Value slashed: Altria slashes value of Juul vaping investment by $4.1 bn

Marco Green
February 3, 2020

Altria, the Richmond, Virginia-based cigarette company, took a $4.1 billion impairment charge during the fourth quarter for its investment in the e-cigarette company Juul, according to an Altria press release Thursday. Smokeless revenue was up 6.1% vs. +4.3% consensus as volume fell 4.0%. Analysts had expected EPS of $4.22 and sales of $4.88 billion. In October, Altria wrote down its Juul stake by $4.5 billion.

Altria reported a loss of $1.81 billion for the fourth quarter, down from net income of $1.25 billion for the fourth quarter past year.

Altria paid what used to be regarded as a top worth for its stake in Juul, with a deal that valued the company more than double what earlier traders had.

Under the new agreement, Altria will continue to provide assistance to Juul on regulatory affairs services, but will by the end of March 2020 "discontinue" other services.

The new deal also gives Altria the option to launch its own e-cigarettes if Juul is prohibited by federal law from selling vaping products in the USA for at least a year or if the value of Altria's investment in Juul falls below $1.28 billion. "We believe Altria's enhanced business platform best positions us to succeed under various future category scenarios".

The new agreement also allows Altria to develop its own vaping products if Juul is prohibited from selling e-cigarettes in the USA for at least a year.

Altria Chief Executive Howard Willard cited the "unexpected challenges" of Juul that had led to impairment charges and reported losses. 8 billion investment does not retain more than 10% of its original value. The lower estimate primarily reflects Altria's current expectations for no equity earnings from Juul at least through 2022.

A significant investor in main e-cigarette-maker Juul has noticed its stake within the corporate drop by way of more than two-thirds. The company raised its dividend in August to an annualized rate of $3.36 and repurchased 16.5 million shares of stock in 2019 at a cost of about $845 million.

Altria also said it does not expect to receive earnings contributions from Juul over the next three years.

Altria expects the US cigarette industry volume to decline at an adjusted rate of 4% to 6% in 2020, the company said Thursday.

Shares of Altria are down 0.22% premarket to $50.00. The stock's 52-week range is $39.30 to $57.88.

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