By Angela Chen
Better-than-expected cigarette volumes at Altria Group Inc. led
the company to adjust its earnings guidance higher on Wednesday,
but the company said it expects cigarette shipments to slow during
the second half.
The maker of Marlboro said cigarette shipment volume increased
3.1% in the second quarter as tobacco consumers benefited from
relatively low gas prices and an improving economy.
As a result, Altria's net revenue after excise taxes rose 6.7%
to $4.9 billion in the second quarter, compared to the year-earlier
period. The company raised its earnings guidance by 1 cent and now
expects per-share earnings of $2.76 to $2.81.
Altria Chief Executive Marty Barrington told analysts the coming
quarters face tougher comparisons to year-ago periods when
cigarette shipments improved as gasoline prices dropped by as much
as 80 cents. The company also faces tax increases in several states
that will cut into results.
But with housing starts up and unemployment down, Mr. Barrington
said "the adult tobacco consumer continues to feel better." He said
Altria is benefiting from that because consumers are choosing to
buy higher-priced cigarettes like Marlboro over discount brands. He
added, "You would hope and expect that will continue as long as the
adult tobacco consumer continues to feel like they are in a better
economic circumstance."
Reynolds American Inc., the No. 2 U.S. tobacco company behind
Altria, on Tuesday was more optimistic about the cigarette volumes.
The maker of Camel and Newport cigarettes said its cigarette volume
increased 5.6% during the second quarter. Chief Executive Susan
Cameron said she expects industrywide cigarette volume declines to
slow to about 2% this year, less than previous declines of 3.2%
last year and 4.6% in 2013.
Altria said its cigarette market share during the second quarter
increased to 51.4% from 50.9% during the period. About half of that
increase came from the company's Marlboro brand, which increased
shipments 3% to 28.5 billion cigarettes.
Mr. Barrington said the new Marlboro packaging the company
introduced in 2011 continues to perform well. The Marlboro Black
packaging, which was designed for young adult smokers, had its 18th
consecutive quarter of market share growth and "just continues to
do gangbusters," Mr. Barrington said, especially in the 21- to
29-year-old age group.
The company's smokeless product segment, which is driven by
moist snuff brands Copenhagen and Skoal, increased revenue after
excise tax 4.4% to $447 million during the quarter. The Copenhagen
brand drove much of that as shipment volume rose 5.4%. Skoal
shipment volume was flat.
Earnings rose to $1.45 billion from $1.26 billion in the
year-earlier quarter. Per-share earnings increased to 74 cents from
64 cents.
Angela Chen contributed to this story.
Write to Tripp Mickle at Tripp.Mickle@wsj.com
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