Professional Documents
Culture Documents
DECEMBER 2, 2010
Katsy Douangvichit
Nate Evett
Rajani Meka
Tom Wang
http://stockwatch.in/files/Philip-Morris.jpg
AGENDA
Company Overview
Industry Overview
Recent Financial Results
Competitors
SWOT Analysis
Porter’s Five Forces
Management Assessment
Financial Valuation
Recommendation
COMPANY OVERVIEW
Headquartered in New York, leading international tobacco company that
sells products in over 160 countries
Spinoff from Altria on March 31st, 2008
Operations Center located in Lausanne, Switzerland
60 factories worldwide
Products include cigarettes, loose tobacco, chewing tobacco, and cigars and
cigarillos.
The top player in global tobacco market with 15.4% of the market share
outside of the U.S. as of 2009
2009 recorded sales: $25 billion
Employs over 77,000 individuals
NYSE ticker symbol: PM
Currently trading at $57.70.
http://www.pmi.com/eng/about_us/company_overview/pages/company_overview.aspx
BRANDS
PM has the industry’s strongest and most diverse portfolio consisting of blends
and styles across 150 districts and more than 1,900 variants
7 of the world’s top fifteen brands belong to PM
•World’s # 1 cigarette brand since 1972 and one of the most
powerful trademarks amongst all consumer products
• In ’09, its volume outside U.S exceeded 302 billion, which is
larger than the sum of top four global brands
• L & M is the world’s fourth largest brand
http://www.tobaccoworld.org/arcaras-state-tobacco-taxing-policies/
RECENT STOCK PERFORMANCE
http://finance.yahoo.com/echarts?s=PM+Interactive#chart2:symbol=pm;range=ytd;compare=^dji+^gspc;indicator=volume;charttype=line;crosshair=o
n;ohlcvalues=0;logscale=on;source=undefined
WHY PM?
Philip Morris International falls under the consumer staples sector and
tobacco industry which helps in diversifying our current portfolio
PM is the leader of global tobacco industry
Recently listed on NYSE
INDUSTRY OVERVIEW
Global Tobacco market is highly concentrated at the top end with top three players
accounting for 44.4% share of total value
Philip Morris International, British American Tobacco, Japan Tobacco
The tobacco industry consists of retail sale of cigarettes, loose tobacco, chewing
tobacco, cigars and cigarillos.
http://library.marketlineinfo.com.proxy2.library.uiuc.edu/library/DisplayContent.aspx?Ntt=global+tobacco+industry&Ntx=mode%2bmatchall&N=21
0&Nty=1&D=global+tobacco+industry&Ntk=All
GLOBAL MARKET SEGMENTATION
http://library.marketlineinfo.com.proxy2.library.uiuc.edu/library/DisplayContent.aspx?Ntt=global+tobacco+industry&Ntx=mode%2bmatchall&N=21
0&Nty=1&D=global+tobacco+industry&Ntk=All
INDUSTRY PERFORMANCE
The global tobacco industry generated $429.3 billion in ‘09
The global tobacco industry grew at a steady rate between 2005 and 2009 with a
CAGR of 3.1% and is expected to follow a similar trend in the forthcoming 5 years
Source:
http://library.marketlineinfo.com.proxy2.library.uiuc.edu/library/DisplayContent.aspx?Ntt=global+tobacco+industry&Ntx=mode%2bmatchall&N=21
0&Nty=1&D=global+tobacco+industry&Ntk=All
FACTORS IMPACTING THE INDUSTRY
Government Regulation
Excise Taxes
Legislative compliance requirements
Advertising bans
Social and Economic trends
Health consciousness
Percentage of smokers
Anti-smoking campaigns
World price of tobacco
The major economic factor that hampers growth is taxes
Available resources
Tobacco can be grown on anywhere because of its non-specific growing conditions
Technology
Technology plays a major role in innovation to create less riskier products
Inventory systems
Shipping Options
GOVERNMENT REGULATION: IMPACT OF TAXES
Source: http://www.who.int/tobacco/statistics/tobacco_atlas/en/
SOCIAL AND ECONOMIC TRENDS
Percentage of smokers is declining in USA and so is the demand for wholesalers
Adverse public attitudes towards smoking due to more awareness
Source: http://www.ibisworld.com.proxy2.library.uiuc.edu/industryus/default.aspx?indid=293
AVAILABILITY OF RESOURCES
Source: http://www.who.int/tobacco/statistics/tobacco_atlas/en/
GLOBAL CIGARETTE CONSUMPTION
The total number of smokers worldwide should increase due to the increase in the world’s
population by 2030, however due to better awareness and strict regulations the number is
expected to stay steady
Source: http://www.tobaccoatlas.org/consumption.html?iss=07&country=0
COMPETITORS
Philip Morris International
Market Share
15.40%
British American Tobacco
13.00%
Japan Tobacco
International
Imperial Tobacco
http://www.bat.com/group/sites/uk__3mnfen.nsf/vwPagesWebLive/DO6Z2EUD?opendocument&SKN=1
COMPETITORS
British American Tobacco
Known for their commitment to purchase tobacco leaves from environmentally
responsible and sustainable sources
Employs over 60,000 people worldwide with over 50 factories
Kent
Lucky Strike
Winston
Launched in 1954 and was one of the world’s first filter tipped
cigarettes
No 2. top-selling brand in the world and it is distributed in over 80
countries
Camel
Launched in 1913
Sold in over 100 countries and is the 5th biggest global tobacco brand
http://www.jti.com/brands/overview
http://www.jti.com/About/facts
http://www.jti.com/About/about_history
COMPETITORS
Imperial Tobacco
Business strategy also revolves around making acquisitions
Brands
Davidoff
Gauloises Blondes
http://www.imperial-tobacco.com/index.asp?page=16
SWOT ANALYSIS
Strengths
Strong financial budget
Weaknesses
Tobacco produces considerable health risks to users
PMI is so big that suppliers would lose a lot of business if PMI ended
their relationship
Smokeless Tobacco
http://www.pmi.com/eng/our_products/pages/our_brands.aspx
RECENT FINANCIAL RESULTS
0.64
$0.65
$0.50
$0.45
0.46
$0.40
$0.35
$0.30
$0.25
The estimated 2010-2016 rate of return was chosen based on our assumption that moderate
growth in those years would be similar to the time period from Jan. 2009 to Sep 2010.
DCF VALUATION
SENSITIVITY ANALYSIS
RATIO VALUATION
RECOMMENDATION
Reasons that Philip Morris International is an attractive investment
The company continues to expand into emerging markets
Constant dividend payments
However, we recommend that this company be placed on watch list for the following
reasons:
PM went public in ’08 (during deep global economic crisis) and is too short a period to
predict how the company would perform in future