Altria(US:MO)2024-04-25 17:04Financial Data and Key Metrics Changes - First quarter adjusted diluted earnings per share (EPS) declined by 2.5% compared to the previous year [20] - The company reaffirmed its full year adjusted diluted EPS guidance in the range of $5.05 to $5.17, representing a growth rate of 2% to 4.5% from a base of $4.95 in 2023 [19][20] - Adjusted operating companies income for the smokeable products segment was over $2.4 billion, with a net price realization of 8.5% [21] Business Line Data and Key Metrics Changes - The smokeable products segment reported a 10% decline in adjusted cigarette volumes, while industry volumes declined by an estimated 9% [22] - The oral tobacco products segment saw adjusted operating companies income grow by 4.6%, with adjusted OCI margins expanding by 0.2 percentage points to 69.5% [24] - NJOY's retail share of consumables grew by 4.3 share points in the quarter, up 0.6 share points sequentially [10] Market Data and Key Metrics Changes - The oral nicotine pouches category grew 13.8 share points year-over-year, now representing over 40% of the oral tobacco category [17] - The e-vapor category continued to grow, primarily driven by illicit disposable products [45] - The discount segment in the cigarette market grew by 0.8 share points, reflecting macroeconomic pressures on adult smokers [22] Company Strategy and Development Direction - The company is focused on maximizing profitability while making appropriate investments in both traditional and innovative tobacco products [33][62] - There is a commitment to addressing the challenges posed by illicit products through engagement with regulators and stakeholders [14][15] - The company plans to broaden awareness and grow brand affinity for NJOY through improved retail positioning and marketing campaigns [13] Management's Comments on Operating Environment and Future Outlook - Management noted that the economic strain on consumers is impacting discretionary spending, which is a concern for the tobacco market [34][69] - The company expressed confidence in its ability to manage costs and maintain profitability despite industry challenges [38] - Management highlighted the need for a more effective regulatory environment to combat illicit products and support harm reduction efforts [17][45] Other Important Information - The company sold a portion of its investment in ABI and expanded its share repurchase program to $3.4 billion [25] - Adjusted equity earnings from ABI were recorded at $165 million, down 8.3% [26] - The company paid approximately $1.7 billion in dividends and retired $1.1 billion of notes that came due in the first quarter [25] Q&A Session Summary Question: About the modest raise to full year guidance following the ABI share sale - Management expressed confidence in core businesses and flexibility to manage overall business and investments behind innovative products [31] Question: Sustainability of the strategy to maximize operating profit - Management affirmed the strategy is to maximize long-term profitability while making appropriate investments [33] Question: Drivers of increased controllable costs in smokeable products - Management explained that higher costs were due to accounting adjustments and inventory revaluation, which are expected to moderate [37][38] Question: Expectations for improved dollar profit growth in smokeable products - Management indicated confidence in margin growth and performance of the smokeable segment moving forward [40] Question: Concerns about price gaps and down trading pressures - Management acknowledged the challenges but emphasized the strength of the Marlboro brand and the effectiveness of their pricing strategy [42] Question: Industry volume decline impact on EPS outlook - Management stated they run various scenarios and feel confident about their guidance despite industry volume challenges [45] Question: Growth of the vapor category and its impact on cigarette volumes - Management noted that the e-vapor category is growing, primarily from illicit products, impacting cigarette volumes negatively [45] Question: Share performance in oral tobacco and strategy moving forward - Management emphasized the strategy to maximize profitability while investing in both Copenhagen and on! products [62]