Altria Q2 Profit Rises 1.5 Percent

RICHMOND, Va. – Altria Group Inc., parent of Richmond-based Philip Morris USA, said Wednesday its second-quarter profit rose 1.5 percent as its robust international tobacco operations helped offset its food division’s lagging performance.

Altria, based in New York, said net income increased to $2.67 billion, or $1.28 per share, in the quarter ended June 30 from $2.63 billion, or $1.27 per share, in the year-earlier period. Much of this gain was due to a favorable comparison to the year-ago quarter, when it took a $250 million charge due to an international tobacco agreement.

Earnings from continuing operations were $1.40 per share, above the expectations of analysts surveyed by Thomson Financial, who were looking for $1.34 per share. The continuing operations figure excludes a charge related to the sale of certain brands at Kraft Foods.

Revenue increased 8.3 percent to $24.78 billion in the quarter from $22.89 billion in the year-ago period.

"Both our domestic and international tobacco businesses continued to perform strongly," said Louis C. Camilleri, Altria’s chief executive officer. "Kraft’s results lagged our expectations as the business continued to face severe commodity headwinds. But it is pursuing the right actions to secure longer-term sustainable growth, even if such actions hurt short-term results."

Altria’s domestic tobacco unit, Philip Morris USA, saw its operating income rise 4 percent to $1.26 billion even as cigarette shipment volumes barely budged. Domestic tobacco shipments increased 1.4 percent to 49.3 billion units, but the company noted they were "essentially flat" when adjusted for the timing of promotional shipments and trade purchases before the July 4 holiday.

Still, Philip Morris’ share of the domestic retail market increased 0.2 percentage points to 50 percent in the second quarter from the same period a year ago, with the Marlboro and Parliament brands posting strong performances.

Philip Morris International’s operating income increased almost 38 percent to $2.02 billion in the second quarter. This was mainly due to a favorable comparison with the 2004 quarter, when the division took the $250 million charge for a European Commission agreement in which Philip Morris International will provide funds for law enforcement agencies’ anti-contraband and anti-counterfeit efforts.

The international tobacco business said shipment volume rose 5 percent to 202.4 billion units, driven by growth in Eastern Europe, the Middle East and Africa and acquisitions in Indonesia and Colombia. Those gains were partially offset by lower shipments in Western Europe. Excluding acquisitions, shipments increased 1.6 percent.

Altria’s Kraft Foods business, which released second-quarter earnings Tuesday, reported a 32 percent decline in its profits as it sold off its sugar confectionary business and experienced higher commodity costs. Revenue increased 3 percent to approximately $8.30 billion.

For the first six months of the year, Altria earned $5.26 billion, or $2.53 per share. That’s up 9.2 percent from $4.82 billion, or $2.34 per share, in the 2004 period. Revenue rose 8.5 percent to $48.40 billion in the first half of 2005 from $44.62 billion in the year-earlier period.

Altria revised upward its outlook for the full year, saying it now expects earnings per share from continuing operations in a range of $5 to $5.10 per share, up 5 cents per share. The company cited its recently acquired Indonesia operation, PT HM Sampoerna Tbk, which is expected to increase earnings per share by 3 cents to 4 cents per share. It also said it plans to post a gain of 10 cents per share from repatriating foreign profits at a reduced tax rate under the 2004 American Jobs Creation Act.

Shares of Altria fell 5 cents to $65.21 in morning trading on the New York Stock Exchange.