Altria Profit Down 44% on Debt-Repurchase Charge

Altria Group Inc.’s third-quarter revenue dropped 44 percent because of a debt repurchase charge, although sales went up as the cigarette maker revealed higher cigarette volumes despite the broader industry’s fall.

When excluding the $874 million pretax charge associated with Altria’s debt repurchase, which it finished last month, adjusted revenue met Wall Street’s expectations while sales growth was better than expected.

Marlboro Cigarettes

Marlboro ciggies

Altria, the maker of Marlboro, has been getting market share this year as the group has released special offers} that reduce the price for some of its tobacco products.

In the third quarter, Altria’s overall cigarettes volume has grown 1.2 percent, simply besting the industry’s 2.7 percent drop. Marlboro’s shipments increased 1% while discount brands experienced a 14 percent rise. Altria’s total cigarette market share increased to 49.9 percent from 48.7 percent.

Altria rivals Reynolds American Inc and Lorillard Inc. have said that special offers have obtained more disruptive in latest months, and both companies said they intended to get more aggressive on cigarette pricing.

Reynolds American shared a high drop in third-quarter volume and Lorillard only slightly outperformed.

Altria’s smokeless products volume increased 5.9 percent. Growth for snuff brands, Copenhagen and Skoal, was partially balanced out by drops for other brands in the collection. Copenhagen experienced an especially strong performance, as new products keep on to hit the market.

The firm has promoted brand-building efforts, as it was with Marlboro NXT, which broadened into 27 states at the end of the third quarter. Marlboro NXT consists of menthol capsule that enable smokers to switch from non-menthol taste to menthol.

Menthol, which is extremely famous among young smokers, accounts for approximately 31 percent of domestic tobacco volume and though the market has been centered on Lorillard, Altria and Reynolds American have introduced their new menthol versions.

Altria, which reaffirmed its full-year guidance, invested around $262 million to repurchase 7.7 million shares throughout the quarter. The corporation as well increased the authorization of its share repurchase program by $500 million. It now has around $550 million remaining under the program, which it wants to finish by the end of 2013’s second quarter.

Tobacco shares possessed a strong performance in 2011 and during the first half of 2012 as dividend yields and strong cash flows drew investors to the sector. But valuations have fallen in recent months and all three tobacco companies are underperforming the Standard & Poor’s gain in 2012.

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