Q2 2024 Altria Group Inc Earnings Call
Unknown Executive: Our Results The release, presentation, quarterly metrics, and our latest corporate responsibility reports are all available at altria.com. During our call today, unless otherwise stated, we're comparing results to the same period in 2023. Our remarks contain forward-looking and cautionary statements and projections of future results. Please review the forward-looking and cautionary statement section at the end of today's earnings release for various factors that could cause actual results to differ materially from those projected. Future dividend payments and share repurchases will remain subject to the discretion of our Board of Directors.
Unknown Executive: and our results.
Unknown Executive: The release, presentation, quarterly metrics, and our latest corporate responsibility reports are all available at Altria.com. During our call today, unless otherwise stated, we're comparing results to the same period in 2023.
<unk> 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 2023.
Unknown Executive: Our remarks contain forward-looking and cautionary statements and projections of future results. Please review the forward-looking and cautionary statement section at the end of today's earnings release for various factors that could cause actual results to differ materially from projections. Deterred dividend payments and sharey purchases remain subject to the discretion of our Board of Directors. We report our financial results in accordance with U.S. generally accepted accounting principles. 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 these non-GAAP financial measures and reconciliations are included in today's earnings release and on our website at Altria.com.
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 our board of directors.
Unknown Executive: We report our financial results in accordance with U.S. generally accepted accounting principles. 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.
We report our financial results in accordance with U S generally accepted accounting principles.
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.
Unknown Executive: Descriptions of these non-GAAP financial measures and reconciliations are included in today's earnings release and on our website at altria.com. Finally, all references in today's remarks to tobacco consumers or consumers within a specific tobacco category or segment refer to existing adult tobacco consumers 21 years of age or older. With that, I'll turn the call over to Billy.
Descriptions of these non-GAAP financial measures and reconciliations are included in today's earnings release and on our website at <unk> Dot com.
Unknown Executive: Finally, all references in today's remarks to tobacco consumers or consumers within a specific tobacco category or segment refer to existing adult tobacco consumers 21 years of age or older.
Finally, all references in today's remarks to tobacco consumers for consumers within a specific tobacco category or segment referred to existing adult tobacco consumers 21 years of age or older.
Unknown Executive: With that, I'll turn the call over to Billy.
With that I'll turn the call over to Bill.
Billy: Thanks, Mark. Good morning, and thank you for joining us. Altria's momentum continues to build as we pursue our vision to responsibly lead the transition of adult smokers to a smoke-free future. In the second quarter, our company's innovative smoke-free products delivered strong share and volume performance. And we hit meaningful milestones that we believe set us up for future success. Enjoy received the first and only marketing-granted orders from the FDA for menthol e-cigarette products.
Billy: Thanks, Matt.
Bill: Thanks, Matt Good morning, and thank you for joining us.
Billy: Good morning, and thank you for joining us. Altria's momentum continues to build as we pursue our vision to responsibly lead the transition of adult smokers to a smoke-free future. In the second quarter, our company's innovative smoke-free products delivered strong share and volume performance. And we hit meaningful milestones that we believe set us up for future success. Enjoy, receive the first and only marketing granted orders from the FDA for Mintball eBay for products. And we submitted PMK applications to the FDA for next-generation Enjoy and On products. Our traditional tobacco businesses remain resilient despite a challenging operating environment.
Bill: <unk> momentum continues to build as we pursue our vision to responsibly lead the transition of adult smokers to a smoke free future.
Bill: In the second quarter, our company's innovative smoke free products delivered strong share and volume performance.
Bill: And we hit meaningful milestones that we believe set us up for future success.
Speaker Change: Enjoy received the first and only marketing granted orders from the FDA for menthol ebay products and.
Billy: And we submitted PMTA applications to the FDA for Next Generation ENJOYTM and ON product. Our traditional tobacco businesses remain resilient despite a challenging operating environment, are highly cash generative businesses, and support continued investments in our innovative products efforts. And we returned significant value to shareholders during the first half of the year, with more than $5.8 billion delivered to shareholders through Sherry Purchases and Dividends.
Speaker Change: And we submitted <unk> applications to the FDA for next generation enjoy and on products.
Speaker Change: Our traditional tobacco businesses remained resilient, despite a challenging operating environment.
Billy: Our highly cast-generative businesses supported continued investments in our innovative products efforts. And we returned significant value to shareholders during the first half of the year, with more than $5.8 billion delivered to shareholders through share repurchases and dividends. And we believe our dedicated teens have us on track to deliver against full-year financial guidance. This morning, my remarks will focus on enjoys encouraging second quarter results. The state of the eBay for Category, the listed market activity, and enforcement actions, and strong second quarter results from the point. I'll then turn it over to Sal, who will provide further detail on our financial results, including that outlook.
Bill: Our highly cash generative businesses supported continued investments in our innovative products efforts and.
Bill: And we returned significant value to shareholders. During the first half of the year with more than $5 $8 billion delivered to shareholders.
Bill: Through share repurchases and dividends.
Billy: And we believe our dedicated teams have us on track to deliver against full year financial guidance. This morning, my remarks will focus on NJOI's encouraging second quarter results, the state of the e-cigarette category, illicit market activity, and enforcement action, and strong second quarter results from Warren. I'll then turn it over to Sal, who will provide further detail on our financial results, including an outlook.
Bill: And we believe our dedicated teams have us on track to deliver against full year financial guidance.
Speaker Change: This morning, My remarks will focus on enjoys encouraging second quarter results.
Bill: The state of the E vapor category illicit market activity and enforcement actions.
Bill: Strong second quarter results from Hawaii.
Bill: I'll, then turn it over to Sal, who will provide further detail on our financial results, including our outlook.
Salvatore Mancuso: the performance of our traditional tobacco businesses and capital allocation.
Billy: The performance of our traditional tobacco businesses and capital allocation. Let's begin with the e-cigarette category. In June, we celebrated the one-year anniversary of welcoming Enjoy into the Altria family of companies.
Sal: The performance of our traditional tobacco businesses and capital allocation.
Billy: Let's begin with the evapour category. In June, we celebrated the one-year anniversary of welcoming Enjoy into the Altria family of companies. Since that time, we've combined our industry-leading capabilities with Enjoy's competitive product offering and are thrilled with the progress we've made. Let me briefly recap some rare accomplishments. We strengthened Enjoy's supply chain to enable our expansion plans. Tripleed, Enjoy's retail footprint to over 100,000 stores, secured premium positioning at retail in more than 80% of contracted stores through Enjoy's first trade program. Launched a variety of trial-generating activities with compelling results and introduced a new brand equity campaign with impactful consumer messaging.
Sal: Let's begin with the E vapor category.
Sal: In June we celebrated the one year anniversary of welcoming enjoy into the <unk> family of companies.
Billy: Since that time, we've combined our industry-leading capabilities with NJOI's competitive product offering and are thrilled with the progress we've made. Let me briefly recap some of our accomplishments. We strengthened NJOI's supply chain to enable our expansion plan, tripled Enjoy's retail footprint to over 100,000 stores, secured premium positioning at retail in more than 80% of contracted stores through Enjoy's First Trade Program, launched a variety of trial-generating activities with compelling results, and introduced a new brand equity campaign with impactful consumer messages.
Sal: Since that time, we've combined our industry, leading capabilities with enjoys competitive product offering and are thrilled with the progress we've made.
Sal: Let me briefly recap some of our accomplishments.
Sal: We strengthened enjoy supply chain to enable our expansion plans.
Sal: Tripled enjoys retail footprint to over 100000 stores.
Bill: Secured premium positioning at retail and more than 80% of contracted stores through enjoys first trade program.
Bill: Launched a variety of trial generating activities with compelling results.
Bill: And introduced a new brand equity campaign with impactful consumer messaging.
Billy: As a result of these efforts, Enjoy's thought continued traction at retail during the second quarter and first half, as evidenced by volume momentum and share growth. Enjoy consumables, Ship of Vime, was approximately 12.5 million units for the second quarter and 23.4 million units for the first half. Enjoy's Device Ship of Vime was approximately 1.8 million units for the second quarter and 2.8 million units for the first half. Both consumable and device Ship of Vime increased sequentially, with consumables increasing by 14.7% and devices by 80%. To generate trial in the second quarter, Enjoy paired equity messaging about its attractive product proposition with promotional support and saw compelling results at retail.
Billy: As a result of these efforts, NJOI saw continued traction at retail during the second quarter and first half, as evidenced by volume momentum and share growth. Enjoy Consumables shipment volume was approximately 12.5 million units for the second quarter and 23.4 million units for the first half. In Jewish device shipment volume was approximately 1.8 million units for the second quarter and 2.8 million units for the first half.
Bill: As a result of these efforts enjoy saw continued traction at retail during the second quarter and first half.
Bill: As evidenced by volume momentum and share growth.
Bill: Enjoy consumables shipment volume was approximately $12 5 million units for the second quarter and $23 4 million units for the first half.
Bill: And Joyce device shipment volume was approximately $1 8 million units for the second quarter and $2 8 million units for the first half.
Billy: Both consumable and device shipment volumes increased sequentially, with consumables increasing by 14.7 percent and devices by 80%. To generate trial in the second quarter, Enjoy paired equity messaging about its attractive product proposition with promotional support and saw compelling results at retail. For the second quarter, NJOY's retail share of consumables was 5.5 SharePoints, up 1.3 SharePoints sequentially. Meanwhile, Indoor's retail share of consumables grew in each of the past nine months.
Bill: Both consumable and device shipment volumes increased sequentially with consumables, increasing by 14, 7%.
Bill: And devices by 80%.
Bill: To generate trial in the second quarter enjoy paired equity messaging about its attractive product proposition with promotional support and saw compelling results at retail.
Billy: For the second quarter, Enjoy's retail share of consumables was 5.5 share points, up 1.3 share points sequentially. Enjoy's retail share of consumables grew into each of the past nine months. We're also encouraged by Enjoy's Device Share, which we believe is an important indicator of trial and a potential leading indicator of longer-term adoption. As a result of trial-focused investments in the second quarter, Enjoy expanded its share of devices in the multi-outlet and convenience channel to 25.4 share points. More than doubling its share of devices sequentially. We plan to continue investing behind Enjoy's value proposition and equity to build awareness and generate trial.
Bill: For the second quarter enjoys retail share of consumables was five five share points up one three share points sequentially.
Bill: Enjoys retail share of consumables grew in each of the past nine months.
Billy: We're also encouraged by NJOI's device share, which we believe is an important indicator of trial and a potential leading indicator of longer-term adoption. As a result of trial-focused investments, in the second quarter, Androi expanded its share of devices in the multi-outlet and convenience channel to 25.4 percent, more than doubling its share of devices sequentially. We plan to continue investing behind NJOI's value proposition and equity to build awareness and generate trials.
Bill: We're also encouraged by enjoys device share, which we believe is an important indicator of trial and a potential leading indicator of longer term adoption.
Bill: As a result of trial focused investments in the second quarter enjoy expanded its share of devices in the multi outlet and convenience channel to $25 four share points.
Bill: More than doubling its share of devices sequentially.
Bill: We plan to continue investing behind enjoys value proposition and equity to build awareness and generate trial.
Billy: At retail, approximately two thirds of fixed resets are now complete, and we've amplified Enjoy's visibility and secured premium positioning through its trade. Injoy is also reaching increased numbers of adult consumers through its events and for structure and digital marketing programs. Through these engagement and InJoy's equity campaign, we can continue to position InJoy as a competitive alternative for adult smokers and vapors to responsibly grow Enjoy over the long term. On the regulatory front, Injoon InJoy received marketing credit orders from the FDA for four Mittal evapour products. InJoy has the first and only Mittal evapour products authorized by the FDA, a significant accomplishment for the InJoy team and a testament to the quality of InJoy's robust science and evidence-based applications.
Billy: At retail, approximately two-thirds of fixture resets are now complete, and we've amplified Enjoy's visibility and secured premium positioning through its trade program. INJOY is also reaching increased numbers of adult consumers through its events infrastructure and digital marketing program.
Bill: At retail approximately two thirds of fixed the resets are now complete and we've amplified enjoys visibility and secured premium positioning through its trade program.
Bill: Enjoy is also reaching increased numbers of adult consumers through its evinced infrastructure and digital marketing programs.
Billy: Through these engagements and InJOY's equity campaign, we can continue to position InJOY as a competitive alternative for Adult Smokers and Vapors to responsibly grow and enjoy over the long term. On the regulatory front, in June, NJROI received marketing-granted orders from the FDA for four menthol e-cigarette products. NJOI has the first and only menthol e-cigarette products authorized by the FDA, a significant accomplishment for the NJOI team, and a testament to the quality of NJOI's robust science and evidence-based application. Under the terms of our acquisition of NJOI, upon receiving these authorizations, we made cash payments totaling $250 million in July.
Bill: Through these engagements and enjoys equity campaign.
Bill: We can continue to position enjoy as a competitive alternative.
Bill: For adult smokers.
Bill: And vapors to responsibly grow enjoy over the long term.
Bill: On the regulatory front in June enjoy received marketing granted orders from the FDA for for Menthol E vapor products.
Bill: Enjoy has the first and only menthol E vapor products.
Bill: Authorized by the FDA, a significant accomplishment for the enjoy team.
Bill: And a testament to the quality of enjoys robust science and evidence based applications.
Billy: Under the terms of our acquisition of InJoy, upon receiving these authorizations, we made cash payments to link $250 million in July. Now, all in-market InJoy products are covered by marketing granted orders from the FDA. In addition, InJoy submitted a supplemental TMA to the FDA to commercialize and market the InJoy A's 2.0 device, which incorporates access restriction technology designed to prevent underage use. InJoy also resubmitted MTAs for blueberry and watermelon pod products that work exclusively with the 2.0 device. These emissions mark further milestones in pursuit of revision, and InJoy looks forward to responsibly providing flavored evapour options for adult smokers and vapors once authorized.
Speaker Change: Under the terms of our acquisition of enjoy upon receiving these authorizations, we made cash payments totaling $250 million in July.
Billy: Now, all in-market Enjoy products are covered by marketing-granted orders from the FDA. In addition, ENJOY submitted a supplemental TMTA to the FDA to commercialize and market the ENJOY ACE 2.0 device, which incorporates access restriction technology designed to prevent underage use. NJOY also resubmitted PMTAs for blueberry and watermelon pod products that work exclusively with the 2.0 device.
Speaker Change: Now all in market enjoyed products are covered by marketing granted orders from the FDA.
Speaker Change: In addition enjoys submitted a supplemental PMA to the FDA to commercialize and market the enjoy a 2.0 device.
Speaker Change: Which incorporates access restriction technology designed to prevent under age juice.
Speaker Change: Enjoy also resubmitted <unk> for blueberry and watermelon pod products that work exclusively with the two point our device.
Billy: These submissions mark further milestones in the pursuit of revisions, and NJOY looks forward to responsibly providing flavored e-cigarette options for adult smokers and vapors once authorized. NJOI's momentum and the results are even more encouraging in the context of the broader e-cigarette category, which continues to be overrun by illicit disposable products due to a lack of effective regulation and enforcement. At the end of the second quarter, we estimate the e-cigarette category included approximately 19 million vapors, up over 3 million compared to a year ago. During this same period, disposable vapors increased by 4 million to approximately 12 million vapors.
Speaker Change: These submissions mark further milestones in pursuit of our vision.
Speaker Change: And enjoy looks forward to responsibly, providing flavored E vapor options for adult smokers and Vapers once authorized.
Billy: InJoy's momentum and the results are even more encouraging in the context of the broader evapour category, which continues to be overrun by illicit disposable products due to a lack of effective regulation and enforcement. At the end of the second quarter, we estimate that evapour category included approximately 19 million vapors, up over 3 million vapors versus a year ago. During the same period, disposable vapors increased by 4 million to approximately 12 million vapors. Through the first half of 2024, we estimate the category grew by approximately 40 percent, driven by illicit flavored disposable products, which we believe now represent more than 60 percent of the category.
Speaker Change: Injuries momentum and the results are even more encouraging in the context of the broader E vapor category, which continues to be overrun by illicit disposable products due to a lack of effective regulation and enforcement.
Speaker Change: At the end of the second quarter, we estimate that E. Vapor category included approximately 19 million papers up over 3 million vapors versus a year ago.
Speaker Change: During the same period disposable vapors increased by $4 million to approximately 12 million vapors.
Billy: Through the first half of 2024, we estimate the category grew by approximately 40 percent, driven by illicit flavored disposable products, which we believe now represent more than 60% of the category. We estimate pod-based volumes declined by approximately 15% in the first half of 2024 and now represent approximately 15% of category volume. We are beginning to see the robust supply chains and lack of enforcement that support the illicit e-cigarette market enable increased illicit activity across multiple tobacco categories, including nicotine pouches and cigarettes that are available to U.S. consumers.
Speaker Change: Through the first half of 2024, we estimate the category grew by approximately 40% driven.
Speaker Change: Driven by illicit flavor disposable products, which.
Speaker Change: Which we believe now represent more than 60% of the category.
Billy: We estimate pod-based violence declined by approximately 15 percent in the first half of 2024, and now represents approximately 15 percent of category volumes. We are beginning to see the robust supply chains and lack of enforcement that supports the illicit evapour market, enable increased illicit activity across multiple tobacco categories. , including nicotine pouches and cigarettes that are available to U.S. consumers. In fact, we've identified more than 350 illicit nicotine pouches across both retail and e-commerce, with new brands launching every month. This illicit market echoes the beginning of their illicit evapour market several years ago. In addition, we believe illicit cigarettes are becoming more prevalent in the U.S.
Speaker Change: We estimate pod based volumes declined by approximately 15% in the first half of 2024.
Speaker Change: And now represents approximately 15% of category volumes.
Speaker Change: We are beginning to see the robust supply chains and lack of enforcement that supports the illicit E vapor market.
Speaker Change: Enable increased illicit activity across multiple tobacco categories.
Speaker Change: Including nicotine pouches.
Speaker Change: And cigarettes that are available to U S consumers.
Billy: In fact, we've identified more than 350 illicit nicotine pouch cues across both retail and e-commerce, with new brands launching every month. This illicit market echoes the beginning of the illicit e-cigarette market several years ago. In addition, we believe illicit cigarettes are becoming more prevalent in the U.S. and are evading regulation and taxation. We periodically conduct discarded pack studies and select geographic markers.
Speaker Change: In fact, we've identified more than 350 elicit nicotine pouch skus.
Speaker Change: Across both retail.
Speaker Change: And e-commerce.
Speaker Change: With new brands launching every month.
Speaker Change: This illicit market echoes the beginning of the Theyre listed E vapor market several years ago.
Speaker Change: In addition, we believe illicit cigarettes are becoming more prevalent in the U S. <unk>.
Billy: and are evading regulation and taxation. We periodically conduct discarded tax studies and select geographic markets. One such study in California found more than 25% of discarded cigarette packs were non-domestic products, originating primarily from duty-free channels and China. The FDA's inaction, lack of enforcement, and slow pace of smoke-free authorization continues to enable bad actors who are blatantly disregarding regulations. For our part, we continue to actively engage with regulators, federal and state lawmakers, our trade partners, and other stakeholders to build awareness of these issues and drive marketplace enforcement. This month, we sent the FDA data that supports our increasing concern that illicit market actors are expanding into the nicotine pouch category.
Speaker Change: <unk> regulation and taxation.
Speaker Change: We periodically conduct discarded pack studies in select geographic markets.
Billy: One such study in California found more than 25% of discarded cigarette packs were non-domestic products, originating primarily from duty-free channels and China. The FDA's inaction, lack of enforcement, and slow pace of smoke-free authorization continues to enable bad actors who are blatantly disregarding regulation. For our part, we continue to actively engage with regulators, federal and state lawmakers, our trade partners, and other stakeholders to build awareness of these issues and drive marketplace enforcement.
Speaker Change: One such study in California.
Speaker Change: Now more than 25% of discarded cigarette packs, where non domestic products.
Speaker Change: Originating primarily from duty free channels.
Speaker Change: And China.
Speaker Change: The Fda's inaction.
Speaker Change: Lack of enforcement and slow pace of smoke free authorization.
Speaker Change: Continues to enable bad actors, who are blatantly disregarding regulations.
Speaker Change: For our part we continually we continue to actively engage with regulators federal and state lawmakers, our trade partners and other stakeholders to build awareness of these issues and drive marketplace enforcement.
Billy: This month, we sent the FDA data that supports our increasing concern that illicit market actors are expanding into the nicotine pouch category. Our hope is that this information demonstrates the need for the FDA to direct enforcement actions against illicit nicotine pouch products in addition to illicit e-cigarette products. We believe it is critical that the FDA acts decisively to regain control over the old nicotine pouch category to prevent another widespread illicit market from taking hold at the federal level.
Speaker Change: This month, we sent the FDA data that supports our increasing concern that illicit market actors are expanding into the nicotine pouch category.
Billy: Our hope is that this information demonstrates the need for the FDA to direct enforcement actions against illicit nicotine pouch products in addition to illicit evapor products. We believe it is critical that the FDA acts decisively to regain control over the oral nicotine pouch category to prevent another widespread illicit market from taking hold.
Speaker Change: Our hope is that this information demonstrates the need for the FDA to direct enforcement actions.
Speaker Change: Against illicit nicotine pouch products. In addition to elicit E vapor products.
Speaker Change: We believe it is critical that the FDA act decisively to regain control over the oral nicotine pouch category to prevent another widespread illicit market from taking hold.
Billy: At the federal level, we saw some positive actions in the second quarter. For example, in June, the Justice Department and the FDA announced the creation of a federal multi-agency task force, which is expected to coordinate and streamline efforts to bring all available criminal and civil tools to bear against the illegal distribution and sale of evapour products. We have been advocating for multi-agency collaboration and view this announcement as a much-needed course correction for enforcement efforts. In addition, we continue to see other actions at the federal level, including evapour-related import refusals, civil monetary penalties, and warning letters issued to manufacturers, retailers, and wholesalers of illicit products.
Billy: We saw some positive actions in the second quarter. For example, in June, the Justice Department and the FDA announced the creation of a federal multi-agency task force that is expected to coordinate and streamline efforts to bring all available criminal and civil tools to bear against the illegal distribution and sale of e-cigarettes.
Speaker Change: At the federal level, we saw some positive actions in the second quarter.
Speaker Change: For example in June the Justice Department, and the FDA announced the creation of a federal multi agency task force, which is expected to coordinate and streamlined efforts to bring all available criminal and civil tools to bear against the illegal distribution and sale of <unk>.
Speaker Change: Vapor products.
Billy: We have been advocating for multi-agency collaboration and view this announcement as a much-needed course correction for enforcement activities. In addition, we continue to see other actions at the federal level, including e-vapor related import refusals, Civil Monetary Penalties, and warning letters issued to manufacturers, retailers, and wholesalers of a list of products.
Speaker Change: We have been advocating for multi agency collaboration and to this announcement as a much needed course correction for enforcement efforts.
Speaker Change: In addition, we continued to see other actions at the federal level, including E vapor related import refusals.
Speaker Change: Civil monetary penalties.
Speaker Change: And warning letters issued to manufacturers retailers and wholesalers of illicit products.
Billy: In the absence of effective FDA enforcement today, many states are stepping up to address this issue. As of today, 11 states have passed legislation requiring manufacturers to certify that they are compliant with FDA requirements, and four states are considering similar legislation. Enforcement has started in four states, with the balance set to begin in the second half of 2024 and 2025. When properly implemented and comprehensively enforced, we believe state registry bills can be effective. We continue to believe in the promise of a responsible and fully regulated tobacco industry. As we stated in the past, regulation without enforcement is indistinguishable from no regulation at all.
Billy: In the absence of effective FDA enforcement today, many states are stepping up to address this issue. As of today, 11 states have passed legislation requiring manufacturers to certify that they are compliant with FDA requirements. And four states are considering similar legislation. Enforcement has started in four states, with the balance set to begin in the second half of 2024 and 2025. When properly implemented and comprehensively enforced, we believe state registry laws can be effective.
Speaker Change: In the absence of effective FDA enforcement to date, many states are stepping up to address this issue.
Speaker Change: As of today 11 states have passed legislation.
Speaker Change: Acquiring manufacturers to certify that they are compliant with FDA requirements and.
Speaker Change: In four states are considering similar legislation.
Speaker Change: Enforcement has started in four states with a balanced set to begin in the second half of 2024 and 2025.
Speaker Change: When properly properly implemented.
Speaker Change: Comprehensively enforced we believe state registry bills can be effective.
Billy: We continue to believe in the promise of a responsible and fully regulated tobacco industry. However, as we have stated in the past, regulation without enforcement is indistinguishable from no regulation at all.
Speaker Change: We continue to believe in the promise of a responsible and fully regulated tobacco industry.
Speaker Change: As we stated in the past.
Speaker Change: Regulation without enforcement is indistinguishable from no regulation at all.
Billy: We're hopeful to see more meaningful action and enforcement activity over the next year.
Billy: We're hopeful to see more meaningful action and enforcement activity over the next year. Let's turn back to the old tobacco category, where all nicotine pouches grew 12.3 SharePoints year over year and now represent nearly 42% of the category. All nicotine pouches were the primary contributor of the estimated 9% increase in oral tobacco industry volume over the past six months. Geelix participated in the category growth, growing its reported shipment volume by 37% to 41 million cans during the second quarter.
Speaker Change: We're hopeful to see more meaningful action and enforcement activity over the next year.
Billy: Let's turn back to the old tobacco category where all nicotine pouches grew 12.3 share points here of a year and now represent nearly 42 percent of the category. All nicotine pouches were the primary contributor of the estimated 9 percent increase in old tobacco industry volume over the past six months. Geelix participated in the category growth, growing on reported ship volume by 37 percent to 41 million cans during the quarter. Geelix continues to invest strategically and responsibly behind on. This spring, Geelix launched a new trade program that secured the number one retail fixture position for nearly 80 percent of on volume, creating broader visibility of the on brand.
Speaker Change: Let's turn back to the oral tobacco category.
Speaker Change: We're all nicotine pouches grew 12, three share points year over year, and now represent nearly 42% of the category.
Speaker Change: All nicotine pouches were the primary contributor of the estimated 9% increase in oral tobacco industry volume over the past six months.
Speaker Change: <unk> participated in the category growth.
Speaker Change: <unk> reported shipment volume by 37% to 41 million cans during the second quarter.
Billy: Helix continues to invest strategically and responsibly behind On. This spring, Helix launched a new trade program that secured the number one retail fixture position for nearly 80% of On's volume, creating broader visibility of the On brand. And in June, Helix introduced a fresh new look for its packaging and a new equity campaign, It's On, to further differentiate the brand. Encouragingly, we saw consistent on-share momentum throughout the quarter. Warren's retail share grew in each of the past three months to 8.1% for the quarter, an increase of 1.2 share points versus the prior year and a one share point sequentially.
Speaker Change: <unk> continues to invest strategically.
Speaker Change: And responsibly behind on.
Speaker Change: This spring helix launched a new trade program that secured the number one retail fixture position for nearly 80% of <unk> volume, creating broader visibility of the on brand.
Billy: And in June, Geelix introduced a fresh new look for unpackaging and a new equity campaign. It's on to further differentiate the brand. Incidentally, we saw consistent on-share momentum throughout the quarter. Ones retail share grew in each of the past three months to 8.1 percent for the quarter, an increase of 1.2 share points versus the prior year and a one share point sequentially. Geelix remains focused on long-term profitability and delivered these impressive results while reducing on promotional spending year over year. We are very excited about the prospects and potential for On-Plus. An innovative pouch product made using a proprietary soft film material, which is designed for adults who dip and do users with cigarettes.
Speaker Change: And in June helix introduced a fresh new look for on packaging and a new equity campaign, it's on to further differentiate the brand.
Speaker Change: Encouragingly, we saw consistent olin share momentum throughout the quarter.
Speaker Change: <unk> retail share grew in each of the past three months to eight 1% for the quarter.
Speaker Change: An increase of <unk> <unk>.
Speaker Change: One two share points versus the prior year.
Speaker Change: A one share point sequentially.
Billy: Helix remains focused on long-term profitability and delivered these impressive results while reducing our promotional spending year over year. We are very excited about the prospects and potential for ONPLUS, an innovative pouch product made using a proprietary soft film material which is designed for adults who dip and dual users with cigarettes.
Speaker Change: Helix remains focused on long term profitability and delivered these impressive results.
Speaker Change: While reducing our promotional spending year over year.
Speaker Change: We are very excited about the prospects and potential for <unk> plus an innovative health product made using our proprietary software material, which is designed for adults.
Speaker Change: And dual users with cigarettes.
Billy: Early international results contain a show that On-plus is a growing competitive player in the nicotine pouch space in Sweden and the United Kingdom. In both markets, on-plus has been incremental to our photo portfolio, sourcing mainly from competitive brands with minimal cannibalization. In Sweden, levels of trial are increasing, and the e-commerce repurchase rates are strong above 30%. Supported by these results, we expanded on-plus distribution beyond e-commerce into 2000 key retail accounts in Sweden, including Circle 10 and ICA. In the UK, following the launch of on-plus, the on-portfolio is the number two brand in e-commerce, and Helix recently secured on-plus distribution in 1,000 retail stores.
Billy: Early international results continue to show that Owen Ploss is a growing competitive player in the nicotine pouch space in Sweden and the United Kingdom. In both markets, OnePlus has been incremental to our total portfolio, sourcing mainly from competitive brands with minimal cannibalization. In Sweden, levels of trowel are increasing.
Speaker Change: Early international results continue to show that one plus is a growing competitive player in the nicotine pouch space in Sweden, and the United Kingdom.
Speaker Change: In both markets <unk> plus has been incremental to our total portfolio sourcing mainly from competitive brands with minimal cannibalization.
Speaker Change: In Sweden levels of trial are increasing.
Billy: And e-commerce repurchase rates are strong, above 30 percent. Supported by these results, we expanded OWNPLUS distribution beyond e-commerce into 2,000 key retail accounts in Sweden, including Circle K and ICA. In the U.K., following the launch of Enclosh, The ORM portfolio is the number two brand in e-commerce, and Helix recently secured OnePlus distribution in a thousand retail stores.
Speaker Change: e-commerce repurchase rates are strong above 30%.
Speaker Change: Supported by these results, we expanded one plus distribution beyond e-commerce into 2000 key retail accounts in Sweden include.
Speaker Change: Including circle K and ICA.
Speaker Change: In the UK following the launch of <unk> plus the arm portfolio is the number two brand in E Commerce.
Speaker Change: And helix recently secured one plus distribution and 1000 retail stores.
Billy: Consumer feedback indicates that consumers enjoy the innovative on-plus pouch and view it as a unique point of differentiation in the category.
Billy: Consumer feedback indicates that consumers enjoy the innovative phone plus pouch combination and view it as a unique point of differentiation in the category. Turning back to the U.S. market, Helix submitted PMTAs to the FDA for ORM Plus in June. The PMTAs were submitted for three varieties, tobacco, mint, and wintergreen, each in three different nicotine-strength options. We believe our innovation in the nicotine pouch space can be a meaningful contributor to our smoke-free goals once authorized in the U.S.
Speaker Change: Consumer feedback indicates that consumers enjoy the innovative foam plus pouch.
Speaker Change: And view it as a unique point of differentiation in the category.
Billy: Turning back to the U.S. market, Helix submitted PMTAs to the FDA for On-plus in June. The PMTAs were submitted for three varieties: tobacco, mint, and winegring, each and three different nicotine shrink options. We believe our innovation in the nicotine pouch space can be a meaningful contributor to our smoke-free goals once authorized in the U.S.
Speaker Change: Turning back to the U S market helix submitted <unk> to the FDA for owned plus in June.
Speaker Change: The <unk> were submitted for three varieties tobacco mint and wintergreen each in three different nicotine.
Speaker Change: Options.
Speaker Change: We believe our innovation in the nicotine pouch space can be a meaningful contributor to our smoke free goals once authorized in the U S.
Billy: In summary, it was an exciting quarter for Altria. We made significant progress toward our vision within market products and achieved important milestones to prepare for future success. We're confident in the long-term outlook for our smoke-free portfolio, and we have a significant opportunity to responsibly lead the transition of adult smokers to a smoke-free future.
Billy: In summary, it was an exciting quarter for Altria. We made significant progress toward our vision with in-market products and achieved important milestones to prepare for future success. We're confident in the long-term outlook for our smoke-free portfolio, and we have a significant opportunity to responsibly lead the transition of adult smokers to a smoke-free future.
Speaker Change: In summary, it was an exciting quarter for Altria, we made significant progress toward our vision within mid market products and achieved important milestones to prepare for future success.
Speaker Change: We're confident in the long term outlook for our smoke free portfolio.
Speaker Change: And we have a significant opportunity to responsibly lead the transition of adult smokers to a smoke free future.
Salvatore Mancuso: I believe we have the appropriate strategies in place to execute our growth plans, and I want to thank all of our employees who continue to work tirelessly to make our vision become a reality.
Billy: I believe we have the appropriate strategies in place to execute our growth plans, and I want to thank all of our employees who continue to work tirelessly to make our vision become a reality. I'll now turn it over to Sal to provide more detail on the business environment and our results. Thanks, Billy. Adjusted diluted earnings per share was unchanged in the second quarter and declined by 1.6% for the first half.
Speaker Change: I believe we have the appropriate strategies in place to execute our growth plans and I want to thank all of our employees, who continue to work tirelessly tirelessly to make our vision become a reality.
Salvatore Mancuso: I'll now turn it over to Sal to provide more detail on the business environment and our results.
Speaker Change: I'll now turn it over to <unk> to provide more detail on the business environment and our results.
Salvatore Mancuso: Thanks, Billy. The adjusted diluted earnings per share was unchanged in the second quarter and declined by 1.6% for the first half. Our first half results were consistent with our expectations.
Billy: Thanks Billy.
Billy: Diluted earnings per share was unchanged in the second quarter and declined by one 6% for the first half.
Sal: Our first half results were consistent with our expectations, for 2024 adjusted diluted EPS growth weighted to the second half due to the timing of the Enjoy acquisition in June 2023 and the impact of two additional shipping days in the second half of the year. Therefore, we are narrowing our full year 2024 guidance range and now expect to deliver adjusted diluted EPS in a range of $5.07 to $5.15, representing a growth rate of 2.5% to 4% from a base of $4.95 in 2023. Let's turn to an update on consumer and industry dynamics. Cigarette industry shipment volumes remain pressured during the second quarter and first half due primarily to macroeconomic factors and the growth of illegal disposable e-cigarette products.
Billy: Our first half results were consistent with our expectations.
Salvatore Mancuso: For 2024, adjusted diluted EPS growth waited to the second half due to the timing of the Enjoy acquisition in June 2023 and the impact of two additional shipping days in the second half of the year. Therefore, we are narrowing our full year 2024 guidance range and now expect to deliver adjusted diluted EPS in a range of $5.07 to $5.15, representing a growth rate of 2.5% to 4% from a base of $4.95 in 2023.
Speaker Change: For 2024, adjusted diluted EPS growth weighted to the second half.
Speaker Change: Due to the timing of the enjoy acquisition in June 2023, and the impact of two additional shipping days in the second half of the year.
Speaker Change: Therefore, we are narrowing our full year 2024 guidance range and now expect to deliver adjusted diluted EPS in a range of $5 seven.
Speaker Change: To $5 15.
Speaker Change: Representing a growth rate of two 5% to 4% from a base of $4 95.
Speaker Change: In 2023.
Salvatore Mancuso: Let's turn to an update on consumer and industry dynamics. Secret industry shipment volumes remain pressured during the second quarter and first half due primarily to macroeconomic factors and the growth of illegal disposable e-vapor products. While the rate of inflation has stabilized in recent months, we believe adult smokers remain under economic pressure, as the cumulative impacts from prolonged inflation persist and constrained discretionary spending. Late last year, we share our estimate that the growth of illegal disposable evapour products contributed to cigarette industry declines in a range of 1.5% to 2.5%, and committed to continue evaluating this dynamic trend.
Speaker Change: Let's turn to an update on consumer and industry dynamics.
Speaker Change: Cigarette industry shipment volumes remain pressured during the second quarter and first half.
Speaker Change: Due primarily to macroeconomic factors and the growth of illegal disposable E vapor products.
Sal: While the rate of inflation has stabilized in recent months, we believe adult smokers remain under economic pressure as the cumulative impacts of prolonged inflation persist and Constrained Discretionary Spending. Late last year, we shared our estimate that the growth of illegal disposable e-cigarette products contributed to cigarette industry declines in a range of 1.5% to 2.5% and committed to continue evaluating this dynamic trend. As we've continued to see elevated growth of illicit e-cigarette due to a lack of enforcement, we believe that cross-category movement has been higher in recent quarters than our previously estimated range.
Speaker Change: While the rate of inflation has stabilized in recent months, we believe adult smokers remain under economic pressure as.
Speaker Change: As the cumulative impacts from prolonged inflation persists.
Speaker Change: Constrained discretionary spending.
Speaker Change: Late last year, we shared our estimate that the growth of illegal disposable E vapor products contributed to cigarette industry declines in the range of one 5% to two 5% and committed to continue evaluating this dynamic trend.
Salvatore Mancuso: As we've continued to see elevated growth of illicit evapour due to lack of enforcement, we believe that cross-category movement has been higher in recent quarters than our previously estimated range. We estimate that cross-category movement from cigarettes, primarily to illicit disposable evapour products, contributed an estimated 2% to 3% of the cigarette industry decline over the last 12 months, and have reflected these updates in our decomposition of cigarette industry decline rates. We will continue to monitor the illicit evapour market and provide updates as we enhance our estimates in this space.
Speaker Change: As we've continued to see elevated growth of illicit E vapor due to lack of enforcement. We believe that cross category movement has been higher in recent quarters than our previously estimated range.
Sal: We estimate that cross-category movement from cigarettes, primarily to illicit disposable e-cigarette products, contributed an estimated 2% to 3% of the cigarette industry decline over the last 12 months, and we have reflected these updates in our decomposition of cigarette industry decline rates. We will continue to monitor the illicit e-cigarette market and provide updates as we enhance our estimates in this space. In the smokable product segment, our strategy continues to be to maximize profitability over the long term while appropriately balancing investments in Marlboro with funding the growth of smoke-free products. Segment adjusted operating company's income declined by 2% to $2.8 billion in the second quarter and by 2.3% to $5.3 billion in the first half.
Speaker Change: We estimate that cross category movement from cigarettes, primarily to elicit disposable E vapor products contributed an estimated 2% to 3% of the cigarette industry decline over the last 12 months and have reflected these updates in our decomposition.
Speaker Change: Cigarette industry decline rates.
Speaker Change: We will continue to monitor the illicit E vapor market and provide updates as we enhance our estimates in this space.
Salvatore Mancuso: In the smokeable product segment, our strategy continues to be to maximize profitability over the long term, while appropriately balancing investments in marble with funding the growth of smoke-free products. Segment-adjusted operating company's income declined by 2% to $2.8 billion in the second quarter and by 2.3% to $5.3 billion in the first half. As we look to the second half of the year, in addition to the two additional shipping days, I'll remind you of the expiration of legal fund payments related to the master settlement in agreement in the fourth quarter, which we previously disclosed in our 2023-10K.
Speaker Change: In the Smokable products segment, our strategy continues to be mapped to be to maximize profitability over the long term, while appropriately balancing investments in Marlboro with funding the growth of smoke free products.
Speaker Change: Segment adjusted operating companies income declined by 2% to $2 8 billion in the second quarter and by two 3% to $5 3 billion in the first half.
Sal: As we look to the second half of the year, in addition to the two additional shipping days, I'll remind you of the expiration of legal fund payments related to the Master Settlement Agreement in the fourth quarter, which we previously disclosed in our 2023 10-K. Adjusted OCI margins expanded to 61.6% for the second quarter and 61% for the first half. This performance was supported by strong net price realization of 9.9% for the quarter and 9.3% for the first half.
Speaker Change: As we look to the second half of the year. In addition to the two additional shipping days I'll remind you of the exploration of legal fund payments related to the Master settlement agreement in the fourth quarter.
Speaker Change: Which we previously disclosed in our 2023 10-K.
Salvatore Mancuso: Adjusted OCI margins expanded to 61.6% for the second quarter and 61% for the first half. This performance was supported by strong net price realization of 9.9% for the quarter and 9.3% for the first half. Marble continued to be the undisputed category leader, with a retail share of 42% in the second quarter, down 1.10% versus the prior year and unchanged sequentially. Within the premium segment, Marble expanded its share to 59.4%, an increase of 0.7 share points versus the prior year and 1.10th sequentially. Smokable products segment reported domestic cigarette volumes declined by 13% in the second quarter and 11.5% for the first half.
Speaker Change: Adjusted OCI margins expanded to 61, 6% for the second quarter and 61% for the first half.
Speaker Change: This performance was supported by strong net price realization of nine 9% for the quarter and nine 3% for the first half.
Sal: Marlboro continued to be the undisputed category leader, with a retail share of 42% in the second quarter, down one-tenth versus the prior year and unchanged sequentially. Within the premium segment, Marlboro expanded its share to 59.4%, an increase of 0.7 share points versus the prior year and one-tenth sequentially. The Smokable Products segment reported domestic cigarette volumes declined by 13% in the second quarter and 11.5% for the
Speaker Change: Marlboro continue to be the undisputed category leader.
Speaker Change: With a retail share of 42% in the second quarter down $1 10 versus the prior year and unchanged sequentially.
Speaker Change: Within the premium segment marble expanded its share to 59, 4%.
Speaker Change: An increase of zero seven share points versus the prior year and 110 sequentially.
Speaker Change: Smokable products segment reported domestic cigarette volumes declined by 13% in the second quarter and 11, 5% for the first half.
Salvatore Mancuso: When adjusted for trade and inventory movements, smokable products segment domestic cigarette volumes for the second quarter and the first half declined by an estimated 11% in 10.5%, respectively. At the industry level, when adjusted for trade inventory movements, second quarter domestic cigarette volumes declined by an estimated 9.5 percent. For the first half, when adjusted for trade inventory movements and other factors, we estimate that adjusted domestic cigarette industry volumes declined by 9 percent. The discount segment grew one share point year over year and two tenths sequentially in the second quarter. We believe these results were driven in part by macroeconomic pressures on adult smokers and competitive activity.
Sal: When adjusted for trade inventory movements, cigarette volumes in the smokable products segment declined by an estimated 11% and 10.5%, respectively. At the industry level, when adjusted for trade inventory movements, second quarter domestic cigarette volumes declined by an estimated 9.5 percent. For the first half, when adjusted for trade inventory movements and other factors, we estimate that adjusted domestic cigarette industry volumes declined by 9%. The discount segment grew one share point year-over-year and two-tenths sequentially in the second quarter. We believe these results were driven, in part, by macroeconomic pressures on adult smokers and Competitive Activity and Cigars. Reported shipment volume decreased 0.9% in the second quarter.
Speaker Change: When adjusted for trade inventory movements Smokable products segment domestic cigarette volumes for the second quarter and the first half declined by an estimated 11% and 10, 5% respectively.
Speaker Change: At the industry level, when adjusted for trade inventory movements second quarter domestic cigarette volumes declined by an estimated nine 5%.
Speaker Change: For the first half and when adjusted for trade inventory movements and other factors, we estimate that adjusted domestic cigarette industry volumes declined by 9%.
Speaker Change: The discount segment grew one share point year over year, and 210 sequentially in the second quarter.
Speaker Change: We believe these results were driven in part by macroeconomic pressures on adult smokers.
Salvatore Mancuso: In cigars, reported shipment volume decreased 0.9 percent in the second quarter. Middleton continued to contribute to smokeable products, segment financial results, and Black and Mild remained, the leader in the highly profitable machine-made large cigar segment. Moving to the oral tobacco product segment, adjusted OCI grew by 1.8 percent in the second quarter and 3.1 percent for the first half. Adjusted OCI margins decreased by 2.4 percentage points for the second quarter and 1.2 percentage points for the first half, as Helix continued to invest in the growing oral nicotine pouch category. Reported shipment volume decreased 1.8 percent for the second quarter and 2.5 percent for the first half, as ON's growth was more than offset by lower MSD volumes.
Speaker Change: And competitive activity.
Speaker Change: In cigars reported shipment volume decreased <unk>, 9% in the second quarter.
Sal: Middleton continued to contribute to the Smokable Products segment financial results, and Black and Mild remained the leader in the highly profitable machine-made large cigar segment, moving to the oral tobacco product segment. Adjusted OCI grew by 1.8% in the second quarter and 3.1% for the first half. Adjusted OCI margins decreased by 2.4 percentage points for the second quarter and 1.2 percentage points for the first half, as Helix continued to invest in the growing oral nicotine pouch category. Reported shipment volume decreased 1.8% for the second quarter and 2.5% for the first half, as An's growth was more than offset by lower MST volume when adjusted for calendar differences and trade inventory movements.
Speaker Change: Middleton continued to contribute to smokable products segment financial results and black and mild remained the leader in the highly profitable machine made large cigar segment.
Speaker Change: Moving to the oral tobacco products segment.
Speaker Change: Adjusted OCI grew by one 8% in the second quarter and three 1% for the first half.
Speaker Change: Adjusted OCI margins decreased by two four percentage points for the second quarter and one two percentage points for the first half as <unk> continued to invest in the growing oral nicotine pouch category.
Speaker Change: Reported shipment volume decreased one 8% for the second quarter and two 5% for the first half.
Speaker Change: <unk> growth was more than offset by lower MST volumes.
Salvatore Mancuso: When adjusted for calendar differences and trade inventory movements, we estimate that second quarter and first half oral tobacco product segment volumes declined by approximately 3 percent and 3.5 percent, respectively. Oral tobacco product segment retail share was 37.9 percent for both the second quarter and first half, as declines in our MSD brands were partially offset by the growth of On. Evolving consumer preferences and the accelerated growth of oral nicotine pouches have continued to impact MSD products.
Speaker Change: When adjusted for calendar differences and trade inventory movements.
Sal: We estimate that second quarter and first half oral tobacco product segment volumes declined by approximately 3% and 3.5%, respectively. However, oral tobacco product segment retail share was 37.9% for both the second quarter and first half, as declines in our MST brands were partially offset by the growth of ON. Evolving consumer preferences and the accelerated growth of oral nicotine pouches have continued to impact MSD products. As a result, we determined that the estimated fair value of the Skoll trademark at June 30, 2024, was below its carrying value, and we recorded a non-cash pre-tax impairment of $354 million.
Speaker Change: We estimate that second quarter, and first half oral tobacco products segment volumes declined by approximately 3% and three 5% respectively.
Speaker Change: Oral tobacco products segment retail share was 37, 9% for both the second quarter and first half as declines in our MST brands were partially offset by the growth of on.
Speaker Change: Evolving consumer preferences, and the accelerated growth of oral nicotine pouches have continued to impact MSG products.
Salvatore Mancuso: As a result, we determined that the estimated fair value of the school trademark at June 30, 2024, was below its carrying value and recorded a non-cash pre-tax impairment of $354 million. Despite this, we remain encouraged by the resilience of Copenhagen, the longstanding number one brand in MSD, and the continued growth of on in nicotine pouches, which surpassed goal to become our second largest oral tobacco brand at retail.
Speaker Change: As a result, we determined that the estimated fair value of the school trademark at June 32024 was below its carrying value and recorded a noncash pretax impairment of $354 million.
Sal: Despite this, we remain encouraged by the resilience of Copenhagen, the longstanding number one brand in MST, and the continued growth of bond and nicotine pouches, which surpassed Skoal to become our second largest oral tobacco brand at retail. Turning to ABI's financial results, we recorded $145 million of adjusted equity earnings for the second quarter, up 9.8% versus the prior year. As a reminder, we use the equity method of accounting for our investment in ABI and report our share of ABI's results using a one-quarter lag. Accordingly, our second quarter adjusted equity earnings represent our share of ABI's first quarter earnings, reduced by our lower ownership percentage following the partial sale of our ABI investment, which occurred late in the first quarter.
Speaker Change: Despite this we remain encouraged by the resilience of Copenhagen.
Speaker Change: The longstanding number one brand in MST.
Speaker Change: And the continued growth of bond and nicotine pouches.
Speaker Change: Which surpassed our goal to become our second largest oral tobacco brands at retail.
Salvatore Mancuso: Turning to ABI's financial results, we recorded $145 million of adjusted equity earnings for the second quarter, up 9.8 percent versus the prior year. As a reminder, we use the equity method of accounting for investment in ABI and report our share of ABI's results using a one-quarter lag. Accordingly, our second quarter adjusted equity earnings represent our share of ABI's first quarter earnings, reduced by our lower ownership percentage following the partial sale of our ABI investment, which occurred late in the first quarter.
Speaker Change: Turning to <unk> financial results, we recorded $145 million of adjusted equity earnings for the second quarter up.
Speaker Change: Up nine 8% versus the prior year.
Speaker Change: As a reminder.
Speaker Change: We use the equity method of accounting for our investment in Abi and report our share of Abi's results using a one quarter lag.
Speaker Change: Accordingly, our second quarter adjusted equity earnings represent our share of Abi's first quarter earnings reduced by our lower ownership percentage following the partial sale of our <unk> investment which occurred late in the first quarter.
Salvatore Mancuso: Lastly, on capital allocation, we returned significant value to shareholders during the first half of the year. Supported by the partial sale of our investment in ABI, we returned $2.4 billion to shareholders through an accelerated share repurchase program, which was completed during the second quarter. At the end of the quarter, we had approximately $1 billion remaining under our currently authorized share repurchase program, which we expect to complete by the end of this year. We also paid $3.4 billion in dividends, resulting in a total cash return to shareholders of $5.8 billion for the first half. Our balance sheet remains strong; our debt to EBIT ratio as of June 30th was 2.1 times, in line with our capital structure goal of approximately two times.
Sal: Lastly, on capital allocation. We return significant value to shareholders during the first half of the year. Supported by the partial sale of our investment in ABI, we returned $2.4 billion to shareholders through an accelerated share repurchase program, which was completed during the second quarter. At the end of the quarter, we had approximately $1 billion remaining under our currently authorized share repurchase program, which we expect to complete by the end of this year. We also paid $3.4 billion in dividends, resulting in a total cash return to shareholders of $5.8 billion for the first half.
Speaker Change: Lastly on capital allocation.
Speaker Change: We returned significant value to shareholders during the first half of the year.
Speaker Change: Supported by the partial sale of our investment in Abi, we returned $2 $4 billion.
Speaker Change: To shareholders through an accelerated share repurchase program, which was completed during the second quarter.
Speaker Change: At the end of the quarter, we had approximately $1 billion remaining under our currently authorized share repurchase program, which we expect to complete by the end of this year.
Speaker Change: We also paid $3 $4 billion in dividends.
Hoelting: Hoelting in total cash returned to shareholders of $5 8 billion.
Sal: Our balance sheet remains strong. Our debt to EBITDA ratio as of June 30th was 2.1 times, in line with our capital structure goal of approximately two times. As we continue to execute on our vision, we remain committed to creating long-term value for our shareholders and maintaining a strong balance sheet. 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 released in our non-GAAP reconciliations are available on altria.com.
Speaker Change: For the first half.
Speaker Change: Our balance sheet remained strong our debt to EBITDA ratio as of June 30 was two one times in line with our capital structure goal of approximately two times.
Salvatore Mancuso: As we continue to execute on our vision, we remain committed to creating long-term value for our shareholders in maintaining a strong balance sheet.
Speaker Change: As we continue to execute on our vision, we remain committed to creating long term value for our shareholders and maintaining a strong balance sheet.
Unknown Executive: With that, we'll wrap up, and Billion I will be happy to take your questions.
Speaker Change: With that we'll wrap up.
Speaker Change: And Billy and I will be happy to take your questions.
Unknown Executive: While the calls are being compiled, I remind you that today's earnings release and on-gap reconciliation are available on Altria.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.
Billy: 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.
Speaker Change: We've also posted our usual quarterly metrics, which include pricing inventory and other items.
Sal: We've also posted our usual quarterly metrics, which include pricing, inventory, and other items. Now, let's open the question and answer period. Operator, do we have any questions? Thank you. And once again, as a reminder, if you would like to ask a question, please press star followed by one on your touchtone telephone at this time.
Speaker Change: Let's open the question and answer period.
Speaker Change: Operator, do we have any questions.
Unknown Executive: Once again, as a reminder, if you would like to ask a question, please press star, followed by one on your touchtone telephone at this time.
Speaker Change: Thank you and once again as a reminder, if you would like to ask a question. Please press star followed by one on your Touchtone telephone at this time.
Operator: Investors, analysts, and media representatives are now invited to participate in the question and answer session, and we will take questions from the investment community first. And our first question will come from the line of Bonnie Herzog with Goldman Sachs. Please go ahead. Thank you. Good morning, everyone.
Unknown Executive: Investors, analysts, and media representatives are now invited to participate in the question-and-answer session, and we will take questions from the investment community first.
Speaker Change: Investors analysts and media Representatives are now invited to participate in a question and answer session and we will take questions from the investment community first and our first question will come from the line of Bonnie Herzog with Goldman Sachs.
Bonnie Herzog: Our first question will come from the line of Bonnie Herzog with Goldman Pax.
Bonnie Herzog: Please go ahead. Thank you.
Bonnie Herzog: Good morning, everyone. I had a question on your guidance this morning. You narrowed your EPS guidance, but that implies the midpoint stays the same, and it does suggest a decent step of growth in the back half. I guess I'm wondering what some of the drivers of that growth will be, and ultimately, how much visibility do you have on this given what really has been a challenging environment? Then how should we think about the implied back half EPS growth, especially given the investments you have been making behind smoke-free, and will those ramp or are they going to slow down in the back half?
Speaker Change: Please go ahead.
Bonnie Lee Herzog: Thank you good morning, everyone.
Bonnie Lee Herzog: I had a question on your guidance this morning. You narrowed your EPS guidance, but that implies, you know, the midpoint stays the same, and it does suggest a decent step-up of growth in the back half. So I guess I'm wondering what some of the drivers of that growth will be, and ultimately, you know, how much visibility do you have on this given, you know, what really has been a challenging environment?
Bonnie Lee Herzog: I had a question on your guidance. This morning, you narrowed your EPS guidance, but that implies the midpoint stays the same and it does suggest a decent step up of growth in the back half.
Bonnie Lee Herzog: Im wondering what some of the drivers of that growth will be in and ultimately how much visibility do you have on this given what really has been a challenging environment.
Bonnie Lee Herzog: And then how should we think about the implied back half EPS growth, especially, you know, given the investments you have been making behind smoke-free and, you know, will those ramp up, or are they going to slow down in the back half? Thank you for that. Sure. Good morning, Bonnie.
Speaker Change: And then how should we think about the implied back half EPS growth, especially given the investments you have been making behind smoke free and will those ramp or are they going to slow down in the back half. Thank you for that.
Salvatore Mancuso: Thank you for that.
Salvatore Mancuso: Sure.
Salvatore Mancuso: Good morning, Bonnie. As you said, we were able to narrow guidance. Our EPS for the first half was in line with our expectations. As for the second half, let me point to a few factors. Remember, we're lapping the acquisition of Enjoy, which occurred in June of last year. We also have two extra shipping days, and there are a couple of items; other items I'll point out. The benefit of our accelerated share repurchase program is back half weighted, and then, as I mentioned earlier, there'll be the expiration of the legal fund, which is part of our MSA cost, and that expires in the fourth quarter of this year.
Sal: As you said, we were able to narrow guidance. Our EPS for the first half was in line with our expectations. As far as the second half is concerned, let me point to a few factors.
Bonnie: Good morning, Bonnie.
Bonnie: As you said, we were able to narrow guidance our EPS for the first half was in line with our expectations.
Speaker Change: As far as the second half, let me point to a few factors.
Sal: Remember, we're lapping the acquisition of Enjoy, which occurred in June of last year. We also have two extra shipping days, and there are a couple of other things I'll point out. You know, the benefit of our accelerated share repurchase program is back half-weighted. And then, as I mentioned earlier, there will be the expiration of the legal fund, which is part of our MSA cost, and that expires in the fourth quarter of this year. The question would be on, you know, your smokable segment. Despite expanding operating margins, which have been quite impressive, your, you know, your dollar profits didn't increase again in the quarter.
Speaker Change: Remember, we're lapping the acquisition of enjoy which occurred in June of last year. We also have two extra shipping days and there are a couple of item other items I'll point out.
Speaker Change: The benefit of our accelerated share repurchase program.
Speaker Change: Back half weighted.
Speaker Change: And then as I mentioned earlier there'll be the exploration of the legal fund, which is part of our MSA cost and that expires in the fourth quarter of this year.
Bonnie Herzog: Okay, thank you. So it sounds like, all right, that's helpful.
Speaker Change: Okay. Thank you so it sounds like Alright, that's helpful. And then I guess my second question would be on your Smokable segment, despite expanding op margins, which have been quite impressive here.
Bonnie Herzog: And then, I guess my second question would be on, you know, your smokeable segment. You know, despite expanding out margins, which have been quite impressive, your, you know, your dollar profits didn't increase again in the quarter. And, you know, really, this has been a concern; you know, obviously the sharp sig volume declines continue to weigh on your top line despite, you know, what I would characterize as robust net price realization. But what about the controllable costs in the quarter, which were up high single digits? You know, could you talk a little bit more about, you know, maybe the drivers behind these costs.
Sal: And, you know, really, this has been a concern. Obviously, the sharp sig volume declines continue to weigh on your top line, despite, you know, what I would characterize as robust net price sterilization. But what about the controllable costs in the quarter, which were up high single digits? Could you talk a little bit more about, you know, maybe the drivers behind these costs, and then ultimately, you know, going back to your EPS guidance? Yeah, there's a lot to unpack, so I want to make sure I get to all your questions, Bonnie. If I don't, please follow up.
Speaker Change: <unk> profits didn't increase again in the quarter and really this has been a concern on obviously the sharp volume declines continue to weigh on your top line. Despite what I would characterize as robust net price realization.
Speaker Change: But what about the controllable costs in the quarter, which were up high single digits could you talk a little bit more about maybe the drivers behind these cost and then ultimately.
Salvatore Mancuso: And then ultimately, you know, going back to your EPS guys, you know, does that imply that your, your smokeable profits are expected to grow this year? Or are you just assuming, you know, flat, you know, profitability and you can still hit your EPS, you know, guys, without smokeable profits growing. Thank you.
Speaker Change: Going back to your EPS guidance.
Speaker Change: Does that imply that your ear smokable profits are expected to grow this year or are you just assuming.
Speaker Change: Flat.
Speaker Change: Profitability and you can still hit your EPS.
Speaker Change: Guidance without smokable profits growing thank you.
Salvatore Mancuso: Yeah, there's a lot to impact. So I want to make sure I get to all your questions, Bonnie. If I don't, please follow up.
Speaker Change: Theres still lots of impacts we want to make sure I get to all your questions. Bonnie if I don't please follow up.
Sal: I'm going to work a little bit backwards, so let's talk about smokeables for a minute. Remember, we are managing that business to maximize profitability and balance investments behind Marlboro and our smoke-free products, and we're really pleased with the strong net price realization. We're pleased with the strong margin performance, but during economic difficult times for our consumers, we are going to support them, and we're doing that, I think, pretty effectively through our RGM strategies, which include investments in Marlboro Black. In the second half of the year, there are some tailwinds that we expect to see.
Salvatore Mancuso: I'm going to work a little bit backwards. So let's talk about smokeable for a minute. Remember, we are managing that business to maximize profitability and balance investments behind Marlboro and our smoke-free products. And we're really pleased with the strong net price realization; we're pleased with the strong margin performance. But during economic difficult times for consumers, we're going to support them. And we're doing that, I think, pretty effectively through our RGM strategies, which include investments in Marlboro Black. In the second half of the year, there are some tailwinds that we expect to see. Some of already mentioned, right, the two extra shooting days that occur in the back half of the year, the expiration of the legal fund in the fourth quarter.
Speaker Change: Going to work a little bit backwards, so, let's talk about smokable for a minute.
Speaker Change: Remember, we are managing that business to maximize profitability and balanced investments behind Marlboro and our smoke free products and we're really pleased with the strong net price realization, which we're pleased with the strong margin performance, but during economic.
Speaker Change: Difficult times for our consumers, we are going to support them and we're doing that I think pretty effectively through.
Speaker Change: Our <unk> strategies, which include our investments in Marlboro Black in the second half of the year. There are some tailwind that we expect to see.
Sal: I've already mentioned some, right, the two extra shipping days that occur in the back half of the year, and the expiration of the legal fund in the fourth quarter. We'll also be lapping the investments we began to make in Marlboro Black last year, which really is an important tool to engage with consumers who are facing difficult economic times and may be more price sensitive. So we feel really good about the progress in the smokeable segment and the progress going forward with that as well.
Speaker Change: Some are already mentioned right. The two extra shipping days that occur in the back half of the year. The exploration of the legal fund in the fourth quarter will also be lapping the investments we began to make in Marlboro Black last year.
Salvatore Mancuso: We'll also be lapping the investments. We we began to make in Marboro Black last year, which really is an important tool to engage with consumers who are facing difficult economic times and maybe more price sensitive. So, so we feel really good about the progress and the smokeable segment and the progress going forward with that as well.
Speaker Change: Which really is an important tool to engage with consumers who are facing difficult economic times and may be more price sensitive. So so we feel really good about the progress in the smokable segment and the progress.
Sal: So that's the smokeable segment. As far as the back half of the year, I think I've talked to you about and discussed the individual items that will be tailwinds to our EPS growth in the back half of the year. But we don't manage the business quarter to quarter.
Speaker Change: Going forward.
Salvatore Mancuso: So that's the smokeable segment. As far as you know, the back half of the year, I think I've talked to you about and talked about the individual items that will be tailwinds or EPS growth in the back half of the year.
Speaker Change: With that as well so.
Speaker Change: The smokable segment as far as the back half of the year I think I've I've talked to you about.
Speaker Change: Talked about the individual items that were.
Speaker Change: That will be tailwind store EPS growth.
Salvatore Mancuso: But, you know, we don't manage the business quarter to quarter; we are managing it for the long term, and we're really pleased with the financial progress. But, you know, volumes are down, and that will drive a controllable cost up on a per pat basis. And, you know, part of margin growth is both pricing and effective cost management. There are a couple of items that we've mentioned. So, you know, we have a base inflation rate for MSA of at least 3%. And then I talked about this last quarter, and it disproportionately hit the first quarter, but industry profits from the leading competitor are lower than expected, so that is driving some of our MSA costs.
Speaker Change: In the back half of the year, but we don't manage the business quarter to quarter, we are managing it for the long term and we're really pleased with the financial progress but.
Sal: We are managing it for the long term, and we're really pleased with the financial progress. But volumes are down, and that will drive controllable costs up on a per pack basis. And part of margin growth is both pricing and effective cost management. There are a couple of items that we've mentioned. So you know we have a base inflation rate for MSA of at least 3%. And then I talked about this last quarter, and it disproportionately hit the first quarter. Industry profits from a leading competitor are lower than expected.
Speaker Change: Volumes are down.
Speaker Change: And that will drive controllable costs up.
Speaker Change: On a per pack basis and.
Speaker Change: Part of margin growth as both pricing and effective cost management cost management. There are a couple of items that we've mentioned so we have a base inflation rate for MSA.
Speaker Change: <unk>, 3% and then I talked about this last quarter and it disproportionately hit the first quarter, but.
Speaker Change: <unk>.
Speaker Change: Industry profits from our leading competitor a lower than expected. So that is driving some of our MSA cost, but again, our folks do a great job of using technology thinking about better ways of continuing to execute our strategy and then having flexibility where we could manage.
Sal: So that is driving some of our MSA costs. But again, our folks do a great job of using technology, thinking about better ways of continuing to execute our strategy and then having flexibility where we could manage costs between, you know, smokeable and then use that infrastructure in our newer products. And I think you've seen the strong results in our innovative smoke-free products. All right, thank you for that. I'll pass it on. Our next question will come from Matt Smith with Stiefel. Please go ahead. Hi, good morning, and thank you for taking my question. Good morning, Matt.
Salvatore Mancuso: But again, our folks do a great job of using technology, thinking about better ways of continuing to execute our strategy. And then having flexibility where we could manage costs between, you know, smokeable and then use that infrastructure in our newer products.
Speaker Change: <unk> costs between.
Speaker Change: Smokable and then use the infrastructure in our newer products and I think you've seen the strong results in our innovative smoke free products.
Salvatore Mancuso: And I think you've seen the strong results in our innovative smoke-free products.
Bonnie Herzog: All right, thank you for that. I'll pass it on.
Speaker Change: Alright, Thank you for that I will pass it on.
Matt Smith: Our next question will come from Matt Smith with Steve Foll.
Speaker Change: Our next question will come from Matt Smith with Stifel. Please go ahead.
Matt Smith: Please go ahead. Hi, good morning, and I could take my question. Good morning, Matt. I want to tie together a few comments from the paired remarks. The impact of cross-category movement on the cigarette industry decline rate is now higher. You talked about that being largely driven by the growth in illicit vapor products.
Matthew Edward Smith: I want to tie together a few comments from the prepared remarks. The impact of cross-category movement on the cigarette industry decline rate is now greater. You talked about that being largely driven by the growth in illicit vapor products. So as enforcement steps up, albeit with a limited impact on the broader market today, can you talk about how adult consumers are reacting in terms of switching to compliant products and vapor or the impact on the cross-category headwind where you are seeing some progress on those enforcement efforts? Yeah, and that is the key point that you point out, Matt. I think when you think about it, when we talk about continued momentum building, that momentum is really around awareness.
Matthew Edward Smith: Hi, Good morning, and thank you for taking my question.
Speaker Change: Good morning, Matt.
Speaker Change: I wanted to tie together a few comments from the prepared remarks, the impact of cross category movement on the cigarette industry decline rate is now higher.
Speaker Change: You talked about that being largely driven by the growth in illicit vapor products. So as enforcement steps up, albeit with a limited impact of the broader market. Today can you talk about how adult consumers are reacting in terms of switching to compliant products and vapor or the impact to the cross category headwind, where you are.
Billy: So as enforcement steps up, albeit with a limited impact to the broader market today, can you talk about how adult consumers are reacting in terms of switching to compliant products in vapor or the impact to the cross-category headwind where you are seeing some progress on those enforcement efforts? Yeah, and that's a key point that you point out, Matt. I think when you think about it, when we talk about continued momentum building, that momentum is really around awareness. And I think we have their attention. We need to translate that momentum and awareness to momentum and action.
Speaker Change: Some progress on those enforcement efforts.
Speaker Change: Yes, and that is the key.
Speaker Change: The point that you point out that I think when you think about it when we talk about continued momentum building that momentum is really around awareness and I think we have their attention and we need to translate that momentum and awareness some momentum in action and so yes. There are some limited actions that have been taken place, but they need to step up.
Billy: And I think we have their attention; we need to translate that momentum and awareness into momentum and action. And so, yeah, there are some limited actions that have been taking place, but they need to step up significantly. What you saw in that increase in category movement to illicit vapes is the prevalence of illicit vapes in the marketplace. Just to give you an example, you heard a story mentioned at the hearing on Capitol Hill with the FDA and DOJ.
Billy: And so, yeah, there are some limited actions that have been taken place, but they need to step up significantly. What you saw in that increase in category movement to illicit vapor is the prevalence of the illicit vapor in the marketplace. Just to give you an example, you heard a store mentioned at the hearing on Capitol Hill with the FDA and DOJ. We sent a representative in this week, and those illicit vapor are still available, and they were able to purchase it. So, then we sent them to the stores around the FDA Headquarters. And within the shadow of the FDA headquarters, we found at least five stores where illicit vapes are prevalent and readily available.
Speaker Change: Significantly what you saw in that increase in.
Speaker Change: Category movement to illicit Vapes is the prevalence of the illicit vapes in the marketplace just to give you. An example, you heard as Stuart mentioned at the hearing on Capitol Hill with the FDA and Doj, We sent a representative in this week and those illicit payments are still available and they were able to purchase. It. So then we send them into our stores.
Billy: We sent a representative in this week, and those illicit vapes are still available, and they were able to purchase them. So then we sent them to stores around FDA headquarters, and within the shadow of FDA headquarters, we found at least five stores where illicit vapes are prevalent and readily available. So it's one thing to drive momentum and awareness; we need momentum in action. Thank you, Billy.
Speaker Change: Round, the FDA headquarters and within the Shadow of the FDA headquarters, we found in at least five stores, where illicit vapes are prevalent and readily available. So that it's one thing to drive momentum and awareness, we named momentum in action.
Billy: So, it's one thing to draw momentum and awareness.
Billy: We need momentum and action.
Billy: Thank you, Billy. Maybe just as a follow-up specifically in Louisiana, which I believe is a state where you have a longer period of time where there's been enforcement. Did you see adult tobacco users stay within their existing categories, meaning evapour, or did you see consumers shift between categories as enforcement stepped up?
Billy: Maybe just as a follow-up, specifically in Louisiana, which I believe is a state where you have a longer period of time where there's been enforcement, did you see adult tobacco users stay within their existing categories, meaning e-cigarette, or did you see consumers shift between categories as enforcement stepped up? Yeah, we've seen some enforcement there. Remember, they started enforcing it right away in Louisiana, and then there was a TRO, a restraining order, that put it on hold.
Speaker Change: Thank you Billy and maybe just as a follow up specifically in Louisiana, which I believe is a state where you have a longer period of time, where theres been enforcement.
Speaker Change: Did you see adult.
Speaker Change: Tobacco users.
Speaker Change: <unk> within their existing categories, meaning E vapor.
Speaker Change: Or did you see consumers shift between categories as enforcement stepped up.
Billy: Yeah, we've seen some enforcement there that remember they started enforcing right away in Louisiana, and then there was a TRO restraining order that put it on hold. What we did see as far as early trends, and again, I call them early because we need to see continued enforcement, is that in the multi outlet convenience channel, we did see authorized products go up as far as that. The illicit products went virtually to zero, and then we did see a slight difference in cigarette volume decline. But what we see is that because of the lack of enforcement across the US, once entrenched, those supply chains—and you heard in the remarks—we're seeing that now that the supply chains have been established, the bad actors are putting more products through that same supply chain.
Speaker Change: Yes, we've seen some enforcement there remember they started enforcing right away in Louisiana, and then there was a CRO a restraining order that put it on hold.
Billy: What we did see as far as early trends, and again, I call them early because we need to see continued enforcement, is that in the multi-outlet convenience channel, we did see authorized products go up. As far as that was concerned, illicit products went virtually to zero, and then we did see a slight difference in cigarette volume decline. But what we see is, because of the lack of enforcement across the U.S., once entrenched in those supply chains, and you heard in the remarks, we're seeing that now that the supply chains have been established, the bad actors are putting more products through that same supply chain. So we need a concerted effort across the U.S. But those were the early trends we saw in Louisiana.
Speaker Change: What we did see as far as early trends and again I'll call them early because we need to see continued enforcement.
Speaker Change: Is that in the multi outlet convenience channel, we did see authorized products.
Speaker Change: Go up as far as that.
Speaker Change: The illicit products with virtually zero and we did see a slight difference in cigarette volume declines.
Speaker Change: But what we see is because of the lack of enforcement across the U S is that once entrenched those supply chains and you heard in the remarks, we're seeing it now that the supply chains have been established the bad actors are putting more products through that same supply chain. So we need a concerted effort across.
Billy: So we need a concerted effort across the US, but those were the early trends we saw in Louisiana.
Speaker Change: The U S. But those were the early trends we saw in Louisiana.
Billy: Thank you, Billy; I'll pass it on.
Billy: Thank you, Billy. I'll pass it on. Our next question will come from Callum Elliott of Bernstein. Peace, go ahead. Hi, good morning, guys.
Speaker Change: Thank you Bill and I'll pass it on.
Callum Elliott: Our next question will come from Callum Elliott, Ms. Bernstein.
Speaker Change: Our next question will come from Cowen Ellie.
Callum Elliott: Please go ahead. I could want to go. Maybe I could start by building on Matt's question, just wondering if you could give us an idea. I think you had mentioned in the prepared remarks 11 states of past measures, but only four of that she should enforce those measures on active measures so far. Of the seven where we're still waiting for an act and in the back half of this year and 2025, proportion of US zero volumes roughly to those seven states represent Billy. Yeah, I don't have that number off the top of my head. Callum, I'll make sure IR follows up as far as percent of cigarette volume and evapour volume.
Speaker Change: Please go ahead.
Callum Elliott: Maybe I could start by building on Matt's question. Just wondering if you could give us an idea. As you mentioned in your prepared remarks, 11 states have passed measures, but only four have actually sort of enforced those measures or enacted the measures so far. Of the seven where we're still waiting for enactment in the back half of this year and 2025, what proportion of US cigarette volumes roughly do those seven states represent? Yeah, I don't have that number off the top of my head, Callum.
Ellie: Hi, Good morning, guys, maybe like Morningstar.
Speaker Change: Building on one of them.
Ellie: Building on Matt's question, just wondering if you could give us some idea I think you had mentioned in the prepared remarks, 11 states with pulse benches, but I think that's.
Speaker Change: That's useful to enforce those measures enacted the majors so fall.
Speaker Change: Of the seven where we're still waiting for enactment in the back half of this year in 2025, what proportion of U S cigarette volumes roughly to those seven states represent.
Billy: I'll make sure IR follows up as far as percent of cigarette volume and e-cigarette volume. But the point you highlight is that I think they're trying to be disciplined and think about a total enforcement approach in these states, and that's why we see a bit of a delay in the implementation of it. But I think it's an important step. Once they get the enforcement in place and really hold manufacturers accountable for it, we think they can have an impact.
Speaker Change: Yes, I don't have that number off the top of my head column I'll make sure IR follows up as far as percent of cigarette volume in E vapor volume.
Billy: The point you highlight is that I think they're trying to be disciplined and think about a total enforcement approach in these states, and that's why we see a bit of delay in the implementation of it, but I think it's an important step. Once they get the enforcement in place and really hold manufacturers accountable to it, we think they can have an impact. We would like to see this happen across the US and at the federal level.
Speaker Change: At that point.
Speaker Change: Highlight is that I think they are trying to be disciplined and think about a total enforcement approach in these states and thats why we see a bit of a delay in the implementation of it but I think it's an important step once they get the enforcement in place and really.
Billy: We would like to see this happen across the U.S. and at the federal level. Okay, maybe this segues nicely there. And obviously, we've got a US election later this year. And whatever happens, we're going to have a new president now.
Speaker Change: Hold manufacturers accountable to it.
Speaker Change: They can have an impact we would like to see this happen across the U S and at the federal level.
Billy: Okay, and maybe this segway is mostly there, and also we've got a US election later this year, and whatever happens, we're going to have a new president now. So my question is, are there legislative measures that could help with this problem and that we could maybe expect to accelerate after the election? Or do you think this has to remain in the hands of the FDA? Yeah, I think to your point, you know, regardless of the outcome of the election, we'll certainly have a new administration. We really engage on both sides of the aisle and intend to work with either administration that comes in place.
Billy: So my question is, are there legislative measures that could help with this problem and that we could maybe expect to see accelerate after the election? Or do you think this has to sort of remain in the hands of the FDA? Yeah, I think to your point. You know, regardless of the outcome of the election, we'll certainly have a new administration.
Speaker Change: Okay, maybe this segways must be that in.
Speaker Change: Obviously, we've got a U S election later this year and whatever happens we're going to have a new president now.
Speaker Change: So my question is although legislative measures.
Speaker Change: To help with this problem.
Speaker Change: We could maybe expect to see accelerates after the election, whether you think this has sort of remain in the hands of the FDA.
Billy: We really engage on both sides of the aisle and intend to work with either administration that comes in place. I think the focus will be on harm reduction, but to have a fruitful harm reduction, you need both authorizations for legitimate smoke-free products and enforcement for illicit products. And that prohibition is not the proper framework. And so they really need to focus on restoration. We think the FDA has all the tools necessary and is partnering with other federal agencies.
Speaker Change: Yes, I think to your point, we do regardless of the outcome of the election, we will certainly have a new administration.
Speaker Change: Really engage on both sides of the al and intend to work with either administration that comes in place I think the focus will be that the right approaches harm reduction but to have a fruitful harm reduction you need both authorizations.
Billy: I think the focus will be that the right approach is harm reduction, but to have a fruitful harm reduction, you need both authorizations for legitimate smoke-free products and enforcement for illicit products. And that prohibition is not the proper framework, and so they really need to focus on restoring. We think the FDA has all the tools necessary in partnering with the other federal agencies. They just need to take action, but certainly we will never turn down a legislative approach. We'll continue to propose approaches that we think could be effective, but we think the tools that they're already.
Speaker Change: For legitimate smoke free products and enforcement for illicit products.
Speaker Change: Prohibition is not the proper framework and so they really need to focus on restoring.
Speaker Change: We think the FDA has all the tools necessary and partnering with the other federal agencies. They just need to take action, but certainly we will never turn down a legislative approach will continue to propose approaches that we think could be effective, but we think that tools are there already.
Billy: They just need to take action, but certainly, we will never turn down a legislative approach. We'll continue to propose approaches that we think could be effective, but we think the tools that they already have. Okay, great. And maybe the final one, shifting gears a little bit.
Callum Elliott: Okay, great, and maybe final one should give us a little bit. Incredibly encouraging, enjoy device share that you shared in this lives up at 25% to the very big sequential step up. You spoke in your remarks really about how you think that can maybe be a leading indicator of consumable share.
Speaker Change: Okay, Great and my final one shifting gears a little bit.
Callum Elliott: Incredibly encouraging. Enjoy the device share that you shared in the slides. Up at 25% is a very big sequential step up. You spoke in your remarks earlier about how you think that could maybe be a leading indicator of consumable share. I guess my question is, can you talk about any recent data that you have on conversion? Like, what do the rates of conversion look like for Enjoy Ace? And what proportion of people trialing the product actually do convert, in your experience?
Speaker Change: Incredibly encouraging enjoy device that you said in the slides up but 75% of the very big sequential step up.
Speaker Change: You spoke in your remarks about how you think that could maybe be a leading indicator.
Billy: I guess my question is, can you talk about any recent data that you have on the conversion? Like what do the rates of conversion look like for in UAAs? What proportion of people trialing the product actually can that in your experience? Yeah, it's early on, yet, Callum, as we've repositioned the enjoy at retail, given it greater visibility, and really have both equity, a new equity campaign highlighting the benefits of enjoy over other products and the advantages the consumer can have.
Speaker Change: Consumables.
Speaker Change: I guess my question is can you talk about any recent data that you have on the conversion and like what are the rates of conversion like to enjoy as well.
Speaker Change: What proportion of ethical trialing the product actually came because of the experience.
Billy: Yeah, it's early on yet, Callum, but we've repositioned Enjoy at retail, given it greater visibility, and really have equity, a new equity campaign highlighting the benefits of Enjoy over other products and the advantages the consumer can have. I understand your question, and we'll be sure to share those when we feel like we have enough data on hand to be able to project. Thanks a lot. Thank you. The next question will come from Fahambeg, with UBS. Please go ahead. Good morning, gents. A couple from me as well.
Speaker Change: Yes, it's early on yet column as we've repositioned to enjoy at retail given a greater visibility and really had both equity a new equity campaign, highlighting the benefits of enjoy over other products in the advantages. The consumer can have I understand your question and we'll be sure to share those when we feel like we have enough.
Billy: I understand your question, and we'll be sure to share those when we feel like we have enough data on hand to be able to project those.
Speaker Change: Data on hand to be able to project those.
Speaker Change: Okay. Thanks for that.
Unknown Executive: Next question will come from for home bag with UBS. Please go ahead.
Speaker Change: You.
Speaker Change: Our next question will come from for home Bank with UBS.
Unknown Executive: Good morning, gents. A couple from me as well. Firstly, I wanted to get your thoughts on the ABI stake and the credit rating given Fish Ratings' recent comments. I guess, I guess there are two questions within this. Firstly, how important is the current investment-grade credit rating to you? And secondly, could this mean a further stake sale is unlikely in the net?
Fahambeg: Firstly, I wanted to get your thoughts on the ABI stake and the credit rating given Fish Rating's recent comments. I guess there are two questions within this. Firstly, how important is the current investment grade credit rating to you?
Speaker Change: Please go ahead.
Speaker Change: Good morning, Gents, a couple from me as well Firstly I wanted to get your thoughts on the API stake and the.
Speaker Change: The credit rating given Fitch ratings recent comments I guess I guess there are two questions within this firstly how important is the current investment grade credit rating to you.
Sal: And secondly, could this mean a further stake sale is unlikely in the near term? And then there is the second question, formed, for example, synthetic nicotine, non-nicotine products, WS3, et cetera, which has probably created an unequal playing field. I wanted to get your view on what options do you believe authorities have to evolve regulation, and do you believe it is feasible to reset the deeming regulation date to permit new products as the industry seeks greater adoption of smoke-free products? Let me start with your question on the credit rating and ABI, and then I'll turn it over to Billy.
Speaker Change: And secondly could this mean a further stake sell is unlikely.
Unknown Executive: And then the second question, given it is proving quite a challenge to control these new alternative nicotine products and, as you suggested, prohibition isn't valid. It shouldn't be valid. A large part of this expansion of illicit products has probably been due to the rapid evolution of these categories. And there are many factors that clearly weren't considered at the time these regulations were formed. For example, synthetic nicotine, non nicotine products, WS3, etc. Which is probably created an unequal playing field. I wanted to get your view on what options do you believe authorities have to evolve regulation?
Speaker Change: Yes.
Speaker Change #116: And then the second question.
Speaker Change: Given it is proving quite a challenge to control these new alternative nicotine products and as you suggested prohibition.
Speaker Change: Isn't file it shouldnt be valid.
Speaker Change: Large part of this.
Speaker Change: Expansion of illicit products has probably been due to the rapid evolution of these categories.
Speaker Change: And there are many factors that clearly one considered at the time. These regulations were full for example, synthetic nicotine non nicotine products Ws III et cetera, which is probably created.
Speaker Change: An equal playing field I wanted to get your view on what options do you believe <unk>.
Speaker Change: <unk> have to evolve regulation and do you believe it is feasible to reset the deeming regulation date to permit new products as the industry seeks greater and greater adoption of smoke free products.
Unknown Executive: And do you believe it is feasible to reset the deeming regulation date to permit new products as the industry seeks greater adoption of smoke-free products?
Salvatore Mancuso: Let me start with your question on the credit rating in ABI, and then I'll turn it over to Billy. So first, look, we believe it's in the best interest of our shareholders to manage a strong balance sheet. And an investment grade credit rating is important because, from time to time, we do enter the commercial paper market as our cash outflows vary over the course of the year. You pay MSA in April and things like that. But if you look at our history and our allocation of resources in capital, we've taken a very balanced approach. We have really strong cash generative operating companies.
Speaker Change: Let me start with with your question on on the credit rating and Abi and then I'll turn it over to Billy So.
Billy: So first, look, we believe it's in the best interest of our shareholders to manage a strong balance sheet. And an investment-grade credit rating is important because, from time to time, we do enter the commercial paper market as our cash outflows vary over the course of the year. You know, you pay MSA in April and things like that.
Billy: First we believe.
Billy: It's in the best interest of our shareholders to manage a strong balance sheet.
Billy: And investment grade credit rating is important because from time to time, we do enter the commercial paper market.
Billy: Our cash outflows vary over the course of the year you pay MSA in in April and things like that but.
Sal: But if you look at our history and our allocation of resources and capital, we've taken a very balanced approach. We have really strong cash-generative operating companies. After paying the dividend to our shareholders, we generally have over a billion dollars in excess cash, and we're able to deploy that in a number of ways. In the past, we've deployed it through share repurchase. We have managed our maturity towers. We've paid off debt that is coming due.
Billy: If you look at our history and our allocation of of.
Billy: Resources and capital we've taken a very balanced approach, we have really strong cash generative operating companies.
Salvatore Mancuso: After paying the dividend to our shareholders, we generally have over a billion dollars in excess cash, and we're able to deploy that in a number of ways. In the past, we've deployed it through share repurchase. We have managed our maturity towers. We've paid off debt that is coming to so. And we were able to provide in our corporate goals some a little bit of transparency related to our leverage goal of two to one. So obviously, managing the strength of our balance sheet remains strong.
Billy: After paying the dividend to our shareholders, we generally have over $1 billion in excess cash and we're able to deploy that in a number of ways in the past we've deployed through share repurchase we have managed store maturity towers, we've paid off debt that is coming due so.
Sal: And we were able to provide in our corporate goals a little bit of transparency related to our leverage goal of 2 to 1. So obviously, managing the strength of our balance sheet remains strong. As far as the ABI asset, there's really no change to how we view that asset. It's a financial asset. We think about it through the lens of voucher shareholder and long-term shareholder values.
Billy: And we were able to provide in our corporate goals.
Billy: Some a little bit of transparency related to our leverage goal of two to one so obviously managing the strength of our balance sheet remained strong as far as the Abi asset there's really no change to how we view that asset it's a financial asset we think about it through the lens of vouchers shareholder and long.
Salvatore Mancuso: As far as the ABI asset, there's really no change to how we view that asset. It's a financial asset. We think about it through the lens of about your shareholder and long term shareholder value. So really no change to that at all.
Sal: So really, no change to that at all. Yeah, and following up on your question about potential enforcement actions, we do believe they can bring the market back to order. Some of the things that we've mentioned to the FDA and in letters to them, just to give you a flavor of what we think they can do. The FDA really hasn't taken any action against either in the form of litigation or civil monetary penalties against the largest illicit vapor manufacturer or the U.S.-based distributors.
Billy: Term shareholder value so.
Billy: Yeah, and following up on your question about potential enforcement actions, we do believe they can bring the market back to order. Some of the things that we've mentioned to the FDA and letters to them, just to give you a flavor of what we think they can do. The FDA really hasn't taken any action against either in the formal litigation or civil monetary penalties against the largest illicit vapor manufacturers. Or the US-based distributors. If you think about US-based distributors, the litigation, the distributors have assets that can be seized. If you think about holding these illicit actors either civilly or criminally accountable for the activities they have in the marketplace, they can put all those illicit products on a list that customers should prevent from entering the borders.
Billy: Really no change to that at all.
Billy: Yes.
Speaker Change: Following up on your question about potential enforcement actions, we do believe they can bring the market back to order.
Speaker Change: Some of the things that we've mentioned to the FDA and letters to them just to give you a flavor of what we think they can do.
Speaker Change: The FDA really hasnt taken any action against either in the form of litigation, our civil monetary penalties against the largest elicit vapor manufacturers.
Billy: If you think about U.S.-based distributors, the litigation, the distributors have assets that can be seized. If you think about... holding these illicit actors either civilly or criminally accountable for the activities they have in the marketplace, they can put all known illicit products on a list that customers should prevent from entering the borders and impose the civil monetary penalties that they have at the maximum levels, not just warning letters.
Speaker Change: The manufacturers or the U S based distributors, if you think about U S based distributors the litigation the distributors have assets that can be <unk>.
Speaker Change: If you think about.
Speaker Change: Holding these illicit actors either civilly or criminally accountable for the activities they have in the marketplace.
Speaker Change: We can put all illicit products on a list that custom should prevent from entering the borders.
Billy: And impose the civil monetary penalties that they have at the maximum levels, not just learning letters.
Speaker Change: And impose the civil monetary penalties that they have at the maximum levels not just warning letters and like I mentioned earlier to Matt following up on the warning letters here that was a store pointed out to them in a congressional hearing and the illicit vapor products are still available there at that store. So there are some.
Billy: And like I mentioned earlier to Matt, following up on warning letters here, there was a store pointed out to them in a congressional hearing, and the illicit vapor products are still available there at the store. So there are some simple things, and then there are some that require this multi-agency collaboration, but we believe could be effective. You mentioned synthetic nicotine. Just take the...
Billy: And like I mentioned earlier to Matt, following up on learning letters, here there was a store pointed out to them in a congressional hearing, and the illicit vapor products are still available there at the store. So there are some simple things, and then there's some that require this multi-agency collaboration. But we believe could be effective.
Speaker Change: Simple things and then Theres some that require this multi agency collaboration but we believe could be effective you mentioned synthetic nicotine.
Billy: You mentioned synthetic nicotine. Just take the prevalence we're starting to see in nicotine pouch. When that statute was passed to give the FDA authorization over synthetic nicotine, it said any product that did not receive authorization, and it gave a deadline. That wasn't authorized, was no longer legally available, should be legally available on the market. But we're seeing I mentioned 350 skews and more each month. It's just a matter of enforcement and holding people accountable to the regulation.
Billy: Prevalence, we're starting to see a nicotine pouch. When that statute was passed to give the FDA authorization over synthetic nicotine, it said any product that did not receive authorization, and it gave a deadline, that wasn't authorized, was no longer legally available, should be legal available on the market. But we're seeing, I mentioned 350 SKUs and more each month. It's just a matter of enforcement and holding people accountable for the regulation. Thanks, Billy.
Speaker Change: Just take the prevalence.
Billy: Thank you. Our next question will come from Gaurav Jain with Barclays, ahead. All right. Hi, good morning.
Speaker Change #102: Prevalence, we're starting to see a nicotine pouch when that statute was.
Speaker Change: Was passed to give the FDA authorization over synthetic nicotine. It said any product that did not receive authorization and it gave a deadline.
Speaker Change: That wasn't authorized was no longer legally should be legally available on the market, but we are seeing.
Speaker Change: Mentioned 350, Skus and more each month.
Speaker Change: Just a matter of enforcement and holding people accountable to the regulation.
Penni: Thanks Penni.
Rob: Our next question will come from Rob. Hi. Good morning.
Speaker Change: Thank you our next or.
Ross <unk>: Our next question will come from Ross <unk> with Barclays.
Gaurav Jain: Three questions from me. So the first is on industry volume declines, which, you know, remain weak, but they are weak at a constant level where we are seeing other parts of the consumer weaken sequentially. So, is it fair to say that you are maybe seeing some green shoots, and your key competitor was highlighting that they are beginning to see industry volume trends improve? Is that something you are seeing? I think you could highlight it. I'm sorry; I didn't mean to cut you off.
Speaker Change: Please go ahead.
Rob: Three questions from me. So the first is you know on the industry volume declines, which you know remain weak, but they are weak at a constant level, while we are seeing other parts of consumer we can sequentially. So is it fair to say that you know maybe seeing some green shoots and your key competitor was highlighting that they're beginning to see industry volume trends and true. Is that something you are seeing? I think you could highlight. I'm sorry. I mean to cut you off. I think you could highlight some green shoots. I think when you think about it, it is certainly we've seen like this just use inflation as one.
Speaker Change: Hi.
Ross: Hi, Good morning, three questions from me.
Speaker Change #121: And on the industry volume declines, which.
Speaker Change: We remain weak, but that week at a constant level.
Ross <unk>: We are seeing.
Ross <unk>: Lots of consumer weaken sequentially.
Ross <unk>: Sure.
Speaker Change: Fair to say that you may be seeing some.
Speaker Change: Reinsurance and your key competitor was highlighting.
Speaker Change #106: They are beginning to see industry volume trends improve.
Speaker Change #101: Is that something you are seeing.
Speaker Change: So you could highlight I am sorry, I didn't mean to cut you off I think you could highlight some green shoots I think when you think about it. It is certainly we've seen like let's just use inflation is one we've seen inflation lessening, but it's not a matter of a quarter to quarter inflation, it's really a matter of the cumulative inflation that takes place.
Billy: I think you could highlight some green shoots. I think when you think about it, it is certainly something we've seen like, let's just use inflation as one. We've seen inflation lessening, but it's not a matter of quarter to quarter inflation. It's really a matter of the cumulative inflation that takes place. And so the green shoots from a standpoint are that you need some time in a steady marketplace for the consumer to adapt to their new conditions. And we try to highlight that for a couple of quarters.
Salvatore Mancuso: We've seen inflation lessening, but it's not the matter of a quarter-to-quarter inflation. It's really a matter of the cumulative inflation that takes place. And so the green shoots from a standpoint is you need some time of a steady marketplace for the consumer to adapt to their new conditions. And we try to highlight that for a couple of quarters. So we're still in some green shoots. You highlighted the kind of a more steady decline, but then we highlighted just the opposite with Elicit vape where we're seeing increased consumers moving over because of the plethora of those products in the marketplace and being readily available.
Speaker Change: So the green shoots from our standpoint is you need some time of us Daddy marketplace for the consumer to adapt to their new conditions.
Billy: So we're seeing some green shoots. You highlighted the kind of a more steady decline, but then we highlighted just the opposite with illicit vapes, where we're seeing increased consumers moving over because of the plethora of those products in the marketplace and being readily available. So, yeah, there's some green shoots that we're seeing in the economy. Sure. My second question is on this MSA legal bill, you know, bill that the industry pays $500 million max cap, which will, I guess, run out by the end of this year.
Speaker Change: And we tried to highlight that for a couple of quarters. So we're seeing some green shoots.
Speaker Change #113: You highlighted the kind of a more steady decline, but then we highlighted just the opposite with Elisa base, where we're seeing increased.
Speaker Change: Consumers moving over because of the plethora of those products in the marketplace and being readily available. So yes. There is some green shoots that we're seeing in the the economics.
Salvatore Mancuso: So yeah, there's some green shoots that we're seeing in the economics.
Salvatore Mancuso: My second question is on this MSA legal bill, which the industry pays $500 million max cap, which will, I guess, we are now by the end of this year.
Speaker Change: My second question is on this on the Se.
Speaker Change: Legal.
Speaker Change: <unk>.
Speaker Change: Mitch the industry passed $500 million on those.
Scott: <unk>, Scott I guess.
Salvatore Mancuso: So can you just tell us things about the benefit to you and to you for this year and then for that in 2025? Yes, sure, you know, you are correct; the total legal fund is about $500 million. We pay our fair share of that based on shipments, and you'll get a quarter of that this year in the remaining three quarters in 2020 costs. Sure. Okay.
Speaker Change #120: We are now by the end of this year. So can you just help us think about the benefit to you in Q4. This year and then slide 25.
Gaurav Jain: So can you just help us think about the benefit to you in Q4 this year and then further in 2025? Yeah, sure. You are correct. The total legal fund is about $500 million.
Sal: We pay our fair share of that based on shipments, and you'll get a quarter of that this year, and the remaining three quarters in 2025. Sure. Okay. And my last question is on LEAF costs. So, your key competitor was highlighting that LEAF cost inflation, which was almost low double-digit and one-edge, is going to be lower in 2H and then completely unwind in FY25. So, is that something you are also seeing? And will that also be a benefit as we look ahead over the next 13 months?
Speaker Change #111: Yes sure you are correct. The total legal fund is about $500 million, we pay our fair share of that based on shipments and Youll get a quarter of that this year and the remaining three quarters in 2020 cost.
Salvatore Mancuso: And my last question is on leaf costs. So a key competitor was highlighting that leaf costs inflation, which was almost loadable to get in one edge is going to be lower into which and then combined completely in a fight on to five. Is that something you are also seeing? And will that also be a benefit as we look ahead for the next 13 months? Yeah, well, you know, we engage with domestic growers primarily. They're fantastic business partners. They work really hard to provide us with high quality leaf. You are seeing some inflation in the leaf costs; their labor costs are up, fuel costs are up, obviously.
Speaker Change: Sure.
Speaker Change: And my last question is on lease costs are a key component of LOE, highlighting that leaf cost inflation, which was almost low double digit in one niche.
Speaker Change: Bill.
Speaker Change: <unk> and then unwind completely in the slide 25.
Speaker Change #118: That's something you are also seeing and will that also be a benefit.
Speaker Change: Looking ahead for the next 18 months.
Sal: Yeah, well, you know, we engage with domestic growers, primarily, they're fantastic business partners, they work really hard to provide us with high-quality leaf. You are seeing some inflation in leaf costs; their labor costs are up, fuel costs are up, obviously.
Speaker Change: Yes, well look we engaged with.
Speaker Change: Domestic growers, primarily they're fantastic business partners. They work really hard to provide us with high quality leaf.
Speaker Change: You are seeing some inflation in the leaf costs or labor costs are up.
Salvatore Mancuso: We're blending multiple years of leaf in our product, and as some of those economic factors move, it could influence our leaf costs. You know, we're very fortunate in our businesses is that our cost of goods are fairly low for our products. We have high margins in the cigarette category as an example. It's really MSA, FET fees like that that are the primary cost drivers in the cigarette business. But, you know, we have a terrific department that engages with our growers, and they do a fantastic job of getting high quality leaf at a competitive price, and they'll continue to do that work.
Speaker Change: Fuel costs are up obviously.
Sal: We're blending multiple years of leaf in our product, and as some of those economic factors move, it could influence our leaf costs. You know, we're very fortunate in our businesses that our cost of goods is fairly low for our products; we have high margins. In the cigarette category, as an example, it's really MSA, FET, fees like that that are the primary cost drivers in the cigarette business.
Speaker Change: We're blending multiple years of leaf and our in our product and as some of those economic factors move it could influence our leaf costs.
Speaker Change: We're very fortunate in our businesses is that our cost of goods.
Speaker Change: <unk> are fairly low for our products, we have high margins in.
Speaker Change: In the cigarette.
Ross <unk>: Category as an example, it's really MSA <unk> fees like that that are are the primary cost drivers in the cigarette business, but we have a terrific department that engages with our growers and they do a fantastic job of.
Sal: But, you know, we have a terrific department that engages with our growers, and they do a fantastic job of getting high-quality leaf at a competitive price, and they'll continue to do that work. Thank you so much. You're welcome. And our next question will come from Owen Bennett with Jeffreys. Please go ahead. Morning, gents.
Ross <unk>: Getting high quality leaf at a at a competitive price and they'll continue to do that work.
Rob: Thank you so much.
Speaker Change: Thank you so much.
Owen Bennett: And our next question will come from Owen Bennett with Jeffries. Please go ahead. Morning, Jen. Topol. Well, a couple of questions from me. And the first one relates to industry wholesale shipment. So there appears to be a sizeable inventory headwind in the first part, such that we've got cigarette industry treatments down close to 12% versus the adjusted decline of around 9%. There also seems to be a similar dynamic at play in traditional smoke.
Ross <unk>: Welcome.
Ross <unk>: And our next question will come from Owen Bennett with Jefferies.
Owen Michael Bennett: Hope you are all well. A couple of questions from me. And the first one relates to industry wholesale shipments. So there appears to be a sizable industry headwind in the first half such that we've got cigarette industry shipments down close to 12% versus the adjusted decline of around 9%. There also seems to be a similar dynamic at play in traditional smokeless. My question is, as we continue to see the shift over to new RRPs and more shelf space allocated to these products, can we expect this inventory dynamic to be an ongoing trend, so where shipment trends are worse than in-market trends? Or do you think this will start to unravel at some point?
Speaker Change: Please go ahead.
Melanie Gentzler: Melanie Gen telco well a couple of questions for May and the cash one.
Speaker Change #115: The industry wholesale shipments of that pain.
Speaker Change #109: Sizable inventory headwind in the first half such that we thought.
Speaker Change #104: These statements darn close to 12%.
Speaker Change #107: A decline of around 9% that also seem to be a similar dynamic at play in traditional snow closing my question is as we continue to see the shift over.
Salvatore Mancuso: So my question is, as we continue to see the shift over in new RRP and more shelf space allocate to these products, let me expect this inventory dynamic to be an ongoing trend, so where shipment trends are worse than in market trends. And what do you think this will start to one one at some point? Yeah, thanks for the question, Owen. I think you're highlighted inventory. And when you think about inventory, you know, I would just encourage you to look at them a bit more long-term quarter. Certainly, from a standpoint of overall inventory, they tend to balance through time.
Speaker Change: L P and more shelf space allocated to these products, let me expand a hyndman GE dynamic to be an ongoing trend so as shipments and the west and end market trends and what you think this will we will start to unwind at some point.
Billy: Yeah, thanks for the question, Owen. I think you're highlighting inventories. And when you think about inventories, you know, I would just encourage you to look at them a bit more over the longer term. Quarter, certainly from a standpoint of overall inventories, they tend to balance through time. But, as we see, volume declines certainly through time. You would expect some decrease in inventories commensurate with the decrease in volume, but that's more of a kind of a trend to trend basis. They're both very similar.
Speaker Change: Yes. Thanks for the question Owen I think you highlight inventories and when you think about inventories I would just encourage you to look at them a bit more longer term quarter, certainly from a standpoint of overall inventories they tend to balance through time.
Salvatore Mancuso: But as we see vine declines, certainly through time you would expect some decrease in inventories, commensurate with the decrease in volume. But that's more of a trend to trend basis. They're very similar. I think also I would highlight you highlighted wholesale inventory included in there is some retail inventory. I do think, as we seen the plethora of elicit vape, as we see some capital allocated by retailers into the elicit vape category. Okay, thanks.
Speaker Change: But as we see.
Speaker Change #105: Volume declines are certainly through time, you would expect some decrease in inventories commensurate with the decrease in volume, but thats more of a.
Owen Michael Bennett: I think also, I would highlight the wholesale inventory you highlighted. There is some retail inventory, too. I do think, as we've seen the plethora of illicit vapes, as we see some capital allocated by retailers into the illicit vape category. Okay, friends, and just my second question is on RRP internationally.
Speaker Change: Kind of a trend to trend basis Theyre very similar.
Speaker Change: Also I would highlight you highlighted wholesale inventory included in there is some retail inventory I do think as we've seen the plethora of illicit vapes as we see some capital allocated by retailers into the illicit vape category.
Billy: And we'll have two questions here. Do you have market share estimates for on in Sweden in the UK? And then the second question is any plans for Enjoy or even SWIC internationally at any point over the next 12 months as this could clearly be a way to offset some of the US pressures, so at least on the top line, obviously get the additional spend involved with us. Thank you. Yeah, as far as on in Sweden and the UK are concerned, we haven't disclosed our market share. We're still in the early stages of that. We tried to highlight some of the repeat purchases and some of the increased distributions.
Owen Bennett: My second question is on RRP internationally.
Speaker Change #110: Okay and then just my second question is on our LP internationally.
Owen Bennett: Well, two questions here. Do you have market share estimates for on in Sweden, in the UK?
Speaker Change #110: And we will see some questions here.
Speaker Change #119: You have market share estimates for <unk> in Sweden, and the UK and then the second question is any plans for and jewelry or even switch internationally any point over the next 12 months could clearly be a way to offset some of the U S question at least on the top line is obviously get the additional spend involved today. Thank you.
Billy: And then the second question is, any plans for Enjoy or even Swig internationally at any point over the next 12 months? Is this could clearly be a way to offset some of the US pressures? So at least on the top line is obviously get the additional spend involved with this. Thank you. Yeah, as far as on in Sweden in the UK, we haven't disclosed market share. We're still in the early stages of that. We tried to highlight some of the RRP purchases and some of the increased distribution. So we'll get a little traction there. And then we'll be able to share those.
Speaker Change #108: Yes, as far as on and in Sweden in the UK, we havent disclose market share we're still in the early stages of that we tried to highlight some of the repeat purchases and some of the increased distributions that we will get a little traction there and then we'll be able to share those.
Billy: So we'll get a little traction there, and then we'll be able to share those. I think as far as enjoyment is concerned, you see the activity in the US with illicit vapes. I think as you look at least in the European community, it's a very similar type of situation taking place with a plethora of illicit vapes there as well. Some countries are looking to try to garner and take control of that illicit vape market.
Billy: I think, as far as enjoy, you see the activity in the US with Elizabeth Vape. I think, as you look, at least in the European community, it's a very similar type of situation taken place with a plethora of illicit dates there as well. Some countries are looking to try to garner and take control of that illicit vape market. So we'll see how that plays out.
Speaker Change #108: As far as enjoy UC.
Speaker Change #108: You see the activity in the U S with illicit vape I think as you look at least in the European community. It's a very similar type of.
Speaker Change #108: Situation taken place with a plethora of illicit vapes there as well some countries are looking to try to garner and take control of that Elisa based markets that we will see how that plays out.
Billy: So we'll see how that plays out. Our focus for enjoyment right now is we feel like there's a huge opportunity here in the US. So that's where our focus is. And then, as far as SWCC is concerned, we mentioned some learnings that we would have as we approach year-end, and so we'll share more about that as we get going. Thanks very much; I appreciate the time. Thank you. And There appear to be no further questions at this time.
Billy: Our focus for Enjoy right now is we feel like there's a huge opportunity here in the US. So that's where our focus is.
Speaker Change #108: Our focus for enjoying right now is we feel like there is a huge opportunity here in the U S and Thats, where our focus is and then as far as Swift we mentioned some learning that we would.
Billy: And then, as far as quick, we mentioned some learning that we would have as we approach year-end. And so we'll share more about that as we get closer. So thank you very much.
Speaker Change #108: As we approach year end and so we'll share more about that as we get closer.
Unknown Executive: Thank you.
Speaker Change #108: Hello, Thanks, very much appreciate the time thank.
Speaker Change #122: Thank you.
Unknown Executive: And they're up here, Navino, for their questions at this time.
Billy: I would like to turn the call back to Mac Livingston for any closing remarks. Thank you, everyone, for joining us. Have a great day. Talk to you soon. Bye. And this concludes today's call. Thank you for your participation, and you may disconnect at any time.
Speaker Change #122: And there appear to be no further questions at this time I would like to turn the call back to Mac Livingston for any closing remarks.
Mac Livingston: I would like to turn the call back to Mac Livingston for any closing remarks. Thanks everyone for joining us. Have a great day. Talk to you soon. Bye.
Mac Livingston: Thanks, everyone for joining us have a great day talk to you soon.
Unknown Executive: And this concludes today's call. Thank you for your participation, and you may disconnect at any time.
Speaker Change #112: And this concludes today's call. Thank you for your participation and you may disconnect at any time.
Speaker Change #108: Yes.
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Unknown Executive: Andrei Condrea, Jennifer Smith, Murray Garnick, Andrei, Jennifer Smith, Murray Garnick, Andrei, Jennifer Smith, Murray Garnick, Andrei, Jennifer Smith, Murray Garnick.
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