Altria Records $4.5 Billion Write-Down on Juul

Tobacco maker cites potential FDA ban on flavored vaping
Photograph: Shutterstock

RICHMOND, Va. Altria Group reported a $4.5 billion write-down on its investment in electronic cigarette maker Juul, citing concerns that the U.S. Food and Drug Administration (FDA) will remove flavored e-vapor products from the market pending its scheduled review process.

In its third-quarter earnings, Richmond, Va.-based Altria, maker of Marlboro premium branded cigarettes, said it recorded a noncash, pretax impairment charge of $4.5 billion on its investment in San Francisco-based Juul Labs. Officials said various bans from U.S. cities and states, as well as some international markets, also factored into its decision.

Altria purchased a 35% minority interest in Juul last December for $12.5 billion, leading to a $35 billion valuation of the e-cigarette company at the time.

Meanwhile, Altria announced it will introduce its IQOS product into a second U.S. market. Currently introducing the heat-not-burn product in Atlanta, the company said it will conduct a similar introduction in Richmond in the last quarter of 2019.

Despite the Juul announcement, Howard Willard, chairman and CEO of Altria, described the company’s third-quarter results as “excellent.” He said its 2019 plans were on track and reaffirmed its guidance to deliver an adjusted, diluted earnings per share growth of 5%-7%.

Its third-quarter earnings grew 0.3% to $6.9 billion over its third quarter last year, while its third-quarter year-to-date revenues were down 0.8%.

“We continue to believe the evolution of the tobacco industry represents a significant opportunity for Altria,” Willard said. “We marked major milestones in our transformation journey this year, including launching IQOS and completing the On [nicotine pouch] transaction. We believe that, with current adult smoker trends and e-vapor disruption, it’s an opportune time to expand the availability of these options.”

In light of those considerations, Willard announced an earnings-per-share growth objective of 5%-8% for 2020 through 2022. “We believe this new growth objective provides us the flexibility to make investments in noncombustible offerings for the long term, generate sustainable income growth in the core tobacco businesses and return cash to shareholders through a strong dividend,” Willard said. “We also expect to maintain our dividend payout ratio target of approximately 80% of adjusted diluted earnings per share during this period.”

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