Altria Group 1Q profit drops, still tops view

NEW YORK — Altria Group Inc. said Wednesday acquisition charges and interest expenses outweighed strong cigar sales, leading the owner of the nation’s biggest cigarette maker to report a 76 percent drop in its first-quarter profit.

But adjusted results from the maker of Marlboros slipped only 4 percent and narrowly topped Wall Street estimates.

Altria Group 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 as a discontinued operation. The company spun off that division last year.

The Richmond, Va.-based company said it earned 39 cents per share from continuing operations excluding charges from buying smokeless tobacco maker UST Inc. in a deal that closed in January. That was a penny above estimates from analysts polled by Thomson Reuters.

Interest expenses cut into the company’s results. Altria reported interest expenses of $336 million in the quarter. In last year’s quarter, the company reported interest income of $16 million.

Altria said revenue rose 3 percent to $4.52 billion - topping Wall Street estimates of $3.99 billion.

Much of that revenue increase came from strong sales of Altria’s Black & Mild cigars. Sales jumped 26 percent due to higher prices and higher volume. Revenue in the company’s financial services division also rose substantially.

Cigarette sales, meanwhile, slipped 8 percent, hurt by lower volume. Analysts had largely expected the volume drop since tobacco wholesalers and retailers have tried to limit their inventory to prepare for paying a tax April 1 on what they owned that day.

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 for continuing operations excluding special items in 2008.

Analysts predict profit of $1.73 per share. Analyst estimates typically exclude special items and discontinued operations.

The company also said it will cease production at its Cabarrus cigarette manufacturing facility by the end of July. Altria said in 2007 that it would close the facility to help bring its manufacturing capacity in line with declines in U.S. cigarette volume.