Altria Group Inc., the nation's largest tobacco maker, told its shareholders Tuesday that recent acquisitions and a focus on the growing area of smokeless products put it in a strong position for long-term growth.
The maker of Marlboro, Parliament and Virginia Slims also affirmed its full-year profit guidance as it cited the strength of its brands in the most profitable tobacco categories.
Chief Executive Michael E. Szymanczyk reiterated to shareholders the importance of smokeless products to the company as consumers turn away from cigarettes.
Szymanczyk said Altria, which owns Philip Morris USA, saw a 3.2 percent drop in cigarette volume in 2008 from the previous year.
The industry expects domestic cigarette volumes will keep falling due to smoking bans, health concerns and higher prices. The federal excise tax on cigarettes rose to $1 per pack from 39 cents on April 1, a move that should translate directly into fewer cigarettes bought.
In an effort to move beyond cigarettes, Altria and other tobacco companies have introduced a number of smokeless products to keep smokers as buyers of other items. They are trying to convert smokers to products such as moist snuff, chewing tobacco and snus — a teabag-like pouches that users stick between their cheek and gum.
The Richmond-based company also is using its market-leading Marlboro brand to expand some of its smokeless offerings. Szymanczyk said its Marlboro Snus product is "off to a good start" in test marketing and the company is optimistic about its growth.
To add its offerings, Altria completed its $10.4 billion acquisition of smokeless tobacco company UST Inc. in January, giving it market-leading brands such as Skoal and Copenhagen. Earlier, it bought the John Middleton cigar company, maker of the Black & Mild brand.
Altria said it believes volume in the smokeless tobacco industry as a whole grew 6 percent to 7 percent in the first quarter compared with the same period a year earlier, and machine-made large-cigar volume grew 4 percent compared with a year earlier.
The company's profit for 2008 fell 50 percent, reflecting the spinoff of Philip Morris International, which makes Marlboro and other cigarettes for sale overseas, in March 2008. Net income dropped to $4.93 billion, or $2.36 per share, from $9.79 billion, or $4.62 per share. Revenue rose 4 percent to $19.36 billion.
Altria said Tuesday it still expects to earn a full-year profit of between $1.70 and $1.75 per share for continuing operations, excluding one-time charges. That's up from $1.65 per share on that basis in 2008. Analysts surveyed by Thomson Reuters, whose estimates typically exclude special items and discontinued operations, predict profit of $1.74 per share.
Investors also re-elected nine directors and rejected six shareholder proposals, including ones on say on executive pay and making future or expanded brands non-addictive.
Source: AP News