PMI - 2009 Annual Meeting of Stockholders, May 5, 2009..

May 7, 2009 - Philip Morris International Inc. (PMI) held its 2009 Annual Meeting of Stockholders today. Remarks of Louis C. Camilleri, Chairman and Chief Executive Officer, highlighted the company's key achievements in 2008 and reaffirmed the company's commitment to deliver returns to its shareholders.

The highlight of 2008 was clearly our spin-off from Altria Group, Inc. in March." Our track record is excellent. Over the last ten years, we have increased our volume at a compound annual growth rate of 2.0% and our operating companies income (OCI) at a compound annual growth rate of 7.6%," said Mr. Camilleri.

In 2008, PMI’s cigarette volume reached 869.8 billion units, an increase of 21.1 billion, or 2.5%, compared to 2007. During the first quarter of this year, our cigarette shipment volume was stable at 203.4 billion units, but was 1.1% lower excluding acquisitions. PMI emphasized its 2008 profit: $16.3 billion on the sale of 850 billion cigarettes outside the United States.

Our confidence in the future is based on the successful implementation of the strategies that we outlined at the time of the spin-off and, in particular, on the successful acceleration of innovation across our key brands and the roll-out of a new brand architecture for Marlboro. Our innovation efforts are focused on four key consumer trends. These are a greater preference for lighter-tasting, smoother cigarettes; an increased consumer interest in innovation and new products; a growing preference for slimmer diameter products amongst both male and female adult smokers; and an increase in demand in certain markets, most notably in Asia, for menthol cigarettes.

Let me share with you a couple of examples of our success with the launch of new products, focusing on Marlboro. Marlboro Filter Plus, also sold as Marlboro Flavor Plus, has a unique multi-chambered filter, one of which contains tobacco for added flavor and is sold in a novel sliding pack.

Marlboro Black Menthol was launched last August in Japan, where it has become our most successful new launch ever in this important market. It has achieved a 1.0% share of market and has enabled the Marlboro brand family to resume its growth, reaching a 10.4% market share in the first quarter of this year. Given the success of Marlboro Black Menthol in Japan, it was launched during the first quarter in Hong Kong and Indonesia.

Marlboro remains by far the best selling international cigarette brand in the world, but we have also successfully developed a broad portfolio of other brands across all price categories. Parliament is a prestige brand noted for its recessed filter. Its volume grew by 5.9% in the first quarter of this year. The brand generates superior margins and is particularly successful in Korea, Russia, Turkey and Ukraine. In Russia in fact, Parliament outsells Marlboro by some 25%. L&M is one of the world’s leading mid-price brands. Although L&M’s volume declined by 0.5% in the first quarter of this year, this was a relatively solid performance attributable mainly to the European Union Region, where it is the second largest cigarette brand, and most notably Germany, where L&M is the fastest growing brand on the market. Chesterfield is a mid-price brand that generally sells at a premium to L&M and therefore generates higher margins. During the first quarter of this year, the brand’s strong performance in the EU Region, where volume was up 5.5% most notably due to its strength in Austria, France and Portugal, was partially offset by a decline in Russia.

While we have actively supported ratification, and many of the provisions, of the World Health Organization’s Framework Convention on Tobacco Control, we do not support each and every proposal made by the FCTC’s Conference of the Parties or by all public health groups. We believe that tobacco companies should be permitted to communicate directly with adult smokers within well-defined – and enforced – rules. The ability to communicate with adult smokers about our brands is fundamental to the ability to communicate with adult smokers about our brands is fundamental to fair and vigorous competition which is why we do not agree to unilaterally stop all advertising, marketing or promotions. However, we will continue to press for effective legislation restricting tobacco marketing, including bans on television, radio, cinema, and billboards, provided that the rules apply to, and are enforced against, all tobacco products and all industry participants.
Similarly, we do not support unreasonable product standards that are intended to prevent the manufacture of products that adult smokers prefer. Nor do we support the growing call for product display bans and plain packaging. The imposition of point-of-sale display bans and generic packaging are inappropriate measures – fraught with legal and anti-competitive problems – with no evidence whatsoever to support the claim that either action would lead to a reduction in smoking prevalence among youth or adults.

We have an outstanding brand portfolio, led by Marlboro and Parliament, which is the leader in the above premium price category, and a wide range of mid and low-price brands, led by L&M, Chesterfield and Bond Street.

Around the globe, more than 75,000 people, representing over 100 nationalities, work for Philip Morris International. In 2005, we were delighted to welcome into our family the employees of PT HM Sampoerna. Today, this PMI affiliate in Indonesia employs approximately 30,000 people directly, and contracts with third-party operators who collectively employ more than 60,000 people.

References: Philip Morris International Inc. (PMI) Holds 2009 Annual Meeting of Stockholders, Reuters, 5/5/2009; Philip Morris Meeting Mixes Tobacco Profit and Protests by DUFF WILSON, The New York Times, 5/5/2009.

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