Altria's Q2 2023 Report: Decreased Shipments, Increased Promotional Investments

On August 1st, Altria Group released its financial report for the second quarter and first half of 2023.

Shipment volume declines, promotional investment increases, resulting in a decrease of 1.7% in net income.

In the first half of 2023, Altria Group reported a net income of $12.23 billion, representing a 1.7% decrease compared to the previous year. However, when excluding consumer taxes, the company's revenue saw a slight growth of 0.1%, amounting to $10.2 billion. Altria stated in a press release that the decline in net income can be attributed to a decrease in shipping volume and increased investments in promotions, although some of these effects were offset by pricing increases.

In the second quarter of 2023, Altria reported a net income of $6.51 billion, representing a decrease of 0.5% compared to the previous year. After excluding sales tax, the company's revenue stood at $5.43 billion, marking a growth of 1.2% year-on-year. Altria stated in a press release that the decline in net income for the second quarter was mainly attributed to a decrease in shipment volume and increased investment in promotions, partially offset by price increases.

Net revenue from oral tobacco products rose by 2.3%, while shipments of nicotine pouches such as ON! saw a significant increase of over 40%.

In the second quarter and first half of 2023, Altria's net revenue from oral tobacco products increased by 2.3%. This growth was primarily driven by price increases, but partially offset by increased promotional investments, reduced shipment volume, and increased on! shipment volume.

In the second quarter and first half of 2023, the shipment volumes of oral tobacco products saw a decline of 1.7% and 1.8% respectively. Among them, the shipment volume of nicotine pouch ON! in the second quarter of 2023 reached 30 million cans, showing a year-on-year increase of 47.8%; for the first half of the year, it reached 55 million cans, with a year-on-year growth of 43%.

In the second quarter and first half of 2023, Altria had a market share of 44% and 44.6% respectively in the oral tobacco products segment.

Philip Morris International (PMI) has successfully completed the acquisition of NJOY and has received a final payment of $1.8 billion.

In a press release, Altria announced that it has successfully completed the acquisition of NJOY Holdings, Inc. on June 1, 2023, by paying a cash amount of $2.75 billion. Additionally, there is a potential for an additional cash payment of up to $500 million in the future, subject to FDA authorization for certain NJOY products.

In July, Altria received a final payment of approximately $1.8 billion (including interest) from Philip Morris International (PMI) as part of the $2.7 billion (including interest) transition agreement for the IQOS tobacco heating system. The proceeds were subsequently used to fully repay the outstanding $2 billion term loan.

Altria's CEO, Billy Gifford, stated, "We had a good performance in the first half of the year and continue to make progress towards our smoke-free goals. We completed the acquisition of NJOY and achieved strong business results, with a 5% increase in adjusted diluted earnings per share for the first half of the year. Additionally, we returned $3.8 billion to shareholders while investing in pursuit of our vision.

We look forward to implementing our business plan for NJOY in the second half of the year, and reiterate our guidance of projected diluted earnings per share in the range of $4.89 to $5.03 for the full year of 2023. This range represents a growth rate of adjusted diluted earnings per share of 1% to 4% from the base of $4.84 in 2022.

Reference:

[1] Altria Reports 2023 Second-Quarter and First-Half Results; Reaffirms 2023 Full-Year Earnings Guidance