Altria Earnings Climb on Higher Marlboro Prices

Altria Group Inc., the largest U.S. cigarette maker, said fourth-quarter profit rose on higher prices for cigarettes including the top-selling Marlboro brand. Earnings per share from continuing operations increased to 37 cents from 35 cents a year earlier, the Richmond, Virginia-based maker of Parliament and Virginia Slims cigarettes said today in a statement. That matched the average estimate of 11 analysts surveyed by Bloomberg. Altria raised cigarette prices twice since May to counter falling demand by smokers. As shipments dropped 3.2 percent in 2008, Chief Executive Officer Michael Szymanczyk engineered last month's $10.4 billion acquisition of UST Inc. to add top-selling U.S. snuff brands Copenhagen and Skoal. "They've got good control of pricing," Thomas Russo, who oversees $3 billion in assets at Gardner Russo & Gardner, said yesterday in a telephone interview. The Lancaster, Pennsylvania-based firm owned 7.4 million Altria shares through September. With snuff, the company is "more hedged across the tobacco category." Sales rose 2.8 percent to $4.65 billion in the quarter. Altria said it expects to earn $1.70 to $1.75 a share in 2009, compared with $1.65 last year. Twelve analysts in the Bloomberg survey projected, on average, $1.73. The forecast is "prudent and appropriately cautious," reflecting falling consumer confidence and the possibility of higher U.S. and state tobacco excise taxes, Szymanczyk told analysts today on a conference call. Domestic Reliance Altria, which makes one of every two cigarettes sold in the U.S., now depends on the domestic market after last March's spinoff of its international division sent two- thirds of profit overseas. Marlboro increased its share of smokers to 41.6 percent in the quarter, rising 0.4 percentage point. Total market share slipped 0.3 point to 50.4 percent on declines by Parliament, Virginia Slims and Basic. Marlboro shipments dropped to 34.1 billion cigarettes from 34.3 billion. Operating profit for Philip Morris USA, Altria's cigarette unit, advanced 3.5 percent to $1.12 billion, helped by higher prices and lower selling, general and administrative expenses. Altria increased cigar shipments 3.4 percent to 311 million in the quarter. Its Middleton division, which makes Black & Mild cigars, generated profit of $36 million, up from $7 million in 2007. Altria acquired Middleton in December 2007. Altria plans to report UST's 2008 results tomorrow. Year-earlier results exclude the overseas unit, which was spun off in March. That unit, New York-based Philip Morris International Inc., is to report fourth-quarter results Feb. 4. Five-Cent Rise Altria raised Marlboro and other cigarette prices by 5 cents a pack on Dec. 15, after increasing them in May. Altria rose 4 cents to $16.84 at 4:06 p.m. in New York Stock Exchange composite trading. The shares have advanced 12 percent this year, after sinking 35 percent in 2008, their sharpest decline in nine years. The company said it was suspending its $4 billion share buyback plan through 2010 because of economic conditions. About $1.2 billion of repurchases were completed in 2008. "It is in the best interest of shareholders to preserve financial flexibility while it completes the financing of the UST transaction," Altria said in the statement. The company plans to sell debt this year to refinance the $4.3 billion bridge loan it took out to buy UST.