Altria Group Inc. has announced its 2016 third-quarter and nine-month business results and reaffirmed its outlook for 2016 full-year adjusted diluted earnings per share.
- Altria’s 2016 third-quarter reported diluted earnings per share (EPS) decreased 28.2% to $0.56, as comparisons were affected by special items.
- Altria’s 2016 third-quarter adjusted diluted EPS, which excludes the impact of special items, increased 9.3% to $0.82.
- Altria’s 2016 nine-month reported diluted EPS decreased 0.5% to $2.02, as comparisons were affected by special items.
- Altria’s 2016 nine-month adjusted diluted EPS, which excludes the impact of special items, increased 10.3% to $2.35.
“Altria delivered excellent performance in the third quarter and for the first nine months,” said Marty Barrington, Altria’s chairman, CEO and president. “Our core tobacco businesses delivered solid income growth on the strength of their leading premium brands. We also continued to simplify business processes, streamline infrastructure and invest in important growth initiatives. And with the completion of Anheuser-Busch InBev’s business combination with SABMiller, we maximized the value of our SABMiller investment and expanded and extended our share repurchase program. Going forward, we continue to have a position in the global brewing profit pool as a significant shareholder in the new combined company.”
Product Innovation and Regulation
In e-vapor, Nu Mark, LLC (Nu Mark) continued its disciplined distribution of MarkTen XL while preparing for the U.S. Food and Drug Administration’s (FDA) final deeming regulations, which came into effect on Aug. 8, 2016.
In heated tobacco, Altria continues to partner with Philip Morris International Inc. (PMI) on its FDA applications for iQOS. PMI plans to submit a modified risk tobacco product application to the FDA by the end of 2016, and a pre-market tobacco product application in the first quarter of 2017. Altria’s U.S. commercialization and marketing plans for iQOS continue to progress, and Altria is working closely with PMI to capitalize on insights from current iQOS markets.
All the tobacco products that Altria’s operating companies manufacture and market are now regulated by the FDA. Altria and its companies continue to focus on compliance and constructively engaging with FDA and others to advocate for science- and evidence-based decisions that are consistent with the statute, promote innovation, and create sound public policy.
Altria announced the consolidation of certain operating companies’ manufacturing facilities to streamline operations and achieve greater efficiencies. John Middleton Co. (Middleton) will transfer its Limerick, Pa. operations to the Manufacturing Center site in Richmond, Va. U.S. Smokeless Tobacco Company LLC (USSTC) will transfer its Franklin Park, Ill. operations to its Nashville, Tenn. facility and the Manufacturing Center site in Richmond, Va. Employees affected by the consolidation will be offered the opportunity to transfer into available positions; those who do not do so will be offered separation benefits. The consolidation is expected to be completed by the first quarter of 2018 and deliver approximately $50 million in annualized cost savings by the end of 2018.
As a result of this consolidation, Altria expects to record total pre-tax charges of approximately $150 million, or $0.05 per share.
Business Combination with SABMiller
On Oct. 10, 2016, Anheuser-Busch InBev completed its business combination with SABMiller. As previously announced, the combined group will retain the name Anheuser-Busch InBev SA/NV (AB InBev). In connection with the closing, Altria received 185,115,417 restricted shares of AB InBev, representing a 9.6% ownership of AB InBev, and approximately $5.3 billion in pre-tax cash. These results reflect the terms of the partial share alternative (PSA), including proration, and the proceeds from the currency derivatives that Altria entered into to hedge its British pound exposure (Currency Derivatives). Further, Marty Barrington, Altria’s Chairman, CEO and President, and Billy Gifford, Altria’s CFO, have been appointed to AB InBev’s Board of Directors.
2016 Full-Year Guidance
Altria reaffirms its most recent guidance for 2016 full-year adjusted diluted EPS, which reflects the reporting lag, to be in a range of $2.98 to $3.04. This represents a growth rate of 6.5% to 8.5% from a 2015 adjusted diluted EPS base of $2.80.