Altria as It Takes a $4.5 Billion Write-Down on Its Juul Investment

Altria Group Inc., the U.S. maker of Marlboro cigarettes, reported a $4.5 billion charge related to its investment in Juul Labs Inc. as the nascent vaping market faces a reckoning.

The company said the non-cash charge isn’t tied to a single event. Instead, it cited a slew of challenges: a high chance the U.S. Food & Drug Administration will remove flavored e-vapor products from the market, various bans already put in place by some cities and states and other factors.

Investors weren’t surprised: Bloomberg Intelligence analyst Ken Shea had warned heading into the results that a writedown was likely, and Fidelity Investments recently slashed the value of its own stake in the e-cigarette maker by almost 50%. In fact, shareholders may have been relieved to see Altria take its medicine now, rather than wait until May, when the FDA is expected to decide whether to authorize various e-cigarette products.

Shares rose as much as 1.2% in premarket trading in New York. The stock has fallen 6.9% so far this year, weighed down by increased regulatory action in the market for e-cigarettes.

Altria’s 35% stake in Juul, which it paid $12.8 billion for late last year, has turned into a headache as the e-cigarette market grapples with a rash of vaping-related illnesses and deaths. Altria has also been named in lawsuits claiming youth addiction to Juul. These are new kinds of challenges for an old-guard company like Altria that’s used to taking things slow, getting FDA approval and testing the market before making big decisions.

Still, the vaping scare may be a double-edged sword, since the outbreak of illnesses could push some consumers back to regular cigarettes. Howard Willard, Altria’s chairman and chief executive officer, said Thursday that “our core tobacco businesses delivered excellent third-quarter financial results” — even as its total cigarette shipments fell 6.6% in the quarter.

The company reaffirmed its 2019 guidance based on its core tobacco business, though that forecast includes “little to no” contribution from its Cronos cannabis or Juul investments.

Meanwhile, Altria is moving forward with IQOS, a heat-not-burn device for tobacco developed by sister company Philip Morris International Inc. that arrived in the U.S. this fall. Altria, which already started testing it in Atlanta, said Thursday it will expand into Richmond, Virginia, and that it plans to increase investments related to the device.