Altria Posts 15.4 Percent Rise in Q1

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Altria Posts 15.4 Percent Rise in Q1

By Melissa Kress, Convenience Store News - 04/20/2011

RICHMOND, Va. -- Altria Group Inc. is starting the year off strong with diluted earnings per share rising 15.4 percent in the first quarter.

According to the company's earnings call this morning, higher operating companies income (OCI) from cigarettes, smokeless products and wine were key factors in the reported results increase. Higher earnings from the company's investment in SABMiller plc, lower interest and other debt expense, net also led the rise. These factors were partially offset by lower OCI from cigars. The company added that this year's first-quarter adjusted diluted EPS increased 4.8 percent.

Chairman and CEO Michael E. Szymancyk said he was pleased with the numbers, given the high unemployment rate, low consumer confidence and competitive business environment. "As we anticipated, adjusted EPS growth comparisons for the first quarter were challenging, but our results exceeded our initial expectations and give us confidence in our belief that we can achieve adjusted diluted EPS growth within our forecasted range for the year."

Specifically, Szymancyk explained that launched two Marlboro Special Blend products in January 2010 which "made it hard to compare" the two quarters. PM USA also introduced two new Marlboro Special Blends products in late February 2011, which had a minimal impact on retail share results in the year's first quarter. Overall, the brand's retail share decreased 0.5 share points primarily due to the timing of the launches, he added.

Similarly, the smokeless category's first-quarter financial, shipment volume and retail share comparisons were impacted by new product launches and promotional product introductions. The first quarter of 2010 benefited from the launch of new Copenhagen products, the national introduction of Marlboro Snus and a Skoal Can pouch promotion, the company said. On the other hand, the segment's 2011 first quarter did not see the same degree of benefit from new product activity because of the timing and size of the launches on several Skoal and Marlboro smokeless products so far in 2011.

But overall, the smokeless segment posted "solid business results in a competitive market," Szymancyk added. Specifically, Copenhagen's retail share for the first quarter 2011 rose 0.4 share points versus the same period in 2010 and grew 0.3 share points versus the fourth quarter of 2010.

As for cigars, the company saw the segment's first-quarter financial results negatively impacted by events following the 2009 federal excise tax increase on tobacco products. However, building on Black & Mild's marketplace position, the company plans two brand-building initiatives, Szymancyk explained. Those are the introduction of two untipped cigarillo varieties nationally in the second quarter, and the introduction of Black & Mild shorts. This should enhance Black & Mild's market share and lead to good results this year, he added.

Altria also plans to move forward with a $1-billion share repurchase program this year, however, when depends on marketplace factors and other conditions, and is at the discretion of the board, added Howard Willard, executive vice president and chief financial officer.