Altria Group, Inc. (MO) CEO Billy Gifford Presents at Consumer Analyst Group of New York Conference Transcript

Summary of Altria Group, Inc. Conference Call Company Overview - Company: Altria Group, Inc. (NYSE: MO) - Date: February 21, 2024 - Participants: - Billy Gifford - CEO - Sal Mancuso - CFO - Analysts from Goldman Sachs and Davenport Industry Context - Industry: Tobacco - Trends: Significant shifts in consumer demand and regulatory dynamics affecting the tobacco industry. The company is focused on transitioning adult smokers to smoke-free alternatives. Core Points and Arguments 1. Vision for Smoke-Free Future: Altria aims to lead the transition of adult smokers to a smoke-free future, reshaping its portfolio to include products like on!, NJOY, and Ploom [2][5][44] 2. Consumer Insights: Research indicates that nearly 30% of the 52 million tobacco consumers in the U.S. exclusively use smoke-free formats. The total industry equivalized nicotine volumes increased by 3% in 2023 [7][8] 3. Regulatory Engagement: Altria is actively engaging with the FDA to advocate for science-based regulation and to address misinformation about nicotine and tobacco products [10][11] 4. Harm Reduction Strategy: The company believes that harm reduction requires a fully regulated marketplace, a decline in underage tobacco use, and a variety of FDA-authorized smoke-free products [8][9] 5. E-Vapor Market Dynamics: The e-vapor category grew by approximately 35% in 2023, with disposable products representing over 50% of the category. However, there are concerns about underage use due to illicit products [15][16] 6. NJOY Brand Development: Altria has strengthened NJOY's supply chain and expanded its retail footprint to over 75,000 stores, focusing on trial generation and brand visibility [17][19] 7. Oral Tobacco Growth: The oral tobacco segment, including products like Copenhagen and on!, reported a 5.5% growth in adjusted operating income and a 67.4% adjusted OCI margin [24][25] 8. Heated Tobacco Products: Altria is preparing to introduce heated tobacco products like Ploom and SWIC, targeting smokers seeking alternatives to traditional cigarettes [27][28][29] 9. International Expansion: The company plans to expand its smoke-free portfolio internationally, particularly in the nicotine pouch category, which is estimated to represent a $1 billion to$2 billion market [35][36] 10. Non-Nicotine Opportunities: Altria is exploring non-nicotine products, with a focus on enhancing consumer well-being. The total addressable market for these solutions is estimated at $100 billion in the U.S. [38][39][40] Financial Performance and Shareholder Returns 1. **Profitability**: The smokeable products segment has grown adjusted OCI by$2.3 billion over the past five years, with margins expanding from nearly 51% to 60% [31][33] 2. Dividend Policy: Altria has a strong commitment to dividends, having returned over $37 billion to shareholders in the last five years. The quarterly dividend was increased by 4.3$0.98 per share [42][43] 3. Debt Management: The company maintains a strong balance sheet with manageable debt maturities, and as of the end of Q4 2023, the debt-to-EBITDA ratio was 2.2 times [43] Additional Important Points - Market Challenges: The cigarette industry volume is declining due to macroeconomic factors and the rise of illicit flavored e-vapor products, contributing to a decline of 1.5% to 2.5% in cigarette volumes [34] - Litigation: Ongoing litigation with JUUL regarding patent infringement claims is expected to continue into 2025 [23] - Future Guidance: Altria reaffirmed its 2024 adjusted diluted EPS guidance of $5.00 to$5.15, representing a growth rate of 1% to 4% from 2023 [43]