01—Abstract
Summary
Summary of the 10-Q filed October 31, 2024. Cited figures are marked; the original filing is the authoritative source.
Altria Group, Inc. reported its financial results for the nine months and third quarter ended September 29, 2024.
The company experienced a significant increase in net earnings driven by the $2.7 billiona pre-tax gain from the sale of IQOS System commercialization rights and favorable investment income, particularly from its ABI stake. This surge in net earnings offset a decline in operating income, which was impacted by lower shipment volumes in the smokeable products segment and an asset impairment charge of $354 million on the Skoal trademark. Despite the strong reported net earnings, adjusted net earnings saw a slight decrease primarily due to lower operating companies income (OCI) in the smokeable products segment.
The company continues its transition towards a smoke-free future, with its oral tobacco products segment showing growth, driven by its 'on!' nicotine pouch brand, while its NJOY e-vapor business is gaining market share. However, the overall tobacco industry faces headwinds from inflation impacting consumer discretionary income, the proliferation of illicit e-vapor products, and ongoing regulatory scrutiny.
02—Key points
Key Highlights
- Net earnings for the nine months ended September 30, 2024, increased by 35.5% to $8.225 billion, largely due to a $2.7 billion pre-tax gain from the sale of IQOS System commercialization rights.
- Adjusted net earnings decreased slightly by 1.5% to $6.637 billion for the nine months ended September 30, 2024, primarily due to lower adjusted operating companies income (OCI).
- The company recorded a $354 million pre-tax impairment charge on the Skoal trademark in the second quarter of 2024 due to declining sales volumes in the moist smokeless tobacco (MST) category.
- The oral tobacco products segment experienced a revenue increase of 4.6% for the nine months, driven by higher pricing and growth in the 'on!' nicotine pouch brand.
- The NJOY e-vapor business continues to grow, with market share increasing to 6.2% in the third quarter of 2024.
- Altria repurchased $3.09 billion of its common stock during the nine months ended September 30, 2024, as part of its share repurchase program.
- The company announced an "Optimize & Accelerate" initiative expected to deliver at least $600 million in cumulative cost savings over the next five years, with initial phases incurring approximately $100-125 million in charges.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, Altria Group, Inc. kept $0.37.
- Revenue$6.26B100.0%
- Cost of revenue−$2.45B39.2%
- Gross profit$3.81B60.8%
- Operating costs−$656.0M10.5%
- Operating income$3.15B50.4%
- Interest, other & tax−$859.0M13.7%
- Net income$2.29B36.6%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed October 31, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $6.26B$6.28B | −0.4% |
| Cost of Revenue | $1.54B$1.58B | −2.7% |
| Gross Profit | $3.81B$3.70B | +2.9% |
| Operating Income | $3.15B$3.09B | +2.0% |
| Net Income | $2.29B$2.17B | +5.9% |
| EPS (Basic) | $1.34$1.22 | +9.8% |
| EPS (Diluted) | $1.34$1.22 | +9.8% |
| Shares Outstanding (Basic) | 1.70B1.77B | −3.9% |
| Shares Outstanding (Diluted) | 1.70B1.77B | −3.9% |
05—Questions
Frequently Asked Questions
What was the primary driver of the significant increase in Altria's net earnings for the nine months ended September 30, 2024?
The substantial increase in net earnings was primarily driven by a $2.7 billion pre-tax gain recognized from the sale of Altria's U.S. commercialization rights to the IQOS System, along with favorable investment income from its stake in Anheuser-Busch InBev (ABI).
How is the company addressing the decline in its smokeable products segment and the broader industry trends?
Altria is focused on its 'Vision' to lead the transition to a smoke-free future. While the smokeable products segment saw lower volumes, the company is investing in growth areas like oral nicotine pouches ('on!') and e-vapor products (NJOY). It also approved an 'Optimize & Accelerate' initiative to improve efficiency and reinvest savings into its smoke-free transition.
What is the impact of the Skoal trademark impairment charge?
Altria recorded a non-cash, pre-tax impairment charge of $354 million in the second quarter of 2024 on its Skoal trademark. This was due to declining sales volumes in the moist smokeless tobacco (MST) category, influenced by evolving consumer preferences and increased competition from oral nicotine pouches.
What is Altria's outlook regarding consumer discretionary income and its impact?
The company notes that inflationary pressures continue to impact consumer discretionary income, leading to a shift towards discount cigarette brands. This trend is also observed to contribute to the growth of illicit e-vapor products and potentially impacts the adoption of Altria's smoke-free alternatives.
06—Continue