Case 1:20-cv-00393-LMB-WEF Document 1425-4 Filed 09/09/22 Page 1 of 26 PageID# 36933
`Case 1:20-cv-00393-LMB-WEF Document 1425-4 Filed 09/09/22 Page 1 of 26 PagelD# 36933
`
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`EXHIBIT 60
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`Case 1:20-cv-00393-LMB-WEF Document 1425-4 Filed 09/09/22 Page 2 of 26 PageID# 36934
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`Case 1:20-cv-00393-LMB-WEF Document 1425-4 Filed 09/09/22 Page 3 of 26 PageID# 36935
`Case 1:20-cv-00393-LMB-WEF Document 1425-4 Filed 09/09/22 Page 3 of 26 PagelD# 36935
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`As mentioned previously, starting in the second quarter of 2022, and on a comparative
`basis, PMI will exclude amortization and impairment of acquired intangibles from its
`adjusted results. Today’s remarks contain forward-looking statements and projections of
`future results. | direct your attention to the Forward-Looking and Cautionary Statements
`disclosure in today’s presentation and pressreleasefor a review of the various factors
`
`Good day, and welcome to the Philip Morris International Second Quarter 2022
`
`Earnings Conference Call. Today's call is scheduled to last about one hour, including
`remarks by Philip Morris International managementsessions, and the question and
`answersession. [Operator Instructions] Media representatives on the call will also be
`invited to ask questions at the conclusion of the question-and-answerfrom the
`
`investment community.
`
`| would nowlike to turn the call over to Mr. James Bushnell, Vice President of Investor
`
`Relations and Financial Communications. Please go ahead, sir.
`
`James Bushnell
`
`Welcome. Thank youforjoining us. Earlier today, we issued a press release containing
`detailed information on our 2022 second quarter results. You may access the release on
`pmi.com. A glossary of terms, including the definition for reduced risk products or RRPs
`
`as well as adjustments, other calculations and reconciliations to the mostdirectly
`comparable U.S. GAAP measures and additional heated tobacco unit market data are at
`the end of today's webcastslides, which are posted on our website.
`
`Unless otherwisestated, all references to I|QOS are to our I|QOS heat-not-burn products
`and all references to smoke-free products are to our RRPs. Growth rates presented on
`
`an organic basis reflect currency-neutral adjusted results, excluding acquisitions and
`disposals. Consistent with last quarter, figures and comparisons presented on a pro
`forma basis entirely exclude PMI’s operations in Russia and Ukraine.
`
`that could causeactual results to differ materially from projections or forward-looking
`
`statements.
`
`

`

`Case 1:20-cv-00393-LMB-WEF Document 1425-4 Filed 09/09/22 Page 4 of 26 PageID# 36936
`Case 1:20-cv-00393-LMB-WEF Document 1425-4 Filed 09/09/22 Page 4 of 26 PagelD# 36936
`
`It’s now mypleasure to introduce Emmanuel Babeau, Chief Financial Officer. Over to
`you, Emmanuel.
`
`Emmanuel Babeau
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`Turning to our business. We demonstrated strong underlying momentum in the second
`quarter of 2022 with another quarter of positive volume supporting better-than-expected
`top and bottom line growth. Most impressive wasthe continued excellent |QOS
`performance and strong Q2 pro forma user growth of more than 1.1 million,
`demonstrating further sequential acceleration compared to Q1 as device limitation and
`COVID restrictions continue to ease. This reflects strong momentum in the EU region,
`Japan and developing market.
`
`Thank you, James. Welcome to you in your new role, and welcome, everyone. Before|
`
`begin, | want to reiterate our focus on supporting our employeesandtheir families
`affected by the warin Ukraine and aboveall on the safety of our people. We continue to
`deploy pledge humanitarian support and additional benefits for our Ukraine employees.
`
`As previously announced, weintend to exit the Russian market in an orderly manner, as
`the complexities of continuing to operate in Russia increase such as supply chain
`challenges and financial and banking sectorrestriction. We continue to actively work on
`options for doing so in the context of an increasingly complex and rapidly changing
`regulatory and operating environment, including the requirement to obtain certain
`
`governmental approval for any transaction.
`
`Q2 RPpro forma net revenues grew by plus 11% despite the adverse shipment timing
`impact due to supply chain constraints highlighted last quarter, while HTU IMS volumes
`grew by plus 20%. IQOS ILUMAdelivered further impressive results in its first three
`markets of Japan, Switzerland and Spain. The acceleration in category growth in these
`diverse geographieshighlight the exciting future growth opportunity across the world,
`including in the latest launch market of Greece.
`
`In combustible, robust Q2 pro forma volume growth of plus 2.4% and organic net
`revenue growth of plus 4.2% were driven by Marlboro share gains stronger pricing and
`
`the continued recovery of the market. Maintaining leadership of the cigarette category
`allows us to maximize the switching of adult smokers to smoke-free alternatives and
`accelerate our transformation into a predominantly smoke-free business by 2025.
`
`

`

`Case 1:20-cv-00393-LMB-WEF Document 1425-4 Filed 09/09/22 Page 5 of 26 PageID# 36937
`Case 1:20-cv-00393-LMB-WEF Document 1425-4 Filed 09/09/22 Page 5 of 26 PagelD# 36937
`
`The proposed addition of Swedish Match would further boost our future financial profile.
`This is a value-creating offer for both set of shareholders with a compelling strategic and
`culturalfit, providing an additional opportunity to accelerate our smoke-free future.
`
`We expectthe strong underlying momentum of our business in H1 to continue, and we
`are from an organic growth outlook for the year. We are now well on track to deliver two
`consecutive years of volume growth, confirming our status as a growth companyin
`terms of volumes, organic net revenues and margins. Despite a substantial currency
`headwind in 2022, we expectto deliver full year adjusted diluted EPS of around $6,
`including Russia and Ukraine.
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`Turning to the headline numbers. Our Q2 volumesgrew by plus 3% on a pro forma
`basis and by plus 1.1% in total, including Russia and Ukraine. Pro forma net revenues
`grew organically by plus 6.2% and by plus 5.3% for total PMI, reflecting both the
`
`continued strong growth of |QOS and the ongoing recovery of the combustible business
`in many markets against a pandemic affected comparison.
`
`As weanticipated and indicated previously, less unfavorable timing of cigarette
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`3.5% on a pro forma basis or almost plus 5% excluding Indonesia.
`
`

`

`Case 1:20-cv-00393-LMB-WEF Document 1425-4 Filed 09/09/22 Page 6 of 26 PageID# 36938
`Case 1:20-cv-00393-LMB-WEF Document 1425-4 Filed 09/09/22 Page 6 of 26 PagelD# 36938
`
`Our Q2 adjusted operating income margin declined organically by 190 basis points on a
`pro forma basis and by 150 basis points in total. As expected and communicated in our
`Q1 quarterly results, this reflects four main factors: first, investment to further expand
`and match the speed of growth in our smoke-free portfolio. This includes theinitial
`
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`
`higher cost of ILUMA devices and HTUs andthe transitory dilutive margin impact of
`higher device sales as we roll out ILUMA and replenish distribution channel as device
`constraint ease to support reaccelerating I|QOS user growth. Second, the impact of
`supply chain disruption, notably due to the war in Ukraine, including around $80 million
`in additionalair freight expenses. Third, inflation of around 4% in our cost of goods
`driven by the global pandemic recovery and exacerbated by the war, notably for certain
`direct materials, wages, energy and transportation costs. Andlast, a challenging prior
`year margin comparison, which included substantial cost of goods sold productivity
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`Despite these typical margin challenges, our robust top line growth and ongoing cost
`efficiency enable us to deliver plus 5.6% growth in pro forma currency-neutral adjusted
`diluted EPS ahead of expectation to $1.32 and plus 3.8% growth for total PMI to $1.48,
`including Russia and Ukraine. Looking atthefirst half of the year now, our volumes grew
`by plus 4% on a pro forma basis and by plus 2.2% for total PMI. Pro forma revenues
`grew byplus 8.1% and byplus 7.1% in total, also driven by strong l|QOS performance
`and the recoveryof the cigarette category.
`
`We delivered organic net revenue perunit growth of plus 4% on a pro forma basis and
`plus 4.7% in total, again, reflecting the positive impact of growing HT volumes and
`pricing. Our H1 adjusted operating income margin contracted organically by 110 basis
`points on a pro forma basis and 90 basis points in total, driven by the factors mentioned
`previously. We expect better margin performancein H2, a topic | will review it shortly.
`Currency-neutral adjusted diluted EPS grew by plus 10.4% to $2.79 on a pro forma
`basis and plus 9.2% in total to $3.06, an excellent performance given the
`circumstances.
`
`Reflecting this strong momentum, weare raising our guidance for 2022. With strong
`IQOS growth and robust trends in combustible, we foresee an acceleration in our
`currency-neutral growth expectation relative to our previous forecast. First, we now
`expect to grow our total pro forma shipment volume by plus 1.5% to plus 2.5% for 2022,
`achieving another year of volume growth.
`
`

`

`Case 1:20-cv-00393-LMB-WEF Document 1425-4 Filed 09/09/22 Page 7 of 26 PageID# 36939
`Case 1:20-cv-00393-LMB-WEF Document 1425-4 Filed 09/09/22 Page 7 of 26 PagelD# 36939
`
`For pro forma net revenue, we expectto deliver between plus 6% and plus 8% organic
`growth as comparedto the plus 4.5% to plus 6.5% announced previously, despite a
`greater-than-anticipated drag from hyperinflationary accounting in Turkey. With a strong
`recovery in device volume, the increasing contribution of ILUMAwithinitially higher unit
`
`cost and ongoing globalinflation, we are narrowing our forecast for pro forma adjusted
`organic Ol margin expansion to between zero and plus 50 basis points.
`
`Weare also raising our growth outlook for pro forma currency-neutral adjusted diluted
`EPS to between plus 10% and plus 12%. This reflects a range of $5.23 to $5.34,
`including an estimated unfavorable currency impact of $0.80 at prevailing rates notably
`due to the euro and Japaneseyen. We'll include a slide in the appendix with further
`detail on this estimated impact. For total PMI, which assumesa full year contribution
`from Russia and Ukraine, we expect adjusted diluted EPS of $5.90 to $6.05, reflecting
`similar dynamic to the pro forma basis and including an estimated $0.69 unfavorable
`Currency impact.
`
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`Please note our 2022 forecast assumesno contribution from the proposed combination
`with Swedish Match, which is expected to close in the fourth quarter of this year, subject
`to Swedish Match shareholder acceptance and the necessary regulatory approvals. The
`outlook for |QOS growth is excellent, and we now expectto deliverfull year pro forma
`HTU shipment volume of 90 billion to 92 billion units, representing the upper half of our
`previous forecast range.
`
`With growth momentum verystrong, the main constraint for not further raising our HTU
`volume target is our production capacity, notably for ILUMA HTUs due to their
`outstanding initial success and the cancellation of production in Russia as we convert
`existing production line for induction consumable. We continue to expect excellent HTU
`growth in the coming quarters with a progressive improvementin ILUMA HTU capacity
`through the first half of 2023. Weareprioritizing ILUMA launch market accordingly with
`further launches plan in Q4 as communicated previously.
`
`

`

`Case 1:20-cv-00393-LMB-WEF Document 1425-4 Filed 09/09/22 Page 8 of 26 PageID# 36940
`Case 1:20-cv-00393-LMB-WEF Document 1425-4 Filed 09/09/22 Page 8 of 26 PagelD# 36940
`
`A notable further update to our outlook is an increase in our operating cash flow forecast
`to around $10.5 billion as compared to around $10 billion previously despite notable
`currency headwinds. This includes our accelerated pro forma earnings growth forecast
`and an assumedfull year contribution from Russia and Ukraine. We delivered robust
`
`operating cash flow growth in H1 of plus 14%. And as shown through the challenges of
`recent years, the cash generation capacity of our business remains exceptional.
`
`While flatted somewhatin 2021 by favorable timing and one-off impact, our revised full
`year forecast demonstrates underlying growth against this exceptional year after also
`accounting for higherinflation driven working capital requirements and currency. This
`
`underlines our ability to maintain a strong balance sheet, pay down debt andinvestin
`the growth of our business.
`
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`While the temporary cost headwinds in Q2 are expected to ease somewhatin the third
`quarter, we expectthis to be broadly offset by a step-up in smoke-free commercial and
`R&D investment as comparedto a device constraint in Q3 2021. This results in an
`expected Q3 pro forma adjusted diluted EPS range of $1.23 to $1.28, including an
`estimated adverse currency impact of $0.24 at prevailing rates. We expect a strong Q4
`with a rebound in HTU shipment volume due to phasing to the most pronounced as HT
`capacity constraint improve. The H2 recoveryin our pro forma adjusted OI margin is
`also expected to be Q4 weighted.
`
`Our net debt of $23 billion at June 30, 2022, decreased compared to both June and
`December 2021, despite H1 capital expenditure of $0.5 billion and ongoing dividend
`payment. Our commitment to our progressive dividend policy is unwavering and we look
`forward to the additional cash flow, the proposed combination with Swedish Match
`would bring. We also continue to expect around $1 billion in full year capital expenditure.
`
`Moving now to the pro forma outlook for the second half. We expect to deliver strong top
`line growth, organic adjusted Ol margin expansion and further acceleration in bottom
`line growth. For Q3, we expect mid-single-digit organic top line growth driven by l|QOS
`with around $22billion in pro forma HTU shipment volumes. While there is a tougher
`
`comparison for cigarette and a modest negative impact expected from shipmenttiming,
`we expect combustible volume trends to remain resilient by historical standards. Net
`revenue growth will also continue to be impacted in both Q3 and Q4 bythe shift to
`hyperinflationary accounting in Turkey.
`
`

`

`Case 1:20-cv-00393-LMB-WEF Document 1425-4 Filed 09/09/22 Page 9 of 26 PageID# 36941
`Case 1:20-cv-00393-LMB-WEF Document 1425-4 Filed 09/09/22 Page 9 of 26 PagelD# 36941
`
`Turning back to our results. Pro forma HTU in-market sales volume grew strongly by
`plus 20% for both the second quarter and thefirst half, notably driven by strong
`performancein the EU region. As expected, Q2 IMS pro forma growth wassignificantly
`ahead of shipment volume growthreflecting the later timing of shipments | mentioned
`
`earlier. Our total pro forma shipment volume increased by plus 3% for Q2 and plus 4%
`for H1. As | touched on earlier, this put us well on track to deliver total volume growth for
`the second consecutive year on both a pro forma and total PMI basis.
`
`With the impressive performance of I|QOS, heated tobacco units comprised 12.6% of
`our pro forma shipment volumein H1 or 14% in total despite the anticipated HTU
`
`shipment timing impact in Q2. Our sales mix is also changing rapidly as we aim to
`become a majority smoke-free company by 2025. Smoke-free net revenues made up
`almost 30% of our pro forma total and exceeded 30% for total PMI in thefirst half of the
`
`year.
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`IQOS devices accounted for approximately 5% of the $4.2 billion of pro forma H1 RRP
`net revenues. This reflects higher device volume at a lower average price than last year
`as we expand our device portfolio with VEEV and ILUMA andprice ladder, our blade
`device portfolio in preparation for the launch of premium position in ILUMA.Thepositive
`
`momentum of IQOS continuesand is further accelerating in many geographies,
`providing a powerful driver of revenue and margin growth.
`
`Wedelivered organic growth of plus 8.1% in H1 pro forma net revenues and shipment
`
`on growth of plus 4%. This reflects