Altria reports earnings down on special items, lower cigarette sales

THE TAKE: Net profit at Richmond-based tobacco company Altria Group Inc. fell 56 precent in the fourth quarter because of special charges.

The company reported net income of $488 million, or 24 cents per share, compared with $1.1 billion in the fourth quarter of 2013. During the fourth quarter, the company recorded pre-tax charges of $1.1 billion for early extinguishment of its debt.

Excluding the charge, earnings per share grew 3.6 percent to 57 cents per share.

The company saw a 2.6 percent decrease in fourth-quarter revenues to $6.1 billion primarily becuase of lower net revenues in the company’s smoking products division. For the year, net revenues fell 0.6 percent to $24.5 billion, which was partially offset by increased revenue in Altria’s smokeless products and wine segments.

Fourth-quarter revenues in the smokeable products division decreased 3.2 percent because of lower shipment volume, which was partially offset by higher prices.

As the number of smokers in the U.S. drops, the company has continued to expand its smokeless tobacco division, including marketing electronic cigarettes. During the fourth quarter of 2013, Altria reported that its Nu Mark LLC subsidiary expanded testing of its MarkTen electronic cigarettes from Indiana to Arizona.

Also in December, Arizona subsidiaries signed agreements with Philip Morris International to license and distribute e-vapor and other innovative products. Philip Morris has an exclusive license to commercialize e-vapor products internationally, while Altria has exclusive rights to two of Philip Morris’ new products in the U.S.

“Altria also took important steps toward future growth in e-vapor and other innovative products for adult tobacco consumers,” Chairman and CEO Marty Barrington said in a statement. “MarkTen is performing well in the e-vapor category, including its expanded test market in Arizona. Further, we believe our agreements with Philip Morris International create the foundation for commercializing our e-vapor products abroad and opportunities to expand our portfolio of innovative products in the U.S.”

THE NUMBERS:

Revenue: Net sales for the fourth quarter dropped 2.6 percent to $6.08 billion, compared with $6.24 billion during the same quarter last year. For the year, revenue fell six tenths of a percentage point to $24.47 billion, compared with $24.6 billion the previous year.

Earnings: Profit in the fourth quarter was $488 million, or 24 cents per share, compared with $1.1 billion, or 55 cents per share, the previous year.

For the year, profit was $4.5 billion, or $2.26 per share, compared with $4.2 billion, or $2.06 per share.

THE COMPANY’S TAKE: “Altria grew its full-year adjusted diluted earnings per share by 7.7 percent on the strength of its diverse business model and solid performance by its core businesses,” Barrington said. “Higher pricing and our operating companies’ brand-building activities contributed to operating companies income growth in all three of our reportable segments.”