Altria Group, Inc.

Altria Group says Q4 profit slumps, CEO to retire


Cigarette maker Altria Group (NYSE:MO) said Friday fourth quarter net income fell nine percent due to its cost-cutting restructuring plan, and also announced that its chief executive will retire this May. 

Altria Group is the parent company of cigarette makers Marlboro, Virginia Slims and Benson & Hedges, among others and was formerly known as Philip Morris.

Revenue, excluding excise taxes, increased five percent to $4.34 billion. Analysts polled by Bloomberg were expecting $4.2 billion.

Net income slid nine percent to $836 million, or 41 cents per share, compared to last year’s profit of $919 million, or 44 cents per share.

Excluding special one-time items, the company said adjusted earnings rose 13.6 percent to 50 cents a share.

Analysts, on average, were expecting earnings of 49 cents a share.

Cigarette revenue excluding excise taxes rose four percent to $3.63 billion during the quarter on higher prices. Volumes were relatively flat at 33.7 billion mainly due to trade inventory, partly offset by retail losses and one less shipping day.

An increase of nearly 20 percent in its discount cigarette brands offset declines in its premium brands like Marlboro.

The company’s top-selling brand Marlboro brand lost 0.7 points of market share to end up with 41.6 percent of the US
market. Marlboro volumes declined less than one percent. Its other brands such as Virginia Slims, Parliament and Basic, also lost market share.

Altria has introduced a number of new products with the Marlboro brand, often at lower promotional pricing. They include
special blends of both menthol and non-menthol cigarettes.

For the quarter, the company's smokeless tobacco brands, which include Copenhagen and Skoal, saw revenue growth of 6.6 percent to $418 million.

Volumes for its smokeless tobacco products rose nearly 10 percent to $189.3 million, while its market share nudged up to 55.5 percent.

Both Copenhagen’s and Skoal's volume continued to benefit from new product introductions such as Copenhagen Wintergreen pouches and Skoal X-tra and Skoal Snuff which were introduced in the first quarter of last year, partially offset by the de-listing of seven Skoal products in the second quarter of 2011. 

In addition, Marlboro Snuff’s volume was negatively hurt by "significantly" lower levels of promotional support and a shift from packages of six pouches to tins of 15 pouches.

Volume for its Black & Mild cigars fell about six percent during the period. But revenue rose nearly 7.3 percent to $132 million as the company raised prices and spent less money promoting the brand.

Altria also owns a wine business and holds a voting stake in brewer SABMiller. Volume for wine rose nearly 11 percent. But sales grew 10.6 percent to $167 million in the wine segment helped by due to lower restructuring charges and growth in its
Chateau Ste. Michelle brand.

During the third quarter, the company said it finished a multi-year cost savings program, exceeding its goal of reducing costs by $1.5 billion between 2007 and 2011 compared with 2006.

Last quarter the company rolled out a plan to cut $400 million in "cigarette-related infrastructure costs" by the end of 2013 in advance of anticipated cigarette volume declines. Altria said that the restructuring charges in connection with the program totalled seven cents per share in the fourth quarter.

For the year, the company sees adjusted per share earnings of $2.17 to $2.23 per share. Analysts, on average, predict profits of $2.18 per share. 

The owner of America's biggest cigarette maker also said CEO Michael E. Szymanczyk will retire in May following the company's annual shareholder meeting.

Altria's board has selected Martin J. Barrington to replace him as CEO and chairman, and David R. Beran will serve as president and chief operating officer.

The company also disclosed that it has entered into an agreement with an affiliate of Fertin Pharma A/S to develop non-combustible nicotine-containing products.

Shares fell 32 cents to $28.34 apiece Friday morning.

Quick facts: Altria Group, Inc.

Price: $40.81

Market: NYSE
Market Cap: $76.24 billion

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