アルトリア（MO）2026年第3四半期決算説明会：EPSガイダンスを引き上げ

主要なポイント

• アルトリア・グループ（NYSE: MO）が発表した第3四半期の調整後希薄化後1株当たり利益（EPS）は前年同期比4.8%増加しました。2026年最初の9か月間の調整後EPSは5.1%増加しました。
• 経営陣は、2026年通期の調整後希薄化後EPS見通し（ガイダンス）を5.66ドル〜5.74ドルに引き上げました。これは、2025年の5.42ドルから4.5%〜6.0%の成長を示しています。
• 可燃性タバコ製品セグメントの調整後営業会社利益（OCI）は3.9%増の31億ドルとなり、調整後利益率は0.1ポイント上昇して64.5%に達しました。
• 「on!」の出荷数量は13.3%増の4,780万缶となりました。第3四半期の小売シェアは8.3%に達し、前年同期比で1ポイント上昇したものの、前四半期比では低下しました。
• アルトリアは最初の9か月間に、53億ドルの配当と7億3,500万ドルの自社株買いを含め、60億ドル超を株主に還元しました。取締役会は既存の自社株買い枠を10億ドル追加しました。
• 経営陣は、成人の喫煙者に対する経済的圧力、ニコチンパウチの競合、非合法の電子たばこ製品、およびFDA（米国食品医薬品局）の承認プロセスに関する不確実性が、引き続き重要な事業上の考慮事項であると述べました。

主要財務データ

最初の9か月間において、可燃性タバコ製品の調整後OCIは4.1%増の88億ドルとなり、調整後利益率は0.4ポイント拡大して64.8%となりました。経口無煙タバコ製品の調整後OCIは4.0%減の13億ドルとなり、利益率は66.8%でした。

事業および業績の動向

可燃性タバコ製品

可燃性タバコ製品事業は、引き続きアルトリアの主な収益成長の牽引役となりました。当四半期の報告ベースの国内紙巻たばこ出荷数量は2.9%減少しました。流通在庫の変動を調整した後、経営陣は4%の減少と推定しており、業界全体で推定される5%の縮小をやや上回る推移となりました。

「マールボロ」はプレミアムセグメントで60%のシェアを維持し、前年同期比で0.3ポイント上昇しました。経済的圧力を背景にディスカウントブランドの成長が続いたため、全体の小売シェアは前四半期比で横ばい、前年同期比では1ポイント低下しました。

「マールボロ・カウボーイ・カット」は、価格に敏感な喫煙者をマールボロ・ブランド内に引き留めることを目的としています。経営陣は、データ分析とレベニュー・グロース・マネジメント・ツールに基づき、導入時の特別価格設定の後に、時間の経過とともに価格や利益率を引き上げることが可能であると述べました。

PM USAがプレミアムおよびディスカウントのより幅広いポートフォリオを活用したことで、「ベーシック」もシェアを拡大しました。PM USA全体の小売シェアは前四半期比、前年同期比ともに上昇しました。

経口無煙タバコおよびニコチンパウチ

アルトリアの推定によると、直近6か月間で経口無煙タバコカテゴリーは5.5%成長しました。ニコチンパウチは第3四半期にシェアを5.8ポイント伸ばし、経口無煙タバコカテゴリー全体の60%以上を占めました。

Helixは全米で「on! PLUS」12ミリグラム製品の「ウィンターグリーン」と「タバコ」を拡大しました。また、「ブルーベリーミント」と「マンゴーパイナップル」を導入し、11月には一部の販売店向けに「スイカミント」の展開を予定しています。

同社によると、「on!」のプレミアム小売ポジショニングは、現在、同社出荷数量の約90%を占める店舗をカバーしています。しかし、「on!」の成長が湿式スナッフの数量減少によって相殺されたため、経口無煙タバコ全体の出荷数量は4.3%減少しました。

株主還元と貸借対照表

アルトリアは最初の9か月間に、53億ドルの配当を支払い、7億3,500万ドルの自社株買いを実施しました。四半期配当は4.7%増の1株当たり1.11ドルに引き上げられ、57年間で61回目の増配となりました。

取締役会は既存の自社株買い枠を10億ドル拡大し、プログラムの期限を2027年12月31日まで延長しました。9月30日時点のアルトリアの有利子負債対EBITDA比率は1.9倍となり、目標とする約2倍に概ね沿った水準となりました。

経営陣の見通し（ガイダンス）

アルトリアは2026年の調整後希薄化後EPS見通しを5.66ドル〜5.74ドルに引き上げました。このレンジは、2025年の調整後希薄化後EPSである5.42ドルから4.5%〜6.0%の成長を示唆しており、当初の成長見通しである2.5%〜5.0%から上方修正されました。

経営陣は、改定後の見通しには、アルトリアの煙の出ない製品（スモークフリー）戦略、特に「on! PLUS」、高ニコチン度数、およびフレーバーの拡張への継続的な投資が含まれていると述べました。また、この見通しは、インフレやガソリン価格の高騰による消費者への継続的な圧力を前提としています。

リスクと注目点

• 消費者への圧力：経営陣によると、財やサービスの全体的なコストは2021年以降およそ30%上昇しており、ガソリン価格の高騰が可処分所得をさらに圧迫しているとのことです。
• ニコチンパウチの競争：競合他社の販促支出は依然として高水準にあり、「on!」の小売シェアは前年同期比では拡大したものの、前四半期比では低下しました。
• FDAの承認プロセス：アルトリアは、既存の取り締まり指針が変更される可能性を指摘し、ルールメイキングを通じてより予測可能な承認枠組みを確立するよう求めました。
• 非合法の電子たばこ市場：経営陣は、取締りの強化がカテゴリーの動向に影響を与えているようであるものの、非合法製品が依然として電子たばこ市場の大半を占めていると述べました。
• 経口無煙タバコの製品ミックス：湿式スナッフの出荷数量減少が引き続きニコチンパウチの成長を相殺し、セグメント利益の押し下げ要因となりました。
• 投資要件：製品の市場投入、ブランド構築、および店頭施策への継続的な支出が、短期的には経口無煙タバコ事業の収益性を圧迫する可能性があります。

アナリスト質疑応答の要点

• 紙巻たばこ出荷数量の底堅さ：経営陣は、紙巻たばこの減少幅の鈍化について、低価格の非合法電子たばこ製品への流出が減少したことが一因であると説明しました。その要因として製品の成熟化と取締りの強化を挙げました。
• 「on!」の出荷データとスキャナーデータの差異：アルトリアは、12ミリグラム製品や新フレーバーの展開により一定の流通在庫が生じたことに加え、パウチ単位と缶単位の計測方法の違いも報告データの乖離に寄与したと説明しました。
• 関税払戻し（デューティー・ドローバック）と輸出：経営陣は、現在の受託製造契約による利益効果が第3四半期と第4四半期の間で概ね同程度になると見込んでいます。フィリップ・モリスとの製造協定は2027年から寄与し始める予定ですが、アルトリアは具体的な財務予測数値を公表していません。
• 電子たばこ市場への再参入：同社は電子たばこ市場へ再参入する計画ですが、時期は発表していません。経営陣は、規律あるアプローチをとり、時間をかけて収益性を達成することに注力すると述べました。
• ニコチンパウチの長期的な機会：経営陣は、ニコチンパウチをタバコのハームリダクション（危害軽減）における重要な機会と捉え続けています。ニコチン度数やフレーバーのイノベーション、ブランド投資が「on!」を支えると期待する一方で、市場規模の拡大に伴いパーセンテージベースの成長率は鈍化する可能性があることを認めています。

業績説明会（決算電話会議）全文文字起こし

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good day, and welcome to the Altria Group 2026 3rd quarter earnings conference call. Today's call is scheduled to last about 1 hour, including remarks by Altria's management and a question-and-answer session. Representatives of the investment community and media on the call will be able to ask questions following the conclusion of the prepared remarks. I would now like to turn the call over to Mac Livingston, Vice President of Investor Relations. Please go ahead, sir.

Mac Livingston

Thanks, Olivia. Good morning, and thank you for joining us. This morning, Sal Mancuso, Altria's CEO; and Heather Newman, our CFO, will discuss Altria's 2026 and third quarter and first 9 months business results.

Earlier today, we issued a press release providing our results. The release, presentation and quarterly metrics are all available at altria.com. During our call today, unless otherwise stated, we're comparing results to the same period in 2025. Our remarks contain forward-looking statements, including projections of future results. Please review the forward-looking and cautionary statements section at the end of today's earnings release for various factors that could cause actual results to differ materially from projections. Future dividend payments and share repurchases remain subject to the discretion of our Board of Directors.

We report our financial results in accordance with U.S. generally accepted accounting principles. Today's call will contain various operating results on both a reported and adjusted basis. Adjusted results exclude special items that affect comparisons with reported results. Descriptions of these non-GAAP financial measures and reconciliations to the most comparable GAAP financial measures are included in today's earnings release and on our website at altria.com.

Finally, all references in today's remarks to nicotine consumers or consumers within a specific nicotine category or segment refer to existing adult nicotine consumers 21 years of age or older. With that, I'll turn the call over to Sal.

Salvatore Mancuso

Thanks, Mac. Good morning, and thank you for joining us. Altria delivered strong financial performance in the third quarter, growing adjusted diluted earnings per share by 4.8%, while continuing to invest in our vision and building on our foundation for the future. In smokable products, PM USA grew operating company's income through its data-driven total portfolio approach with Cowboy Cut strengthening Marboloro's premium position and basic continuing to gain share in discount.

In smoke-free, Helix made meaningful progress by expanding on! PLUS 12-milligram nationwide, investing in brand-building initiatives and preparing for its next wave of innovation, which is now underway with the introduction of Blueberry Mint and Mango and pineapple flavor extensions at retail. Our highly cash-generative businesses supported significant returns to shareholders. through dividends and share repurchases, while we continue to invest in support of our vision. In August, we announced our first dividend increase in 57 years and our Board recently authorized a $1 billion expansion of our existing share repurchase program. Our strong performance through the first 9 months and confidence in our full year plan allowed us to raise our earnings guidance for the year. My remarks this morning will focus on third quarter performance from on! and the evolving regulatory environment.

I'll then turn it over to Heather, who will provide further details on our business results and 2026 financial outlook. Let's begin with the nicotine pouch category and are growing on! portfolio. Nicotine pouches continue to drive volume growth in the oral tobacco category which we estimate increased 5.5% over the past 6 months. In the third quarter, the nicotine pouch category grew 5.8 share points and now represents more than 60% of the total oral category. As the category continues to expand, Helix is delivering solid results and strengthening on!'s position in an increasingly competitive marketplace.

In the third quarter, on! reported shipment volume increased 13.3% to 47.8 million cans. Year-to-date, reported shipment volume increased 7.7%. On! retail share was 8.3% in the third quarter, up 1 versus the prior year and down sequentially. This performance is encouraging as ON's retail price continued to move higher and competitive investment remained elevated across the category during the quarter. Higher nicotine strengths and broader flavor variety continue to drive growth in the nicotine pouch category. And Helix is expanding on! to better meet this consumer demand. In the third quarter, Helix expanded on! PLUS 12-milligram nationally across a Wintergreen and tobacco. And this month, introduced Blueberry Mint and Mango Pineapple and we're excited to announce that Watermelon Mint will join the portfolio in select retail locations in November with plans for more flavor innovation to come.

We believe these additions strengthen the on! PLUS portfolio and are supporting it with superior retail execution. Earlier this year, Helix launched a retail trade program that secured premium positioning and stores representing approximately 90% of its volume. In an increasingly competitive category, we believe this positioning provides valuable visibility to support awareness, trial and conversion. Beyond retail, Helix continues to invest in building beyond brand and creating distinctive consumer experiences.

Earlier this month, Helix hosted the inaugural [ on!vitational ] and invite-only golf tournament in Palm Beach, Florida. The event gave on! consumers a chance to compete alongside athletes and golf personalities. Helix highlighted the tournament with digital content design to end its adult nicotine consumer reach beyond the event itself. Planned as a multiyear platform. We believe the [indiscernible] can become a signature brand experience that builds lasting equity and further differentiates on! over time. These efforts are grounded in responsibility with safeguards to limit reach to underage audiences and a strong focus on regulatory compliance.

We're encouraged by the progress Helix has made so far this year and the foundation it is building for future growth. with a broader on! PLUS portfolio, premium retail visibility and growing brand equity, we continue to believe on! is well positioned to compete and drive long-term profitable growth in the category. From a regulatory perspective, the FDA's enforcement guidance allowed Helix to move through the regulatory process more efficiently. However, guidance can change. sustained progress on harm reduction requires a more durable foundation, an efficient and predictable authorization process established to rulemaking. That's why Helix and Enjoy brought legal action against the FDA during the quarter. The complaint asked the court to require the FDA to establish a review process that meets the 180-day time frame set by Congress and to allow our products with applications pending beyond that time frame to be in market while the agency puts a new process in place.

Following the filing, the FDA announced plans to evaluate changes to the PMTA framework. The agency acknowledged challenges it has faced implementing the 2021 PMTA rule, including the widespread growth of the illicit market and slow pace of new product authorizations and intends to pursue new rulemaking. We welcome this development and believe the modernize framework that maintains a high bar, with rigorous standards for new products and provides greater clarity, predictability and efficiency is critical to advancing the long-term harm reduction opportunity. A more efficient authorization process must be paired with consistent illicit product enforcement. On that front, we continue to see encouraging progress on illicit e-vapor enforcement as federal, state and local policymakers and law enforcement take meaningful steps to close the gaps and hold bad actors accountable across the supply chain.

These enforcement efforts appear to be impacting e-vapor category dynamics. At the end of September, we estimate there were approximately 20 million adult vapers, down $1 million versus a year ago, primarily driven by fewer e-vapor consumers using illicit products. Ultimately, we believe sustained enforcement and a more efficient authorization process are both necessary to establish a level playing field for legal manufacturers and expand access to high-quality smoke-free products for adult nicotine consumers. We remain confident in the opportunities in front of us. The breadth of our portfolio, the passion of our talented employees, our manufacturing capabilities and the financial flexibility supported by PM USA's import export activity position us to deliver strong shareholder returns while investing for the future.

With that, I'll turn the call over to Heather to provide additional details on our business and financial results.

Heather Newman

Thanks, Sal, and good morning, everyone. Altria's operating companies effectively executed their strategies and delivered impressive third quarter and first 9 months financial performance. Adjusted diluted earnings per share increased 4.8% in the third quarter and by 5.1% for the first 9 months. We delivered these results in an environment of continued economic pressure on adult smokers. The overall cost of goods and services has risen roughly 30% since 2021. And putting sustained pressure on household budgets while more recent increases in gas prices have further constrained discretionary income.

Against this backdrop, the smokeable products segment remains the key contributor to earnings growth. Our smokeable strategy is to maximize profitability over the long term, while balancing investments in Marlboro and funding the growth of smoke-free products. PM USA's portfolio approach supports this strategy by offering options across brands and price points, while driving strong financial results. Adjusted operating company's income grew by 3.9% to $3.1 billion in the third quarter and by 4.1% to $8.8 billion for the first 9 months.

Adjusted OCI margins expanded to 64.5% for the third quarter and 64.8% for the first 9 months, up 0.1 percentage points and 0.4 percentage points, respectively. Price realization was 4.4% for the quarter. reflecting the mix impact of both Marlboro Cowboy Cut and basic volume growth. Smokeable volumes declined remained moderate. Reported domestic cigarette volumes declined by 2.9% in the third quarter and 2.8% for the first 9 months. When adjusted for trade inventory movements, we estimate domestic cigarette volumes for the third quarter and for the first 9 months declined by 4%, slightly below an estimated 5% decline for the industry. Within the highly profitable premium segment, Marlboro strengthened its long-standing leadership position.

The introduction of Cowboy Cut provided price-sensitive Marlboro smokers with a premium option in a challenging economic environment, contributing to moral share performance in the third quarter. Marlboro expanded its share premium segment to 60% up 0.3% versus the prior year and 4/ %10 sequentially. Marlboro's overall retail share was unchanged sequentially and down 1 share point versus the year ago period. as economic pressures continue to drive discount segment growth. In the third quarter, discount retail share grew by 2 share points and is now 34.1% of the category.

Basic continues to support PM USA's RGM strategy by providing a competitive offering in stores where discount brands are most relevant. During the quarter, basics retail share expanded by 3/10 sequentially and 1.8 share points year-over-year. The combined performance of Marlboro and Basic reflects the effectiveness of PM USA's total portfolio approach. Total PM USA retail share expanded 2 share point sequentially and 0.3 versus a year ago. In cigars, for the third quarter and first 9 months, reported shipment volume increased 0.9% and 2%, respectively, as Middleton continued to significantly outperform in a declining large mass cigar industry.

Let's now turn to the Oral Tobacco Products segment. Financial results reflect continued investment behind on! PLUS and the impact of lower MST volumes. Adjusted OCI decreased by 3.7% to $443 million in the third quarter and by 4% to $1.3 billion for the first 9 months. Adjusted OCI margins remained strong at 66.4% for the third quarter and 66.8% for the first 9 months. Total segment reported shipment volume decreased 4.3% for the third quarter and 5.4% for the first 9 months as growth in on! was more than offset by the lower MST volumes. When adjusted for trade inventory movements, we estimate third quarter and first 9 months oral tobacco products segment volumes both declined by an estimated 5%.

Oral Tobacco Products segment retail share was 27.9% for the third quarter and 28.6% for the first 9 months. In the highly profitable moist smokeless tobacco segment, Copenhagen maintained its long-standing premium leadership. Turning to ABI's financial results. we recorded $191 million of adjusted equity earnings in the third quarter, up 21.7% versus the prior year. We continue to view our ABI stake as a financial investment and our goal remains to maximize the long-term value of the investment for our shareholders. Our strong financial performance for the first 9 months enabled us to return over $6 billion to our shareholders. including $5.3 billion in dividends and $735 million in share repurchases. We remain committed to providing significant cash returns to our shareholders as demonstrated by our recent dividend increase.

In August, our Board increased our quarterly dividend by 4.7% to $1.11 per share, our 61st increase in 57 years. and consistent with our progressive dividend goal of mid-single-digit annual growth. And today, we announced that our Board authorized a $1 billion expansion of our existing share repurchase program. which now expires on December 31, 2027. In addition, our balance sheet remains strong. Our debt-to-EBITDA ratio as of September 30 was 1.9x, in line with our target of approximately 2x.

Finally, let's turn to our financial outlook. Our businesses performed extremely well in a dynamic environment during the first 9 months of the year, and we maintain the strength of our core tobacco businesses while investing towards our vision. As a result, we raised our earnings guidance and now expect to deliver adjusted diluted EPS in a range of $5.66 to $5.74 and representing a growth rate of 4.5% to 6% from a base of $5.42 in 2025.

With that, we'll wrap up, and Sal and I will be happy to take your questions. While the calls are being compiled, I'll remind you that today's earnings release and our non-GAAP reconciliations are available on altria.com. We've also posted our quarterly metrics, which include pricing, inventory and other items. Operator, let's open the question-and-answer period.

Operator

[Operator Instructions]. The first question is from Faham Baig at UBS.

質疑応答

Mirza Faham Baig

A couple of questions from me, please. Firstly, on industry cigarette volumes and then on Marlboro Cowboy cut. So on the industry, the volumes have remained pretty resilient this year, and it looks like the sequential growth in the discount segment moderated somewhat this quarter despite the higher gasoline prices. Are there any particular factors you would call out behind the resilience. And more broadly, are you seeing any evidence that the pressure on the smoker is beginning to ease?

And then secondly, on Cowboy cut. Can you maybe help us understand where you see the sub-brands positioning within the broader Marlboro portfolio? I know initially it was launched at a discount to Marlboro Black, but we're now seeing priced above black in some states, while in other states, it's sort of yet to be introduced. How should we think about the positioning and the intended role of Cowboy cut longer term?

Salvatore Mancuso

Yes, terrific. And thanks for your questions. Two really good questions. So let's start with the industry volume. The consumer continues to be under economic pressure. No doubt, the inflation, which has been in place for multiple years, continues to put pressure on their everyday goods. I would say, though, that nicotine historically has been a little bit more resilient than other CPG categories, for sure. But when you look at the moderation of the decline rates that you're seeing in the cigarette category, that's primarily being driven by the lower cost category movement from the illicit e-vapor category.

And I would say probably two factors are driving that. One is these products have been in the market for multiple years now. So consumers that were interested in it have moved. And then the second factor is, as we talked about earlier, the focus on enforcement for [ licin ] products, we think that is having some impact. Now we need that -- those efforts to be sustained and to continue but it's definitely having an impact on supply chain in our minds.

As far as Cowboy cut, let's start with the smokable strategy, which is to maximize profitability over the long term and balance investments in Marlboro with investments in our long-term vision. Cowboy cut provides a premium Marlboro option at the right price to retain value-sensitive smokers within that franchise. It delivers a classic mobile experience and is supported by brand equity that draws on its American heritage and complements the nation's 250th celebration. It's pretty widely distributed. It's in about 10 stores, which is about 75% of the cigarette volume. And it's a strategy we've deployed before. You've seen it with Marlboro Special Select, you've seen it with Marlboro Black, where you have introductory pricing, and then you will see PMA take pricing or margin up those over time.

Obviously, you talked about different states and different pricing. Well, that's reflective of the data analytics and RGM tools that came has been able to deploy. So we're really, really pleased with the impact on Marlboro. You saw Marlboro share premium has reached about 60%. It's up 3% year-over-year. So we feel really good about the overall performance of our smokeable segment and the cigar category, in particular.

Operator

Next question is from Matt Smith at Stifel.

Matthew Smith

Just wanted to come back to the raise of the full year guidance for EPS. Can you talk about where you're seeing strength relative to your previous expectations? And have you stepped up your investment levels behind some of the initiatives, whether it's behind the smoke-free vision investments or in combustible and leaned into the volume opportunity that becomes the future pricing opportunity over time.

Heather Newman

SP265679286 Matt, thanks for the question. Just as a reminder, in the beginning of the year, we did have our guidance range, 2.5% to 5%. And as we performed really strongly through the first 9 months, it's given us confidence to not only narrow, but raise the guidance to the 4.5% to 6% I will say that's inclusive of investments that we tend to invest in our smoke-free vision really around on! PLUS and you're starting to see that play out in the marketplace with the 12-milligram product as well as our flavor line extensions.

The other thing that we're mindful of is that we continue to be challenged by a pretty difficult macroeconomic environment for the consumer. We feel great about our RTM capabilities to manage through that environment as they remain under pressure. Gas prices are still elevated, Sal's already talked about inflation, but this new guidance range of the 4.5% to 6%, we feel really confident that we can deliver throughout the rest of the year.

Matthew Smith

Appreciate that, Heather. And a follow-up on the quarter. duty drawback, I think it was $124 million revenue benefit. Previously, you talked about it being pretty equally phased in the second half of the year. Does that -- is the third quarter level a reasonable amount for the fourth quarter? I know there's some catch-up timing in there. I'll pass it on after that.

Heather Newman

Yes. I appreciate it. Our expectations have not changed. We did have some slight benefit in Q2 from a timing of the FET credit that we benefited from in our expectations for the second half of the year in terms of stepping up and the imbalance between the quarters has not changed.

Operator

The next question is from Bonnie Herzog at Goldman Sachs.

Bonnie Herzog

I had a quick follow-up on what you just touched on, Heather. In terms of the double duty drawback benefit, you did export 10% of your SIG volume in Q3. So I guess I was hoping to hear a little more color on how we should think about your ability to ramp this further next year, especially given your contract manufacturing agreement with Philip Morris will kick in. So if you could talk about that also, that would be appreciated.

Heather Newman

Yes. Thank you, Bonnie, so in the first half of the year, we were really establishing the contract manufacturing arrangements and then we communicated that step-up balanced approach through the second half of the year. without getting too far ahead in terms of expectations for 2027. You are right to call out that, that PMI agreement does not start until 2027. And so that benefit will certainly kick in. what we're working against and where you see the increase from Q2 to Q3 is our current CMA arrangements. And again, without getting too far ahead, we expect to be pretty balanced across the Q3 and Q4 here.

Bonnie Herzog

Okay. And then maybe if I could just switch gears a bit and I have a question on vapor, which you touched on. But just in terms of Enjoy ACE, I believe you've addressed the patent infringement issues and you're able to bring the product back to the market. So curious if you're planning on doing this maybe soon? And how you're thinking about what role vapor can ultimately play in your smoke-free portfolio? And then if or when you bring it back to the market, I guess I'm trying to understand how you're going to manage it? I mean, would you manage it differently or run the business differently than what you had done before because I'm thinking about the substantial operating losses you used to have on the brand.

Salvatore Mancuso

Bonnie, so you are correct to point out that we have worked around the patent issues that forced us to pull enjoy as out of the market. We have not announced when we're going back in the market, but we do plan on being back in the e-vapor market. You're also right to point out that our approach is going to be, I would say, I would characterize it as very disciplined. The market, while we've seen some improvement is still predominantly driven by the illicit category. And we want to compete in the market, but we want to do it in a disciplined way and in a profitable way over time.

So for us, we continue to engage with stakeholders to drive enforcement activity to maintain or sustain it over time. We also recognize that it's important for the FDA to authorize products more quickly. We also recognize that there are certain attributes related to the illicit category that appeal to the consumers. So if you think about our innovative pipeline, we want to delight the consumer over time. So we continue to innovate further on enjoy age. But our approach will be disciplined, and we'll have more to say as time proceeds.

Operator

The next question is from Andrei Andon at Jefferies.

Andrei Andon-Ionita

Good morning, Sal, Heather and Mac. Two for me, please. Firstly, following up to Bonnie's question on vapes. We've already seen a legal competitor launched flavored vapes in August, September this year. Where do you see such products legal flavored vapes potentially gaining share? Are they more likely to be a pressure point on cigarettes or rather on illicit vapes?

And then secondly, it's encouraging to see on grow year-on-year in Q3, but I believe the volumes have still declined relative to the previous quarter to Q2 '26. What are your expectations for volume growth for on! into next quarter and into next year? And what would underpin this?

Salvatore Mancuso

Yes. So let me start with your vapor question, and it's a good one. Look, e-vapor is a far lower risk proposition for smokers and exposes those smokers to lower levels of smoking. So we believe e-vapor continues to play an important role in long-term harm reduction. We also recognize that flavors is something that attracts smokers to a less harmful product. So we do think it plays a role. But as we said, the category itself is upside down the risk of consumers using illicit vapors, which have not been through the regulatory process, threatens the long-term tobacco harm induction opportunity.

And so we continue to engage with our stakeholders, as I said earlier, to drive the [indiscernible] enforcement, and we have seen definitely a stepped-up level of enforcement. So over the long term, we believe vapor does play an important role, and we will participate in that. your question on growth of the nicotine pouch look, the volume decline you're seeing is primarily driven actually by the MST category as consumers move from MST into the nicotine pouch category. We're really excited about on us. We believe that the nickel technology for the pouch is a differentiator.

We also recognize that higher levels of nicotine and flavors drive a lot of the consumer growth. So we're excited that we've got 12 milligrams just went into the market recently. We haven't really seen the impact of that on retail share yet. And then we are entering the retail space with flavors, mango pineapple and Blueberry Mint. We announced Watermelon Mint coming in November in select stores. And we plan on having future innovation through flavor deliveries in the future. So we're excited about the pipeline. We're excited about the tobacco home reduction opportunity that nicotine pouch provides the adult nicotine consumers. So we look forward to on! PLUS and on! Class A continuing to play a role in that.

Operator

[Operator Instructions]. The next question is from Pallav Mittal at Barclays.

Pallav Mittal

So just to follow up on volumes. See volumes are up 13% Y-o-Y in the third quarter. But when I look at scanner data, it is down mid-teens or something like that. So is there a significant inventory as you roll out 12MG or is it something else?

Salvatore Mancuso

I wouldn't say significant, but I would say there's obviously some pipeline inventory as we launched a 12-milligram across Mint, Wintergreen and tobacco. And then you've got the flavor introductions that we talked about earlier. There's some differences on how you read scan and data where they look at pouches versus cans. So there's a little bit of noise in that. But nothing significant, but within a quarter, you're going to have some pipeline movement, not just for us, you have other brands introducing new SKUs as well. So I think you got to look at that over a longer period of time.

Pallav Mittal

Sure. And if I can then ask on your cigarette business, okay. And if I exclude the WT [indiscernible] for a moment, then the EBIT on your core cigarette business is flat despite secret volumes being much better than what anyone sort have thought at start of the year. So how should we think about that? And how do you plan to grow your cigarette profit, especially as cigarette volumes start lapping tougher comps over the next few months?

Salvatore Mancuso

Yes. I think it's frankly, a little unfair to pick out one aspect of the margin and pull it out and say, well, EBIT is flat or you got to look across the entire marked composition of the margin, which is driven by pricing, cost management, duty drawback is part of it. We feel really good about our ability to grow income within the cigarette category. We've got strong OCI performance through the first 9 months. You've seen Marlboro perform really well in the highly profitable premium segment PM USA's overall share has grown through the total portfolio approach. And so we feel really good about the smokable segment in general.

And as Heather stated earlier, that confidence in that performance through the first 9 months allowed us to raise guidance, and we were happy to provide that as well. So we feel really good about the business overall. But thanks for the question.

Pallav Mittal

Sure. And if I can just squeeze one more in on duty drawback. You are exiting the year at around 500 million annual benefit from duty drawback based on the current run rate? And then as I think about next year, you will probably ramp up the current program and then the PM contract agreement will also kick in. So can you give us a broad range? I mean, from 500 million, can it go to 1 billion? Or are we looking at something around 700 million, 800 million for next year?

Salvatore Mancuso

No, we're not providing that range I understand the question. I'll remind you, as Heather said earlier, you were not seeing the impact of the contract manufacturing agreement with PMI yet that will happen next year. So we talked about that this volume does build over time. I think Heather laid it out really well in earlier questions in her remarks. So -- but we won't provide any further guidance on that.

Operator

And the final question is from Eric Serotta at Morgan Stanley.

Eric Serotta

A couple of things. First, Sal, I think your perspective a little bit in terms of nicotine pouch category growth over the shorter term and then over the mid to long term, you've seen an incredible amount of innovation from both Altria Helix and adding to your competitors over the past 4 or 5 months as the regulatory environment has changed. At the same time, the category growth rate hasn't really materially accelerated coming up, you're going to have the leader in the category, effectively lowering the price per pouch. How do you see this all playing out in terms of category volume and revenue growth over the short term? And then any change to your thinking about how big this category can be over the mid to long term?

Salvatore Mancuso

Yes. Look, it's a really good question. The nicotine pouch category has seen tremendous growth, much of it driven by MST consumers that move into nicotine pouch. There are a number of reasons for that, including social friction. If you think about. There's no spinning, as an example, with nicotine pouch. You've also seen some growth from cigarette consumers that are seeking a reduced harm way of enjoying nicotine, if you will. The rate of acceleration, look, as the numbers get bigger, like any category, you would see that the percentage change might not be as high as when you're first seeing the adoption, obviously. So that's something we may consider.

But we see the category as a tremendous tobacco harm reduction opportunity. It's still predominantly male. I think if you look overseas, you have seen women and other demographics adopt the product. So we think that continues to be an opportunity. And you're right to point out it is a highly competitive category. It's a growing category. So you're going to see competition, and we're used to that. I mean the cigarette category has been highly competitive. The smokeless category was highly competitive. But we believe over the long term, [indiscernible] margins are very achievable in this category. We see on! and on! is a premium proposition. We continue to invest in the pipeline of innovation. We continue to invest in the brand. We were really excited to see the ovation take place. So we feel really good about the category and the potential it has for long-term home reduction in the U.S. market.

Eric Serotta

Great. And then a quick follow-up. Just turning to your slide on the industry volume decomposition for cigarettes. The price elasticity impact ticked down about 20 basis points over the past quarter. What do you think is driving that? And then additionally, the macro cross category and other continues to tick lower. I know you called out across category at less than 50 basis points versus about 50 basis points. So maybe there's just some rounding here, but just wondering what's driving the reductions on both of those lines?

Salvatore Mancuso

Yes. The cigarette price elasticity coefficient hasn't changed. It's still negative 0.35. So the impact you're seeing is just a year-over-year price change across the category, if you will and it's just multiplication it. As far as the macro and cross-category movement, it's really the cost category movement and the moderation of that is lowering that number over time. macroeconomics still continue to be headwinds, if you will, for the consumer, it continues to put pressure on consumer spending.

Obviously, we're paying very close attention to that. But as Heather pointed out earlier, our ability to use data analytics and RGM tools, I think, positioned us really well to navigate through that. So PM USA and the employees there as well as Helix and UST continue to use these tools very effectively, and we feel good about our ability to continue to manage through that.

Operator

There appears to be no further questions at this time. I would like to turn the call back over to Mac Livingston for any closing remarks.

Mac Livingston

Thanks to everyone for joining us today. If you have further questions, please feel free to reach out to the IR team. Thanks.

Operator

This concludes today's call. Thank you for your participation. You may disconnect at any time.