Altria Reports 2021 First-Quarter Results; Reaffirms 2021 Earnings Guidance; Acquires Remaining 20% of Global on! Business
Altria Group, Inc. (NYSE: MO) reported its Q1 2021 results, with net revenues of $6.036 billion, down 5.1% year-over-year. Adjusted diluted EPS was $1.07, a decline of 1.8%. Altria reaffirmed its 2021 EPS guidance of $4.49 to $4.62, indicating a growth rate of 3% to 6%. Significant developments include acquiring full ownership of on! oral nicotine pouches and expanding the Marlboro HeatSticks and IQOS products. The company paid $1.6 billion in dividends and repurchased 6.9 million shares. Challenges include an unrealized loss of $200 million on its JUUL investment.
- Acquisition of the remaining 20% of on! oral nicotine pouches enhances portfolio.
- Continued expansion of non-combustible products, with increasing market share for Marlboro HeatSticks.
- Reaffirmed guidance for 2021 adjusted diluted EPS growth of 3% to 6%.
- Net revenues decreased by 5.1% compared to last year.
- Reported diluted EPS down 7.2%, reflecting financial strain.
- Recorded a $200 million unrealized loss on JUUL investment due to lower revenue projections.
Altria Group, Inc. (Altria) (NYSE: MO) today reports its 2021 first-quarter business results and reaffirms its guidance for 2021 full-year adjusted diluted earnings per share (EPS).
“We are off to a strong start to the year and believe our businesses are on track to deliver against full-year plans. Against a challenging comparison, our tobacco businesses performed well in the first quarter and we continued to make progress advancing our non-combustible portfolio,” said Billy Gifford, Altria’s Chief Executive Officer.
“This morning we announced another important milestone in Altria’s journey in Moving Beyond Smoking™. We now have full global ownership of on! oral nicotine pouches as we recently closed transactions to acquire the remaining
“We would like to honor the memory of Tom Farrell, our late Chairman of the Board. Tom served 13 distinguished years on our Board, offered valuable insights and guidance during his tenure and was a true visionary. We will miss his leadership, contributions and friendship.”
Altria Headline Financials1
($ in millions, except per share data) |
Q1 2021 |
Change vs. Q1 2020 |
Net revenues |
|
(5.1)% |
Revenues net of excise taxes |
|
(3.3)% |
|
||
Reported tax rate |
26.6 % |
0.1 pp |
Adjusted tax rate |
25.0 % |
1.0 pp |
|
||
Reported diluted EPS2 |
|
(7.2)% |
Adjusted diluted EPS2 |
|
(1.8)% |
1 “Adjusted” financial measures presented in this release exclude the impact of special items. See “Basis of Presentation” for more information.
2 “EPS” represents diluted earnings per share attributable to Altria.
As previously announced, a conference call with the investment community and news media will be webcast on April 29, 2021 at 9:00 a.m. Eastern Time. Access to the webcast is available at www.altria.com/webcasts.
Cash Returns to Shareholders
Dividends
-
In the first quarter, Altria paid
$1.6 billion in dividends. -
Altria’s current annualized dividend rate is
$3.44 per share. -
Altria maintains its long-term objective of a dividend payout ratio target of approximately
80% of its adjusted diluted EPS. Future dividend payments remain subject to the discretion of Altria’s Board of Directors (Board).
Share Repurchase Program
-
In the first quarter, Altria repurchased 6.9 million shares at an average price of
$47.02 , for a total cost of$325 million . -
As of March 31, 2021, Altria had approximately
$1.7 billion remaining under the current$2 billion share repurchase program, which Altria expects to complete by June 30, 2022. Share repurchases depend on marketplace conditions and other factors, and the program remains subject to the discretion of Altria’s Board.
Non-combustible Products Business Platform
Heated Tobacco
- In March, PM USA introduced the new IQOS 3 device for sale in all current markets. IQOS 3 has a longer battery life and a faster re-charging time compared to the 2.4 version.
- As of the end of April, PM USA expanded Marlboro HeatSticks in retail stores statewide, across Georgia, Virginia, North Carolina and South Carolina.
-
In the first quarter, Marlboro HeatSticks achieved a cigarette category retail share in stores with distribution of:
-
1.1% in Atlanta, an increase of0.2% from the fourth quarter of 2020. -
1.0% in Charlotte, an increase of0.3% from the fourth quarter of 2020.
-
- In June, PM USA plans to open a new IQOS boutique in the Tysons Corner Mall, a center point in the highly populated Northern Virginia metro market.
-
As previously announced, PM USA:
- plans to expand IQOS and Marlboro HeatSticks into three additional metro markets in 2021.
-
expects Marlboro HeatSticks to be sold in geographies covering approximately
25% of U.S. cigarette industry volume by the end of 2021.
Oral Tobacco
-
In December 2020 and April 2021, Altria subsidiaries closed transactions to acquire the remaining
20% of the global on! business for a total of approximately$250 million . - In the first quarter, Helix expanded the distribution of on! by an additional 15,000 stores. on! was available in approximately 93,000 stores as of the end of the first quarter.
-
on!’s retail share performance:
-
on!’s retail share of the total oral tobacco category was
1.7% in the first quarter, an increase of0.6% from the fourth quarter of 2020. -
on!’s retail share of the oral tobacco category in stores with on! distribution was
3.1% for the twelve months ended March 31, 2021, an increase of0.7% from the twelve months ended December 31, 2020.
-
on!’s retail share of the total oral tobacco category was
-
As previously announced, Helix expects by mid-year 2021:
- unconstrained on! manufacturing capacity in the U.S. market.
-
on! to be sold in stores covering
90% of total oral tobacco category volume and80% of total cigarette category volume in the U.S.
JUUL Investment
In the first quarter:
-
Altria estimates (i) total e-vapor category volumes increased by
24% versus a year ago and7% sequentially and (ii) JUUL’s retail share of the total e-vapor category was33% , a decrease of6% year-over-year and2% sequentially. -
Altria recorded a non-cash pre-tax unrealized loss of
$200 million as a result of a decrease in the fair value of JUUL. The decrease in fair value was primarily driven by (i) Altria’s projections of lower JUUL revenues over time due to lower JUUL volume assumptions resulting from a continuation of heightened competitive dynamics in the U.S. e-vapor category and (ii) an increase in the discount rate due to a change in market factors.
As of March 31, 2021, the fair value of Altria’s JUUL investment was
Altria accounts for its investment in JUUL under the fair value option. Under this option, Altria’s consolidated statement of earnings includes any cash dividends received from its investment in JUUL as well as any change in the fair value of the investment, which is calculated quarterly. These fair value changes are treated as special items and are excluded from Altria’s adjusted results.
Capital Markets Activity
Debt Liability Management Transaction
In the first quarter, Altria:
-
Executed a series of transactions to take advantage of favorable market conditions to adjust its debt maturity profile and extend the weighted average maturity of its debt. Specifically, Altria issued new long-term senior unsecured notes totaling
$5.5 billion and repurchased over$5 billion aggregate principal amount in outstanding long-term senior unsecured notes through cash tender offers and a redemption (“Debt Liability Management Transaction”). -
Recorded pre-tax losses on early extinguishment of debt in the amount of
$649 million as a result of the tender offers and the redemption.
Following the completion of the Debt Liability Management Transaction, Altria’s weighted average coupon rate was
Debt Maturity
In May, Altria expects to retire
Environmental, Social and Governance (ESG)
Altria’s Corporate Responsibility Focus Areas are: reducing the harm of tobacco products, preventing underage use, protecting the environment, driving responsibility through our value chain, supporting our people and communities and engaging and leading responsibly.
Environmental
- In April, Altria joined over 400 businesses and investors in supporting the Biden administration’s commitment to climate action and calling for U.S. targets aligned with the Paris Agreement and the latest climate science. The letter Altria signed was organized by the We Mean Business coalition and Ceres. It communicates business and investor support for an ambitious 2030 emissions reduction target, or Nationally Determined Contribution pursuant to the Paris Agreement, in pursuit of reaching net-zero emissions by 2050.
Social
-
In April, Altria released its 2020-2021 Supporting our People and Communities Corporate Responsibility Progress Report. 2020 Highlights include:
-
Altria established aspirational Inclusion and Diversity Aiming Points, which include 50-50 gender parity at its Vice President and above levels and a composition of at least
30% ethnically diverse executives. At the end of 2020, approximately34% of Altria’s VPs were women and approximately19% were ethnically diverse. -
Altria’s data on pay equity showed that salaries of non-white employees are
99.6% of white employees’ salaries, and female employees’ salaries are99.4% of male employees’ salaries when adjusted for factors generally considered to be legitimate differentiators of salary. -
Altria’s Corporate Giving, Employee Community Engagement and Race & Equity Initiative included
$55 million of corporate giving, of which, Altria contributed$5 million to help address systemic racism.
-
Altria established aspirational Inclusion and Diversity Aiming Points, which include 50-50 gender parity at its Vice President and above levels and a composition of at least
Governance
- In April, Thomas F. Farrell II, Altria’s Chairman of the Board passed away. The Board plans to evaluate Board leadership succession and appoint a new Chair at its meeting following Altria’s 2021 Annual Meeting of Shareholders in May.
Impact of COVID-19 Pandemic
Impact on Tobacco Business Operations
- To date, Altria’s tobacco businesses have not experienced any material adverse effects associated with governmental actions to restrict consumer movement or business operations, but Altria continues to monitor these factors. The majority of retail stores in which tobacco products are sold, including convenience stores, have been deemed to be essential businesses by authorities and remain open.
- Altria continues to monitor the macroeconomic risks of COVID-19 and its effect on adult tobacco consumers (ATC), including stay-at-home practices, disposable income (which may be impacted by unemployment rates and fiscal stimulus), purchasing patterns and adoption of non-combustible products.
Impact on Wine Business Operations
- In 2020, Ste. Michelle’s on-premise and direct-to-consumer sales were significantly impacted by COVID-19. Ste. Michelle continues to monitor the impact of the COVID-19 pandemic-associated risks to its businesses.
Impact on ABI, JUUL and Cronos Investments
- ABI has been, and continues to be, impacted by COVID-19. While ABI stated in its year end 2020 earnings report that it expects its financial results in 2021 to improve meaningfully versus 2020, ABI did not provide earnings guidance for 2021 given the continued uncertainty. The extreme market disruption and volatility associated with the COVID-19 pandemic resulted in a steep decline in ABI’s stock price in the first half of 2020. Although there was a gradual recovery in ABI’s stock price in the second half of 2020 and again in April 2021, the fair value of Altria’s investment in ABI continues to be below the carrying value. While Altria believes that this decline is temporary, it will continue to monitor its investment in ABI, including the impact of the COVID-19 pandemic on ABI’s business and market valuation.
- JUUL’s operations were negatively impacted in 2020 by COVID-19 due to stay-at-home practices and government-mandated restrictions. While the impact was considered in Altria’s quantitative valuations conducted in connection with the preparation of its financial statements for the three months ended March 31, 2021 and the year ended December 31, 2020, Altria does not believe the COVID-19 pandemic was a primary driver of the non-cash pre-tax impairment charge recorded during 2020 or the changes in fair value recorded during 2020 and during the three months ended March 31, 2021. Altria will continue to monitor the impact of the COVID-19 pandemic on JUUL’s business in its quarterly valuations of JUUL.
- Cronos has been, and continues to be, impacted by COVID-19, due in part to government actions limiting access to retail stores in the United States and Canada. Altria will continue to monitor its investment in Cronos, including the impact of the COVID-19 pandemic on Cronos’s business and market valuation.
2021 Full-Year Guidance
Altria reaffirms its guidance for 2021 full-year adjusted diluted EPS to be in a range of
Altria’s 2021 full-year adjusted diluted EPS guidance range includes planned investments in support of its Vision, such as (i) marketplace investments to expand the availability and awareness of Altria’s non-combustible products, (ii) costs associated with building an industry-leading consumer engagement platform that enhances data collection and insights in support of ATC conversion to non-combustible products and (iii) increased non-combustible product research and development expense. Altria expects 2021 adjusted diluted EPS growth in the last three quarters of the year.
Altria continues to expect its 2021 full-year adjusted effective tax rate will be in a range of
Altria’s full-year adjusted diluted EPS guidance and full-year forecast for its adjusted effective tax rate exclude the impact of certain income and expense items that management believes are not part of underlying operations. These items may include, for example, loss on early extinguishment of debt, restructuring charges, asset impairment charges, acquisition-related costs, COVID-19 special items, equity investment-related special items (including any changes in fair value of the equity investment and any related warrants and preemptive rights), certain tax items, charges associated with tobacco and health litigation items, and resolutions of certain nonparticipating manufacturer (NPM) adjustment disputes under the 1998 Master Settlement Agreement (such dispute resolutions are referred to as NPM Adjustment Items).
Altria’s management cannot estimate on a forward-looking basis the impact of certain income and expense items, including those items noted in the preceding paragraph, on its reported diluted EPS or its reported effective tax rate because these items, which could be significant, may be unusual or infrequent, are difficult to predict and may be highly variable. As a result, Altria does not provide a corresponding U.S. generally accepted accounting principles (GAAP) measure for, or reconciliation to, its adjusted diluted EPS guidance or its adjusted effective tax rate forecast.
ALTRIA GROUP, INC.
See “Basis of Presentation” below for an explanation of financial measures and reporting segments discussed in this release.
Financial Performance
-
Net revenues decreased
5.1% to$6.0 billion , primarily driven by lower net revenues in the smokeable products segment. Revenues net of excise taxes decreased3.3% to$4.9 billion . -
Reported diluted EPS decreased
7.2% to$0.77 , primarily driven by losses on early extinguishment of debt from the Debt Liability Management Transaction, a decrease in the estimated fair value of Altria’s investment in JUUL and higher acquisition-related costs, partially offset by higher reported operating companies income (OCI) in the wine segment and favorable Cronos-related and ABI-related special items. -
Adjusted diluted EPS decreased
1.8% to$1.07 , primarily driven by unfavorable timing of interest expense and a higher adjusted income tax rate.
Table 1 - Altria’s Adjusted Results |
|
|
|
||||||
|
|
|
|
||||||
|
First Quarter |
||||||||
|
2021 |
|
2020 |
Change |
|||||
Reported diluted EPS |
$ |
0.77 |
|
|
$ |
0.83 |
|
(7.2) |
% |
NPM Adjustment Items |
(0.01 |
) |
|
— |
|
|
|||
Implementation and acquisition-related costs |
0.02 |
|
|
0.16 |
|
|
|||
Tobacco and health litigation items |
0.01 |
|
|
0.01 |
|
|
|||
JUUL changes in fair value |
0.10 |
|
|
— |
|
|
|||
ABI-related special items |
(0.05 |
) |
|
0.03 |
|
|
|||
Cronos-related special items |
(0.04 |
) |
|
0.05 |
|
|
|||
Loss on early extinguishment of debt |
0.27 |
|
|
— |
|
|
|||
Tax items |
— |
|
|
0.01 |
|
|
|||
Adjusted diluted EPS |
$ |
1.07 |
|
|
$ |
1.09 |
|
(1.8) |
% |
Note: For details of pre-tax, tax and after-tax amounts, see Schedule 5.
Special Items
The EPS impact of the following special items is shown in Table 1 and Schedules 4 and 5.
Implementation and Acquisition-Related Costs
-
In the first quarter of 2021, Altria recorded pre-tax charges of
$48 million (or$0.02 per share), primarily related to acquisition-related costs for the settlement of an arbitration related to the 2019 on! transaction. -
In the first quarter of 2020, Ste. Michelle recorded pre-tax charges of
$392 million (or$0.16 per share) consisting of$292 million for a wine inventory write-off and$100 million for estimated losses on future non-cancelable grape purchase commitments that Ste. Michelle believes no longer have a future economic benefit.
ABI-Related Special Items
-
In the first quarter of 2021, equity earnings from ABI included net pre-tax income of
$128 million (or$0.05 per share), consisting primarily of (i) ABI’s completion of the issuance of a minority stake in its U.S.-based metal container operations, (ii) mark-to-market gains on certain ABI financial instruments associated with its share commitments and (iii) charges associated with an early bond termination by ABI. -
In the first quarter of 2020, equity earnings from ABI included net pre-tax charges of
$56 million (or$0.03 per share), consisting primarily of (i) mark-to-market losses on certain ABI financial instruments associated with its share commitments and (ii) ABI’s completion of its initial public offering of a minority stake of its Asia Pacific subsidiary.
The special items above include Altria’s respective share of the specific amounts recorded by ABI and may also include additional adjustments related to (i) conversion from international financial reporting standards to GAAP and (ii) adjustments to Altria’s investment required under the equity method of accounting.
Cronos-Related Special Items
In the first quarter 2021, Altria recorded net pre-tax (income) expense consisting of the following:
|
First Quarter |
|||||
($ in millions, except per share data) |
2021 |
|
2020 |
|
||
|
|
|
||||
(Gain) loss on Cronos-related financial instruments 1 |
$ |
(110) |
|
$ |
137 |
|
(Income) losses from equity investments 2 |
40 |
|
(48) |
|
||
Total Cronos-related special items - (income) expense |
$ |
(70) |
|
$ |
89 |
|
Earnings per share |
$ |
(0.04) |
|
$ |
0.05 |
|
1 The 2021 and 2020 amounts are related to the non-cash change in the fair value of the warrant and certain anti-dilution protections acquired in the Cronos transaction.
2 Amounts primarily include Altria’s share of Cronos’s non-cash change in the fair value of Cronos’s derivative financial instruments associated with the issuance of additional shares.
JUUL Changes in Fair Value
-
In the first quarter of 2021, Altria recorded a non-cash pre-tax unrealized loss of
$200 million (or$0.10 per share) as a result of a decrease in the fair value of Altria’s investment in JUUL. A corresponding adjustment was made to the JUUL tax valuation allowance.
Loss on Early Extinguishment of Debt
-
In the first quarter of 2021, Altria recorded pre-tax losses on early extinguishment of debt of
$649 million (or$0.27 per share) as a result of the Debt Liability Management Transaction.
SMOKEABLE PRODUCTS
Revenues and OCI
-
Net revenues decreased
6.4% , primarily driven by lower shipment volume and higher promotional investments, partially offset by higher pricing. Revenues net of excise taxes decreased4.6% . - Reported OCI was essentially unchanged, as higher pricing, lower costs and NPM Adjustment Items, were mostly offset by lower shipment volume, higher promotional investments and higher per unit settlement charges.
-
Adjusted OCI decreased
0.7% , primarily driven by lower shipment volume, higher promotional investments and higher per unit settlement charges, partially offset by higher pricing and lower costs. Adjusted OCI margins increased by 2.2 percentage points to57.5% .
Table 2 - Smokeable Products: Revenues and OCI ($ in millions) |
|
|
|
||||
|
|
|
|
||||
|
First Quarter |
||||||
|
2021 |
|
2020 |
|
Change |
||
Net revenues |
$ |
5,250 |
|
$ |
5,606 |
|
(6.4)% |
Excise taxes |
(1,121) |
|
(1,278) |
|
|
||
Revenues net of excise taxes |
$ |
4,129 |
|
$ |
4,328 |
|
(4.6)% |
|
|
|
|
||||
Reported OCI |
$ |
2,372 |
|
$ |
2,370 |
|
|
NPM Adjustment Items |
(32) |
|
— |
|
|
||
Tobacco and health litigation items |
35 |
|
22 |
|
|
||
Adjusted OCI |
$ |
2,375 |
|
$ |
2,392 |
|
(0.7)% |
Adjusted OCI margins 1 |
57.5 |
% |
55.3 |
% |
2.2 pp |
||
1 Adjusted OCI margins are calculated as adjusted OCI divided by revenues net of excise taxes.
Shipment Volume
-
Smokeable products segment reported domestic cigarette shipment volume decreased
12.0% , primarily driven by trade inventory movements, the industry’s rate of decline, one fewer shipping day and other factors. -
When adjusted for trade inventory movements, one fewer shipping day and other factors, smokeable products segment domestic cigarette shipment volume decreased by an estimated
3.5% . -
When adjusted for trade inventory movements, one fewer shipping day and other factors, total estimated domestic cigarette industry volumes decreased by an estimated
2% . -
Reported cigar shipment volume increased
11.1% .
Table 3 - Smokeable Products: Shipment Volume (sticks in millions) |
|
|
|
||
|
|
|
|
||
|
First Quarter |
||||
|
2021 |
2020 |
Change |
||
Cigarettes: |
|
|
|
||
Marlboro |
19,415 |
|
21,842 |
|
(11.1)% |
Other premium |
981 |
|
1,137 |
|
(13.7)% |
Discount |
1,618 |
|
2,045 |
|
(20.9)% |
Total cigarettes |
22,014 |
|
25,024 |
|
(12.0)% |
|
|
|
|
||
Cigars: |
|
|
|
||
Black & Mild |
479 |
|
430 |
|
|
Other |
1 |
|
2 |
|
(50.0)% |
Total cigars |
480 |
|
432 |
|
11.1 % |
|
|
|
|
||
Total smokeable products |
22,494 |
|
25,456 |
|
(11.6)% |
Note: Cigarettes volume includes units sold as well as promotional units, but excludes units sold for distribution to Puerto Rico, and units sold in U.S. Territories, to overseas military and by Philip Morris Duty Free Inc., none of which, individually or in the aggregate, is material to the smokeable products segment.
Retail Share and Brand Activity
-
Marlboro retail share of the total cigarette category increased 0.4 share points to
43.1% .
-
The industry retail share for the discount cigarette segment increased 0.1 share point to
25.3% .
Table 4 - Smokeable Products: Cigarettes Retail Share (percent) |
|
|
|
||
|
|
|
|
||
|
First Quarter |
||||
|
2021 |
2020 |
Percentage
|
||
Cigarettes: |
|
|
|
||
Marlboro |
43.1 |
% |
42.7 |
% |
0.4 |
Other premium |
2.3 |
|
2.3 |
|
— |
Discount |
3.6 |
|
4.0 |
|
(0.4) |
Total cigarettes |
49.0 |
% |
49.0 |
% |
— |
|
|||||
Note: Retail share results for cigarettes are based on data from IRI/MSAi, a tracking service that uses a sample of stores and certain wholesale shipments to project market share and depict share trends. This service tracks sales in the food, drug, mass merchandisers, convenience, military, dollar store and club trade classes. For other trade classes selling cigarettes, retail share is based on shipments from wholesalers to retailers (STARS). This service is not designed to capture sales through other channels, including the internet, direct mail and some illicitly tax-advantaged outlets. It is IRI’s standard practice to periodically refresh its services, which could restate retail share results that were previously released in this service.
ORAL TOBACCO PRODUCTS
Revenues and OCI
-
Net revenues increased
4.2% , primarily driven by higher pricing, partially offset by higher promotional investments in on!. Revenues net of excise taxes increased4.4% . -
Reported OCI decreased
5.3% , primarily driven by higher costs (including acquisition-related costs) and higher promotional investments, partially offset by higher pricing. -
Adjusted OCI increased
3.1% , primarily driven by higher pricing, partially offset by higher promotional investments and higher costs. Adjusted OCI margins declined by 0.9 percentage points to72.1% .
Table 5 - Oral Tobacco Products: Revenues and OCI ($ in millions) |
|
|
|
||||
|
|
|
|
||||
|
First Quarter |
||||||
|
2021 |
|
2020 |
|
Change |
||
Net revenues |
$ |
626 |
|
$ |
601 |
|
|
Excise taxes |
(31) |
|
(31) |
|
|
||
Revenues net of excise taxes |
$ |
595 |
|
$ |
570 |
|
|
|
|
|
|
||||
Reported OCI |
$ |
392 |
|
$ |
414 |
|
(5.3)% |
Acquisition-related costs |
37 |
|
2 |
|
|
||
Adjusted OCI |
$ |
429 |
|
$ |
416 |
|
|
Adjusted OCI margins 1 |
72.1 |
% |
73.0 |
% |
(0.9) pp |
||
1 Adjusted OCI margins are calculated as adjusted OCI divided by revenues net of excise taxes.
Shipment Volume
-
Oral tobacco products segment reported domestic shipment volume increased
0.6% , primarily driven by the growth of on! oral nicotine pouches and trade inventory movements, partially offset by retail share losses (primarily due to the growth of oral nicotine pouches), calendar differences and other factors. When adjusted for trade inventory movements, calendar differences and other factors, oral tobacco products segment shipment volume increased by an estimated0.5% . -
Total oral tobacco industry volume increased by an estimated
5% over the past six months, driven by growth in oral nicotine pouches.
Table 6 - Oral Tobacco Products: Shipment Volume (cans and packs in millions) |
|
|
|
||
|
|
|
|
||
|
First Quarter |
||||
|
2021 |
2020 |
Change |
||
Copenhagen |
122.9 |
|
125.0 |
|
(1.7)% |
Skoal |
48.2 |
|
51.3 |
|
(6.0)% |
Other (includes Red Seal and on!) |
26.8 |
|
20.4 |
|
|
Total oral tobacco products |
197.9 |
|
196.7 |
|
|
Note: Volume includes cans and packs sold, as well as promotional units, but excludes international volume, which is currently not material to the oral tobacco products segment. New types of oral tobacco products, as well as new packaging configurations of existing oral tobacco products, may or may not be equivalent to existing MST products on a can-for-can basis. To calculate volumes of cans and packs shipped, one pack of snus or one can of oral nicotine pouches, irrespective of the number of pouches in the pack, is assumed to be equivalent to one can of MST.
Retail Share & Brand Activity
-
Oral tobacco products segment retail share was
48.1% and Copenhagen continued to be the leading oral tobacco brand with a retail share of30.2% . Share losses in the oral tobacco products segment, including Copenhagen, were due to the growth of oral nicotine pouches.
Table 7 - Oral Tobacco Products: Retail Share (percent) |
|
|
|
|||
|
|
|
|
|||
|
First Quarter |
|||||
|
2021 |
2020 |
Percentage point change |
|||
Copenhagen |
30.2 |
% |
32.4 |
% |
(2.2 |
) |
Skoal |
12.9 |
|
14.4 |
|
(1.5 |
) |
Other (includes Red Seal and on!) |
5.0 |
|
3.6 |
|
1.4 |
|
Total oral tobacco products |
48.1 |
% |
50.4 |
% |
(2.3 |
) |
Note: The oral tobacco products retail share results exclude international volume. Retail share results for oral tobacco products are based on data from IRI InfoScan, a tracking service that uses a sample of stores to project market share and depict share trends. This service tracks sales in the food, drug, mass merchandisers, convenience, military, dollar store and club trade classes on the number of cans and packs sold. Oral tobacco products is defined by IRI as moist smokeless, snus and oral nicotine pouches. New types of oral tobacco products, as well as new packaging configurations of existing oral tobacco products, may or may not be equivalent to existing MST products on a can-for-can basis. For example, one pack of snus or one can of oral nicotine pouches, irrespective of the number of pouches in the pack, is assumed to be equivalent to one can of MST. Because this service represents retail share performance only in key trade channels, it should not be considered a precise measurement of actual retail share. It is IRI’s standard practice to periodically refresh its InfoScan services, which could restate retail share results that were previously released in this service.
WINE
Revenues, OCI and Shipment Volume
-
Net revenues increased
2.7% , primarily driven by higher pricing. -
Reported OCI increased
100% + to$18 million , primarily driven by 2020 inventory-related charges (included in implementation costs in Table 8 below). -
Adjusted OCI increased
46.2% to$19 million , primarily driven by higher pricing and lower costs. -
Reported wine shipment volume increased
1.7% to approximately 1.7 million cases.
Table 8 - Wine: Revenues and OCI (Loss) ($ in millions) |
|||||||
|
|
|
|
||||
|
First Quarter |
||||||
|
2021 |
|
2020 |
|
Change |
||
Net revenues |
$ |
150 |
|
$ |
146 |
|
2.7 % |
Excise taxes |
(4) |
|
(4) |
|
|
||
Revenues net of excise taxes |
$ |
146 |
|
$ |
142 |
|
2.8 % |
|
|
|
|
||||
Reported OCI (Loss) |
$ |
18 |
|
$ |
(379) |
|
|
Implementation costs |
1 |
|
392 |
|
|
||
Adjusted OCI |
$ |
19 |
|
$ |
13 |
|
46.2 % |
Adjusted OCI margins 1 |
13.0 |
% |
9.2 |
% |
3.8 pp |
||
1 Adjusted OCI margins are calculated as adjusted OCI divided by revenues net of excise taxes.
Altria’s Profile
Altria has a leading portfolio of tobacco products for U.S. tobacco consumers 21+. Altria’s Vision through 2030 is to responsibly lead the transition of adult smokers to a non-combustible future (Vision). Altria is Moving Beyond Smoking™, leading the way in moving adult smokers away from cigarettes by taking action to transition millions to potentially less harmful choices - believing it is a substantial opportunity for adult tobacco consumers, Altria’s businesses and society.
Altria’s wholly owned subsidiaries include the most profitable tobacco companies in their categories: Philip Morris USA Inc. (PM USA), U.S. Smokeless Tobacco Company LLC (USSTC) and John Middleton Co. (Middleton). Altria’s non-combustible portfolio includes ownership of Helix Innovations LLC (Helix), the maker of on! oral nicotine pouches, exclusive U.S. commercialization rights to the IQOS Tobacco Heating System® and Marlboro HeatSticks®, and an equity investment in JUUL Labs, Inc. (JUUL).
Altria complements its tobacco portfolio with ownership of Ste. Michelle Wine Estates (Ste. Michelle) and equity investments in Anheuser-Busch InBev SA/NV (ABI), the world’s largest brewer, and Cronos Group Inc. (Cronos), a leading Canadian cannabinoid company.
The brand portfolios of Altria’s tobacco operating companies include Marlboro®, Black & Mild®, Copenhagen®, Skoal® and on!®. Ste. Michelle produces and markets premium wines sold under various labels, including Chateau Ste. Michelle®, 14 Hands® and Stag’s Leap Wine Cellars™, and it imports and markets Antinori® and Champagne Nicolas Feuillatte™ products in the United States. Trademarks and service marks related to Altria referenced in this release are the property of Altria or its subsidiaries or are used with permission.
Learn more about Altria at www.altria.com and follow us on Twitter, Facebook and LinkedIn.
Basis of Presentation
Altria reports its financial results in accordance with GAAP. Altria’s management reviews OCI, which is defined as operating income before general corporate expenses and amortization of intangibles, to evaluate the performance of, and allocate resources to, the segments. Altria’s management also reviews certain financial results, including OCI, OCI margins and diluted EPS, on an adjusted basis, which excludes certain income and expense items, including those items noted under “2021 Full-Year Guidance.” Altria’s management does not view any of these special items to be part of Altria’s underlying results as they may be highly variable, may be unusual or infrequent, are difficult to predict and can distort underlying business trends and results. Altria’s management also reviews income tax rates on an adjusted basis. Altria’s adjusted effective tax rate may exclude certain tax items from its reported effective tax rate. Altria’s management believes that adjusted financial measures provide useful additional insight into underlying business trends and results and provide a more meaningful comparison of year-over-year results. Altria’s management uses adjusted financial measures for planning, forecasting and evaluating business and financial performance, including allocating resources and evaluating results relative to employee compensation targets. These adjusted financial measures are not consistent with GAAP and may not be calculated the same as similarly titled measures used by other companies. These adjusted financial measures should thus be considered as supplemental in nature and not considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. Reconciliations of historical adjusted financial measures to corresponding GAAP measures are provided in this release.
Altria uses the equity method of accounting for its investment in ABI and Cronos and reports its share of ABI’s and Cronos’s results using a one-quarter lag because ABI’s and Cronos’s results are not available in time to record them in the concurrent period. The one-quarter reporting lag for ABI and Cronos does not affect Altria’s cash flows. In the fourth quarter of 2020, Altria elected to account for its investment in JUUL under the fair value option. Prior to this date, Altria accounted for its investment in JUUL as an investment in an equity security.
Altria’s reportable segments are smokeable products, including combustible cigarettes and cigars manufactured and sold by PM USA and Middleton; oral tobacco products, including moist smokeless tobacco (MST) and snus products manufactured and sold by USSTC, and oral nicotine pouches sold by Helix; and wine, produced and/or distributed by Ste. Michelle. Results for innovative tobacco products and PMCC are included in “All Other.”
Comparisons are to the corresponding prior-year period unless otherwise stated.
Forward-Looking and Cautionary Statements
This release contains projections of future results and other forward-looking statements that involve a number of risks and uncertainties and are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.
Important factors that may cause actual results and outcomes to differ materially from those contained in the projections and forward-looking statements included in this release are described in Altria’s publicly filed reports, including its Annual Report on Form 10-K for the year ended December 31, 2020. These factors include the following:
- unfavorable litigation outcomes, including risks associated with adverse jury and judicial determinations, courts and arbitrators reaching conclusions at variance with our, our subsidiaries’ or our investees’ understanding of applicable law, bonding requirements in the jurisdictions that do not limit the dollar amount of appeal bonds, and certain challenges to bond cap statutes;
- government (including the U.S. Food and Drug Administration (FDA)) and private sector actions that impact adult tobacco consumer acceptability of, or access to, tobacco products;
- tobacco product taxation, including lower tobacco product consumption levels and potential shifts in adult consumer purchases as a result of federal, state and local excise tax increases;
- unfavorable outcomes of any government investigations of Altria, our subsidiaries or investees;
- a successful challenge to our tax positions or an increase to the corporate income tax rate;
- the risks related to our and our investees’ international business operations, including failure to prevent violations of various U.S. and foreign laws and regulations such as foreign privacy laws and laws prohibiting bribery and corruption;
- the risks associated with health epidemics and pandemics, including the COVID-19 pandemic and similar outbreaks, such as their impact on our financial performance and financial condition and on our subsidiaries’ and investees’ ability to continue manufacturing and distributing products, and the impact of health epidemics and pandemics on general economic conditions (including any resulting recession or other economic crisis) and, in turn, adult consumer purchasing behavior, which may be further impacted by any changes in government stimulus or unemployment payments;
- the failure of our tobacco and wine subsidiaries and our investees to compete effectively in their respective markets;
- the growth of the e-vapor category and other innovative tobacco products, including oral nicotine pouches, contributing to reductions in cigarette and MST consumption levels and sales volume;
- our tobacco and wine subsidiaries’ and our investees’ continued ability to promote brand equity successfully; to anticipate and respond to evolving adult consumer preferences; to develop, manufacture, market and distribute products that appeal to adult consumers (including, where appropriate, through arrangements with, and investments in third parties); to improve productivity; and to protect or enhance margins through cost savings and price increases;
- changes, including in economic conditions (due to the COVID-19 pandemic or otherwise), that result in adult consumers choosing lower-priced brands, including discount brands;
- the unsuccessful commercialization of adjacent products or processes by our tobacco subsidiaries and investees, including innovative tobacco products that may reduce the health risks associated with cigarettes and other traditional tobacco products, and that appeal to adult tobacco consumers;
- significant changes in price, availability or quality of tobacco, other raw materials or component parts, including as a result of the COVID-19 pandemic;
- the risks related to the reliance by our tobacco and wine subsidiaries on a few significant facilities and a small number of key suppliers, distributors and distribution chain service providers, and the risk of an extended disruption at a facility of, or of service by, a supplier, distributor or distribution chain service provider of our tobacco or wine subsidiaries or investees, including as a result of the COVID-19 pandemic;
- required or voluntary product recalls as a result of various circumstances such as product contamination or FDA or other regulatory action;
- the failure of our information systems or service providers’ information systems to function as intended, or cyber-attacks or security breaches;
- our inability to attract and retain the best talent due to the impact of decreasing social acceptance of tobacco usage, tobacco control actions; and other factors;
- impairment losses as a result of the write down of intangible assets, including goodwill;
- the risks related to Ste. Michelle’s wine business, including competition, unfavorable changes in grape supply, and changes in adult consumer preferences that have resulted and may continue to result in increased inventory levels and inventory write offs, and governmental regulations;
- the adverse effect of acquisitions, investments, dispositions or other events on our credit rating;
- our inability to acquire attractive businesses or make attractive investments on favorable terms, or at all, or to realize the anticipated benefits from an acquisition or investment and our inability to dispose of businesses or investments on favorable terms or at all;
- the risks related to disruption and uncertainty in the credit and capital markets, including risk of access to these markets both generally and at current prevailing rates, which may adversely affect our earnings or dividend rate or both;
- our inability to attract and retain investors due to the impact of decreasing social acceptance of tobacco usage or unfavorable ESG ratings;
- the risk that any challenge to our investment in JUUL, if successful, could result in a broad range of resolutions including divestiture of the investment or rescission of the transaction;
- the risks generally related to our investments in JUUL and Cronos, including our inability to realize the expected ben
FAQ
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