Altria reports cigarette sales down but smokeless up

Philip Morris USA’s reported domestic cigarette shipment volume for the whole of 2011, at 135.1 billion, was down by four per cent on that of 2010, primarily due to retail share losses and one less shipping day, partially offset by changes in trade inventories.

Marlboro’s volume, at 117.2 billion, was down by 3.8 per cent, while the volume of the company’s other premium brands fell by 9.1 per cent to 9.4 billion and its discount brands volume fell by 0.9 per cent to 8.5 billion.

Philip Morris

Philip Morris USA, a property of Altria Group.

PM USA’s fourth quarter volume, at 33.7 billion, was up by 0.2 per cent on that of the last quarter of 2010, primarily due to trade inventory dynamics, partially offset by retail share losses and one less shipping day.

Marlboro’s volume during the fourth quarter of 2011 was down by 0.6 per cent to 29.0 billion and the volume of the company’s other premium brands was down by 7.2 per cent to 2.3 billion, but its discount brands volume was increased by 19.7 per cent to 2.4 billion.

After adjusting for changes in trade inventories and one less shipping day, PM USA’s 2011 fourth-quarter and full-year volumes were estimated to be down about three per cent and four per cent respectively.

Total cigarette market volume for the fourth quarter and full year of 2011 was estimated to be down about 3 per cent and 3.5 per cent respectively, when adjusted primarily for changes in trade inventories and one less shipping day.

PM USA’s retail share of the cigarette market during 2011 was down by 0.8 of a percentage point to 49.0 per cent.

Marlboro’s share was down by 0.6 of a percentage point to 42.0 per cent, while the share of its other premium brands was down by 0.2 of a percentage point to 3.7 per cent and its discount brands’ share was unchanged at 3.3 per cent.

Altria reported its fourth quarter and full-year results on Friday. The tobacco company’s 2011 reported diluted earnings per share (EPS) were down by 6.8 per cent to $0.41 for the fourth quarter and down by 12.3 per cent to $1.64 for the full year, primarily due to the impact of special items, including a 2011 second-quarter charge related to certain leveraged lease transactions, 2011 fourth-quarter restructuring charges related to a cost reduction program announced in October 2011, and charges related to tobacco and health judgments.

Marlboro Filter Plus

Marlboro Filter Plus cigarettes

Altria’s 2011 adjusted diluted EPS, which excludes the impact of special items, including charges related to tobacco and health judgments, were up by 13.6 per cent to $0.50 for the fourth quarter and up by 7.9 per cent to $2.05 for the full year.

Meanwhile, smokeless tobacco volume during the full year 2011, at 734.6 million (cans and packs), was up by 1.4 per cent on that of the full year 2010.

Copenhagen’s volume rose by 8.2 per cent to 354.2 million and Skoal’s volume was up by 4.5 per cent to 286.8 million, but the volume of other brands taken together was down by 23.6 per cent to 93.6 million.

During the fourth quarter of 2011, total smokeless product volume was up by 9.7 per cent to 189.3 million.

Copenhagen’s volume was increased by 15.9 per cent to 95.7 million, Skoal’s volume was up by 9.4 per cent to 71.9 million, but the volume of other products was down by 10.4 per cent to 21.7 million.

During the full year 2011, the company’s share of the smokeless market fell by 0.1 of a percentage point to 55.1 per cent.

Copenhagen’s share was up by 1.5 percentage points to 26.2 per cent, while Skoal’s share was down by 0.5 of a percentage point to 22.8 per cent and the share of the company’s other smokeless products fell by 1.1 percentage points to 6.1 per cent.

Cigar volume during the full year 2011 was unchanged at 1,246 million, though the volume of Black & Mild cigars, at 1,226 million, was up by 0.3 per cent.

The fourth quarter saw cigar volume down by 5.6 per cent to 286 million, with Black & Mild’s volume down 5.5 per cent to 281 million.

The company’s cigar share during the full year was up by 0.4 of a percentage point to 29.8 per cent, with Black & Mild’s share up by 0.5of a percentage point to 29.5 per cent.

“Altria delivered strong returns for its shareholders in 2011 in a challenging business environment while taking steps to continue creating shareholder value into the future,” said Michael E. Szymanczyk, chairman and CEO of Altria. “Altria grew its redefined adjusted diluted EPS by 7.9 per cent behind the strength of our tobacco and wine businesses.

“Altria outperformed the S&P 500 Index for the twelfth consecutive year and delivered total shareholder return of 26.9 per cent. In 2011, Altria created shareholder value by increasing its dividend by 7.9 per cent, repurchasing $1.3 billion of its shares, completing a $1.5 billion 2007 to 2011 cost reduction program and announcing a new cost reduction program for its tobacco and services companies in October.”

Szymanczyk then turned to lower risk products. “Altria continues to focus on developing lower risk products that appeal to adult tobacco consumers,” he said. “To support this goal, I am pleased to announce that Altria Client Services has entered into an agreement with Okono A/S, an affiliate of Fertin Pharma A/S, to develop innovative, non-combustible nicotine-containing products for adult tobacco consumers. This new product initiative combines the expertise of the Altria family of companies with Okono and its affiliates’ product development and manufacturing capabilities.”

Szymanczyk is to retire after 23 years with the company, including four years as chairman and CEO of Altria.

The board has elected Martin J. Barrington to serve as chairman and CEO, effective upon Szymanczyk’s retirement following the annual meeting of shareholders on May 17. The board has elected Barrington to Altria’s board, effective immediately.

Additionally, the board elected David R. Beran, to serve as president and COO, effective May 17, and approved a consulting agreement with Szymanczyk for an initial period ending January 31, 2014.

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