Altria Group Inc., the world's largest cigarette maker, said profit increased 4.9 percent on higher Marlboro prices and rising overseas sales. The stock fell 1.6 percent on declining U.S. shipments.
![]()
Second-quarter net income expanded to $2.22 billion, or $1.05 a share, New York-based Altria said today in a statement. Profit a year earlier was $2.11 billion, or $1, assuming the March spinoff of Altria's Kraft Foods Inc. unit had been completed. Excluding some items, profit exceeded analysts' estimates by 2 cents a share.
Sales climbed 9.7 percent to $18.8 billion on higher prices in western Europe and the U.S., where top-selling Marlboro gained market share. Overseas shipments rose 3.3 percent on an acquisition in Pakistan. Cigarette shipments at Altria's Philip Morris USA unit fell 3.3 percent, more than analysts expected.
``It was a mixed bag, with operating profit slightly below consensus,'' Herb Achey, an analyst at U.S. Trust in New York, said today. ``Marlboro gained market share in the U.S. on higher prices.'' U.S. Trust oversees $265 billion including 21.6 million Altria shares as of March.
Chief Financial Officer Dinyar Devitre reiterated today that Altria is considering a spinoff of Philip Morris International among other steps to improve shareholder returns. Altria also said it will expand in Mexico, where its share of smokers climbed to a record 64.2 percent, up 1.4 percentage points on a new Marlboro Wides cigarette.
Profit Estimates
Analysts estimated profit, excluding some items, of $1.13 a share, the average prediction of nine analysts polled by Bloomberg. On that basis, it had earnings of $1.15 a share.
Altria cut its 2007 profit forecast by 15 cents a share for additional restructuring costs, saying it will earn $4.05 to $4.10. It had estimated profit of $4.20 to $4.25. The expenses for a U.S. factory closing bring annual costs for the U.S. and international tobacco units to 24 cents a share. Previously the company estimated 9 cents.
Shares of Altria, which also makes Merit and Chesterfield cigarettes, fell 98 cents to $70.30 as of 4:01 p.m. in New York Stock Exchange composite trading. They have the best gain among three U.S. tobacco companies this year, climbing 9.1 percent, compared with a drop of 9.3 percent for UST Inc., the largest U.S. snuff maker.
In the second quarter of 2006, Altria had profit of $599 million, or 29 cents a share, from discontinued operations, resulting in net income of $2.71 billion, or $1.29.
Options for Altria
Investors said Altria should look into options to boost the stock price, including repurchasing shares. Matthew Kaufler, who helps manage $2.6 billion at Clover Capital Management Inc. in Rochester, New York, favors separating the faster-growing international unit to insulate that division from the risk of U.S. smokers' lawsuits.
Second-quarter operating results were ``slightly disappointing,'' said Judy Hong, a Goldman Sachs Group Inc. analyst in New York who rates Altria as a ``buy.''
The increase of 3.3 percent in international shipments was less than Hong's projection of 3.7 percent. U.S. shipments fell almost twice as fast as she expected.
Altria forecast a drop of 3 percent to 4 percent this year in domestic shipments. In September, it plans to introduce new Marlboro varieties in the U.S. where its total share of smokers was unchanged at 50.5 percent from a year earlier. Marlboro's share rose 0.4 percentage point to 41 percent.
Higher Prices
The average U.S. price of Marlboro was $4.17 a pack in the second quarter, 25 cents more than a year earlier, Devitre said.
In February, Philip Morris USA raised prices by 20 cents a pack on more than a dozen brands such as Benson & Hedges and Merit. In December, it increased prices on Marlboro, Basic, Parliament and Virginia Slims, its four largest brands.
Altria's acquisition of a controlling interest in Lakson Tobacco Co. Ltd., Pakistan's second-largest tobacco company, in the first quarter boosted international shipments.
Altria's board may decide to spin off its international division at its Aug. 29 meeting, Bonnie Herzog, an analyst at Citigroup Inc., said today.
Today, Philip Morris International unit agreed to increase its stake in a Mexican tobacco joint venture to 80 percent from 50 percent. Its partner is Grupo Carso SA in Mexico. The international unit plans further expansion in emerging markets, Devitre said, without giving specifics.
Rival Imperial Tobacco Group Plc today said it will expand in Europe, agreeing to buy Altadis SA for 12.6 billion euros ($17 billion), gaining Gauloises cigarettes and the world's best-selling cigars. Imperial is based in Bristol, England.
Last month, Altria said it will close its Cabarrus County, North Carolina, factory by the end of 2010 and shift cigarette production to Richmond, Virginia, and European factories. Enditem
