RICHMOND, Va. – Marlboro maker Altria Group Inc. said Thursday that its first-quarter profit rose almost 4 per cent as higher prices and cost-cutting helped offset declines in cigarette volumes.
The owner of the nation’s biggest cigarette maker reported net income of $973 million, or 48 cents per share, for the three-month period ended March 31, up from $937 million, or 45 cents a share, a year earlier.
Adjusted earnings were 49 cents per share. That matched analyst estimates, according to a survey by FactSet.
Revenue, excluding excise taxes, rose about 1 per cent to $3.99 billion. Analysts polled by FactSet expected revenue of $4.01 billion.
Its shares rose 22 cents to $31.91 in afternoon trading. Its shares have been trading near their 52-week high of $32.10 and traded as low as $23.20 over the past year.
Richmond, Va.-based Altria said cigarettes volumes fell 2.6 per cent to 31.1 billion cigarettes compared with a year ago as an increase of nearly 18 per cent in its discount cigarette brands offset declines in its premium brands like Marlboro.
Its top-selling Marlboro brand gained 0.1 points of market share to end up with 42.3 per cent of the U.S. market. Marlboro volumes declined 3.4 per cent.
The company 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.
Altria still faces pressure in the current economy from less-expensive brands such as Pall Mall from Reynolds American Inc. and Maverick from Lorillard Inc.
Like other tobacco companies, Altria is focusing on cigarette alternatives — such as cigars, snuff and chewing tobacco — for future sales growth because the decline in cigarette smoking is expected to continue.
Volumes of its smokeless tobacco brands such as Copenhagen and Skoal fell 7.5 per cent compared with the year-ago period, which included the launch of several Skoal products. For the quarter, the company’s smokeless tobacco brands had 55.5 per cent of the market, which is tiny compared with cigarettes.
Volume for its Black & Mild cigars grew more than 14 per cent during the period.
The company also owns wine and financial services business that saw gains during the quarter. It also holds a voting stake in brewer SABMiller.
In his final earnings conference call, CEO Michael E. Szymanczyk said he believes the company has many strengths that position it for growth and is “excited about the prospects for Altria’s future.” The company announced last quarter that he would retire following Altria’s annual shareholder meeting on May 17.
Altria has been forced to cut costs as tax hikes, smoking bans, health concerns and social stigma make the cigarette business tougher.
After completing a $1.5 billion multi-year cost savings program last year, the company rolled out a plan to cut $400 million in “cigarette-related infrastructure costs” by the end of 2013 in advance of anticipated cigarette volume declines.
The company said its marketing, administration and research costs fell about 12 per cent to $483 million, and its gross profit rose 2.5 per cent to $2.2 billion.
Altria also reaffirmed its full-year adjusted earnings guidance of between $2.17 and $2.23 per share.
During the quarter the company also said it repurchased 9.9 million shares for a total cost of about $294 million as part of its previously announced $1 billion share buyback program. It has $378 million remaining in the program and intends to complete it by the end of the year.
Altria is the last of the major U.S. tobacco companies to report first-quarter results.
On Wednesday, No. 3 Lorillard Inc., maker of Newport and Maverick cigarettes, said its net income fell 10 per cent in the first quarter as higher prices couldn’t offset an about 3 per cent decline in the number of cigarettes sold.
Reynolds American, the nation’s second-biggest tobacco company and maker of Camel, Pall Mall and Natural American Spirit brand cigarettes, said Tuesday its first-quarter profit fell 29 per cent as restructuring charges and a 5 per cent decline in the number of cigarettes sold more than offset the effect of higher prices and productivity improvements.
Michael Felberbaum can be reached at http://www.twitter.com/MLFelberbaum .