Altria's Profit Increases 7.8% As Marlboro Gains Market Share
By VANESSA O'CONNELL
Staff Reporter of THE WALL STREET JOURNAL
July 20, 2004
Altria Group Inc., parent of the world's largest cigarette company and the nation's biggest food company, said its net income rose 7.8% in the second-quarter, boosted by a weaker dollar, a lower tax rate and U.S. market-share gains for Marlboro.
The New York parent of Philip Morris USA and Philip Morris International and majority owner of Kraft Foods Inc., posted earnings of $2.63 billion, or $1.27 a share, in the quarter, compared with $2.44 billion, or $1.20 a share, a year earlier. Analysts surveyed by Thompson First Call projected earnings of $1.28 a share.
Overall revenue rose 10.5% to $23.01 billion from $20.83 billion, while revenue from U.S. tobacco sales rose 1.9% to $4.6 billion.
Looking ahead, Altria repeated its earlier forecast that it expects to post net income of $4.50 to $4.60 a share for the full year. Analysts had been expecting full-year earnings of $4.84, according to Thomson First Call.
Bonnie Herzog, an analyst at Smith Barney, with a "long-term buy" rating on Altria shares, said in a report today "we are frustrated with what we believe appears to be disappointing quarterly earnings results." But she noted that the firm is "seeing signs that fundamentals in the U.S. are improving." Overall, Philip Morris USA, which makes Marlboro, Parliament and Virginia Slims cigarettes, is by far the leader in U.S. cigarette sales, with roughly a 49.8% share of the market. Volume and operating profit growth was weaker than expected, Ms. Herzog said, but she also argued that some of the biggest lawsuits against Philip Morris should be resolved in the company's favor in the next year.
Philip Morris USA's Marlboro brand strengthened its hold on the No. 1 position in the second quarter: Marlboro accounted for 39.6% of U.S. cigarette sales, up from 37.8% a year ago. The Philip Morris USA unit shipped 48.6 billion cigarettes, up 0.9% from a year earlier. "Our domestic tobacco business continued its momentum, with a particularly strong increase in Marlboro's retail share,'' said Louis Camilleri, chairman and chief executive of Altria, in a statement.
Philip Morris International shipped 192.7 billion cigarettes, up 2.8% from a year earlier. "Our international tobacco business performed well, but continues to face challenges in France, Germany and Italy,'' Mr. Camilleri said.
Altria's second-quarter results reflected charges of $261 million, or 13 cents a share, resulting from a restructuring at Kraft and an international tobacco agreement with the European Community to combat cigarette smuggling overseas. The weaker U.S. dollar contributed five cents a share in the quarter, while a lower effective tax rate added 15 cents a share.
On Monday, Kraft Foods said second-quarter profit fell 26% due to higher costs for ingredients such as milk and eggs, and increased spending on marketing designed to help lift the company's sluggish sales. Profit for the quarter ended June 30 fell to $698 million, or 41 cents a share, from $949 million, or 55 cents a share. (See article.)
Altria saw its shares slide slightly in early morning trading. By midday, Altria shares were up 14 cents to $48.97 in New York Stock Exchange composite trading. Kraft shares had risen 77 cents, or 2.5%, to $31.90.
Write to Vanessa O'Connell at vanessa.o'connell@wsj.com |
