Altria Group, Inc.

Altria Q2 profit surges on sales growth, raises FY 2012 guidance


Cigarette maker Altria Group (NYSE:MO) Tuesday said its second quarter net income rose on gains in its smokeless and financial services segments, and raised its guidance based on “strong first-half business results”.

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

Net income more than doubled to $1.22 billion, or 60 cents per diluted share, compared to last year’s profit of $444 million, or 21 cents per share. Excluding items, such as Altria’s investment in brewer SABMiller plc (LON:SAB), profit totaled 59 cents.

Revenue, excluding excise taxes, increased 14.4 per cent to $4.6 billion for the second quarter of 2012, primarily due to higher net revenues from its financial services segment.

Analysts polled by Thomson Reuters had expected earnings of 57 cents per share on revenues of $4.48 billion.

“Altria delivered excellent financial results for the second quarter and first six months of 2012, reflecting the strength of our diverse business model,” said chairman and CEO Marty Barrington.

“The brand-building activities of our tobacco companies contributed to adjusted operating companies income and margin growth in the smokeable and smokeless products segments.

“Exceptionally strong gains from our investment in SABMiller and our financial services business complemented these results.”

Cigarette revenue excluding excise taxes were essentially unchanged as higher list prices were offset by higher promotional investments behind Marlboro, lower reported shipment volume and unfavorable mix, said Altria, adding that second-quarter and first-half revenues net of excise taxes increased 1.4 per cent and 0.8 per cent, respectively.

An increase of 24 per cent in the company’s discount cigarette brands offset declines in its premium brands like Marlboro. The company’s Marlboro brand gained 0.3 points of market share to end up with 42.9 per cent of the US market.

For the quarter, the company's smokeless tobacco brands, which include Copenhagen and Skoal, saw revenue growth of 5.8 per cent to $399 million. Volumes for its smokeless tobacco products rose 7.6 per cent, while its market share edged up to 55.2 per cent.

Both Copenhagen’s and Skoal's volume continued to benefit from new product introductions such as the May 2012 expansion of Copenhagen Southern Blend into select geographies and last year's launch of Skoal X-TRA and Skoal Snus.

Altria noted that adjusted income for its finanical services segment, Philip Morris Capital Corporation (PMCC), increased to $42 million for the second quarter of 2012 primarily due to lower PMCC leveraged lease charges.

Altria also owns a wine business and holds a voting stake in SABMiller. Volume for wine rose 2.1 per cent, while sales grew 9.8 per cent to $123 million in the wine segment helped by higher shipment volume, improved premium mix and higher pricing.

Looking ahead, Altria said it is revising its 2012 full-year guidance for adjusted diluted earnings per share (EPS) excluding special items, from a range of $2.17 to $2.23 to a range of $2.19 to $2.23.

Altria said it anticipates adjusted diluted EPS growth to moderate in the second half of 2012 compared to the first half, with stronger adjusted diluted EPS growth expected in the fourth quarter compared to the third quarter.

Shares were up 0.48 per cent as at 10:15 am ET, trading at $35.66.

Quick facts: Altria Group, Inc.

Price: $40.81

Market: NYSE
Market Cap: $76.24 billion

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