Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
Economic Profit
Altria Group Inc., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 8,681 – 10.86% × 28,647 = 5,570
The financial trajectory from 2019 to 2023 reflects a significant turnaround in value creation, transitioning from a period of substantial economic loss to consistent economic profit. This trend is characterized by a simultaneous increase in operational profitability and a strategic reduction in the capital base.
- Net Operating Profit After Taxes (NOPAT)
- A volatile but overall upward trend is observed in NOPAT. Following a negative result of 482 million in 2019, profitability rose sharply to 5,245 million in 2020, dipped to 2,233 million in 2021, and then entered a period of sustained growth, reaching a peak of 8,681 million by 2023. This progression indicates a strengthened capacity to generate operating earnings.
- Invested Capital
- A consistent downward trend in invested capital is evident throughout the analyzed period. The capital base decreased from 42,624 million in 2019 to 28,647 million in 2023. This contraction suggests an optimization of the asset base or a reduction in capital intensity, which effectively lowered the cost charge against operating profits.
- Cost of Capital
- The cost of capital remained relatively stable, fluctuating within a narrow range between 10.36% and 11.18%. Because this percentage remained consistent, the fluctuations in economic profit are primarily attributable to changes in NOPAT and the scale of invested capital rather than shifts in the cost of financing.
- Economic Profit
- Economic profit shifted from a significant deficit of 4,985 million in 2019 to a substantial surplus of 5,570 million in 2023. The convergence of rising NOPAT and a diminishing capital base has led to an acceleration of value creation, particularly between 2021 and 2023, where economic profit rose from negative 1,414 million to 5,570 million.
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Net Operating Profit after Taxes (NOPAT)
Altria Group Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in LIFO reserve. See details »
3 Addition of increase (decrease) in equity equivalents to net earnings (losses) attributable to Altria.
4 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 1,149 × 21.00% = 241
5 Addition of after taxes interest expense to net earnings (losses) attributable to Altria.
6 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 160 × 21.00% = 34
7 Elimination of after taxes investment income.
The financial trajectory between 2019 and 2023 is marked by an initial period of instability followed by a consistent recovery and expansion in operational and net profitability. Both net earnings and net operating profit after taxes (NOPAT) transitioned from negative territory in 2019 to record highs by the end of the period.
- NOPAT Performance and Volatility
- A significant operational recovery occurred between 2019 and 2020, with NOPAT shifting from a loss of $482 million to a profit of $5,245 million. Following a temporary contraction to $2,233 million in 2021, a strong upward trend emerged, with the figure rising to $5,753 million in 2022 and reaching a peak of $8,681 million in 2023.
- Net Earnings Trend Analysis
- Net earnings demonstrated a similar pattern of fluctuation, recording a loss of $1,293 million in 2019 before rebounding to $4,467 million in 2020. After a decline to $2,475 million in 2021, earnings increased steadily over the subsequent two years, closing at $8,130 million in 2023.
- Operational Efficiency and Bottom-Line Correlation
- A strong positive correlation is observed between NOPAT and net earnings throughout the five-year period. In 2023, NOPAT exceeded net earnings by $551 million, suggesting that core operating performance is a primary driver of financial value. The divergence in 2019, where net losses were more severe than the operating loss, indicates that non-operating factors or one-time charges had a disproportionate negative impact on the final bottom line during that fiscal year.
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Cash Operating Taxes
Altria Group Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
Analysis of the tax components reveals a divergence between accounting-based tax provisions and actual cash outflows for taxes. While the provision for income taxes exhibits significant volatility, the cash operating taxes demonstrate a more consistent upward trajectory over the five-year period ending December 31, 2023.
- Cash Operating Tax Trajectory
- Cash operating taxes increased from US$ 2,428 million in 2019 to US$ 3,236 million in 2023. This represents a steady growth pattern, with only a marginal decline observed in 2021, followed by a consistent climb through 2023, indicating a rising cash requirement for tax obligations.
- Tax Provision Volatility
- The provision for income taxes shows substantial variance, fluctuating from a low of US$ 1,349 million in 2021 to a high of US$ 2,798 million in 2023. The non-linear movement of the provision suggests the impact of deferred tax adjustments or non-cash accounting items that do not align with immediate cash disbursements.
- Cash-to-Provision Variance
- A persistent gap is maintained where cash operating taxes consistently exceed the provision for income taxes. This discrepancy was most acute in 2021, where cash taxes were more than double the reported provision, signaling a significant difference between the accrual-based tax expense and the actual cash liquidity utilized for tax payments.
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Invested Capital
Altria Group Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 Elimination of deferred taxes from assets and liabilities. See details »
2 Addition of LIFO reserve. See details »
3 Addition of equity equivalents to stockholders’ equity (deficit) attributable to Altria.
4 Removal of accumulated other comprehensive income.
5 Subtraction of construction in progress.
Between December 31, 2019, and December 31, 2023, a significant contraction in the total invested capital is observed, with the value decreasing from 42,624 million US$ to 28,647 million US$. This represents a total reduction of approximately 32.8% over the five-year period. The most pronounced declines occurred between 2020 and 2022, indicating a substantial shift in the capital structure and the overall funding base used to generate economic value.
- Invested Capital Trends
- Invested capital experienced a steady downward trajectory, falling from 42,624 million US$ in 2019 to 28,647 million US$ by the end of 2023. A notable acceleration in this decline is evident between 2020 and 2021, where the value dropped by approximately 8 billion US$, and continuing into 2022. By 2023, the level of invested capital appeared to stabilize, showing only a marginal decrease from the previous year.
- Stockholders' Equity Evolution
- The most volatile component of the capital structure is stockholders' equity, which transitioned from a positive balance of 6,222 million US$ in 2019 to a deficit position. The equity balance declined sharply to 2,839 million US$ in 2020 before crossing into negative territory in 2021 with a deficit of 1,606 million US$. The deficit deepened to a peak of 3,973 million US$ in 2022 before slightly recovering to 3,540 million US$ in 2023. This shift toward a negative equity position suggests an aggressive return of capital to shareholders or significant accounting adjustments that outweighed retained earnings.
- Debt and Lease Obligations
- Total reported debt and leases remained relatively stable compared to the volatility observed in equity. After a slight increase to 29,471 million US$ in 2020, debt levels entered a gradual decline, reaching 26,233 million US$ by December 31, 2023. Because the stockholders' equity became negative, debt became the primary, and eventually the sole, positive contributor to the invested capital calculation in the later years of the period.
The intersection of these trends reveals a capital structure that has become increasingly reliant on debt while aggressively reducing the equity base. The transition to a negative equity position significantly lowered the denominator for invested capital, which typically alters the calculation of the return on invested capital (ROIC) and the subsequent determination of economic value added (EVA).
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Cost of Capital
Altria Group Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 72,126) | 72,126) | ÷ | 96,499) | = | 0.75 | 0.75 | × | 13.39% | = | 10.01% | ||
| Long-term debt, including current portion3 | 24,373) | 24,373) | ÷ | 96,499) | = | 0.25 | 0.25 | × | 4.25% × (1 – 21.00%) | = | 0.85% | ||
| Total: | 96,499) | 1.00 | 10.86% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 83,100) | 83,100) | ÷ | 106,028) | = | 0.78 | 0.78 | × | 13.39% | = | 10.50% | ||
| Long-term debt, including current portion3 | 22,928) | 22,928) | ÷ | 106,028) | = | 0.22 | 0.22 | × | 4.00% × (1 – 21.00%) | = | 0.68% | ||
| Total: | 106,028) | 1.00 | 11.18% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 93,552) | 93,552) | ÷ | 124,011) | = | 0.75 | 0.75 | × | 13.39% | = | 10.10% | ||
| Long-term debt, including current portion3 | 30,459) | 30,459) | ÷ | 124,011) | = | 0.25 | 0.25 | × | 3.99% × (1 – 21.00%) | = | 0.77% | ||
| Total: | 124,011) | 1.00 | 10.88% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 81,039) | 81,039) | ÷ | 115,721) | = | 0.70 | 0.70 | × | 13.39% | = | 9.38% | ||
| Long-term debt, including current portion3 | 34,682) | 34,682) | ÷ | 115,721) | = | 0.30 | 0.30 | × | 4.15% × (1 – 21.00%) | = | 0.98% | ||
| Total: | 115,721) | 1.00 | 10.36% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 78,962) | 78,962) | ÷ | 109,672) | = | 0.72 | 0.72 | × | 13.39% | = | 9.64% | ||
| Long-term debt, including current portion3 | 30,710) | 30,710) | ÷ | 109,672) | = | 0.28 | 0.28 | × | 4.17% × (1 – 21.00%) | = | 0.92% | ||
| Total: | 109,672) | 1.00 | 10.57% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
Economic Spread Ratio
Altria Group Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | 5,570) | 2,532) | (1,414) | 945) | (4,985) | |
| Invested capital2 | 28,647) | 28,802) | 33,524) | 41,498) | 42,624) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 19.45% | 8.79% | -4.22% | 2.28% | -11.70% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Coca-Cola Co. | 3.97% | 3.66% | 5.20% | — | — | |
| Mondelēz International Inc. | -0.12% | -3.93% | -0.92% | — | — | |
| PepsiCo Inc. | 4.22% | 4.19% | 4.75% | — | — | |
| Philip Morris International Inc. | 8.81% | 11.75% | 26.08% | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 5,570 ÷ 28,647 = 19.45%
4 Click competitor name to see calculations.
The financial performance from 2019 to 2023 demonstrates a significant transition toward enhanced capital efficiency and value creation. The period is characterized by a strategic contraction of the invested capital base coinciding with a substantial recovery and growth in economic profit.
- Economic Profit Trends
- Economic profit exhibited high volatility in the initial three years, fluctuating from a deficit of US$ 4,985 million in 2019 to a surplus of US$ 945 million in 2020, before returning to a deficit of US$ 1,414 million in 2021. A decisive positive trend emerged thereafter, with profit increasing to US$ 2,532 million in 2022 and reaching US$ 5,570 million by the end of 2023.
- Invested Capital Dynamics
- A consistent downward trend is observed in invested capital throughout the analyzed period. The capital base decreased from US$ 42,624 million in 2019 to US$ 28,647 million in 2023, representing a total reduction of approximately 32.8%. This suggests a systematic streamlining of assets or a strategic reduction in capital deployment.
- Economic Spread Ratio Analysis
- The economic spread ratio reflects the volatility seen in economic profit but indicates a strong acceleration in efficiency toward the end of the period. After oscillating between -11.70% and 2.28% between 2019 and 2021, the ratio expanded significantly to 8.79% in 2022 and 19.45% in 2023. This sharp increase suggests a widening margin between the return on invested capital and the cost of capital, signaling a marked improvement in the company's ability to generate economic value per unit of capital employed.
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Economic Profit Margin
Altria Group Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | 5,570) | 2,532) | (1,414) | 945) | (4,985) | |
| Net revenues | 24,483) | 25,096) | 26,013) | 26,153) | 25,110) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 22.75% | 10.09% | -5.44% | 3.61% | -19.85% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Coca-Cola Co. | 7.25% | 6.81% | 10.80% | — | — | |
| Mondelēz International Inc. | -0.21% | -7.96% | -1.98% | — | — | |
| PepsiCo Inc. | 3.46% | 3.37% | 4.17% | — | — | |
| Philip Morris International Inc. | 12.87% | 17.52% | 24.21% | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 Economic profit. See details »
2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Net revenues
= 100 × 5,570 ÷ 24,483 = 22.75%
3 Click competitor name to see calculations.
The analysis of economic performance between 2019 and 2023 reveals a significant transition from capital value destruction to substantial value creation. Despite a gradual decline in net revenues, there is a pronounced upward trajectory in both absolute economic profit and the economic profit margin during the latter half of the period.
- Economic Profit Trends
- Economic profit exhibited significant volatility in the early years of the period, recording a loss of 4,985 million USD in 2019 and a subsequent loss of 1,414 million USD in 2021. However, a strong recovery is observed in 2022 and 2023, with economic profit reaching 5,570 million USD by the end of 2023. This represents a sharp reversal in the capacity to generate returns exceeding the cost of capital.
- Net Revenue Performance
- Net revenues peaked in 2020 at 26,153 million USD and have since followed a consistent downward trend, decreasing to 24,483 million USD by 2023. The fact that economic profit increased while revenues declined suggests that the improvement in value creation is driven by internal efficiencies, cost management, or capital structure optimizations rather than top-line expansion.
- Economic Profit Margin Analysis
- The economic profit margin mirrors the volatility of the absolute profit figures, shifting from a low of -19.85% in 2019 to a high of 22.75% in 2023. The acceleration of this margin, particularly the increase from -5.44% in 2021 to 22.75% in 2023, indicates a substantial increase in the efficiency of value generation relative to the revenue base.
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