The paragraph introduces the Altria Group's 2024 Third Quarter Earnings Conference Call, led by operators including Mac Livingston, Billy Gifford, and Sal Mancuso. The call is scheduled for one hour, encompassing management remarks and a Q&A session. Mac Livingston kicks off the call with a thank you, noting that Billy Gifford and Sal Mancuso will discuss Altria's business results for the third quarter and first nine months. A press release was issued earlier with results, and relevant materials are available on Altria's website. The call includes forward-looking statements, cautionary notes, and financial results in accordance with GAAP, with some presented on an adjusted basis. Non-GAAP financial details are also provided.

The paragraph discusses Altria's positive third-quarter results, highlighting the growth of its smokable and oral tobacco product segments, notably Marlboro's resilience and the profitability of MST brands. Altria is committed to reducing underage tobacco use, investing in smoke-free products, and modernizing processes to accelerate its vision. It also mentions a promising report from the FDA and CDC on the decline of tobacco use among middle and high school students, achieving the Healthy People 2030 goals for reducing adolescent tobacco and nicotine use. This progress is credited to collaborative efforts, ensuring tobacco does not become accessible to youth while providing smoke-free alternatives for adult smokers.

The paragraph highlights ongoing issues with the illicit e-cigarette market, emphasizing that over 55% of young e-cigarette users use illicit disposable products. It suggests a need for regulatory reform that balances adult smokers' needs with underage use prevention. The focus then shifts to NJOY's efforts within the e-vapor category, noting NJOY's successful strategies in enhancing consumer trials, distribution, and brand visibility, which have led to increased repeat purchases and brand loyalty. Recent promotional efforts resulted in significant volume growth, which was largely retained post-promotion. NJOY's "simply enjoy" campaign and brand marketing have improved its Net Promoter Score by over 20 points since 2023, attributed to increased product satisfaction and better retail presence. The paragraph concludes by discussing NJOY's positive marketplace performance signs.

In the third quarter, NJOY saw significant growth with a 15% increase in consumable shipments and a tripling of device shipments compared to the previous year. They captured a larger share of the e-vapor market, but overall market growth is primarily driven by illicit disposable products. An estimated 19 million adults use e-vapor products, with a sharp rise in users of illicit disposables. NJOY views e-vapor growth as a step towards tobacco harm reduction but criticizes inadequate FDA product authorization and enforcement. They are actively engaging with various stakeholders to address these issues. The FDA has taken some steps, such as seizing unauthorized products and proposing a rule for tracking imported vapor products, which NJOY supports and seeks to extend to nicotine pouches.

The paragraph discusses recent developments in the legal battle between Juul and NJOY, highlighting a joint federal task force seizure of unauthorized e-vapor products worth $76 million. It mentions ongoing patent infringement litigation between Juul and NJOY, with an initial determination in Juul's favor being reviewed by the U.S. International Trade Commission (ITC), which will issue a final decision by late December. NJOY's case against Juul has been extended, with a determination expected by early April. NJOY is preparing strategies to mitigate potential negative outcomes in the litigation. The paragraph also notes growth in the oral tobacco market, particularly in oral nicotine pouches, which now make up nearly 44% of the category and contributed to a 7.5% industry volume increase in the past six months. Helix is participating in this growth.

In the third quarter, on! experienced a 46% growth in shipment volume, reaching nearly 42 million cans. The brand's robust sales growth is primarily due to repeat purchasers, which increased by 40%, contributing over 80% of its volume. on! also grew its retail market share in the oil tobacco product category to 8.9%. Helix plans to sustain this growth by enhancing brand awareness and adoption. However, the rise of illicit synthetic nicotine pouch products has become a challenge, with over 1,000 unauthorized SKUs identified, due to a lack of FDA enforcement. Despite this, Helix remains focused on advancing its smoke-free initiatives and improving organizational efficiency to achieve its goals.

The paragraph discusses a plan to enhance efficiency and cost savings by centralizing work, standardizing processes, leveraging technology and AI, and outsourcing tasks. An accelerated business solutions organization will be created to implement these changes, aiming for $600 million in cost savings over five years, with initial pretax charges estimated at $100-$125 million. Most costs will be recorded as special items by mid-2025. This initiative supports Altria's vision of transitioning smokers to smoke-free alternatives, ensuring long-term growth. The speaker expresses confidence in Altria's strategies and leadership in tobacco harm reduction before passing the discussion to Sal Mancuso for more insights.

In the third quarter, Altria reported a 7.8% increase in adjusted diluted earnings per share, with a 1.6% rise over the first nine months, and projected a full-year growth in 2024 earnings. The Smokable Products segment showed substantial profitability, increasing its adjusted operating income and margins, backed by substantial price realization despite a decline in domestic cigarette volumes. The decline in cigarette volumes was attributed to rising illicit flavored e-vapor products and ongoing economic pressures on consumers due to persistent inflation.

The paragraph discusses trends in the tobacco industry, highlighting that wages have not kept up with rising prices and consumer debt issues. The discount segment in retail saw growth, while Marlboro's share declined but still led the premium cigarette segment with increased market share. Cigar shipments decreased, though Middleton and Black & Mild performed well in their segments. In oral tobacco, adjusted operating income improved despite margin contraction due to product mix changes. Shipment volumes showed mixed results, with slight increases in the third quarter but overall declines for the first nine months when adjusted for calendar differences and inventory movements.

In the third quarter, the company experienced a 4.2 percentage point decline in the retail share of its oral tobacco products segment, largely due to declines in MST brands, although the brand on! saw volume and share growth. Copenhagen remained the top MST brand. The company reported $144 million in adjusted equity earnings from its investment in ABI, which was a slight increase from the previous year despite a reduced ownership stake. An agreement with the IRS allowed the company to claim $4 billion of ordinary losses and $4.1 billion of capital losses on its tax return related to its former investment in JUUL, with $3.2 billion offsetting gains from ABI and IQOS transactions. There are $5.6 billion in remaining capital losses to utilize by 2028, though they haven't been recognized for financial statements. The company reiterated its commitment to shareholder value and balance sheet strength, paying $1.7 billion in dividends, raising the dividend by 4.1%, and repurchasing 13.5 million shares for $680 million in the third quarter.

In the paragraph, the company discusses its financial status at the end of the third quarter, mentioning that $310 million remains in its share repurchase program, which they plan to complete by year-end. Their debt to EBITDA ratio is at 2.1 times, aligning with their target. During the Q&A session, Matt Smith from Stifel inquires about the company's guidance for the fourth quarter and the variables to consider, such as the benefit from the expiration of the MSA legal fund and an extra shipping day. He also asks about the dynamics in the discount category, noting Marlboro's strong performance in the premium segment and queries about divergent trends between premium and discount consumers.

The paragraph features a conversation between Matt Smith and Billy Gifford, followed by a question from Bonnie Herzog of Goldman Sachs regarding the company's financial guidance. Billy Gifford acknowledges the economic strain on consumers affecting cigarette sales and the impact of illicit products. Bonnie Herzog seeks clarification on why the company maintained its guidance despite a strong Q3 performance, asking about limited visibility or reasons behind projected Q4 EPS growth deceleration. Sal Mancuso responds by expressing satisfaction with maintaining the guidance amid a dynamic U.S. tobacco market.

The paragraph discusses the impact of illicit nicotine and e-vapor products on consumer behavior and product categories. Bonnie Herzog and Billy Gifford discuss the effects of extra shipping days in the third and fourth quarters on inventory and shipment figures, acknowledging timing differences that might affect reported figures. Herzog highlights a discrepancy between reported shipments and adjusted inventory, suggesting that it may correct in the fourth quarter. Furthermore, the conversation touches on a widening relative price gap, now at 47%, due to four list price increases implemented throughout the year.

The paragraph involves a discussion between Bonnie and Sal Mancuso, focusing on the strategy regarding Marlboro's pricing amid consumer pressures and competition from discount cigarette brands. Sal emphasizes the importance of considering the national price gap in their strategy and highlights their use of Revenue Growth Management (RGM) to efficiently address pricing at the store level and within the Marlboro brand. The approach aims to maximize long-term profitability while investing in Marlboro and growth areas. The paragraph also notes Marlboro's strong performance in the premium segment. Additionally, the conversation briefly shifts to a new question from Faham Baig regarding JUUL's patent infringement lawsuit against NJOY.

The paragraph discusses a final determination date set for December 23 regarding NJOY's product importation issues related to patent concerns. There is a 60-day period post-determination before an exclusion order could be enforced unless approved earlier by a trade representative. NJOY has filed PMP exemptions for three of the four concerning patents by making simple changes to their product, and they're working to address the fourth patent issue. They're also engaged in discussions with the FDA and have ongoing negotiations with JUUL through a mediator, with no significant updates on that front. The subsequent question mentions NJOY's strong EBIT margin performance in the smokables division.

In the paragraph, a discussion takes place about controllable costs, with Sal Mancuso explaining that the recent decrease in these costs is due to timing factors and advising against extrapolating short-term results. Faham Baig then shifts the conversation to the tobacco industry, asking about the potential success of heated tobacco products over the next five years. Billy Gifford responds by outlining expectations for growth in the e-vapor category, followed by nicotine pouches, and briefly mentions their joint venture with JT for the Ploom device, with plans to file applications in 2025.

The paragraph involves a discussion about ongoing litigation with JUUL and the efforts of NJOY to navigate around patent issues. Callum Elliott from Bernstein questions Billy Gifford about the strategy to bypass a remaining patent that could lead to an import ban by the International Trade Commission (ITC). Gifford acknowledges the challenge but mentions that the team is making progress in addressing the patent concerns. He suggests that JUUL's legal actions indicate its concern over NJOY's market success. Gifford also clarifies that any further changes to circumvent the patent would require a new application, emphasizing that the company's filing of PMTA exemptions was a precautionary measure.

The paragraph features a discussion between Callum Elliott and Billy Gifford about various topics related to their business operations. Billy Gifford clarifies that a partnership with Japan Tobacco for the Ploom device remains unaffected by Japan Tobacco's recent U.S. acquisition. They also discuss a proposed rule requiring vaping imports to have a PMTA tracking number and Gifford suggests expanding it to nicotine pouches. However, Gifford expresses uncertainty about the timeline for this process, as predicting the FDA's timing has been challenging. The paragraph concludes with an indication from the operator that there are no further questions.

The paragraph indicates that Mac Livingston is offering closing remarks, thanking everyone for participating and wishing them a great day, followed by the operator concluding the program and allowing participants to disconnect.

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