01—Abstract
Summary
Summary of the 10-Q filed July 31, 2024. Cited figures are marked; the original filing is the authoritative source.
Altria Group, Inc. (MO) reported a significant increase in net earnings for the six months ended June 30, 2024, primarily driven by a substantial gain from the sale of its IQOS System commercialization rights, which contributed $2.7 billiona to earnings before income taxes.
Despite this large one-time gain, the company's adjusted net earnings saw a slight decrease of 4.1% compared to the prior year, reflecting a challenging operating environment. This was impacted by lower operating companies income (OCI) in the smokeable products segment due to declining shipment volumes and increased costs, and an asset impairment charge of $354 millionb related to the Skoal trademark in the oral tobacco products segment. While the company continues to navigate macroeconomic pressures and evolving consumer preferences, it has successfully executed substantial share repurchases funded by proceeds from its ABI investment sale, aiming to enhance shareholder value.
The company also advanced its smoke-free future strategy with positive developments in its NJOY e-vapor business, including FDA marketing granted orders for menthol products. However, the company faces ongoing challenges from illicit e-vapor products and a general increase in illicit trade across tobacco categories, which management is actively monitoring.
02—Key points
Key Highlights
- Altria reported a significant increase in net earnings to $5.93 billion for the six months ended June 30, 2024, up from $3.90 billion in the prior year, largely due to a $2.7 billion pre-tax gain from the sale of IQOS System commercialization rights.
- Adjusted net earnings decreased by 4.1% to $4.28 billion for the six months ended June 30, 2024, compared to $4.46 billion in the prior year, indicating pressure on core operations.
- The company recorded a $354 million pre-tax impairment charge on the Skoal trademark due to declining sales volumes in the smokeless tobacco market.
- Altria repurchased $2.4 billion of its common stock under accelerated share repurchase agreements during the first quarter, funded by proceeds from the sale of a portion of its ABI investment.
- NJOY, Altria's e-vapor business, received FDA marketing granted orders for four menthol e-vapor products, and its U.S. e-vapor category share grew to 5.5% in the second quarter.
- The smokeable products segment experienced a 4.7% decrease in net revenues due to lower shipment volumes, despite pricing increases.
- The oral tobacco products segment saw a 4.1% increase in net revenues, driven by higher pricing, but reported OCI declined significantly due to the Skoal impairment charge.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2024, Altria Group, Inc. kept $0.61.
- Revenue$6.21B100.0%
- Cost of revenue−$2.53B40.8%
- Gross profit$3.67B59.2%
- Operating costs−$1.14B18.4%
- Operating income$2.53B40.8%
- Interest, other & tax$1.27B20.5%
- Net income$3.80B61.2%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed July 31, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $6.21B$6.51B | −4.6% |
| Cost of Revenue | $1.60B$1.68B | −4.7% |
| Gross Profit | $3.67B$3.76B | −2.2% |
| Operating Income | $2.53B$2.90B | −12.8% |
| Net Income | $3.80B$2.12B | +79.6% |
| EPS (Basic) | $2.21$1.19 | +85.7% |
| EPS (Diluted) | $2.21$1.19 | +85.7% |
| Shares Outstanding (Basic) | 1.72B1.78B | −3.6% |
| Shares Outstanding (Diluted) | 1.72B1.78B | −3.6% |
05—Questions
Frequently Asked Questions
What was the primary driver of Altria's increased net earnings in the first half of 2024?
The primary driver of the significant increase in net earnings for the first half of 2024 was the $2.7 billion pre-tax gain recognized from the assignment of the IQOS System commercialization rights to Philip Morris International Inc. (PMI).
How did Altria's core operational performance change, excluding special items?
Excluding special items such as the IQOS gain and the Skoal trademark impairment, Altria's adjusted net earnings decreased by 4.1% to $4.28 billion for the six months ended June 30, 2024, compared to the same period in 2023. This reflects challenges in its core operations, particularly lower operating companies income in the smokeable products segment and increased costs.
What is the impact of the Skoal trademark impairment on the company's financials?
Altria recorded a non-cash, pre-tax impairment charge of $354 million on the Skoal trademark in the second quarter of 2024. This was due to declining sales volumes for moist smokeless tobacco (MST) products, influenced by evolving consumer preferences and increased competition from oral nicotine pouches. This impairment negatively impacted the oral tobacco products segment's reported OCI.
What is the status of Altria's share repurchase program and its ABI investment?
Altria repurchased $2.4 billion of its common stock through accelerated share repurchase (ASR) transactions in the first half of 2024, funded by proceeds from selling a portion of its Anheuser-Busch InBev (ABI) investment. The company still has $990 million remaining under its authorized share repurchase program.
What progress has been made with the NJOY e-vapor business?
NJOY received FDA marketing granted orders for four menthol e-vapor products in June 2024, a positive step for its regulatory standing. The company also saw its U.S. e-vapor category share grow to 5.5% in the second quarter of 2024.
06—Continue