The paragraph provides an introduction to the Altria Group's Fourth Quarter and Full Year Earnings Conference Call for 2024. It mentions that the call will last about an hour and includes remarks by Altria's CEO and CFO, who will discuss the company's financial results. The press release with the results is available on their website. The call will include forward-looking statements with a cautionary statement provided in the earnings release. Financial results are reported according to GAAP, and adjusted results will exclude special items. All references to tobacco consumers pertain to adults aged 21 or older.

In this paragraph, Billy Gifford discusses the accomplishments of Altria in 2024, highlighting progress towards their vision, robust financial results, and significant shareholder returns. Altria's core tobacco brands and innovative smoke-free products like NJOY and on! contributed to income growth and margin expansion. NJOY achieved a milestone by obtaining FDA marketing orders for e-vapor products, and the company has made strategic investments for future success, such as submitting regulatory applications and preparing to commercialize new products. Gifford emphasizes the potential for tobacco harm reduction and the growing consumer demand for smoke-free alternatives. He also mentions upcoming earnings guidance for 2025 and hands over the call to Sal for further updates.

Over the past year, the number of adult consumers in the e-vapor and oral tobacco categories has grown significantly, matching the adult smoker population. Smoke-free alternatives now make up about 45% of the nicotine market, which has seen a consistent increase in nicotine volumes. The rise in smoke-free products aligns with public health goals and harm reduction efforts, as underage tobacco use is at an all-time low. However, the growth is largely driven by illicit disposable e-vapor products, which dominate over 60% of the category and threaten long-term harm reduction opportunities. The e-vapor category expanded by 30% in 2024, with a notable portion of users having no prior cigarette usage. The U.S. market is divided between those adhering to regulations and those evading them, indicating a broken regulatory system not functioning as Congress intended.

The FDA has not authorized enough smoke-free products to meet consumer demand, allowing the illicit e-vapor market to grow unchecked, which challenges responsible manufacturers and confuses consumers. As a result, the company is reassessing its 2028 smoke-free goals and NJOY financial targets due to the unexpected scale of the illicit market. They are looking for progress in combating illicit products, such as reduced market growth, prevention of illegal imports, and legal actions against violators. Encouragingly, recent actions have been taken by nine state attorneys general and the District of Columbia against illicit e-vapor entities.

The paragraph discusses the FDA's potential role in regulating the market for smoke-free products and emphasizes the company's commitment to developing FDA-authorized smoke-free options for adult consumers. Despite updates to their 2028 enterprise goals, there is no impact on their corporate financial or long-term growth objectives. The company highlights the performance of NJOY in 2024, noting its growth in a competitive e-vapor market. NJOY expanded distribution to over 100,000 stores, secured premium retail positions, and launched effective marketing campaigns, leading to significant increases in the shipment volumes of consumables and devices, as well as an improved retail share of consumables.

The paragraph discusses NJOY's recent market performance, including a rise in its share of consumables and retail price, indicating strong demand. It highlights ongoing litigation between JUUL and NJOY, where the ITC ruled in favor of JUUL regarding patent claims, leading to an exclusion order against NJOY's ACE product. NJOY is working on solutions to address the patent issues while awaiting a possible review by the U.S. Trade Representative. In a separate case, JUUL was initially found not to infringe NJOY’s patents, and NJOY has requested a review. Additionally, the paragraph notes growth in the oral tobacco category, particularly with oral nicotine pouches, where Helix's on! brand saw significant shipment volume increases.

In the fourth quarter, on! tobacco products increased their market share to 8.9% and grew consumer loyalty, with 800,000 regular buyers, up 40% from the previous year. Helix's strategic investments, including new trade programs and packaging redesign, contributed to on!'s success, achieving first-time profitability earlier than planned with expectations to remain profitable through 2025. Internationally, on! PLUS is growing in Sweden and the UK by capturing customers from competitors. Helix plans to expand on! PLUS to the US once approved and develops heated tobacco products through a joint venture, Horizon, to offer alternatives to e-vapor options.

In 2024, significant progress was made towards PMTA submission for Ploom, with a combined submission expected by mid-2025. A small-scale e-commerce launch of the heated tobacco product SWIC was conducted in Great Britain to gather consumer insights. For 2025, the focus remains on tobacco harm reduction in the U.S., with investments directed towards market activities, research, and regulatory preparations for smoke-free products. Despite anticipated challenges like inflation and regulatory changes, the company projects a 2025 adjusted diluted EPS growth of 2% to 5%, expecting earnings between $5.22 and $5.37. This projection includes fewer shipping days, limited effects from illicit product enforcement, cost-saving reinvestments, and reduced net periodic benefit income. Additionally, Rich Stoddart was welcomed to the board, bringing valuable global marketing and leadership expertise.

Sal Mancuso discussed the financial performance of the core tobacco business, highlighting solid results despite a challenging environment. The smokable product segment focused on maximizing profitability, balancing investments in Marlboro, and growing smoke-free products. The segment's adjusted operating company's income grew by 5.5% in the fourth quarter and by 2% for the year, with margins expanding significantly. Despite a decline in domestic cigarette volumes, robust net price realization supported performance. Adjustments show a significant decline in cigarette volumes, both at the company and industry level. Changes in adult tobacco consumer preferences, particularly towards smoke-free products, have been noted, with updates made to the cigarette category's decline estimates, suggesting a 2.5% secular decline excluding cross-category changes.

The cigarette industry experienced a decline partly due to cross-category impacts, while the discount segment's share grew, primarily from deep discounts. Marlboro's market share in the cigarette category dropped slightly in the fourth quarter but increased within the premium segment. Marlboro's premium share rose to 59.4% in Q4. Cigar shipments increased, with Black & Mild leading the large-tipped machine-made segment. In oral tobacco, there was strong performance in Q4, with significant growth in adjusted operating company income (OCI) and OCI margins. However, total shipment volume for the segment slightly decreased for both the quarter and the year.

In the fourth quarter, adjusted segment volumes were stable, but overall volumes declined by 2% for the year. The oral tobacco product segment's market share dropped by 3.1 percentage points, though Copenhagen maintained its leadership in the MST category. The company recorded $159 million in adjusted equity earnings from its investment in ABI for the fourth quarter, an 8.1% decrease from the previous year, due to a reduced ownership stake following a partial sale. The company prioritized returning value to shareholders, distributing over $10.2 billion through dividends and share repurchases in 2024. This included a $6.8 billion dividend payout with a 4.1% increase, marking the 59th increase in 55 years, and a $3.4 billion buyback of 73.5 million shares, the largest in over 20 years, financed by proceeds from the ABI stake sale. The company maintained a strong balance sheet with a total debt-to-EBITDA ratio of 2.1x, aligning with its target of approximately 2x.

The paragraph discusses a company's announcement of a new $1 billion share repurchase program expected to be completed by the end of the year. During an earnings call, Billy Gifford addresses a question about earnings growth guidance for the year, explaining that there are no major distortions expected in 2025 compared to 2024. He mentions a decrease in shipping days for the first quarter but notes it shouldn't significantly impact the year's outlook. Matt Smith asks about market trends, particularly noting Marlboro's strong performance in the premium segment, but points out increased activity in the discount segment and mentions that economic pressures on consumers are affecting these trends.

The paragraph involves a discussion about the cumulative impact of inflation and its effect on consumer behavior, specifically in the tobacco industry. Billy Gifford mentions that consumers are experiencing financial pressure, evident from indicators like increased credit card debt and late payments. This stress is compounded by the proliferation of cigarette alternatives, such as illicit vapor products. Gifford suggests that consumers are open to switching to alternatives if they are legally available and sees potential in that shift, provided there is adequate regulatory enforcement. In response to a question from Bonnie Herzog of Goldman Sachs, Gifford indicates that strategies involving NJOY and potential settlements with JUUL are under consideration, reflecting on the evolving e-vapor market.

In the paragraph, Bonnie asks Billy Gifford if it's currently more strategic to focus on the profitability of traditional smokable products and nic pouches, like on!, and to consider shareholder returns through dividends and buybacks, given the challenges in the e-vapor market. Billy acknowledges the complexities and mentions the importance of public health considerations in the regulatory processes concerning NJOY. He notes the prevalence of illegal disposable vapor products negatively affecting the market, emphasizing the need for a reasonable settlement approach and disciplined decision-making, especially as the pod segment declines by 15%.

The paragraph involves a discussion about a company's strategies in the e-vapor market, particularly regarding patent issues and potential product modifications. Bonnie Herzog queries about three patent exemptions achieved, noting a fourth pending one. Billy Gifford acknowledges ongoing efforts to resolve this final issue to avoid patent infringement. Additionally, there is a discussion about the company's financial guidance, particularly concerning the potential market withdrawal of NJOY ACE by March and its impact on earnings. Sal Mancuso explains that the company's EPS guidance considers various scenarios, affecting earnings positively or negatively.

The paragraph is part of a conference call where Faham Baig from UBS asks several questions, including on the NJOY patent process and its potential market re-entry timeline, the significant increase in controllable costs in the company's smokable division during Q4, and the growth prospects for nicotine pouches in 2025. Billy Gifford responds, explaining that the timeline for the NJOY product's market re-entry depends on navigating the fourth patent to avoid JUUL's infringement, presumably through the SE exemption process. Sal is expected to address the specifics of the smokable division costs.

The paragraph discusses the SE exemption process for FDA authorization, highlighting its relative speed. The growth of nicotine pouches is attributed to traditional tobacco users transitioning to these products. The company anticipates further growth as consumers switch from cigarettes to nicotine pouches, with a focus on products like on! and the forthcoming on! PLUS. In terms of costs, Sal Mancuso emphasizes considering costs over longer periods rather than just one quarter, noting the declining smokable category and the importance of disciplined resource allocation. The company uses data analytics and revenue growth management to efficiently support its cigarette brand promotions, beyond just managing controllable costs.

The discussion revolves around the pricing and volume growth of a nicotine product named on!. Despite increased pricing, the product maintains impressive volume growth. Billy Gifford highlights the competitive nature of the nicotine market, which includes challenges from illicit products and FDA enforcement on synthetic nicotine. He mentions that on! resonates well with consumers, and strategic promotional spending has improved profitability and consumer loyalty. Gaurav Jain follows up with a question about the synthetic nicotine market, noting competitors' involvement and differing strategies.

The paragraph discusses a company's strategy and challenges in the nicotine and cigarette markets. Billy Gifford acknowledges that the company is evaluating opportunities in synthetic nicotine products due to recent enforcement discretion. He also addresses concerns about losing market share in the cigarette industry, highlighting that economic pressures lead consumers to down trade. The company aims to maintain Marlboro as an aspirational brand and is monitoring the situation. Additionally, there's mention of illicit vape products and legal products from outside the U.S. impacting the local market, extending into nicotine pouches and cigarettes.

In this paragraph, Eric Serotta from Morgan Stanley asks about EPS guidance for 2025, noting factors like a lower tax rate and reduced pension income. Billy Gifford and Sal Mancuso respond, explaining that the EPS growth rate is influenced by various factors, such as one less shipping day and the performance of pension investments. They emphasize that the pension plan is well-managed and acknowledge the favorable tax rate, which has shown variability due to tax credits and state tax changes. The provided guidance represents their best current estimate based on 2025 plans.

In the paragraph, Eric Serotta inquires about consumer trends in the tobacco sector, particularly among low-end consumers, in the convenience channel. Billy Gifford responds, noting the primary challenge is the cumulative impact of inflation, which significantly affects their consumers who are generally of lower socioeconomic status. He explains that these consumers adjust to steady economic conditions over time, but ongoing inflation pressures them. Gifford emphasizes the importance of monitoring inflation's impact on consumers as it could continue to pressure them if it persists. Lastly, Emma Rumney from Reuters asks about expected policy changes under the new administration.

The paragraph discusses the regulatory landscape for nicotine products, emphasizing the scrapping of the menthol ban and the uncertainty surrounding nicotine pouch regulation under the Trump administration. Billy Gifford expresses a desire for the FDA to function as originally intended by Congress, advocating for harm reduction through expedited authorization of alternative products and enforcement against illegal ones. Gifford highlights that a significant portion of adult cigarette consumers are seeking alternatives, suggesting that a change in administration might offer an opportunity to push for effective regulatory changes.

The paragraph discusses the challenges facing the regulation of nicotine products in the U.S., highlighting the need for better authorization of legal products and enforcement against illegal ones to ensure public health and safety. Emma Rumney raises the possibility of the U.S. administration scrapping the PMTA process due to the FDA's delays, which Billy Gifford opposes, emphasizing the importance of FDA oversight to prevent an unregulated market. The conversation also touches on the uncertainty surrounding potential tariffs and their impact on Altria's vaping business, with a focus on possible mitigation strategies such as price adjustments or shifting production, although no tariffs have been implemented yet.

In the paragraph, Emma Rumney questions the impact of tariffs on China, assuming NJOY products are manufactured there. Billy Gifford clarifies that NJOY has alternative production facilities outside China, which minimizes the impact of such tariffs. While he confirms that production occurs globally, he avoids specifics for competitive reasons. The conversation concludes with Mac Livingston and the operator wrapping up the call.

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