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Apr-25-2008Costs of Spinoff Push Down Altria's Profit(topic overview)
CONTENTS:
- Altria, based in Richmond, Virginia, has increased 0.5 percent since March 31. (More...)
- The company shipped 40.1 billion cigarettes, down 1.2 percent from a year earlier. (More...)
- The introduction of the new variety followed the company's 2005 purchase of PT H.M. Sampoerna, Indonesia's third-largest cigarette maker. (More...)
- PMI sells Marlboro and other cigarette brands outside of the United States since it was spun off to shareholders by parent company Altria last month. (More...)
- Earnings-per-share figures for the 2007 quarter are based on the number of shares distributed by Altria in the spin-off. (More...)
- In the after-hours trading, the stock is currently quoted at $22.25, down 28 cents, or 1.24%. (More...)
- The company is monitoring industry trends as consumer confidence falls, but so far, Altria officials "haven't seen 'down-trading' to lower-priced cigarettes," Beran told analysts. (More...)
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Altria, based in Richmond, Virginia, has increased 0.5 percent since March 31. It's scheduled to report first-quarter results tomorrow. Separately, in its first acquisition as an independent company, Philip Morris International agreed to buy some of Imperial Tobacco Group Plc's fine-cut tobacco trademarks for 254 million euros ($405 million). Bristol, England-based Imperial was required by European competition regulators to sell some brands to get approval for its purchase of Altadis SA. Philip Morris International expects the addition of Interval and other Imperial brands used for roll-your-own cigarettes to increase its annual profit by 1 cent a share. [1] Camilleri was Altria's chief executive from April 2002 until assuming the same position at Philip Morris International when it spun off from Altria on March 28. He had been with the company since 1978. Altria now consists mainly of its domestic cigarette unit Philip Morris USA, cigar manufacturer John Middleton Inc., Philip Morris Capital Corp. and a 29 percent stake in London-based SABMiller PLC, brewer of Miller beer. Its first-quarter profit fell 11 percent, in part because of costs related to the spinoff of Philip Morris International Inc. and relocating its corporate headquarters from New York to Richmond.[2] RICHMOND, Va. — Altria Group Inc. said Thursday its first-quarter profit fell 11 per cent, in part because of costs related to the spinoff of Philip Morris International Inc. and relocating its corporate headquarters from New York to Richmond.[3]
April 23 (Bloomberg) -- Philip Morris International Inc., spun off last month by Altria Group Inc., posted first-quarter profit that rose faster than analysts estimated after new varieties of Marlboro cigarettes and acquisitions spurred sales in Indonesia, Pakistan and Mexico. The cigarette maker jumped 3.9 percent in New York trading, the biggest increase since the March 28 spinoff, after saying profit this year will exceed its forecasts.[1] CHICAGO, April 23 (Reuters) - Marlboro cigarette maker Philip Morris International Inc (PM.N: Quote, Profile, Research ) on Wednesday posted better-than-expected quarterly profit, helped by the weak dollar and better pricing in Poland, Russia and Turkey. The company, which was spun off from Altria Group Inc (MO.N: Quote, Profile, Research ) at the end of March, also raised its full-year earnings forecast, citing favorable foreign exchange rates and other factors. The world's largest non-state-owned cigarette maker posted double-digit revenue and profit increases in all its regions, and its stock rose more than 3.5 percent.[4]
Oil and copper aren't the only commodities being hoovered up by fast-growing nations such as China and India. They're substantially increasing cigarette consumption. Profits announced by Philip Morris International this morning demolished analysts' estimtes. Cigarette maker Philip Morris International Inc., spun off last month by longtime owner Altria Group Inc., reported Wednesday a 29.2 percent rise in profit for the first quarter, beating estimates, and raised its outlook for the year.[5] In the first quarter, the cigarette maker reported that net income jumped 29 per cent and sales rose 18 per cent all of which taps into the argument that international tobacco is a thriving market because growing affluence in many parts of the world is encouraging people to smoke premium Western brands. Investors are coming around: They drove Philip Morris' the stock up 3.9 per cent on Wednesday, after the results were released. Since its spinoff, the stock has risen about 5 per cent in total, outperforming the rump Altria Group, which holds the domestic operations. St'fane Marion, an economist at National Bank, points out that while the tobacco market might be a good safe haven in developed economies since people tend to smoke in good times and bad premium cigarettes are considered a luxury good in many of the markets where Philip Morris is pinning its growth prospects. "Although we remain positive on the long-term outlook emerging economies, the short-term has become more challenging because of the surging price of food which is depressing disposable income in many countries," he said in a note to clients.[6]
The maker of top-selling Marlboro cigarettes reported earnings of $2.45 billion, or $1.16 per share, for the quarter ended March 31st. That's down from $2.75 billion, or $1.30 per share, in the year-ago quarter. Excluding 1-time charges and results from its international division, which was spun off March 28th, Altria earned 37 cents per share. That matched the average estimate of analysts surveyed by Thomson Financial. Altria's chief financial officer, David R. Beran said in a conference call with analysts that the company is about where it wants to be with both its share gains and income.[7] NEW YORK (Thomson Financial) - Altria Group Inc. reported first-quarter net income from continuing operations of $614 million, or 29 cents a share, and adjusted earnings excluding non-recurring items of 37 cents a share, matching the mean estimate of analysts surveyed by Thomson Reuters.[8] Altria Group Inc.' s (MO) first-quarter net income fell 11% to $2.45 billion, or $1.16 a share, from $2.75 billion, or $1.30 a share, a year earlier, hurt in part by charges from the spinoff of Philip Morris International Inc.[9] The cigarette maker, which recently completed the spinoff of Philip Morris International PM a year after parting ways with Kraft KFT, had earnings for the quarter of $2.45 billion, or $1.16 a share, once various items were factored in.[10] Excluding costs related to the spinoff of Philip Morris International and the closing of Altria's headquarters in New York, as well as other items, the company would have had earnings from continuing operations of 37 cents a share, up from 33 cents a year ago. On that basis, Altria matched estimates.[10] Earnings from from continuing operations were 29 cents a share for the quarter, which include costs and charges from the spinoff of Philip Morris International Inc.[9]
CHICAGO, April 24 (Reuters) - Altria Group Inc (MO.N: Quote, Profile, Research ) posted lower quarterly profit from continuing operations on Thursday due to charges related to the spinoff of its Philip Morris International (PM.N: Quote, Profile, Research ) business. Earnings were in line with analysts' estimates, and the company also stood by its full-year profit forecast.[11] Emerging markets such as Eastern Europe helped newly independent Philip Morris International Inc. post a 29% jump in first-quarter profit, though the company sold fewer cigarettes in some large, developed regions. Philip Morris International, which sells Marlboro cigarettes outside the U.S., beat forecasts and increased its earnings outlook for the year. In regions such as the European Union and Japan the tobacco giant continued to show declines.[12]
The company posted earnings of 89 cents a share, while analysts expected profits of 77 cents per share. Philip Morris also lifted its outlook for the year. If you'''re looking for a hedged play on this stock, consider a September bull-put credit spread below the $45 range. PM stock could fall up to 13% before expiration and this position would still be profitable.[13] Altria, the parent of Philip Morris USA, said profit from continuing operations dropped to $614 million, or 29 cents a share, in the first quarter, from $696 million, or 33 cents a share, a year earlier.[11] PM is now trading at 51.70, up 1.63 (3.20%). The stock hit its 52 week high of 54.70 in March and set its 52 week low of 47.43 in April. PM has been steady since its initial offering in March of this year. Philip Morris International reported this morning its first quarter profit climbed 29.2 percent to $1.87 billion.[13] Philip Morris International or PMIs' net revenues for the quarter were $15.59 billion, up from $13.27 billion in the year earlier period.[14]
Last month's breakup was designed to separate the lucrative international division from U.S. regulators and had been planned for years despite concerns that the tobacco litigants would try to stop the transaction. Looking forward, Philip Morris now expects growth in adjusted 2008 earnings of 14% to 16% to a range of $3.18 to $3.24 a share, above the 12% to 14% range given by Altria when it reported its fourth-quarter results.[15] Goldman Sachs analyst Judy Hong said cigarette stocks tend to do well when the economy is weak, and said first-quarter results will lift Altria because investors have become too pessimistic about U.S. sales. She rates both Altria and Philip Morris shares at "Buy," and calls Altria her top pick in the sector. Hong believes Altria stock is trading at a discount to peers despite its strong market share and the opportunity for solid profit growth. JPMorgan analyst Erik Bloomquist says PMI is his "favorite U.S. listed stock," as good results from emerging markets including Eastern Europe, Africa and the Middle East will lead to strong profit growth.[16] Philip Morris is expected to report a profit of 77 cents per share and $6.15 billion in sales.[16] Since the spin-off, Philip Morris shares are down about 2 per cent, while Altria's are down 3.2 per cent. Philip Morris raised its 2008 earnings per share forecast to a range of $3.18 to $3.24 from its previous forecast of $3.11 to $3.17.[17] "Importantly, we continue to witness an improvement in our business fundamentals as evidenced by the double-digit revenue and income growth recorded in each of our geographic segments. While we continue to face some challenges in certain markets, I am confident that we have the appropriate strategies and resources in place to deal with them effectively." Looking ahead, Philip Morris increased its full-year earnings forecast to a range of $3.18 to $3.24 a share.[18] Three Wall Street analysts estimated revenue of $3.83 billion. Altria reaffirmed its 2008 adjusted earnings from continuing operations to be in the range of $1.63 - $1.67 per share. This represents a 9% to 11% growth rate from an adjusted base of $1.50 per share in 2007.[19] Analysts polled by Thomson Financial expect Altria to earn 37 cents per share on $3.83 billion in revenue.[16] Analysts polled by First Call/Thomson Financial expected the company to earn $0.25 per share for the quarter on revenue of $387.37 million.[19] On average, analysts polled by First Call/Thomson Financial projected a loss of $0.18 per share on revenues of $7.45 million. While a search for his successor will be initiated immediately, Gable has agreed to remain with the company until that search has been concluded to ensure an orderly transition occurs and to finalize all fiscal year-end reporting activities.[19]
On average, seven analysts polled by First Call/Thomson Financial expected the company to report earnings of $0.16 per share.[19] On average, 8 analysts polled by First Call / Thomson Financial expected the company to report earnings of $0.37 per diluted share for the first quarter.[20] The Richmond, Virginia-based company reported net earnings for the first quarter of $2.45 billion, or $1.16 per diluted share, 10.8% lower than net earnings of $2.75 billion, or $1.30 per diluted share, reported in the corresponding quarter last year.[20] Earnings from continuing operations for the first quarter, including asset impairment, exit, integration and implementation costs, loss on early extinguishments of debt, and gain on sale of corporate headquarters, declined 11.8% to $614 million, or $0.29 per diluted share, from $696 million, or $0.33 per diluted share, reported for the same period last year.[20]
On average, 8 analysts polled by First Call/Thomson Financial expected earnings of $0.37 per share for the first quarter.[19]
FirstCall has earnings estimates pegged at $3.19 per share. PMI reaffirmed its previously announced intention to pay a dividend at the initial rate of $0.46 per share per quarter, or $1.84 per common share on an annualized basis. PMI noted that its dividend policy anticipates a payout ratio of approximately 65%. As previously announced, the company said its $13.0 billion two-year share repurchase program is expected to begin in early May.[14] The company's net income for the quarter rose to $1.87 billion or $0.89 per share from $1.45 billion or $0.69 per share in the year-ago period.[14] For the quarter, the company recorded net income of $0.3 million or $0.01 per share, down from $4.2 million or $0.18 per share in the previous year period.[19]
Altria said it expects to earn $1.63 to $1.67 per share in 2008 and anticipates stronger growth in the second half of the year. It expects the restructuring to save the company $250 million a year, starting in 2009.[3] Shipments of Parliament recorded similar strong growth of 18.8%, while shipments of Virginia Slims grew 13.7%. Total shipment volume of Other Tobacco Products or OTP (in cigarette equivalent units) surged more than 33%, fueled by strong growth in Germany and Poland. Based on favorable currency, business momentum and increased reinvestment in the business, PMI boosted its earnings outlook for the full year of 2008 to range between $3.18 and $3.24 from its prior guidance of $3.11 to $3.17 per share. The revised outlook represents a growth rate of approximately 14% to 16%, from its 2007 revised pro-forma adjusted earnings of $2.79 per share.[14] The transaction is expected to increase PMI's net earnings per share by approximately $0.01 on a full year basis.[14]
The company expects to reported adjusted full-year earnings per share from continuing operations in the range of $1.63 to $1.67, which includes the expected strong earnings across the segments in the second half of the fiscal year 2008.[20]
The New York company said revenue increased to $4.41 billion from $4.29 billion. Altria backed its 2008 view for adjusted earnings from continuing operations of $1.63 to $1.67 a share.[9] Analysts were projecting revenue of $3.83 billion, on average. The Richmond, Va. -based tobacco company affirmed its guidance for 2008 adjusted earnings of $1.63 to $1.67 a share.[8] Analysts' latest mean estimates were earnings of 77 cents a share and revenue of $6.15 billion.[15] Analysts surveyed by Thomson Financial were looking for earnings of 77 cents and revenue, before excise taxes, of $6.15 billion.[18]
Analysts had expected revenue of $3.83 billion. Altria recorded a pre-tax gain of $404 million on the sale of its Park Avenue headquarters building in New York.[3] The company has successfully completed the spin-off of Philip Morris International during the first quarter of 2008. During the quarter, the company has also completed the sale of its headquarters in New York and restructuring of the corporate headquarters has also been completed during the quarter.[20] NEW YORK -- Cigarette maker Philip Morris International Inc. will report its first-quarter results Wednesday, while Altria Group Inc. is scheduled to post its earnings Thursday.[16] Altria Group Inc.' s first-quarter net income fell 12% as the company completed its spinoff of Philip Morris International Inc. in addition to a major restructuring and headquarters move.[21] Philip Morris International Inc. has done well since its spinoff from Altria Group Inc. last month.[6]
Associated Press - April 24, 2008 7:15 PM ET RICHMOND, Va. (AP) - Altria Group says its first-quarter profit fell 11%, in part because of costs related to the spinoff of Philip Morris[7]
Separately, the company said it has reached an agreement to acquire certain brands from Imperial Tobacco Group ITY in a deal valued at 254 million euros ($404 million). Philip Morris said the acquisition should boost its full-year profit by about 1 cent.[18] Philip Morris, the world's largest tobacco company outside of China, sold more clove-flavored Marlboro cigarettes in Indonesia, unburdened by the slowing U.S. tobacco market and the threat of litigation from sick American smokers since the separation from Altria. "These developing economies are growing faster, benefiting Philip Morris as people are able to afford their cigarettes,'' said Giri Cherukuri, who helps manage $1.4 billion in assets including 82,950 Philip Morris shares at Oakbrook Investments LLC in Lisle, Illinois.[1] Camilleri _ who has been replaced at Altria by Philip Morris USA's chief executive Michael E. Szymanczyk _ also received $469,165 in "other" compensation, including $94,339 for use of company aircraft and $29,921 for the installation of a home-security system. He also got $64,374 in reimbursements on taxes on retirement assets. The proxy statement showed that Camilleri also received stock awards valued at $10 million when they were issued in January 2007.[2] Philip Morris rose $1.93 to $52 at 4:15 p.m. in New York Stock Exchange composite trading. The stock has advanced 2.8 percent since March 31, its first trading day after being spun off as an independent company.[1] We know Altria closed at $22.20 on March 31, the first trading day after PM was split off. That day, Philip Morris International closed at $50.58.[22] A: On March 28, shareholders of Altria got a little bit 'MO stock. Altria, maker of cigarettes and other tobacco products, shifted all its ownership of Philip Morris International to shareholders.[22] If you owned Altria on March 19, you were given shares of Philip Morris International on March 28. Shareholders received one share of Philip Morris International for every share of Altria they owned.[22]
Net earnings, including results from spinoffs (Philip Morris International) and other non-recurring items, were $2.45 billion, or $1.16 a share.[8] The gain was partially offset by a pre-tax charge of $247 million from the Philip Morris International spinoff - largely employee-separation costs, but also fees related to investment banking and legal services, Beran said.[3] To figure your cost basis in Philip Morris International, multiply your original Altria cost basis of $70 by the allocation factor of 69.5%, or $48.65. That's it.[22] Camilleri, who now is the chief executive of Philip Morris International Inc., which was spun off last month from Altria, was paid a salary of $1.75 million, according to Altria's proxy statement with the Securities and Exchange Commission. He also received $4.75 million under a non-equity incentive plan for 2007 plus $5.03 million under a long-term incentive plan. His salary remained unchanged, but the value of his long-term incentive plan fell, from $15 million in 2006.[2]
Philip Morris International PM, the cigarette seller that was recently spun off from Altria MO, topped analysts' estimates for the quarter in which it became an independent company.[18] Philip Morris International was spun off from Altria to give investors a pure play in the international cigarette business, which is seen as having more growth while the U.S. market continues to shrink.[17] Louis Camilleri, 53, took charge of Philip Morris International after serving as Altria's chief executive officer since 2002. He's expanding distribution of Marlboro, the world's top-selling cigarette, in emerging markets after smoking bans and rivals' discount cigarettes eroded demand in western Europe.[1] Philip Morris International started selling Marlboro "kretek'' cigarettes, a mixture of tobacco and the sweet- smelling clove spice, in Indonesia last year.[1] Philip Morris International which sells Marlboro cigarettes outside the U.S. beat forecasts and hiked its outlook for the year.[15]
Philip Morris International accounts for 69.5% of the cost basis, or $50.58 divided by $72.78.[22] The unit will increase Philip Morris International's share of the fine-cut tobacco market to more than 10 percent in the European Union.[1] Philip Morris shares were rising 3.7% to $51.92, and Altria was up 1.6% at $22.41.[18] The deal is expected to add 1 cent a share to Philip Morris earnings, the company said.[17]
The Marlboro brand achieved a 41.5 per cent share in the first quarter, compared with 40.8 per cent in the year-ago period. Beran said the previously announced closure of the company's Cabarrus, N.C., cigarette plant, and the relocation of workers and equipment to its Richmond plant, is on schedule to be completed in 2010. Altria's first-quarter results also included those of cigar manufacturer John Middleton Inc., which the company acquired in December.[3] Middleton's sales were $91 million, company officials said. As cigarette volume continues to fall, Altria expanded its test market of Marlboro Snus _ a smokeless-tobacco pouch product _ to Indianapolis, and expanded testing of its Marlboro Moist Smokeless Tobacco to more Atlanta-area counties in the first quarter.[23] Revenue from cigarettes and other tobacco products during the first quarter declined marginally by 0.3% to $4.23 billion from $4.245 billion reported in the same period last year.[20] Operating companies income for the first quarter declined 10.5% to $1.16 billion from $1.29 billion reported in the same period last year. The company reaffirmed its full year 2008 guidance announced while releasing the full year results for fiscal 2007.[20]
Gross profit for the quarter increased marginally by 1% to $1.72 billion from $1.70 billion reported in the same period last year.[20]
The company said first-quarter profit of $1.87 billion, or 89 cents a share, compared with proforma results of $1.45 billion, or 69 cents a share, a year earlier.[4] The world's largest non-state owned cigarette maker posted first-quarter profit of $1.87-billion (U.S.), or 89 cents a share, compared with pro-forma results of $1.45-billion, or 69 cents a share, a year earlier.[17] Ten analysts projected average first-quarter profit of 78 cents a share in a Bloomberg survey. The maker of Virginia Slims and Chesterfield cigarettes said it expects 2008 per-share profit to increase 14 percent to 16 percent, faster than its projection last month of 12 percent to 14 percent. It forecast annual profit of $3.18 to $3.23 a share.[1]
ATLANTA (AP) _ Consumer products maker Newell Rubbermaid Inc. reported Thursday a 15 percent increase in first-quarter profit on a modest rise in sales. GLOUCESTER, Mass. (AP) _ Varian Semiconductor Equipment Associates Inc., which makes equipment used to manufacture semiconductors, said Thursday its fiscal 2008 second-quarter profit fell 11 percent on higher costs and taxes. SAN FRANCISCO (AP) _ Online technology news and entertainment company CNet Networks Inc. said Thursday its first-quarter loss narrowed on cost cuts and improvements to its operating structure. LAKE FOREST, Calif. (AP) _ Hard drive maker Western Digital Corp. said Thursday its fiscal third-quarter profit more than doubled as revenue jumped 50 percent on healthy demand for its data storage products. SANTA CLARA, Calif. (AP) _ Internet security company McAfee Inc. said Thursday that its first-quarter profit fell 27 percent as rising operating costs and a much higher provision for income taxes overshadowed an increase in revenue.[24] NEW YORK (AP) _ Restructuring charges sunk Bristol-Myers Squibb Co.' s first-quarter profit, but the drug developer reported higher sales for key treatments including the blood-thinner Plavix, and managed to top Wall Street forecasts.[24]
The company has offices in New York and Lausanne, Switzerland. Altria now does all its business in the U.S. PMI is operating in international markets, where cigarette sales are growing and the threat of lawsuits is lower. Both companies produce Marlboro cigarettes.[16]
Altria also becomes the largest of the Richmond area's Fortune 500 companies. It is ranked No. 61, with $38 billion in revenue. It dropped from No. 23 last year because of the spinoff last month of its international cigarette business into a separate company. At the top of the Fortune 500 again this year is retailer Wal-Mart Stores Inc., with more than $378 billion in revenue.[25] Eight companies with headquarters in the Richmond area have made this year's Fortune 500, an annual ranking of the nation's largest publicly traded companies by revenue. That's one more than last year for the region, thanks to Altria Group Inc.' s decision to move its corporate offices here from New York last month.[25] NEW YORK (Associated Press) - Former Altria Group Inc. chief executive Louis Camilleri received total compensation valued at $22 million in 2007, the company disclosed Thursday in a regulatory filing.[2]
The stock was recently up 3.4% to $51.75. The international company was recently spun off from parent Altria Group Inc. (MO) and this is the first time the company is reporting as an independent company.[15]
Altria Group MO met analysts' expectations with its first-quarter earnings and said net revenue increased 2.8% from the same period a year ago.[10] Revenue rose to $4.41 billion from $4.29 billion and exceeded the consensus forecast of $3.83 billion. Altria reaffirmed its 2008 guidance for adjusted earnings from continuing operations in the range of $1.63 to $1.67, representing a growth rate of approximately 9% to 11% from a base of $1.50 in 2007.[10]
Net revenues for the quarter increased 2.4% to $4.4 billion from $4.29 billion reported in the corresponding quarter last year.[20] During the quarter, the company earned revenue of $91 million from the sale of cigars, in comparison to no sales in the same period last year.[20] Revenue for the quarter ending March 31 rose 2.8% to $4.41 billion from $4.29 billion in the same period a year ago.[8]
For the quarter ended March 31, the company earned $1.87 billion, or 89 cents a share, up from $1.45 billion and 69 cents a share a year earlier.[18] The company posted net income of $1.87 billion, or 89 cents a share, compared with $1.45 billion, or 69 cents a share, a year earlier.[15] Net income advanced 29 percent to $1.87 billion, or 89 cents a share, the company said today in a statement.[1]
PMI said it earned $1.87 billion, or 89 cents a share, in the first three months of the year, up from $1.445 billion, or 69 cents a share, in the same period last year.[5]
Sales for the first quarter were $4.41 billion, up nearly three per cent from $4.3 billion in the same quarter in 2007.[3] Cigarette sales volume at the company's Philip Morris USA unit was down about 3.5 per cent, when adjusted for changes in trade inventories.[3] Besides Philip Morris USA and Middleton, Altria owns Philip Morris Capital Corp. and a 29 per cent stake in London-based SABMiller PLC, brewer of Miller beer. Altria reported its results after markets closed Thursday.[3]
Altria is the parent company of Henrico County-based Philip Morris USA, the largest U.S. cigarette maker.[25] Philip Morris took control of Lakson Tobacco Co., Pakistan's second-largest cigarette maker, last year. It also increased its ownership of its Mexican joint venture with Grupo Carso SAB to 80 percent from 50 percent.[1] Philip Morris delivered 217.9 billion cigarettes in the quarter, 2.2 percent more than a year earlier.[1]
New York-headquartered PMI said it shipped 218 billion cigarettes during the first quarter, 2.2 percent more than the previous year.[26] The company's European Union shipments dropped 5.9 percent to 62.8 billion cigarettes in the first quarter.[1]
The reported operating companies income for the first quarter of 2008, surged 31.7% to $2.8 billion, driven mainly by solid performances from all business segments and favorable currency.[14] Revenue excluding excise taxes for the first quarter of 2008 increased 14.1% to $6.33 billion.[14] Total revenues for the first quarter were $7.1 million, higher than $4.3 million in the same quarter of the preceding year.[19] Research and development expenses for the first quarter grew to $22.2 million from $11.8 million in the previous year quarter.[19]
Higher prices in Turkey, Russia and Colombia contributed to operating profit, adjusted for some costs, of $2.86 billion, which was 29 percent higher than a year earlier and beat Goldman Sachs Group Inc.' s estimate by $313 million.[1] The Omaha, Neb., food company has a fiscal third-quarter profit of $309.1 million, or 63 cents a share.[18] The company's shares were down 29 cents in extended trading after rising 23 cents to $22.53 in the regular session. AP Business Writer Lauren Shepherd in New York contributed to this report.[3]
Analysts expect the company to report earnings of $1.67 per share for fiscal 2008.[19] Analysts polled by Thomson FirstCall expected the company to earn $0.77 per share.[14]
Adjusted earnings per share from continuing operations were up 12.1% to $0.37 from $0.33 in the year-earlier period.[19] On a per share basis, earnings from continuing operations fell 12.1% to $0.29 from $0.33 a year-ago.[19]
Earnings per share rose 29 percent to US$0.89 (0.56) from US$0.69. "Of this increase, 11 cents per share reflects the strength of our business, and favorable currency accounts for the balance of 9 cents per share," chief financial officer Hermann Waldemer told investors during a conference call.[26] Earnings per share beat estimates by analysts polled by Thomson Financial, who predicted US$0.77 (0.48) per share.[26] Analysts polled by Thomson Financial expected profits of 77 cents per share.[5]
A Thomson Financial survey of analysts, on average, predicted earnings of 37 cents a share for the quarter.[9] Excluding charges related to the spinoff and a gain from the sale of Altria's Manhattan headquarters, earnings were 37 cents a share, matching the average analyst estimate compiled by Reuters Estimates.[11]
To figure your cost basis in Altria after the spinoff, multiply $70 by the allocation factor of 30.5%, or $21.35 a share.[22] Altria shares account for 30.5% of your cost basis, since $22.20 divided by $72.78 is 30.5%.[22]
Altria earned $2.75 billion, or $1.30 a share, in the year-earlier period.[10] Adjusted for the split, Altria shares declined 4.8 percent during the period, to $22.20 from $23.31.[16]
Tobacco Litigation Settlement in Florida Capping 14 years of litigation, a Miami-Dade judge has ruled that tens of thousands of smokers can share in a $600 million fund set up to compensate those injured by cigarettes.[27] Thousands of Floridians who have been injured by cigarettes are lining up to share in a $600 million trust fund set up to compensate smokers for illness. A Miami-Dade Circuit Court judge ruled Friday that Engle Trust Fund will be distributed to thousands of Florida smokers and their survivors.[27]
The stock price closed the regular trading session on Thursday at $22.53, up 23 cents, or 1.03% on a volume of 15.7 million shares.[20] PMI is currently up 2.38% or $1.19 trading at $51.26 on a volume of 7.18 million shares.[14] PMI shares began trading at $50 on March 17, and finished the quarter at $50.58.[16]
Shares of Altria rose 1% to $22.53 in regular trading, but gave all of it away in extended action.[10] Let's say you bought 100 shares of Altria for $70 a share before the spinoff.[22]
Thirty-two Virginia-based companies made the Fortune 1000 list, including 19 on the Fortune 500. That compares with 29 companies on last year's Fortune 1000, including 17 on the Fortune 500. In addition to Altria, joining the list this year are Computer Sciences of Falls Church (No. 170, $14.9), which announced Jan. 30 that it was moving its corporate headquarters to Virginia from El Segundo, Calif.; and AES of Arlington County (No. 183, $13.9) and BearingPoint of McLean (No. 604, $3.5 billion).[25] Revenue excluding excise tax was $3.6 billion, in line with analysts' estimates and up slightly from a year earlier.[11] Wall Street analysts had a consensus revenue estimate of $6.10 billion.[14]
Net revenues for the quarter rose 2.8% to $4.41 billion from $4.29 billion in the comparable quarter a year-ago.[19] Total revenue from the financial services segment doubled during the latest quarter to $86 million from $43 million reported in the year-ago quarter.[20] Operating revenues rose to $524.1 million from $284.7 million in the previous year quarter.[19]
Earnings from continuing operations for the quarter declined 11.8% to $614 million from $696 million in the same quarter prior year.[19] Adjusted earnings from continuing operations rose to 37 cents a share from 33 cents a share a year ago.[9]
Davenport analyst Ann Gurkin estimates that shipments will fall between 2.5 percent and 3 percent over the next few years, which is slightly more than the declines of recent years. She thinks cigarette excise taxes should rise about state 13 cents per pack in 2008, similar to 2007. Bloomquist thinks PMI will report double-digit profit growth over the next two years, noting its presence in important emerging markets like Argentina and Indonesia.[16] "The results reinforce our view that PM should be viewed as a premier tobacco company with healthy top-line and profit growth prospects," Judy Hong, an analyst at Goldman Sachs, said in a research note. "Both net revenue and operating profit came in higher than expected, partly due to currency benefits, but also driven by stronger price/mix and margin improvement."[4]
The company's quarterly gross profit was $4.03 billion, compared with $3.42 billion in the year-earlier quarter, reflecting 17.6% increase.[14] Sales for the period were $4.41 billion, up nearly 3 percent from $4.3 billion in the same quarter in 2007.[2] Sales rose 18 percent to $15.6 billion, boosted by the dollar's declines.[1]
The company shipped 40.1 billion cigarettes, down 1.2 percent from a year earlier. [11] The company also shipped 217.94-billion cigarettes, up 2.2 per cent from a year earlier.[17]
Marlboro brand of cigarettes gained a 0.7% market share during the quarter to 41.5% from 40.8% in the same period last year.[20] The quarterly retail share of cigarettes increased 50 basis points to 50.9% from 50.4% in the same period last year.[20]
Total interest income decreased to $53.03 million from $55.34 million in the same period last year.[19] PMI says net earnings increased to US$1.87 billion (1.17 billion) from US$1.445 billion in the same period last year.[26] Full-year earnings are predicted to rise by 14-16 percent in 2008, PMI said in a statement from New York.[26] Chairman and Chief Executive Michael Szymanczyk said the moves, including the switch from New York City to Richmond, Va., would "substantially reduce the company's cost structure." The company, which reitereated its.[21] The move brought few jobs from New York, but it does give the region another Fortune 500 name for economic development marketing. "We can use these lists to show that we are, and continue to be, a community that is attractive to corporate headquarters because we have a great quality of life, good schools and the type of infrastructure need in order to be successful," said Gregory H. Wingfield, president of the Greater Richmond Partnership, an economic development group.[25]
The list is published by Fortune magazine. The Richmond area retained all its Fortune 500 companies from last year, though one company -- Performance Food Group Inc. -- has agreed to a buyout offer from a private equity firm. That deal is expected to close in June pending shareholder approval, which means Goochland County-based Performance Food would drop from the Fortune 500 next year.[25]
Separately, the company also said it has agreed to buy the fine cut tobacco trademark Interval and other trademarks from Imperial Tobacco Group PLC for 254 million euros ($406-million).[17] The company announced it has agreed to acquire the fine cut trademark Interval and certain other trademarks in the OTP category from Imperial Tobacco Group PLC for 254 million euros.[14]
In 2007, the acquired trademarks generated an estimated operating companies income of 25 million euros and accounted for an approximate 2% share of the total fine cut category in EU region with Interval, the leading fine cut brand in France, holding a 14.8% share of the fine cut category in France. PMI noted that the acquisition complements its fine cut portfolio and will boost the company's total share of fine cut category in EU region to over 10%.[14] The company says it will begin a two-year, US$13 billion (8.16 billion) share repurchase program in May.[26]
The introduction of the new variety followed the company's 2005 purchase of PT H.M. Sampoerna, Indonesia's third-largest cigarette maker. The cigarette maker also uses its acquisitions to start distributing Marlboro, Parliament, Virginia Slims and its other top brands in new markets. "We benefit from up-trading in those markets, which is the strength of our portfolio,'' Chief Financial Officer Hermann Waldemer told analysts on a conference call. [1] Imperial, Europe's second-largest publicly traded cigarette maker, had operating profit of 25 million euros from the brands last year.[1]
Miami Beach pediatrician Howard Engle headed a class-action lawsuit filed in 1994 against Big Tobacco. That verdict was overturned in 2006. Knowing they would be on the hook for some damages, the tobacco companies put up $700 million to benefit smokers. That has turned to $800 million with interest. On Friday the judge ruled that Stanley and Susan Rosenblatt, the attorneys who brought the Engle case, should receive more than $200 million for their work over the 15 years. Comments following the Miami Herald story take a swipe at the lawyers who filed the 1994 action, despite the fact that they were not reimbursed during the 14 years and add fuel to the tort reform fire.[27] Total Non-interest income decreased to $9.4 million from $10.6 million in the year-ago quarter.[19]
Philip Morris International topped analysts' estimates for the quarter ended March 31.[10] The first step is to figure out how much of what you paid for Altria is attributed to Altria and how much to Philip Morris International.[22] The question comes up frequently. Since this is such a popular and recent example, let's use Altria and Philip Morris International. Before we get started, it's important to note that tax situations can get quite complex.[22]
Philip Morris, which was Altria's international arm, is growing faster than the U.S. cigarette business.[15]
Philip Morris USA continues to operate in the United States. The breakup freed the larger PMI from legal and public relations concerns in the United States, where it has been involved in several class action lawsuits brought by smokers who say they were sickened by its products.[26]
PMI sells Marlboro and other cigarette brands outside of the United States since it was spun off to shareholders by parent company Altria last month. [26] While total cigarette shipments of PMI's flagship Marlboro declined 1.2% to 77.3 billion units, mainly due to a drop in EU, there was growth in EEMA, Asia and Latin America.[14] PMI cigarette shipment volume for the quarter was 217.9 billion units, up 2.2%, driven by strong demand in EEMA (Eastern Europe, Middle East & Africa), Asia and Latin America.[14]
Commenting on the first quarter results, Louis Camilleri, Chairman and CEO of PMI said, ' Our robust first quarter results are a terrific start out of the gate.[14]
Earnings-per-share figures for the 2007 quarter are based on the number of shares distributed by Altria in the spin-off. [4] Analysts on average forecast 77 cents a share, according to Reuters Estimates.[4] PMI shares traded on the Zurich exchange were down 0.6 percent at 51.75 Swiss francs (US$51.36; 32.24).[26]
PMI, which has an operations center in Lausanne, Switzerland, is active in more than 160 countries. It earned revenue of US$55.1 billion in 2007, compared with PMUSAs US$18.49 billion. Besides Marlboro, PMI makes LM and Bond Street brands, as well as other products tailored to local markets such as the clove-based Marlboro Mix 9 in Indonesia and Marlboro Fresh Mint and Crisp Mint in Hong Kong.[26] Rounding out the top five are three oil companies -- Exxon Mobil (No. 2, with revenue of $373 billion), Chevron (No. 3, $211 billion), ConocoPhillips (No. 5, $178 billion) -- and automobile maker General Motors (No. 4, $182 billion).[25] Revenue jumped 18% to $15.6 billion, while revenue excluding excise taxes rose 14% to $6.33 billion.[15]
Net revenue was $6.33-billion, compared with the average analyst estimate of $6.10-billion.[17]
In the after-hours trading, the stock is currently quoted at $22.25, down 28 cents, or 1.24%. [20] PMI stock began trading on March 17, and its split from Altria was completed on March 28.[16]
The company is monitoring industry trends as consumer confidence falls, but so far, Altria officials "haven't seen 'down-trading' to lower-priced cigarettes," Beran told analysts. [3] The company benefited from "positive pricing and volume growth in emerging markets,'' Erik Bloomquist, a J.P. Morgan Securities Ltd. analyst in London, wrote today in a note to clients today.[1] Growth was strongest in Asia, with shipments up 10 percent, while the European Union declined by 5.9 percent. The company said its decline in the EU mirrored a general drop in sales in the region due to price increases and newly implemented smoking bans in France and Germany.[26]
SOURCES
1. Bloomberg.com: Worldwide
2. Ex-Altria CEO Camilleri got 2007 compensation valued at $22M
3. The Canadian Press: Altria Group's first-quarter profit falls 11 per cent on spinoff costs
4. UPDATE 2-Philip Morris Int'l profit up, raises forecast | Deals | Mergers & Acquisitions | Reuters
5. baltimoresun.com - Jay Hancock's blog: Emerging markets bullish on tobacco, cancer, too
6. globeandmail.com: Market Blog - Hmm, cigarettes or rice?
7. WAVY TV 10 - News, Weather, Traffic, Sports for Hampton Roads, Virginia - North Eastern North Carolina - Altria Group's 1Q profit falls 11% on spinoff costs
8. Altria 1Q adjusted earnings match expectations, co. affirms 2008 EPS outlook - Forbes.com
9. Altria Group 1Q Net Falls, Hurt By Spinoff Costs
10. Altrias Revenue Stronger Than Expected | Consumer Goods | BTI ITY KFT LTR MO PM RAI - TheStreet.com
11. UPDATE 2-Altria 1st-qtr profit falls on spinoff charges | Industries | Consumer Goods & Retail | Reuters
12. Free Preview - WSJ.com
13. Philip Morris International (PM) NewsBite - Philip Morris Reports 29% Profit Growth
14. Philip Morris International Q1 Profit Up 29%; Boosts FY'08 EPS Outlook [PM] - RTTNews, Today's Top Stories, Global Newswires, ToDay's Top News,Global Business news .
15. 2nd UPDATE: Philip Morris 1Q Net Up 29%, Boosts EPS Outlook
16. Earnings Preview: Altria and Philip Morris International | Chron.com - Houston Chronicle
17. reportonbusiness.com: Philip Morris profit up
18. Philip Morris Smokes Estimates | Consumer Goods | BTI ITY LTR MO PM RAI - TheStreet.com
19. RTTNews - Quick facts Articles, Positive EPS Surprises, News Analysis, Earnings, Audio News.
20. Altria Group Q1 Net Income Slips, On Charges Related To Spin-off - Update [MO] - RTTNews, Today's Top Stories, Global Newswires, ToDay's Top News,Global Business news .
21. Free Preview - WSJ.com
22. Figuring cost basis of a spinoff isn't too tough - USATODAY.com
23. Altria Group's 1Q profit falls 11 percent on spinoff costs | Chron.com - Houston Chronicle
24. Earnings roundup: Altria, Newell Rubbermaid | Chron.com - Houston Chronicle
25. Eight local firms make Fortune 500 - Richmond, Virginia, Business News and Financial Information - inRich.com
26. Philip Morris International reports 29 percent rise in first-quarter net profit - International Herald Tribune
27. Tobacco Litigation Settlement in Florida
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