The Altria Group is holding a conference call to discuss their second quarter and first half earnings. The call will last about an hour and will include remarks from Altria's management and a question-and-answer session. The Vice President of Investor Relations will be leading the call and Altria's CEO and CFO will discuss the company's results. The company has issued a press release and the presentation, quarterly metrics, and corporate responsibility reports are available on their website. Forward-looking and cautionary statements will be made and the company reports their financial results in accordance with U.S. accounting principles. The call will include both reported and adjusted results, with descriptions and reconciliations available on the company's website.

Altria's remarks about tobacco consumers refer to adults 21 years and older. Billy Gifford, speaking on behalf of the company, discussed their progress in transitioning adult smokers to smoke-free products. NJOY received FDA approval for menthol e-vapor products and submitted applications for next-generation products. Despite challenges, their traditional tobacco businesses remained strong. They returned value to shareholders and are on track to meet their financial goals. Gifford also discussed the state of the e-vapor category, illicit market activity, and the success of their on! product. Sal will provide more details on financial results and capital allocation. The paragraph concludes by mentioning the 1-year anniversary of NJOY joining Altria.

Since combining our capabilities with NJOY, we have made significant progress in strengthening their supply chain, expanding their retail footprint, and launching successful marketing campaigns. This has resulted in continued growth in retail sales and market share for NJOY's consumables and devices. Our efforts to generate trial through promotional support have also been successful, with NJOY's retail share of consumables and devices increasing over the past 9 months. We plan to continue investing in NJOY's value proposition and equity to further build awareness and generate trial.

In the retail market, NJOY's fixture resets are almost complete and the company has increased its visibility and secured premium positioning through its trade program. NJOY is also reaching more adult consumers through events and digital marketing. The company recently received FDA authorization for four menthol e-vapor products and has made cash payments totaling $250 million. NJOY has also submitted a PMTA for a new device with access restriction technology and resubmitted PMTAs for flavored pods. Despite challenges in the e-vapor category, NJOY's momentum and results are strong. The e-vapor category has grown by 3 million vapors in the past year, with disposable vapors increasing by 4 million.

The article discusses the growth of the illicit e-vapor market, which has now expanded to include flavored disposable products and other tobacco categories such as nicotine pouches and cigarettes. The lack of enforcement and regulation from the FDA has allowed this illicit market to thrive, with new brands constantly emerging. The company is actively engaging with regulators and other stakeholders to address this issue and has provided data to the FDA to demonstrate the need for enforcement against illicit nicotine pouch products.

The FDA needs to take decisive action to control the oral nicotine pouch category and prevent an illicit market from forming. The creation of a federal multi-agency task force and state legislation requiring manufacturers to certify compliance with FDA requirements are steps in the right direction, but more meaningful action and enforcement is needed. The oral tobacco category has seen significant growth, with all nicotine pouches accounting for 42% of the category and contributing to a 9% increase in industry volume over the past 6 months.

During the second quarter, Helix saw a 37% increase in reported shipment volume for their on! brand and launched a new trade program and packaging campaign to further differentiate the brand. This resulted in consistent share growth throughout the quarter. Helix also introduced a new product, on! PLUS, which has shown promising results in international markets and has been incremental to their total portfolio. The product has received positive consumer feedback and is being expanded into retail stores.

In the second quarter, Helix submitted PMTAs to the FDA for on! PLUS in three varieties and three different nicotine strength options. Altria made significant progress towards their vision with in-market products and achieved milestones to prepare for future success. The company is confident in the long-term outlook for their smoke-free portfolio and believes they have the strategies in place to execute their growth plans. Adjusted diluted earnings per share was unchanged in the second quarter and declined by 1.6% for the first half, consistent with expectations. For 2024, Altria narrowed their full year guidance range and now expects to deliver adjusted diluted EPS growth of 2.5% to 4%. Cigarette industry shipment volumes remained pressured due to macroeconomic factors and the growth of illegal disposable e-vapor products.

The paragraph discusses the impact of inflation and illicit e-vapor products on the adult smoking industry. It also mentions the decline in cigarette sales and the company's strategy to balance investments in Marlboro with smoke-free products. The adjusted operating income and margins for the second quarter and first half are also mentioned.

Marlboro remains the top brand in the cigarette category with a 42% retail share, and its share within the premium segment has increased. Domestic cigarette volumes for the second quarter and first half declined, but when adjusted for inventory movements, the decline was estimated to be 11% and 10.5%, respectively. The discount segment grew, possibly due to economic pressures and competition. In cigars, shipment volume decreased, but Middleton and Black & Mild remained strong. In the oral tobacco products segment, adjusted OCI and margins grew, but reported shipment volume decreased due to lower MST volumes. Helix continues to invest in the oral nicotine pouch category.

In the second quarter, volume and retail share for the oral tobacco products segment declined due to evolving consumer preferences and the growth of oral nicotine pouches. A noncash pre-tax impairment was recorded for the Skoal trademark, but the growth of Copenhagen and on! brand in nicotine pouches was encouraging. Adjusted equity earnings for the quarter increased by 9.8% due to the partial sale of the ABI investment. The company returned $2.4 billion to shareholders through a share repurchase program and plans to complete the remaining $1 billion by the end of the year.

The company's first half results included a $5.8 billion return to shareholders and a strong balance sheet. The company has narrowed its EPS guidance for the year, with the second half expected to see growth due to lapping the acquisition of NJOY, two extra shipping days, and the back half weighting of the accelerated share repurchase program. The company remains committed to creating long-term value for shareholders and maintaining a strong balance sheet. Questions from analysts focused on the drivers of this growth and the visibility of the company's investments in smoke-free products.

The speaker discusses the expiration of the legal fund in the fourth quarter and the decline in profits for the smokable segment due to economic difficulties for consumers. They mention the strong net price realization and margin performance but also mention investments in Marlboro Black. They also mention expected tailwinds in the second half of the year, such as extra shipping days and the expiration of the legal fund.

In the paragraph, the speaker discusses the impact of cross-category movement on the cigarette industry, specifically the decline rate which has increased due to the growth of illicit vapor products. They mention that this decline rate is a result of consumers switching to cheaper alternatives, such as vapor products, due to difficult economic times. The speaker also mentions that the company is managing the business for the long term and is pleased with their financial progress, but acknowledges that volumes are down and controllable costs are increasing. They attribute this to a base inflation rate and lower-than-expected industry profits from a leading competitor. The company is adapting to these challenges by using technology and flexibility to manage costs between smokable and innovative smoke-free products.

The speaker discusses the impact of enforcement efforts on the adult consumer market for vapor products. While there has been some progress in raising awareness, there is still a prevalence of illicit vapes in the market. The speaker emphasizes the need for action in addition to awareness. In Louisiana, where enforcement has been ongoing, there has been some shifting between categories among adult tobacco users.

In the multi-outlet convenience channel, authorized products increased while illicit products virtually disappeared. However, due to lack of enforcement, bad actors are still able to use the same supply chains to distribute their products. 11 states have passed measures against illicit tobacco, but only 4 have enforced them so far. It is unclear how much of the U.S. cigarette and e-vapor volume is represented by the 7 states still waiting to enact these measures. The delay in implementation is due to a desire for a total enforcement approach. The company hopes to see these measures implemented across the U.S. and at the federal level, especially with the upcoming U.S. election.

The speaker asks if there are any legislative measures that could help with the problem of illicit vaping products and if there will be any changes after the election. The speaker believes that the focus should be on harm reduction and that the FDA has the necessary tools to address the issue. They also mention the success of NJOY's device share and the potential for it to lead to higher consumable share. However, it is still early to determine the conversion rates for NJOY Ace and the proportion of people who will continue using the product.

The speaker responds to a question about the ABI stake and credit rating, stating that an investment-grade credit rating is important for managing a strong balance sheet. They also discuss the challenges of regulating alternative nicotine products and the potential for authorities to evolve regulations.

After paying dividends to shareholders, the company has over $1 billion in excess cash which they have used in the past for share repurchases, managing debt, and maintaining a strong balance sheet. The company's view on their ABI asset remains unchanged. The company believes that potential enforcement actions by the FDA can help bring the market back to order and suggests measures such as litigation against illicit vapor manufacturers and distributors, seizing assets, and imposing maximum civil penalties. They also suggest implementing a list of prohibited products and enforcing warning letters.

The speaker responds to a question about the decline in industry volume and notes that there are some positive signs, such as inflation lessening and a more steady decline. However, they also mention the increase in illicit vape products as a challenge.

The speaker responds to three questions, the first regarding the MSA legal bill and the benefit it will provide in the fourth quarter of this year and in 2025. The second question is about leaf costs and the potential impact of inflation on the company's products. The speaker notes that they have good relationships with their domestic growers and are able to keep costs low. The third question is about industry wholesale shipments and the speaker acknowledges a sizable inventory headwind in the first half, resulting in a 12% decline in cigarette industry shipments compared to an adjusted decline of 9%.

The speaker is discussing the inventory dynamics in the traditional smokeless market and how it may be impacted by the shift towards new RRPs. They believe that inventories tend to balance out over time, but there may be a decrease in inventories as volume declines. They also mention the increase in illicit vapes and the potential for expansion of RRP products internationally. They do not disclose market share for on! in Sweden and the U.K. at this time.

The speaker discusses the presence of illicit vapes in the European community and mentions that some countries are trying to control this market. However, their company's focus is on the opportunity in the U.S. and they will share more information about their SWIC approach at the end of the year. The call is then concluded.

This summary was generated with AI and may contain some inaccuracies.