Altria takes another $4.1 billion charge on its Juul investment

E-cigarettes were supposed to help Altria diversify beyond tobacco but its investment in Juul has turned into a recurring nightmare.

Altria (MO), which sells the Marlboro, Virginia Slims and Parliament brands of cigarettes in the United States, announced Thursday that it was taking a $4.1 billion charge related to its Juul investment. It cited “the increased number of legal cases pending against Juul and the expectation that the number of legal cases against Juul will continue to increase.”

Since the end of October, the number of pending lawsuits against Juul is up more than 80%, Altria added.

The news comes just a few months after Altria said it was taking a $4.5 billion writedown on its Juul stake as concerns mounted about the health risks of vaping.

Related article Altria and Philip Morris end plans to reunite

As a result of the $8.6 billion in charges since October, the value of Altria’s stake in Juul is now worth only $4.2 billion. That is a staggering 67% decline from the $12.8 billion that Altria paid in 2018 for a 35% piece of Juul.

Shares of Altria were down nearly 6% Thursday.

“It’s hard to precisely predict what’s going to happen to that category,” said Altria CEO Howard Willard in a conference call with analysts when asked about Juul.

“But if you just turn to the fourth quarter of this year, its year-over-year growth rate was only 3%. And I think that we really expect that we’re going to see a continued slowdown or even maybe a decline in the e-vapor category over the next couple of years,” he added.

Overall sales for the fourth quarter were slightly lower than expected, Altria said. Shares are now flat in the past year, lagging the gains of the broader market. And the stock has tumbled more than 30% in the past three years.

Following a number of deaths tied to vaping, several US regulators have cracked down on e-cigarettes.

Juul was also criticized for selling pods with flavors like mango, creme and cucumber that became popular with teens.

Last year, the company said that it will end the sale of its flavored products in the US. That move came shortly before the Food and Drug Administration banned all vaping flavors except tobacco and menthol at the start of 2020.

This September 25, 2013 photo illustration taken in Washington, DC, shows a woman smoking an "Blu" e cigarette. The National Association of Attorneys General on September 24, issued a letter urging the US Food and Drug Administration to clamp down on the fast-growing e-cigarette market, saying manufacturers are enticing teenagers to smoke with cartoon characters, television ads and bubble-gum flavors. (Photo credit should read JIM WATSON/AFP/Getty Images)

Related article Trump administration to clear market of most e-cigarette cartridge flavors, but not menthol

Juul CEO Kevin Burns stepped down last year amidst all the turmoil and was replaced by Altria executive K.C. Crosthwaite. And Juul announced it was laying off 650 people last November as the company pushed to cut costs by $1 billion.

Making matters worse, Altria also abandoned a plan last year to reunite with Philip Morris (PM), the international tobacco giant that Altria spun off in 2008.

But Altria still went ahead with plans to partner with Philip Morris to sell iQOS, a Philip Morris e-cigarette product that heats tobacco but does not burn it, in the United States.

Altria is taking other steps to diversify beyond cigarettes as well.

It bought a majority stake in oral nicotine pouch on! last year. The company also has a nearly 45% stake in Canadian cannabis company Cronos (CRON) and is a significant investor in beer giant Anheuser-Busch InBev (BUD).