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Altria's total expenses have trended steadily higher from around $11.5 billion in 2016 to about $18.4 billion in 2018.As a percentage of revenues, expenses have increased from 45% to 73% during the same period.
Total Expenses were $18.4 Billion in 2018
Breakdown of Altria's Total Expenses in 2018 :
Total = $18.4 Bil
Excise Duty = $5.7 Bil
Cost of Sales = $7.4 Bil
Operating Expenses = $3.1 Bil
Non-operating (income)/expense = -$0.2 Bil
Provision for income taxes = $2.4 Bil
Altria's Total Expenses Have Increased From $11.5 Billion in 2016 to $18.4 Billion in 2018
Altria's total expenses have grown from $11.5 billion in 2016 to about $18.4 billion in 2018.
For 2019, we expect total expenses to stand at $22.3 billion, which comprises of
1) Excise Duty: $5.6 billion
2) Cost of Sales: $7.3 billion
3) Operating Expenses: $7.4 billion
2) Non-Operating Expense (Income): $0.1 billion
3) Income Taxes: $2.0 billion
Below, we take a look at how the company's key expense components have trended and the key reasons for the change.
Altria Revenues: How Does Altria Make Money?
Altria v/s Philip Morris: Comparative Analysis
1) Excise tax has decreased from $6.4 Bil in 2016 to $5.7 Bil in 2018 driven by continuous drop in shipments of smokeable tobacco products (cigarettes and cigars). It is expected to continue the trend and drop to about $5.5 billion by 2020. As a % Revenues, Excise has steadily decreased from 24.9% in 2016 to 22.6% in 2018 and is expected to drop further to 21.5% by 2020
Excise as % of Revenue
2) Cost of Sales have decreased from $7.8 Bil in 2016 to $7.4 Bil in 2018, driven by decrease in cigarette and cigar volume sold. As most of the revenue growth was driven by increase in price per unit sold, cost of sales as a % of revenue saw constant decrease from 30.2% in 2016 to 29.1% in 2018
Cost of Sales
Cost of Sales as % of Revenue
3. Operating Expenses Have Increased From $2.8 billion in 2016 to $3.1 Billion in 2018, Driven By
(A) $0.1 billion increase in Marketing, Administration & Research cost
(B) $0.3 billion increase in Impairment and Exit cost
Operating Expense (A + B)
Marketing, Admin & Research (A)
Asset Impairment & Exit cost (B)
A) Marketing, Administration & Research (MAR) costs having initially decreased in 2017 to $2.3 billion due to lower costs in the smokeable products division, later saw a sharp rise to $2.8 billion in 2018, due to higher costs in the smokeable products segment and the wine segment, acquisition-related costs to effect the investment in JUUL, and higher investment spending in the innovative tobacco products businesses. As a % of Revenues, MAR cost has remained volatile, with it expected to remain elevated in the near term.
Marketing, Administration & Research
Marketing, Administration & Research as % of Revenue
B) Impairment costs have increased from $0.1 Bil in 2016 to $0.4 Bil in 2018, driven by Altria’s decision to refocus its innovative product efforts, the cost reduction program, and the impairment of the Columbia Crest trademark. Impairment cost is expected to rise sharply in 2019, driven by reduction in the value of Altria's share in JUUL ($4.5 billion recognized in first 9 months of 2019)
Asset Impairment & Exit cost
Asset Impairment & Exit cost as % of Revenue
5. Altria's effective tax rate dropped sharply in 2017 as the company recognized one-time tax benefits following the implementation of the TCJ Act. The rate increased in 2018 in the absence of tax benefits, but was lower than in 2016 following reduction in the tax rate. Going forward, the effective tax rate is likely to remain in line with the statutory tax rate
Effective Tax Rate
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1. How to save your forecasts:
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2. How to monitor your scenario vs. actual results
Once you've saved your forecast, you can "rename" your scenario by clicking on the gear icon next to the scenario (on the left panel). For more info, see this quick, 30-sec video (look at the 9 sec mark)
With your forecast saved and named, you can see how well you forecast the company's performance at the end of each period and compare your forecasts to hundreds of other Trefis users who came up with their own forecasts. Lastly, you can share with friends and colleagues to show them how you fared and compare your forecasts to theirs.