Altria announced in the late hours of April the financial results for the first quarter of its fiscal year 2021 (FY), which was the three-month period that ended on March 31st, 2021. Altria reported net earnings of $1.4 billion, YOY decrease of 8.3 percent. The revenue for the quarter decreased 5.1 percent when compared with the prior quarter, but it fell in the range of $6.0 billion.
The decreases in revenue were different from the results of Altria in the past when Altria's revenue increased 4.9 percent during Q4 FY2020 and 3.9 percent for Q3 FY2020. The company reported positive net income for the 4th quarter compared to a loss of net income in the fourth quarter one year ago. Additionally, its net loss in Q3 dipped considerably from the loss it reported during Q3 of FY 2019.
Operating income at Altria increased by $2.7 billion in the first quarter of FY 2021. That's increasing 15.2 percent compared to the same period one year ago. This increase was driven primarily by lower costs of selling, which was down 26.0 percent year-over-year. The growth rate in Q1 in operating earnings was faster than the 6.3 percent and 7.3 percent growth rates recorded in Q4 and Q3 in FY2020, respectively.
Altria's Business Segments
Altria runs its business using the categories of reportable, including smokeable items, orally-smoked tobacco products, wine, and an "all other" category that comprises financial services and its ingenuity-driven products business. Altria provides an analysis of operating income and revenues for each of the segments.
Smokeable Products
The products Altria sells as smokeable are smokeable cigarettes that can be combusted, big machine-made cigars, and tobacco pipe. Philip Morris USA Inc. and John Middleton Co. are the two main subsidiaries that make up the segment known as smokeable. The segment's revenues declined 6.4 percent, up to $5.3 billion in the first quarter of FY 2021. This equates to almost 87% of the company's overall revenue. Operating income in this quarter came in at $2.4 billion, showing no growth compared to the prior year's quarter. Operating income is around 15% of the total revenue for the business.
Oral Tobacco Products
The oral tobacco products offered by Altria comprise snus and other humid smokeless tobacco products manufactured by U.S. Smokeless Tobacco Co. LLC and the oral nicotine pouches produced through Helix Innovations LLC. The segment of oral tobacco products brought in $626 million of revenue during the first quarter, up 4.2 percent from the prior quarter. This segment represents about 10% of revenue. Operating income decreased 5.3 percent year-over-year to $392 million. This is 14% of overall operating earnings.
Wine
The wine segment of Altria consists of wines produced and sold by Ste. Michelle Wine Estates Ltd. The revenue for this segment increased 2.7 percent to reach $150 million in the first quarter of FY 2021. This equates to over 2% of the company's overall revenue. The segment earned operating profits of $18 million, a substantial improvement over the $379-million operating deficit in the prior year's quarter. Operating income is approximately 1 percent of the overall.
All Other
Altria's other division is made up of its financial services as well as innovative tobacco products business. It encompasses the heated tobacco business as well as the international, or rest of the world part of Helix. The financial services division is operated through Philip Morris Capital Corp. It manages an inventory of assets, most of which are leases that are leveraged. Altria announced that it plans to close its financial services unit at the year 2022's end. The revenue for the other categories grew by 66.7 percent to reach $10 million in the first quarter of FY 2021. It is just a fraction of the revenues of the company. The operating loss for this category increased to $14 million, up from 5 million dollars in the previous quarter.
Altria's Recent Developments
In April 2021, Helix released its first-quarter earnings press release that it had completed transactions to acquire all remaining 20 percent worldwide stake in the on! Chewable nicotine pouches that are produced by Helix. Total transaction costs for acquiring the remaining stake amount to about $250 million. The share of retail on! in Altria's oral tobacco product segment in the first quarter of the Fiscal year 2021 was 1.7%.
