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Altria writes down Juul investment by a further $4.1bn

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Via Financial Times

Tobacco group Altria has written down the value of its stake in Juul by a further $4.1bn and cut its earnings forecasts following an increase in litigation and a political and regulatory backlash against the troubled e-cigarette start up.

At the end of June 2019, Altria, parent of Marlboro maker Philip Morris USA, had valued its Juul stake at $12.8bn. But the tobacco group then lowered its valuation of its Juul investment by $4.5bn in October. The charge announced on Thursday has brought the value of its investment to $4.2bn as at the end of 2019.

The decision to take another non-cash charge on Juul was “primarily due to the increased number of legal cases pending against Juul and the expectation that the number of legal cases against Juul will continue to increase,” Altria said.

In addition to the writedown, Altria lowered its forward guidance because of a “current expectation for no equity earnings contributions from Juul through 2022.”

Between 2020 and 2022, the tobacco group said, adjusted earnings would now grow between 4 per cent and 7 per cent a share, down from a previous forecast of growth between 5 per cent and 8 per cent.

The Juul writedown pushed Altria into a $1.8bn loss for 2019, compared to a $1.3bn profit the previous year. Revenues for the calendar year fell by 2 per cent to just over $6bn.

Altria said it would install two of its own directors on to Juul’s board. Juul chief executive KC Crothwaite, a tobacco veteran who transferred to the helm of the vaping group from a senior position at Altria last September, will stay in his post.

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US medical experts have already connected hundreds of cases of lung damage to vaping, although they have not blamed Juul specifically. Flavoured vaping variants have been blamed for encouraging underage use and getting a new generation addicted to nicotine.

Earlier this month, the Trump administration revealed long-awaited curbs on the sale of some flavoured e-cigarettes, which critics of vaping say encourage children and adolescents to become addicted to nicotine.

Since October 31, Altria said, “the number of legal cases pending against Juul has increased by more than 80%,” although the company had not made any assumptions regarding the merits or likelihood of success of these cases.

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