philip morris(NYSE: PM) 4Q20 실적과 컨퍼런스콜

 

우선 서두에서 밝히자면 난 PM의 주주는 아니라..

 

엄청 대충보았다.

 

MO라고해서 진득하게 보진않았지만.. 정말 훑어보는 수준으로봄

 

근데 사실 별다를게 없는 컨퍼런스콜이라고 생각이되고 여전히 아이코스를 필두로한 PMI의 전략의 방향성은

 

크게 바뀌지 않았다는 사실이다.

 

 

 

담배회사들이 드라마틱한 실적을 발표할리 만무하고

 

눈에띄는 숫자는 마진율인데 애널리스트도 그 부분을 콕 집어서 물어본다.

 

 

 

 

 

제조업 마진이 맞습니까 휴먼?

 

 

 

 

 

HTU제품들이 전통 연초담배들의 볼륨의 하락을 막는 것에는 무리가 있어보인다.

 

 

 

 

 

인도네시아.. KT&G도 열심히 파보고있는 시장인데, 여긴 이미 PMI가 꽉 잡고있다.

 

 

 

 

 

아이코스 유저에대한 것도 사실 난 좀 회의적인게

 

기존 연초 유저들이 스윗칭 하는 부분이 크지않나?

 

뭔가 새로운 시장을 연 느낌보다는 기기교체로 마진만 챙기는 일을 하는 느낌이 든다.

 

 

 

 

 

여러 슬라이드들이 있었지만 EU랑 Japan만 가져와봤는데 성장률도 그렇게 드라마틱하진 않다.

 

하루아침에 사람들이 모두 연초를 끊고 아이코스나 릴을 피우지 않는다는 것이다.

 

이번 실적발표때는 릴솔리드나 릴하이브리드 소개는없었다...(아쉽)

 

 

 

 

다음은 컨퍼런스콜 내용이다. Q&A 내용만 가져왔다.

 

슬라이드와 자세한 내용은 

 

https://www.pmi.com/investor-relations/overview/event-details?EventId=23076

Event Details

 

여기 들어가서 스크립트를 보면 알 수 있다.

 

 

 

 

Company Participants

Nicholas Rolli - VP, IR and Financial Communications

Emmanuel Babeau - CFO

Jacek Olczak - COO

Andre Calantzopoulos - Global CEO & Director

 

Conference Call Participants

Bonnie Herzog - Goldman Sachs Group

Michael Lavery - Piper Sandler & Co.

Vivien Azer - Cowen and Company

Gaurav Jain - Barclays Bank

Adam Spielman - Citigroup

Robert Rampton - UBS Investment Bank

 

 

Question-and-Answer Session

Operator

[Operator Instructions]. Our first question will come from the line of Bonnie Herzog with Goldman Sachs.

 

Bonnie Herzog

And congratulations, Andre and Jacek. I guess my first question today would be on margins. And I guess, Emmanuel, I was hoping you could talk a little bit more about your expectations around margins, I guess, in terms of any favorable fixed cost absorption you expect as you amortize the investment behind IQOS over this increasingly larger accelerating volume base.

And then as I'm thinking about that, in the context of your variable costs going lower as you touched upon thinking about the progress you've made with digital, so could you just talk about that and how big of an impact this could be or big of an opportunity this could be in the future?

 

Emmanuel Babeau

Sure, Bonnie. Happy to do that. It's going to be only a teaser versus what we're going to see next week. So bear with us, and we'll elaborate with much more detail. But I can certainly anticipate a few headlines on what we'll share next week.

I think what is obvious in our number for 2020 is the fact that, beyond the great performance of IQOS, we have also used efficiency on cost as a powerful lever to generate performance. That's really showing up very clearly in our numbers. So we are delivering in 2 years, instead of 3 years, the overall at least $1 billion savings. And what is good is that we are working on cost efficiency on several levels, and many of them, of course, are related to IQOS, but not exclusively to IQOS for some of them.

If you look at the gross margin level, it's quite obvious that we are being very successful in generating manufacturing productivity, and that's a great driver for further margin improvement. And here, we are working globally across the portfolio, I would say, on margin improvement. So it's not just on IQOS, even if probably on IQOS, because that's a business that doesn't have the same maturity, we have more runway, if you want, to improve the productivity. And we are certainly making extremely good inroad in that respect, but we are also generating manufacturing productivity on CC.

And then on our SG&A, I think you could identify 2 drivers on cost efficiency. One, I would say it's probably something you're going to find in many companies today. We are working to be a more efficient and agile company. So we work on being more digitized, we work on simplifying the way we work, we automate, we standardize, and that is allowing us not to be cost cutter, but just to take cost to be a better company and deliver overall higher performance.

And then you have elements that are indeed connected with our commercial performance and not only to IQOS, but certainly mainly to IQOS, and you have 2 elements. One is all the investment that we made in the past, and that is a great platform on IQOS. And I'm not saying that the investment is over. We're going to keep investing. But of course, we have now an investment that we amortize over a fast-growing base. And we are not growing the level of investment at the speed of the growth of the IQOS business.

And then there is this great work that we are doing. Thanks to digital and thanks, of course, to all the learnings that we are making on the IQOS business, where we very nicely reduced all the variable per user cost. But I will stop there because we will elaborate on that next week.

 

Bonnie Herzog

Okay. That was really helpful. I appreciate that. And then my second question is all the progress you've made with IQOS in growing the base, and it's so large. But as you look out, could you talk about further segmentation of markets with your different platforms or possibly different price points as you continue to convert more smokers? I mean you touched on that. My guess is you're going to touch on that more next week.

But just as I look at your business, it implies that your user base is probably going to need to double in the next maybe 3-plus years based on our analysis for you to hit your aspirational target of that 250 billion units by 2025. So love to hear any strategy there, insights because if I think about it, I assume more of the conversion is going to come from other reduced-risk technologies. And how do you anticipate your mix evolving over time?

 

Andre Calantzopoulos

Yes. I'll give you the first shot. I still believe, over the next 3 years, Bonnie, as I said many times, that heated tobacco technology will be the prevailing technology because it has the highest ability in terms of taste and satisfaction to convert people.

Now in terms of segmentation, I believe, in most markets, we will need 1 or 2 heat-not-burn technologies, if I stay with this segment, and probably 2 to 3, over time, consumable price segment, so we can cover mostly the vast majority of the market. There will be exclusions where you need to cover 4 price segments with probably 2 technologies. And we'll talk next week about the next step in technology for aerosolization in heat-not-burn, which will address many of the pain points consumers have today.

Now clearly, the heated tobacco product is one category. I think that's the fastest growth, both in terms of revenue and bottom line and volume. The second is obviously e-vapor. We are entering this market because I believe there is consumers there that want to switch trade to these products. There is a lot of dual users, and we see also dual users between heat-not burn and e-vapor that, obviously, we would like to capture. I think we can also capture consumers for every e-vapor products.

The key there is clearly to leverage the infrastructure and the brand name of IQOS. I think the product is very good, and that's the first reactions we get, but we need to build equity because that's a problem for the category, as you know, and also consumer loyalty because for the economics to be at best for e-vapor, you don't only need to be premium positioned, but you also need to have loyal consumers because if you discount just products and you sell them, and then a consumer has 10 different products from 10 different competitors and consumes half a cartridge of your product per week, it's very difficult to make the turn and, more importantly, it's very difficult to maintain an infrastructure.

Now we have the advantage of having a lot of infrastructure with IQOS that we can leverage. The equity of IQOS is undeniably the best in the RRP, so I think that's helpful. Technology is good. We are premium, so I think we can make inroads in this category.

And then obviously, we were also going to expand in the pure nicotine products like nicotine pouches or the P3 over time, although I think this is more occasional use products or non-predominant use products. So that's a little bit -- and again, sorry to cut this here, but we're going to elaborate this more -- in more -- extensively next week, okay?

 

Operator

The next question will come from the line of Michael Lavery with Piper Sandler.

 

Michael Lavery

Just wanted to touch on IQOS again. And the Philippines, you have a 20 basis points share, which, of course, is small, but it's very early there. And if I understand it right, you launched there without any stores initially. You also touched on the call about some digital launches in Estonia and Kuwait and the Maldives.

And so just would love a little more sense of how some of those digital efforts work. And it's certainly seen in the Philippines, they're ready to be pretty quickly effective. Can you just bring to life a little bit of how you're going to market there?

 

Jacek Olczak

Yes. It's Jacek here. So yes, we started this year in Philippines, to be very precise, in the Manila, not even greater Manila. And the product as expected actually responded pretty well. This was one of the first fully digital, if I may, launch, also driven by the fact that we had to change the strategy last moment due to the COVID restrictions and the whole COVID impact.

And the product starts getting good tractions. I think we'll still stay for a while in Manila, which is, frankly speaking, not the major secret because we're following the same path of the same strategy for the rollout in every geographies, right, especially if you go to the sizable geography like Philippines.

But product is well received. I think the taste characteristics, et cetera, fits very well. We're also testing the different route-to-consumer models, as we're entering the countries when you have a stick purchase. There is a lot of consumption on trade rather than just off trade. So we need to come up with very good solutions there. But I'm very positive on that part of Asia, which is still unchartered for IQOS.

 

Michael Lavery

Okay. That's helpful. And just a second one on buybacks. Helpful clarity that there's no consideration on that in the guidance. But with some currency tailwinds now and the balance sheet where it is, it certainly seems like that could be -- it could come into play. Can you give a sense of what you would need to have in place or see before you might trigger resuming with buybacks?

 

Emmanuel Babeau

Look, if you bear with us until next week, we'll have a global review of our capital allocation strategy, and we'll address all components at that stage.

 

Michael Lavery

Okay. That's no problem. If I could just maybe swap that question then. Could you give any sense of where you stand on Platform 2 with TEEPS? Any update on that?

 

Jacek Olczak

On TEEPS on the Platform 2, I mean, we will be further conducting that this time the market commercial test this year in 2021.

 

Operator

The next question will come from the line of Vivien Azer with Cowen.

 

Vivien Azer

I wanted to also drill down on IQOS. I was wondering if you could give us some color on what the mix looks like for the consumables from traditional tobacco flavors and some of the novel flavors that you have in the market.

 

Jacek Olczak

That's Jacek here, Vivien. It varies market by market, okay? Obviously, as you know, we have flavors of menthol. We have some other flavors. But still, IQOS, frankly speaking, in most of the places is very much attractiveness is coming from tobacco flavors.

I mean, at the end of the day, most of the segments which we are targeting at this stage, and we are operating at scale, I mean most of the segments are the flavor -- tobacco flavor type of segment, right? So IQOS really has a very winning proposition. There also has a great proposition in menthol and our flavors.

So that varies by the country, and you can't really -- I think if I give you the international share of the flavors, it will be just misleading. The average doesn't make that. But it follows, typically, if you have a predominant menthol market like Japan, the dominance of menthol if you are predominantly full -- I mean, cigarette markets without menthol, then you are predominantly there. A bit sometimes over indexed in menthol in general because it has a bit more impact for people, so it's easier to switch.

 

Vivien Azer

Understood. And my follow-up also on IQOS, please. In terms of the market share progression that you saw in Japan, either in the quarter over the course of the year, can you contextualize the contribution from the Marlboro brand versus the HEETS brand?

 

Jacek Olczak

The Marlboro brand is still the major contributor of the overall volumes and the growth, so we're very pleased that on the course of the last year, we continue growing Marlboro.

Obviously, HEETS, which is priced not below the Marlboro had a bit a better dynamics than Marlboro, but the above actually contributing to the growth. And it's very interesting, Vivien. You're asking because this is the first market which we try the dual -- or double -- dual positioning of the consumables, Marlboro and HEETS in Japan.

As you know very well, we also extended HEETS in a couple of Eastern European geographies, in Russia. When first, we brought the above premium propositions to HEETS, the HEETS Creations. And the HEETS Creations contributes. So we like premium rise further to HEETS in Russia. And HEETS Creations in Moscow constitute now about 10% of the overall HEETS volume. So that's very good.

And then we complemented on the notch below price segment by bringing the lil Fiit proposition. So with now in Russia, we're testing can IQOS operate on the free essentially price segments on the devices. And the spread is pretty phenomenal because IQOS devices will go from $60 on the premium device, and then we go down to the $20 on the lil device. And then we have a coverage on the consumables spreading from RUB 170 per pack to RUB 130.

So it gives you the hint how broadly we now -- why we can go with IQOS touching the segments above medium and below medium. And this is despite, as you know, that we have a competition in Russia. But frankly speaking, competition in terms of the devices is essentially close to 0.

So it's a little bit of a very aggressive promotions, but we continue delivering the strong growth on IQOS, both in terms of user acquisitions measured by the device sales and by the HEETS -- further expansions on the HEETS. And what is also good in places like in Russia that we continue growing in the top cities, which we started a few years ago. So we have a continuous growth in the cities, and the expansion doesn't need from that growth which we have in the Moscow, St. Petersburg and the other main cities.

 

Operator

The next question will come from the line of Gaurav Jain with Barclays.

 

Gaurav Jain

So on the organic margin improvement, which you are guiding to for FY '21 of 150 basis points, that is on top of 240 basis point improvement in FY '20. And this saw benefits like production and travel expense, there was a cut in German VAT, et cetera.

So what I'm trying to ask is that is your underlying margin improvement closer to 200 basis points, not 150 basis points, and that is clearly happening because of high cost. So is that how we should be thinking about the next few years as well?

 

Emmanuel Babeau

Well, so for the medium term, again, we'll elaborate next week on more outlook. For the year, Gaurav, I'll let you make your assumption. I think we are clear on the kind of one-off savings that we have seen because of the COVID, so you can factor that in your model. And then I think we are also clear on what are the driver for margin improvement. So it's about the positive impact of the growth of IQOS in terms of per stick revenue, in terms of margin and then everything that is happening on cost efficiency.

That is really what is driving -- that has been driving the margin improvement in 2020, and that will continue in 2021. As you can imagine, beyond 2021, but we'll elaborate on that next week.

 

Gaurav Jain

Sure. My second question is on the European Beating Cancer Plan, which was released earlier this week, and they talk of things like flavor ban, plain packaging, increasing taxes on heated tobacco to -- equal to cigarettes. So how do you think of that? And how do you incorporate these sort of risks in your outlook?

 

Andre Calantzopoulos

Okay. First of all, this is a plan, and there are many positive aspects also in this plan in my view. First of all, we don't talk about taxes. I mean, this is subject to directives. The tobacco excise directive that governs the excise tax and the tobacco product directive, that is the regulation of the products, okay?

The first is the tobacco side directive today does not foresee reduced risk product category, so it has to be amended under all circumstances, okay? And we're not talking about increases. It's creating a framework under which member states can tax.

Our view is that absence of combustion, for example, is a key criteria on how to tax differently cigarettes to other products. And then within that major cliff of change in toxicity and exposure, member states can have different tax rates for these products. But this product should not be, by any means, higher than any combustible category available, okay, as a minimum criteria. But this has to happen.

Nobody said that taxes will increase or hit the tobacco products, frankly speaking, at this stage or in vapor product, okay? So all this has to be defined, and the discussions are going to start in the course of this year and continue in next year, in any case.

So that's for -- and then the tobacco product directive been served, I hope that there will be a bit more regulatory clarity in there regarding RRPs because -- and e-vapor product because just now, we left it up to the member state to regulate, which, frankly speaking, is not harmonizing a directive, one; and secondly is a pain for all the industry participants because every country has a different regulation. And we always advocated serious regulation on these products, provided that this is differentiated from cigarettes, okay?

Now there are voices that say that these products should be the same thing as cigarettes. But at the end of the day, it was very clear also in the cancer plan that all -- in the Q&A that only based on science and evidence, they will take decisions. So I wouldn't be particularly worried about this at this stage. And I think the outcome may be positive actually because it's an opportunity to discuss all these things.

Now in the longer term, we discussed very often, I believe tax differentials will be maintained because it makes sense for public health, it makes sense for the consumers. And as we also explained, we have room even to pass taxes if, by any chance, differentials close somehow because IQOS, also in order to pass part of the tax benefit to the consumers, it's mid-price position, essentially, if you take the weighted average of the countries, number one.

And number two, its price productivity is much, much higher than cigarettes, so passing on a tax is triggering less price increase than passing on tax on cigarettes. So that's in a nutshell the way we should look at it, but we have to assume that excise taxes will increase over time also for RRPs as governments need money, and that will apply to heated tobacco products that's already taxed substantially and, potentially, in some cases, to e-vapor products in the future. But that's all baked in, in the assumptions.

 

Gaurav Jain

Sure. And if I can ask one last question. It's on a minority interest, which has been increasing at a higher rate than your EBIT, and that's driven by Philippines. So is there an opportunity to reduce your minority interest, considering your partner in Philippines, it trades on the exchanges at like some 6x PE?

 

Andre Calantzopoulos

No, we don't envisage this. Not in the -- I mean if our partner wants to sell one day, we can discuss. At the moment, they're very happy with us.

 

Emmanuel Babeau

We're very happy with our partnership in Philippines.

 

Operator

The next question will come from the line of Adam Spielman with Citi.

 

Adam Spielman

So the first question, I think you said in your guidance that you're expecting to take less pricing variance on combustible cigarettes than usual. Now for years and years and years, it's been 6%, and I think you said it's something to do with COVID that you want to take less pricing. I'm really surprised by that.

You also said the pricing model has been broken. So I suppose the question is, if you take less pricing in combustibles this year, 2021, what would it take for you to have another low year in 2022? That will be my first question.

 

Andre Calantzopoulos

Okay. First of all, we didn't say we will take less pricing. We will also -- where the pricing opportunity, we'll take pricing, and I think the model still works very well. Elasticities are the same, everything.

We had to make some, in my view, reasonable, conservative, you may say, assumptions regarding what's going to happen in Indonesia and Russia because of the tax increase. And Indonesia has never got it carryover from last year, which makes the comparisons year-to-year problematic, okay? Plus, in Germany, we had a VAT, I would say, tax break, which we assume is not going to continue this year. So if you exclude all these elements, I think we're still back to a normal pricing in the other markets.

So clearly, in terms of post-COVID, I would say, assumptions, we have to watch more carefully the price gaps, that's clear, at the mid- to low end of the market, but that doesn't mean that we're going to take any severe pricing decisions at this stage anywhere. I just -- this is a watch out.

If there is down trading, which is happening between the mid-price typically and the low-price segment, also because we have absence of contraband and all these things, that's something to watch in certain markets. But overall, I think we're in good shape.

Also both on IQOS, on heat-not-burn products and combustible, the excise taxes are now in, if I'm not mistaken, everywhere. So we have pretty good visibility of where we are, okay? So I don't think it's super COVID related. What is COVID related in the guidance is the range we gave because if you look, Adam, at what happened last year, if we assume 2% to 3% underlying industry decline, even baking in Indonesia, we had a 6.7% industry decline.

So we're missing consumption for mathematically 3.7%to 4.7%. That's on average, $100 billion for the industry. So we don't -- that will rebound, in my view, one day, but once the restrictions finish.

Now we gave a guidance for this year of 0 to minus 3, which is at 0, you have some recovery. At minus 3, you have super underlying negativity, maybe exaggerated. I don't know at this stage, but that's plus/minus 20 billion units for us. So that's plus/minus 2.5 revenue points.

So that's where the volatility is, okay? And if pricing comes better in Russia and Indonesia, that much the better. We may end up at the high end of the range.

 

Adam Spielman

Okay. Well, I think that leads to my next question, which is, to be blunt, I don't really understand the EPS guidance, and there are many aspects to really understand about it.

So first of all, you're saying in Q1, where your comp is insanely hard, you're going to have flat organic sales, you're going to have margin expansion, you're going to have 8% like-for-like EPS growth. You then say because the comp is really easy in Q2, you're going to have a great quarter, or you imply that. And yet the full year is only 9% to 11%, and it seems to me that if you can do so well in Q1 and you don't do well in Q2, then the 9% to 11% is very conservative.

And another way of asking the same question. Every single time you've given guidance of any sort on EPS since 2018, you're being smooth. This is -- this quarter, you gave guidance. It wasn't a range. It was a point estimate.

You said you were going to do about $1.20 for the fourth quarter, and you said that in December, And yet you beat it very handsomely. Now that would suggest that the way you give guidance is systematically incredibly conservative.

You either you can't forecast, which I don't believe, or you're systematically incredibly conservative. To that point, the fact you've always been conservative with the price very well in Q1 against a really tough comp suggests to me that the guidance for the full year is also super conservative. Is that fair?

 

Andre Calantzopoulos

I wouldn't say conservative, but it's not bullish either, okay? I mean, I understand what you are saying, but we're at the beginning of the year, okay? Many things can happen regarding COVID because it's not finished.

So last year, as Emmanuel said, we had more than $150 million exceptional expenses because of COVID, okay? So you need to put some cushion in the bottom line regarding unexpected costs. And if we have a rebound, I would call, not a very gradual recovery, we may need to invest a bit more money towards the end of the year to accelerate acquisition. You can physically do that. If we physically can't, then clearly, the money will go to the bottom line.

So at this stage, we gave this range, okay, which, by the way, if the dollar stays where it is, it's not bad at all because it's 14% to 16%, and the revenue line would be 8% to 11%, which will be phenomenal, I would say. So I don't think this is conservative. It's just I don't have a crystal ball to foresee everything that's happening in every month of this year, okay? We're still not in normal situation. That's all. So I understand and -- but -- and it's just how I can further explain.

 

Emmanuel Babeau

Just in the sequence, please factor in that -- I mean, as we say, we talk about a gradual recovery that we are expecting without being able to, of course, design exactly what is going to be the trajectory, but that would mean certainly more investment in H2.

Remember, we've been, of course, limited in commercial activity. As you know, we say H2 could be a better moment overall with a number of restrictions being eased. There will be also more investment skewed towards the second part of the year.

So you have to take that into account, and that explains as well why Q1 maybe is expected today better than one could have expected initially. But the investment will need to happen in the year.

 

Andre Calantzopoulos

Any case, I would love to be conservative and as the quarters unfold, we'll get more. But I think I gave the parameters. The pricing, that still can come more favorable. That goes straight to the bottom line. If we have bit more combustible, that's fine. It goes to the bottom line, but we have to assume that. So as the quarters pass, we will give you better outlook.

 

Operator

The final question will come from the line of Robert Rampton with UBS.

 

Robert Rampton

Hello? Hello?

 

Operator

Robert, your line is open.

 

Robert Rampton

How to come in the queue actually?

 

Nicholas Rolli

Operator, can you put Robert Rampton in queue from UBS, please?

 

Operator

His line is open.

 

Nicholas Rolli

Robert, can you join? Okay. We'll get back to Robert after the call, operator. If we can just go to the final remarks. Andre, I think you have some closing remarks.

 

Andre Calantzopoulos

Yes. I mean, thank you all for joining. I think we had a rather complicated 2020, but the results came out much better than I would have thought when we were talking for the first time in March.

I think we look at a very good recovery in relative terms in '21. IQOS continues to grow strongly. The momentum is excellent, in my view, and we will see some rebound, hopefully, in cigarette volumes in the next 1 to 2 years. I would love to see positive total market maybe in '22.

And we look forward to sharing with you more on the long-term growth and more on understanding the profitability of IQOS in -- next week, actually. So have a very good day, and thank you for listening to us.

 

Nicholas Rolli

I just wanted to add that, well, if you have any follow-up questions, you can contact the Investor Relations team and look on our website for the instructions on how to log on to the Investor Day event. It starts at 8:30 Eastern Time on February 10. You can register on our website. And again, thank you very much for joining the call. Have a nice day.

 

Emmanuel Babeau

Bye.

 

Operator

This does conclude today's conference call. We thank you for your participation and ask that you please disconnect your lines.

 

 

 

 

UBS에서 걸려온 로버트씨의 전화는 끝내 듣지못한채 컨퍼런스콜이 끝나버림 ㅡㅡ..;;

 

 

 

어쨌든 나의 중학교 영어 실력으로 읽어본 바에 의하면

 

 

궐련형이랑 evapor랑 듀얼로 쓰는 사람이 많다는 것 --> evapor 시장도 iqos의 브랜드력으로 밀어붙이겠다. 

더불어 우리도 니코틴 파우치 팔꺼다. 

아이코스랑 릴 둘다 러시아에서 공격적인 마케팅을 했다.

 

말보로-아이코스 둘다 강려크하고 올해 잘했고 내년에는 더 잘할꺼다.

 

자세한 내용은 다음주에 이야기해주겠다.

 

 

다음주에 뭐가 있나? 하고 보니까 Investor day가 있더라..

 

까먹지말고 그때 한번 드가봐야겠다.

 

 

 

저번 실적발표때랑 비슷하게 애널리스트들도 아이코스랑 세금 그리고 건강문제이슈..이런정도의 질문이 전부다.

 

다음은 알트리아를 보도록하겠다.