Altria Profit Rises on Snuff Demand, Cost Cutting

Source from:  Bloomberg Businessweek 07/22/2010

July 21 (Bloomberg) -- Altria Group Inc., the largest U.S. tobacco company, posted a 3.2 percent increase in second-quarter profit and raised its full-year forecast, helped by snuff sales and cost reductions. Adjusted earnings will be as much as $1.91 a share this year, up from a previous projection of as much as $1.89, the Richmond, Virginia-based company said today in a statement. Analysts had predicted earnings of $1.88, the average of 12 estimates compiled by Bloomberg. Altria's shipments of smokeless tobacco increased while cigarette volumes dropped amid higher state and U.S. tobacco taxes. The company, led by Chief Executive Officer Michael Szymanczyk, raised cigarette prices to wholesalers on May 10 by 8 cents a pack on all brands in the Philip Morris USA division. "Each and every year, people are smoking less so it's critical for them to keep raising prices and cutting costs," Jack Russo, an analyst at Edward Jones & Co. in St. Louis, said in an interview. He recommends holding Altria shares. Second-quarter net income rose to $1.04 billion, or 50 cents a share, from $1.01 billion, or 49 cents, a year earlier, the company said. That matched analysts' estimates. Marlboro Retail Share Revenue fell 6.6 percent to $6.27 billion. The company said it reduced corporate and manufacturing costs by $129 million in the quarter. Altria paid $970 million in taxes and interest this month, with $945 million related to its financial services division. The company said it plans to file a claim to be refunded $945 million, and intends to pursue litigation if the IRS disallows the claim, according to the statement. Smokeless tobacco shipments rose 9.2 percent to 181.9 million cans and cigarette shipments fell 10 percent to 36.5 billion. Cigar shipments rose 20 percent 323 million. Marlboro's retail share increased 1.6 percentage point to 42.8 percent in the quarter. Altria fell 12 cents to $21.40 by 4 p.m. in New York Stock Exchange composite trading. The shares have increased 9 percent this year. Enditem