Altria Takes $4.5B Writedown On Juul Investment

Cigarette and tobacco company Altria Group Inc MO said in conjunction with its third-quarter report that it took a $4.5-billion pretax charge against its earnings from its investment in e-cigarette maker Juul.

What Happened

Altria said in its earnings release that a decision to record a non-cash pre-tax impairment charge of $4.5 billion related to its investment in Juul is not due to any one event or factor.

The company cited multiple potential headwinds ahead for the e-cigarette industry, including:

• An increased likelihood of the Food and Drug Administration banning flavored products from the market.
• Multiple cities and states banning e-cigarette products.
• International markets that have made similar gestures toward banning e-cigarette products.

Why It's Important

Altria CEO Howard Willard said during a conference call Thursday that the company is "not pleased" to take an impairment charge, according to CNBC.

The company couldn't have imagined this "dramatic of a change" when it invested in $12.8 billion in Juul in late 2018, valuing the company at $38 billion, the CEO said. 

Nevertheless, Altria remains "committed to Juul's success" and it is seeing share gains, as its market share in customers over the age of 21 rose from 10.3 million last year to 12.6 million.

What's Next

The e-cigarette and vaping category faces a "critical inflection point," and potential changes such as raising the smoking age to 21 could "reset the course" for the category, CNBC also quoted the CEO as saying.

Altria shares were down 0.72% at $45.63 at the time of publication. 

Related Links:

Altria Group Reports Q3 Earnings Beat, Reaffirms Guidance

Juul, Facing Regulatory Crackdown, To Lay Off 500

Photo courtesy of Juul.