Altria (MO) 28 Jul 202020 Q2 Earnings call transcript

Good day, and welcome to the Altria Group 2020 Second Quarter and First Half Earnings Conference Call. Today's call is scheduled to last about one hour including remarks by Altria's management and a question-and-answer session. Representatives of the investment community and media on the call will be able to ask questions following the conclusion of the prepared remarks. I would now like to turn the call over to Mr. Mac Livingston, Vice President of Investor Relations for Altria Client Services. sir. ahead, go Please

today, morning metrics Gifford, you Altria Mancuso Altria's Altria's website release, and results. will Good providing altria.com press This results. at all our our joining app. available morning Investor discuss The Earlier business quarter Billy CEO and second the issued and Adrian. a for release quarterly thank presentation, us. CFO we are Thanks, through and our Sal on

to unless During period stated, otherwise the our results same XXXX. comparing today, call in we're

Our results. to dividend forward-looking actual end cause various and and payments discretion section and of remarks for cautionary contain Principles. remain could results Future Board. results Altria's reported of the will Descriptions at statements with Please call contain cautionary included results its share repurchases projections to and Altria of at the forward-looking release accordance reports that future today's differ over earnings website financial review subject in Accepted financial Generally materially the of factors special these items operating projections. that, release exclude With adjusted turn call statements Accounting and I'll with results that earnings reconciliations on affect and non-GAAP various reported U.S. in are and comparisons altria.com. our Billy. a results. Today's basis. to both measures the on today's Adjusted from

challenges of year and execute pandemic focus morning Good to vision joining COVID-XX and Despite thank the Max. strong everyone the the for commitment. with Thanks XX employees U.S., you in our against continue our us.

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half. diluted We've reestablishing growth be quarter from earnings EPS of have base consumer to flat EPS our diluted first in range expect now impacts additional represents $X.XX. a adult we XXXX adjusted We understanding a of range outstanding businesses full seen of ABI Turning adjusted rate performance full an we're in of quarterback guidance. the This guidance. behavior XXXX X% year from $X.XX XXXX. purchasing year now COVID-XX and to in contributions, adjusted to $X.XX Because better on an EPS tobacco to a

of for accounts a guidance range Our scenarios.

monitoring environment dynamic facing However, and performance. we're quickly we're still a changing ABI and external

first Our strong half results reflected fourth were ABI's quarter and and results. first

account second the we more ABI’s difficult half. a lag, equity As results quarter be our one on income comparisons expect to we in year-over-year

monitor to could by adult unemployment tobacco government consumers, payments. and stimulus behaviors. including income, decisions conditions unemployment We purchasing also factors benefit influenced continue rates, or for disposable be These future and

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re-established reflects full range XX% a rate adjusted a Our XXXX expectation year EPS tax XX%. in guidance to effective of

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Thanks, Billy.

OCI the Let more quarter some revenue performance framework, detail the of strong strong volume second additional Copenhagen navigating reported volume top successfully points margins deadline. current Copenhagen effectively adult leader with first the half. promotions We the to for been the orders leading relevance growing in cigar the toolkit Middleton’s net Packs allows and Oral the cigars, tobacco continues STC stores to in products its its me percentage U.S. in contributing adjusted segment brand's increased X.X In X.X segments the through profitable into states. provide process to brand. dippers combination of our geographies. satisfying FDA plans behind products submissions expanded margins XX.X% to efficiently over manufacturer across XX.X% Pouch. on Packs promotional key which our volume in resources. and to and quarter. Middleton has Marlboro regulatory by oral expanded line has the invoice the points MST aided percentage be Mild & impacted support and XX Marlboro points Investments fastest to XX,XXX realization believe us the on Copenhagen for select the OCI growth enhance decreased two second Wintergreen segment. is segment. in manufacturing Black introduced recently adjusted is first first performance. enhancement our percentage expect states. MST adjusted to to X.X% margin We products X.X half. employ efficiently oral first margins, covering and with smokeable tobacco with retail remaining Segment XX% which RTM price of In tobacco for its management continues continue be achieved more This we capacity. address And with as pleased supported our the Xth in expand to strong to prior allows us of market seek second for quarter We continued the and X.X% adjusted remain continuing the to XX.X% segment in X.X% the footprint of OCI half. we September the to OCI segments, We're to

In quarter improve alcohol earnings ABI's profitability of In quarter direct to and to wine, maximize driven last reset premise impacted has flows. to representing decrease the in Turning in second highly equity long-term of a share of by XX.X% our second Altria’s the beer, COVID-XX primarily a sales. negatively adjusted lower started the quarter, first OCI quarter, year. Michelle Ste. million to results cash on XXXX recorded from Michelle $XX XX.X% in Ste. we and strategic decreased results. a Adjusted operate consumer and continues category. assets, competitive pandemic second

U.S. its $XX is related Bioworks Turning successfully test of strategic an company's consistency. and we This using large and step making intellectual R&D light believe Gingko of an product investment, of brands. disruptive setting. their Cronos is the strategy to a developing at represents an progress remains to iconic toward long the future first partnership in drive million strategy. with quarter investment. cost in term cannabis, important producing efficiency We XXXX cannabinoids and of executing fermentation the reiterate is can quarter second framework the scale adjusted believe of legalized goal target market. to that produced asset executing property U.S. to We recorded Recently, a with cannabis opportunity. in our We Cronos Cronos cannabis Cronos’s regulatory Cronos tremendous share create policymakers an market adjusted a one Cronos its building which results. primarily importance presents cannabinoids intend and in work growth regulators responsible of in appropriate loss our

rate dividend capital a quarterly declared $X.XX normally we're an Board our dividend dividend in annualized our The $X.XX increase new previous $X.XX date. annualized of the Board Turning allocation, per marks per of quarterly from pleased share to share. share, that rate to of dividend ahead the XXth announce and X.X% increase scheduled the declaration yesterday of years. represents representing per This XX declared a the past of

to generate Our is core businesses continue strong sheet our balance cash. tobacco significant and

making During billion. income of unsecured second senior back and the billion And that tax balance $X revolving our borrowed in had billion the cash approximately we we issued At the on in $X.X is March. we after current cash July, quarter, our of and paid dividend second agreement our under hand. end payments the credit quarter, billion $X notes $X in

continue expect normal maintain preserve We financial to a cash balance flexibility. than to higher to

our on I'd we progress ESG in In XXXX which efforts. like altria.com. Progress highlights the Corporate are Report, Q&A, Before we to making our provide Responsibility available some published on June is

Among we XXXX. lead. environmental Members or half More diverse diverse. important we've pleased and they based of reducing committed efforts, we target footprint other reduction our a approval the goals carbon Board Team having we're science to the -- our Board of women areas Management and set are our reflects with been focus ethnically than the For initiatives, recent that ESG ESG effort are environmental organizations systematically for

points accountable as management, set that As be reaching. aiming diversity will shared for earlier, we've we Billy for of the our

these and your That look forward to to more Operator, advance questions. sharing efforts. questions? happy any remarks and make we'll We in to we take have our we ESG as be concludes progress continue do

Instructions]. [Operator

question comes Chris Stifel. Growe first from with Our

Hi, good morning.

Good morning, Chris.

morning, cigarette relation Good just your the first think expectations. in is category, marked improvement previous about we curious I'm for that how time. for want which for all, to ask you we of your obviously outlook outlook consumer. a I outlook to thank the you as the associate with showing

flat do outlook? you your weaker your the a So sequentially and the And a expect inform half share based even on think a expect was down in Marlboro’s to outlook half the that discount second a bit picture little bit as for I bit consumer reverse then change second volume? do in second those half was quarter did you and sequentially, or where about share what happened in

Chris. for the questions Yeah, thanks

need the benefits I to there. important First for on experience government unemployment the because down paid the volume, the quarter, trade how we to environment is consumer second saw government. In the lot it's of fluid the didn't think remember being stimulus pressure to see out we and a by

it category be X%, Now, we as third, through its X.X% of it, the comparisons half. at we Remember they government in it's front From tobacco to in standpoint half they the pass do, know are first think somewhat but second to it unknown I of cigarette the year until progress considering adult then we certainly than that's benefit decline think still will the receded last they're something. year, of to And for then remember bit and were the peaked fourth. in the easier to if and it's down will important X.X% right now the in able the a the comps they a consumer. an

in bit that little a So it's it's included environment a But monitor. that something forecast. and to fluid also were continue comparisons tougher we'll

second Marlboro As in with quarter. the we're far performed in pleased share, Marlboro marketplace as the second very way the question, your

flat. sequentially mentioned You it was

of brands portion safe Marlboro you that manufacturers a We manufacturers saw hardship, brand any Marlboro the to felt certain a we responded pandemic some competitive is our entire discount but that by of across of without for was I the landing RGM could discounting the portfolio brand. pretty economic our like saw differently. COVID-XX facing we think what provide consumer tools really

with very to Marlboro so the RGM tools quarter. how performed second we're with from the first pleased with And sequential shift, and

That's -- great, once a thank device one about of expect on follow-up on claims marketing to expect I you going expand IQOS product you you. approved the the ended to more FDA? and trying approved of there you you thinking the a the just prominently I'm exposure forward more FDA, reduced again, as quick quarter, it's the And sort your from strategy, marketing question as I get do approved, this featured had the a and device, have know and new by get you're in marketing once you

produce get MRTP them days XX FDA approval or ahead Yeah, mentioned, to two I them the think then and you them marketplace. we send in using the and as to assets was have the I those touched on the key points, One of Chris. approved

filed was and the version three, that you think been that other with mentioned I the has FDA. application

can that move we'll that. will we slow certainly the But in for I want three in you COVID to we various how MRTP see balancing new putting there that don't you best any wait states mention well down version that's and believe lead markets by imagine claim four I progressing as forward are having foot as so is also And but on lead how have forward, and why think around the that version we're as U.S. reasons balance three. didn't we'll we markets, with to competitive for both progresses. your the the the just that And enhancements to

decisions. expansion in we additional make And will as all so of that factor

Okay, thank you very much. I appreciate time. your

you. Thank

comes with Cowen. question the Azer next Vivien from line The of

both or terms as days saw attractiveness to good and juxtapose you Billy, with snus some what smokers on!. success, curious, even the demographics consumer in of your for as Thanks. you of takeaways this of detail to Thank you kind much demographic category relative cigarette reflect consumer proposition, Thank if well incremental very e-cigarette Clearly early on in in the early to I'm those that you compelling category? the any on as morning. so of you women. the

Yeah, thanks for the question, Vivien.

very you're we're think right. exactly I Look, excited.

fast early smokers and can, caveat make that to on capitalize we the we're we to as that. that sure expanding very on we excited Now and as has attraction and with this about it dippers want but the we're both

will, to in from consumers it the as consumer. female minds distinguish packaging but do traditional well that you with As remarks, believe it, has the the mentioned the attraction well they're we the something variety rectangular our if to ability purchases I MST all as making my to have. And as plays that in making them flavors and of that into marketplace. consumer to disrupt strengths decisions, we as they're think the of as the we and in

moving So we as fast capacity. on can as we're manufacturing

no that's we it into and as want it constraint to we XXXX progress in then constraint remove XXXX where that be. and a longer get to stores So the

And for extremely about plans on!. so got we're with we've in place excited what

really That's helpful, thank you.

you're up Just on!? dippers over assume what that relative follow to with category to with to to it on seeing snus that, that is indexed fair

correct is Vivien. That

packaging the in I think as they qualitatively is your having that as tobacco you're at in consumer's at that as in when both it heard the least mind, category, that MST you for traditional the mouth. looked what putting saw well we

with consumers hearing on! marketplace. it's more distinction white, variety I the from from the what and strengths think of it's it's discrete, in flavors, that and intriguing we're is very

squeeze last one that. And one in. will it. Got I Thanks just for

chatter Democrats terms change set the meaningful -- for candidates there's of But take depending potential change of able to some regulation. the in of for of outcome does election, White U.S. the course. terms on pretty growing and Cronos, of are to that the regulatory the the a it pretty a extent control up around In in investment your certainly Senate potential House,

on So change I'd would a love to the as election investment? potential hear your thoughts the Thanks. thinking how Cronos catalyst your on

their Democrats. so and federal we support legalization cannabis. Yes, be and we've look, efforts. point, see, support Republicans your been And to both We clear under could successful both regulation G&A we of to

and and controls implements underage it across we so support But appropriate issues. we believe seen social standards advances the the election entire regulatory turn really certainly use, quality And industry, how to it science out. believe it it regulation we be remains addresses prevents justice and the because will consistent

that's the in place Republican we or that so is Democratic the regulatory the think -- So important it's are a in to have framework administration we either U.S. legalization why put under right

much. very thanks Understood,

you. Thank

The the Stanley. next from of Morgan Pamela question line with Kaufman comes

Hi, good morning.

Good morning.

full influencing you growth factors guess reinstate can relatively I some do you implies talk and a the the algorithm? year about mid-term see to drivers earnings touch Can your some what range that you range of as half of for your on guidance, and back it earnings needed wide

take reverse Yeah, Pamela. in I'll them order,

see on think news, we're are times, on with I the U.S. hot midterm across daily in unprecedented you the spots look, changes the as it where

how lot and there's shut consumer will stay But And monitor around that. so the how down uncertainty of be a impacted. we things or open will

well and there as As the economic Congress through enacted. will version whether be passes that another gets stimulus, of that

major necessary. this again, the in and be remarks I having see year. So then to and global the changes a as on those of But respond a uncertainty. much basis the the of a the and on they They're monitoring factors that remainder as highlighted range lot broader investment what bit global wider ABI, in range that, job good broader in there's very would go a making the we COVID-XX our have through doing pandemic. to we equity you why a exposure a scale to of of That's see

industry from volume industry volumes year and from does long-term performance back smoke unemployment thinking to declines? stimulus And e-cigs contribution this for outlook your influence shift discuss the how benefits can the cigarette and Great. more you about improved the higher a versus opportunity relative you're to and

the you major Pamela. factors, I on two Yeah, touched think

the the tobacco think benefited, stimulus and the consumers. mentioned, Americans. And lower first as I that, both certainly in I was adult our of course, is income included middle

So they the discretionary less that, commuting, for so well as gas, items, certainly as less output entertainment. lower benefited from non-tobacco less

had from that non-tobacco more income So they much discretionary discretionary in spending not space. as

regulation with mentioned related you from to movement to menthol that tobacco the flavors was consumer that I marketplace. the cigarettes And back was other outside and of choices. in the factor faced as of of e-vapor, saw we really FDA the banning think consumers

skewed SKU it's discount. smokers tend Now, we It smokers discount know category, to said adult to older older side. I and adult but entire as certainly that see cigarette the benefited tentative the

the from on And so those when exact to bit to of out that's monitor you a move think we continue we'll impact both tease about that, but forward. something it's early as that

on excise question. managed just on presidential one increase the maybe investor’s I excise how a last likelihood the about prior tax that's implications thinking And the Great. and tax the you something upcoming of guess, are how and you obviously, minds increase? that's just touch can the potential from to election federal you industry

Sure.

at up their you bills federal government the think have racked I look certainly governments and response COVID-XX to if both pandemic. the state it, significant in

to time they for or to certainly at bills. certainly appropriate turn look how And think will could be pay part I for taxes of excise on that. those the

an engages have on strong extremely team We government that. that regularly affairs

both you Democratic As shown it's in our we've successfully look we I think to far as Republican, of know history, whether if navigate or how back those administrations.

place, feel right in government a the that employee we have we the of like right and so so sides navigate feel have affairs have support base strong aisle, right team, like in successfully. And the both we we the and we we place to tools tools

Thank you.

Thank you.

Bonnie comes Herzog line question with Goldman the from next of The Sachs.

guidance. morning, you. everyone. Thank I your have question a Good on

it guess just could to that guidance am, assume your guidance. terms First, curious did the year. so surprised appreciate and enough of touch guys with resilience term, unsure, EPS this if is guidance bit changing, since to something volume you guidance But have makes you your comfortable be worst, you you're I trying visibility could three second, that, guidance why what the as basically is I'd not this reinstating on us the you like assumed, re-establish that? I'm year packages just of tell the then into there feels industry year it? hear from that factored I this And would look to I in future stimulus out a understand long category your you of you in your

agree wholeheartedly, resilient. you Sure, with I the category Bonnie, that is would

mentioned three then to whether or I'll continue. how and and spots both products order, U.S. external and go take them mentioned continues popping earlier I their is various their be could the because the think, and and guidance in that I outlook I of stimulus doesn't up the it how factor impact just those. of stimulus the fluid. around ability on economic reverse out it environment consumer's overall hot the impacts the year get situation so is again, a will

standpoint on look, the impact we its a I stimulus guidance, range from were guidance. think of scenarios we when on and provide

the we we And case will, case based and what if worst is really so we to factor in, guidance right those you on try combination of scenarios. think and best provide

as, on so mentioned, a well bit that's ABI. why as those see as you the And based I guidance wider

why And like we the guidance felt reestablished so we that's appropriate range.

has years. XX% helpful. quarter, a be And about wanted been and cigarette you ask which to investors hear then really I lowest questions almost so I'd this is guys for get retail think I Okay, that's from do your been curious your total about share, it's thinking also are lot to XX share, of how I from the you

have And then, imply, this we key you may of year-over-year pricing I'm some half that is your and what you about and as of start thinking loss? share continue losses? something to then, I'm about actions think that drivers will from the hear losses perspective the the So, the worrisome share do of that recent in to second does implementing some is or your there minimize if to share guidance, been curious you're think this

I growth portfolio. Marlboro the the funding is remember of it's in long-term overall while maximize investments employ important balancing Yeah, we future think Bonnie profitability strategy to the category noncombustible to cigarette over the that in and our

in overall have strategy cigarettes. we So that's the

from mentioned the as you second what category well gross in I very share, with with as saw quarter pleased the in if offerings. as the the both saw to first as increased well We're margin as we pleased profitability of discount we're far from brands quarter will you as Marlboro. our OCI, As with earlier, increase Marlboro

in the branded We compete discount discount, in will be but profitability way compete major a that we the category. factor will brands in

of final consumer four has the of we popular It's at that Marlboro. And is look and look remaining which across really one those the starting to the we're they at meaning one, age years, brand. And profitability we evolve. at it discount, is the remember branded share with and going it's on were one, at looking with we that up. in look pace it strength factors; is of at brand, it age is profitability. the we're You'll the the see cohorts we the cohorts of monitor. equity based where participate we appropriately premium if remaining both score, four overall the a brand, a but keeping relevant, be XX XX when company, on with a at we're Remember, is very to we and equity then of as something especially And really We're focused right standpoint demographics. from engaging share pleased is health share the across

Marlboro, something we'll good feel certainly we about it's but So monitor.

the the economic half. face consumers know, pressures you that mentioned could second we I As in potentially

place. that of we how the times. shown have these And to we environment in right However, know type I in tools think we've uncertain navigate

think quite and I Billy, it the expansion important, to you've showing, it's impressive I helpful, that really mentioned. as been was That think margin is you

really I it's squeeze with balance. one just may question so on Morris. last If agreement and that Philip your And IQOS

second, a to incentives how margin frame dilutive trying and guys you're time even your is understand going cig everything going greater what willing business, you the to And your seems relative it really core much me, curious for details so providing quite this know, was raised, You year, your guess milestones it question? you achieve the from maybe perspective I'm I achieve Thank to the felt to you've low it bit with asking relatively for of guarded business two IQOS to point. of been milestone with the of lot why how you're then about given you. just invest, important a the because share this at bar COVID, share to of are a historically wondering, so manage that? on to especially market

Sure, question appreciate sure. additional I Bonnie. the

you disclosure, against thought IQOS. we and when was at disclosure good expansion about progress the plans the where for think think with I we're making it

that. really we term that felt know the it so investor important was we So disclosed to for and

we very mentioned quiet confidentiality of we we've because it we the have the been was fairly agreement. crossed As detailed terms good as But PMI feel make can progress you like going be disclosure we're with did markets. to place on in appropriate continue behind IQOS. to a standpoint against in We in thinking From lead think balancing, invest IQOS of it we're successful expanding U.S. about the the how the dollars

look on going like XX investments. place, that's XX at year thinking the time long make and we're appropriate so objectives then the agreement runway meet in we performance and is the total Certainly based about we to total of years length years. a you currently the that agreement. time If of current feel can XX the

we and IQOS feel excited can in the So U.S. the about success it have

you. Thank

you. Thank

Piper comes Sandler. next question of Michael The with from Lavery line the

thank morning, you. Good

morning, Michael. Good

change of below a and time, but temporary asset? that's just on you it nature weighing the to defined time that issue to does you how is you the if as is On amount and assessing But depend ABI, on the it temporary. anything And that you view should how that that pandemic. your value a what give view mentioned is about there's how that can with fair of consider for value, we one the transitory environment hopefully obviously think stock, specific on of carrying look sense might

Michael, morning, Good Sal. this is

quarter. deemed correct, detailed closing as item. Look, You the part perform as a ABI we every analysis impairment temporary are a of process have our we

have evaluation ABI. You in recovery seen recent of

book forward. to temporary will going to for believe going it is value we this that under impairment our it guidance, asset. monitor ABI recover But we're and continue to SEC So

Sal. welcome and helpful that's thanks, Okay,

mix a the margins bit the very five at of to your was of strong, was a basis comparable but the the piece just XXX points. on love little specifically, little previously in average price sense Just X% five margin around less smokeable the of cost there, some of previous expansion roughly your but pace would quarter than quarters maybe

continue with driver, question of so is half nature of cost an there initiatives costs were acceleration those? and into bigger those guess one some just the your for is some And more time savings of that we a the I second expect in should some to or if of

at make of Yeah, you and Michael, time I look short period to comparisons. would just try this to caution

You have of year quarter given differences in any or that cost through year-over-year the timing on a basis. occurred

period. You're expansion any right the cadence of pricing can in margin short-term affect the

referring manufacturer I time list put costs marketplace, its in we at it is more has we think we growth much that components, promotions as you been management margins efficient look us retail implementation time, focused revenue price promotions two in really look from be and have And on the been has at more well where back and pricing. as very really and to. and through pricing the if growth step how marketplace. we've much precise to you're the revenue the improve management. those leverage opportunity really disciplined believe reducing the has through able It been of in very And the the afforded the to

is really different period a place. as as get really list factors, its when pricing So of you back the price at two step revenue we it's cost, and but short-term pricing its manufacturer well three out the pieces, in and management put look growth

the towards year. implemented And of last back-end restructured we the program happened year, Michael the the I course the add more the savings that will over year, of

strategic management So our very of think that. businesses. But take ongoing is management is you important leverage business. part are we as we tobacco margins and our just in a of approach that it about said an lapping We the cost

well plans, flexible you, last could on your markets pretty sense And there. XX rollout, how more Can for might that faster Okay, you the the color map set? is then into helpful. and give you one of what, kind or of IQOS month or you us accelerate just road anything, thank if that's a those on thinking are move one the thank this

and today, what we on to look if us faster we to that's at allow marketplace. having to in desire the move what analysts mention certainly we're investors the No, always I would based think experience wanted we so

prepared. we're So

is that, areas different different the COVID-XX the balancing also are U.S. in of We increase. earlier, that pandemic mentioned in as at rates with I

that with And factor speed what continue so all we of will into of expansion the IQOS. our

Okay, that's very you great, thank much.

you. Thank

from next Powers Deutsche line Steve comes of The question the Bank. with

Two good for morning. Yes, Good hey me. morning. quick ones guys,

you first thing given on! think the that just So XXXX which at level one the we if the confirmation target a of ceiling could that originally But about timing year respect think to we end and apologies there percolating. of about year level? with Billy, I XX are plans but should think capacity increase is million of million, of or missed end for your the as I getting that to to the capacity I hit are beyond delays talk that a The is can ability to good the XX further it was

so the million certainly Yes, for year-end. what XX is we stated

that constraints Steve, will mentioned behind being We also of curve. a personal capacity tired in we remove XXXX. I standpoint, the from I'm

closed Richmond, the we've here we stay in PMTAs with starting has manufacturing here it FDA, we're I expanded the forward. it's now when expand and overlooked. employee stores, it's capacity, XX to we're ago. produce we work. to filed quite of important look their We're Remember, base of that remarkable. in the XX,XXX to we as We what able campus on out transaction So going months ahead XX been foundational achieve, this you And move think it gets at curve demand sometimes N.C.

you. So it. ahead being to behind the I don't rapidly. like we're But very moving get with I of want curve. I'm

of can plays you Okay, once balance things, I ahead out normalize? to COVID okay, Billy's bit, hopefully that this period, think curve looking get a you're the but as frame desire cash through into about allocation priorities, maybe Sal, then and this capital higher that your carrying

balance a we times about these But in the having overall, think especially is company is has of investments for have capital to paying our dividends to But past, about we and of in the a expenditures than this the unprecedented capital in are year. our our level that cash size. talked you to remember, expenditures the we've our going depreciation fortunately the about of the future tend we're for we higher capital be do. make When a at think thing obviously. level investing allocation, need if we same after we and during after an and we capital important our On! going low business make necessary are product health shareholders very business prudent look, $X normal make the Yeah And capital through right and our about for a investments. And analysis billion cash. think company expenditures, to detailed we capital a to generally and the excess that about for through best long-term businesses. run allocation we of and in our

Understood. Thank much. very you

Thank you.

of question line Citi. Spielman next comes from The the with Adam

Thank you morning, everyone. Good very much.

morning Good Adam.

then Can on ask two I IQOS to questions just contract. follow-up and one -- I'd like another the

just I you question And first if be that specific is, terms curve, said the about a you're year wonder XXXX really massively more and the follow-up particularly, on of So in to behind capacity XXXX. the mind cans and clearly my in be as end I want in is the to curve And you on! behind going you you're going a of capacity. can capacity is the it million which start with think to not little XX that capacity. don't by about the of have that yet presumably more clearly bit year,

is you'll terms have come XX, was at the of capacity end little to beginning be you let's big you rate to run the I bit isn't the and hope sort evidently can enough, XXXX? next say, wondering of because of the specific a when capacity, of which at the if of So be why XXXX going is in tranche on

let I would the I capacity appreciate Adam. I to of is be to really follow-up, constraint we no the what a marketplace. meant like What Yeah, longer in do

not capacity remove manufacturing I wanting that of a have desire so we marketplace, produce where be ability specifically product ahead curve the in the if to to stores to ability so the in and from and want want the to product will, we you that it. have produce have constraint to And stores it, we to capacity being the of and more that's of in the

what that's And by ahead curve. being meant I of the so

capacity, so what of about talked be to million let's And capacity -- sort in sort of XXX you will million, what remove that? XXX required say mid XXXX,

refrain I'm The question far. Adam, on from what to too your going going desires are,

we just the in we're XX want about we're with the capacity million is think remove to constraints as far in I go. to as going environment And that knowing XXXX.

thank you. Okay,

just obviously to I had so understand detail, can about obviously huge now increase the XQ. want I Okay, question a really you and margin, turn to in margin the

is in because moment, is some there America understanding there this with some my Now, expenses make was the couldn't you at pandemic. situation of just the

go and going regular as of you'll we level? of bit watermark activities, being you're back and and level guess, should this think to And is beginning the build a markets or be forward, a new high in think a this so I this regular we of we from should half the to new second as more more XXXX,

get this but I Adam, we'll to where specifics into going do go. follow-up, and about again is not I'm where Yeah, appreciate margin the

do in revenue the manufacturer you're those certainly our more with earnings the to there as being other through is we us of can release. or putting be through and there's From I in But spent. And Michael, resources do because in any even there marketplace, more as think precise, are related a and I price increase efficient the levers in piece, pricing of list expenses And the but in that is expenses more COVID be time, you're standpoint shows like the reductions. that the some a that's implementation also you're right, achieve the consider a year-over-year are reduction pricing, through with cadence margins what like that and results. like it's we of better up promotional of mentioned earlier overall additional you to ability in management. cost in you're margins highlighted can affect able pricing given it quarter, We expense we to well doing growth through, time. to though think and to second quarter as really around that

but get the that, we're so And expect We're continue us implementation satisfied. at, we're can with with that with extremely to to pleased better you of modeling. where never

And becomes. and more that to that so it the goes the data gets, it sharper model the experience

think answer. that’s I Okay, actually and meaningful helpful very

have you IQOS about question specific that I'm value point get about what let's way and gave to you ask can talk maybe, and So I my share contracts new just I -- to about you is specific with the the wondering quarter say the with think talk metro it is that, Atlanta third the so that a And a area? that details geographic this geographic -- be this and areas. But state about area would not would basis XX enough be I new you that of be metro just or was how familiar we or does that internally. a would it very think not specific or specific mean, should refers

cross-confidentiality market as share a a as so cigarette we data forward be again, that's move the disclose from each point and quarter. I'm going data met you, place, where IQOS the important we've disclose Without and earlier. reference. point those a progress we the against category in met objectives. to it it, it just financial thought refrain mentioning stores or With meeting that a we'll X.X I haven't items. at have to mentioned that's in whether deeper of to we of describing to was And sure Yeah, term, of as have this our we with the just share of end going second But in much point we were Adam, Atlanta selling the

really it specific phrase clear, it's about not think a be from of geographic state, area area to or But that whether just a if county? mean, tell my that’s something is point view, a possible you to smaller, metro I

the I and refrain question that from asking. I with you're going understand just to going deeper. agree I'm

for I think good that was disclosure investors.

Okay, thank very much. you

Thank you, Adam.

Barclays. with question from Jain of line Gaurav the next comes Your

so Hi, the the California. good in Bill question is first on I morning. three have questions, SB-XXX

ban you just the Could how different smokeless, speakers]? will have, categories [multiple So that cigars, talk it might happens there flavor pouches in what that a or about impact and California. is you cigarettes, be nicotine

the best that important. Yeah, think think the to FDA flavors. entity situated we Look, is on is I it make decisions

will that of that they'll on based Bill, have through FDA the tend category. overall under index in the products All of been a make from either or the evidence. it's scientific California. FDA Specific you decisions we mentioned cigarette category, in the cigarette under through basis, to go I and menthol those science remember course, to And into think tends in important the index menthol to to and

think California can in traditional over or space, about mention alternative really as you space, the the in of under when other those in you And to be indexing far mentioned, MST share, somewhere equal I think in of front the then all categories, as the nothing FDA products get as I will indexing. to around shortly. here

oral Sure, second tobacco on the question my is category.

new where smokers. users it possible sharing XX% the disaggregating and are of into is snus, to you the consumers mentioned for XX% coming e-cigarettes, that thanks are other coming Of users on! to slide the So what from product? that

the wanted we the go But consider It opportunity in what thus far. other because the is other the presents. into smokers saw possible. categories future. of detail share with we We just whether We'll from that we to exclusive haven’t

XXXX do to will [ph] do of you COVID. youth PMTA that be what the Survey And you over that from respect and e-cigarette relevant? months be will survey indications helpful. have prior last Sure, you think youth the will on category, Tobacco that think Youth might three of will see tobacco JUUL so the it that's a very next is at question guide my the But trends delayed because more first years access we or with will impact be the

pulling see. came external if place FDA it well before I taking Yeah, you place. panel actual started we'll be flavors voluntarily what's think remains Certainly to seen what environment consider JUUL in in remember, the the

go share we their so saw down actually slightly. And

if that some you even of manufacturers Now more field, share. there's of seen of playing recapture that an JUUL across will, share we've all

types biggest social use of mean for with even high out and school, as XX, we well is have products. if underage of to more that was what where use for chance as access be And pandemic saw you. these for that you're being the think access there it would COVID-XX school remember, access I the underage me I by to XX I'm in buy to

also independent supported we XX across minimum why age purchase at of us, U.S. that's and so JUUL the And the to

at has steady states it progress in at passed is the so of yet. passed affairs in haven't The end And was that really the team that year government federally passed last those being made and engaged state.

an use. always more any those of underage consumers done be no factors nicotine. So I should use access and certainly type should have we have impact on to all underage or of There's think believe

That's very helpful. you. Thank

Thank you.

next line Bennett comes Jefferies. the The question from with Owen of

Good morning, [indiscernible]

morning Good Owen.

be back terms data me. geographies not will Yeah, just for not excitement guys realistic just seem if and it think and next so you is makes over to to was specific have there. XX% those specific he around in share, perhaps continues be been that your the be can't possible main gave competitor I those I able a doesn't guessing tobacco what the Atlanta could, Thank to ambition successful obviously talk be Could two in the one for may of months in a you dollar answer north what you. Coming points kind say challenging, years? you IQOS of you success especially to, you he about more success? bit see the of and you U.S. that, won't it so to the And curious XX confident a share

refrain I Owen the to the one, appreciate detail projected going questions to I'm right and going we were you're into on from be. first where Yeah,

is in the back cigarette a tobacco you if success the we think why U.S. be will to I think heated consumers. related really to go

those of consumers e-vapor half of somewhere an have forms rejected over products. So it. move And those reduced expressed consumers and lot tried a a various desire of the half to slightly harm shown potentially to and roughly went over to

of And me believe scale really a on combustible if the tobacco fits so to you and one e-vapor put end we on heated cigarettes other. conventional allow or

consumer in though the IQOS The so a satisfaction. what similar. as They put the to With HeatSticks, a have you're feel mouth from aware the very would cigarettes base. experience I well even closer is device you goes mouth, experience, get is it

You're inhaling the product.

group rejected looking category are consumers satisfy So IQOS e-vapor great we to that for. is they it, think conventional tried because a of for and what a those cigarette large

very you appreciate thank much, it. Well,

Thank you.

We from Robert Rampton have UBS. a question with

that for MRTP questions breaks? mentioned, were first Good tax state your secured reduced as excise tax the have what's status, IQOS specification the to state that further me, breaks morning. for you for probably exposure you receive outlook Three and still received, does if previously hold you

exactly you're right. Yeah,

Some were those of secured.

by differs it state. Now

reduced some risk different a for rate So rate and one reduced states have exposure. for

Some rate. a similar incorporate at both

differs by state. it So

As type team outlook, the were to affairs government the I the approval secure the from FDA most of they having strength far mentioned without able our affairs those as team, of government that marketplace. product and of in

conversation legislatures, you with the a excise So be deterrent think various state see some far down be move continuum to the for desire that believe of risk. very not it'll that as goes we And the now taxes a I we fruitful conversation. as that should consumers have

prediction see put think I more on we'll conversations outcome. I so take a and the place will And

is any point follow the to number was it still mentioned at think been states, you that, just And that added one since? four on has I up or

because it it IR period does of Yeah, have I or period. with will I head But you. IR many four don't is, make I five. follows ask will off my the handy sure either to how actually top states up change

and respect, my but in should should was pricing more kind going retail year revenue in Great, question very be and increases elevated price we a thank is you much. that net see one-off normal And historic level elevated as next looking forward? of it XXXX hindsight things then at

any we're about about Yeah, talk wouldn't realization. one how I'll be going to careful any exactly future or not anything think to pricing particular into of read going year forward. it I price

economic is the, and that achieve, time, important with about will, how strategy you of facing. feel the well part back if as we and pricing cost consumers reductions profitability when is as our algorithm. they're of from step to we we're through outlook specifics overall think We know what the I balance that you an able general, in maximizing think pricing the

make we balance and we of so how pricing year. that decisions. year-to-year And a given And throughout on all basis any that's

very thank clear, very Alright, you much.

was it was And Sal was that five able states. look it Robert, to up, states, five

turn At like you. I over back Thank for management comments. closing to this would time, the to call

joining very of much Altria’s tobacco quarterback for of track financial the strong Look, category thanks have businesses, environments. a in Well, us. performance challenging and evolve, continues but record delivering to consistent

progress stay for and vision the We by to has winning continue healthy. in brand of transitioning excited to our cash our Thank you we're continue achieving our of shareholders future. significant non-combustible adult We returning unmatched. form amount of non-combustible is responsibly smokers to us in dividends. to reward make platform and And again a a the believe joining