Altria Writes Down Its Juul Investment...Again

Andrew Cummings
February 3, 2020

Altria took a fourth-quarter pretax, noncash impairment charge of $4.1 billion related to its $12.8 billion investment in e-cigarette maker Juul.

Despite the unexpected challenges related to our investment in JUUL, which led to impairment charges and reported losses, we made significant progress advancing and building our noncombustible business platform with the launch of IQOS and completion of the on! transaction. The company notes the charge was necessary due to the number of pending legal cases against Juul.

Tobacco giant Altria Group has blamed the $8.5bn (£6.5bn) fall in value on rising legal and regulatory threats.

Altria said its non-compete option would be void if Juul can't sell its products in the USA for at least a year, or if the value falls to less than 10 per cent of its initial US$12.8 billion investment.

Shares of Altria slumped 4.95 to US$47.66 in late-morning trading.

Juul also faces criminal investigations in the United States over its marketing practices.

Federal officials have since identified a thickening agent added to illicit THC vaping liquids as the culprit behind the "vast majority" of the lung injuries.

Smoking has been on the decline for more than five decades.

Tobacco companies like Philip Morris International are attempting to develop new technologies that could serve as an alternative to traditional tobacco use as those sales fade. Some 42% of US adults smoked in the early 1960s.

Altria once again slashed the value of its stake in Juul on Thursday, as the once high-flying e-cigarette company faces lawsuits and a regulatory crackdown. But few saw the risks involved. The new board will have nine members, including two representing Altria, and three independent directors, one of whom Altria will nominate. The board restructuring will take place once Juul receives antitrust clearance from the Federal Trade Commission. The company also expects total domestic cigarette industry sales volume to decline by 4% to 6%, including the impact of the recent change to federal law raising the age limit for cigarette purchases from 18 to 21. The maker of Marlboro cigarettes posted quarterly adjusted diluted earnings per share (EPS) of $1.02 on revenue of $4.8 billion (net of excise taxes).

Altria expects its adjusted earnings per share to be in the range of $4.39 to $4.51 in 2020, representing a growth rate of 4% to 7% from adjusted earnings of $4.22 per share in 2019.

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