Marlboro maker Altria Group Inc.'s first-quarter profit rose about 16 percent as it commanded higher prices for its cigarettes and smokeless tobacco products and it benefited from adjustments to a longstanding legal settlement.
The owner of the nation's biggest cigarette maker, Philip Morris USA, said Thursday that it earned $1.38 billion, or 69 cents per share, for the period ended March 31, up from $1.19 billion, or 59 cents a share, a year ago.
Excluding one-time items, earnings were 54 cents per share, beating Wall Street expectations by a penny. That excludes a benefit of 15 cents per share in credits for disputed payments under the 1998 multistate tobacco settlement.
The Richmond, Va., company said revenue, excluding excise taxes, decreased slightly to $3.97 billion. Analysts polled by FactSet expected $4.03 billion.
Cigarette volumes fell about 5 percent to 29.7 billion cigarettes compared with a year ago. Volumes for discount cigarette brands like L&M increased nearly 6 percent, Marlboro volumes fell more than 5 percent and volume for its other premium brands fell by more than 12 percent.
Its share of the U.S. retail market rose 0.5 percentage points to 50.5 percent. Marlboro brand gained 0.2 percentage points of market share to end up with 43.6 percent of the U.S. market.
The premium Marlboro brand has been under pressure from competitors and lower-priced cigarette brands as consumers face economic pressure and high unemployment.
Those economic challenges are in addition to the tax hikes, smoking bans, health concerns and social stigma that have made the cigarette business tougher.
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 to lure smokers away from its competitors. It has said it has a pipeline of innovative products to supplement the Marlboro brand moving forward.
Altria and others are 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 rose about 3 percent compared with the year-ago period. For the quarter, the company's smokeless tobacco brands had 55 percent of the market, which is tiny compared with cigarettes.
Altria said inventory changes and retail share losses drove volumes for its Black & Mild cigars down nearly 17 percent during the quarter.
The company also announced Thursday that its NuMark subsidiary plans to introduce an electronic cigarette during the second half of the year.
It is the last of the major domestic tobacco companies to enter the electronic cigarette market as part of the industrywide push to diversify beyond the traditional cigarette business.
Reynolds American Inc., owner of the second-biggest U.S. cigarette maker, has begun limited distribution of its first electronic cigarette under the Vuse brand as part of the industrywide push to diversify beyond the traditional cigarette business and Lorillard Inc., the nation's third-biggest tobacco company, acquired e-cigarette maker Blu Ecigs in April 2012.
Electronic cigarettes are battery-powered devices that heat a liquid nicotine solution in a disposable cartridge, creating vapor that users inhale. Some e-cigarettes are made to look like a real cigarette with a tiny light on the tip that glows like the real thing. Devotees tout them as a way to break addiction to real cigarettes. They insist the devices address both the nicotine addiction and the behavioral aspects of smoking without the more than 4,000 chemicals found in cigarettes.
Altria Group Inc. also owns a wine business, holds a voting stake in brewer SABMiller, and has a financial services division.
During the latest quarter, the company said it repurchased 1.7 million shares for a total cost of about $57 million, completing its $1.5 billion share buyback program. It said Thursday its board has authorized a new $300 million share repurchase program, which it expects to complete by the end of 2013.
Altria also reaffirmed its full-year adjusted earnings in the range of between $2.35 and $2.41 per share.
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