Marlboro maker Altria Group's 2Q profit up 3 percent on higher prices, lower legal costs

RICHMOND, Va. — Marlboro maker Altria Group Inc. said Tuesday its second-quarter profit rose about 3 percent as higher prices and lower expenses from a longstanding legal settlement offset a decline in cigarette sales.

The owner of the nation's biggest cigarette maker, Philip Morris USA, also raised the lower end its full-year earnings guidance.

The Richmond, Va.-based company earned $1.27 billion, or 63 cents per share, for the April-June period, up from $1.22 billion, or 60 cents a share, a year ago.

Excluding one-time items, earnings were 62 cents per share, missing Wall Street expectations by a penny.

Revenue, excluding excise taxes, decreased 2.5 percent to $4.5 billion. Analysts polled by FactSet expected $4.62 billion.

Its shares fell 89 cents, or 2.4 percent, to close at $35.99 Tuesday.

Cigarette volumes fell nearly 7 percent to 33.8 billion cigarettes compared with a year ago. Adjusting for trade inventory changes, Altria says its cigarette volumes were down 3.5 percent during the quarter, compared with a total industry decline of 4 percent.

Its share of the U.S. retail market rose 0.3 percentage points to 50.7 percent. Marlboro's share of the U.S. market was flat at 43.7 percent.

The premium Marlboro brand has been under pressure from competitors and lower-priced cigarette brands as consumers face economic pressure and high unemployment.

Those economic challenges are in addition to the tax hikes, smoking bans, health concerns and social stigma that have made the cigarette business tougher.

The Marlboro brand sold for an average of $5.78 per pack during the second quarter, compared with an average of $4.30 per pack for the cheapest brand.

The company has introduced several new products with the Marlboro brand, often with lower promotional pricing. They include special blends of both menthol and non-menthol cigarettes to try to keep the brand growing and to lure smokers away from its competitors. It has said it has a pipeline of innovative products to supplement the Marlboro brand in the future.

Volumes of Altria's smokeless tobacco brands such as Copenhagen and Skoal rose more than 4 percent from a year ago. For the quarter, the company's smokeless tobacco brands had 55 percent of the market, though smokeless tobacco is a tiny market compared with cigarettes.

Altria said inventory changes and retail share losses drove volumes for its Black & Mild cigars down 8 percent during the quarter.

Altria also owns a wine business, holds a voting stake in brewer SABMiller, and has a financial services division.

The company on Tuesday also raised the lower end of its full-year adjusted earnings guidance by a penny to a range of $2.36 and $2.41.