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 – 10.69% × 28,647 = 5,618
The analysis of economic profit from 2019 to 2023 reveals a transition from significant value destruction to substantial value creation. After a period of volatility between 2019 and 2021, a consistent upward trajectory in economic profit is observed, culminating in a peak of 5,618 million US dollars by the end of 2023.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited significant volatility during the first three years of the period, shifting from a loss of 482 million US dollars in 2019 to 5,245 million US dollars in 2020, before dropping to 2,233 million US dollars in 2021. However, from 2021 onward, a strong recovery is evident, with NOPAT increasing to 5,753 million US dollars in 2022 and reaching 8,681 million US dollars in 2023, indicating a marked improvement in core operating profitability.
- Invested Capital and Capital Efficiency
- A sustained downward trend in invested capital is observed throughout the five-year period. Capital decreased from 42,624 million US dollars in 2019 to 28,647 million US dollars in 2023. This reduction in the capital base suggests a strategic contraction or a shift toward a more capital-light operating model, which reduces the total capital charge required to generate profits.
- Cost of Capital Stability
- The cost of capital remained relatively stable, fluctuating within a narrow band between 10.21% and 11.01%. Because the cost of capital did not vary significantly, the fluctuations in economic profit were primarily driven by changes in operating performance and the volume of invested capital rather than changes in the cost of funding.
- Economic Profit Dynamics
- Economic profit was negatively impacted in 2019 and 2021, reflecting instances where NOPAT was insufficient to cover the cost of invested capital. The shift to a positive economic profit of 5,618 million US dollars in 2023 is the result of a dual-positive effect: the simultaneous increase in NOPAT and the decrease in the invested capital base. This combination indicates that the entity is generating increasingly higher returns on a smaller amount of capital, leading to accelerated shareholder value creation.
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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.
- Net earnings (losses) attributable to Altria
- The net earnings attributable to the company demonstrated significant volatility over the analyzed period. In 2019, the company reported a net loss of $1,293 million. However, a substantial recovery occurred in 2020, with net earnings increasing sharply to $4,467 million. This positive trend continued, albeit with fluctuations, as earnings decreased to $2,475 million in 2021 before rising again to $5,764 million in 2022 and further to $8,130 million in 2023. Overall, the data indicates a strong recovery and growth in earnings after the initial loss in 2019.
- Net operating profit after taxes (NOPAT)
- NOPAT mirrored the pattern observed in net earnings, starting with a negative value of $482 million in 2019. This figure increased significantly to $5,245 million in 2020, reflecting improved operational profitability. After a decline to $2,233 million in 2021, NOPAT rebounded to $5,753 million in 2022 and further increased to $8,681 million in 2023. These trends signify a recovery in operating performance, with NOPAT surpassing net earnings figures consistently from 2020 onward, indicating effective operational management and tax impact considerations.
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Cash Operating Taxes
Altria Group Inc., cash operating taxes calculation
US$ 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).
- Provision (benefit) for income taxes
- The provision for income taxes experienced fluctuations over the five-year period. Starting at 2,064 million USD in 2019, it rose substantially to 2,436 million USD in 2020. A marked decline occurred in 2021, with the provision dropping to 1,349 million USD, followed by a moderate increase to 1,625 million USD in 2022. In 2023, the provision escalated sharply to 2,798 million USD, reaching its highest level in the observed period.
- Cash operating taxes
- Cash operating taxes showed a consistent upward trend across the years. The amount increased from 2,428 million USD in 2019 to 2,854 million USD in 2020. Although there was a minor decrease in 2021 to 2,753 million USD, the overall trajectory remained positive, with values climbing to 2,794 million USD in 2022 and further rising to 3,236 million USD in 2023. This indicates a steady growth in cash outflows related to operating taxes over the period.
- Comparative Insights
- While cash operating taxes demonstrated a relatively stable and progressive increase, the provision for income taxes displayed more volatility, with notable decreases and increases. The divergence between provision and cash taxes in some years, particularly in 2021 and 2023, could suggest variations in deferred tax accounting or changing tax planning strategies. The significant rise in both provisions and cash taxes in 2023 warrants careful examination to understand underlying drivers such as changes in taxable income or tax rates.
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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.
- Total reported debt & leases
-
The total reported debt and leases show a relatively stable yet slightly declining trend over the five-year period. Starting at $28,042 million in 2019, the figure increased moderately to $29,471 million in 2020, signaling a short-term rise in liabilities. However, from 2021 onwards, the debt levels consistently decreased each year, falling to $28,044 million in 2021, $26,680 million in 2022, and further down to $26,233 million in 2023. This pattern suggests an effort to reduce overall debt and lease obligations after a peak in 2020.
- Stockholders’ equity (deficit) attributable to Altria
-
The stockholders' equity attributable to the company experienced a marked and continuous decline throughout the period. Beginning at $6,222 million in 2019, equity reduced sharply to $2,839 million in 2020. In 2021, equity became negative, registering at -$1,606 million, indicating that liabilities exceeded assets. The negative trend intensified in subsequent years, reaching -$3,973 million in 2022 and slightly improving to -$3,540 million in 2023. This deterioration reflects possible sustained losses, share repurchases, or other factors diminishing equity value over time.
- Invested capital
-
Invested capital demonstrated a clear downward trend from 2019 through 2023. It started relatively high at $42,624 million in 2019, followed by a moderate decline to $41,498 million in 2020. The reduction accelerated thereafter, with invested capital dropping to $33,524 million in 2021, and further to $28,802 million in 2022 and $28,647 million in 2023. The consistent decrease in invested capital suggests contraction in assets employed in the business or disposition of investments over the analyzed timeframe.
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Cost of Capital
Altria Group Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 72,126) | 72,126) | ÷ | 96,499) | = | 0.75 | 0.75 | × | 13.17% | = | 9.85% | ||
| Long-term debt, including current portion3 | 24,373) | 24,373) | ÷ | 96,499) | = | 0.25 | 0.25 | × | 4.25% × (1 – 21.00%) | = | 0.85% | ||
| Total: | 96,499) | 1.00 | 10.69% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ 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 | × | 13.17% | = | 10.33% | ||
| 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 | 11.01% | ||||||||||
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 | × | 13.17% | = | 9.94% | ||
| 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 | 10.71% | ||||||||||
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 | × | 13.17% | = | 9.23% | ||
| 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 | 10.21% | ||||||||||
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 | × | 13.17% | = | 9.49% | ||
| 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 | 10.41% | ||||||||||
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 | 5,618) | 2,582) | (1,358) | 1,009) | (4,918) | |
| Invested capital2 | 28,647) | 28,802) | 33,524) | 41,498) | 42,624) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 19.61% | 8.96% | -4.05% | 2.43% | -11.54% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Coca-Cola Co. | 4.37% | 4.06% | 5.59% | — | — | |
| Mondelēz International Inc. | 0.25% | -3.57% | -0.56% | — | — | |
| PepsiCo Inc. | 4.58% | 4.56% | 5.11% | — | — | |
| Philip Morris International Inc. | 9.14% | 12.10% | 26.45% | — | — | |
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 × 5,618 ÷ 28,647 = 19.61%
4 Click competitor name to see calculations.
A comprehensive analysis of value creation reveals a significant reversal in financial performance between 2019 and 2023. The transition from negative economic profit to a substantial positive spread indicates a strategic shift from value destruction to value creation.
- Economic Spread Ratio
- The ratio exhibited volatility during the initial years, fluctuating from -11.54% in 2019 to 2.43% in 2020, and returning to a negative -4.05% in 2021. However, a robust recovery occurred in the subsequent period, with the ratio rising to 8.96% in 2022 and peaking at 19.61% in 2023. This trajectory indicates a widening positive gap between the return on capital and the cost of capital.
- Economic Profit
- Economic profit followed a similar pattern of volatility and eventual growth. After an initial loss of US$ 4,918 million in 2019, the figure fluctuated, including a loss of US$ 1,358 million in 2021. A strong upward trend emerged thereafter, resulting in a profit of US$ 2,582 million in 2022 and US$ 5,618 million in 2023, marking a substantial increase in the amount of wealth generated above the required return.
- Invested Capital
- A consistent and steady decline in invested capital is observed over the five-year period. Total invested capital decreased from US$ 42,624 million in 2019 to US$ 28,647 million in 2023. This reduction in the capital base has served as a catalyst for the improvement in the economic spread ratio, as higher economic profits were achieved on a significantly smaller capital footprint.
The synthesis of these trends suggests that the improvement in the economic spread ratio was driven by a dual mechanism: the recovery and growth of absolute economic profit coupled with a systematic reduction in invested capital.
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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 | 5,618) | 2,582) | (1,358) | 1,009) | (4,918) | |
| Net revenues | 24,483) | 25,096) | 26,013) | 26,153) | 25,110) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 22.94% | 10.29% | -5.22% | 3.86% | -19.59% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Coca-Cola Co. | 7.97% | 7.55% | 11.61% | — | — | |
| Mondelēz International Inc. | 0.43% | -7.23% | -1.20% | — | — | |
| PepsiCo Inc. | 3.76% | 3.67% | 4.49% | — | — | |
| Philip Morris International Inc. | 13.35% | 18.05% | 24.56% | — | — | |
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 × 5,618 ÷ 24,483 = 22.94%
3 Click competitor name to see calculations.
The financial performance between 2019 and 2023 is characterized by a significant transition from negative economic value creation to substantial economic profit growth. While revenues experienced a slight contraction during the latter part of the period, the efficiency of capital utilization improved markedly, resulting in a sharp increase in the economic profit margin.
- Economic Profit Volatility and Growth
- A period of instability is observed between 2019 and 2021, with economic profit fluctuating between a deficit of 4,918 million USD in 2019 and a surplus of 1,009 million USD in 2020, before dipping again to -1,358 million USD in 2021. However, a strong recovery began in 2022, with economic profit reaching 2,582 million USD and accelerating to 5,618 million USD by 2023. This indicates a successful reversal of value destruction toward consistent value creation.
- Revenue and Profit Divergence
- A divergence is noted between net revenues and economic profit. Net revenues peaked in 2020 at 26,153 million USD and followed a gradual downward trend to 24,483 million USD by 2023. Despite this decline in top-line revenue, economic profit increased substantially over the same period. This suggests that the growth in economic profit was not driven by sales expansion, but rather by improvements in operational efficiency, cost reductions, or a reduction in the cost of capital.
- Economic Profit Margin Expansion
- The economic profit margin reflects this efficiency gain, moving from a low of -19.59% in 2019 to a high of 22.94% in 2023. The margin trajectory shifted from negative territory to a robust positive percentage, effectively more than doubling from 10.29% in 2022 to 22.94% in 2023. This expansion confirms that the organization is generating significantly more value over and above its cost of capital per dollar of revenue generated.
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