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    MO
    Earnings call· Jun 2025(Q2 FY25)

    ALTRIA GROUP Q2 FY25 earnings call MO

    Jul 30, 2025 Source

    Executive summary

    Altria Group Q2 FY25 — Strong Performance and Raised Guidance Lower End

    Altria delivered strong financial results in Q2 FY25, driven by robust adjusted OCI growth and the continued success of on! nicotine pouches. The company raised the lower end of its full-year EPS guidance, reflecting confidence despite ongoing macroeconomic pressures on consumers and a dynamic e-vapor market. Management is actively addressing NJOY patent challenges and advocating for more consistent regulatory enforcement against illicit e-vapor products.

    Highlights

    5

    • Adjusted diluted EPS increased 8.3% to $1.44 in Q2 FY25 and 7.2% for H1 FY25.

    • on! nicotine pouches grew 10 share points year-over-year, now representing over half of the oral tobacco category.

    • on! reported shipment volume increased by 26.5% to 52.1 million cans in Q2 FY25.

    • Returned over $4 billion to shareholders in H1 FY25 through dividends and share repurchases.

    • Adjusted OCI margins expanded to 64.5% for the smokeable products segment in Q2 FY25 and H1 FY25.

    Concerns

    5

    • Domestic cigarette volumes declined by 10.2% in Q2 FY25 and 11.9% for H1 FY25 (reported).

    • Estimated domestic cigarette volumes declined by 8.5% in Q2 FY25 and H1 FY25 (industry adjusted).

    • Discount cigarette segment grew 1.9 share points year-over-year due to macroeconomic pressures on consumers.

    • Patent Trial and Appeal Board did not invalidate JUUL's patent, impacting NJOY ACE.

    • FDA PMTA decisions are delayed, with some applications pending over 5 years.

    Guidance & targets

    3
    CategoryTargetConfidence
    Adjusted diluted EPS
    $5.35 to $5.45
    high materiality
    High
    Share repurchase program completion
    $400 million remaining to be completed
    medium materiality
    High
    Long-term EPS growth algorithm
    mid-single digits CAGR
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Smokeable Products
    Strong adjusted OCI growth and margin expansion driven by net price realization, despite declines in reported and adjusted domestic cigarette volumes. Strategic expansion of Basic contributed to overall PM USA share gains, while Marlboro maintained premium leadership. Middleton cigars continued to outperform.
    Adjusted OCI growth: 4.2% YoYAdjusted OCI margins: 64.5%Net price realization: 10% (Q2), 10.4% (H1)Reported domestic cigarette volumes decline: 10.2% (Q2), 11.9% (H1)Adjusted domestic cigarette volumes decline: 10.5% (Q2), 11% (H1)Marlboro share of premium segment: 59.5% (up 0.2 share points)PM USA total cigarette retail share: 45.2% (up 0.2 sequentially)Middleton cigar reported shipment volume growth: 3.7%
    		———$2.9 billion
    Oral Tobacco Products
    Impressive adjusted OCI growth and margin expansion primarily driven by on!'s strong performance. on! volume growth partially offset declines in MST volumes, leading to overall segment volume decline. on! continued to gain share in the oral tobacco category.
    Adjusted OCI growth: 10.9% (Q2), 5.5% (H1)Adjusted OCI margins increase: 3.1 percentage points (Q2), 1.4 percentage points (H1)Total segment reported shipment volume decline: 1% (Q2), 2.9% (H1)Estimated adjusted segment volume decline: 4% (Q2), 2.5% (H1)Retail share: 33.1% (Q2), 33.9% (H1)on! reported shipment volume increase: 26.5% to 52.1 million cans (Q2)on! retail share of total oral tobacco category: 8.7% (up 0.7 share points YoY)
    		————
    ABI
    Adjusted equity earnings declined due to a lower ownership interest compared to the prior year, following the sale of a portion of the ABI investment. Altria continues to view this as a financial investment.
    Adjusted equity earnings decline: 10.3% YoY
    		———$130 million

    Operational metrics

    14
    Adjusted diluted EPS
    $1.44up 8.3% YoY
    Q2 FY25

    Driven by robust adjusted OCI growth and share repurchases.

    Adjusted OCI margins
    64.5%
    Q2 FY25

    Expanded in the smokeable products segment.

    Adjusted OCI margins
    64.5%
    H1 FY25

    Expanded in the smokeable products segment.

    Adjusted OCI margins increase
    3.1
    Q2 FY25

    Mainly driven by on!'s strong performance.

    Adjusted OCI margins increase
    1.4
    H1 FY25

    Mainly driven by on!'s strong performance.

    Share repurchases
    $600 million
    H1 FY25

    Part of significant value returned to shareholders.

    Dividends paid
    $3.5 billion
    H1 FY25

    Part of significant value returned to shareholders.

    Net debt-to-EBITDA ratio
    2.0x
    as of June 30

    In line with the target of approximately 2x.

    Oral tobacco industry volume growth
    11%
    past 6 months

    on! was the primary driver of this growth.

    E-vapor category consumers
    20.5 millionup 1.9 million YoY
    end of Q2 FY25

    Estimated total e-vapor consumers.

    Disposable vapors consumers
    14.4 millionup 2.7 million YoY
    end of Q2 FY25

    Estimated number of consumers using disposable e-vapor products.

    on! in-person activations reach
    170,000
    H1 FY25

    Through events like music festivals, NASCAR races, and golf tournaments.

    on! digital impressions
    190 million
    Q2 FY25

    Amplifying in-person experiences and reinforcing brand positioning.

    on! brand awareness increase
    7vs a year ago
    H1 FY25

    Result of combined marketing efforts and retail presence.

    Industry KPIs

    10
    MetricValueDetails
    Net price realization10%%
    Cigarette category share45.2%%
    Cigarette shipment volume10.2%% decline
    Illicit trade enforcement60%%
    Smoke free market footprint—
    Smoke free consumer user count20.5 millionconsumers
    Regulatory authorization pipeline—
    Smoke free revenue and profitability—
    Smoke free reduced risk shipment volumes52.1 millioncans
    Nicotine pouch oral tobacco category dynamics8.7%%

    Risks & headwinds

    5
    Macroeconomic pressures on consumersOngoing

    Inflation exceeding overall wage growth, especially among low-income consumers; discount segment grew 1.9 share points YoY.

    Mitigation: Strategic expansion of Basic brand into targeted stores to retain consumers within Altria's portfolio; monitoring consumer purchasing behaviors.

    Illicit e-vapor marketOngoing

    Flavored e-vapor disposable products represent more than 60% of the category; estimated 14.4 million disposable vapors.

    Mitigation: Advocating for consistent enforcement actions by FDA, Customs and Border Protection, state legislatures, and State Attorneys General; encouraged by recent momentum in enforcement.

    NJOY ACE patent disputeImmediate

    Patent Trial and Appeal Board did not agree to invalidate JUUL's patent.

    Mitigation: Actively exploring all potential next steps, including litigation routes; completed product design of a modified NJOY ACE solution to address disputed patents.

    FDA PMTA authorization delaysOngoing

    Waited over 5 years for decisions on some product applications.

    Mitigation: Urging FDA to accelerate product authorizations and implement a workable process for timely decision-making to meet statutory requirements and promote public health.

    Federal Excise Tax (FET) drawback policyOngoing

    Allows competitors with international manufacturing to import products into the U.S. without FET paid, creating a competitive disadvantage for domestic manufacturers.

    Mitigation: Looking for partnerships to address the policy and avoid competitive disadvantage.

    What to watch in Q3 FY25

    5

    Share repurchase program completion

    by year-end
    Current$400 million remaining
    TargetCompletion of $400 million

    Why it matters

    Indicates continued commitment to shareholder returns and capital allocation discipline.

    At the end of the second quarter, we had $400 million remaining under our current share repurchase program, which we expect to complete by the end of the year.

    Q&A highlights

    6

    Asked about expectations for underlying OCI performance in H2 given the raised guidance and uncertain consumer environment, considering the lapping effects of share repurchases and MSA legal fund expiration.

    Sal Mancuso reiterated satisfaction with H1 results and the narrowed guidance. He acknowledged the dynamic macroeconomic environment, including inflation and consumer confidence, and stated the company will continue to monitor consumer purchasing behaviors. He noted that while gas prices are still high, consumers can adapt if conditions remain stagnant.

    “Inflation is still an unknown variable going forward. There's been some green shoots, lower gas prices on a year-over-year basis. Even though they remain high, most recently, we have seen an uptick in consumer confidence. But again, the macro economic environment remains dynamic and somewhat unsettled trade deals are still being negotiated and what potential impact that could have on controllable spending for the consumer is something that we'll pay close attention to.”

    asked by Matthew Smith · answered by Salvatore Mancuso

    2 min read5 chapters

    Detailed Narrative

    01

    Oral Tobacco Growth Driven by on!

    on! nicotine pouches were the primary growth driver for the oral tobacco segment, contributing to an estimated 11% increase in oral tobacco industry volume over the past six months. on! grew 10 share points year-over-year in Q2 FY25, now holding over 50% of the category. Helix's marketing efforts, including in-person activations reaching over 170,000 adult consumers and 190 million digital impressions, increased on! brand awareness by 7 percentage points in H1 FY25.

    02

    NJOY and E-Vapor Regulatory Landscape

    The Patent Trial and Appeal Board did not invalidate JUUL's patent, prompting Altria to explore next steps and complete the design of a modified NJOY ACE solution addressing the disputed patents. The e-vapor category continues to grow, with over 20.5 million vapors (up 1.9 million YoY) and disposable vapors increasing to 14.4 million (up 2.7 million YoY). Illicit flavored disposable products are estimated to represent over 60% of the category, but enforcement actions by FDA, Customs and Border Protection, and state authorities are showing increased momentum.

    03

    Smokeable Products Performance and Consumer Dynamics

    The smokeable products segment delivered strong adjusted OCI growth of 4.2% in Q2 FY25, with margins expanding to 64.5%. This was supported by 10% net price realization. Domestic cigarette volumes declined by 10.2% (reported) and an estimated 8.5% (industry adjusted) in Q2 FY25. Macroeconomic pressures🌐, particularly on low-income consumers, led to the discount segment growing 1.9 share points year-over-year. PM USA strategically expanded Basic into approximately 30,000 targeted stores, contributing to a 0.2 sequential increase in total PM USA cigarette retail share to 45.2%.

    04

    Shareholder Returns and Financial Strength

    Altria returned significant value to shareholders in the first half of 2025, paying approximately $3.5 billion in dividends and repurchasing 10.4 million shares for $600 million. The company has $400 million remaining under its current share repurchase program, expected to be completed by year-end. Altria maintains a strong balance sheet, with a total debt-to-EBITDA ratio of 2.0x as of June 30, in line with its target.

    05

    Federal Excise Tax Drawback and Tariffs

    Management highlighted concerns regarding the federal excise tax (FET) drawback policy, which allows some competitors to import products without paying FET, creating a competitive disadvantage for domestic manufacturers. While tariffs have impacted Altria's supply chain, particularly for packaging materials, the impact is not considered material to overall costs and has been contemplated in guidance. The company continuously monitors the broader impact of tariffs on consumer purchasing power.

    AI-generated summary of the company’s earnings call. Not investment advice.