April 22, 2009 / 11:22 AM / 10 years ago

UPDATE 3-Altria profit beats estimates, volume dips

* Altria Q1 shr $0.39 before items vs Wall St view $0.38

* Philip Morris USA cigarette volume down 14.2 pct

* Stands by 2009 EPS view of $1.70 to $1.75 before items

* Shares up 1.7 pct (Adds analyst, company comments, byline; updates stock move)

By Brad Dorfman

CHICAGO, April 22 (Reuters) - Altria Group Inc (MO.N) posted a higher-than-expected quarterly profit on Wednesday, as price increases helped offset a drop in cigarette shipments related to a rise in the federal tax on cigarettes.

The parent of Marlboro cigarette maker Philip Morris USA and Skoal tobacco maker U.S. Smokeless Tobacco Co also stood by its full-year earnings forecast.

Altria’s net income fell to $589 million, or 28 cents a share, compared with $2.45 billion, or $1.16 a share, a year earlier. But year-earlier net income included $1.84 billion from discontinued operations, as the company spun off Philip Morris International Inc (PM.N) unit last year.

Excluding one-time items, earnings per share rose to 39 cents from 37 cents per share a year earlier. Analysts on average had forecast 38 cents a share, according to Reuters Estimates.

Revenue rose 2.6 percent to $4.52 billion.

U.S. cigarette makers are adjusting to a 62-cent-per-pack increase in the federal tax on cigarettes, which took effect on April 1, as well as a recessionary economy and a long-term decline in cigarette consumption.

Philip Morris USA shipped 14.2 percent fewer cigarettes in the quarter than a year earlier as wholesalers and retailers reduced inventories that would have been subject to the higher excise tax if they held them on April 1.

The company’s total cigarette market share fell to 50.9 percent of the U.S. market from 51.2 percent a year ago.

Altria Chief Executive Officer Michael Szymanczyk said it was too early to tell what the long-term impact of the tax increase would be. He said Philip Morris had raised prices in anticipation of the tax increase earlier than some rivals, which might have hurt market share.

That could change as rivals adjust prices to account for the higher taxes.

“Eventually, the tax man gets his money, so eventually that comes home to roost,” Szymanczyk said during a conference call.

Morningstar analyst Phil Gorham said the tax increase was a “disruptive” factor. He said U.S. industry shipment volume could fall 5 percent to 6 percent this year, before rebounding to a more normal 3 percent decline next year.

“I think it’s too early, really, to tell at this point how consumers will react to such a disruptive event as the tax increase,” Gorham said. “We’ll need at least the second quarter’s results as well.”

Wholesalers and retailers have been rebuilding inventories of Philip Morris products this month, Chief Financial Officer David Beran said.

Profit in the Philip Morris unit rose 9.9 percent in the first quarter, as the higher prices lifted margins. The company raised the price of Marlboro and other cigarettes by more than 70 cents per pack in March.

Over at U.S. Smokeless Tobacco, shipments fell 5.3 percent to 151.5 million cans, as wholesalers and retailers also cut inventories of those products ahead of the tax increase.

In March, Altria cut prices on Skoal, Copenhagen and Red Seal tobacco to try to make them a better value compared with competitors.

Altria has been cutting costs to try to boost profit and had said it planned to close its Cabarrus, North Carolina, cigarette production facility. On Wednesday, the company said it will cease production at that facility in 2010.

Altria stood by its 2009 forecast calling for earnings of $1.70 a share to $1.75 a share, excluding one-time items. Analysts on average have forecast $1.73 a share.

Altria shares were up 56 cents, or 3.4 percent, at $17.29 in late morning trade on the New York Stock Exchange. (Reporting by Brad Dorfman; Editing by Gerald E. McCormick and Maureen Bavdek)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below