2016 barclays global consumer staples conference altria
TRANSCRIPT
September 9, 2015
2015 Barclays Global Consumer Staples Conference Presentation
1 For Investor Purposes Only - Barclays GCS Conference, Sept. 9, 2015
Safe Harbor Statement
Statements, including earnings guidance, in this presentation that are not reported
financial results or other historical information are “forward-looking statements” within
the meaning of Private Securities Litigation Reform Act of 1995. Such forward-
looking statements are based on current plans, estimates and expectations, and are
not guarantees of future performance. They are based on management’s
expectations that involve a number of business risks and uncertainties, any of which
could cause actual results to differ materially from those expressed in or implied by
the forward-looking statements. Altria undertakes no obligation to publicly update or
revise any forward-looking statement other than in the normal course of its public
disclosure obligations. The risks and uncertainties relating to the forward-looking
statements in this presentation include those described under “Risk Factors” in Altria’s
Annual Report on Form 10-K for the year ended December 31, 2014 and under
“Cautionary Factors That May Affect Future Results” in its Quarterly Report on Form
10-Q for the period ended June 30, 2015.
Reconciliations of non-GAAP financial measures included in this presentation to the
most comparable GAAP financial measures are available on Altria’s website at
altria.com.
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Agenda
Goals and strategies
Track record of consistent
financial performance
Questions and answers
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Track Record of Value Creation
FACT
Altria’s 20.2% annualized shareholder
return leads all companies named to
each FORTUNE 500 list since 1955.
4
Note: Third party trademarks are the property of their respective owners and are included for informational purposes only.
Source: Fortune.com, June 9, 2015
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Altria’s Long-Term Financial Goals
• Grow adjusted diluted EPS at an average
annual rate of 7% to 9%
• Maintain a target dividend payout ratio of
approximately 80% of adjusted diluted EPS
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Consistent Adjusted Diluted EPS* Growth
Source: Altria company reports
*For reconciliation of non-GAAP to GAAP measures visit altria.com
$1.75
$2.57
2009 2014
+8.0% CAGR
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$1.36
$2.08
2.9% 8.6%
7.9% 7.3%
9.1% 8.3%
$0.00
$2.50
2009 Feb-10 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 2014
Strong Dividend Growth
Note: Year-end annualized rate: 5-year CAGR.
Source: Altria company reports
+8.9% CAGR
In 2014, we paid shareholders $3.9 billion in dividends.
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Altria’s Performance Against Long-Term Goals
$1.22 $1.38
1H 2014 1H 2015
Source: Altria company reports
*For reconciliation of non-GAAP to GAAP measures visit altria.com
** Annualized dividend
Altria increased its dividend 49 times in the past 46 years.
+13.1%
Adjusted Diluted EPS* Performance
$2.08 $2.26
Aug-14 Aug-15
+8.7%
Dividend per Share**
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Reaffirms 2015 Guidance
Altria reaffirms its guidance for 2015 full-year adjusted diluted EPS in the range
of $2.76 to $2.81, representing a growth rate of 7.5% to 9.5% from an adjusted
diluted EPS base of $2.57* in 2014.
Source: Altria company reports
*For reconciliation of non-GAAP to GAAP measures visit altria.com
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1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Changing Industry Dynamics
Reynolds American
Inc. acquires
Lorillard
RJ Reynolds and
Brown & Williamson
Tobacco merge
Master Settlement
Agreement signed
Federal Excise Tax Increase
and FDA Regulation enacted
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36.9
43.8
0
50
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Marlboro Camel Winston Newport
Marlboro Long-Term Performance
+6.9pp
Source: MSAi Shipments; IRI/Capstone IRP and TRP; IRI/MSAi
Note: IRI/MSAi was implemented to read market share in 2011. Share prior to that reflects estimates based on share changes derived from previous services.
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1,081%
190%
330%
Altria Group S&P 500 S&P Food, Beverage &Tobacco
Total Shareholder Return 1998-2014
Source: Bloomberg 12/31/1997-12/31/2014
Note: Total shareholder return is simple price appreciation plus the reinvestment of the dividend as of the ex-dividend date. Excludes spin-offs.
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Altria’s Strategies
Grow new income streams with innovative
tobacco products
Maximize income from core premium
tobacco businesses over the long term
Manage diverse income streams and
strong balance sheet to deliver consistent
financial performance
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Altria’s Strategies
Grow new income streams with innovative
tobacco products
Maximize income from core premium
tobacco businesses over the long term
Manage diverse income streams and
strong balance sheet to deliver consistent
financial performance
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Altria’s Strategies
Grow new income streams with innovative
tobacco products
Maximize income from core premium
tobacco businesses over the long term
Manage diverse income streams and
strong balance sheet to deliver consistent
financial performance
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U. S. Tobacco Manufacturers’ Profits
$11.8
$15.5
2009 2014
+5.5%
CAGR
Source: ALCS estimates; other public company reports
$ in Billions
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74.8% 75.1% 75.6%
Q2 2013 Q2 2014 Q2 2015
Premium Segment Retail Share Performance
Source: IRI/MSAi
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44.1%
Marlboro
Marlboro Retail Share Leadership
Source: IRI/MSAi, Cigarettes ending 6/30/15 (1H 2015)
Next 10 Largest Cigarette Brands = 43.0%
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Unmatched Brand Equity
0
70
Camel NewportMarlboro 0
70
Camel NewportMarlboro
Source: 2014 TNS Brand Equity Study (Age Group: 21 – 54), February 2015
Overall Equity Overall Opinion
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Cigarette Category Decline Rate Estimates
(5.0)%
(3.5)% (3.0)%
(4.0)% (3.5)%
(0.5)%
2010 2011 2012 2013 2014 1H 2015
Source: ALCS estimates
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Smokeable Products Strategy
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$3.3
$3.8
1H 2014 1H 2015
Smokeable Products Performance
Adjusted OCI* - $ in Billions
Source: Altria company reports
*For reconciliation of non GAAP to GAAP measures visit altria.com
+14.3%
1H 2014 1H 2015
Adjusted OCI* Margins
+2.9pp
44.1% 47.0%
Marlboro’s Retail Share
+0.3pp
1H 2014 1H 2015
43.8% 44.1%
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$121.18 $127.08
1H 2014 1H 2015
Smokeable Products Segment Price Realization
Source: Altria company reports
*For reconciliation of non-GAAP to GAAP measures visit altria.com
Net Revenues Net of Excise Taxes /1000 Units*
+4.9%
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1954 1964 1974 1984 1994 2004
Marlboro Long-Term Retail Share Growth
Source: Maxwell; MSAi Shipments; IRI/Capstone – Total Retail Panel; IRP IRI Group/Capstone Projected Retail Panel; IRI/MSAi
44.1%
1H ‘15
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Active Digital Engagement with Adult Smokers
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Marlboro Retail Share Among Adult Smokers
35%
45%
AS 21-29Total Marlboro
Source: CATTS 6mm May'15
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Marlboro App: Convenient Adult Smoker Interaction
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Increased Mobile Engagement
Mobile Logins - in Millions
0
10
2011 2014
~+1,000%
Note: Total mobile interactions (Adult Smokers 21+)
Source: PM USA
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Marlboro’s Mobile Presence
Marlboro.com is among
the leading CPG mobile
websites.
Source: comScore, 1H 2015
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Smokeless Products Category Adjusted Volume Growth
0
2,000
2009 2014
Source: IRI InfoScan, ALCS Estimate
~+5%
CAGR
Note: Volume adjusted for trade inventory changes, calendar differences and product discontinuation.
Cans in Millions
As of June 30th, USSTC estimates that smokeless category
volumes have grown ~3% on a trailing 12-month basis.
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Smokeless Products Strategy
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389.9 400.1
1H 2014 1H 2015
Smokeless Products Shipment Volume Performance
Source: Altria company reports
+2.6%
Note: Other includes Red Seal, Husky, Weyman’s Best and Marlboro Snus.
Reported Shipment Volume
40
352.2
37.7
364.7
35.4
Copenhagen & Skoal Other
1H 2014 1H 2015 1H 2014 1H 2015
+3.5% (6.1)%
Copenhagen & Skoal
Cans in Millions
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64.5% 64.9%
1H 2014 1H 2015
$524 $548
1H 2014 1H 2015
Smokeless Products Income Growth
Source: Altria company reports
+4.6%
*For reconciliation of non GAAP to GAAP measures visit altria.com
Adjusted OCI* - $ in Millions Adjusted OCI* Margins
+0.4pp
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Copenhagen & Skoal Combined Retail Share
50.8% 51.1%
1H 2014 1H 2015
Source: IRI InfoScan
+0.3pp
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Smokeless Products Segment Performance
Source: Altria company reports as of Q2 2015
The two leading premium brands
with over 51% combined retail share
for the first half of 2015
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Copenhagen Retail Share Strength
26.0%
30.7%
2011 2014
Source: IRI Group InfoScan Smokeless Tobacco Database (FY 2012 – Retail Share)
Source: IRI InfoScan
~+1.6pp Average
Annual
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Maximizing the Core, Innovating for the Future
Grow new income streams with innovative
tobacco products
Maximize income from core premium
tobacco businesses over the long term
Manage diverse income streams and
strong balance sheet to deliver consistent
financial performance
Grow new income streams with innovative
tobacco products
Maximize income from core premium
tobacco businesses over the long term
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~100%
~150%
~50%
<25%
2012 2013 2014 2015
Estimated U.S. E-Vapor Category Growth
Source: ALCS estimates
Consumer Expenditures Year over Year % Change
We estimate full-year 2015 consumer expenditures in
the e-vapor category to be nearing ~$2.5 billion.
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Fullness of vapor
Familiar taste and form
Flavor variety
Dependable quality
Good battery life
Long-lasting cartridge
Reasonable value
E-Vapor Desired Attributes
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Nu Mark’s E-Vapor Portfolio
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MarkTen XL Features
Longer-lasting cartridge and battery
Familiar taste and form
More flavor variety
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Expanded Green Smoke Retail Presence
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Expansion of Agreement with PMI
Expanded agreement with Philip Morris International includes joint research,
development and technology-sharing agreement on e-vapor products.
This supplements the 2013 agreement with PMI.
The latest step in our ongoing portfolio approach to product development and
commercialization.
Note: Third-party trademarks are the property of their respective owners and are included for informational purposes only.
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Innovative Products Portfolio Approach
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Regulatory Landscape
• We support FDA extending its regulatory authority over all
tobacco products.
• We believe FDA has an unprecedented opportunity to advance
public health goals.
• Proposed regulations recognized a continuum of risk for different
tobacco products.
• Implementation of a comprehensive tobacco harm reduction
strategy would be among the most meaningful actions FDA could
take to reduce the health effects of tobacco use.
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Altria’s Strategies
Grow new income streams with innovative
tobacco products
Maximize income from core premium
tobacco businesses over the long term
Manage diverse income streams and
strong balance sheet to deliver consistent
financial performance
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Alcohol Assets
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Wine Strategy
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$50
$62
1H 2014 1H 2015
Wine Segment Performance
Source: Altria company reports
OCI - $ in Millions
+24.0%
18.9%
21.8%
1H 2014 1H 2015
OCI Margins
+2.9pp
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SABMiller Market Value
Source: Bloomberg as of 8.31.2015
Note: Market value as of 8.31.2015
$20.2
Aug-15
Market Value ($ in Billions)
61
*For reconciliation of non GAAP to GAAP measures visit altria.com
2011 2014
Adjusted Equity Earnings* ($ in Millions)
+8.3% CAGR
$812
$1,031
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A Compelling Investment
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• Diverse business
model
• Strong balance sheet
and cash flow
Return large
amounts of cash
to shareholders
Dividend Payout Ratio
80.9%
79.7%
78.4%
73.2%
69.8%
60.7%
59.8%
56.6%
53.8%
52.6%
MO
PM
RAI
LO
KRFT
GIS
KO
PEP
HSY
DPS
S&P Food, Beverage and Tobacco Index
NOTE: Altria’s dividend payout ratio is based on the August 2014 annualized dividend of $2.08 / $2.57 2014 adjusted diluted EPS. In addition, Altria’s announced targeted dividend
payout ratio is ~80% of adjusted EPS. All dividend payout ratios have been calculated using each company’s 2014 annualized dividend rate / 2014 actual and estimated
consensus adjusted diluted EPS. Dividend payout ratio ranks companies in the Food, Beverage and Tobacco Index in these respective categories.
Source: Bloomberg and Thomson First Call
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An Attractive Dividend Yield
Source: Bloomberg
4.2%
2.2% 2.2%
Altria 10-year U.S.Treasury
S&P 500
Altria’s dividend yield
was higher than virtually
all S&P Food, Beverage
and Tobacco peers.
Note: as of August 31, 2015
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Strong Dividend Growth
$1.36
$2.26
Aug-09 Aug-15
+8.8% CAGR
Source: Altria company reports
Note: Dividend shown annualized as of August 2009 and August 2015.
$ per Share
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Returning Value to Shareholders
$13.0
$3.1
$16.1
2012 to Q2 2015
Share Repurchase
Dividend
Source: Altria company reports
In July 2015, Altria’s Board of Directors authorized
a new $1 billion share repurchase program.
$ in Billions
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Investing For Our Future
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Earnings Per Share Performance
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
2008 2009 2010 2011 2012 2013 2014
Altria's Adjusted Diluted EPS*
S&P 500 Operating EPS
Source: Altria company reports; Standard and Poor’s
*For reconciliation of non-GAAP to GAAP measures visit altria.com
7.9%
4.6%
Altria's AdjustedDiluted EPS*
S&P 500 OperatingEPS
2007 to 2014 CAGR Annual % Change
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218%
63%
117%
Altria Group S&P 500 S&P Food, Beverage &Tobacco
Seven-Year Total Shareholder Return
Source: Bloomberg 12/31/2007-12/31/2014
Note: Total shareholder return is simple price appreciation plus the reinvestment of the dividend as of the ex-dividend date. Excludes spin-offs.
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Regulation G Disclosure
For reconciliations and further explanations of non-GAAP financial measures, visit:
altria.com
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