Altria profit up but cigarette volumes shrivel

Altria Group Inc. said Thursday that its fourth quarter earnings rose 7% even as cigarette volumes continued to shrivel, and the tobacco titan said the business outlook for 2010 remains challenging.

Altria (MO 19.78, -0.15, -0.75%) earned $725 million, or 35 cents a share, in the quarter
ended , from $679 million, or 33 cents a share, a year earlier.

Revenue at the Richmond, Va.-based maker of Marlboro cigarettes rose 29% to $6.01 billion from $4.65 billion.

On an adjusted basis, the company said it would have earned 39 cents a share in the latest quarter.

The average estimate of analysts polled by FactSet Research had been for the company to earn 40 cents a share on revenue of $4.17 billion.

The company said the business environment for 2010 is likely to remain challenging, as adult consumers remain under economic pressure and face high unemployment.

Its tobacco operating companies also continue to see competitive promotional activity. It also expects that continuing state budget issues may lead to excise tax increase proposals in many states in 2010.

Altria forecast that its 2010 profit to be $1.78 to $1.82 a share, including estimated charges of 7 cents a share related to exit, integration and implementation costs, UST-acquisition related costs and SABMiller (UK:SAB 1,711, -9.00, -0.52%) special items.
Excluding items, profit is forecast to be $1.85 to $1.89 a share.

Altria spun off Philip Morris International (PM 46.97, -0.63, -1.32%) at the end of March
2008 in a move designed to separate the fast-growing overseas cigarette business from a U.S. unit hobbled by litigation worries, huge payments to states and seemingly inexorable year-on-year volume declines.

About a year ago, it closed on the acquisition of smokeless tobacco and wine maker UST.

During the period, Philip Morris USA's domestic cigarette shipment was down 11.4% while its flagship Marlboro brand's retail share was down 0.4 percentage point to 41.7%.

On the brighter side, smokeless tobacco brands Copenhagen and Skoal's combined volume rose 7.8% versus the prior-year period, driven by the successful launch of Copenhagen Long Cut Wintergreen

"Marlboro displayed resiliency in an intensely competitive promotional environment, and we are also pleased with the strong retail share and volume growth of Copenhagen in the fourth quarter of 2009," said Michael Szymanczyk, chief executive, in the earnings report.

Shares of Altria rose 20 cents to $20.01.