Profits at Altria slip as U.S. cigarette shipments slow

GREENSBORO, North Carolina: Altria, the world's largest publicly traded tobacco company, said Thursday that first-quarter profit fell more than analysts estimated after U.S. cigarette shipments declined 6.2 percent.

Profit from continuing operations fell 18 percent to $2.13 billion, or $1.01 a share, while sales rose 8.2 percent to $17.6 billion, Altria said. The results exclude Kraft Foods, which Altria spun off as a separate company in March.

Profit a year earlier was $2.6 billion, or $1.24 a share, including a 30-cent tax gain stemming from an audit of four years of U.S. tax returns.

Altria also confirmed that it was considering spinning off its international tobacco unit, a move that analysts have said might allow it to accelerate acquisitions and share buybacks.

In the United States, Altria distributed 2.7 billion fewer cigarettes in the first quarter after raising prices for Marlboro, Parliament and other brands.

"I would expect their pace to pick up now that the Kraft spin-off is behind them," said Matthew Kaufler, a fund manager at Clover Capital Management in Rochester, New York. "Slimmed-down, focused companies tend to be highly prized by investors."

Altria increased its 2007 earnings forecast to $4.20 to $4.25 a share, 5 cents higher than its January outlook.

Shares of Altria fell 55 cents to $69.53 in afternoon trading on the New York Stock Exchange. The stock has increased 7.2 percent this year, including a gain of 4.8 percent since it spun off its 89 percent stake in Kraft on March 30.

Altria, based in New York City, said it earned $1.03 a share excluding some items, compared with analyst projections for $1.04 a share.

The chief financial officer, Dinyar Devitre, said the company was looking into the separation of its U.S. and international tobacco businesses, and was studying other moves to lift its stock price.

Philip Morris International "is organizationally ready to stand independently" if Altria's board decides to spin off the unit, Devitre said.

Filippe Goossens, an analyst at Credit Suisse in New York, said that a board meeting in August "could be the first opportunity to decide what to do with Philip Morris International."

Profit at Philip Morris International rose to $2.2 billion, driven by price increases and a currency benefit of $96 million. International shipments rose 1.5 percent to 213.3 billion cigarettes, with gains in Argentina, Poland and other developing countries offsetting declines in Japan and Russia.

The international results include Lakson Tobacco, a tobacco company in Pakistan in which Altria acquired a controlling interest during the first quarter.

Profit at Philip Morris USA increased 1.3 percent to $1.1 billion after price increases countered a 6.2 percent decline in shipments to 40.6 billion cigarettes.

In December the company raised prices on Marlboro, Basic, Parliament and Virginia Slims, its four largest brands. It cut a promotional discount 10 cents a pack to 40 cents. In February, it increased prices 20 cents a pack on more than a dozen other brands, like as Benson & Hedges and Merit.