2%
3.5%
3.5%
3.6%
4.8%
5.0%
5.7%
Heineken
PepsiCo
Coca-Cola
Roche
Nestle
Johnson & Johnson
Bayer
McDonalds
Imperial Tobacco
Novartis
Diageo
BAT
Kraft
Unilever
PMI
Vodafone
GlaxoSmithKline
Pfizer


80
Share Repurchases
$13 billion two-year program has been maintained
throughout the economic and financial crisis
$9.6 billion used to purchase 209.6 million shares at
an average price of $45.81 per share
$3.4 billion remaining in current program, as of
September 30, 2009
Source: PMI Financials


81
Net Debt to EBITDA –
Peer Group
Note:
Not
Meaningful
(NM).
Please
see
relevant
reconciliations
to
most
comparable
GAAP
measures
posted
on
our
website
or
at
the
end
of
this
presentation
Source: Centerview Partners based on company filings
September 30, 2009
NM
NM
NM
0.2x
0.5x
0.9x
1.0x
1.1x
1.2x
1.2x
1.8x
1.9x
1.9x
2.0x
2.7x
2.8x
2.8x
3.6x
Johnson & Johnson
Pfizer
Novartis
Coca-Cola
PepsiCo
Nestle
GlaxoSmithKline
Unilever
McDonalds
PMI
Bayer
Roche
Vodafone
BAT
Diageo
Kraft
Heineken
Imperial Tobacco


82
Capital Structure
Goal is to maintain current credit ratings and
flexibility to make acquisitions
Intention is to maintain our leverage within the
constraints of these credit ratings


83
Shareholder Returns
This year so far, $7.4 billion returned to shareholders
through dividends and share repurchases
Since March 2008 spin-off, $14.9 billion returned to
shareholders, representing more than 15% of our
current market capitalization
Source: PMI Financials


84
Total Shareholder Return –
Weighted Average
Since Spinoff (March 28, 2008 –
November 13, 2009)
Note: Peer groups represent the market weighted average return of the group. Total shareholder return and exchange rates are for period beginning
March 28, 2008 and ending November 13, 2009.  PMI includes pro forma $0.46 per share dividend paid in April 2008
Source: Centerview Partners based on FactSet
Total Shareholder Return –
Local Currency
PMI
Company
Peer Group
S&P 500
Tobacco
Peer Group
FTSE 100
PMI
Company
Peer Group
FTSE 100
Tobacco
Peer Group
S&P 500
Total Shareholder Return –
USD
6.4%
(3.5)%
(13.5)%
(13.5)%
(16.5)%
1.8%
6.4%
(0.4)%
(6.4)%
(13.5)%


85
Total Shareholder Return –
Peer Group (USD)
Since Spinoff (March 28, 2008 –
November 13, 2009)
Note: Exchange rates are as of March 28, 2008 and November 13, 2009.  PMI includes pro forma $0.46 per share dividend paid in April 2008
Source: Centerview Partners based on FactSet
Vodafone
Imperial Tobacco
Heineken
Roche
Diageo
PepsiCo
Kraft
Pfizer
BAT
Coca-Cola
Nestle
Johnson & Johnson
Unilever
Bayer
PMI
GlaxoSmithKline
Novartis
McDonalds
(19.2)%
(16.8)%
(16.2)%
(12.9)%
(12.3)%
(9.4)%
(6.9)%
(4.8)%
(4.5)%
(2.7)%
0.2%
0.3%
1.3%
1.8%
6.4%
6.8%
8.7%
20.2%


86
Conclusions
Key objective is to continue to provide superior
returns to our shareholders
Business fundamentals in very good shape
Expect to consistently meet or exceed financial mid to
long-term growth targets
Organic volume growth should resume following
employment-led economic recovery
Tremendous cash flow generation
Optimization of working capital
Dividend and share repurchases


Questions & Answers


88
(in millions USD rounded)
PHILIP MORRIS INTERNATIONAL
Reconciliation of Non-GAAP Measures
Adjustments for the Excises Taxes, Impact of Currency and Acquisitions on Net Revenues
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
14,354
$     
8,433
   
5,921
$          
442
          
5,479
$          
45
          
5,434
$             
For the Quarter ended March 31,
12,170
$     
7,018
   
5,152
$       
14.9%
6.3%
5.5%
16,703
9,994
6,709
638
6,071
-
6,071
For the Quarter ended June 30,
13,948
8,113
5,835
15.0%
4.0%
4.0%
17,365
10,412
6,953
590
6,363
14
6,349
For the Quarter ended September 30,
14,232
8,316
5,916
17.5%
7.6%
7.2%
15,218
9,096
6,122
(288)
6,410
170
6,240
For the Quarter ended December 31,
14,893
8,986
5,907
3.6%
8.5%
5.6%
63,640
37,935
25,705
1,382
24,323
229
24,094
For the Year ended December 31,
55,243
32,433
22,810
12.7%
6.6%
5.6%
% Change on Reported Net Revenues
excluding Excise Taxes
2007
2008


89
(in millions USD rounded)
PHILIP MORRIS INTERNATIONAL
Reconciliation of Non-GAAP Measures
Reconciliation of Reported Operating Companies Income to Adjusted Operating Companies Income &
Adjustments for the Impact of Currency and Acquisitions on Operating Companies Income
Reported
Operating
Companies
Income
Less Asset
Impairment &
Exit Costs /
Others
Adjusted
Operating
Companies
Income
Less
Currency
Adjusted
Operating
Companies
Income
excluding
Currency
Less
Acquisi-
tions
Adjusted
Operating
Companies
Income
excluding
Currency &
Acqusitions
Reported
Operating
Companies
Income
Less Asset
Impairment &
Exit Costs /
Others
Adjusted
Operating
Companies
Income
Adjusted
Adjusted
excluding
Currency
Adjusted
excluding
Currency &
Acquisitions
2,546
$         
(23)
                     
2,569
$         
224
           
2,345
$         
21
              
2,324
$            
For the Quarter ended March 31,
1,884
$          
(62)
                     
1,946
$         
32.0%
20.5%
19.4%
2,646
           
(172)
                    
2,818
           
277
           
2,541
           
13
              
2,528
              
For the Quarter ended June 30,
2,240
            
(76)
                     
2,316
           
21.7%
9.7%
9.2%
2,939
           
(13)
                     
2,952
           
217
           
2,735
           
23
              
2,712
              
For the Quarter ended September 30,
2,518
            
(15)
                     
2,533
           
16.5%
8.0%
7.1%
2,303
           
-
                         
2,303
           
(237)
          
2,540
           
68
              
2,472
              
For the Quarter ended December 31,
2,301
            
(42)
                     
2,343
           
-1.7%
8.4%
5.5%
10,434
         
(208)
                    
10,642
         
481
           
10,161
         
125
            
10,036
            
For the Year ended December 31,
8,943
            
(195)
                    
9,138
           
16.5%
11.2%
9.8%
% Change on Adjusted Operating
Companies Income
2008
2007


90
(in millions USD rounded)
PHILIP MORRIS INTERNATIONAL
Reconciliation of Non-GAAP Measures
Reconciliation of Reported Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share &
Adjustments for the Impact of Currency and 2007 Pro-Forma
Reported
(1)(3)
Less Asset
Impairment &
Exit Costs /
Others
Adjusted
Less
Currency
Adjusted
excluding
Currency
Reported
(1)(3)
Less Asset
Impairment &
Exit Costs /
Others
Adjusted
Pro-Forma
(2)
Adjustments
Adjusted
Pro-Forma
Adjusted
Adjusted
excluding
Currency
For the Quarter ended March 31,
0.79
$                 
(0.01)
0.80
$      
0.07
0.73
$       
Diluted Earnings Per Share
0.60
$                
(0.02)
0.62
$      
(0.03)
0.59
$         
35.6%
23.7%
For the Quarter ended June 30,
0.80
$                 
(0.07)
0.87
$      
0.10
0.77
$       
Diluted Earnings Per Share
0.70
$                
(0.03)
0.73
$      
(0.03)
0.70
$         
24.3%
10.0%
For the Quarter ended September 30,
1.01
$                 
0.08
0.93
$      
0.08
0.85
$       
Diluted Earnings Per Share
0.82
$                
0.01
0.81
$      
(0.03)
0.78
$         
19.2%
9.0%
For the Quarter ended December 31,
0.71
$                 
-
0.71
$      
(0.10)
0.81
$       
Diluted Earnings Per Share
0.74
$                
0.01
0.73
$      
(0.01)
0.72
$         
-1.4%
12.5%
For the Year ended December 31,
3.31
$                 
-
3.31
$      
0.15
3.16
$       
Diluted Earnings Per Share
2.86
$                
(0.03)
2.89
$      
(0.09)
2.80
$         
18.2%
12.9%
(1)
Refer to schedule 11 and 12 in the 2008 Full Year Earnings Release.
(2)
For details on the Pro-Forma adjustments, please refer to the schedule 14 in the 2008 Full Year Earnings Release.
% Change on Diluted
Earnings Per Share
2008
2007
(3)
Effective
January
1,
2009,
PMI
adopted
the
provisions
of
amended
FASB
authoritative
guidance
which
requires
that
unvested
share-based
payment
awards
that
contain
nonforfeitable
rights
to
dividends
are
participating
securities and therefore shall be included in the earnings per share calculation pursuant to the two-class method.


91
(in millions USD rounded, except ratios)
PHILIP MORRIS INTERNATIONAL
Reconciliation of Non-GAAP Measures
Calculation of Net Debt to EBITDA Ratio
March 31,
September 30,
2008
2009
April~December
January~March
12 months
October~December
January~September
12 months
2007
2008
rolling
2008
2009
rolling
Earnings before income tax
7,033
$             
2,449
$             
9,482
$     
2,120
$                     
7,027
$                     
9,147
$              
Interest expense, net
-
75
75
106
572
678
Amortization & Depreciation
585
201
786
217
607
824
EBITDA
7,618
$             
2,725
$             
10,343
$   
2,443
$                     
8,206
$                     
10,649
$             
March 31,
September 30,
2008
2009
Short-term borrowings
793
$        
313
$                  
Current portion of long-term debt
104
197
Long-term debt
6,643
13,741
Total debt
7,540
$     
14,251
$             
Less: Cash & cash equivalents
1,231
1,602
Net Debt
6,309
$     
12,649
$             
Ratio
Net Debt / EBITDA
0.61
1.19

Exhibit 99.3

 

LOGO

   LOGO

PHILIP MORRIS INTERNATIONAL INC. (PMI) PRESENTS AT

MORGAN STANLEY GLOBAL CONSUMER & RETAIL CONFERENCE

NEW YORK, November 19, 2009 – Philip Morris International Inc. (NYSE/Euronext Paris: PM) Chairman and Chief Executive Officer, Louis Camilleri, addresses investors today at the Morgan Stanley Global Consumer & Retail Conference in New York.

The presentation and Q&A session are being webcast live, in a listen-only mode, beginning at approximately 12 Noon Eastern Time at www.pmintl.com. An archived copy of the webcast, together with slides, will be available on the same site.

The presentation will include the following key highlights:

 

   

The company reaffirmed its forecast for 2009 reported full-year diluted earnings per share of $3.20 to $3.25, stated in its third-quarter results on October 22, 2009, and announced it expects to be at the high end of the range. Excluding currency at the then prevailing exchange rates, diluted earnings per share are projected to increase by approximately 12%-14%;

 

 

   

The company announced a new initiative to generate an additional $750 million to $1.0 billion in cash through improvements in working capital over the period 2010-2012;

 

 

   

Since the March 2008 spin-off, $15 billion has been returned to the company’s shareholders, through dividends and share repurchases, representing more than 15% of its current market capitalization.

 

The presentation may contain projections of future results and other forward-looking statements that involve a number of risks and uncertainties and are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.

PMI is subject to other risks detailed from time to time in its publicly filed documents, including those described under Item 1A, “Risk Factors” in PMI’s Form 10-K for the year ended December 31, 2008, and Form 10-Q for the quarter ended September 30, 2009. PMI cautions that any of these risks and uncertainties could cause actual results and outcomes to differ materially from those contained in or implied by the forward-looking statements and does not undertake to update any forward-looking statements that it may make, except in the normal course of its disclosure obligations.

For more information, see www.pmintl.com.


LOGO

   LOGO

 

Contact:

Investor Relations

New York +1 (917) 663 2233

Lausanne +41 (0)58 242 4666

 

 

Philip Morris International Inc. Profile

Philip Morris International Inc. (PMI) [NYSE/Euronext Paris: PM] is the leading international tobacco company, with seven of the world’s top 15 brands including Marlboro , the number one cigarette brand worldwide. PMI has more than 75,000 employees and its products are sold in approximately 160 countries. The Company held an estimated 15.6% share of the international cigarette market outside of the United States in 2008. For more information, see www.pmintl.com.

 

 

 

2