Alexa

Altria 4Q net rises on higher prices, cost cuts

Altria 4Q net rises on higher prices, cost cuts

Marlboro maker Altria Group Inc. said Thursday that its net income rose nearly 27 percent in the fourth quarter on lower costs and higher prices, even though it sold fewer cigarettes.
The owner of the biggest U.S. cigarette maker, Philip Morris USA, reported that it earned $919 million, or 44 cents per share, for the period ending Dec. 31, up from $725 million, or 35 cents per share, a year earlier.
Net revenue excluding excise taxes increased 1 percent to $4.14 billion. Lower sales from cigarettes and cigars were partially offset by higher revenue from its smokeless products, and financial services and wine businesses.
Analysts expected Altria to earn 45 cents per share on sales of $4.22 billion, according to FactSet.
Its shares fell 15 cents, or less than a percent, to $24.11 in morning trading Thursday.
Altria forecast its 2011 full-year earnings will be in the range of $2 to $2.06 per share. But the company said business is likely to remain challenging.
"Adult consumers remain under economic pressure and face high unemployment," CEO Michael E. Szymanczyk said in a conference call with investors. "We're also cautious about the competitive promotional environment and mindful of uncertainties facing our tobacco businesses."
Altria also said it will conduct a $1 billion share buyback program in 2011.
The company based in Richmond, Virginia, said the number of cigarettes sold fell 7 percent to 33.6 billion compared with last year's fourth quarter. Adjusted for seasonal variations, volume declined 6 percent, higher than Altria's industry estimate of a 4 percent decline.
Cigarette revenue excluding excise taxes fell 1.5 percent to $3.48 billion during the fourth quarter. However, operating income in its cigarette business grew more than 7 percent. Altria has increased its profit per pack for the past 11 quarters through price increases and cost cutting.
Altria said its top-selling Marlboro brand, which sold for an average price of $5.66 per pack, gained 0.6 points of market share to end up with 42.3 percent of the U.S. market. But its other brands, including Virginia Slims, Parliament and Basic, lost ground.
Altria continues to face competition from other companies' less expensive brands _ like Pall Mall from Reynolds American Inc. and Maverick from Lorillard Inc.
Like other tobacco companies, Altria is focusing on cigarette alternatives _ such as cigars, snuff and chewing tobacco _ for future sales growth because of expected continuing declines in cigarette smoking. The company also owns a wine business and holds a voting stake in brewer SABMiller.
Altria sold more of its smokeless tobacco brands such as Copenhagen and Skoal, as well as Marlboro Snus. Excluding excise taxes, revenue from its smokeless tobacco business grew more than 15 percent to $366 million.
For the quarter, the company's smokeless tobacco brands had 54.5 percent of the market, which is tiny compared with cigarettes.
Its Black & Mild cigars saw volumes unchanged during the period, and its revenue excluding excise taxes fell about 17 percent to $71 million because it spent more money promoting the brand, including discounting.
The company's performance also was boosted by cost savings.
Altria has been reining in expenses as tax increases, smoking bans, health concerns and social stigma make the cigarette business tougher. Altria said it cut costs about $65 million in the fourth quarter and expects to save about $145 million more by the end of 2011.
For the full year, the company said its net income rose nearly 22 percent to $3.9 billion, or $1.87 per share, compared with $3.2 billion, or $1.55 per share, in the previous year. Net revenue excluding excise taxes grew less than 1 percent to $16.89 billion.