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Altria sees earnings fall 41 percent following investment in cannabis industry

According to a report from CNBC, cigarette maker Altria Group saw first-quarter earning slide as a result of their investment in cannabis company Cronos Group (CRON).

The Marlboro cigarette maker saw earnings fall 41 percent year-over-year, with the company bringing in a net income of $1.12 billion, or 60 cents per share. That was far less than the same time last year when the company earned $1.89 billion, or $1 per share.

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News of drop hit Altria stock hard on Thursday, with the company stock falling 6 percent, closing out the day at $51.41.

According to CNBC, the company missed analyst estimates on both profit and revenue, generating $4.39 billion in net revenue during the first quarter, a 6 percent drop from the year prior. Experts had forecasted $4.59 billion for the tobacco giant, according to Refinitiv.

CNBC also noted that Altria excluded $715 million in “special items,” including $425 million in pre-tax losses on derivatives the company used to buy additional shares of Cronos from its adjusted earnings. According to a statement, this was done to avoid “significant reported earnings volatility.”

“As expected, Altria’s first-quarter adjusted diluted EPS declined in the mid-single digit range as we incurred higher interest expense as a result of our recently issued debt, without the full benefit of savings from our cost reduction program, which began to ramp up at the end of the quarter,” Altria CEO Howard Willard said in a statement.

A big bet on Cronos and Juul

Late last year Altria made a $12.8 billion investment in popular e-cigarette brand Juul right around the same time they made their groundbreaking deal with Cronos group. The hope is that, as cigarette sales decline, the company can reinvent itself in both the cannabis and vape industries.

Adjusted cigarette sales volumes fell about 5 percent from last year, according to CNBC.

“As we have previously noted, we accept any short-term slowdown resulting from actions to address youth e-vapor use in an effort to preserve the long-term e-vapor opportunities for adults,” Willard said.

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Currently, the FTC is still mulling over a decision on Altria investment in Juul. The commission requested more information from the company, which is working closely with officials to give them all of the information they need.

(CNBC's Aditi Roy discusses cigarette giant Altria Group's $1.8 billion investment in cannabis company Cronos Group/ Dec. 8, 2017)
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