Philip Morris International Inc 8-K, filed Feb 23, 2022
Philip Morris International Inc. (PM)
8-K
2022-02-23
For: 2022-02-23
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Added on
April 02, 2026
About this 8-K
Philip Morris International Inc filed this 8-K on February 23, 2022.
Items reported
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
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): February 23, 2022
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||||||||
| (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)) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). | |||||
Emerging growth company | |||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ | ||||
Item 7.01. | Regulation FD Disclosure. | ||||
On February 23, 2022, Philip Morris International Inc. ("PMI") is releasing a video presentation at the Consumer Analyst Group of New York Conference where PMI’s Chief Executive Officer, Jacek Olczak, and Chief Financial Officer, Emmanuel Babeau, will address investors. In connection with the presentation, PMI 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 to this Item 7.01: (i) the press release, dated February 23, 2022, attached as Exhibit 99.1 hereto; (ii) the presentation script, dated February 23, 2022, attached as Exhibit 99.2 hereto; and (iii) the presentation slides, dated February 23, 2022, attached as Exhibit 99.3 hereto.
In accordance with General Instruction B.2 of Form 8-K, the information in Item 7.01 of this Current Report on Form 8-K, including Exhibits 99.1, 99.2 and 99.3, 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. The information in Item 7.01 of this Current Report on Form 8-K shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as may be expressly set forth by specific reference in such filing or document.
Item 9.01. | Financial Statements and Exhibits. | ||||
(d) | Exhibits. | ||||
99.1 | |||||
104 | Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document and contained in Exhibit 101) | ||||
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/ DARLENE QUASHIE HENRY | |||||||
| Name: | Darlene Quashie Henry | |||||||
| Title: | Vice President, Associate General Counsel & Corporate Secretary | |||||||
Date: February 23, 2022
| Exhibit 99.1 | ||||||||||||||
| PRESS RELEASE |  | |||||||||||||
| Investor Relations: | Media: David Fraser | |||||||||||||
| New York: +1 (917) 663 2233 | Lausanne: +41 (0)58 242 4500 | |||||||||||||
| Lausanne: +41 (0)58 242 4666 | Email: David.Fraser@pmi.com | |||||||||||||
| Email: InvestorRelations@pmi.com | ||||||||||||||
PHILIP MORRIS INTERNATIONAL INC. (PMI) PRESENTS AT THE
2022 CONSUMER ANALYST GROUP OF NEW YORK (CAGNY) VIRTUAL CONFERENCE
NEW YORK, February 23, 2022 – Philip Morris International Inc.’s (NYSE: PM) Chief Executive Officer, Jacek Olczak, and Chief Financial Officer, Emmanuel Babeau, address investors today at the 2022 Consumer Analyst Group of New York (CAGNY) Virtual Conference.
The pre-recorded video presentation can be accessed at www.pmi.com/2022cagny as of approximately 9:10 a.m. ET. Presentation slides and script will also be available on the same site. The video will remain available until 5:00 p.m. ET on Thursday, March 24, 2022. The video can also be accessed on iOS or Android devices by downloading PMI’s free Investor Relations Mobile Application at www.pmi.com/irapp.
The presentation will cover:
•PMI’s progress to date on becoming a predominantly smoke-free business by 2025 and the powerful financial model underlying the company’s transformation;
•The growing base of real-world evidence supporting the significant public health opportunity from encouraging smokers who would otherwise continue smoking to switch to scientifically substantiated smoke-free products;
•The attractive growth outlook for smoke-free products and their role in reducing cigarette consumption;
•The company’s smoke-free category investment and innovation leadership – driven by heat-not-burn – and plans for deployment within and across categories, geographies, consumer segments and price tiers;
•PMI’s investments in wellness and healthcare to further support long-term growth;
•The company’s leadership on sustainability, with a continued focus on the health impact of its products; and
•PMI’s confidence in its 2021 to 2023 compound annual growth targets for net revenues of more than 5%, on an organic basis, and adjusted diluted EPS of more than 9%, excluding currency.
In response to investor questions on the current geopolitical situation involving Russia and Ukraine, the company said: “Our primary concern is the safety and security of our colleagues and their families, and we are monitoring the situation closely. At this time, we do not anticipate any material impact on our business related to the announced sanctions.” In 2021, Russia and Ukraine accounted for around 12% of PMI’s total cigarette and heated tobacco unit shipment volume and around 8% of PMI’s total net revenues.
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Forward-Looking & Cautionary Statements
The presentation, related discussion and this press release contain projections of future results and other forward-looking statements. Achievement of future results is subject to risks, uncertainties and inaccurate assumptions. In the event that risks or uncertainties materialize, or underlying assumptions prove inaccurate, actual results could vary materially from those contained in such forward-looking statements. Pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, PMI is identifying important factors that, individually or in the aggregate, could cause actual results and outcomes to differ materially from those contained in any forward-looking statements made by PMI.
PMI's business risks include: excise tax increases and discriminatory tax structures; increasing marketing and regulatory restrictions that could reduce our competitiveness, eliminate our ability to communicate with adult consumers, or ban certain of our products in certain markets or countries; health concerns relating to the use of tobacco and other nicotine-containing products and exposure to environmental tobacco smoke; litigation related to tobacco use and intellectual property; intense competition; the effects of global and individual country economic, regulatory and political developments, natural disasters and conflicts; changes in adult smoker behavior; lost revenues as a result of counterfeiting, contraband and cross-border purchases; governmental investigations; unfavorable currency exchange rates and currency devaluations, and limitations on the ability to repatriate funds; adverse changes in applicable corporate tax laws; adverse changes in the cost, availability, and quality of tobacco and other agricultural products and raw materials, as well as components and materials for our electronic devices; and the integrity of its information systems and effectiveness of its data privacy policies. PMI's future profitability may also be adversely affected should it be unsuccessful in its attempts to produce and commercialize reduced-risk products or if regulation or taxation do not differentiate between such products and cigarettes; if it is unable to successfully introduce new products, promote brand equity, enter new markets or improve its margins through increased prices and productivity gains; if it is unable to expand its brand portfolio internally or through acquisitions and the development of strategic business relationships; or if it is unable to attract and retain the best global talent, including women or diverse candidates. Future results are also subject to the lower predictability of our reduced-risk product category's performance.
In addition, PMI’s business risks also include risks and uncertainties related to PMI’s acquisitions of Fertin Pharma A/S (“Fertin”), OtiTopic, Inc. ("OtiTopic") and Vectura Group plc (“Vectura”), including, amongst other things: (1) the possibility that the integration of the operations of Fertin and Vectura with those of PMI may be more difficult and/or take longer than anticipated, and may not accelerate PMI’s desired entry into additional smoke-free and beyond nicotine platforms as quickly as anticipated; (2) the possibility that the respective integrations of Fertin and Vectura into PMI may be more costly than anticipated and may have unanticipated adverse results relating to Fertin, Vectura or PMI’s existing businesses; (3) the inability to gain access to or acquire differentiated proprietary assets, technology and/or pharmaceutical development expertise as anticipated by these acquisitions; (4) risks associated with third-party contracts containing consent and/or other contractual provisions that may be triggered by the acquisitions; (5) the success of the research and development efforts of Fertin, OtiTopic and Vectura, including the ability to obtain regulatory approval for new products, and the ability to commercialize or license these new products; (6) any unanticipated safety, quality or efficacy concerns and the impact of identified concerns associated with the products developed by Fertin, OtiTopic and Vectura; and (7) the ability of PMI to retain key personnel of Fertin and Vectura, or hire key talent to work in the Fertin and Vectura businesses due to their affiliation with PMI.
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The ongoing COVID-19 pandemic has created significant societal and economic disruption, and resulted in closures of stores, factories and offices, and restrictions on manufacturing, distribution and travel, all of which may adversely impact our business, results of operations, cash flows and financial position. Our business continuity plans and other safeguards may not be effective to mitigate the impact of the pandemic. Currently, significant risks include our diminished ability to convert adult smokers to our reduced-risk products, significant volume declines in our duty-free business and certain other key markets, disruptions or delays in our manufacturing and supply chain, increased currency volatility, and delays in certain cost saving, transformation and restructuring initiatives. Our business could also be adversely impacted if key personnel or a significant number of employees or business partners become unavailable due to the continuation of the COVID-19 pandemic. The significant adverse impact of COVID-19 on the economic or political conditions in markets in which we operate could result in changes to the preferences of our adult consumers and lower demand for our products, particularly for our mid-price or premium-price brands. Continuation of the pandemic could disrupt our access to the credit markets or increase our borrowing costs. Governments may temporarily be unable to focus on the development of science-based regulatory frameworks for the development and commercialization of reduced-risk products or on the enforcement or implementation of regulations that are significant to our business. In addition, messaging about the potential negative impacts of the use of our products in relation to COVID-19 risks may lead to increasingly restrictive regulatory measures on the sale and use of our products, negatively impact demand for our products, the willingness of adult consumers to switch to our reduced-risk products and our efforts to advocate for the development of science-based regulatory frameworks for the development and commercialization of reduced-risk products.
The impact of these risks also depends on factors beyond our knowledge or control, including the duration and severity of the pandemic, its recurrence in our key markets, actions taken to contain its spread and to mitigate its public health effects, and the ultimate economic consequences thereof.
PMI is further subject to other risks detailed from time to time in its publicly filed documents, including its Annual Report on Form 10-K for the fourth quarter and year ended December 31, 2021. PMI cautions that the foregoing list of important factors is not a complete discussion of all potential risks and uncertainties. PMI does not undertake to update any forward-looking statement that it may make from time to time, except in the normal course of its public disclosure obligations.
Philip Morris International: Delivering a Smoke-Free Future
Philip Morris International (PMI) is a leading international tobacco company working to deliver a smoke-free future and evolving its portfolio for the long-term to include products outside of the tobacco and nicotine sector. The company’s current product portfolio primarily consists of cigarettes and smoke-free products, including heat-not-burn, vapor and oral nicotine products, which are sold in markets outside the U.S. Since 2008, PMI has invested more than USD 9 billion to develop, scientifically substantiate and commercialize innovative smoke-free products for adults who would otherwise continue to smoke, with the goal of completely ending the sale of cigarettes. This includes the building of world-class scientific assessment capabilities, notably in the areas of pre-clinical systems toxicology, clinical and behavioral research, as well as post-market studies. The U.S. Food and Drug Administration (FDA) has authorized the marketing of a version of PMI’s IQOS Platform 1 device and consumables as a Modified Risk Tobacco Product (MRTP), finding that an exposure modification order for these products is appropriate to promote the public health. As of December 31, 2021, PMI's smoke-free products are available for sale in 71 markets, and PMI estimates that approximately 15.3 million adults around the world have already switched to IQOS and stopped smoking. With a strong foundation and significant expertise in life sciences, in February 2021 PMI announced its ambition to expand
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into wellness and healthcare areas and deliver innovative products and solutions that aim to address unmet patient and consumer needs. For more information, please visit www.pmi.com and www.pmiscience.com.
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Exhibit 99.2
Consumer Analyst Group of New York (CAGNY) Conference
February 23, 2022
Philip Morris International Inc.
JACEK OLCZAK
(SLIDE 1.)
Hello everyone and welcome. I am Jacek Olczak, Chief Executive Officer of Philip Morris International. I am joined by Emmanuel Babeau, our Chief Financial Officer. It is our great pleasure to be back presenting at CAGNY, albeit in a virtual format.
(SLIDE 2.)
I direct your attention to the Forward-Looking and Cautionary Statements disclosure in today’s presentation and press release for a review of the various factors that could cause actual results to differ materially from projections or forward-looking statements.
(SLIDE 3.)
Here are the key messages for today. As demonstrated by the tremendous success of IQOS, we have invested over the long-term in our scientific, product development and commercial capabilities to deliver ground-breaking innovations. Despite these substantial investments, we have continued to deliver best-in-class top-and-bottom line performance and generously reward shareholders from our robust cash flows.
This model of innovation and investment will allow us to deliver sustainable, high-quality growth over the years to come, including our 2021-23 CAGR targets of more than 5% in organic net revenues and more than 9% in currency-neutral adjusted diluted EPS.
(SLIDE 4.)
Let me remind you of our progress. We have invested over $9 billion in the capacity to bring smoke-free products to market, with a significant portion of this investment made before any revenues were realized. This built the IQOS business of today, which has grown to $9 billion in annual net revenues.
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Despite this heavy investment, we have consistently delivered excellent growth and rewarded shareholders. In the last 5 years, we grew organic net revenues by a CAGR of 5.0% and currency-neutral adjusted diluted EPS by a CAGR of 10.5% while paying $36 billion in dividends.
(SLIDE 5.)
The best testimony to this investment is that smoke-free products are now the core engine of our growth, passing 30% of our net revenues in the last quarter of 2021.
Smoke-free products are designed to replace cigarettes, serving consumer needs and society by accelerating the decline of smoking. We continue to innovate and broaden the reach of our portfolio. IQOS leads the growth of heat-not-burn, the biggest and most effective category. Our early commitment allowed us to build and develop the capabilities, technology, products and brand to cement a sustainable first-mover advantage. Importantly, we are now leveraging this R&D and commercial infrastructure to expand in e-vapor and nicotine pouches. We also see an attractive mid-to-long term opportunity in other forms of cigarette replacement alternatives, notably in oral delivery.
In combustibles, maintaining our leading share is an important enabler of this transition. Through direct communication with our smokers, where permitted, we can encourage them to consider better alternatives. Our leverage with the retail trade helps to secure distribution and prominence for our smoke-free portfolio.
(SLIDE 6.)
Achievement of the 50% target entails going smoke-free on a market-by-market basis. We have already reached this milestone in 10 markets, which represent over 25% of total net revenues, including the significant geographies on this slide. The 50% threshold was reached in Italy and the Czech Republic in 2021, while Greece and Japan are now at two- thirds or higher. This clearly demonstrates the power of our transformation, and the potential to go much further than 50% over the longer term.
(SLIDE 7.)
We are also making strong progress in 3 of our 4 largest regions by net revenue. With the East Asia and Australia Region now approaching 60% smoke-free net revenues, Eastern Europe and the EU Region are also moving firmly in the right direction. In the other regions we are working to achieve the right regulatory environments in order to accelerate the progress of smoke-free alternatives.
(SLIDE 8.)
In addition to this, we are now building the foundations to capture the significant long- term opportunities in Wellness and Healthcare. As with our IQOS business, this requires a long-term vision and upfront investment in critical development capabilities to build a strong pipeline of products. The acquisitions of Fertin and Vectura last year jump-started
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our journey, and we are now progressing and enhancing our initial pipeline. I will return to give more on this later.
(SLIDE 9.)
Turning back to our core business of smoke-free products. There is growing evidence and recognition that RRPs have a positive public health impact. The facts are simple. Combustion and smoking are the primary cause of smoking-related disease. Removing combustion significantly reduces the harms of nicotine consumption. Moreover, nicotine is a critical part of the solution to the public health impact of smoking, as it allows reduced risk products to offer an acceptable alternative for adult smokers, who do not quit nicotine consumption, to switch to. Clearly, the right marketing regulation and surveillance has to be in place to minimize unintended use, especially among youth.
Regrettably, as we covered at investor day last year, there exists societal confusion on these simple facts on nicotine. This is exacerbated by the misinformation campaigns of certain NGOs and has led to both consumer misunderstanding and instances of misguided regulation.
The simple facts are based on clear scientific evidence and have been recognized by both governmental and independent authorities in their assessments, including the U.S. FDA. Evidence indicates that completely switching to smoke-free products such as heat- not-burn, e-vapor or nicotine pouches does, or is likely to, substantially reduce exposure to harmful and potentially harmful chemicals compared with continuing to smoke. We are also working to go beyond measuring exposure to generate further real-world evidence and clinical data demonstrating the benefits of switching. In addition, we believe greater societal focus on the health impact of nicotine in isolation is needed, and we plan to play our part in furthering this understanding through our own research.
It follows that there is a very significant public health opportunity from encouraging smokers, who would otherwise continue smoking, to switch. To precisely quantify the benefit of reduced disease through long-term epidemiology will take time, as these products are still new. However, there is now a growing base of real-world evidence which supports this ultimate conclusion.
(SLIDE 10.)
Let me recap on two time-trend analyses in Japan which we showed last year. First, we observed a downward trend in hospitalizations for COPD exacerbations over the period since heated tobacco products, led by IQOS, were introduced.
(SLIDE 11.)
Second, we also see an encouraging trend in the decline of admissions for ischemic heart disease in Japan, coinciding with the introduction of heated tobacco products.
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(SLIDE 12.)
In addition, independent studies that measure disease risk using epidemiology are starting to emerge. We show an example here from South Korea using data from the National Health Insurance Service.
(SLIDE 13.)
Compared to continued smoking, switching to smoke-free products was associated with 23% lower risk of developing cardiovascular disease among both recent switchers and long-term switching. Long-term quitters, or those who had quit all products for more than 5 years were associated with 37% lower risk. You can see the full study at the linked web address.
Given smoke-free products are only a few years old, this is not yet long-term epidemiology, and it will be very interesting to see how the data evolves over time. It’s also worth noting this is product-agnostic on the smoke-free category, though we know by far the biggest segment is heated tobacco, where the main brands in Korea are IQOS and LIL. This is further encouraging evidence for the harm reduction potential of smoke- free products.
(SLIDE 14.)
With such growing evidence pointing to public health benefit, it is becoming ever clearer that smoke-free alternatives have a sustainable future. Technology and innovation provide great experiences to consumers, which is critical to convince them to switch from cigarettes, and not to go back to smoking.
Innovation also provides increasingly safer ways to deliver nicotine, while preserving the perceived benefits and enjoyment for the consumer.
EMMANUEL BABEAU
(SLIDE 15.)
The rapid success of smoke-free products drives an attractive growth outlook for the industry. While recent history has been more volatile due to the pandemic, we estimate total nicotine consumption excluding the U.S. and China is declining at an underlying rate of around -1%; with retail value growing mid-single digit.
Within this overall trend, smoke-free products are rapidly gaining volume share with both heat-not-burn and overall smoke-free expected to roughly double in size between 2021 and 2025 to 10% and 15% respectively.
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In terms of retail value, heat-not-burn remains by far the biggest smoke-free category, driven by the quality of experience and high rates of conversion. We expect its recent strong growth to continue at a CAGR of 25% or more over the next 4 years. With e-vapor also expected to grow double-digit and very fast growth from a small base for nicotine pouches, smoke-free products should continue to drive the majority of total industry value creation.
(SLIDE 16.)
The growth of smoke-free products is replacing cigarette consumption. In the 10 markets where IQOS HTUs have the highest share, cigarette category declines have accelerated.
(SLIDE 17.)
Given this structural growth, our leadership means we are well set to naturally gain share of the total industry over time. Our retail value share of smoke-free products is more than double our share of cigarettes at an estimated 59% in 2021, despite a very small presence in e-vapor. As we have covered previously, smoke-free products are also more profitable.
JACEK OLCZAK
(SLIDE 18.)
Innovation is driven by consumer needs. While cigarettes saw 2 meaningful innovations in 70 years, there has been a sharp acceleration with the advent of smoke-free products. This is illustrated by the fast evolution of the three main smoke-free categories in the last decade, making it critical not only to keep up, but to lead in consistently bringing new and better products to consumers.
Consumer needs reflect the desire to maintain the ritual, taste and satisfaction of smoking. There is also a fundamental preference for convenience to accelerate smoker conversion. This shift towards convenience is visible in the progression from IQOS 3 to ILUMA, from open tank to closed pod to disposable e-vapor products, and from snus to nicotine pouches. We plan to replicate our rapid heat-not-burn innovation in e-vapor and oral nicotine.
(SLIDE 19.)
Investment in our innovation pipeline and deployment capabilities has allowed us to lead the innovation of the category, catering to a broadening range of consumer preferences, occasions, form factors and price points. As a result, the competitive gap has consistently grown in recent years, as shown by the comparison of estimated retail sales on this slide. It’s also notable that the gap from the leading two players to the others is growing, again showing the importance of commitment to the category.
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(SLIDE 20.)
We are building a pipeline of growth initiatives to drive the achievement of our 50% smoke-free target. While heat-not-burn retains the lion’s share of the smoke-free category and of its growth, we now have a more balanced and complete multi-category portfolio.
This is increasingly important as smoke-free poly-usage becomes more prevalent. An IQOS heat-not-burn user may use an e-vapor or pouch product in certain moments or situations, and vice versa. Having a full portfolio leveraging our commercial infrastructure allows us to serve the consumer across these different occasions.
As the undisputed leader in smoke-free innovation led by heat-not-burn, 2022 promises to be an exciting year for the deployment of our enlarged portfolio. While there remains some uncertainty on the availability of electronic device components, we are broadening our global growth base within and across categories, geographies, consumer segments and price tiers.
Nicotine pouches and e-vapor offer a very promising opportunity. We are also looking to develop disposable e-vapor products to complete the VEEV portfolio. Responsibly marketed disposables provide a convenient and simple entry point to adult smokers switching for the first time, and a hassle-free option for smoke-free poly-users.
(SLIDE 21.)
One of the biggest opportunities for converting smokers is in low-and-middle income markets, which make up 70% of international cigarette volumes. While already 30 of the 71 PMI smoke-free product markets at the end of 2021, we are still in the very early stages of growth in these geographies. In certain markets, differentiation in fiscal and regulatory treatment which considers the continuum of risk has been implemented. In some other markets, governments are yet to embrace tobacco harm reduction and there remains important work to do.
A clear consideration is affordability. However, in many countries, the premium cigarette segment is large in both volume and percentage terms. With strong effectiveness in the premium segment, there is ample room for the current IQOS portfolio to convert emerging market smokers and generate strong growth, as illustrated by our remarkable performance in Egypt since the Cairo launch 6 months ago.
In addition, there is a substantial opportunity in addressing smokers in the medium and below segments. We plan to introduce a new heat-not-burn device to expand the access for such consumers towards the end of this year. This will be a simple, convenient and affordable proposition which can cater to local taste preferences without compromising on harm reduction. We believe this product can also help address the lower price segment in developed countries, where our competitors are often positioned. With a full suite of
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heat-not-burn platforms, including the only true premium proposition of IQOS, we will have unmatched segmentation within the category.
EMMANUEL BABEAU
(SLIDE 22.)
Through our smoke-free transformation we have a powerful model of investment, innovation and growth. I will start with our top-line equation.
After positive volumes in 2021, albeit with a favorable comparison, we are targeting broad stability this year. We believe stable-to-growing volumes are sustainable over time as HTU growth offsets cigarette declines. Mathematically, at our current volume split, 20- 25% growth in HTU volumes compensates up to a 5% decline in cigarettes. As HTUs continue growing, this equation naturally becomes stronger, driven by a growing volume and value share of the industry.
As evident in recent performance, the higher net revenue per unit and gross margin of HTUs create a positive mix effect as they replace cigarettes.
Beyond HTUs, we expect e-vapor and nicotine pouches to also make a growing positive revenue contribution.
In addition, pricing on both categories is a key lever of growth. We believe combustible pricing can at least balance cigarette volume declines, including the impact of cannibalization, over the next few years.
(SLIDE 23.)
As outlined on this slide, when it comes to the profitability of smoke-free products, the key to success is conversion and loyalty. This derives from serving consumer needs, including the growing demand for convenience.
For closed-system e-vapor products, gross margins may be higher than cigarettes. However, the low degree of conversion and loyalty to both the category and individual brands has been exacerbated by aggressive device discounting and higher trade margins.
We estimate that exclusive use of nicotine pouches generates a gross profit per user between closed system e-vapor and heat-not-burn, with similar estimated economics for disposable e-vapor.
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(SLIDE 24.)
I turn now to the overall profitability of our IQOS business, which is growing strongly through scale, operating leverage and efficiency. In 2021 the positive profit contribution, after commercial and R&D costs, grew by well over $1 billion organically.
This reflects RRP net revenues which increased by $2.3 billion, and while we don’t disclose gross profit by product category, this compares to a $0.5 billion increase in commercial and R&D costs for the whole of PMI, compared to a pandemic-depressed cost comparison in 2020.
JACEK OLCZAK
(SLIDE 25.)
Let me now expand on our plans for long-term growth in Wellness and Healthcare, which do not entail a standard pharma approach. We will be developing best-in-class differentiated products for unmet patient and consumer needs, starting from the demands of physicians, payers, patients and consumers, rather than drug discovery. We will be innovating in the method of delivery of existing approved and permitted molecules as well as the route-to-market, using digital tools.
Vectura & Fertin bring technology platforms at the forefront of innovation. Realizing our ambitions requires R&D investment in these platforms, and we intend to invest a broadly stable $150 to $200 million per annum over the next 3 years to develop our pipeline and target revenues from new products from 2024. With a focus on innovation, we are pursuing opportunities with strong returns and cash generation. Following the acquisitions of last year, our emphasis is on organic product development to deliver these revenues, with a possibility of smaller bolt-on acquisitions, co-development and partnerships to complement.
(SLIDE 26.)
As we have shown before, the addressable market for wellness and healthcare products is large and growing.
We have several focus areas in our pipeline. In healthcare, we believe there are significant unmet patient needs for fast and effective treatments in cardiovascular such as myocardial infarction, neurology such as migraine, which can be served via innovative solutions. We also see promising opportunities for pain management treatment with medical cannabis.
For consumer and OTC wellness products, we have several initiatives looking at focus, sleep, energy, pain and calm. We are also evaluating the promising applications for CBD
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in some of these areas, notably through oral delivery. Safe CBD dosage levels are now being defined by regulators in a number of countries, informed by clinical studies.
Given the attention around the topic, I also want to emphasize we have no intention to participate in the recreational cannabis market.
Another area of interest is in smoking cessation products, sometime known as NRT. As I mentioned earlier we see an opportunity to provide more effective solutions via consumer, OTC and Rx prescription pathways over time, building on Fertin’s current CDMO business.
(SLIDE 27.)
The business cycle and model in these new areas differs from consumer goods. Upfront investment is required and -- especially in Rx drugs -- a number of milestones must be achieved, such as clinical trials, to bring a product to market.
We show here an illustration of the time and complexity for the consumer wellness, OTC and Rx pathways. From a standing start, wellness products are quicker to commercialize. However, with some elements of our pipeline - such as the Otitopic Asprihale product - in the Rx late development stage, we are optimistic that our healthcare offering will start to bear fruit by 2025. As mentioned earlier, we plan to participate in the stages after drug discovery and have current pipeline plans covering the majority of our $1 billion net revenue target. However it’s important to note that peak sales for these initiatives are estimated to be significantly higher, supporting further growth beyond 2025 toward becoming a multi-billion business by 2030.
EMMANUEL BABEAU
(SLIDE 28.)
Innovating in wellness and healthcare is now an integral part of our long-term plan seeking to have a net positive impact. This topic featured in our new sustainability materiality report published last week, which identifies our ESG priorities. As shown here, product health impact remains our most material sustainability topic and main focus.
(SLIDE 29.)
The results of the assessment are reflected in our updated sustainability framework, shown on this slide. Identifying clear ESG priorities, the framework offers a distinction between the issues that relate to our products (or what we produce) and issues related to our business operations (or how we produce).
Building on the sophistication of our materiality results and new framework, I am proud to be taking our commitment to sustainability to the next level, by introducing an innovative
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new sustainability index. This will ensure we strive for best-in-class ESG performance with robustly measurable & verifiable metrics covering all our sustainability priorities.
As you will read in our proxy statement, the index will be integrated into our 3 year PSU incentive plan with a weighting of 30%. This complements the metrics already present in our annual and long-term compensation structure.
(SLIDE 30.)
Given the limitations of subjective and relative ESG ratings and assessments, we are committed to disclosing comparable and reliable data, methodology, and targets on our business.
Our integrated report is a leading example of consolidating financial and non-financial performance and disclosure, moving beyond purely qualitative assessment. We further recognize the need for more in depth, complementary, disclosures on specific ESG topics with recent examples shown here.
Last, we fully support regulatory developments toward the standardization of ESG reporting, and plan to be an early adopter.
JACEK OLCZAK
(SLIDE 31.)
I will now leave you with some key messages.
With smoke-free products, the core part of our transformation, we are well on track to reach 50% of net revenues by 2025.
After a strong 2021 we are very confident in the achievement of our net revenue and adjusted diluted EPS CAGR targets. We are delivering high-quality, sustainable organic growth and cash flows. We remain committed to generously rewarding shareholders through dividends and share repurchases as we continue our transformation.
Our path to 2025 is driven by continuous investment in innovation, and this year many of these growth initiatives will take hold.
Beyond 2025 we have an additional leg of growth through our Wellness and Healthcare business, where we are investing now for long-term returns.
We are leading on sustainability, remaining focused on our products. This gives us a tremendous opportunity to lead on delivering a significant positive impact for the more than 1 billion people who smoke, and society at large.
10
Thank you, and we look forward to speaking with you further this year.
11
Delivering a Smoke-Free Future CAGNY Conference February 23, 2022 Jacek Olczak, Chief Executive Officer Emmanuel Babeau, Chief Financial Officer Forward-Looking and Cautionary Statements • This presentation and related discussion contains projections of future results and other forward-looking statements. Achievement of future results is subject to risks, uncertainties and inaccurate assumptions. In the event that risks or uncertainties materialize, or underlying assumptions prove inaccurate, actual results could vary materially from those contained in such forward-looking statements. Pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, PMI is identifying important factors that, individually or in the aggregate, could cause actual results and outcomes to differ materially from those contained in any forward-looking statements made by PMI • PMI's business risks include: excise tax increases and discriminatory tax structures; increasing marketing and regulatory restrictions that could reduce our competitiveness, eliminate our ability to communicate with adult consumers, or ban certain of our products in certain markets or countries; health concerns relating to the use of tobacco and other nicotine-containing products and exposure to environmental tobacco smoke; litigation related to tobacco use and intellectual property; intense competition; the effects of global and individual country economic, regulatory and political developments, natural disasters and conflicts; changes in adult smoker behavior; lost revenues as a result of counterfeiting, contraband and cross-border purchases; governmental investigations; unfavorable currency exchange rates and currency devaluations, and limitations on the ability to repatriate funds; adverse changes in applicable corporate tax laws; adverse changes in the cost, availability, and quality of tobacco and other agricultural products and raw materials, as well as components and materials for our electronic devices; and the integrity of its information systems and effectiveness of its data privacy policies. PMI's future profitability may also be adversely affected should it be unsuccessful in its attempts to produce and commercialize reduced-risk products or if regulation or taxation do not differentiate between such products and cigarettes; if it is unable to successfully introduce new products, promote brand equity, enter new markets or improve its margins through increased prices and productivity gains; if it is unable to expand its brand portfolio internally or through acquisitions and the development of strategic business relationships; or if it is unable to attract and retain the best global talent. Future results are also subject to the lower predictability of our reduced-risk product category's performance • In addition, PMI’s business risks also include risks and uncertainties related to PMI’s acquisitions of Fertin Pharma A/S ("Fertin"), OtiTopic, Inc. ("OtiTopic") and Vectura Group plc ("Vectura"), including, amongst other things: (1) the possibility that the integration of the operations of Fertin and Vectura with those of PMI may be more difficult and/or take longer than anticipated, and may not accelerate PMI’s desired entry into additional smoke-free and beyond nicotine platforms as quickly as anticipated; (2) the possibility that the respective integrations of Fertin and Vectura into PMI may be more costly than anticipated and may have unanticipated adverse results relating to Fertin, Vectura or PMI’s existing businesses; (3) the inability to gain access to or acquire differentiated proprietary assets, technology and/or pharmaceutical development expertise as anticipated by these acquisitions; (4) risks associated with third-party contracts containing consent and/or other contractual provisions that may be triggered by the acquisitions; (5) the success of the research and development efforts of Fertin, OtiTopic and Vectura, including the ability to obtain regulatory approval for new products, and the ability to commercialize or license these new products; (6) any unanticipated safety, quality or efficacy concerns and the impact of identified concerns associated with the products developed by Fertin, OtiTopic and Vectura; and (7) the ability of PMI to retain key personnel of Fertin and Vectura, or hire key talent to work in the Fertin and Vectura businesses due to their affiliation with PMI • PMI is further subject to other risks detailed from time to time in its publicly filed documents, including the Form 10-K for the year ended December 31, 2021. PMI cautions that the foregoing list of important factors is not a complete discussion of all potential risks and uncertainties. PMI does not undertake to update any forward- looking statement that we may make from time to time, except in the normal course of its public disclosure obligations 2 Exhibit 99.3
Investing, Innovating & Delivering Sustainable Growth • Investing behind sustainable growth while delivering superior returns for shareholders •Well on track to become a predominantly smoke-free business •Continuous smoke-free innovation & transformation • Investing in Wellness & Healthcare for further growth beyond 2025 •Delivering high-quality, sustainable organic growth; on track for 2021-23 CAGR targets 3Source: PMI Financials or estimates Source: PMI Financials or estimates. Investments reflect research, product and commercial development, production capacity, scientific substantiation, and studies on adult smoker understanding. See reconciliation schedules in the appendix to this presentation Investing, Transforming & Delivering Sustainable Growth 4 $9.2bn 2021 Smoke-Free Net Revenues >$9bn RRP Investments Since 2008 $36bn 5 Year (2017-21) Total Dividends 5.0% Organic Net Revenues 5 year (2016-2021) CAGR 10.5% Currency-Neutral Adj. Diluted EPS 5 year (2016-2021) CAGR
Smoke-Free Products Core Engine of Sustainable Growth 5 0.2% 2.7% 12.7% 13.8% 18.7% 23.8% 29.1% 2015 2016 2017 2018 2019 2020 2021 2023 2025 ~40% >50% Target Ambition Smoke-Free Net Revenues as % of Total PMI Adjusted Net Revenues Smoke-Free Products (Replacing Cigarettes) • Heated Tobacco Products • Vapor Products • Nicotine pouches • New forms of cigarette replacement alternatives Combustible Cigarettes • Maximizing value while accelerating smoke-free conversion Transitioning Source: PMI Financials or estimates. See reconciliation schedules in the appendix to this presentation 30.7% Q4 2021 Source: PMI Financials or estimates Number of Markets Where RRP NR > 50% Rapidly Transforming to a Majority Smoke-Free Business (As a % of Total Net Revenues) 53% 55% 65% 71% 0% 10% 20% 30% 40% 50% 60% 70% 80% Italy Czech Republic Greece Japan 2018 2019 2020 2021 6 3 4 5 10
Source: PMI Financials or estimates 7 Rapidly Transforming to a Majority Smoke-Free Business (As a % of Total Net Revenues) 33% 37% 59% 0% 10% 20% 30% 40% 50% 60% EU EE EA&A 2018 2019 2020 2021 Number of Markets Where RRP NR > 50% 3 4 5 10 Significant Long-Term Opportunity in New Growth Areas 8 Filling Pipeline to Achieve Initial Milestone of ≥$1 billion in Net Revenues by 2025 on Long-term Growth Trajectory Healthcare • Innovative drug/device combinations • Focus on existing Rx molecules •Unmet patient needs: Cardiovascular, Pain, Neurology, Allergy Wellness • Innovative oral and inhalable consumer health products • Sleep, Energy, Calm and Focus
Growing Evidence & Recognition of RRP Positive Health Impact • Smoke-free products have a positive public health impact • Nicotine, although addictive, is not the main problem: ⎼ Combustion is the primary cause of smoking- related disease⎼ Certain NGOs have propagated confusion on nicotine leading to consumer misunderstanding and instances of misguided regulation • Recognized by FDA and other authorities • The significant(a) reduction in exposure to harmful and potentially harmful chemicals – from switching to heat- not-burn, e-vapor or oral delivery– will result in better public health outcomes • We are working to generate additional clinical and epidemiological data to further demonstrate the health benefits of switching • Long-term epidemiology needed to precisely quantify the benefit but real-world evidence is already emerging 9 (a) Full switching to scientifically substantiated smoke-free products estimated to achieve at least 95% of the exposure reduction from smoking abstinence Real-World Evidence: Japan Study on COPD 10 Note: Model adjusting for age and sex. COPD stands for Chronic Obstructive Pulmonary Disease. Observational time-trend analysis looking at temporal associations and not designed to assess cause and effect. Specific factors associated with changing hospitalization rates over time have not been fully analyzed. Subject to inherent limitations of ecological analysis. Source: MDV Diagnosis Procedure Combination Data. https://en.mdv.co.jp/ (January 13, 2021) COPD Exacerbation Hospitalization Rate Over Time MDV Hospital Records $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Pre-HTP Post-HTP Prediction from Pre-HTP data (50)% (a) 1 2 3 4 5 C O P D E xa ce rb at io n R at e (p er 1 0 ,0 0 0 H o sp it al iz at io n s) National Launch
3.5% 4.0% 4.5% 5.0% 5.5% 2013 2014 2015 2016 2017 2018 2019 2020 IH D H o sp it al iz at io n R at e Real-World Evidence: Japan Study on IHD Ischemic Heart Disease Hospitalization Rate Over Time JMDC All Hospital Records Note: HTP stands for Heated Tobacco Products. Model: adjusting for age and sex – other confounding factors that could influence hospitalization rates have not been fully analyzed Observational time-trend analysis looking at temporal associations and not designed to assess cause and effect. Specific factors associated with changing hospitalization rates over time have not been fully analyzed. Subject to inherent limitations of ecological analysis Source: JMDC all event data (Data available on www.jmdc.co.jp/en) National Launch 11 Pre-HTP Post-HTP Prediction from Pre-HTP data Source: Choi S, et al. Combined Associations of Changes in Noncombustible Nicotine or Tobacco Product (NNTP) and Combustible Cigarette (CC) Use Habits With Subsequent Short-Term Cardiovascular Disease Risk Among South Korean Men. A Nationwide Cohort Study. Circulation. 2021. Observation period 2018-Dec 2019 Source: Data available on https://doi.org/10.1161/CIRCULATIONAHA.121.054967 Switching to Smoke-free Products is Associated with Lower Cardiovascular Disease Risk than Continuing to Smoke 12
Recent (<5 years) CC quitter with NNTP use Long-term (≥5 years) CC quitter with NNTP use 0.77 (0.59-1.02) 0.77 (0.66-0.92) Continual CC only smokers as ref. Source: Choi S, et al. Combined Associations of Changes in Noncombustible Nicotine or Tobacco Product (NNTP) and Combustible Cigarette (CC) Use Habits With Subsequent Short-Term Cardiovascular Disease Risk Among South Korean Men. A Nationwide Cohort Study. Circulation. 2021. Observation period 2018-Dec 2019 Source: Data available on https://doi.org/10.1161/CIRCULATIONAHA.121.054967 • Independent study using epidemiological government data • Switching to smoke-free products associated with 23% lower risk among both recent and long-term switchers • Long-term cessation associated with 37% lower risk of cardiovascular disease • Over 95% of the Korean smoke-free market is heated tobacco products Switching to Smoke-Free Products is Associated with Lower Cardiovascular Disease Risk than Continuing to Smoke 13 Smoke-Free Alternatives to Cigarettes Have Strong Sustainable Growth • Innovative products provide great experiences • With fast-progressing innovations there are increasingly safer ways to deliver nicotine while preserving perceived consumer benefits • Total nicotine consumption is close to stable in volume, and growing in value • Our strong innovation-driven leadership in smoke-free allows us to gain volume and value share 14
Smoke-Free Success Drives Attractive Growth Outlook (a) Includes cigarettes, Other Tobacco Products (OTP), heat-not-burn, e-vapor and nicotine pouches in stick equivalents (b) Includes combustible cigarettes and OTP in stick equivalents; OTP includes fine cut tobacco, cigars and cigarillos (c) Includes heat-not-burn, e-vapor and nicotine pouches (d) OTP includes cigars, cigarillos, pipe tobacco and fine cut (e) Modern oral includes snus and nicotine pouches Source: PMI Financials or estimates. International excl. China and the U.S. NRT represents Smoking cessation products 2018-20 2021 2022-25 Total Industry Volume Growth CAGR(a) ~(3)% ~+2% ~(1)% Total Industry by category 2019 2021 2025 Combustible(b) 95% 93% 85% Total Smoke-Free(c) 5% 7% 15% Of which Heat-not-Burn 2.5% 4% 10% 2021 Retail Value Anticipated retail value CAGRs through 2025 : • Total industry: 4% • Heat-not-burn: 25%+ • E-vapor: 10-15% • Nicotine pouches: 30-40% 15 92% 5.5% 1.7% Cigarettes and OTP(d) Heat-not-Burn E-Vapor Modern Oral(e) (0.3%) Total Retail Value ~$470 billion NRT (0.3%) (a) Markets included based on 2021 IMS share: Cyprus, Czech Republic, Greece, Hungary, Italy, Japan, Lithuania, Portugal, Slovak Republic, Ukraine Note: Estimated IMS volume excluding China and the U.S. Source: PMI Financials or estimates Smoke-Free Products Replacing Combustibles, Cigarette Declines Accelerating 16 International Cigarette Industry Volume Trend (in %) -2.5% -2.3% -2.4% -3.6% -2.8% -2.6% -6.6% 1.5% -2.6% -0.9% -2.2% -8.5% -8.0% -7.5% -11.5% -7.3% 2014 2015 2016 2017 2018 2019 2020 2021 Total Cigarette Industry Top 10 IQOS Markets by HTU SoM(a)
Higher Share in a Growing Category Leads to Sustainable Growth • Internal innovation, supplemented by partnerships • First mover advantage & highest brand equity • Existing user base and commercial engine to continue acquisition • Natural share gains from leading position in smoke-free products 17 Note: Smoke-free products include e-vapor, modern oral and heated tobacco products. Excluding China and the U.S. Acquisition means switching adult smokers Source: PMI Financials or estimates 2021 PMI International Share of Retail Value Combustibles Smoke-Free Products 28% 59% Note: Description and dates are illustrative Accelerated Pace of Innovation Key to Smoke-Free Growth 1950 2010 2015 2021 Combustible HnB E-Vapor Oral Filter & Flip-Top Box Capsule Internal Blade External Coil Internal Pin External Coil Induction Internal Induction Format Heating Technology Cigalike Open Tank Closed pods Disposables Coil & wick MeshCeramic Original Snus White Snus Nicotine Pouches 18
PMI Innovation Pipeline & Commercial Engine Confers Leadership 19 Smoke-Free Retail Value (in $bn, excl. US & China) 10 13 16 21 2018 2019 2020 2021 Source: PMI Financials or estimates PMI Competitor 1 Competitor 2 Competitor 3 Significant 2022 Expansion of Multi-Category Portfolio to Drive Achievement of 50% Smoke-Free Net Revenues by 2025 20 Heat-not-Burn E-vapor Nicotine Pouches
Expanding IQOS Growth Base in Low & Middle-Income Markets 21 Size of Premium Cigarette Segment in LMI Markets in 2021 (in %) 14 19 28 29 44 47 50 Pakistan Argentina Turkey Brazil Philippines Indonesia Mexico Total Cigarette Industry (in billion sticks) 54 36 124 59 55 296 32 70% of total combustible industry in LMI markets (a) Launch date Source: PMI Financials or estimates 1.2% 2.0% 2.6% 3.0% 3.6% Urban Cairo Sept’21 Oct’21 Nov’21 Dec’21Aug’21(a) PMI HTU Offtake Share New HnB technology planned for price-conscious consumers Powerful Financial Model of Investment, Innovation & Growth • We target stable to growing total PMI volume stability over the coming years as innovation-driven HTU growth offsets cigarette declines • Positive revenue and margin impact from shift to smoke-free products • Pricing in both categories, targeting cigarette pricing which at least balances volume declines 22 Net Revenue per Unit(a) (in $ per '000 eq. units) 36.1 38.9 41.6 43.8 2018 2019 2020 2021 35 CAGR +6.7% (a) Reflects total PMI adjusted net revenues divided by total PMI cigarette and HTU shipment volume, at 2021 exchange rates. Excludes the ‘Other’ category Source: PMI Financials or estimates
Device & Consumables Model Requires Loyalty to Drive Returns • Despite significantly higher excises than e-vapor, heat- not-burn remains the most profitable category due to its high degree of loyalty and full switching from cigarettes • Loyalty derives from consumer needs: taste, ritual and satisfaction • Growing demand for convenience, served by ILUMA in heat-not-burn, nicotine pouches and disposable e-vapor • Closed-system e-vapor products have higher gross margins than cigarettes, but low conversion and loyalty exacerbated by device discounting and higher trade margins • Nicotine pouches exclusive use generates gross profit per user between closed pod e-vapor and heat-not-burn 23Source: PMI Financials or estimates Source: PMI Financials or estimates More Than $1bn Growth in Positive Profit Contribution From IQOS in 2021 24 2021 vs. 2020 Growth (in $bn) 2.3 0.5 RRP Net Revenue Total PMI Commercial, R&D
Investing in Wellness & Healthcare for Long-Term Growth • Natural long-term evolution into a broader lifestyle, consumer wellness and healthcare company • Developing best-in-class differentiated products meeting high unmet patient and consumer needs • Vectura & Fertin technology platforms at forefront of innovation • Investing in platforms for long-term growth:⎼ Intend to invest broadly stable $150-200m per annum over next 3 years⎼ Acceleration of revenue targeted from 2024⎼ Pursuing opportunities with strong returns and cash generation⎼ Focus on organic development 25Source: PMI Financials or estimates Innovating in Large & Growing Markets 26 Addressable Market (Areas of Interest) 2025 CAGR (2021-2030) Example Areas of Opportunity Product Focus Areas Wellness o/w Cannabinoids $33bn $4bn 8% • Sleep Aid • Energy & Focus • Calm & Anxiety • Botanicals • CBD Healthcare o/w Cannabinoids $56bn $24bn 15% • Acute and Chronic Conditions • Pain Management • Better Efficacy and Safety • Myocardial infarction: Asprihale • Neurology, e.g. Migraine • Pain Management: Medical Cannabis • Allergy • Smoking Cessation / Cigarette Replacement Alternatives Total $89bn 11% Note: o/w refers to ‘Of Which’ Source: PMI Financials or estimates
Note: Rx stands for prescription Longer Business Cycle, Attractive Opportunities 27 Consumer OTC (inhaled/other innovative delivery methods) Rx (Inhaled Rx) Time and Complexity Rx timeline Open Innovation Early Development (2y) Discovery Late Development and Commercial Readiness (3-4y) Commercialization Drug Device prototyping Translational Medicine (Phase 1 and 2a clinical) Phase 2b/3 clinical Life Cycle mgmt. Med. Affairs & Safety Prepare Market Entry Phase 4 Life Cycle Mgmt. Med. Affairs & Safety Marketing & Sales Sustainability: Identifying Strategic Priorities • New sustainability materiality Assessment • Inward and outward impacts considered (double materiality) • Product health impact remains our core priority 28 Sustainability Materiality Matrix
Reliable Measurement of Sustainability Progress Drives Best-in-Class Performance • Updated sustainability strategy framework following materiality • New robust and reliable sustainability index to drive performance • Index used to strengthen link to executive compensation (30% of PSUs) 29Note: PSU stands for Performance Share Unit • Structured measurement and reporting of progress toward our goals • Moving beyond qualitative assessment of performance • Disclosing reliable and comparable data Transparent, Robust ESG Reporting 30
Investing, Innovating & Delivering Sustainable Growth • Well on track to become a predominantly smoke- free business by 2025 • Confident in 2021-23 organic CAGR targets of >5% Net Revenues and >9% Adjusted Diluted EPS • Delivering high-quality, sustainable organic growth and cash flow to reward shareholders • Transforming into a broader consumer wellness, lifestyle and healthcare business • Continuous investment and innovation in smoke- free products • Investing in Wellness & Healthcare for further growth beyond 2025 • Leading on sustainability to maximize positive impact to society 31 Source: PMI Financials or estimates Delivering a Smoke-Free Future CAGNY Conference February 23, 2022 iOS Download Android DownloadHave you downloaded the PMI Investor Relations App? The free IR App is available to download at the Apple App Store for iOS devices and at Google Play for Android mobile devices Or go to: www.pmi.com/irapp
33 Glossary of Key Terms and Definitions, and Reconciliation of Non-GAAP Measures Glossary: General Terms • "PMI" refers to Philip Morris International Inc. and its subsidiaries. Trademarks and service marks that are the registered property of, or licensed by, the subsidiaries of PMI, are italicized • Until March 28, 2008, PMI was a wholly owned subsidiary of Altria Group, Inc. ("Altria"). Since that time the company has been independent and is listed on the New York Stock Exchange (ticker symbol "PM") • Comparisons are made to the same prior-year period unless otherwise stated • Unless otherwise stated, references to total industry, total market, PMI shipment volume and PMI market share performance reflect cigarettes and heated tobacco units • References to total international market, defined as worldwide cigarette and heated tobacco unit volume excluding the U.S., total industry, total market and market shares are PMI estimates for tax-paid products based on the latest available data from a number of internal and external sources and may, in defined instances, exclude the People's Republic of China and/or PMI's duty free business • 2020 and 2021 estimates for total industry volume and market share in certain geographies reflect limitations on the availability and accuracy of industry data during pandemic-related restrictions • "OTP" is defined as "other tobacco products," primarily roll-your-own and make-your-own cigarettes, pipe tobacco, cigars and cigarillos, and does not include reduced-risk products • "Combustible products" is the term PMI uses to refer to cigarettes and OTP, combined • In-market sales, or "IMS," is defined as sales to the retail channel, depending on the market and distribution model • "Total shipment volume" is defined as the combined total of cigarette shipment volume and heated tobacco unit shipment volume • Following the acquisitions of Fertin Pharma A/S, OtiTopic, Inc. and Vectura Group plc., PMI added the "Other" category in the third quarter of 2021. Business operations for the Other category are evaluated separately from the geographical operating segments • "RBH" refers to PMI’s Canadian subsidiary, Rothmans, Benson & Hedges Inc. • The Companies’ Creditors Arrangement Act (CCAA) is a Canadian federal law that permits a Canadian business to restructure its affairs while carrying on its business in the ordinary course 34
Glossary: General Terms (cont.) • "EU" is defined as the European Union Region • "EE" is defined as the Eastern Europe Region • "ME&A" is defined as the Middle East & Africa Region and includes PMI's duty free business • "S&SA" is defined as the South & Southeast Asia Region • "EA&A" is defined as the East Asia & Australia Region • “AMCS” is defined as the Americas Region. It refers to the former Latin America & Canada segment, which was renamed as the Americas segment as of the third quarter of 2021. References to "Americas" may, in defined instances, exclude the U.S. • Following the deconsolidation of PMI's Canadian subsidiary, Rothmans, Benson & Hedges, Inc. (RBH), PMI will continue to report the volume of brands sold by RBH for which other PMI subsidiaries are the trademark owner. These include HEETS, Next, Philip Morris and Rooftop • From time to time, PMI’s shipment volumes are subject to the impact of distributor inventory movements, and estimated total industry/market volumes are subject to the impact of inventory movements in various trade channels that include estimated trade inventory movements of PMI’s competitors arising from market-specific factors that significantly distort reported volume disclosures. Such factors may include changes to the manufacturing supply chain, shipment methods, consumer demand, timing of excise tax increases or other influences that may affect the timing of sales to customers. In such instances, in addition to reviewing PMI shipment volumes and certain estimated total industry/market volumes on a reported basis, management reviews these measures on an adjusted basis that excludes the impact of distributor and/or estimated trade inventory movements. Management also believes that disclosing PMI shipment volumes and estimated total industry/market volumes in such circumstances on a basis that excludes the impact of distributor and/or estimated trade inventory movements, such as on an IMS basis, improves the comparability of performance and trends for these measures over different reporting periods • "ESG" stands for environmental, social, and governance • "Illicit trade" refers to domestic non-tax paid products • "SoM" stands for share of market 35 Glossary: Financial Terms • Net revenues related to combustible products refer to the operating revenues generated from the sale of these products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes. PMI recognizes revenue when control is transferred to the customer, typically either upon shipment or delivery of goods • Net revenues related to RRPs represent the sale of heated tobacco units, heat-not-burn devices and related accessories, and other nicotine- containing products, primarily e-vapor and oral nicotine products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes. PMI recognizes revenue when control is transferred to the customer, typically either upon shipment or delivery of goods • Net revenues in the Other category primarily consist of operating revenues generated from the sale of inhaled therapeutics, and oral and intra-oral delivery systems, resulting from the third quarter 2021 acquisitions of Fertin Pharma A/S, OtiTopic, Inc. And Vectura Group plc. • Adjusted net revenues exclude the impact related to the Saudi Arabia customs assessments • "SG&A" stands for selling, general & administrative • "Adjusted Operating Income (OI) Margin" is calculated as adjusted OI, divided by adjusted net revenues • "Net debt" is defined as total debt, less cash and cash equivalents • Growth rates presented on an organic basis for consolidated financial results reflect currency-neutral underlying results • Management reviews net revenues, operating income, operating income margin, operating cash flow and earnings per share, or "EPS," on an adjusted basis, which may exclude the impact of currency and other items such as acquisitions, asset impairment and exit costs, tax items and other special items. Currency-neutral and organic growth rates reflect the way management views underlying performance for these measures. PMI believes that such measures provide useful insight into underlying business trends and results. Management reviews these measures because they exclude changes in currency exchange rates and other factors that may distort underlying business trends, thereby improving the comparability of PMI’s business performance between reporting periods. Furthermore, PMI uses several of these measures in its management compensation program to promote internal fairness and a disciplined assessment of performance against company targets. PMI discloses these measures to enable investors to view the business through the eyes of management • "Fair value adjustment for equity security investments" reflects the adjustment resulting from share price movements in passive investments for publicly traded entities that are not controlled or influenced by PMI. Under U.S. GAAP, such adjustments are required, since January 1, 2018, to be reflected directly in the income statement 36
Glossary: Reduced-Risk Products • Reduced-risk products (“RRPs”) is the term PMI uses to refer to products that present, are likely to present, or have the potential to present less risk of harm to smokers who switch to these products versus continuing smoking. PMI has a range of RRPs in various stages of development, scientific assessment and commercialization. PMI's RRPs are smoke-free products that contain and/or generate far lower quantities of harmful and potentially harmful constituents than found in cigarette smoke • "Aerosol" refers to a gaseous suspension of fine solid particles and/or liquid droplets • "Combustion" is the process of burning a substance in oxygen, producing heat and often light • "Smoke" is a visible suspension of solid particles, liquid droplets and gases in air, emitted when a material burns • "Heated tobacco units," or "HTUs," is the term PMI uses to refer to heated tobacco consumables, which for PMI include the company's HEETS, HEETS Creations, HEETS Dimensions, HEETS Marlboro and HEETS FROM MARLBORO (defined collectively as HEETS), Marlboro Dimensions, Marlboro HeatSticks, Parliament HeatSticks and Terea, as well as the KT&G-licensed brand, Fiit and Miix (outside of South Korea) • IQOS heat-not-burn devices are precisely controlled heating devices into which a specially designed and proprietary tobacco units are inserted and heated to generate an aerosol • "PMI heat-not-burn products" include licensed KT&G heat-not-burn products • "PMI HTUs" include licensed KT&G HTUs • HTU "offtake volume" represents the estimated retail offtake of HTUs based on a selection of sales channels that vary by market, but notably include retail points of sale and e-commerce platforms • HTU "offtake share" represents the estimated retail offtake volume of HTUs divided by the sum of estimated total offtake volume for cigarettes and HTUs • Market share for HTUs is defined as the total sales volume for HTUs as a percentage of the total estimated sales volume for cigarettes and HTUs 37 Glossary: Reduced-Risk Products (cont.) • "Total IQOS users" is defined as the estimated number of Legal Age (minimum 18 years) users of PMI heat-not-burn products for which PMI HTUs represented at least 5% of their daily tobacco consumption over the past seven days The estimated number of adults who have "switched to IQOS and stopped smoking" reflects:⎼ for markets where there are no heat-not-burn products other than PMI heat-not-burn products: daily individual consumption of PMI HTUs represents the totality of their daily tobacco consumption in the past seven days⎼ for markets where PMI heat-not-burn products are among other heat-not-burn products: daily individual consumption of HTUs represents the totality of their daily tobacco consumption in the past seven days, of which at least 70% is PMI HTUs. Note: The above IQOS user metrics reflect PMI estimates based on consumer claims and sample-based statistical assessments, the accuracy and reliability of which may vary based on individual market maturity and availability of information. The average margin of error for IQOS users in key volume markets is +/-5% at a 95% Confidence Interval As of December 2020, PMI heat-not-burn products and HTUs include licensed KT&G heat-not-burn products and HTUs, respectively • "FDA" stands for the U.S. Food & Drug Administration • "MRTP" stands for Modified Risk Tobacco Product, the term used by the U.S. FDA to refer to RRPs • "MRTP application" stands for Modified Risk Tobacco Product application under section 911 of the FD&C Act • "PMTA" stands for Premarket Tobacco Application under section 910 of the FD&C Act • "Acquisition" refers to our efforts to switch LAS from smoking cigarettes to RRPs or to switch LAU from competing smoke-free products to PMI’s RRPs • "Retention" refers to our efforts to deter LAU from going back to smoking cigarettes or from choosing a competing smoke-free product instead of a PMI RRP 38
Glossary: IQOS in the United States • On April 30, 2019, the U.S. Food and Drug Administration (FDA) announced that the marketing of a version of PMI's Platform 1 product, namely, IQOS 2.4, together with its heated tobacco units (the term PMI uses to refer to heated tobacco consumables), is appropriate for the protection of public health and authorized it for sale in the U.S. The FDA’s decision followed its comprehensive assessment of PMI’s premarket tobacco product applications (PMTAs) submitted to the Agency in 2017 • In the third quarter of 2019, PMI brought IQOS 2.4 and three variants of its heated tobacco units to the U.S. through its license with Altria Group, Inc., whose subsidiary, Philip Morris USA Inc., is responsible for marketing the product and complying with the provisions set forth in the FDA's marketing orders • On July 7, 2020, the FDA authorized the marketing of a version of PMI's Platform 1 product, namely, IQOS 2.4, together with its heated tobacco units, as a Modified Risk Tobacco Product (MRTP). In doing so, the agency found that an IQOS exposure modification order is appropriate to promote the public health. The decision followed a review of the extensive scientific evidence package PMI submitted to the FDA in December 2016 to support its MRTP applications • On December 7, 2020, the FDA confirmed that the marketing of a version of PMI's Platform 1 product, namely, IQOS 3, is appropriate for the protection of public health and authorized it for sale in the U.S. The FDA’s decision followed an assessment of a PMI's PMTA filed with the agency in March 2020 • On November 29, 2021, an importation ban and cease-and-desist orders imposed by the U.S. International Trade Commission (ITC) relating to IQOS Platform 1 products (including consumables and infringing components) went into effect. As a result, IQOS is not currently available for sale in the U.S. PMI has appealed the patent and statutory issues related to the ITC's Final Determination, and also has contingency plans underway, including domestic production. PMI believes it is unlikely that IQOS will be available in the U.S. in 2022. For more details on the ITC case and related legal matters, please refer to PMI's Form 10-K for 2021, which the company plans to file with the SEC in the coming days. Note: The ITC decision has no bearing outside the U.S.; competitor lawsuits based on the same patent families have repeatedly and universally failed in European courts and the European Patent Office • Shipment volume of heated tobacco units to the U.S. is included in the heated tobacco unit shipment volume of the Americas segment. Revenues from shipments of Platform 1 devices, heated tobacco units and accessories to Altria Group, Inc. for sale under license in the U.S. are included in Net Revenues of the Americas 39 PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures 40 Adjustments of Net Revenues for the Impact of Special Items, Currency and Acquisitions ($ in millions) / (Unaudited) (1) Represents the impact attributable to RBH from March 22, 2018 through end of period date (2) Represents the impact attributable to RBH from January 1, 2019 through March 21, 2019 (3) Pro forma (4) On an organic basis Years Ended December 31, Years Ended December 31, Years Ended December 31, Years Ended December 31, Years Ended December 31, 2021 2020 % Change 2020 2019 % Change 2019 2018 % Change 2018 2017 % Change 2017 2016 % Change Net Revenues $ 31,405 $ 28,694 $ 28,694 $ 29,805 $ 29,805 $ 29,625 $ 29,625 $ 28,748 $ 28,748 $ 26,685 Net Revenues attributable to RBH - - - (181) - (742) - - - - Saudi Arabia Customs Assessments (246) - - - - - - - - - Adj. Net Revenues $ 31,651 28,694 10.3% $ 28,694 29,624 (3.1)% $ 29,805 28,883 3.2% $ 29,625 28,748 3.1% $ 28,748 26,685 7.7% Currency 678 - (470) (937) - (103) - (437) - Adj. Net Revenues excluding Currency $ 30,973 28,694 7.9% $ 29,164 29,624 (1.6)% $ 30,742 28,883 6.4% $ 29,728 28,748 3.4% $ 29,185 26,685 9.4% Acquisitions 109 - - - - - - - - - Adj. Net Revenues, ex. Currency & Acqusitions $ 30,864 28,694 7.6% $ 29,164 29,624 (1.6)% $ 30,742 28,883 6.4% $ 29,728 28,748 3.4% $ 29,185 26,685 9.4% (4) (2) (3) (3) (1) (4)(4)(4)(4)
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries Reconciliation of Non-GAAP Measures 41 Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS, excluding Currency (Unaudited) (1) Represents the impact attributable to RBH from January 1, 2019 through March 21, 2019 (2) Represents the impact attributable to RBH from March 22, 2018 through end of period date Years Ended December 31, Years Ended December 31, Years Ended December 31, Years Ended December 31, Years Ended December 31, 2021 2020 % Change 2020 2019 % Change 2019 2018 % Change 2018 2017 % Change 2017 2016 % Change Reported Diluted EPS $ 5.83 $ 5.16 13.0% $ 5.16 $ 4.61 11.9% $ 4.61 $ 5.08 (9.3)% $ 5.08 $ 3.88 30.9% $ 3.88 $ 4.48 (13.4)% Saudi Arabia customs assessments 0.14 - - - - - - - - - Asset impairment and exit costs 0.12 0.08 0.08 0.23 0.23 - - - - - Asset acquisition cost 0.03 - - - - - - - - - Equity investee ownership dilution (0.04) - - - - - - - - - Canadian tobacco litigation-related expense - - - 0.09 0.09 - - - - - Loss on deconsolidation of RBH - - - 0.12 0.12 - - - - - Russia excise and VAT audit charge - - - 0.20 0.20 - - - - - Brazil indirect tax credit - (0.05) (0.05) - - - - - - - Fair value adjustment for equity security investments - 0.04 0.04 (0.02) (0.02) - - - - - Tax items - (0.06) (0.06) (0.04) (0.04) 0.02 0.02 0.84 0.84 - Adjusted Diluted EPS $ 6.08 $ 5.17 17.6% $ 5.17 $ 5.19 (0.4)% $ 5.19 $ 5.10 1.8% $ 5.10 $ 4.72 8.1% $ 4.72 $ 4.48 5.4% Currency 0.12 (0.32) (0.13) (0.11) (0.21) Adjusted Diluted EPS, excluding Currency $ 5.96 $ 5.17 15.3% $ 5.49 $ 5.19 5.8% $ 5.32 $ 5.10 4.3% $ 5.21 $ 4.72 10.4% $ 4.93 $ 4.48 10.0% Net earnings attributable to RBH (0.06) (0.26) Pro Forma Adjusted Diluted EPS $ 5.13 7.0% $ 4.84 9.9% (1) (2) Delivering a Smoke-Free Future CAGNY Conference February 23, 2022