Altria Group, Inc. · NYSE:MO
Altria — Q2 2022 Earnings Presentation
40 slides from Altria's earnings presentation, Jul 28, 2022
Slide 1: Altria's Second-Quarter 2022 Earnings Conference Call
Altria’s Second-Quarter 2022 Earnings Conference Call July 28, 2022 1 | ALCS | Q2 2022 | 07.28.22 | For Investor Purposes ONLY | Final
Slide 2: Safe Harbor Statement
Safe Harbor Statement Statements, including earnings guidance, in this presentation that are not reported financial results or other historical information are “forward-looking statements” within the meaning of Private Securities Litigation Reform Act of 1995. Such forward-looking statements are bas
Slide 3: Responsibly guiding the transition of adult smokers
Responsibly eh ' i the transition of adult smokers . ire) a smoke: free future. Moving beyond smoking”
Slide 4: Agenda
Agenda ▪ our core tobacco businesses, including the macroeconomic backdrop and potential combustible tobacco product regulation; ▪ the smoke-free opportunity in the U.S. and our smoke-free product portfolio; ▪ our continued confidence in our Vision; and ▪ our second-quarter and first-half results. 4
Slide 5: Macroeconomic Headwinds
Macroeconomic Headwinds Monthly Consumer Price Index Weekly Retail Gasoline Prices (∆ Year-over-Year) ($ per Gallon) $5.50 10% $5.11 9.1% $4.60 1% $2.00 Jan-21 Mar-21 Jun-21 Jul-21 Jan-22 Mar-22 Jun-22 Jul-22 Feb-21 Nov-21 Dec-21 Feb-22 Aug-21 Sep-21 Apr-21 May-21 Oct-21 Apr-22 May-22 Jan-21 Mar-21
Slide 6: Consumer Tactics to Manage Spending
Consumer Tactics to Manage Spending % of Drivers* Who Partially Cigarette Volume Sales Per Trip (in packs) Filled Their Car’s Gas Tank 2021, 2022 Premium Segment Discount Segment 2.4 2.4 61% 1.4 1.4 Jan-21 Jun-21 Jul-21 Mar-21 Feb-21 Nov-21 Dec-21 Aug-21 Sep-21 Apr-21 May-21 Oct-21 Jan-21 Mar-21 Jun
Slide 7: Adult Tobacco Consumer 21+ Brand Loyalty
Adult Tobacco Consumer 21+ Brand Loyalty % Stick to My Preferred Brand Marlboro Retail Share Regardless of Price 42.6 42.7 Tobacco Alcohol Groceries Household Items Q1 '22 Q2 '22 Source: Adult Tobacco Consumer Pulse Survey May 2022. N=566. % of Adult Tobacco Consumers 21+ surveyed who selected “stic
Slide 8: Macroeconomic Tailwinds
Macroeconomic Tailwinds Wage Growth by Occupation 14% (Q2 2022 vs. Q2 2021) 13.1% 8.6% Average CPI Growth 10.5% 8.1% 5.2% Average Wage Growth 4.4% 4.5% 4.8% 4.2% 2.7% 1.6% -5.9% -7% Farming, Construction Administrative Maintenance Professional Sales Production Transportation Financial Service Fishin
Slide 9: Combustible Regulatory Update
Combustible Regulatory Update FDA Rulemaking Process Initiating events to Optional: Advance Notice of Determination whether consider rulemaking Proposed Rulemaking a rule is needed Optional: Tobacco Products Office of Management & Budget Preparation of proposed rule Scientific Advisory Committee (OM
Slide 10: Majority Support for Tobacco Harm Reduction
Majority Support for Tobacco Harm Reduction % of Adults Who Support the Preferred Approach Concept of Tobacco Harm Reduction Policy Professionals Adult Smokers 21+ General Population Adults 21+ 85% 72% 66% 62% 59% 55% 27% 22% 19% 17% 16% 10% Policy Adult General Population Tobacco Harm Tobacco Unsur
Slide 11: Moving toward a new day.
. Moving toward a new day.
Slide 12: Oral Nicotine Pouch (ONP) Category Growth
Oral Nicotine Pouch (ONP) Category Growth Share of Total U.S. Oral Tobacco Category ONP Share ONP Share Growth by Brand (Q2 2022 vs. Q2 2021) +6.8pp 21.0 56% 43% 14.2 ∆ vs. YAGO 3.8 2.9 5% (4%) 0.4 Q2 '21 Q2 '22 (0.3) Zyn on! Velo Other Source: IRI InfoScan Oral Tobacco MOC, WE 07/03/22 12 | ALCS |
Slide 13: Continued on! Shipment Volume and Share Growth
Continued on! Shipment Volume and Share Growth on! Shipment Volume on! Share of Oral Tobacco Category (cans in millions) (total U.S.) 4.9 +57% 20.3 4.1 3.8 12.9 3.0 2.0 Q2 '21 Q2 '22 Q2 '21 Q3 '21 Q4 21 Q1 '22 Q2 '22 Source: IRI InfoScan Oral Tobacco MOC, WE 07/03/22 13 | ALCS | Q2 2022 | 07.28.22 |
Slide 14: Increased on! Awareness, Trial and Repurchases
Increased on! Awareness, Trial and Repurchases Consumer Awareness of on! on! Sales Volume (Among Total ATC 21-54) (In Millions of Cans) Repeat Purchase Trial 19 52 16 47 15 12 41 37 8 30 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Source: 2022 Quarterly Nicotine Pouch Aware
Slide 15: New Carry on! Equity Campaign
New Carry on! Equity Campaign 15 | ALCS | Q2 2022 | 07.28.22 | For Investor Purposes ONLY | Final
Slide 16: E-Vapor Category Volume
E-Vapor Category Volume Estimated Equivalized Volume (in billions of units) Q2 2022 Category ∆ Quarterly Estimates (7)% Q/Q (2)% Y/Y 0.52 0.52 0.53 0.50 0.50 0.51 0.49 0.49 0.45 0.46 0.46 0.44 0.44 0.40 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22
Slide 17: E-Vapor Market Dynamics
E-Vapor Market Dynamics Q2 2022 Estimated Equivalized Disposable E-Vapor Products Volume Share of the E-Vapor Category Shipments to Retail Volume + ~240% 45 - 50 28 22 - 27 JUUL JUUL Other Pods Open Systems & 2H 2019 1H 2022 & Cig-a-likes Disposables Source: AVI SCMI estimates Note: Share based on v
Slide 18: Synthetic Nicotine Products
Synthetic Nicotine Products ▪ Recent legislation clarified the FDA’s authority to regulate tobacco products containing nicotine from any source. ▪ Manufacturers of synthetic nicotine products were required to obtain FDA authorization by July 13th to continue legally marketing their products. ▪ So fa
Slide 19: FDA E-Vapor PMTA Decisions
FDA E-Vapor PMTA Decisions ▪ Thus far, the FDA has authorized only 23 e-vapor Estimated E-Vapor Category Volume applications, which account for ~1% of e-vapor category volume. PMTA Authorized: ~1% ▪ Given the limited number of authorizations to date, we believe that the e-vapor category is still in
Slide 20: JUUL Regulatory Update
JUUL Regulatory Update ▪ In the second quarter, JUUL products received marketing denial orders (MDOs). ▪ Earlier this month, the FDA administratively stayed the JUUL MDOs, citing unique scientific issues that warrant additional FDA review. The administrative stay temporarily suspends the MDOs during
Slide 21: JUUL Investment Update
JUUL Investment Update ▪ We recorded for the second quarter a non-cash pre-tax unrealized loss of $1.2 billion as a result of a decrease in the estimated fair value of our investment. ▪ The decrease in fair value was driven by several factors, including uncertainty created by the FDA’s action relate
Slide 22: JUUL Investment Update
JUUL Investment Update ▪ Under the terms of our relationship agreement with JUUL, we have the option to be released from our non-compete obligations under several conditions, including if the fair value of our investment is not more than 10% of the initial carrying value of $12.8 billion. ▪ If we el
Slide 23: Heated Tobacco
Heated Tobacco Our teams remain in discussions with PMI relating to IQOS. We continue to believe in the potential of the heated tobacco category in the U.S. Our plans remain on track to finalize designs by year-end for two product platforms within heated and oral tobacco and then begin regulatory pr
Slide 24: Continued Confidence in Our Vision from:
Continued Confidence in Our Vision from: ▪ our robust manufacturing, sales and distribution system and understanding of U.S. adult tobacco consumers; ▪ our science-based approach to tobacco harm reduction, which we believe is aligned with adult tobacco consumers, society and the FDA; ▪ our portfolio
Slide 25: Adjusted Diluted Earnings Per Share (EPS)
Adjusted Diluted Earnings Per Share (EPS)* Q2: Adjusted Diluted EPS 1H: Adjusted Diluted EPS +2.4% +3.5% $2.38 $2.30 $1.23 $1.26 Q2 2021 Q2 2022 1H 2021 1H 2022 *For reconciliations of non-GAAP to GAAP measures visit altria.com. 25 | ALCS | Q2 2022 | 07.28.22 | For Investor Purposes ONLY | Final
Slide 26: Smokeable Products Segment
Smokeable Products Segment Adjusted Operating Companies Income* (OCI) Q2: Adjusted OCI 1H: Adjusted OCI ($ in millions) ($ in millions) +0.6% +2.9% $5,159 $5,311 $2,784 $2,800 (0.4) Q2 2021 Q2 2022 1H 2021 1H 2022 *For reconciliations of non-GAAP to GAAP measures visit altria.com. 26 | ALCS | Q2 202
Slide 27: Smokeable Products Segment
Smokeable Products Segment Adjusted OCI Margins* Q2: Adjusted OCI Margins 1H: Adjusted OCI Margins +0.7pp +1.3pp 58.4% 59.1% 58.0% 59.3% (0.4) Q2 2021 Q2 2022 1H 2021 1H 2022 *For reconciliations of non-GAAP to GAAP measures visit altria.com. 27 | ALCS | Q2 2022 | 07.28.22 | For Investor Purposes ON
Slide 28: Adjusted Cigarette Decline Rates
Adjusted Cigarette Decline Rates Smokeable Segment Total Industry Q2 2021 Q2 2022 Q2 2021 Q2 2022 (4.5%) (5.0%) (8.5%) (10.0%) 1H: (9.0%) 1H: (7.5%) Source: AVI SCMI estimates – rounded to nearest 0.5% Note: Estimates are subject to revision due to wholesaler resubmission of inventory data 28 | ALCS
Slide 29: Smokeable Products Segment
Smokeable Products Segment Marlboro Retail Share 45 42.6 43.1 43.0 43.0 43.1 43.0 42.6 42.6 42.7 15 Q2 '20 Q3 '20 Q4 '20 Q1 '21 Q2 '21 Q3 '21 Q4' 21 Q1 '22 Q2 '22 Source: IRI/MSAi InfoScan – Blended, WE 07/03/22 29 | ALCS | Q2 2022 | 07.28.22 | For Investor Purposes ONLY | Final
Slide 30: Smokeable Products Segment
Smokeable Products Segment Marlboro Share of Premium Segment 60 57.6 57.6 57.8 57.6 57.8 58.1 56.8 57.3 57.4 30 Q2 '20 Q3 '20 Q4 '20 Q1 '21 Q2 '21 Q3 '21 Q4' 21 Q1 '22 Q2 '22 Source: IRI/MSAi InfoScan – Blended, WE 07/03/22 30 | ALCS | Q2 2022 | 07.28.22 | For Investor Purposes ONLY | Final
Slide 31: Discount Retail Share
Discount Retail Share Total Discount Segment (%) Deep Discount Branded Discount 30 26.1 26.4 26.4 25.1 25.2 25.4 25.1 25.5 24.8 14.9 15.0 15.2 15.1 14.8 14.9 14.7 14.8 14.9 10.4 10.5 10.4 10.7 11.2 11.4 11.2 10.0 9.9 0 Q2 '20 Q3 '20 Q4 '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Source: IRI/MSAi I
Slide 32: John Middleton Cigars
John Middleton Cigars Reported Shipment Volume (in millions) (5.0%) 456 433 Q2 2021 Q2 2022 32 | ALCS | Q2 2022 | 07.28.22 | For Investor Purposes ONLY | Final
Slide 33: Oral Tobacco Products Segment
Oral Tobacco Products Segment Adjusted OCI* and OCI Margins* Adjusted OCI Adjusted OCI Margins (7.1%) (3.1pp) 71.9% 68.8% $901 $837 1H 2021 1H 2022 1H 2021 1H 2022 *For reconciliations of non-GAAP to GAAP measures visit altria.com. 33 | ALCS | Q2 2022 | 07.28.22 | For Investor Purposes ONLY | Final
Slide 34: Oral Tobacco Industry Volume Growth Estimates
Oral Tobacco Industry Volume Growth Estimates Six Months Ended 7.0% 6.5% 6.0% 5.0% 5.0% 3.0% 2.0% 1.5% 6/30/2022 Q2 ‘22 6/30/2020 9/30/2020 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021 3/31/2022 (0.5)% Source: AVI SCMI Estimates - rounded to the nearest 0.5% Oral Tobacco industry includes MST
Slide 35: Oral Tobacco Products Segment Retail Share
Oral Tobacco Products Segment Retail Share MST + Snus on! 47.7 47.7 47.6 46.9 46.7 2.0 3.0 3.8 4.1 4.9 45.7 44.7 43.8 42.8 41.8 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Source: IRI/MSAi InfoScan Oral Tobacco 2022 – MOC, WE 07/03/22 35 | ALCS | Q2 2022 | 07.28.22 | For Investor Purposes ONLY | Final
Slide 36: Copenhagen's 200th Anniversary
Copenhagen’s 200th Anniversary 36 | ALCS | Q2 2022 | 07.28.22 | For Investor Purposes ONLY | Final
Slide 37: Copenhagen's 200th Anniversary
Copenhagen’s 200th Anniversary 37 | ALCS | Q2 2022 | 07.28.22 | For Investor Purposes ONLY | Final
Slide 38: Adjusted Equity Earnings From ABI Investment
Adjusted Equity Earnings* From ABI Investment $ in millions +9.7% $124 $113 Q2 2021 Q2 2022 *For reconciliations of non-GAAP to GAAP measures visit altria.com. All third-party trademarks remain the property of their respective owners. 38 | ALCS | Q2 2022 | 07.28.22 | For Investor Purposes ONLY | Fin
Slide 39: Creating Long-Term Shareholder Value
Creating Long-Term Shareholder Value Cash Returned to Shareholders 2022 Guidance We reaffirm our guidance to deliver 2022 full- $4.4 B year adjusted diluted EPS* in a range of $3.8 B Guidanc $1.1 B Share $0.6 B e to $4.93. This range represents an $4.79 Repurchases adjusted diluted EPS growth rate o
Slide 40: Responsibly guiding the transition of adult smokers
Responsibly eh ' i the transition of adult smokers . ire) a smoke: free future. Moving beyond smoking”