Altria’s Juul stake goes up in smoke

Altria Group, Inc. announced its 2022 second-quarter and first-half business results, slashing the value of its Juul investment by USD 1.2 billion to USD 450 million.

The company’s revenue for the quarter fell 5.7 per cent to USD 6.5 billion, primarily driven by lower net revenues in the smokeable products segment, the sale of its wine business in October 2021 and lower net revenues in the oral tobacco products segment. Net revenues for the first half decreased 4.1 per cent to USD 12.4 billion. “Our tobacco businesses performed well in a challenging macroeconomic environment for the first half of the year,” said Billy Gifford, Altria’s Chief Executive Officer.
In the second quarter of 2022, Altria recorded a non-cash pre-tax unrealized loss of USD 1.2 billion as a result of a decrease in the estimated fair value of its investment in JUUL. The decrease in the estimated fair value was primarily driven by a decrease in the likelihood of a favourable outcome from the FDA for JUUL’s products that are currently marketed in the US, which have received MDOs and are now under additional administrative review, a decrease in the likelihood of JUUL maintaining adequate liquidity to fund projected cash needs, which could result in JUUL seeking protection under bankruptcy or other insolvency law, and projections of higher operating expenses resulting in lower long-term operating margins. As of 30 June 2022, the estimated fair value of Altria’s investment in JUUL was USD 450 million.
“We believe this is a pivotal point in the U.S. tobacco industry. The FDA has the opportunity to create a mature, regulated marketplace of smoke-free products that can successfully realize tobacco harm reduction and improve the lives of millions of adult smokers. We share the FDA’s goal to transition adult smokers away from cigarettes, but we continue to believe that harm reduction, not prohibition, is the best path forward,” Gifford said.
According to Altria, its financial plans for the year remain on track, and it reaffirmed guidance to deliver 2022 full-year adjusted diluted EPS in a range of USD 4.79 to 4.93. This range represents an adjusted diluted EPS growth rate of 4% to 7% from a USD 4.61 base in 2021.

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