Richmond - Marlboro maker Altria Group Inc. recently released a report stating that cost-cutting and strong sales of smokeless tobacco such as Skoal and Copenhagen led its fourth-quarter profit to climb 7%, even though it sold fewer cigarettes.
Still the Richmond-based owner of Philip Morris USA said it expects 2010 will be challenging as economic pressures, high unemployment and possible state tax hikes could hurt tobacco sales.
The company said it sold 11.4% fewer cigarettes in the fourth quarter than a year earlier. Altria estimated a total industry decline of about 10%. For the year, Altria’s cigarette volume fell 12.2%, compared with 8% industrywide.
For the quarter, revenue grew 29% to $6.01 bn from $4.65 bn on higher prices related mostly to the 62-cent-per-pack federal tax increase that took effect in April 2009, as well as its acquisition of smokeless tobacco company UST LLC.
Excluding the excise taxes Altria collects, its quarterly revenue increased 7%, to $4.1 bn. Wall Street expected revenue of $4.14 bn. Annual revenue overall grew 21.7% to $23.56 bn, but it increased only 5.4% excluding excise taxes.
Altria’s cigarette sales excluding excise taxes decreased 4.7% to $3.5 bn during the fourth quarter. Including taxes, like the new federal tax, the company’s overall revenue was $5.4 bn. In the fourth quarter, Philip Morris USA reported volume declines among all cigarette brands, including Marlboro, Parliament, Virginia Slims, and Basic. Marlboro, the best-selling brand in the US, lost 0.4 point of market share in the quarter to end up with 41.7% of the US market, according to data from Information Resources Inc.
Like other tobacco companies, Altria is focusing on cigarette alternatives - such as cigars, snuff and chewing tobacco - for future sales growth. Altria sold fewer cigars, but its smokeless tobacco volume grew 3.6% during the quarter. For the year, volumes for its smokeless products declined 2.4% and cigar volumes decreased 3.6 percent. Still, both segments gained market share.
The company said it cut expenses $157 mn during the fourth quarter and $398 mn for the full year and expects additional cost savings of about $462 mn by 2011. It closed its Cabarrus County, North Carolina, cigarette factory in July to bring its manufacturing capacity in line with falling demand.