Altria Group, Inc. Q2 FY2026 earnings call

• Helix (Smoke-Free Nicotine Pouches): • Recent FDA guidance provides regulatory clarity for future product launches, and existing OnPlus authorizations enable a faster supplemental PMTA pathway for future line extensions • Helix resumed shipments of 12 milligram OnPlus in three states in Q2, with national expansion planned for Q3 2026 • New flavor extensions across 6mg, 9mg, and 12mg strengths (starting with blueberry mint and mango pineapple) are scheduled for Q4 launch to meet consumer demand for more options

• eVapor Category: • Management believes the category supports tobacco harm reduction in the U.S., and recent FDA actions and increased enforcement against illicit products are helping level the playing field for legal manufacturers • Q2 saw over $250 million in federal seizures of illicit products, a major lawsuit against the top illicit manufacturer, and platform restrictions on illicit sales; illicit disposable growth continued to moderate in Q2, with modest declines in disposable e-vapor consumer counts • The number of adult vapers stayed flat at ~20 million year-over-year

• Heritage and Consumer Engagement Initiatives: • To mark the U.S. 250th anniversary, Altria is investing in American tobacco growers and local communities, and launching portfolio-specific initiatives including Copenhagen's year-long farmer/veteran/trade celebration and PMUSA's launch of Marlboro Cowboy Cut

• Traditional Tobacco Portfolio Strategy: • The discount cigarette segment is growing due to ongoing consumer discretionary pressure from elevated inflation and gas prices; Marlboro maintained its 59.6% share of the profitable premium cigarette segment (unchanged YoY, up 0.1pp sequentially) • BASIC discount brand grew retail share 0.3pp sequentially and 2.3pp YoY, with targeted RGM-driven investment limited to ~35,000 stores to capture share from competitors while minimizing cannibalization of Marlboro. Total PMUSA retail share grew 0.1pp sequentially and 0.3pp YoY

1. Smokable Products: Adjusted OCI grew 2.4% to $3 billion in Q2 2026, and grew 4.2% to $5.7 billion for the first half of 2026. Adjusted OCI margins reached 64.8% in Q2 and 64.9% in H1. Reported domestic cigarette volumes declined 3.2% in Q2 and 2.8% in H1; trade inventory-adjusted volumes declined 4.5% in Q2 and 4% in H1, while the broader industry saw a 5% decline in both periods, marking four straight quarters of moderated decline. Cigar reported shipment volume increased 5% in Q2, with Middleton outperforming the mass cigar industry which saw an overall 6.4% volume decline. 2. Oral Tobacco Products: Adjusted OCI decreased 8% in Q2 and 4.2% in H1, impacted by tough year-over-year comps from 2025 promotional timing and competitor supply disruptions, plus strategic investments for OnPlus expansion. Adjusted OCI margins remained strong at 66.7% in Q2 and 67% in H1. Total reported shipment volume decreased 8.5% in Q2 and 6% in H1, with nicotine pouch growth offset by lower moist smokeless tobacco (MST) volumes. Trade inventory-adjusted volumes declined ~2% in Q2 and ~5.5% in H1. The segment held 29% retail share in Q2 and H1, stable sequentially, supported by On growth and resilient MST brands. 3. ABI Investment: Adjusted equity earnings were $158 million in Q2, up 21.5% year-over-year.

• Management raised the lower bound of full-year 2026 adjusted diluted EPS guidance, with a new range of $5.61 to $5.72, representing 3.5% to 5.5% growth from 2025's $5.42 base
• Double duty drawback (tax refund) benefits were flat sequentially in Q2 due to application and inventory timing factors; management still expects higher export volumes and balanced tax refund benefits across Q3 and Q4 2026

• Persistent macroeconomic pressure, including elevated gas prices and inflation outpacing wage growth, continues to drive trade-down to discount cigarettes, putting pressure on premium brand share and price mix
• Illicit flavored disposable e-vapor products remain prevalent in the market, even as growth moderates, and continue to drive cross-category volume shifts away from legal combustible cigarettes
• OnPlus volume results in Q2 were impacted by tough year-over-year comparisons from 2025's unusual promotional and competitor supply environment, and future growth depends on successful new flavor launches and consumer adoption
• Discount cigarette segment growth is driven by consumer trade-down during economic stress, and lapping strong 2025H2 BASIC growth could create challenging comparables in 2026H2

Q: Analysts note the raised lower guidance bound is still below first half results, and ask about second half expectations, incremental investments for new launches, and the impact of duty drawback timing. / A: Management narrowed guidance following stronger than expected first half results, but notes consumer financial pressure from geopolitical uncertainty and persistent elevated inflation/gas prices remains a headwind. The planned national OnPlus expansion and new flavor launches will require incremental investment, but management remains confident in full year performance. Early performance of the new Marlboro Cowboy Cut launch is positive: it leverages Marlboro's American heritage for the U.S. 250th anniversary, and serves as a targeted RGM tool to retain value-sensitive premium consumers within the Marlboro portfolio. The brand is using data analytics to target promotions effectively.

Q: Why didn't double duty drawback benefits increase in Q2 despite higher export volumes, what drove strong smokable OCI growth, and what is driving moderating cigarette volume declines? / A: The lack of sequential benefit growth is purely due to timing of credit applications and inventory staging, not underlying issues. Management still expects export growth and balanced benefit across the second half. Strong OCI growth came from solid Marlboro price realization and incremental share gains from the BASIC discount strategy, which aligns with long-term profit goals. Moderating cigarette declines are driven by two factors: increased enforcement and supply chain disruption for illicit disposable e-vapor, and most consumers who would switch to illicit disposables have already done so. This offsets pressure from macroeconomic stress, and PMUSA's RGM tools have kept Marlboro stable in the premium segment. The strategy for BASIC is to participate in discount growth rather than accelerate it, as consumers trade down during tough economic conditions.

Q: OnPlus volumes have not accelerated despite national expansion, what is driving this, and what has consumer feedback been on the new 12mg launch? / A: Weak Q2 volume is largely due to tough year-over-year comps: 2025 Q2 had strong promotional activity when a major competitor faced supply chain disruptions, plus inventory timing ahead of the 2026 OnPlus national launch. OnPlus is already distributed to ~120,000 stores covering 90% of U.S. nicotine product volume, and consumer feedback on the product is very positive. Management is excited for the planned Q4 flavor launches that will expand the portfolio to meet consumer demand for more options beyond the core mint/wintergreen flavors.

Q: How is Altria managing the mix of discount and premium cigarette products going forward, especially as it laps BASIC distribution gains and rolls out Cowboy Cut? / A: Altria's core strategy is to maximize long-term profitability, which the first half performance demonstrates. Cowboy Cut is designed to keep value-sensitive consumers within the Marlboro portfolio rather than losing them to third-party discount brands. For the discount segment, the strategy remains to participate in growth without accelerating it, just as with the prior L&M discount offering. BASIC growth is highly targeted via RGM tools to minimize impact to Marlboro, and management is confident in this balanced approach for the second half.