Altria Reports Q1 2023 Earnings, Decline in Revenue.

Altria has released its Q1 2023 results at 9am EST on April 27th (9pm Beijing time). The earnings, audited under GAAP, show a 2.9% YoY drop in net revenue to $5.719 billion, and a 1.2% YoY drop in revenue after consumer taxes to $4.763 billion. The reported tax rate is 27.9%, up 1.2 points from the same period last year, while the adjusted tax rate is 25.0%, down 0.1 points from last year. Adjusted earnings per share were $1.18, a 5.4% YoY growth, while reported earnings per share were $1, a 7.4% YoY drop.

Altria CEO Billy Gifford announced a solid start to the business, with the tobacco division performing exceptionally well despite the challenging macroeconomic environment, achieving a strong adjusted earnings per share growth of 5.4%.

Altria, a major tobacco company, has reported impressive growth in shipment volume and market share for its smokeless products, specifically its brand on! In the first quarter of 2023, Altria's smokeless products had a total shipment volume of 190 million boxes, with on! accounting for 25.2 million of those boxes, an increase of 37.7% from the previous year. Its market share has also increased each quarter, reaching 6.5%.

Smoking-in-mouth shipments increase | Source: Altria

In addition, other smokeless tobacco products such as Copenhagen, Skoal, and others have also seen an increase as shown in the graph below.

Source: Altria

A call for tobacco law enforcement in 2022: California officially banned flavored (including menthol) tobacco and e-cigarette products through a ballot initiative. Altria has stated that it is actively complying with the new policy, ceasing the transportation of related products to California. This has resulted in a 12.8% decline in shipments by its subsidiary, PM USA, to California, as shown in the following graph.

California flavor ban results in reduced shipments | Source: Altria

In its latest financial report, Altria mentioned that despite the bans on flavored tobacco and menthol in California, flavored tobacco products are still being sold at the retail level. Altria is calling for increased enforcement. Gifford stated that "40% of smokers in California are still using menthol cigarettes," and many menthol and flavored tobacco products have been renamed to avoid regulation.

PowerPoint title: Poor Law Enforcement in California | Source: Altria

According to financial reports, Altria's net income from traditional combustible cigarettes has decreased by 3.3% compared to the previous year. This is primarily due to a decrease in shipment volume and an increase in promotional investments, as shown in the graph below.

Cigarette revenue decline | Source: Altria

Altria released its full-year performance guidance for 2023 in its financial report. The company reiterated its commitment to delivering adjusted earnings per share in the range of $4.98 to $5.13 in 2023, representing a 3% to 6% increase from 2022. Altria stated that the guidance takes into account various scenarios, given the uncertainties in the external environment, including factors such as high inflation, rising interest rates, global supply chain disruptions, as well as regulatory and legislative developments. The company will continue to monitor economic and policy factors closely.

Financial Outlook for 2023 | Source: Altria

The company's full-year adjusted earnings per share guidance for 2023 includes planned investments to support its vision, such as ongoing research, development and regulatory preparation costs for smokeless products, strengthening our digital consumer engagement systems, and supporting market activities for smokeless products. The guidance range also includes expected lower net periodic benefit income due to market factors (including higher interest rates) and the impact of liquidating the former financial services business in 2022. The guidance range does not include the potential financial impact of the NJOY transaction.

Altria has announced its corporate goals for 2028 in its latest performance report. The company plans to achieve these goals through various measures, including achieving mid-single-digit adjusted earnings per share growth by 2028, setting a progressive dividend target with mid-single-digit dividend growth, maintaining a debt/EBITDA ratio of approximately 2.0, maintaining its leadership position in the US tobacco market, and sustaining a total adjusted after-tax profit margin of at least 60% annually for the next five years.

Additionally, Altria plans to achieve growth targets in its portfolio of smokeless products in the United States, including a sales volume increase of at least 35% by 2022, and increasing the net revenue of smokeless products from $2.6 billion in 2022 to $5 billion, with $2 billion coming from innovative smokeless products. The company also aims to expand its international competitiveness in innovative smokeless and non-nicotine products for long-term growth, and anticipates developing strategies for these growth areas in the next 12 months.

Confidence in the electronic vaporization field is strong. This is due in part to Altria's recent announcement of its acquisition of NJOY, a leading electronic vaporization company in North America. While the company's financial report did not include specific data on this acquisition, the CEO stated that he is optimistic about NJOY's future under the Altria umbrella. He explained that NJOY is the only pod vape product to have applied for pre-market tobacco product application (PMTA) with the FDA.

Altria is in the process of acquiring NJOY.

2FIRSTS will continue to track and report on the latest developments from Altria Corporation. Stay tuned.

Related reading:

California bans flavored condiments.

In the US electronic cigarette market, Vuse has increased its market share by 31.1%, whereas NJoy has experienced a decline of 10.9%.

Altria and Reynolds spend large amounts of lobbying funds to "stir up" black groups against the mint-flavored cigarette ban.

References:

Altria's Q1 financial report