Altria Group 1Q profit drops, but beats view
RICHMOND, Va. — Altria Group Inc., the nation’s biggest cigarette maker, said Wednesday its profit skidded 76 percent in the first quarter due to the spinoff of its international tobacco business, charges related to its purchase of UST and interest expenses.
But adjusted results from continuing operations from the maker of Marlboro, Parliament and Virginia Slims slipped only 4 percent and narrowly topped Wall Street estimates.
Its shares rose 47 cents, or 2.8 percent, to $17.20 in afternoon trading.
Richmond-based Altria said it earned $589 million, or 28 cents per share, for the quarter ended March 31, compared with $2.45 billion, or $1.16 per share, a year ago. The 2008 figure included the results of Philip Morris International, which was spun off last year.
Altria said it earned 39 cents per share from continuing operations excluding charges from buying smokeless tobacco maker UST Inc. — that was a penny above analysts’ estimates.
Revenue rose 2.6 percent to $4.52 billion from $4.41 billion a year ago — topping Wall Street estimates of $3.99 billion.
“It’s fair to categorize our first-quarter performance as so far, so good,” Chief Executive Michael E. Szymanczyk said in a conference call with investors.
Interest expenses cut into the company’s results. Altria reported interest expenses of $336 million in the quarter. In last year’s quarter, it had interest income of $16 million.
Altria also said it incurred $283 million in charges related to its acquisition of UST, the maker of Copenhagen and Skoal, as well as restructuring and integration costs. Altria said it expects additional charges of about $160 million in 2009 and $40 million in 2010 related to the transaction and restructuring.
Meanwhile, the company said it reduced costs by $140 million in the first quarter and expects to save about $720 million in additional costs by 2011.
Much of the revenue increase came from the inclusion of UST revenue and strong sales of Altria’s Black & Mild cigars. Sales of cigars jumped 26 percent due to higher prices and higher volume. Revenue in the financial services division also rose substantially.
Cigarette sales, meanwhile, slipped 8 percent to $3.9 billion due to lower shipment volumes as tobacco wholesalers and retailers tried to limit their inventory temporarily in preparation for paying a “floor” tax of 62 cents per pack on what they owned on April 1, when single largest federal tobacco tax increase hit.
Those revenues were partially offset by higher prices and lower promotional allowance rates.
In a note to investors, Deutsche Bank North America analyst Marc Greenberg said Altria “has overcome what is likely to be its biggest hurdle” for the year in regard to the inventory rundown.
By volume, Philip Morris USA reported declines among all cigarette brands, including Marlboro, Parliament, Virginia Slims and Basic. Marlboro, the best-selling brand in the U.S., gained 0.5 points of market share to end up with 42.4 percent of the U.S. market, according to data from Information Resources Inc.
Altria also offered full-year profit guidance of between $1.70 and $1.75 per share for continuing operations excluding one-time charges. That’s up from $1.65 per share on that basis in 2008. Analysts, whose estimates typically exclude special items and discontinued operations, predict profit of $1.73 per share.
The company also announced Wednesday that it will cease production at Philip Morris USA’s Cabarrus County, N.C., cigarette plant by the end of July. Plans for the closure were announced in 2007 to address volume declines and move all cigarette manufacturing to Richmond.
AP Business Writer Lauren Shepherd in New York contributed to this report
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