(Bloomberg) -- Altria Group Inc., the seller of Marlboros in the U.S. market, managed to halt in the precipitous decline of cigarette shipment volumes in the second quarter, but the shares fell as investors saw the result as a blip in the broader downward trend.
Cigarette volume increased by 0.3%, Altria said, in spite of steady declines in U.S. smoking rates and new obstacles to the tobacco industry. Still, that number was propped up by inventory movements, and factoring that out, volumes fell by an estimated 7%.
Key Insights
The pressure remains high for Altria to find new revenue sources from cannabis, vaping and alternative nicotine products. The details of these new businesses were not outlined in the company's second quarter results, but Chief Executive Howard Willard said that Altria is “best positioned among tobacco peers” because of its rights to the IQOS device and investments in Juul and On!, a nicotine patch.
Altria sees U.S. sales of IQOS beginning in September. The cigarette alternative developed by Philip Morris International Inc. was approved for sale in the U.S. by the FDA in April. Success there could help to alleviate the growing pressure on Juul, which received a $12.8 billion investment from Altria late last year and has been coming under increased scrutiny for its popularity with youth.
Despite new obstacles materializing -- such as an increase in the legal age to purchase tobacco products for more than 50% of the U.S. population -- the company managed to increase its revenue. Excluding excise taxes, sales totaled $5.2 billion, higher than the average of estimates compiled by Bloomberg.
Altria also changed its broader outlook for the cigarette industry, changing its forecast for annual declines through 2023 to 4% to 6%. That's a degree worse than the previous range of 4% to 5%.
Market Reaction
- The shares fell as much as 5.9% in New York trading on Tuesday. The decline erased the stock's gain in 2019.
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- For more financial details, click here.
- For company statement, click here.
To contact the reporter on this story: Olivia Rockeman in New York at orockeman1@bloomberg.net
To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Jonathan Roeder
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