Altria,
Q1 2019 - Results
May, 08 2019
1. CONTEXT
As an ex-smoker, I enjoyed learning about the cigarettes business and while I was doing it a popular question (for smokers) popped up in to my head: “What if I had put all the money that I’ve ever spent on cigarettes on Altria stock? How much more money would I have today?” I’ll do that exercise soon and I will share the results on the Facebook Group.
For the time being, I’ll read my first write-up on the company.
The key takeaways are that the company was selling less cigarettes and there was less money coming in the door.
I’ve also said that I would look into the contribution of the iQOS to the sales of Philip Morris International and I didn’t… I’ll do it right away.
I’m feeling kind of let down. I knew that I couldn’t compare the number of combustible cigarettes sold to the number of Heets sold but given the number of people I see around me switching to the iQos and the Heets, I was expecting a more pronounced growth.
Ok, back to Altria.
2. RESULTS
Let’s look at the results.
3. POSITIVES
3.1. Smokeless products revenue went up
While this counts as a positive, unfortunately the smokeless products account for just 11% of the total revenue.
3.2. Wine revenue went up
Same story here. The wine makes up for just 3% of the total revenue.
3.3. iQOS gets FDA approval
The FDA took quite a while to authorize the selling of the iQOS and the Heets in the US but I had no doubt the outcome would be this one. The decision was made public on the 30th of April.
4. NEGATIVES
4.1. Shipment volumes went down
The total number of shipped cigarettes went down by a whopping 14,3%. The company says that when adjusted for trade inventory movements and one fewer shipping day, this was down by 7%, which is still a lot.
4.2. Market share flat
I’m counting this as a negative but we could see it as a positive as well. Although for the FY2018 the Marlboro market share was 43,3%, in the 4th quarter it was 43,1%, so the company was able to at least hold steady a market share that had been in decline for several years.
4.3. Revenue went down
As a result of all of these, the net revenue went down by 8% while the Revenue net of excise taxes – the one I care about – went down by 6%.
4.4. EPS went down
The EPS also went down. While the reported EPS decreased by 40% due to a lot of special items (non-cash expenses related to the Cronos acquisition, asset impairment expenses, etc), the adjusted EPS went down by 5,3% mostly due to higher interest expense and lower equity earnings from AB Inbev.
4.5. Debt went up
To fund the recent acquisitions, the company had to raise new debt.
5. OVERVIEW & CONCLUSION
5.1. OVERVIEW
I think it’s safe to say that there is nothing here to get me excited about. This is the company with the most negative points I’ve ever analysed here on AllinStocks.com.
I know, I know, what about Cronos, Juul and iQOS? Well, it’ll be some time until they can produce meaningful revenues. I’ll be watching them.
5.2. CONCLUSION
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