Q2 2025 Altria Group Inc Earnings Call
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Good day and welcome to the Altria Group 2025 second quarter and first half earnings conference call.
Representatives of the investment community and media on the call will be able to ask questions following the conclusion of the prepared remarks.
I would now like to turn the call over to Mac Livingston, vice president of investor relations for Altria client services. Please go ahead sir.
Thanks Leo.
Good morning and thank you for joining us.
This morning, Billy gourd, alria CEO and Sal manudo. Our CFO will discuss Altria second quarter and first half business results.
Earlier today, we issued a press release, providing our results. The release presentation quarterly metrics, and our latest corporate responsibility. Reports are all available at altria.com.
During our call today. Unless otherwise stated, we're comparing results to the same period in 2024.
Our remarks contain forward-looking statements, including 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.
Future dividend payments and share repurchases, remain subject to the discretion of our board of directors.
We report our financial results in accordance with us 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 Reconciliation. To the most comparable. Gaap Financial measures are included in today's earnings release and on our website at outre.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.
Thanks M. Good morning, and thank you for joining us.
In the second quarter, we continue to the pursuit of our vision while maintaining our strong and profitable core businesses.
In oral Tobacco on deliver, strong performance.
and with the, the substantial driver of the segment's growth in the quarter,
We continue to press for actions that will shape a fully regulated industry.
And provided provide expanded product choices for adult nicotine consumers.
During the first half of the year with more than 4 billion dollars delivered through dividends and share repurchases.
Our operating companies deliver strong financial results in a dynamic Marketplace allowing us to raise the lower end of our 2025 guidance range.
This morning, we'll focus on.
Second quarter and first half results from on.
Next steps for Injoy and the state of the regulatory environment.
I'll then turn it over to S who will provide further details on our business results and 2025 Outlook
Let's begin with on and the nicotine couch category.
Oral nicotine pouches continued to be the primary growth driver of the estimated 11% increase in all tobacco industry, volume over the past 6 months.
In the second quarter, oral nicotine pouches, grew 10 share points year-over-year and now represent more than half of the category.
Within this increasingly competitive environment Helix continued to grow volume and share with on reported shipment volume increasing by 26 and a half percent to 52.1 million cans versus the year ago period.
1, retail share of the total full tobacco category, was 8.7%, an increase of 7 SharePoint versus the prior year.
Last year, Helix launched its own campaign to differentiate the products.
build emotional connections with its target audience,
And drive Greater brand awareness.
NASCAR races and Premiere golf tournaments.
These 1-to-1 interactions, allow consumers to connect with brand Representatives.
Gain deeper insights into the product, and experience the brand and a tangible memorable way.
In the first half of 2025 Hilux reached over 170,000 adult tobacco consumers through these in-person activations.
He looks as digital marketing channels amplify these experiences.
Reinforcing ons. Unique brand positioning across multiple touch points.
In the second quarter, digital Impressions, more than doubled to approximately 190 million.
As a result of these combined efforts and continued strong pre-presence at retail on brand awareness among adult tobacco consumers increased 7 percentage points in the first half of 2025 versus a year ago.
Helix will continue to focus on driving trial.
Building long-term equity and increasing profitability.
In fact, bonds, improving financial performance. Drove the majority of the oral segments. Substantial profit growth.
For the quarter.
Moving to our e, Vapor business and enjoy in June the patent trial and appeal board. Did not agree with our argument and validate Jewels patent.
While this is not the outcome, we hope for we're actively exploring all potential next steps including an appeal.
Meanwhile, we completed the product design of a modified enjoy solution that we believe addresses all four dispatch.
Additionally, our product development teams are actively building a broader Vapor portfolio of products that align with the evolving expectations of today's consumers.
Let's now turn to the state of Regulation and the US Nick Team market.
Where we continue to believe significant progress needs to be made to fulfill the promise of tobacco harm reduction.
For some time we've been advocating for enforcement against products that have completely evaded. The regulatory process.
and for an acceleration in FDA Market authorizations,
To create a responsible Marketplace of smoke-free products for all adult consumers.
As it relates to enforcement.
The flavored disposable Market continues to drive evaporation growth.
At the end of the quarter, we estimate the E, Vapor category included more than 20.5 million Vapors.
Up over 1.9 million versus a year ago.
During the same period disposable Vapors increased by an estimated 2.7 million to approximately 14.4 million,
We continue to estimate that flavored evaporator disposable products.
The majority of which we believe have evaded the regulatory process.
Represent more than 60% of the category.
While this issue remains significant, we see signs that enforcement actions have picked up momentum.
Key government officials at the Department of Health and Human Services.
And the FDA have publicly acknowledged the severity of the issue.
And there is bipartisan support in Congress.
For Urgent action across government agencies.
We're encouraged by recent actions by Customs and Border Protection.
FDA State legislatures and State Attorneys General to prevent the importation of illicit, evapor products evading, the regulatory system
key actions from these stakeholders this year include
The FDA is strengthening its import policy, reducing the possibility of imported vapor products bypassing FDA review.
Title border controls which have a resulted in a higher percentage, of rejections of properly declared evaporator shipments from China than ever before.
And State Attorneys General, issuing warnings and bringing civil litigation addressing illicit, Chinese Vapor importers and distributors.
The net effect of these recent actions is that it is becoming more difficult to import illicit vapor products.
In fact, some wholesalers have recently reported supply shortages of some of the most popular disposable brands.
Citing enforcement at the ports and tariffs.
We believe these changes.
Have prompted eBay for importers to miss declare their shipments.
Resulting in illicit products. Entering the country undetected.
While we're seeing some progress more, consistent action needs to be taken to deliver sustainable long-term results.
We continue to Advocate at the Fate, the federal and state levels for more coordinated and decisive actions against the listed access actors.
Elicit evapor enforcement is only 1 area where the regulatory system is failing.
The FDA must accelerate product authorizations across all tobacco categories.
To review and decide pmta within 180 days.
We have waited over 5 years for a decision on some product applications.
We continue to urge FDA to implement a workable process that results in timely decision-making to meet their statutory requirements and promote Public Health.
We believe these steps are critical to establishing nicotine Marketplace. That offers adult, smokers expanded choices and smoke-free products.
And gives consumers comfort in the oversight of the products available to them.
In summary, we remained encouraged by the strong performance of our operating companies and a challenging Marketplace conditions.
our Holly care Cash, Cash generative, core businesses supported continued investments in our smoke-free products,
And the increased focus by key stakeholders on cleaning up the illicit Market reinforces our confidence in the long-term outlook for our smoke-free portfolio.
I'll now turn it over to S to provide more detail on our business results.
Thanks Billy.
As Billy described in his opening remarks.
I'll show you, delivered strong, second quarter and first half financial performance.
Adjusted diluted earnings per share. Increased 8.3% to $144 cents in the second quarter and increased by 7.2% for the first half.
Driven by robust adjusted oci growth.
And the benefit of share repurchases over the past year.
In the smokable product. Segment, adjusted operating companies, income, grew by 4.2% to 2.9 billion dollars in the second quarter.
And by 3.5% to $5.5 billion in the first half.
Adjusted, oci margins expanded to 64.5% for the second quarter and the first half.
This performance was supported by strong net price realization of 10% for the quarter and 10.4% for the first half.
Total smokable product segment, reported domestic, cigarette, volumes declined by 10.2% in the second quarter and 11.9% for the first half.
When adjusted the calendar differences. In trade inventory movements, the segments domestic cigarette, volumes for the second quarter and first half declined by an estimated 10.5% and 11% respectively.
At the industry level, we estimate that domestic. Cigarette volumes declined by 8.5% in the second quarter. And for the first half, when adjusted for trade inventory, movements, calendar, differences, and other factors.
While our smokable business is focused on marble and the premium segment adult smokers continue to face macroeconomic pressures.
Inflation. Exceeding overall wage growth especially among low-income consumers contributed to the discount segment growing 1.9 sharepoint's year-over-year and 4/10 sequentially.
To better compete in the discount segment.
And informed by our data analytics.
PM USA strategically expanded, reaching approximately 30,000 targeted stores.
In the second quarter.
Basics. Retail Share Group, 4/10 sequentially with limited impact on Marboro.
As a result.
Total PM, USA cigarette, retail share increased to 10 sequential to 45.2% in the second quarter.
The targeted launch of basic demonstrates, how PM USA is using. Its broad toolkit of portfolio Brands and sophisticated data analytics to provide the right value to the right consumer.
While preserving the strength of the marborough brand.
Within the highly profitable premium segment.
Marble maintained its long-standing leadership in the category.
In the second quarter Marboro expanded, its share of the premium segment by 2/10 to 59.5%.
In cigars, reported shipment volume increased 3.7% as Middleton continued to outperform in the large mass cigar industry.
Let's turn now to the oral tobacco product segment.
Adjusted oci grew by an impressive 10.9% in the second quarter and 5.5% in the first half.
Adjusted, oci margins increased by 3.1% points for the second quarter and 1.4% is points.
For the first half.
As Billy mentioned, these results were mainly driven by strong performance in the second quarter.
Total segment, reported shipment volume decreased 1% for the second quarter and 2.9% for the first half.
As growth in on was more than offset by lower MST volumes.
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 4% and 2.5% respectively.
Oral tobacco product segment, retail share was 33.1% for the second quarter and 33.9% for the first half.
As declines in our MST Brands were not fully offset by share gains from ON.
In the highly profitable moist smokeless, tobacco segment, Copenhagen continue to maintain, its long-standing premium leadership.
Turning to Abi's Financial results, we recorded 130 million of adjusted Equity earnings in the second quarter.
Down 10.3% versus the prior year.
This decline was driven by a lower earn ship interest compared to the year ago, period.
Reflecting the sale of a portion of our AI investment last year.
We continue to view our ABI stake as a financial investment.
And our goal remains to maximize the long-term value of the investment for our shareholders.
As Billy mentioned, our businesses performed. Well, in a dynamic environment during the first half of the year
as a result, we raised the lower end of our 2025 guidance range.
We now expect to deliver adjusted diluted EPS in a range of 5.35 to 5.45 representing a growth rate of 3% to 5% from a base of 5.99 in 2024.
We expect EPS growth to moderate as we lap the lower share count associated with the 2024 accelerated share repurchase program and the benefit of the MSA legal fund expiration.
We are also mindful of the challenge state of tobacco consumers and will continue to closely monitor their purchasing behaviors.
Before turning to Q&A, I'd like to highlight the significant value we returned to shareholders during the first half of the year.
We paid approximately 3.5 billion dollars in dividends and repurchased 10.4 million shares for $600 million.
At the end of the second quarter, we had million dollars remaining under our current share repurchase program, which we expect to complete by the end of the year.
In addition.
Our balance sheet remains strong.
Our total debt to EBIT ratio as of June 30th was 2.0 times, in line with our target of approximately 2 times.
With that, we'll wrap up.
And Billy. I will be happy to take your questions.
While the calls are being compiled, I'll remind you that today's earnings release and our non-gaap reconciliations are available on 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. Once again as a reminder. If you would like to ask a question, please press the star key followed by the number 1 on your touchtone phone at this time.
Investors analysts and media, representatives are now invited to participate in the question and answer session.
We will take questions from the investment Community First.
Our first question comes from Matthew Smith of stifel. Please go ahead.
Hi, good morning, Billy, and thank you for taking my question. Good morning.
One of the first to talk about the raising of the lower end of the guidance range. You've had, um, a really nice performance in the underlying OCI growth here in the second quarter, even when you strip out the lower legal settlement benefit. But it looks like the second half doesn't require as strong of an underlying OCI performance, at least at the higher end of the range. Um, you laid out the dynamics here in terms of EPS phasing when you lap the MSA and the MSA benefit and the sheer repo, but on an underlying basis, can you talk about your expectations in the second half of the year? And how you're thinking about what could be an even more?
On certain consumer environment given some of the inflationary pressure which may pick up, uh, as we get further into the back half of the Year. Thank you.
Sure, good morning, Matt. Um, let me start by saying we're really pleased with our first half results.
And our updated EPS guidance range. I think you've summarized well.
The items we highlighted in. In our opening remarks lapping of the uh 2024 accelerated share repurchase program.
The expiration of the legal fund, which occurred in the fourth quarter of last year, and then you rightly highlight that it’s a dynamic market.
And we're going to continue to monitor the state of the adults tobacco consumer. And their purchasing behaviors inflation is still an unknown variable going forward. Um, there's been some green shoots lower gas prices on a year-over-year basis even though they remain high. Most recently, we have seen an uptick in consumer confidence, but again um the the macroeconomic environment remains Dynamic and someone unsettled
Trade deals are still being negotiated and what potential impact that could have on?
Controllable spending for the consumer is is something that will pay close attention to. But again, really happy with the first half results, happy that we were able to narrow guidance by lowering the bottom end of that range.
Thank you, Sal and Billy a question for you as a follow-up on, on njo evapor you talked about working around or or developing a new NJoy Ace device that seems to not. Um it seems to work around the patents that were in dispute with ITC, but if I heard you correctly, that product is still or or has finalized product development, can can you give an update on the path from here as to when you think you could have an application to FDA for that updated device and what kind of application that would be in terms of, uh,
Pmta, thank you.
Yeah, and don't forget Matt that we still have litigation routes that we can take and we're investigating those but from the standpoint of the patents, you're right. You'll recall that we had uh, already filed 3 of those uh, patent workarounds or
Taking care of any disputed uh facts related to patent infringements. Uh, from the ITC, we've already filed those the fourth uh patent we're at product lock.
And and we'll be proceeding done that path. And and we're we're actually encouraged by the fact that, um, we're excited to be able to bring that to Market. It was, uh, making great strides. When it was in Market the consumer, like the the device, and the experience they had within Joy, the brand team had built a, a great brand around it. And so we're excited to be able to bring that back. While I can't satisfy you, we giving you an exact date. We'll continue to update, you, as we make progress against that, in addition to that, uh, we wanted to really focus on the consumer and as you heard in my remarks, really finding what the consumer likes, and some of the devices that they're using, even though they may be coming to the US illicitly and have those, uh, I guess desirable traits in our pipeline of products and so more.
Thank you, Billy. I'll pass it on.
Thanks.
Yeah, our next question is from Bonnie, Herzog of Goldman Sachs. Please go ahead.
All right. Thank you. Good morning, everyone. Good morning. I, um, I had a...
Question, I guess on your guidance, especially given the laughing of the legal elimination in Q4. I guess, you know, how are you feeling about your ability to deliver on your long-term DPS growth, algo of mid-single digits through a 528? I mean, it does imply that growth will need to step up quite a bit in the next few years. So, hoping maybe, Billy, to get your perspective on this and, you know, how confident you are that you're going to be able to deliver on that.
Yeah, we, we still have that as a goal of the way, we're managing our business, Bonnie. And when you think about it, um, you know, it's a, a mid single digit cigarette across that period. Uh, you saw the results from the the first half of this year, we're very pleased with the results even in a, a challenging environment based on the as Sal had mentioned the macroeconomics. Look, our consumer is is still under string economic strain. Uh, we feel like we made some some very disciplined and smart moves in the marketplace to help the consumer with that and from a standpoint of the consumer themselves, you know, Sal mentioned gas prices, they stabilized and even slightly down but there are call it around 3 dollars a gallon across the US.
That's still fairly high. But what we're seeing is what we've seen historically: if things are stagnant for a period of time, they don't necessarily always have to decrease. Our consumer can start getting comfortable with their situation, and because of the Walton-back industry, they'll make different choices.
Okay.
Um,
Mentioned about, you know, sort of your consumer and retaining them. I do want to ask about basic, could you talk a little bit more about your strategy with the brand and the the changes you've made to your promotions on the brand? I guess love to hear from you. You know what your ultimate strategy is for basic and you know, how are you thinking about, you know, possibly taking greater discount share versus trying to retain consumers you know in your total Brand family. Thanks.
Yeah, I appreciate the question Bonnie, you know, not abnormal uh for us. You, you know, if you go back in history,
Basic was there a discount play? We had priced it up and LNM was our discount play. Now, we've priced
LNM up and and pre-positioned basic as our discount play. I I think the difference being is that now with the amount of data we received from retail and the rgm analytics, the revenue growth management analytics that we have, we can be very precise and targeted. You know, you saw the results from basic and approximately 30,000 stores and so a very targeted.
Approach where, um, the store itself skews, heavy discount and be there for the consumers and to your point.
We find it cheaper to keep the consumer and our portfolio, as then we can, uh,
Market to them individually as their economic situation changes through time. So it's about keeping them in our portfolio of brands, being there for the consumer, and having an open conversation with them over time.
You know, working out the way you were expecting and so you're going to continue some of these efforts behind basic. Yeah, while I won't speak to the Future because I don't want to give the competition A playbook to go by, we're very pleased with the results. And I think it shows that the the quality of data analytics, we have with our colleagues across Altra, being able to have those results in a short period of time with a very targeted approach.
All right, thank you for that. I'll pass it on, thanks.
Our next question is from faham Bay of UBS. Your line is open.
Good morning guys, thank you for taking your questions as well.
Um, good morning. Um, a couple from me, as well, please. Um, I'll I'll start with, um, um, you noticing crackdowns on on a list of Vapes and, and, and more restrictions, um, at the border. Um, I just want to understand whether
the net impact of
the um, import restrictions um, versus
The products still coming through mislabeling is having a neutral impact or, or a positive impact. And, and whether that could be driving, some of the Improvement in in cigarette volumes, we've seen over the last um um couple of months. So I want to try and understand that a bit better. Um, and and then the second question,
Um, I I I noticed the federal excise tax per pack, um was was 3 cents lower than than normal. Um, I appreciate there, has been some commentary on drawbacks and imports. Uh, anything you would highlight, um, on this and and how we should think about this line item going forward. Thanks sure. I appreciate your questions and I'll try to take them in an order, but if I missed anything, please follow up.
I think when you think about enforcements, we we certainly are encouraged by some of the momentum. We're seeing the new Commissioners been in place about a 100 days and and we've seen significant momentum uh, since he's taken over. Uh, but as he stated, I believe publicly there's more to do there and uh, we look forward to him and the FDA and the other agencies doing more. I think it's too soon to call it a trend 1 way or the other. Certainly, uh, it's Upstream if you will because that's part of the distribution is is that the distributor wholesaler and import, uh, it's hard to say whether that's taking place and whether the consumer has felt it yet in the marketplace that retails certainly with the, the mislabeling, uh, that's just another step of a illegality from a standpoint of mislabeling products to get them into the US and circumventing. First, evading the FDA, and now trying to evade the customers Customs and Border patrols. So, uh, I think it remains to be seen
As you heard in my remarks, we need consistent action. And, and that's what we're looking forward, and and are hopeful with the new commissioner in place. And the momentum, we've seen pick up
We're an American company with American manufacturing and and so we believe that policy especially tax policy. Should support a man American Manufacturing.
And that fet should be paid on cigarette, sold in the US and this drawback policy actually goes against both of those. And we've seen a number of competitors, taking advantage of this, some pretty pretty large advantage of that. And so we're going to look uh, for Partnerships because we're not going to be able to competitive disadvantage in the marketplace.
Thanks a lot.
I'm sorry I missed the last comment.
No, I just said, "Thanks a lot." Oh, you're welcome.
Thank you. Our next question is from Eric SATA of Morgan Stanley. Please, go ahead.
Great. Uh, just to follow up on the last question around illicit vape. Um, there have been several press stories about shortages for particular leading brands or products of illicit products over the past couple of months. Wondering if that's something that you've seen in the marketplace. Have you seen some of the illicit actors sort of adapting their brands or products? Or, you know, is it just too early to say overall?
For a certain type of device. So it, that's why we are calling from more consistent action, through time, to really clean up the marketplace and get
The progress for harm reduction, moving forward on the right foot. I think, from a standpoint of, of have we seen the versions?
In the past, we've seen the same manufacturer change, brand names and packaging but it's exactly the same as what was before. And as I mentioned earlier, we're certainly seeing now that the Customs and Border Patrol is is appropriately. We have seen instances of misdeclaration and calling that something else other than evapor,
Great and then uh, to follow up, uh, coming back to enjoy the past. Couple of quarters, you seem to have had a little bit more of a cautious tone or, or a comment of, you know, essentially we're not, we're not going to rush a product back to Market when you know, the market is totally in, uh, Des
Array. Um, maybe I didn't really again. I'm paraphrasing. Uh, maybe I didn't, I I didn't catch it, but I didn't quite C. I didn't, I don't know if I heard a similar, uh, comment this time. This, you know, and this quarter is prepared remarks and, you know, has your view in terms of, uh, the ability to compete.
In um vape and you know, sort of the timing of uh when you would be able to come back to Market really changed at all.
Yeah, I wouldn't say it has changed. And and um, if you took that from our remarks, uh let me just restate, we're certainly excited to be able to bring in Joy, back to Marketplace when it's appropriate. We were making great strides and and capturing consumers.
But the state of play in the eve Vapor Market hasn't changed and and you see total evaporators consumers, call it about 20 and a half million consumers. And about 14.4 million of, those are disposable Vapors. And and we believe a large portion of that is making it to the marketplace illicitly. And so, when you see that state of play remember disposables are increasing, that means that pod-based products are decreasing. And you can see that in in takeaway and share at at retail if you include the Disposable Marketplace or an estimate of it. And so uh, certainly when we bring it back to Market, we're going to be disciplined about it. Um, and and and we're excited when it's appropriate to be able to bring that back to work.
Great, thanks for the clarification there. Thank you.
Our next question is from gov Jane of bark.
Berkeley. Please go ahead.
Good morning, Billy. Good morning, everyone. So, any questions from me?
1 is on this double duty drawback. You know, the question which was asked earlier. So if I look at the price at which you are selling basic, and if I assume full excise tax, full MSA.
then it is hard to conclude that there will be any key but left unless
You are claiming this double duty drawback on Basics. So could you talk about how this works? Is it more focused on the discount cigarettes and deep discount cigarettes?
Yeah, I I wouldn't conflate those 2. Guarav, I would keep those 2 separate. Uh, basic is is is is being able to use and utilize our rgm analytics in the marketplace.
To uh, continue to serve consumers and keep America our portfolio brands.
This drawback is a is totally separate issue. Um, when you look at kind of the progress on the big beautiful bill, you saw, when it was proposed by the house, they were removing that because they saw it as, as bad policy, when it went to the Senate side. There were a number of Senators that removed that from it. And and what you see is competition that has International manufacturing and domestic, they just flip-flop production and that allows them to
Basically import product into the US without any fet plates, uh, paid, and so, uh, certainly, uh, with us being a domestic manufacturer, which you would think tax policy would support. Uh, we're certainly going to look to not be at a competitive disadvantage. Now that it's it's uh, apparent law.
% decline. So, is it that this reduction in disposable e-cigarettes is helping the cigarette industry more than it is helping the pot-based industry?
I I think when you look at it, I I would say, you know, that that um when you look at the decomp you can see that the the change in cigarette volume decline was really in that macroeconomic and cross category. I would say it's a bit of both um that that's benefiting the cigarette industry. That's why we're pushing the FDA to authorize more products because the consumers made a choice for smoke-free. If they authorized products that have gone through the science review, then we'll have consumers moving to products that are appropriate for public health and so both from an enforcement standpoint and an authorization is where we need the FDA to move when you step back wave and look at it, it's a a
Proof of concept that consumers will move exactly as we've been saying. Once they Pro find products that satisfy them, um, and, and we can really make progress on reducing our
Sure. And then last question is, you know, uh, on ngps. So, you know, you had a US manufacturer, you don't have an international business, but do you think there are some of these International markets now where you can have a NGP only business?
And make a profitable. And you have like, you, as you mentioned, you are pursuing multiple e secret options. You clearly have gone, which is their internationally. So, are there some International markets? Where you think you can now create a NGP on Division?
We do believe that guarav and you recall as far as their our corporate goals that is 1 of them from a growth standpoint. You'll recall that from a a nicotine pouch. We actually have that in distribution and call it the Nordic region and and in the UK and we're pleased with the progress we're making there. Um and we do believe that we can be successful in NGP internationally through time. I, I think the way you should think about that is we're going to be disciplined about it as we move forward.
Thank you so much. Thank you.
We'll take our next question from Damian McNeela of Deutsche Bank. Please go ahead.
Uh, good morning everybody. Uh, thank you for the questions. Um, first question is just on
Uh, on and whether you can sort of provide any color on what your, uh, plans off the second half in terms of, whether you're expecting to accelerate activation for the brand. Uh, and also, whether you could quantify how well distributed, the brand is currently in the US.
And then my second question is just on Middleton. Can you sort of provide an explanation of what's behind that sort of pretty decent performance?
Yeah, I think when you think about on I, I'll be careful not to lay out exactly what we're going to do in the second half, but you see the success that we've had through the first half? Uh, we believe that is sustainable. Uh, we're excited about being able to bring our pipeline of products to the marketplace when appropriate, um, because we feel like uh, some of the the pipeline of products are very competitive with the existing products in the marketplace as we've shared before. I think that when you think about on and the activations certainly reinforcing the equity and what we feel like is is a bit different than the the rest of the industry focusing on equity and building the sustainable brand through time for the air on portfolio products. When we can bring others to Market, I think, as far as um,
The remind me of the second-party question, middle, middle, middle Middleton. Yeah, and middle Middleton volume, uh, was, uh, you know, it is the dominant.
Cigar in the highly profitable large Mass.
Uh, machine made cigar category and it's uh it's a dominant player. It's it's a very, it's a very strong premium brand. I think when you look at volume and you look within a quarter, there's always movement within the distribution channel in terms of inventory movements and things like that but overall Middleton continues to be a strong performer in the small.
Segment.
Okay, thank you.
Our next question is from Gerald Pasquali of Neiman Company. Please go ahead.
Just in terms of the revised DPS guidance. Does that in any way contemplate? Um, maybe increased investment spending uh behind on, in the back half of the Year. Thank you, I'll take, thank you. I'll take the first half and style. You can pick up on the EPS. I think, when you think about on, uh, it's really about reinforcing the equity. And I think the team has gotten very good about using rgm that we've, uh, perfected in some of our other categories of continuing to induce trial, but not having to over subsidized World, consumers of the on brand, and it's it's about
The consumer is and you heard some of the comments, whether that's music festivals or NASCAR races or things of that nature and reinforcing the brand, uh, to the consumer. Uh, so that they feel good. Not only about the product, but about the brand itself, and so from that standpoint, you're right. Competition is picking up as far as a quarter shipment share and and that nature. I would ask you to look over a longer period of time. Certainly, you're going to have a shipment that are going through the distribution Channel and things of that nature that can distort a quarter. I would look at both uh volume and share over a longer period.
Yeah, and Gerald, as far as guidance, you know, I'm not going to provide any information about promotional activity in the second half. But what I will say, is that the guidance does contemplate, um, our continued support of our, uh, of our vision and, uh, the development of product.
Pipeline within the smoke-free innovative tobacco categories or nicotine categories. And, of course, the continued support of the on-brand, as we continue to drive, uh,
Uh, trial and awareness um, in conversion for that brand.
Perfect. Thanks very much, guys. Thank you.
And once again, to ask a question, please press the star and the number 1 on your touchtone telephone at this time.
Our next question is from Emma Romney of Reuters. Your line is open.
Hi guys. Thanks very much for taking my question. Um, I I wanted to ask about tariffs because the guidance, uh, the guidance statements that it accounts for increased tariff costs. Um, even the enjoy isn't actually on the market at the moment and isn't expected to return this year. Could could you talk me through specifically? What parts of your business are affected by increased tariffs and on which countries? Thank you. Yeah. Sure. Um, so first, what I would tell you is that while tariffs have had an impact
On our costs. We don't view them as material to our overall, uh, business and they have been contemplated in the guidance, uh, that we have provided you. Um, as far as where they, they do impact we, we do sometimes, see the impact of tariffs in our supply chain. Our direct materials, as an example, in some of the packaging material, we use because some of our supply chain is overseas or International base. So um, but again, I I think what's more important for us is to monitor the impact of tariffs on the adult tobacco consumer and the potential impact on costs of everyday items uh that they are purchasing and how that could impact purchasing behaviors of the consumer. So again it's something we monitor closely and and we'll be uh watching as the year plays out.
Got it and is that packaging for your cigarettes for um oral tobacco or um all of the above? Yeah, it's metal for oil liners. It's um tin cans things like that so you can see it there and you see it in some other areas. But again it's something that's been contemplated and unlike many other cpg companies, it really has not had a material impact on our overall costs.
Yeah. So not significant enough to sort of spark price increases or changes to the supply chain or anything. Well I'm not going to I'm not going to talk about price increases um but no nothing, nothing material on a cost basis.
Books are procurement folks. Do a terrific job of managing the different variables that they face. Um, maintaining a strong uh supply chain um is important to us, of course, in high margin business. So um, basically a terrific job. So we feel very comfortable with it.
Cool. And and I think there are um, some tariffs on on markets like uh, Malaysia for example, that that weren't in place last time you updated the market, which, um, would affect enjoy when when you did want to start importing it again. Are you thinking about that? And how you might be able to mitigate the, the impact, once you are ready to start importing the device? Yeah, look, we're always thinking about it. I'm not going to get into details of the supply chain, but we do have flexibility in the supply chain related to Android. But as you know, there's there's there are tariffs across the across the International Market that are part of our consideration set. Um, right now, enjoy as you said, is not in the market, we continue to to work to bring it back into the market with some of the uh IP work that Billy uh, talked about earlier. But um, again we feel very comfortable with the optionality, we have in our e, Vapor category.
Cool. Thanks very much. I appreciate you taking my question, absolutely.
There appears to be no further questions at this time. I would like to turn the call back over to Mac Livingston for any closing remarks.
Thank you for joining us today. Everyone have a great day.
This does conclude today's conference. You may now disconnect your lines, and everyone have a great day.