Altria(US:MO)2024-10-31 16:47Financial Data and Key Metrics Changes - Altria reported adjusted diluted earnings per share (EPS) growth of 7.8% in Q3 2024 and 1.6% for the first nine months, reaffirming full-year adjusted diluted EPS guidance in the range of $5.07 to $5.15, representing a growth rate of 2.5% to 4% from a base of $4.95 in 2023 [32][45] - Adjusted operating company's income (OCI) for the Smokable Products segment grew by 7.1% in Q3 and 0.9% for the first nine months, with adjusted OCI margins expanding to 63.1% for Q3 [33][34] - The company paid approximately $1.7 billion in dividends and repurchased 13.5 million shares for $680 million in Q3 2024 [45] Business Line Data and Key Metrics Changes - The Smokable Products segment saw domestic cigarette volumes decline by 8.6% in Q3 and 10.6% for the first nine months, with adjusted domestic cigarette volumes declining by an estimated 11.5% in Q3 [35][36] - The Oral Tobacco Products segment reported adjusted OCI growth of 2% in Q3 and 2.7% for the first nine months, with strong margins at 66.8% for Q3 [39] - NJOY consumables shipment volume grew more than 15% to 10.4 million units in Q3, with device shipment volume nearly tripling to 1.1 million units [15][16] Market Data and Key Metrics Changes - The e-vapor category included approximately 19 million adult vapors, up 2.5 million from the previous year, with illicit disposable products driving category growth [16][17] - The oral nicotine pouches category grew 11.4 share points, now representing nearly 44% of the category, contributing to a 7.5% increase in oral tobacco industry volume over the past six months [23] - The discount segment share grew by 1.5 share points in Q3, while Marlboro's retail share of the premium segment increased to 59.3% [37] Company Strategy and Development Direction - Altria is launching a multiphase initiative to modernize operations, aiming for at least $600 million in cumulative cost savings over the next five years [27][29] - The company continues to focus on transitioning adult smokers to smoke-free products, emphasizing the importance of regulatory support and enforcement against illicit products [30][19] - Altria's strategy includes maximizing profitability in the Smokable Products segment while investing in smoke-free product growth [33][66] Management's Comments on Operating Environment and Future Outlook - Management highlighted ongoing economic pressures on consumers, impacting discretionary income and cigarette consumption [36][50] - The company remains optimistic about the potential of NJOY and on! brands, with plans to continue testing and investing in these smoke-free products [12][24] - Management expressed confidence in the company's ability to navigate regulatory challenges and litigation, particularly regarding NJOY's patent issues with Juul [20][70] Other Important Information - Altria recorded $144 million of adjusted equity earnings from its investment in ABI, reflecting a 0.7% increase year-over-year [42] - The company has ongoing litigation regarding patent infringement claims against NJOY, with a final determination expected by late December [21][68] - Altria's total debt to EBITDA ratio was 2.1 times as of September 30, aligning with its target of approximately two times [46] Q&A Session Summary Question: Guidance for Q4 and factors affecting it - Management acknowledged the benefit from the MSA legal fee expiration and an extra shipping day in Q4, contributing to their guidance [48][49] Question: Discount category share dynamics - Management noted economic strain on consumers is influencing category movements, with some consumers shifting to discount brands [50][51] Question: Maintaining guidance despite strong Q3 - Management explained that the dynamic market conditions and the impact of illicit products influenced their decision to maintain guidance [53][55] Question: Patent infringement lawsuit against NJOY - Management provided updates on the SE applications and ongoing negotiations with Juul, expressing confidence in avoiding patent infringement [70][71] Question: EBIT margin performance in smokables division - Management confirmed controllable costs were down due to timing factors and advised against extrapolating this performance over the long term [72][74] Question: Expectations for heated tobacco category - Management expects e-vapor to remain the largest category, with ongoing monitoring of the heated tobacco segment [76]