ALTRIA GROUP, INC. MO

on! continued strong momentum, growing reported shipment volume by 18% to over 39 million cans in Q1 FY25. Its share of the oral tobacco category reached 8.8% (+1.8 share points YoY) and 17.9% (+0.5 share points YoY) of the nicotine pouch category. This growth occurred despite increasing retail prices, demonstrating strengthening brand equity, supported by the 'It's On!' campaign which increased consumer impressions by nearly 5x to over $200 million. Awareness of the on! brand among current oral nicotine pouch consumers reached over 60%, an increase of 9 percentage points over the past 6 months.

The e-vapor category now includes over 20 million users, with disposable vapes increasing by an estimated 4 million to approximately 14 million. Illicit e-vapor products are estimated to represent over 60% of the category. Altria is actively advocating for regulatory reforms, faster product authorizations, and enhanced enforcement, supporting state directory legislation (2 states enacted, 21 pending) and state AG actions against illicit manufacturers and retailers. The company hopes for increased enforcement at borders with potential additional government revenue from tariffs.

Due to ITC exclusion and cease and desist orders effective March 31, NJOY discontinued importation and wholesale shipments of NJOY ACE, leading to an $873 million noncash impairment charge. Altria views this as an opportunity to refine its e-vapor portfolio, combining NJOY's talent with an evolved view of consumers to broaden its innovative e-vapor pipeline. The company aims to re-enter a properly regulated market, continues to challenge the ITC decision legally, and is close to having worked around all four infringed patents, with synthetic nicotine now on its radar.

The Smokeable Products segment grew adjusted OCI by 2.7% with 64.4% margins, driven by 10.8% net price realization. Domestic cigarette volumes declined 13.7% (reported) and an estimated 12% (adjusted for calendar/inventory). Industry volumes declined an estimated 9% (adjusted), partly due to illicit e-vapor and consumer income pressures. Marlboro's retail share declined 1 share point YoY but expanded its premium segment share by 0.1 share point to 59.3%, demonstrating resilience amidst consumer pressure^🌐.

The Oral Tobacco Products segment delivered over $400 million in adjusted OCI with 69.2% margins. Total segment reported shipment volume decreased 5% (adjusted -1%) as on! growth was offset by lower moist smokeless tobacco (MST) volumes. Segment retail share declined 3.1 percentage points due to MST brand declines not fully offset by on!'s growth. Copenhagen remains a significant contributor to OCI as a leading premium MST brand.

Adjusted equity earnings from ABI were $146 million, down 11.5% due to a lower ownership interest from a prior sale. Altria continues to view its ABI stake as a financial investment. The company returned approximately $1.7 billion in dividends and repurchased $326 million in shares during the quarter. A remaining $674 million in the share repurchase program is expected to be completed by year-end, and the total debt-to-EBITDA ratio was 2.1x, in line with its target of approximately 2x.

Altria's guidance considers tariff impact^🌐s, noting its predominantly U.S.-focused supply chain limits direct cost exposure, mainly affecting materials like tin and aluminum. Management is closely monitoring potential indirect impacts on consumer purchasing behavior due to cumulative inflation and tariffs, acknowledging early days^💬 for assessing the full effect. The company believes it is well-positioned to adjust to market changes and is exploring alternative suppliers.