Altria: More Tobacco, Less Smoke

Source from:  money.cnn.com RICHMOND, Va. (AP) May 28, 2008 05/29/2008

Marlboro-brand owner focuses on new products as health-conscious U.S. consumers buy fewer cigarettes. Altria Group Inc. on Wednesday reiterated to shareholders its interest in growing its business in other tobacco categories as domestic cigarette sales continue to decline because of concerns about health, smoking bans and price increases. Chief Executive Michael Szymanczyk told shareholders that while Altria (MO, Fortune 500) will still be able to build market share in the declining cigarette business, success depends on finding alternative products that are satisfying to consumers and reduce health risks. "As the company looks to the future, it has clear recognition of the fact that conventional cigarettes are harmful in society and we'd like to make some progress on improving that situation," Szymanczyk said during the question-and-answer portion of the first shareholder meeting since the March spinoff of its international segment, Philip Morris International Inc (PM). Szymanczyk said its domestic tobacco unit, Philip Morris USA - the nation's No. 1 cigarette manufacturer - will deal with fewer cigarette sales by capitalizing on its Marlboro brand and selling more smokeless products. It has projected that cigarette sales volume will fall between 2.5% to 3% in the United States over the next few years. Last year, Philip Morris began testing of its Marlboro-branded moist smokeless tobacco product - cut tobacco placed in the mouth --in Atlanta and recently expanded to counties in the surrounding metropolitan area. It also began testing its spitless product, which is a moist powdered tobacco, called Marlboro Snus (pronounced "snoose") in Dallas last year, and also has expanded to Indianapolis. Szymanczyk said the company already has made a number of modifications to those products based on input from consumers in the test markets. "We're making remarkable progress," he said. "We've learned a lot that will allow us to efficiently develop our products further." Shareholders, along with re-electing eight directors to its board, defeated six shareholder proposals, including one to allow investors to vote on an advisory resolution proposed by management on executive pay. Altria now consists mainly of Philip Morris USA, cigar manufacturer John Middleton Inc., Philip Morris Capital Corp. and a 29% stake in London-based SABMiller PLC, brewer of Miller beer. Its first-quarter profit fell 11%, in part because of costs related to the spinoff its international segment and relocating its corporate headquarters from New York to Richmond. The maker of top-selling Marlboro cigarettes reported earnings of $2.45 billion, or $1.16 per share, for the quarter ended March 31, down from $2.75 billion, or $1.30 per share, in the year-ago quarter. Sales for the period were $4.41 billion, up nearly 3% from $4.3 billion in the same quarter in 2007. Analysts had expected revenue of $3.83 billion. Shares of Altria fell 34 cents to $22.14 in afternoon trading. Enditem