The tobacco giant Altria $MO (+0,96 %) beat Wall Street estimates for sales and profits in the second quarter on Wednesday. The reason for this was robust demand for its on! nicotine pouches.
The Richmond, Virginia-based company is increasingly relying on its portfolio of smokeless alternatives, such as nicotine pouches, to offset the decline in sales caused by the trend among many consumers away from traditional cigarettes and chewing tobacco.
Although sales of Altria's e-cigarette brand NJOY were halted earlier this year due to a patent dispute, strong growth in the on! segment compensated for the decline in sales.
In April, the company announced that NJOY would not be returning to the market this year. As a result, Altria had to recognize a significant impairment loss for its e-cigarette division.
The widespread sale of unregulated disposable e-cigarettes, mostly from China, has negatively impacted both the e-cigarette and traditional tobacco businesses in the US. However, Altria anticipates only limited benefits from increased confiscation of such products.
The company's quarterly revenue, including excise taxes, rose 0.2 percent year-over-year to $5.29 billion. Analysts on average had expected a 1.8 percent decline to 5.18 billion dollars, according to LSEG data.
Adjusted earnings per share in the second quarter amounted to 1.44 US dollars, exceeding expectations of 1.39 dollars.
The shipment volume of on! nicotine pouches rose by 26.5 percent, following an increase of 13.7 percent in the previous year.
The shares of competitor Philip Morris International fell last week after shipments of its ZYN nicotine pouches - by far the leading brand of pouches in the USA - fell short of expectations.
Shipments of Altria's smokable tobacco products fell 10.2 percent in the second quarter, compared with a 13 percent decline in the year-ago period.
During the quarter, the company recognized a non-cash, pre-tax impairment charge of $354 million related to an impairment of the Skoal brand (smokeless tobacco). Altria did not provide a reason for the impairment.
For the full year, Altria expects adjusted earnings per share between 5.35 and 5.45 US dollars. The previous forecast was 5.30 to 5.45 dollars.