Altria's $13B Juul investment has lost 95% of its value

Packaging for an electronic cigarette and menthol pods from Juul Labs is displayed on Feb. 25, 2020, in Pembroke Pines, Fla. The Food and Drug Administration and Juul have agreed to suspend court proceedings while the agency conducts additional review of the company's vaping devices. The agreement Wednesday, July 6, 2022, comes one day after the FDA placed a hold on its initial order banning Juul’s products. (AP Photo/Brynn Anderson, File)

This Thursday, Dec. 20, 2018 file photo shows a Juul electronic cigarette starter kit at a smoke shop in New York. Altria reports its nearly $13 billion investment in troubled vaping company Juul is worth 95% less than it originally paid. The tobacco giant on Thursday, July 28, 2022, said its stake in the e-cigarette maker is now worth less than $500 million after U.S. regulators announced plans to ban Juul's vaping devices. (AP Photo/Seth Wenig)

WASHINGTON (AP) — Cigarette maker Altria's $13-billion investment in the troubled vaping company Juul has gone up in smoke — now worth less than 5% of its original value as U.S. regulators move to ban its e-cigarettes.

Altria slashed the value of its Juul investment by more than $1.1 billion Thursday, pegging its new value at $450 million as it reported second-quarter earnings. Previously, the Marlboro maker had valued its stake in the company at $1.6 billion.

Despite the losses Altria said it would maintain its investment deal with Juul, including an agreement not to sell competing vaping products.

“At this time, we continue to believe that these investment rights are beneficial to us,” Altria said in a prepared statement.

Altria, based in Richmond, Virginia, is Juul’s largest investor with a 35% stake. Altria executives signed the $12.8-billion pact in 2018, betting that Juul’s popular vaping devices represented a lucrative new opportunity in the vaping market.

But last month the U.S. Food and Drug Administration announced plans to ban the small cartridge-based e-cigarettes, saying Juul had failed to provide key information about potentially harmful chemicals in its nicotine formula. The decision surprised industry observers and experts given that the FDA has authorized several competing e-cigarettes and Juul spent years gathering data to support its application.

In yet another twist to the company’s fortunes, the FDA reopened its review of Juul’s application earlier this month after a federal court blocked the ban from immediately taking effect. For now, Juul is able to continue selling its products while the FDA review continues.

The financial hit to Juul contributed to a nearly 60% drop in Altria's quarterly earnings of 49 cents per share.

Excluding Juul and other one-time expenses the company’s adjusted earnings were $1.26 per share, just ahead of Wall Street estimates. Six analysts surveyed by Zacks Investment Research expected earnings of $1.25 per share.

Net revenue slid nearly 6% to $6.5 billion due to lower sales of cigarettes and other core company products. The company brand's include Parliament and Marlboro cigarettes, Black and Mild cigars and Skoal chewing tobacco.

Altria, the nation's largest cigarette maker, has been attempting to diversify its product offerings into vaping and nicotine pouches as traditional tobacco use continues to fade.

Smoking has been declining for more than five decades. Some 42% of U.S. adults smoked in the early 1960s. That was down to less than 13% in the latest report from the Centers for Disease Control and Prevention

For the full-year Altria said it expects earnings in the range of $4.79 to $4.93 per share