Altria's Quarterly Profit Declines

Source from:  By REUTERS July 19, 2007 07/23/2007

The Altria Group posted lower quarterly profit yesterday, partly because of charges for closing a United States cigarette plant and moving some production to Europe as it tries to cut costs and reduce excess capacity. The spinoff of Kraft Foods has pressured earnings at the company, which also reduced its full-year earnings forecast. Altria, the parent of the Philip Morris tobacco companies, is facing a shrinking American market for cigarettes and has been increasing its international presence, while also looking to introduce other tobacco products in the United States. The company announced yesterday an agreement to acquire an additional 30 percent stake in its Mexican tobacco business from its joint venture partner, Grupo Carso, for $1.1 billion, bringing Altria's total stake to 80 percent. The deal is expected to add 3 cents a share annually to earnings, Altria said. Altria posted second-quarter profit of $2.22 billion, or $1.05 a share, compared with $2.71 billion, or $1.29 a share, a year earlier. Altria said in June that it would close its cigarette plant in Cabarrus, N.C., by the end of 2010, consolidating American production at its plant in Richmond, Va., and moving some production for non-American markets to Europe. Results include a charge of $318 million related to the planned plant closing. Excluding one-time items, earnings were $1.15 a share, compared with the average analyst estimate of $1.13, according to Reuters Estimates. Analysts expect Altria to announce plans to spin off Philip Morris International some time this year, and they also expect the company to undertake a large share repurchase. In the quarter, Philip Morris USA shipped 45.6 billion cigarettes, down 3.3 percent from a year earlier. But its Marlboro cigarettes increased market share to a record 41 percent, from 40.6 percent a year earlier. Philip Morris International shipped 221 billion cigarettes, up 3.3 percent, largely because of an acquisition in Pakistan. Shares of Altria, which is a component of the Dow Jones industrial average, closed down 98 cents, to $70.30, on the New York Stock Exchange. Enditem