Altria Cash Metrics 2021 – Cash Flow And Cash On Hand

Altria’s vaping devices. Flickr Image.

Altria Group (NYSE:MO) is one of the best-run companies in the world.

Its businesses span from tobacco to wine.

Additionally, the company also has investment in Juul, ABI and Cronos Group.

While Altria Group may not be as popular as a tech company such as Apple, it is a stable business that generates tonnes of cash, particularly free cash flow.

Aside from cash, Altria also is wildly profitable; the company has a huge earnings power and one that is rising year-over-year on an adjusted basis.

Consequently, Altria is returning tonnes of cash to stockholders in the form of cash dividends.

In addition to dividends, Altria also buys back its shares and has just announced a $2 billion share repurchase program in 2021 Q1, which it expects to complete by June 2022.

In this article, we will look at several of Altria’s cash metrics, including the company’s cash on hand, operating cash flow, cash to revenue ratio, free cash flow and net cash by investing activities.

Let’s get started!

Altria’s Cash On Hand By Quarter

Altria’s cash on hand

Let’s first look at Altria’s cash on hand as shown in the chart above for the period from fiscal 2018 to 2021.

The cash on hand data in the chart is the sums of Altria’s highly liquid assets such as cash and equivalents and restricted cash.

These assets are near cash forms and can be instantly deployed as needed.

Altria may need to satisfy additional terms and conditions if it wanted to withdraw restricted cash.

All told, Altria’s cash on hand hovered around $2 billion between 2018 and 2019 according to the chart above.

Altria had these levels of cash in its balance sheets before the arrival of the COVID-19 pandemic.

Amid the COVID-19 outbreak in 2020, Altria’s cash on hand shot up considerably to more than $4 billion in all quarters, more than double the amount in fiscal 2019.

As of the 4th quarter of 2020, Altria’s cash on hand still stood at $5 billion, indicating the huge amount of cash needed to maintain the company’s liquidity.

The considerable growth in Altria’s cash on hand has been primarily due to the pandemic.

Altria may have been expecting a liquidity crunch during the pandemic and hence, the increase in cash on hand to maintain financial flexibility.

However, as of fiscal 2Q 2021, Altria’s cash on hand has normalized to a pre-pandemic level of $1.9 billion USD.

Altria’s Cash On Hand to Current Assets Ratio

Altria’s cash on hand to current assets ratio

Just seeing the absolute cash-on-hand data alone may not tell us the whole picture.

As such, a plot of cash on hand to current assets ratio is shown in the chart above for the period from fiscal 2018 to 2021.

Prior to 2020, Altria’s cash on hand to current assets ratio hovered between 40% and 50%.

However, the ratio increased significantly to 60% in 1Q 2020 and reached its peak at 70% in 2Q 2020.

The ratio stayed at this level for the rest of 2020, indicating Altria’s deliberate moves to stockpile cash amid the COVID-19 outbreak to maintain the company’s financial health.

As of 2Q 2021, Altria’s cash position to current assets ratio has normalized to the pre-pandemic level of 46%.

Altria’s Operating Cash Flow – TTM

Altria’s net cash from operating activities

Altria’s operating cash flow or net cash from operations is superior as seen in the chart above.

In all quarterly results, Altria has managed to generate positive net cash from operations on a TTM basis.

While cigarette sales volume may have been down over the years, Altria has managed to raise prices and compensate the lower cigarette volumes with higher prices all these years.

As such, Altria has been able to maintain such an exceptional operating cash flow as shown in the chart.

On average, Altria’s net cash from operations comes in at $8 billion USD since fiscal 2018, illustrating the powerful cash-generating capability of the company.

As of fiscal 2021 Q2, Altria’s net cash from operations dived slightly to $6 billion on a TTM basis, one of the lowest levels the company has reported since fiscal 2018.

Altria’s Cash Ratio – TTM

Altria’s cash ratio

Altria’s cash ratio hovers at 40% but dived considerably to 30% in fiscal Q2 2021.

Still, Altria’s cash ratio is one of the highest that I have ever seen at 30%.

In general, most companies’ cash ratio comes in at less than 10%.

Therefore, Altria has such a powerful cash conversion feature that extracts as much as 30% of revenue to net cash from operations.

Altria’s Free Cash Flow – TTM

Altria’s free cash flow

Having a lot of cash on hand does not necessarily mean that Altria may not have a cash flow problem.

To figure out that the cash on hand does not come from debts or borrowings, we may use the free cash flow metric to evaluate Altria’s cash flow health.

Free cash flow is defined as net cash from operating activities minus capital expenditures as shown in the following equation:

Free cash flow = Net cash from operating activities – Capital expenditures

Both net cash from operating activities and capital expenditures can easily be obtained from Altria’s cash flow statements.

All told, Altria’s free cash flow has been entirely positive in the last 3 years from fiscal 2018 to 2021, suggesting a very healthy cash flow for the company.

In other words, Altria has been able to generate sufficient operating cash flow to cover the capital spending all these years.

In fact, Altria has literally no capital spending as the amount is nearly negligible compared to the amount of cash generated.

As seen in the chart, Altria’s free cash flow is almost identical to the net cash from operations, indicating the insignificant capital spendings of the company.

In short, Altria is literally printing free cash flow.

Altria’s Net Cash From Financing Activities – TTM

Altria’s net cash from financing activities

The net cash from financing activities details Altria’s cash flow involving debts and borrowings.

For the data plotted in the chart above, the net cash from financing activities is already minus the cash flow from dividend payments and share buybacks.

Therefore, the effect of cash dividend payments and share buybacks does not come into the picture in this discussion.

That said, a positive number indicates that Altria has raised capital through debt or equity or both whereas a negative number indicates a capital being paid back.

According to the chart, Altria has borrowed quite a huge amount of debt in fiscal 2018 and 2019.

On a TTM basis, Altria had raised cash totaling more than $15 billion in some quarters.

Going into fiscal 2020, we can see that Altria’s capital raise has dialed down considerably but still had remained positive.

Only in fiscal 2021 did Altria pay back the borrowed capital as reflected in the negative net cash from financing activities.

Accordingly, Altria paid back as much as $1.3 billion and $1.9 billion in fiscal 1Q and 2Q 2021, respectively.

Altria’s Free Cash Flow vs Net Cash From Financing Activities

Altria’s free cash flow vs. net cash from financing activities

The chart above shows the comparison between Altria’s free cash flow and net cash from financing activities.

The comparison is meant to find out whether Altria has been able to pay back the debt that it borrowed in the past.

Over the chart, we should focus on only the negative numbers of the net cash from financing activities as these numbers define Altria’s cash outflow or cash burn.

Based on the chart, Altria has considerably lower cash outflow from net cash from financing activities as opposed to the free cash flow in fiscal 2021.

Take the 2Q 2021 quarter, Altria’s free cash flow totaled $6 billion while cash outflow from net cash from financing activities came in at only $2 billion.

In this case, Altria’s free cash flow was more than enough to cover the cash outflow as a result of capital repayment.

Similarly, Altria generated $8 billion of free cash flow in fiscal 2021 Q1 and the amount was sufficient to cover the cash outflow that came in at only $1.3 billion recorded in the same quarter.

In short, Altria can afford to not only finance the company’s capital spending but also pay back the debt.

Even after Altria has paid off these expenses, the company was still left with tonnes of excess cash!

Summary

Altria’s cash on hand shot up considerably during the COVID-19 outbreak and stayed at this elevated level throughout 2020 to maintain the company’s liquidity.

However, Altria’s cash on hand normalized to the pre-COVID level as of 2Q 2021 at $1.9 billion USD.

From the ratio of cash on hand to current assets ratio, the figure also had normalized to the pre-COVID level as of 2021 2Q at 46%.

Therefore, the COVID pandemic seems to have no material impact on Altria’s liquidity.

Moreover, Altria has been a cash cow and generated tonnes of free cash flow, averaging around $8 billion between fiscal 2018 and 2021.

Altria’s cash flow has been more than enough to cover not only the business operations but also capital expenditures as well as the cash outflow meant for debt repayment.

In conclusion, to say that Altria is a cash cow is literally an understatement.

References and Credits

1. All financial figures in this article were obtained and referenced from Altria’s quarterly and annual statements which can be found in Altria’s SEC Filings.

2. Featured images are used under Creative Common Licenses and were obtained from 7C0 and elycefeliz.

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The content in this article is for informational purposes only and is neither a recommendation nor a piece of financial advice to purchase a stock.

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