Altria: FY23 Results

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Top-line & Bottom-line Results1

Q4 2023 Revenue: $5.02Bn (exp. $5.07Bn; -1.2% vs. Q4 2022)

Q4 2023 EPS: $1.18 (exp. $1.17; unchanged vs. Q4 2022)

FY23 Revenue: $20.5Bn (-0.9% vs. FY22)

FY23 EPS: $4.95 (+2.3% vs. FY22) => middle of the guidance (“in a range of $4.91-$4.98”)

FY24 Guidance:

“FY24 EPS in a range of $5.00 to $5.15, representing a growth rate of 1% to 4% from $4.95 in 2023” => in line with the built-in market expectation of $5.1. Recall: Altria – Q4 2023 Results: Preview.

FY24 EPS growth to be H2 weighted. The guidance assumes limited impact from enforcement efforts in the illicit e-vapor market on combustible and e-vapor volumes. FY24 EPS guidance range excludes an estimated per share gain of $1.14 related to the return of the US IQOS commercialization rights to PMI (expected to occur in the Q2 2024).

US Nicotine Market

Altria now states that the overall US nicotine market volume has grown 1% p.a. over the past 5 years (2018-2023) despite the fast decline in cigarette volume. This includes +3% industry volume increase in 2023, driven by the growth of illicit flavored disposable vapes. A year ago (Feburary 2023), Altria stated that the US nicotine volume declined -1.7% p.a. in the 2017-2022 period. The change is due to the growth of illicit/flavored disposable vapes, re-assessment of the size of the e-vapor market and re-calibration of the unit conversion rates between the different product types.

Smoke-free alternatives now represent ~40% of total nicotine space with e-vapor category growing ~35% in 2023. Illicit flavored disposable vapes represents over 50% of the category. Pod-based products declined ~50% in 2023 and currently represent 15%-20% of the category.

Business Segments

Smokeable products:

– Revenue: -2.4% in Q4 (-1.6% in FY23); Operating profit: -1.3% in Q4 (-0.1% in FY23)

– OI margin: 59.0% in Q4 (+0.6pp); 59.9% in FY23 (+0.9pp)

– Volume (Q4 2023): -7.5% (including cigars), -7.6% (cigarettes only)

– When adjusted for trade inventory movements, calendar days and other factors, cigarette shipment volume is down -9% in Q4 (vs. industry volume down -8%)

– Trade inventory: +0.3Bn for Altria while -0.2Bn for the Industry (Q4 2023 vs. Q3 2023)

– Cigarette SoM: 46.8% in Q4 2023 (0.6pp lower than Q4 2022)

– Marlboro SoM: 42.2% in Q4 2023 (flat vs. Q4 2022)

– Marlboro price gap vs. lowest effective: 44%; Marlboro net RSP: $8.93 (+$0.46; +5.4% vs. Q4 2022)

– Net price realization for the cigarette segment: +5.5% for Q4 and +8.8% for FY23

– Discount segment size: 28.6% of the market (+0.9pp)

Oral tobacco:

– Revenue: +7.1% in Q4 (+3.8% in FY23); Operating profit: +10.3% in Q4 (+5.5% in FY23)

– OI margin: 63.1% in Q4 (+1.8pp); 67.4% in FY23 (+1.1pp)

– Volume (Q4 2023): -2%; the fast growth in on! (+32.8% to 30.4Mn cans; smokeless segment share up +1.1pp to 6.9%) fails to compensate for the volume/SoM losses in Copenhagen & Skoal

– Total smokeless SoS: 40.1% in Q4 2023 (-5.8pp; Copenhagen & Skoal SoS loss continues)

– Improving profitability for on!: Analytics and RGM capabilities applied to be more flexible and efficient with promotional investments. As a result, on! RSP increased over 47% vs. Q4 2022

– on! PLUS (wet pouch): Test marketed in Sweden: Consumers perceive on! PLUS to be competitive with the market leader in Sweden. Introduced on! PLUS Berry and Citrus (6mg & 9mg) in the e-commerce channel in Dec 2023. On track to submit a PMTA for on! PLUS in H1 20204

E-vapor:

– NJOY’s global supply chain is strengthened to provide sustainable support for the anticipated volume increase associated with NJOY ACE expansion plans

– Retail inventory gaps are filled and NJOY ACE’s distribution is expanded to 75,000 stores as of year-end (i.e. added 40,000 stores since the acquisition). These stores represent ~75% of e-vapor volume and 55% of cigarette volume sold in the US multi-outlet and c-store channel

– Q4 2023 NJOY shipment volume: 11.1Mn consumable units and 0.9Mn devices (23Mn consumable units and 1.3Mn devices since June 2023)

– Retail share of NJOY (multi-outlet and c-store channel): 3.7% in Q4 2023, 4.0% in Dec 2023 (up from 3.3% in Sept 2023)

– PMTA for NJOY’s age restricted Bluetooth device with non-tobacco flavors will be submitted in H1 2024.

Other Highlights

– Smoke-free volumes (~800Mn units) were essentially flat in FY23 when compared to FY22. Total smoke-free net revenue was $2.7Bn in FY23 (vs. $2.6Bn in FY22). Revenue from innovative smoke-free products (on! and NJOY) was $165Mn in FY23

– On-track to file PMTA for Ploom in H1 2025

– Completed the $1Bn share repurchase program (22.7Mn shares at an average price of $43.96). The Board authorized a new $1Bn share repurchase program (to be completed by December 31, 2024)

– At year end, Debt-to-Net Earnings ratio was 3.2x and Debt-to-EBITDA ratio was 2.2x

– Effective tax rate: 24.5% – 25.5%; FY23 Capex: $175-$225Mn; FY23 D&A Expense: $310Mn

Further Readings:

Altria – Q4 2023 Results: Preview

Altria: Q3 2023 Results

Altria – Q3 2023 Results: Preview

Altria: Dividends

Altria: Q2 2023 Results

Altria: Q1 2023 Results

Altria: Q4 & FY22 Results

References:

  1. https://www.altria.com/investors/events-and-presentations ↩︎

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