Massachusetts lawmakers are weighing a ban on flavored tobacco products like e-cigarettes, and while tobacco giant Altria took a $4.5 billion charge in connection with its December 2018 investment in vaping giant JUUL Labs, its finances will likely be okay in part because even an all-out ban on e-vapor products may slow the decline in Altria’s cigarette sales.
That’s the general sentiment of analysts at Moody’s, which is calling the charge taken by Altria in connection with its 35 percent stake in JUUL a “meaningful write-down” and the investment itself an “ill-timed decision.”
Analysts reported late last week that the write-down stems from Altria’s lower-than-expected profit projections from JUUL “because of the increased likelihood that the US Food and Drug Administration will remove flavored e-vapor products from the US market pending a market authorization decision.” It also accounts for international and state bans, like the one in Massachusetts.
Before the vape bans, Moody’s projected that Altria’s investment in JUUL would contribute to about $200 million of pre-tax earnings to Altria over the next 12 to 16 months, which is less than 2 percent of Altria’s overall projected earnings.
Altria expects cigarette volume declines of 4 to 6 percent per year. An “all-out” vaping ban may slow that decline “as fewer alternative products will be available to smokers who want to quit,” Moody’s reported, but may also boost alternate nicotine products like smokeless tobacco and the tobacco-heating product known as IQOS, which Altria has an agreement with Philip Morris to sell in the United States.
Image credit:Â Lindsay Fox
