Altria: Q1 2024 Results

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Top-line & Bottom-line Results1

Q1 2024 Revenue: $4.72Bn (exp. $4.72Bn; down -1% vs. Q1 2023)

Q1 2024 EPS: $1.15 (exp. $1.15; down -2.5% vs. Q1 2023)

FY24 Guidance:

Re-affirmed: FY24 adj. EPS in a range of $5.05 to $5.17 (midpoint: $5.11), representing a growth rate of 2% to 4.5% from a base of $4.95 in FY23. Growth H2-weighted

Business Segments: Smokable

– Cigarette volume decreased 10%, driven by the industry’s decline (down 9% on an adjustment basis; impacted by macroeconomic pressures on discretionary income and the growth of illicit e-vapor products) and retail share losses

– Marlboro retail share: 42.0% (unchanged vs. Q1 2023 and down -0.3pp sequentially)

– Marlboro share of the premium segment: 59.3% (up +0.7pp vs. Q1 2023 and unchanged sequentially)

– Altria retail share: 46.4% (down -0.6pp vs. Q1 2023)

– Average Marlboro net price: $9.50 (+$0.50 or +5.6% versus previous year); now 46% premium to the lowest priced regular product

– Cigar volume decreased 6.1%

Business Segments: Smokeless

– Oral tobacco shipment volume: down -3.1% (adjusted -4%), driven by retail share losses (to ZYN) and trade inventory movements, despite the category growth (up +9.5% for the six months ended March 31, 2024, driven by growth in nicotine pouches, partially offset by declines in MST)

– Oral tobacco retail share: 37.8% (down -7.1pp, due to Copenhagen & Skoal share losses)

– On! retail share: 7.1% (+0.7pp vs. Q1 2023 and +0.2pp sequentially)

– On! nicotine pouch segment share: 17.6% (down -6.8pp versus Q1 2023) despite 32% volume growth to 33.3Mn cans. ZYN volume in Q1 2024 is 131.6Mn cans (US only); up +79.7% versus prior year.

– Nicotine pouches grew to 40.1% of the oral tobacco category (+13.8pp versus Q1 2023)

Note: In Sept 2008, Altria acquired UST in a transaction valued at ~$11.7Bn (including $1.3Bn debt) to gain the control of the leading premium MST brands, Copenhagen and Skoal. Altria’s smokeless share (Copenhagen, Skoal, on!) is down 7.1pp to 37.8% in a year. ZYN is now at 30%. It is a matter of time before PMI takes over Altria as the new US smokeless category leader

Business Segments: E-vapor

– NJOY shipment volume: 10.9Mn consumable units and ~1.0Mn devices (11:1 consumable:device ratio creates a question mark on repeat purchase)

– Retail share of NJOY (multi-outlet and c-stores): 4.3% in Q1 2024 (up +0.6pp sequentially), 4.4% in March 2024

– NJOY available in 82k stores at the end of Q1 2024

– 17.9Mn total vapers, of which 12.5Mn are exclusive. # of vapers up +0.9Mn on a sequential basis

– Stating that the US FDA’s enforcement approach is not of the scale or scope needed to bring about fundamental change in the marketplace, Altria recommends a more effective compliance and enforcement program to the US FDA: imposing direct liability on the larger manufacturers, importers and distributors of illicit products; focusing on import prevention; and clearing up widespread confusion in the marketplace about the FDA’s enforcement priorities

– Altria filed a new lawsuit against five manufacturers, four brick-and-mortar retailers and three online retailers of Elf Bar products in Feb 2024 in federal court in California.

Other Highlights

– ABI stake sale: 35Mn ABI shares sold through a global secondary offering and ~3.3Mn shares sold directly to ABI itself. The aggregate proceeds is $2.4Bn. 30-day option to purchase additional shares not exercised. Remaining ownership of ABI is ~8.1%

– $2.4Bn accelerated share repurchase program (ASR Program): 46.5Mn shares received (85% of the ASR). Remaining 15% to be received by June 30, 2024. After the completion of the ASR, $1Bn to be remain under the current $3.4Bn share repurchase program (to be completed by Dec 31, 2024)

– $1.7Bn paid in dividends and $1.1Bn of outstanding debt at maturity retired in Q1 2024

Summary

Nothing much to cheer about. Except for squeezing the most out of the (melting down) Marlboro franchise through pricing, Altria is bleeding heavy everywhere. Cigarette market continues to shrink at record rates. Number of vapers reaches 18Mn and Altria is selling only 11Mn consumables to this massive group of consumers in one whole quarter (not even one pack per vaper per quarter!). ZYN is destroying Altria’s Smokeless Kingdom (Copenhagen & Skoal). Altria is the distant category leader in traditional products and not even a close #2 in any of the new nicotine categories (e-vapor, nicotine pouches and the future heated tobacco category). The sun is setting on the Altria’s nicotine empire.

Further Readings:

Altria – Q1 2024 Results: Preview

Altria: Winds of Change

Altria: FY23 Results

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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