Cigarette maker Altria’s 3Q net income rises nearly 4 percent despite lower cigarette sales

by Jenny Novac on October 28, 2011

The Marlboro Man had a more difficult time roping in cigarette smokers in the third quarter, marking one of the biggest U.S. market share declines for Altria Group Inc.’s top-selling premium brand in at least four years.

Marlboro filter plus

Marlboro Filter Plus closed and opened cigarette packs

But the owner of the nation’s largest cigarette maker, Philip Morris USA, said Thursday higher prices and gains from its smokeless tobacco and cigar brands helped keep it in the saddle with a nearly 4 percent increase in its quarterly profit, even as it sold less cigarettes. It also plans an additional $400 million in cost savings by the end of 2013 in advance of anticipated cigarette volume declines industry wide.

Altria, based in Richmond, Va., said Marlboro lost 0.9 points of market share to end up with 41.7 percent of the U.S. market.

Volume declines of 10 percent for the brand drove the number of cigarettes it sold down 9 percent to 33.3 billion cigarettes compared with a year ago, while volume for its discount cigarette brands increased 9.5 percent. Its other brands, including Virginia Slims, Parliament and Basic, also lost market share.

Altria has introduced several new products with the Marlboro brand, often with lower promotional pricing. They include special blends of both menthol and non-menthol cigarettes to try to keep the brand growing and steal smokers from its competitors.

And the company still faces pressure in the current economy from less-expensive brands like Pall Mall from Reynolds American Inc. and Maverick from Lorillard Inc. Marlboro sold for an average of $5.74 per pack during the third quarter, compared with an average of $4.22 per pack for the cheapest brand.

But CEO Michael E. Szymanczyk said Marlboro has maintained its brand loyalty, even during tough economic times.

“We remain confident in Marlboro’s brand strength as its equity, loyalty rates and adult demographics remain strong,” Szymanczyk said in a conference call with investors regarding its third-quarter financial results.

The company reported net income of $1.17 billion, or 57 cents per share, for the period ended Sept. 30, up from $1.13 billion, or 54 cents a share, last year. Adjusted earnings were 56 cents per share, matching analyst estimates.

Revenue, excluding excise taxes, fell 3 percent to $4.33 billion. Analysts polled by FactSet were expecting $4.44 billion.

Altria also reaffirmed its full-year forecast for adjusted earnings and announced a new $1 billion share buyback.

Its shares rose 39 cents to close at $27.66.

Leave a Reply

Your email address will not be published. Required fields are marked *