10-QPeriod: Q3 FY2024

ALTRIA GROUP, INC. Quarterly Report for Q3 Ended Sep 30, 2024

Filed October 31, 2024For Securities:MO

Summary

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 billion 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.

Financial Highlights

49 data points
Beta

Revenue

$6.26B

60.8% Gross Margin

Net Income

$2.29B

36.6% Net Margin

EPS (Diluted)

$1.34

Total Assets

$34.17B

Cash & Equivalents

$1.93B

Free Cash Flow

$2.58B

Financial Statements
Beta
Revenue$6.26B
Cost of Revenue$1.54B
Gross Profit$3.81B
Operating Income$3.15B
Net Income$2.29B
EPS (Basic)$1.34
EPS (Diluted)$1.34
Shares Outstanding (Basic)1.70B
Shares Outstanding (Diluted)1.70B

Key Highlights

  • 1Net 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.
  • 2Adjusted 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).
  • 3The 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.
  • 4The 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.
  • 5The NJOY e-vapor business continues to grow, with market share increasing to 6.2% in the third quarter of 2024.
  • 6Altria repurchased $3.09 billion of its common stock during the nine months ended September 30, 2024, as part of its share repurchase program.
  • 7The 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.

Frequently Asked Questions

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).

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.

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.

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.