Altria Group 4th-quarter profit climbs partly on strength of Skoal and Copenhagen sales

Altria 4Q profit rises on smokeless tobacco

RICHMOND, Va. — Marlboro maker Altria Group Inc. said Thursday that cost-cutting and strong sales of smokeless tobacco such as Skoal and Copenhagen led its fourth-quarter profit to climb 7 percent, even though it sold fewer cigarettes.

Still the Richmond-based owner of Philip Morris USA said it expects 2010 will be challenging as economic pressures, high unemployment and possible state tax hikes could hurt tobacco sales.

The company said it sold 11.4 percent fewer cigarettes in the fourth quarter than a year earlier. Altria estimated a total industry decline of about 10 percent. For the year, Altria’s cigarette volume fell 12.2 percent, compared with 8 percent industrywide.

Altria said it earned $725 million, or 35 cents per share, for the period that ended Dec. 31, compared with $679 million, or 33 cents per share, it reported a year earlier. For the year, profit fell 35 percent to $3.21 billion, or $1.54 per share, compared with $4.93 billion, or $2.36 per share, in the previous year.

For the quarter, revenue grew 29 percent to $6.01 billion from $4.65 billion on higher prices related mostly to the 62-cent-per-pack federal tax increase that took effect in April 2009, as well as its acquisition of smokeless tobacco company UST LLC.

Excluding the excise taxes Altria collects, its quarterly revenue increased 7 percent, to $4.1 billion. Wall Street expected revenue of $4.14 billion. Annual revenue overall grew 21.7 percent to $23.56 billion, but it increased only 5.4 percent excluding excise taxes.

“The four leading premium brands of Altria’s tobacco operating companies displayed great strength in the challenging economic and competitive environment,” CEO Michael E. Szymanczyk said in a conference call with investors.

Altria’s shares fell 18 cents, or less than 1 percent, to $19.81 in morning trading.

Altria’s cigarette sales excluding excise taxes decreased 4.7 percent to $3.5 billion during the fourth quarter. Including taxes, like the new federal tax, the company’s overall revenue was $5.4 billion.

In the fourth quarter, Philip Morris USA reported volume declines among all cigarette brands, including Marlboro, Parliament, Virginia Slims and Basic. Marlboro, the best-selling brand in the U.S., lost 0.4 point of market share in the quarter to end up with 41.7 percent of the U.S. market, according to data from Information Resources Inc.

Like other tobacco companies, Altria is focusing on cigarette alternatives — such as cigars, snuff and chewing tobacco — for future sales growth.

Altria sold fewer cigars, but its smokeless tobacco volume grew 3.6 percent during the quarter. For the year, volumes for its smokeless products declined 2.4 percent and cigar volumes decreased 3.6 percent. Still, both segments gained market share.

The company said it cut expenses $157 million during the fourth quarter and $398 million for the full year and expects additional cost savings of about $462 million by 2011. It closed its Cabarrus County, N.C., cigarette factory in July to bring its manufacturing capacity in line with falling demand.

While Altria expects 2010 to be difficult due to high unemployment and the soft economy, its guidance for adjusted earnings of $1.85 to $1.89 per share is in range of analysts’ $1.87-per-share prediction.

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AP Business Writer Michelle Chapman in New York contributed to this report.