Skip to main content
Open this photo in gallery:

Juul products are displayed at a smoke shop in New York on Dec. 20, 2018.The Associated Press

Altria Group Inc. took another US$4-billion charge on its investment in Juul Labs Inc. and said it had reworked its deal terms with the embattled e-cigarette maker, which is facing increased regulatory scrutiny amid a backlash against vaping.

The Marlboro maker said on Thursday the fourth-quarter charge was mainly due to the increased number of legal cases pending against Juul and the expectation that the number would continue to grow.

Overall, Altria has recorded US$8.6-billion in impairment charges after it took a 35-per-cent stake in Juul for US$12.8-billion in December, 2018. Those charges brought down the value of its investment to US$4.2-billion as of the end of 2019, Altria said.

“I’m highly disappointed in the financial performance of the Juul investment,” Altria chief executive officer Howard Willard said on a postearnings call.

“[The valuation] is substantially below what we had expected.”

Shares of Altria fell 6 per cent in after the charges pushed the company to post a fourth-quarter loss of $1.81 billion, compared with a profit $1.25 billion a year earlier.

The company also said it does not expect to receive earnings contributions from Juul over the next three years.

“It’s a major black eye for the management. It’s a major strategic mistake in hindsight,” CFRA Research analyst Garrett Nelson said.

With the Juul deal, Altria had set its sights on re-entering the market for vaping in the face of declining smoking rates and cigarette sales in the United States.

But a string of vaping-related deaths, coupled with increased bans following a surge in teenage vaping, has clouded the prospects of e-cigarette makers, including Juul.

E-cigarette companies are also facing a May deadline to submit applications to the U.S. Food and Drug Administration, proving that their products provide a net benefit to public health.

If a company fails to make its case, the FDA has the power to order its products off the market.

As part of the revised deal, Altria said it would continue to help Juul with regulatory services including the submission of its products for approval by the FDA.

“Right now, our primary focus is on helping Juul file a compelling and complete PMTA [premarket tobacco product application],” Altria CEO said.

Mr. Willard added he was “optimistic” that data from a federal youth tobacco survey would be released before the FDA made its decision on the applications and that it shows a reduction in youth usage of e-vapour products.

Juul’s new chief executive officer and former Altria executive, K.C. Crosthwaite, has made the FDA application process his central goal and restructured the company to focus on regulatory approval.

Altria will stop providing services including logistics, distribution and access to retail shelf space to Juul, it said, adding that the e-cigarette maker will rejig its board to include two directors designated by Altria.

“This agreement is a continuation of the reset initiated by Juul’s leadership team,” Mr. Willard said.

Report an editorial error

Report a technical issue

Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 27/03/24 6:40pm EDT.

SymbolName% changeLast
MO-N
Altria Group
+1.25%43.66

Interact with The Globe