Altria writes down investment in troubled e-cigarette maker Juul by $4.5 billion

Health, Fitness & Food

Juul products are displayed at a smoke shop in New York, Thursday, Dec. 20, 2018.

Seth Wenig | AP

Tobacco giant Altria wrote down its $12.8 billion investment in troubled e-cigarette maker Juul by more than a third, recording a $4.5 billion pre-tax charge against its third-quarter earnings, the company said Thursday.

There wasn’t a single event or factor that led to the write down, Altria said. It cited the Trump administration’s plans to remove flavored e-cigarettes from the market as well as e-cigarette bans across cities and states in the U.S. and several countries overseas.

Altria’s $12.8 billion investment bought a 35% stake in Juul late last year, valuing the e-cigarette start-up at $38 billion. The deal is still awaiting regulatory approval. Altria said it expects a decision from the Federal Trade Commission in the first quarter of 2020.

The write-down drove the company’s net income down by about $2.41 a share. On an unadjusted basis, Altria booked a $2.6 billion loss for the quarter, or a loss of $1.39 a share, compared with a profit of $1.94 billion, or $1.03 a share, during the same time last year.

On an adjusted basis, which backs out one-time charges like the Juul write-down, the company’s earnings for the three months ended Sept. 30 of $1.19 per share beat Wall Street estimates of $1.15 a share.

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: $1.19, adjusted, vs. $1.15 expected
  • Revenue: $5.41 billion vs. $5.34 billion expected

In the nearly year since announcing the deal, Juul has been embroiled in controversy. The company is largely blamed for fueling an epidemic of teen vaping.

Juul is the subject of numerous lawsuits claiming the company misled minors and addicted them to nicotine, as well as federal investigations into the company’s marketing practices. A former Juul executive filed a wrongful termination lawsuit on Tuesday claiming the company’s quest for profit trumped public health concerns.

Consumers are questioning the safety of e-cigarettes amid an outbreak of a mysterious vaping-related lung injury. The illnesses appear to be related to THC, though a number of patients have reported only vaping nicotine, the addictive chemical in Juul and other e-cigarettes.

The Trump administration is readying a plan that officials said would remove all flavored e-cigarettes from the market until — and if — the FDA reviews and authorizes them for public sale. Juul earlier this month announced it would stop selling most flavors of its nicotine pods.

Longtime Altria executive K.C. Crosthwaite replaced Kevin Burns as CEO of Juul last month. Crosthwaite is shaking up top management, cutting jobs and trying to repair Juul’s image. The company announced it would suspend all product advertising in the U.S. and end its support of a campaign to overturn a San Francisco ordinance that banned the sales of e-cigarettes.

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