10-QPeriod: Q2 FY2022

ALTRIA GROUP, INC. Quarterly Report for Q2 Ended Jun 30, 2022

Filed July 28, 2022For Securities:MO

Summary

Altria Group, Inc. reported a net earnings of $2.85 billion for the six months ended June 30, 2022, a decrease from $3.57 billion in the prior year period, primarily driven by unfavorable results from its equity investments, particularly a significant unrealized loss on its JUUL investment. Diluted EPS also saw a decline. Adjusted diluted EPS, however, showed a slight increase, indicating that core operations performed better excluding these investment-related impacts. The company continued its share repurchase program, returning capital to shareholders. The company is navigating a challenging macroeconomic environment marked by inflation and supply chain disruptions, which are impacting consumer behavior and costs. Regulatory scrutiny, particularly concerning smoke-free products like JUUL, remains a significant factor. Despite these headwinds, Altria remains committed to its "Moving Beyond Smoking" vision, focusing on transitioning adult smokers to smoke-free alternatives.

Financial Highlights

50 data points
Beta

Revenue

$6.54B

56.0% Gross Margin

Net Income

$891.00M

13.6% Net Margin

EPS (Diluted)

$0.49

Total Assets

$36.75B

Cash & Equivalents

$2.63B

Free Cash Flow

-$552.00M

Financial Statements
Beta
Revenue$6.54B
Cost of Revenue$1.71B
Gross Profit$3.67B
Operating Income$3.10B
Net Income$891.00M
EPS (Basic)$0.49
EPS (Diluted)$0.49
Shares Outstanding (Basic)1.81B
Shares Outstanding (Diluted)1.81B

Key Highlights

  • 1Net earnings attributable to Altria decreased by 20.2% to $2.85 billion for the six months ended June 30, 2022, compared to $3.57 billion in the same period last year.
  • 2Diluted EPS attributable to Altria decreased by 18.7% to $1.57 for the six months ended June 30, 2022.
  • 3Adjusted diluted EPS attributable to Altria increased by 3.5% to $2.38 for the six months ended June 30, 2022, driven by fewer shares outstanding and higher adjusted net earnings.
  • 4The company recorded a significant non-cash, pre-tax unrealized loss of $1.26 billion related to its investment in JUUL for the six months ended June 30, 2022.
  • 5Altria continued its share repurchase program, repurchasing $1.08 billion of common stock during the first six months of 2022.
  • 6Net revenues decreased by 4.1% to $12.44 billion for the six months ended June 30, 2022, primarily due to the sale of its wine business and lower revenues in smokeable and oral tobacco products segments.
  • 7The company's smokeable products segment's OCI increased by 3.4% for the six months ended June 30, 2022, driven by higher pricing and lower promotional investments, despite a decline in shipment volume.

Frequently Asked Questions

The primary driver of the decrease in net earnings was the unfavorable results from Altria's equity investments, particularly the significant non-cash, pre-tax unrealized loss of $1.26 billion recognized on its investment in JUUL during the period. Lower income from its investment in ABI also contributed.

For the six months ended June 30, 2022, Altria's smokeable products segment reported an increase in OCI (Operating Companies Income) of 3.4% to $5.32 billion. This was driven by higher pricing and lower promotional investments, which helped offset a decline in shipment volume of 8.8% and increased costs.

Altria forecasted its 2022 full-year adjusted diluted EPS to be in the range of $4.79 to $4.93, representing a growth rate of 4% to 7% over its 2021 full-year adjusted diluted EPS of $4.61. This guidance accounts for potential economic and regulatory factors.

Altria's investment in JUUL continues to face significant challenges. The FDA issued marketing denial orders (MDOs) for JUUL's products, although these were administratively stayed pending further review. This uncertainty, along with JUUL's liquidity concerns and ongoing litigation, led to a substantial decrease in the estimated fair value of Altria's investment, resulting in a large unrealized loss for the period.