Altria‘s investment in Canadian cannabis company Cronos ate into the tobacco company’s first-quarter profits, the company said Thursday.
Altria, which sells best-selling cigarette brand Marlboro in the U.S., reported first-quarter net income of $1.12 billion, or 60 cents per share, down 41% from $1.89 billion, or $1 per share a year earlier. Excluding unrealized losses associated with its investment in Cronos and other items, Altria earned 90 cents per share, less than the 92 cents per share expected by analysts surveyed by Refinitiv.
Shares of Altria slid more than 5% in premarket trading Thursday.
Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
Altria was hit with higher financing costs after issuing fresh debt to finance its $1.8 billion investment in Cronos and $12.8 billion stake in Juul. Two ratings companies cut Altria’s creditworthiness in December following the deals.
“As expected, Altria’s first quarter adjusted diluted EPS declined in the mid-single digit range as we incurred higher interest expense as a result of our recently issued debt, without the full benefit of savings from our cost reduction program, which began to ramp up at the end of the quarter,” Altria CEO Howard Willard said in a statement.
Altria in December said it would cut costs about $575 million in annual expenses by the end of the year. In the first quarter, Altria recorded pre-tax charges of $159 million, or 6 cents per share, related to its investments in Juul and Cronos, among other things.
The company is betting on Cronos and Juul for growth as its core cigarette business declines. Cigarette volumes fell about 14 percent from the year-ago quarter. When adjusted for trade inventory movements and one fewer shipping day, the the decline totaled about 5 percent.
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