Altria Group 2Q profit rises, boosts forecast
RICHMOND, Va. — Altria Group Inc., owner of the nation’s biggest cigarette maker Philip Morris USA, said Wednesday that its second-quarter profit rose 9 percent partly as lower corporate expenses and the impact of an acquisition helped offset a decline in the number of cigarettes it sold.
The Richmond, Va.-based seller of Marlboro cigarettes and Black & Mild cigars also raised its full-year forecast for adjusted earnings from continuing operations.
Altria earned $1.01 billion, or 49 cents per share, compared with $930 million, or 45 cents per share, in the same quarter a year ago. The 2008 figure included the results of Philip Morris International as a discontinued operation. Excluding exit costs related to plant closings and other items, adjusted earnings were 50 cents per share.
Analysts polled by Thomson Reuters, whose estimates normally exclude one-time items, forecast profit of 47 cents per share.
Revenue grew 33 percent to $6.72 billion from $5.05 billion on higher pricing related mostly to the federal excise tax increase. The company also credited its January acquisition of smokeless tobacco maker UST Inc., which makes Copenhagen and Skoal.
The company’s revenue topped Wall Street’s estimate of $5.35 billion.
“Our cigarette business performed exceptionally well, delivering excellent financial results in a challenging environment that included a significant increase in the federal excise tax,” Chief Executive Michael E. Szymanczyk said in a news release.
Cigarette sales excluding excise taxes decreased 2.1 percent to $4 billion due primarily to lower volume.
Philip Morris USA reported volume declines among all cigarette brands, including Marlboro, Parliament, Virginia Slims and Basic. Marlboro, the best-selling brand in the U.S., lost 0.6 points of market share to end up with 41.2 percent of the U.S. market, according to data from Information Resources Inc.
Volumes had dropped industrywide during the first quarter as retailers and wholesalers cut their orders ahead of a one-time federal tax on their inventory. As a 62-cent-per-pack retail sales tax went into effect April 1, tobacco sellers had to pay a “floor” tax of 62 cents per pack on whatever they had on hand that day.
In the second quarter, sales of cigars — which weren’t covered by the floor tax, and rose last quarter — decreased 12.9 percent to $74 million, excluding excise taxes. While volumes declined 23.8 percent, Altria’s cigar business saw its market share jump to 31 percent, an increase of 2.6 points.
Like other U.S. tobacco companies, Altria is focusing on cigarette alternatives — such as cigars, snuff and chewing tobacco — for future sales growth because domestic cigarette consumption is falling 3 percent to 4 percent a year.
While the company’s smokeless tobacco volumes declined 3.4 percent during the quarter, Altria said it believes that the long-term volume growth rate for segment remains 6 to 7 percent.
Altria also said it achieved $25 million in cost savings in the second quarter and $165 million in savings through the first half of 2009. It also expects to save about $695 million in additional costs by 2011.
The company also said its previously announced plans to cease production at its Cabarrus County, N.C. cigarette manufacturing facility by the end of July is expected to deliver ongoing annual cost savings of $188 million by 2011. But Altria said it expects to incur pre-tax charges of about $175 million in the second half of 2009 primarily related to the closure of the facility to help bring its manufacturing capacity in line with declines in U.S. cigarette volume.
The company lifted its full-year outlook for adjusted earnings from continuing operations to a range of $1.72 to $1.77 per share. Previously, the company predicted $1.70 to $1.75 per share.
Analysts expect full-year profit of $1.71 per share.
AP Business Writer Michell Chpaman contributed to this story from New York.
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