Combustible down by 3.3%, Altria Q1 Earnings Says

On April 27th at 9 a.m. ET, Altria Group announced its Q1 2023 financial results. According to GAAP, Altria's net revenue for Q1 2023 was $7.19 billion, a 2.9% decrease YoY; revenue excluding excise taxes was $4.76 billion, a 1.2% decrease YoY. The reported tax rate was 27.9%, up 1.2 percentage points from the same period last year, while the adjusted tax rate was 25.0%, down 0.1 percentage points YoY. Adjusted earnings per share were $1.18, a 5.4% increase YoY, while reported earnings per share were $1.00, a 7.4% decrease YoY.

Altria CEO Billy Gifford said the company had a strong start with robust adjusted earnings per share growth of 5.4% in the challenging macroeconomic environment.

Oral tobacco products performed well 

Altria reported growth in shipment volume and market share for its oral tobacco brand on! In Q1 2023, on! shipments reached 25.2 million boxes, up 37.7% YoY, and its market share increased to 6.5%.

Furthermore, other oral tobacco products such as Copenhagen and Skoal also saw growth.

Call for flavored tobacco enforcement 

In November 2022, California officially banned flavored (and menthol) tobacco and e-cigarette products through a referendum. Altria said it actively followed the policy, and stopped shipping related products to California, causing PM USA shipments to California to drop 12.8%. 

In the report, Altria mentioned that flavored tobacco products are still being sold at retail after the California flavor and menthol bans and called for increased enforcement.

Combustible revenue declines 

Financial results showed that Altria's traditional cigarette net revenue decreased by 3.3% YoY, primarily due to reduced shipment volume and increased promotional investments.

2023 earnings guidance 

Altria also released its full-year 2023 earnings guidance in the report. The company reiterated its commitment to delivering adjusted earnings per share in the range of $4.98 to $5.13 for 2023, a 3% to 6% increase over the 2022 adjusted earnings per share. Altria noted that its 2023 full-year adjusted earnings per share guidance considered various scenarios, as the external environment is uncertain. The company will continue to monitor economic and policy factors, including high inflation, rising interest rates, global supply chain disruptions, and regulatory and legislative developments.
 

2028 corporate goals

Altria also announced its 2028 corporate goals in the earnings report. The company plans to achieve these goals through various measures, including mid-single-digit growth in adjusted earnings per share by 2028, a progressive dividend target with mid-single-digit dividend growth, maintaining a debt/EBITDA ratio of around 2.0, maintaining leadership in the U.S. tobacco market, and sustaining an adjusted net profit margin of over 60% for at least the next five years.

In addition, Altria plans to achieve growth targets in its U.S. smoke-free product portfolio, including at least a 35% increase in smoke-free product sales volume from 2022 and increasing smoke-free product net revenue from $2.6 billion in 2022 to $5 billion, with $2 billion coming from innovative smoke-free products. The company also plans to expand its competitiveness in international innovative smoke-free and non-nicotine products for long-term growth and expects to develop strategies for these growth areas within the next 12 months and is confident in the e-vapor sector. 

Although the recent acquisition of NJOY, a leading North American e-vapor company, was not included in this financial report, the CEO expressed optimism for NJOY's development under Altria, noting that "NJOY is the only cartridge-based e-cigarette product to have passed FDA's pre-market tobacco product application (PMTA)."

Altria has not repurchased any shares in Q1 2023 due to the timing of the NJOY transaction announcement. As of March 31, 2023, there is $1 billion remaining under the current share repurchase program, which is expected to be completed by December 31, 2023. Share repurchases depend on market conditions and other factors, and the program remains subject to the discretion of Altria's Board of Directors.

In summary, Altria Group's Q1 2023 financial results showcased a strong start to the year, with its smoke-free product portfolio and recent acquisition of NJOY being areas of growth and optimism. The company has outlined its 2023 earnings guidance and ambitious 2028 corporate goals, focusing on smoke-free products and international market expansion. Altria will continue to monitor external factors and developments that may impact its performance and adapt its strategies accordingly.

Also read:

Altria, Reynolds Initiated Battle over Menthol Cigarettes in New York
Altria and Juul Face Trial Over Teen Vaping Accusations

Source: Altria's Q1 Report