Altria releases 2022 annual report and buys NJOY e-cigarettes for $2.75 billion


This week: Altria releases its 2022 annual report: In 2022, the company achieved after-tax revenue of $20.688 billion, down 2% year on year, and net profit of $5.764 billion, up 132.9% year on year; And on March 6th the company announced it was buying NJOY e-cigarettes for about $2.75 billion in cash.

Traditional tobacco shipments declined, with Marlboro cigarettes accounting for 58.2 percent of the high-end market

In traditional tobacco, the company achieved $18.187 billion in after-tax revenue in 2022, an increase of 0.4%, mainly due to lower shipments and partially offset by higher selling prices and reduced investment in promotional activities; In terms of shipments, the company’s shipments of cigarettes in the United States in 2022 were 84.678 billion, down 9.7% year on year, mainly affected by the industry decline rate, retail share loss, trade inventory changes and other factors. Adjusted, the company’s shipments of cigarettes in the United States in 2022 were down 8% year on year. The company shipped 75.406 billion Marlboro cigarettes in 2022, down 9.1 percent from a year earlier. In terms of market share, the overall market share of the company’s traditional tobacco in 2022 was 47.9%, down 0.8pct year-on-year, among which the market share of Marlboro cigarettes in the overall cigarette category was 42.5%, down 0.4pct year-on-year, mainly due to the increasing macroeconomic pressure and competition activities. But its market share in the premium segment rose 0.5pct year-on-year to 58.2 percent.

Announced the spin-off of JUUL Holdings to acquire NJOY e-Cigarettes for approximately $2.75 billion in cash

The company lost $1.455 billion on its investment in JUUL in 2022, and its estimated fair value of the JUUL portion of the investment was $250 million as of year-end. The company said it would exchange its entire minority interest in JUUL for certain heated tobacco intellectual property rights to divest from the company’s shares. On March 6, the Company announced the acquisition of NJOY E-Cigarettes for approximately $2.75 billion in cash. The terms of the transaction include an additional $500 million in cash payments, contingent in part on the regulatory outcome of certain NJOY products. Currently, the FDA has issued marketing clearances (Mgos) for 23 e-cigarette products and devices. In 2022, NJOY will receive Mgos for six products: the NJOY ACE e-cigarette device and three totobacco flavored bombs; NJOY DAILY EXTRA, strong tobacco flavor, 6.0% nicotine and NJOY DAILY, strong tobacco flavor, 4.5% nicotine. NJOY also sells menthol flavored e-cigarettes, which are still under FDA review. According to Nielsen, Vuse will have 35.7 percent of the U.S. e-cigarette market in 2022, Juul will have 30.1 percent, and No. 3 NJOY will have 2.7 percent. NJOY’s leading brand, the NJOY ACE, is a pop-changing e-cigarette product currently available in only about 33,000 U.S. retail stores, with ACE accounting for about 85% of NJOY’s total retail shipments in 2022; NJOY also sells its NJOY DAILY disposable vape products in about 23,000 U.S. retail stores, while it is also developing access restriction technology for the device, which uses Bluetooth to authenticate users before unlocking the device; And NJOY has a strong business relationship with Shenzhen Simor Technology Co., LTD., a leading innovator in the field of e-cigarettes, for the development and manufacturing of its e-cigarette products. We believe that NJOY is expected to make full use of Altria’s commercial resource advantages to achieve rapid increase in product sales and market share after subsequent acquisitions are successfully implemented. As its core supplier, Symol International is expected to continue to benefit from its technological advantages.

E-cigarettes are the largest smokeless product category in the United States, with a market share of over 50 percent by 2022

According to Altria, e-cigarettes were the largest smokeless product category in the United States in 2022, accounting for about 15 percent of total tobacco sales and more than 50 percent of total smokeless product sales in the United States. In 2022, there were nearly 14 million adult tobacco consumers in the United States, including 9.5 million e-cigarette only adults; Generated about $7 billion in retail sales. At the same time, the United States has made significant progress in reducing the use of e-cigarettes among minors. According to the Centers for Disease Control’s National Youth Tobacco Survey (NYTS), e-cigarette use among middle and high school students in the United States was estimated at 9.4 percent in 2022, down 53 percent from a peak of 20 percent in 2019. However, COVID-19 may not be ruled out as having an impact on the survey methodology.

Investment suggestions: 1) Atomization industry chain: Key recommendation — Simor International (leading atomization equipment manufacturer in the world); Suggestions to pay attention to: fog core technology, Jincheng Medicine, Rundu shares. 2) Tobacco supply chain: It is suggested to pay attention to: China Tobacco Hong Kong, Jinjia Holdings (jointly covered by light Industry Group), Huabao International (jointly covered by Commercial Community Group), China Bolton, Jiyou Holdings, Shunhao Holdings, Dongfeng Holdings (jointly covered by light industry group).

Risk tips: Risk of new tobacco policy changes; Sales/business development falls short of expectations; The risk of increased market competition; The risk that the acquisition of NJOY will not proceed as expected.


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