Q2 2022 Altria Group Inc Earnings Call
Tobacco harm reduction and improve the lives of millions of smokers.
The fda's goal to transition, but we continue to believe that vision is the best path forward.
Ford.
My remarks, this morning will focus on three topics.
Our core tobacco businesses, including the macroeconomic backdrop and potential combustible tobacco product regulation.
And our smoke free product portfolio.
And our continued confidence in our vision.
I'll, then turn it over to Sal, who will provide further detail on our business and financial results.
Let's begin with a review of the macroeconomic backdrop.
And its impact on U S tobacco consumers.
In the second quarter rising gas prices and inflation continued to pressure tobacco consumers, resulting in volume declines across however, we believe that too.
Tobacco consumers adapted.
Purchasing patterns across a variety of goods and services to compensate for the increases in prices.
Some of the tactics used by consumers only partially filling their gas tank.
And shifting their tobacco.
The purchases from multipack towards single pack purchases.
Particularly.
We also saw signs of continued.
Brand loyalty in the tobacco space.
In May we conducted research to understand how tobacco consumers, we're managing their spending in several cargo alcohol groceries and household items.
Okay to that tobacco consumers.
We're more likely to stick to their preferred brand regardless of price inventory.
Echo category compared to other categories.
Additionally, tobacco consumers sought price relief and other categories before doing so we.
We believe that this prioritization is reflected in <unk>.
The sequential stability of Marlboro retail share despite.
Greater economic pressures.
We believe in <unk>, partially offset for some concern.
Consumers by a strong job market and wage growth.
Overall average wages.
Increased five 2% in the second quarter compared to an average of eight 6% increase in CPI.
And for some Asbury wage growth outpaced inflation.
We continue to monitor to bankers and marketplace conditions, such as the declining gas price.
That we have observed in recent weeks and.
And we will continue to provide our insights as the year for macroeconomic factors contributed in the second quarter and first half.
Which <unk> will discuss.
<unk>.
And menthol cigarettes.
Characterizing flavors in cigars.
Yes.
The FDA has already received over 200000 comments on the proposals.
And we expect to submit our comments by the August deadline.
Deadline.
The FDA will need to address all of these comments before advancing to the next step in the rulemaking process.
Here's our comments will make clear we believe that there are compelling reasons for the FDA to reconsider its proposed rules relating to menthol and cigars.
Additionally, the bond and administration announced plans for future FDA rulemaking to develop a products among nicotine level for cigarettes.
If and when we expect to be fully engaged.
And the multi year process.
Yes.
We believe harm reduction is the best approach towards reducing smoking and improving public health and according to a nationwide.
Based on our research a majority.
Smokers.
In general population of adults support the concept of tobacco harm reduction and preferred this policy approach.
But to achieve harmony.
Function, we believe manufacturers must develop and yet.
<unk>, a potentially reduced harm products.
That can appeal to and transition smokers.
This brings me to my next topic, the smoke free opportunity in the U S and our smoke free product portfolio.
Today over 20 million U S smokers seek less harmful alternatives to cigarettes.
Our strategy is to deliver a compelling portfolio of smoke free products that offers a range of.
And to responsibly.
Feed them to these alternatives.
Our approach spans three of the most promising smokefree categories with the potential to reduce harm.
Bold tobacco E vapor and heated tobacco.
And oral tobacco, we're encouraged by the growth of the novel <unk> of total industry <unk> oral tobacco volume.
In the second quarter.
The category grew 6.8 share points year over year with on representing more than 40% of this growth.
In the second quarter, <unk> reported shipment volume increased nearly 60% versus the year ago period.
<unk> retail share of oral tobacco, essentially reaching $4 99 share points in the second quarter.
Right, although almost a 100.
With 50% year over year.
These strong results were driven by increased adoption of alone increased brand awareness and higher levels of investment.
Helix achieved unconstrained bond manufacturing for the current U S market in the second quarter of 2021.
Over the four quarters since then helix enhance the retail visibility and awareness upon leading to an over 70% increase in consumer awareness.
Tripled on repurchases and continued to increase and data driven strategies.
Retail share to be a top.
Five U S oral tobacco brand and solidified its position as the second largest oral nicotine pouch brand and each of them.
More recently helix launched the new carry on equity Big campaign, which encourages smokers to make progress in their transition journey.
Turning to on smokers can have nicotine satisfaction.
Having to step away from their daily routines.
Which addresses the social friction they experience with smoking.
Looking ahead helix expects to use its understanding of the smoker journey.
Fruit products to drive repeat purchases and adoption among smokers.
We are and the opportunity for future growth.
E vapor category, which we can.
Continue to believe will be significant actions.
In the second quarter totals.
Total.
Estimated E vapor volumes declined 2% versus a year ago, and 7% sequentially as a result of decreased volume and the big store channel.
A reversal of the trend we observed in the first quarter.
Currently slightly over half of the categories volume is comprised such as jewelry and usable.
Wholesale.
Within E vapor disposables represent the fastest growth segment since January 2020.
Which corresponds to when the FDA issued earnings guidance spanning flavors only in pod based E vapor products.
Many of these disposable brands, including pump bar contains synthetic nicotine.
Recent legislation, which we strongly support dougherty to regulate tobacco products.
Containing nicotine from any source.
Manufacturers of synthetic nicotine pain FDA authorization by July 13th.
Okay.
Products.
So far no synthetic nicotine product has been granted authorization.
And the FDA has committed to pursuing compliance and enforcement action against companies found to be marketing selling or distributing illegal synthetic nicotine products.
Thus far the FDA has authorized only 23 total E vapor applications accounting for only eight products and approximately 1% of estimated E vapor category volume.
Further the FDA has only authorized tobacco flavored E vapor products, most of which were for cig alike styled products, which we believe generally do not meet smoker expectations.
<unk>.
Given the limited number of authorizations.
To date, we believe that the E vapor category is still in its early of the support of reasonable regulation.
We believe it could play an important role and harm reduction.
Moving forward and evidence based determination patients and further.
Forsman on Noncompliant.
Factors.
In the second quarter Jewel products received marketing demand orders or <unk>.
Administratively state.
Unique scientific issues that warrant additional FDA review.
The admission to the Ngos during the additional review, but does not with syndrome.
Regarding <unk> for the second quarter.
Non cash pre tax.
The realized loss of $1 2 billion.
As a result of a decrease in the estimated.
The decrease in fair value was driven by several factors.
Created by the Fda's action.
Related to <unk> and.
And uncertainty relating to <unk> ability to maintain adequate as of June 30, our estimated valuation is 450.
As a range of regulatory.
Liquidity and market outcomes.
Agreement with Juul, we have the option to be released from our noncompete ovens.
<unk> the fair value.
Two of our investments if the fair value.
Few of our investment is not more than carrying value of $12 8 billion.
However, if we elect to be released from our noncompete obligations, we would lose many of our investment rates, including our consent rights.
Our preemptive rights designation rights.
Believe that these investment rates.
Are beneficial to us.
Opted to be released from a noncompete.
But retain the option to do.
So in the future.
We continue to believe.
Can play an important role.
And tobacco harm reduction.
In heated tobacco related to Iqos.
We continue to believe in the potential of the heated tobacco category in the U S.
As designs by year end for two product platforms within heated and oral tobacco and then begin regulatory.
Okay.
Adult smokers to smoke.
<unk> future continues at.
And while we may face believed that the tobacco harm reduction.
Yes.
As the leader in the U S tobacco industry.
We have continued confidence in our ability to achieve our vision, including.
Our robust manufacturing sales and distribution system.
And under.
Yes.
Our science.
Let's based approach to tobacco hind with tobacco consumers society and the FDA.
Our portfolio is the most promising.
Free categories.
And our significant cash flows and flexible balance sheet and shareholder returns.
With these in my time and the resiliency of our.
Organization, we believe we can lead the U S and.
I'll now turn it over to salt.
Provide more detail on the business environment and our results outfitted grew adjusted diluted earnings per share by two 4% in the second quarter and by three 5% in the first half.
Environment that Billy described.
The smokable products segment continued to deliver.
Ron its strategy of Maximus, while appropriately balancing investments in Marlboro with funding the growth of smoke free products.
The segment growth.
Who would suggested operating companies income zero.
0.6% in the second quarter.
First half.
Adjusted OCI margins.
Expanded by 0.791% for the second quarter and by one three.
3% for the first half.
Okay.
This performance price realization of 11, 5% in the second quarter and 10, 4% for the first half.
I'll remind you that manufacturer price realization there is not.
For smokers for example.
Hello marble net retail pack price increased five 6% in the second quarter compared to last year.
Smokable products segment reported domestic cigarette volumes declined by 11, 1% in the second quarter and eight 9% in the first half primarily due to changes in consumer purchasing behavior as a result of.
Increased gas prices and inflation for trade inventory movements and odor and first half domestic.
Cigarette volumes declined by.
9% respectively.
At the industry level, we estimate that adjusted Domestics.
Cigarette volumes declined by eight 5% in the second quarter churn in the first half.
As Billy Missouri, E&C during a period numbers.
In the second quarter.
Quarter Marlboro's retail share.
We will return sequentially to 42, 7%, while declining four tenths versus the year ago period.
<unk> grew its share within that.
Eight 1%.
Thank you.
Increase of $3 sequentially and $5 10 versus.
Moving to the total.
Discount segment.
<unk> share was flat sequentially, even as gas prices rose significantly from the first to second quarter.
This count increased one three percentage points year over year to 26, 4%.
As we lapped the period when the discount segment contract.
From smokers, having additionally.
We have branded and deep discount segment.
As a result of a deep.
From the marketplace earlier this year.
Where did cigar shipment volume decrease.
<unk> by 5% in the second.
Grow economic pressures on consumer disposable income trade inventory movements and other factors.
However.
Middleton continued to smokable segment frankly.
And the oral tobacco.
Echo products segment adjusted.
OCI margins contracted in the second quarter and first half due to several factors including.
Declines in MST volumes increased investments behind on and unfavorable mix.
We remain pleased with the strong overall margins for this segment as we made progress with AWN.
Balco volume declines zero point.
And 5% over the past six months.
We continue to observe steady growth from the oral nicotine pouch category planning MSP volumes.
Due to the challenging macroeconomic environment and its effect on consumer behavior.
Consumer movement to oral nicotine pouches and other factors.
Total segment reported shipment volume decreased by four 4% for the second quarter and by three 2% for the first half.
The segment's volume with volume decline was driven by declines in MST volumes, partially offset by the growth of bond.
When adjusted for trade inventory movements segment volume declined by an estimated two 5% for the second quarter and 1% for the first half.
The total oral tobacco pricing quarter contracted.
Two tenths sequentially and one share point versus the prior year to 40 46, 7%.
Copenhagen is celebrating its 200th anniversary this year.
We're extremely proud of Copenhagen long history, and a fantastic employees, who have supported the brand over the years.
Thank you.
After 200 years, Copenhagen remains the number one dip brand because of your hard work dedication and passion.
To honor the scheme introduced Coke rewards.
The first and only national rewards program for an MSP brand.
Under the program differs can earn points by entering codes from their Copenhagen cans and can redeem them for coupons or rewards.
We're excited about coke rewards and its potential contributions to Copenhagen sustained leadership in MST.
Turning to our investment in Abi we recorded 100.
And $24 million of adjusted.
This was an increase of approximately nine seven.
Bid and represent <unk> share of Abi's first quarter 2022 results.
We're committed to creating long term sure.
Our vision and our focus on.
The significant capital returns.
Demonstrated this commitment in the first half.
Acquiring intellect actual property and other assets for a multi subs achieve from potent.
Okay.
Paying approximately $3 3 billion in dividends.
And repurchasing 21, 4 million shares totaling $1 1 billion.
We have approximately $750 million remaining under the currently authorized.
Purchase program, which we expect to complete by the end of this year.
Our balance sheet remains strong and as of the end of the second quarter, our debt to EBITDA range.
Ratio was two three times.
In August we expect to retire one can do with available cash.
And lastly, our financial plans for the year remain on track and we reaffirm our guidance to deliver 2022.
The EPS in the range of $4 79.
This one.
The range represents an adjusted diluted EPS growth rate of 4% to 7% from $4 61 sent base in 2021.
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.
Conciliations are available on our dot com.
We've also posted our usual quarterly metrics, which include pricing inventory and other items.
Let's open the question and answer.
Later, we have any questions.
Thanks to ask a question please press star.
A key followed by the number one on your telephone at this time investors analysts and media Representatives are now invited to participate in the question and answer session.
We'll take questions from the line with that community first our first question comes from Chris Growe with Stifel. Please go ahead. Your line is open.
Good morning, Good morning, Chris.
Bill I have a <unk>.
<unk> for you and you made a good point about it's clear we're at a very pivotal moment for this category I was hoping to get.
You're investing today to be able to internal internally develop our.
<unk> reduced risk products, you've got some uncertainty around your positions in juul and Iqos and Theres risk those are no longer in your portfolio certainly just the risk at this point, but I guess I just wanted to get a sense of what youre doing internally and you talked about having a product already this year at the end of this year and then to what degree maybe M&A could play a bigger role in giving you better positioned in.
Rfps going forward.
Thanks for the question, Chris I think when you think about where we're investing certainly we invested in our innovation process, we have the internal development going on.
<unk> spoken previously about changing that innovation process. So that it is laser focused on the consumer it monitors the marketplace, but I think before we were I would characterize it as almost chasing the market versus sitting side by side with the consumer and so theres a lot of consumer developing with the consumer in those.
The categories that we can develop it to your point, we can't develop per our agreement with juul in the E vapor category, but it's something we continue to monitor that marketplace and understand consumer satisfaction with the various products in the marketplace.
We monitor the entire globe as far as alternative products.
To both influence.
How we think about internal development, but looking for products that could be emerging in the other markets as well.
And so would M&A be an important contributor you think going forward for altra is positioned.
In this category.
It certainly won't be off the table Chris.
I think for the investments, we're making in our internal development.
We feel good about the pipeline of products that we have.
Okay.
And then just one other question in relation to pricing in the cigarette category, it's been larger than I expected and it's occurred sooner than I expected at least this year.
I guess in this environment, where there is.
Yeah.
More burdensome kind of macroeconomic factor that's weighing on your volume.
Are you seeing a greater shift to some of the lower price.
More heavily promoted Marvel varieties and do you see a need to have to increase promotional investments in light of the heavy pricing coming through in this environment yet.
Yes, Chris it's a good question and it's something we monitor but I think when you look at the sequential performance of marble than even.
The discount category you saw sequential stability mobile actually grew at 10%.
When you think about that the changes that were experienced first quarter the second quarter.
From a standpoint of the tools that we put in place with advanced analytics, we feel good about the position.
<unk> raised an important point when you think about the impact to the consumer and you think of percent price increase that's well below.
Below the inflation theyre experiencing in other categories and you saw the results in their remarks.
<unk>.
Where we went to the consumer and talked about how they think about the tobacco categories and other categories and you see they continue to prioritize the tobacco category, that's telling and you saw.
Okay.
Get a lot of questions about that I think you have to step back and think longer term with less if you think about Marlboro share.
We're right, where we were pre pandemic certainly during the pandemic as they received additional funds whether that be from government or unemployment or things of that nature.
Reinforced that Marvel's aspirational brands some marble benefited during that period, certainly we've given a little bit of that share back and feel satisfied with where marble is we've really.
The teams and advanced analytics as well as the marvell team, putting those into the marketplace the stability of Marvel's incredible.
Okay. Thank you for all the color I appreciate it thank you Chris.
And we will take our next question from Pamela Kaufman with Morgan Stanley . Please go ahead. Your line is open.
Hi, Good morning, Hi, Pamela.
Thank you.
Cigarette volumes have weakened considerably during the second quarter, you highlighted the headwinds facing smokers and how theyre adjusting their purchasing behavior.
How are you thinking about the outlook for cigarettes.
In terms of the year.
And then related to that.
How much.
More pricing do you think that consumers can tolerate just given so far we really haven't seen a meaningful acceleration in trade down to the discount segment, it's been consistent.
Over the last couple of quarters.
Do you see.
Elevated risk.
On trade down within the category, Yes, let me see if I can unpack that a little bit Pamela in if I Miss anything. Please follow up I think when you think about the cigarette volume declines that we saw through the first half.
You look historically and when you see the.
The environment, the macroeconomic environment change for our consumer you see that they make short term adjustments and then they adapt through time I think certainly through the first half.
And we saw a little bit of a downshift in gas prices as we entered the third quarter I think we've seen a high correlation from gas prices, just because our consumers uli filling up their vehicle and then going in and making those purchases, but again I think the research that we did is telling the consumer is adjusting those behaviors to be able to prioritize <unk>.
Arco choices in the mostly in the C store gas stores I think from a standpoint of pricing and Pamela we've shared this with you before.
You look at minutes worked.
In the U S and benchmark that around with other countries around the world that have mature tobacco categories. When you look at that you still see that the U S is at the low end of that scale. So certainly.
We feel like there's room to price, but that's something that we monitor you remember the factors that we think about when pricing is the.
The strength of the brand.
Certainly corporate objectives play a part of that but then we think about the economic health of the consumer and what those competitive activities do.
Think it is important to mention here again, the tools that we put in place we put out the <unk>.
Price gap, we put out kind of national metrics, but with the advanced analytics, we are able to use those tools and be very specific so it could be different in Cleveland, Ohio, and in Dallas taxes, because those tools allow us to adapt the retail promotions, we put in the marketplace depending on what the individual consumers are feeling in that local area.
Okay. Thanks, that's helpful.
Secondly, I just wanted to ask about how you're thinking about the implications to your relationship with Philip Morris in the heat not burn category provision of Swedish match and.
And how are you preparing for changes in the competitive landscape in the U S.
Well, apparently you know this as well as I do that it's always been a competitive marketplace. We always had major players certainly this brings on new major player to the marketplace.
But we feel like we have the tools in place subtler, we're going to evaluate everything.
Make sure that we understand or at least game plan.
Now PMI would approach the marketplace using the products of Swedish match and adapt accordingly, I don't want to go much further than that for competitive reasons I think from a standpoint of heat not burn I shared in my remarks that we are continuing discussions with them about.
Iqos.
Thank you. Thank you.
Okay, we'll take our next question from Vivien <unk> with Cowen. Please go ahead. Your line is open.
Okay.
Hi, good morning, good morning Vivian.
I wanted to touch on on daily So your commentary around the improved trial through the extended.
Helix manufacturing capacity was interesting I was curious if you could just expand and touch on repeat and how you're measuring that given the promotional intensity in the category. Thank you.
Vivien, it's a great question I think when you think about our research teams are really looking at repeat purchases versus trial offers and we want to have increases in both if you think about a repeat purchases were very pleased with where we're at.
Certainly to your point as we are investing.
Have those purchases that take place and you want to see the concrete news of that and we feel very pleased and joined the repeat purchases that we have.
We felt like there was still up increase in awareness, we have been able to drive.
And specific to the adult cigarette consumer.
Our product is very satisfying to the adult cigarette consumer and we feel like Theres still opportunity for trial there.
And then my other question is just on the industry outlook I know you guys have shied away from offering industry volume.
Guidance for a while now and I fully appreciate it bye bye.
If we look at the supplemental disclosures the estimated industry volume declines have nearly doubled.
Over the course.
Over the last 12 months against a very challenging.
Macro backdrop that does account for it in the table that you disclosed I'm just curious so has your thinking around the underlying macro drivers changed at all.
It has not Vivien when you think about it and you can take those quarters that we provide and stretch them back and your thoughts you saw macroeconomic was a benefit.
Not that many quarters ago. So you certainly see the swing is no different than the swings we see to history you have the macroeconomic can be a benefit at times. We saw gas prices in 2015 were huge benefit and so I think the only thing I would point out is we're seeing a higher correlation with gas prices and purchasing behavior that would be the.
Ali.
Because historically, we tried to correlate gas prices to it and they were moving nickels and dimes at a time I think you're seeing faster swings in gas prices. So there is a high correlation to consumer behavior as they adapt to the short term nature of those changes.
Understood. That's helpful. Thank you so much thank you.
And we'll take our next question from Bonnie Herzog with Goldman Sachs. Please go ahead. Your line is open.
Alright. Thank you good morning, everyone. Good morning Bonnie.
I just have a question on your guidance you maintained your full year mid single digit EPS growth guidance, but that does imply the second half EPS growth will need to accelerate.
The first half to hit the midpoint of your full year guide. So just wanted to hear from you. What gives you. The confidence this is going to happen, especially during an economic slowdown I mean.
Are your expectations that this will be driven from greater net price realization assuming volumes remain pretty pricey.
<unk> further.
Are there any expected cost savings that you are hoping to realize in the second half that you could.
Share with US and then just finally, how do we think about stepped up investments that you might be making towards your smoke free basin is that.
Something that's factored into your guidance.
Yeah. So Bonnie first thank you for the question and good morning.
I will take you through how we think about guidance so throughout the year.
We have communicated that we expected the second half to really drive the growth.
Of our EPS on a year over year basis.
And just to remind you of a couple of factors that we are seeing in the back half of the year, one as we begin to lap quarters, where we had unconstrained manufacturing.
In the nicotine pouch category.
Also in the fourth quarter were for the first time going to be lapping a quarter without wine income rate that will happen in the fourth quarter and then in.
In the back half of the year is as inflation accelerated and we adjusted our our MSA inflation assumptions you start to lap that in the back half of the year as well so theres some comparative factors that are.
Our part of the first half versus second half.
EPS growth.
As far as investments.
Spending isn't linear necessarily throughout the year, especially when you are making investments in infrastructure and things like that so I definitely wouldn't look at one quarter spending when it comes to that and read into it is it is something that ebbs and flows throughout the year.
Alright, Thank you wanted to ask about.
The I guess the uncertainty around your smoke free future given everything going on from Joe Okay.
Philip Morris entering in the Usps's matched I guess do you have with Philip Morris as it relates to Iqos.
Could be.
One of the key concerns from investors. So I know you touched on this but.
Any more color you can provide.
Your goal to kind of.
Hit this smoke free future transform your business.
The next I guess decade would be helpful. I mean, I know with your agreement with Jill now that the fair valued below the agreement I think you have the ability to compete in.
In the evening paper market. So is that an option you're exploring and then just maybe color a little more color on the timing as it relates to your heat not burn you mention it.
And final design by the end of the year, and then Youre going to begin regulatory preparations how long before you will have a product that you can bring to the market. Do you think is that two years out three years out just trying to get a sense of.
It's Tom <unk>.
I am curious as to how youre going to achieve your goal. Thank you.
Thanks for the question Bonnie I think it's really important to step back and I said it in my remarks, but let me add some color to it the entire harm reduction opportunities in front of us in the U S and let me explain why I say that.
You remember in my remarks, I talked about the authorizations that have taken place in E vapor, thus far and they represent 1% of the E vapor category volume, So theres still 99% of authorizations that could go either way and so that back.
Got it.
We will be in a bit of transition while we're waiting for the FDA to make those authorizations and then the outcome of those authorizations.
If you think about novel all yes, we're making progress and competitors are making progress, but we're still waiting for FDA authorizations in that category and so while we're making progress side there'll be decisions from the FDA regarding that category and then heat not burn while it has been.
Gaining momentum internationally, it's nonexistent in the U S and so that nonexistent. So those are the three major growth categories. That's why I keep saying I just wanted to add some color that the entire harm reduction opportunities. We mentioned that we have.
Development underway and two of those categories. We feel good about the pipeline I know you would love to see those products and I would love to show them to you and we will at the appropriate time, but we feel good about that as I mentioned earlier the co development with the consumer in that space I think with E vapor the color I would add there.
And I mentioned it earlier, we've always monitored the marketplace to understand consumer satisfaction with the various products in the marketplace.
Both in the us and outside of the U S. Additionally, with this quarter with US going below you are right. We have the option to get out of the noncompete.
If we so elect to do so and we really feel like in the process with the day from the FDA and that decision still looming as well as the Reits that I mentioned in my remarks, we believe are beneficial to us at this point in the process, but we will continue to really gauge what our options are there and make decisions.
Gordon.
Alright, thank you.
<unk>.
And we'll take our next question from Priya Ari.
Alright.
Barclays. Please go ahead your line is open.
Yeah.
Hi, This is <unk> on behalf of Korea, and my question is.
So based on your comments, indicating that you plan to repay your upcoming maturity with available cash how are you thinking about any subsequent need to access the market for refinancing and I also have a follow up after that.
Sure and thank you for the question.
Im really not going to <unk>.
Signal future capital allocation decisions I'm happy to share, how we think about capital allocation which of course.
Considers a number of factors in those decisions, including marketplace dynamics.
We manage our balance sheet.
Very carefully we want to have a strong balance sheet, we want to continue to have investment grade credit rating. So when we think about capital allocation, we take a balanced approach and we've made the decision in August to use available cash to retire that debt both future.
Debt maturity towers, we will analyze the marketplace at the time and make the appropriate decision.
Okay.
That makes sense. Thank you.
And as a quick follow up.
Should we sort of expect you to manage your cash balance over the near term as this will likely bring it more in line with your pre pandemic type ranges.
Yes.
We are very fortunate in that we have operating companies that generate a significant amount of growth in cash and.
In a typical year.
After paying our dividend and making the necessary investments. We traditionally have had let's call it $1 billion in excess cash and at the time when we make various decisions there were times where we've.
<unk> gone to the board and ask for a share buyback program. There are times, where we've done some liabilities.
The management to manage our operating companies do a tremendous job of <unk>.
Generating cash flow for the shareholder and other stakeholders.
Alright, thank you so much.
Okay.
Yeah.
And our next question will come from Gaurav Jain with Barclays. Please go ahead. Your line is open.
Hello, Good morning, So a couple of questions from my side.
So we have had some discussion around the harm reduction opportunity in front of us and how it is very early but if we really look weird harm reduction is really developing it is all international.
It's very hard to introduce new products in the U S market.
Or do you think that the really explored the harm reduction opportunity you need to go international much like Philip modest.
Entering the U S.
Yes to your point and I appreciate you recognizing that.
The <unk> process and the entire home production opportunities in front of us in the U S is something that we consider on a regular basis of how to get early consumer feedback outside of research and alive marketplace.
And thus far we've opted to go that route we are which is with consumer research, but it's something that we consider on a regular regular basis.
Sure.
Just also a fall.
Up on the questions around jewel and potential end of exclusivity and you also.
The synthetic nicotine market.
Some of these companies have applied for BMT Aegon can potentially get the MTA.