Q1 2022 Altria Group Inc Earnings Call
Of the prepared remarks, I would now like to turn the call over to Mac Livingston, Vice President of Investor Relations for Altria client services. Please go ahead Sir.
Thanks Gretchen.
And thank you for joining us this morning, Billy Gifford, <unk>, CEO and Sal Mancuso, our CFO , who will discuss <unk> first quarter business results.
Earlier today, we issued a press release, providing our results the release presentation quarterly metrics and our latest corporate responsibility reports are all available at <unk> Dot com.
During our call today, unless otherwise stated we're comparing results to the same period in 2021.
Our remarks contain forward looking and cautionary statements and projections of future results.
Please review the forward looking and cautionary statements section at the end of today's earnings release for various factors that could cause actual results to differ materially from projections.
Future dividend payments and share repurchases remain subject to the discretion of <unk> Board.
Altria reports its financial results in accordance with <unk>.
Today's call will contain various operating results on both a reported and adjusted basis.
Adjusted results exclude special items that affect comparisons with reported results.
Descriptions of the non-GAAP financial measures and reconciliations are included in today's earnings release and on our website at <unk> Dot com.
Finally, all references in today's remarks to tobacco consumers or consumers within a specific tobacco category or segment referred to existing adult tobacco consumers 21 years of age or older.
With that I'll turn the call over to Billy.
Thanks, Matt Good morning, and thank you for joining us.
We're off to a strong start to the year and believe our businesses are on track to deliver against our full year plans.
Our tobacco businesses performed well in a challenging macroeconomic environment and.
And we continue to make progress toward our vision to responsibly lead the transition of adult smokers to a smoke free future.
Let's start with our view of the macroeconomic backdrop and its impact on U S tobacco consumers.
In January the surge of omicron cases, disrupted consumers' routines and purchasing patterns.
Resulting in short term decreases in retail trips.
And overall tobacco volumes.
Increased inflation throughout the quarter pressured discretionary income levels.
As the consumer price index reached a four year high in March and higher gas prices were exacerbated by the Russian invasion of Ukraine.
However, the ryzen inflation was partially offset by improved and increased wage growth for some consumers.
The unemployment rate was three 6% at the end of March down from 6% in March of 2021.
Total wages grew by nearly 5% in the fourth quarter compared to 8% average inflation.
For some occupations wage growth outpaced inflation, including occupations that over indexed towards tobacco consumers.
For example.
Wages grew 11% for production related jobs, and nearly 10% for jobs pertaining to transportation and materials moving.
Additionally, the pressures of inflation were also offset for some consumers by higher federal income tax refunds and.
In the first quarter the average federal income tax refund payment issued by the IRS increased by approximately 12%.
We do expect inflation to persist for the balance of the year, However, and we will continue to monitor its effect on tobacco consumers.
Moving to our consolidated results.
<unk> delivered strong first quarter performance in this dynamic environment.
<unk> adjusted diluted earnings per share by four 7%.
Adjusted EPS growth was primarily driven by higher operating companies income.
And fewer shares outstanding.
Actually offset by lower adjusted earnings from our Abi investment.
And the Smokable products segment, we continued to execute our strategy of maximizing profitability in combustibles, while appropriately balancing investments in Marlboro with funding the growth of smoke free products.
First quarter Smokable segment, adjusted OCI increased to five 7% and mobile retail share was stable sequentially.
We believe mobile share performance through this period reflects its continued strong brand equity among smokers.
We believe the investments we have made behind data analytics and revenue growth management provide us with the right tools to support the smokable strategies.
These tools include PM Usa's manufactured supported off invoice program, which enables more efficient resource deployment for Marlboro.
As well as retail trade programs with multiple options designed to provide retailers with store level solutions for our brands.
We believe these capabilities position our smoked.
<unk> businesses to navigate the current environment and to continue to deliver strong profitability and support of our vision and shareholder returns.
Turning to our smoke free product portfolio.
We're excited by the performance of Boeing and oral nicotine pouches.
<unk> reported shipment volume nearly doubled to $18 million gains in the first quarter.
At retail on share of all tobacco increased by two five percentage points, reaching.
Reaching four 1%.
As we shared at Cagny on share growth has been primarily driven by repeat purchases from existing on consumers.
And increased tobacco consumer trial.
We are encouraged that these dynamics continued into the first quarter.
At the category level oral nicotine pouches reached.
Total all tobacco retail share of $19 three percentage points in the first quarter.
The category grew $6, one share points year over year with <unk>, representing more than 40% of this growth.
We believe the brand continues to be a highly competitive product in this space and it continues to perform well in all regions of the U S.
As a reminder, our premarket tobacco applications for the entire portfolio remains pending with the FDA.
And we believe the FDA should determined that the marketing of these products is appropriate for the protection of public health.
We are also actively working on modified risk tobacco product applications for oil.
We believe <unk> claims would provide impactful points of differentiation for the brand and important tools in educating and ultimately transitioning smokers to less harmful products.
Any vapor we estimate the total category volume increased 10% versus the year ago period, and increased 4% sequentially. As a result of increased volume and the vape store channel.
Our minority investment in Juul remains subject to challenge by the U S Federal Trade Commission and.
In February and administrative law judge found in favor of Altria and juul and dismissed the entirety of the FTC's claims.
The FTC is appealing that decision to the FTC.
Any decision by the FTC is subject to appeal and federal Applet Court.
In heated tobacco, our teams are continuing to work with PMI.
Coast reentry plans and we will keep you informed on developments as circumstances warrant.
There is no change to our expectations regarding iqos product availability.
Moving to the regulatory environment.
President Biden signed a bill last month to bring synthetic nicotine products under FDA regulation by updating the definition of a tobacco product within the food drug and cosmetic act to include any product that contains nicotine, including synthetic nicotine products.
The Bill allows manufacturers a synthetic nicotine products currently on market to keep those products on the market for 120 days after the Bill's enactment.
Provided that they have submitted a PMT for those products by may 14th.
Unless the FDA grants at <unk> within that time period, the products become unlawful and subject to the Fda's enforcement discretion.
The Bill creates a certain exception for this review period for those circumstances, where the FDA issued a denial of a marketing order and the manufacturer thereafter marketed the product with synthetic nicotine.
We believe this legislation is an important step towards the creation of a responsible smoke free marketplace, consisting solely of FDA authorized products.
In combustibles. The FDA has indicated that as it is on track to issue proposed product standards. This month regarding menthol in cigarettes.
In characterizing flavors in cigars.
As a reminder, the FDA rulemaking process has multiple steps and provide several opportunities for stakeholders to provide input.
Hunter a smoking is at the lowest level in a generation and efforts to prohibit the legal sale of products to adults as we have seen with alcohol prohibition and cannabis criminalization have consistently failed.
Prohibition pushes products into illegal markets that lacked regulatory oversight and lack under age prevention.
We believe equitable harm reduction is a better public policy approach to reducing smoking and improving public health.
This means manufacturers must develop and the FDA authorized an array of potentially reduced harm alternatives.
That can appeal.
Two and transition smokers across all backgrounds and demographic groups.
We expect to be actively engaged in providing our perspective to the FDA throughout the process.
We remain optimistic about the future of harm reduction in the U S.
We believe we have an unprecedented opportunity to lead the way and shifting millions of smokers away from cigarettes.
We are encouraged that the FDA has started authorizing smoke free products, but more needs to be done to build a marketplace of authorized reduced harm products.
Smokers can consider as they move away from cigarettes.
Our tobacco businesses delivered extraordinary results in a challenging and dynamic environment and this could not be done without the passion resiliency and fierce determination of our employees.
Their talent and dedication continue to give me confidence in our ability to move beyond smoking.
I'll now turn it over to Sal to provide more detail on the business environment and our results.
Thanks Billy.
I'd like to begin with a discussion on the inflationary environment.
Which was exacerbated by the Russian invasion of Ukraine.
We continue to monitor the potential impacts to our operations and supply chain.
And we are actively working to mitigate risk.
Thanks to the hard work of our teams we have not experienced a material adverse impact from these events.
While our company will continue to monitor the situation our hearts go out to the suffering Ukrainian people.
And to all of those affected by the board.
Moving to our businesses.
<unk> products segment delivered excellent financial performance once again.
In the first quarter. The segment grew its adjusted OCI by five 7% and expanded its adjusted OCI margins to 59, 5%.
This segment also reported strong net price realization of nine 2%.
First quarter Smokable segment reported domestic cigarette volumes declined six 3%.
When adjusted for trade inventory movements and other factors, we estimate that segment domestic cigarette volumes for the first quarter declined by 8% and that industry volumes declined by six 5% over the same period.
We believe it's important to analyze cigarette volume trends over the longer term.
As decline rates in any one period can be influenced by various factors in fact, the two year average decline rates for first quarter, adjusted Smokable segment and industry cigarette volume declines were five 5% and four 5% respectively.
In the marketplace marble demonstrated strength and resilience during this dynamic period for consumers in.
In the first quarter Marlboro's retail share of the category was 42, 6%.
Stable sequentially and down four tenths versus the year ago period.
<unk> also maintained its leadership among premium brands growing its share of the premium segment to 57, 8%.
Up to 10 sequentially and versus year ago.
And then discount.
<unk> share of the cigarette category in the first quarter increased three tenths sequentially to 26, 4% driven primarily by deep discount products.
We believe the share increases in discount where due to the previously mentioned macroeconomic factors that affected tobacco consumers in the first quarter.
In cigars Middleton continued to provide strong contributions to smokable segment financial results and we are encouraged by the continued strength of the iconic black and mono brand.
Reported cigar shipment volume decreased nine 6% in the first quarter, primarily driven by trade inventory movements.
To date Middleton is successfully navigating the regulatory environment with the support of our regulatory affairs team, having received market orders, where exemptions from the FDA covering over 99% of its volume.
Of course, as Billy mentioned earlier, we will continue to monitor the Fda's proposed products standard on characterizing flavors in cigars, and its potential impact to middle <unk> portfolio.
We expect to be actively engaged in providing our perspective throughout the rulemaking process.
Moving to the oral tobacco products segment, adjusted OCI and adjusted OCI margins contracted in the first quarter, primarily due to the increased investments behind on.
Total segment reported shipment volume decreased one 9%.
When adjusted for trade inventory movements and calendar differences, we estimate that total oral tobacco segment volumes were unchanged.
At the industry level total oral tobacco volume growth moderated to one 5% over the past six months.
We continue to observe steady growth from the oral nicotine pouch category.
But this has been offset by declining moist smokeless tobacco volumes as a result of difficult comparison periods and the macroeconomic challenges facing tobacco consumers.
Retail share for the oral tobacco products segment declined one one percentage points in the first quarter as declines in MSP offset strong share gains for on.
We remain pleased with the overall performance of this segment.
As Copenhagen continues to generate significant income in the high margin MST category.
And we remain excited about the performance upon.
Turning to our investment in Abi, we recorded $141 million of adjusted equity earnings in the first quarter.
Down 25, 8% versus the prior year.
As we have previously shared we view, our API state as a financial investment.
Our goal is to maximize the long term value of the investment for our shareholders.
Moving to capital allocation and our financial outlook.
We remain committed to creating long term shareholder value through the pursuit of our vision and our significant capital returns.
In the first quarter, we paid approximately $1 6 billion in dividends and repurchased approximately 11 3 million shares totaling $576 million.
We have approximately $1 2 billion remaining under the currently authorized three $5 billion share repurchase program, which we expect to complete by year end.
We reaffirm our guidance to deliver 2022 full year adjusted diluted EPS in a range of $4 79.
To $4 93.
This range represents an adjusted diluted EPS growth rate of 4% to 7% from $4 61 base in 2021.
We continue to expect that 2022, adjusted diluted EPS growth will be weighted towards the second half of the year.
Before opening it up to Q&A.
I'd like to comment on our recent ESG progress.
Whilst harm reduction and under age use remain the most important social issues for our company to address.
We are committed to make advancements in other ESG areas.
At Altria, we are committed to reducing our environmental impact and recently announced our first virtual power purchase agreement for energy produced by a new wind farm project in Texas.
This agreement marks significant progress towards two of our science base environmental targets.
Achieving 100% renewable electricity.
And reducing operational greenhouse gas emissions, 55% by 2030.
When the project is operational we expect we will hit both those targets ahead of schedule.
We're proud to support a project that will bring additional renewable energy to the electricity grid.
Contributing to positive climate action.
With that we'll wrap up and Billy and I will be happy to take your questions.
While the calls are being compiled I'll remind you that today's earnings release, and our non-GAAP reconciliations are available on <unk> Dot com.
We've also posted our usual quarterly metrics, which include pricing inventory and other items.
Let's open the question and answer period.
Operator, do we have any questions.
Thank you once again as a reminder, if you'd like to ask a question. Please press the star key followed by the number one and you touched on phone at this time investors analysts and media Representatives are now.
To participate in the question and answer session.
I'll take questions from the investment community first our first question comes from Chris Growe with Stifel.
Please go ahead.
Hi, good morning good.
Good morning, Chris.
Good morning, just had I just had a question for you.
You have had there is a little bit more of a macro headwind that's been occurring or is there some areas where wages. You showed I think we're doing a little better but as I think about that as you look at your kind of the way you look at it today, whether it be unemployment and gas prices those sorts of things is there a point.
At what point this year would you expect that to be less of a drag on volume and I guess related to that.
In terms of what Youre seeing within the Marlboro franchise Marlboro's share was quite resilient. This quarter, our consumers are moving around within that let's say that tomorrow. The different blends as an example.
Yes. Thanks for the question, Chris I'll take them in order. So from our standpoint, we were excited to see the resilience of our consumer and that's why we wanted to highlight the wage inflation that I think a number of industries don't see it's benefited our tobacco consumer is something that we'll continue to watch certainly gas prices as a <unk>.
<unk> on our consumers because usually they are filling up their car truck and then going in and purchasing the product. So it's something that we'll continue to watch, but we feel pleased through the first quarter with the resiliency, we've seen in the tobacco consumer.
As far as marble.
We're extremely excited with the stability of marble. If you go back you can see pre COVID-19 .
<unk> had the benefit of the strength of Marvel and we benefited from the consumer have an extra discretionary income as we proceeded through the Covid pandemic and I think that pointed to that <unk> is still the aspirational brand in the marketplace and then as we've seen discretionary income come under pressure, we gave a little bit of that share back.
You had benefited during the COVID-19 virus, but through that entire period. The mobile brand has held up you always see a little bit of movement. If you think about mobilize the brand has over 90% loyalty. That's a consumer that's buying it every time they make a purchase of a cigarette in the marketplace.
But you see a little bit of movement, but nothing that I would highlight for you at this point.
Thank you for that I just had one other question I think you've talked about.
The dynamic of cable for vapor.
Is that.
So I guess, just what could be driving.
I mean that.
And I guess to that effect, what that could mean to the jewel in the future based on that movement by consumers yes.
Yes, what we tried to highlight was where we saw that some of the growth. It was in the vape shop channel.
Again, no trend there to highlight just wanted to highlight where we saw the growth sequentially.
Thank you.
If you step back and look at the entire E vapor category. What we tried to highlight is as all of these products are coming under FDA regulation, and we should see and have started seeing some of the decisions by the FDA I think that entire category will be in a bit of a transition over the next year to 18 months.
As some products make it through the process on some are denied and so those consumers will be moving around a bit.
What we look forward.
Two and continue to believe is that E vapor can play an important role in harm reduction in U S. Once we get to a total FDA authorized marketplace.
Okay. Thank you for your time today. Thank you.
Our next question comes from David <unk> from Cowen.
Please go ahead.
Hi, good morning.
Morning Vivien.
Yes.
Paul news than long anticipated currently over the last 12 months.
In April 2022 target.
It will be helpful. You guys have been pretty consistent in.
Disclosing your share of menthol, but with demand from the rising.
Menthol category is in the product category context. Thanks, yes.
Yes, so so to your point on our metrics page you can see our share of menthol is nine four cross PM USA and it's pretty consistent from an industry standpoint that it represents about a third of industry from.
From a menthol cigarettes in the marketplace versus non menthol.
Understood. Thank you that's really helpful. My next question is on the IRS callout.
A bit of a unique call out relative to what we've been hearing from other companies under my coverage.
Yes.
Is the message that this is kind of a one quarter benefit but how are you guys kind of thinking about that does that annualize or do you kind of you thought that that was kind of a one time off that.
Please scenario question a second tumor.
Yes, I think you can think of it as a form of government stimulus to a certain extent.
When you think about it.
The actual refund checks are up as far as we will see how that plays out through the second quarter not everybody gets that refund checks in the first quarter.
But we certainly wanted to highlight it for our consumer I think the bigger callout, though and you saw it was the wage inflation and that's a piece that was benefiting are consumer and that would be something that we would anticipate would be consistent throughout the year.
Thank you so much thank you.
Our next question comes from Pamela Kaufman from Morgan Stanley . Please go ahead.
Hi, good morning, good morning.
Can you give an update on your strategy.
<unk> segment performance reflects continued elevated investment behind on how should we think about profitability in that segment and how it evolved and is there a level of market share or particular goalpost that you can point to that would drive a shift towards more of a <unk>.
Okay.
Hi.
Yes, I appreciate the question Pamela I think when you think about our strategy and oral tobacco, it's to maximize profitability over the long term and the moist smokeless category with the strength of Copenhagen investments in on for to continue to fund its growth.
But we believe long term weakened the oral nicotine pouch category, but certainly to your point, we're in the investment period now we saw year over year almost doubling volume.
Volume from.
<unk>.
Once we got past the manufacturing.
And to invest to make sure it was in the considered.
And they're making those choices for alternative products.
Okay.
We've started as is.
It is really using our advanced analytics that we invested in.
To be more targeted with some of the promotions.
Okay.
Okay. Thanks.
And then but can you discuss what you are observing from the competitive landscape within the cigarette category in light of the current consumer environment.
The deep discount segment continued to gain share in at a higher pace.
And price gaps remain wide can you talk about how youre thinking about trade down within the cigarette category.
Okay.
Yes, sure some of what <unk> seen is exactly what you highlighted Panama, which is as the discretionary income comes under pressure, whether thats through inflation or gas prices or even mobility youll.
Youll see some trade down I think if you think about the total cigarette consumer group.
Think about it as a bit of a barbell. There is a group of consumers that are at the bottom end of that that are always buying the cheapest in the store and so you see you see that occur.
Saw the benefit in marble that we experienced wind discretionary income wasn't under so much pressure.
But the way we think about it is we're premium focused company and you see this rock solid stability of marble through time.
Thank you.
The next question comes from Gregory Jon from Barclays. Please go ahead.
Hi, good morning.
Even a couple of <unk>.
<unk> here.
Yes.
A number of things in which you are talking about how <unk>.
Trending across different.
Yes.
Professional who is very interesting.
Applying a similar.
Solar remains to the entire U S industry understood and maybe different inflation in different states.
<unk> seen better volume trends and as Dave said, we had inflation is high adolescence nerve agent station ignored.
Yes, it's an interesting question level, but we do see where.
Wage inflation has and we tried to highlight a couple of other categories that fit the tobacco consumer and that's why we wanted to.
To highlight that for you.
Correct.
And that information will likely accelerate as we go through this year.
You can see weekly jobless data and everything else.
We are still behind the curve.
Then it should be then extend thats. The nook margin was minus six and a half plus and then Q1.
Columns, which Ed.
Thanks Bye.
So it should start moderating from here then in Peru.
Progressive.
Yes, I think the macroeconomic environment to your point is very dynamic certainly we would expect wage inflation to at least be consistent throughout the year.
In Europe hypothesis of it increasing I guess, we'll see on how unemployment goes and how job openings respond to that I think the other side, though is the tailwind you highlighted gas prices, we will see where gas prices go through the remaining part of the year and where inflation trends. So I think it's very dynamic.
And that's why we wanted to highlight some of the tailwind and headwinds that we were seeing.
Sure.
This didn't particularly nicotine market on what the FDA has done so in the synthetic nicotine market. How do you see this entire category playing out in the next few months.
We are benefiting our volumes as well.
Yes, so when you think about the total nicotine you've seen us highlight that a couple of tough times and really looking at how the consumer is moving around and that's exactly why guara, we put a portfolio approach in place because.
FDA decisions in one category put consumers at play and force them to other categories and so we believe in having a portfolio approach is important and so.
You can take the E vapor category, depending on the decisions made by the FDA. That's why we highlight that that category could be in a bit of a transition for the next year to 18 months as decisions come out and some products make it through in some products do not those consumers for products that do not make it will be at play either for other E vapor products.
Our other categories that they have in their consideration set.
And if I could just sneak in a last one for.
Net periodic benefit income line item in your P&L, which has been a constant benefit and I used to think that done and dusted.
Become a headwind.
So how does this line item.
Can you repeat that I apologize.
The next periodic benefit income line item, which I think is meaningfully up pension income.
Income and expense. So it has always been a tailwind buildup bina.
And then part of that is going to become a headwind of investments I would assume that as a benefit that is happening.
I would like to turn up the strength that I am sorry to interrupt that is a reflection of the strength of our funding of our pension plan and also some favorability in our.
Overall performance in the pension plan, which as you know it gets amortized over time so.
You are correct in that it has had a slight benefit to our P&L.
Sure. Thank you sure. Thank you.
Our next question comes from Bonnie Herzog from Goldman Sachs.
Good morning. Thank you good morning, everyone.
I wanted to.
So I'll go back on your Cig volumes, just given some of the investor concerns about your volume in this environment.
<unk> your premium marble volume given the wider price gap. So first Billy could you highlight breath at your Q1 results were in line with your expectations and then you may.
Let me share some more color around your strategy to protect your volume and share.
For instance, I think you guys are stepping up promotional spending a bit for some of the price sensitive consumers and then maybe highlight how you leverage your specials like Brian during these times to kind of keep more consumers.
On your Marlboro franchise, and then I'd like to just better understand.
Why you arent you may be striking a better balance between your pricing and volume.
Yes, Bonnie so I'll try to address it.
Total parts, there, but I'll try to address it with the strategy, we implemented I think what you've seen with <unk> and we highlighted for you is the rock steady performance of marble through time, I think when you think about the pricing and the promotions in the marketplace.
Highlighted for you the way we are using advanced analytics and revenue growth management is what most companies call it of being able to get closer to the consumer and provide.
If we're having promotions provide a closer to the individual consumers and so whether that's through our retail trade programs, where we have multiple options for retail trade partners to really have multiple solutions store level solutions versus more of a total geographic solution.
For consumers in the marketplace, because as you know certain states the consumers under different economic health and other states as well as the ability to have our manufactured off invoice and so.
Our price realization I would just remind you is made up of two components its list price and it's the <unk>.
<unk> sees that we're getting through our revenue growth management and advanced analytics. So when you think about that in totality.
You see the steadiness of Marlboro and the efficiencies coming through the promotional process and so it's allowing us to be more to more targeted and efficient with.
The way, we spend promotions Bonnie I would just add one other point, which we highlighted in our opening remarks, I think the strength of <unk> performance within the premium category.
<unk> premium has grown as a reflection of the effectiveness of the programs.
Tools, Billy just mentioned.
Alright.
So I guess the right way to think about your small business I mean, it's an industry. That's been in secular decline in terms of volumes. They have been declining for a very very long time. So the way you are managing that.
Offsetting that with pricing and trying to dry whether it's low or mid single digit operating income growth and expanding your margins and you feel good.
Even in this environment that you are going to be able to continue to do that.
Yes, I think you see with the results through the first quarter I think that.
From a macroeconomic standpoint.
A pretty tough quarter, and you've seen other industries be impacted by that and we were able to navigate that very nicely.
Again, I would just highlight with the advanced analytics and the tools, we have available to us we can be much more precise.
When you look at the.
The 12 month decomposition, we provide on volume.
Can see from a price elasticity its holding firm from a standpoint of total price elasticity you can really see it as just the macroeconomic factors that have switched around through time.
Okay. Thank you for that and just one quick final clarification just on your guidance.
Can you touch on what it assumes in terms of.
Total industry volumes I mean are you assuming that volumes decelerate further this year any color on that would be helpful day kind of frame all of that.
Yes, I appreciate it Bonnie and I don't know that Youre looking for volume guidance that with that we don't provide I think with this dynamic marketplace.
Reason, we give a range of guidance is we know that things are going to change for our consumer base and we want to be able to provide the consumer what they need and so that's why we put our range of guidance out there.
Volume is one component, but there are multiple components that go into that guidance. So just to highlight one factor I don't think is appropriate is really we feel comfortable reaffirming our guidance in the quarter and its really about keeping an eye on how the consumers.
Bearing through this macroeconomic environment.
Okay. Thank you. Thank you.
Our next question comes from <unk>.
Ari Gupta from Barclays.
Okay. Thank you so much for taking the question.
I was wondering if you could just.
US with some thoughts on your outlook for.
Refinancing market.
Hello.
Maturing later this year.
And how you're thinking about other opportunities.
Perhaps greater interest expense management across your portfolio and then secondly.
You do have one of your your alpine materially maturing early in 2023, I recall that serves as a net investment hedge against the dividend you receive from Abi.
So strategically how should we think about sort of the need to refinance that in euro per se.
Refinancing of dollar thank you.
Sure. So I'll take those questions in order first.
I guess wed respond to your initial question instead, it's critical for US that we continue to manage a strong balance sheet going forward.
As you know last year in part of our capital allocation. We did do some tend to refinancing our debt, which extended maturities of low interest debt. We're pleased with the results of that transaction and part of the way we manage the balance sheet as we manage our debt towers going forward. So.
That.
We are less impacted by market dynamics, and where we have the ability to have flexibility.
And how we treat maturing debt so.
I'm not going to forecast out necessarily how we'll handle that debt thats coming to maturity, but of course, we will do the analysis and determined the best way to handle that whether rich.
Paid off with existing cash or thinking about refinancing.
As such.
Same answer goes for the euro debt, that's coming through that's coming due.
We will do the analysis you are correct in that it is a natural hedge against the Abi dividends that we receive and we do have flexibility to think about being how we can be opportunistic across various markets.
Whether we're thinking about managing our balance sheet going forward or refinancing or managing debt as it comes due.
Okay. Thank you so much sure.
And we have a question from Gareth James from Barclays again.
Thank you.
Quick question on EMEA as Dave Bloom Lake any updated thoughts on how youre thinking about it.
Thank you.
Yes.
There is really nothing new.
Hey.
We continue to.
Perform the analysis related to our Abi's stake as we.
Spoke about in our opening remarks.
As a financial investment our focus is on maximizing that investment for the long term shareholder value.
We continue to do the analysis and there's nothing new to report on that on the asset itself.
Thanks, Good luck.
Sure.
We will now take questions from the media Representatives and our next question comes from Jennifer Mahoney from Wall Street Journal.
Hi, good morning.
Morning.
I wanted to ask about consumer consumer.
Switching patterns that you would expect to see incremental ban implemented either in the state of California or nationwide first of all would you expect to see Newport smokers switching tomorrow borough and if so what net impact would you expect to see on your overall cigarette business.
Yes, I think it's tough to say I think with the some of the alternative products that are in the marketplace certainly.
If there were an outright ban using your hypothetical to menthol.
The consumer for the menthol cigarettes will either go to the illegal market as we highlighted under unintended consequences of an outright ban or look to either non menthol cigarettes alternative products. So it's tough to say where that will go I think if you look at some of the research. There is limited research on it but some would say that.
They would convert to non menthol cigarettes.
I think the better point here, though is if you step back prohibition at least through history. Hasnt worked the better approach is to have these alternative products and allow we know consumers want to move to.
Alternative products that have the potential to reduce harm that seems like that should be the focus on a better approach than an outright ban.
One quick follow up what products would you expect Marlboro menthol smokers to switch to and would you market any products specifically to them in the event of a menthol cigarette brand like Marlboro gold argue or on.
Yes, we will.
Have to wait to see what the proposal that comes out and how it approaches menthol.
Would really look to as we said to support our vision and really look to move the consumer down the continuum of risk and so that's the way we would approach it with the alternative products that are in the marketplace, but certainly it's ultimately the consumer's choice.
Thanks.
You.
Thank you at this time I would like to turn the call back to Mac Livingston for closing comment.
Thank you all for joining us. This morning, please feel free to contact the Investor Relations team. If you have further questions. Thanks again.
Conclude today's program. Thank you for your participation you may disconnect at this time have a great day.
Okay.