July 23, 2010 -
Altria attributed the profit growth mainly to the reversal of tax reserves and associated interest, partially offset by lower operating income, and lower earnings from Altria's equity investment in SABMiller due primarily to special items.
Altria's reporting segments are Cigarettes, manufactured by PM USA, Smokeless Products, manufactured by USSTC and PM USA, Cigars, manufactured by John Middleton Co.; Wine, produced and distributed by Ste. Michelle, and Financial Services, provided by Philip Morris Capital Corporation (PMCC).
Cigarettes, manufactured by PM USA
Quarterly net revenues from Cigarettes fell 7.2% year-over-year to $5.59 billion, and revenues net of excise taxes dropped 5.8% to $3.74 billion. PM USA's reported domestic cigarette shipment volume declined 10.2% to 36.5 billion units from 40.6 billion units a year ago, due primarily to trade inventory changes. In the quarter, Marlboro achieved retail share of 42.8%, and PM USA's second-quarter cigarette retail share increased 0.7 share points.
Marlboro achieves record retail share of 42.8% in the second quarter of 2010, and PM USA's second-quarter cigarette retail share increases 0.7 share points, versus the prior-year period. The Marlboro Special Blend line extensions launched earlier this year were important contributors to this strong retail share performance.
Smokeless Products, manufactured by USSTC and PM USA
Copenhagen's second-quarter retail share increases 2.6 share points, and United States Smokeless Tobacco Company (USSTC) and PM USA's combined smokeless products second-quarter retail share up 1.8 share points, versus the prior-year period. Second quarter reported smokeless product shipments increased 9.2% versus the prior year period. Combined second quarter shipments for Copenhagen and Skoal, which grew 7.1%, helped drive these results. We are very pleased that overall smokeless products segment retail share grew in the second quarter on a year-over-year basis. Our primary driver of this retail share performance was Copenhagen and Skoal's combined retail share performance, which grew a very strong 1.3 share points in the second quarter on a comparable year-over-year basis.
Product initiatives contributed to Copenhagen and Skoal's strong combined retail share performance. Copenhagen Long Cut Wintergreen, Long Cut Straight and Extra Long Cut Natural helped drive the brand's strong second quarter retail share growth up 2.6 share points. Skoal introduced brand building programs on Wintergreen, Straight and Mint variants in the second quarter, which in conjunction with the Skoal up to Summer equity building campaign, helped strengthen the brand's retail share performance as the second quarter progressed.
In the Smokeless Products segment, revenues grew 4.6% to $390 million. USSTC and PM USA's combined reported domestic smokeless products shipment volume for the quarter increased 9.2% from last year to 181.9 million cans and packs. The smokeless products segment second quarter adjusted operating companies' income declined 5.2% versus the comparable year-ago period, primarily due to costs associated with the national expansion of Marlboro Snus.
Marlboro Snus - Can you comment on the Marlboro Snus based on your national efforts and what you're seeing with that product?
Mike Szymanczyk, CEO, Pres. Board Chair - well, it is early, distribution has ramped up. I always like to remind people, we view Snus as a long-term play, although it is – Now that you have two major players out there in the marketplace, it is actually pretty decent level of share in Snus relative to the whole smokeless category. And I think that it has had some impact on category growth rates. So, it's so far, so good. But this something where we will be for a while, giving cigarette smokers the opportunity to engage with Snus, give it a try, try it a second time, because it is a very different experience than smoking a cigarette.
So I think we have to have patience with our expectations of the Snus business. But we're out there now. We've got good distribution on the product. We're getting good consumer feedback. And really now it is just kind of doing the general marketing work that has to take place over time to engage with consumers.
Marlboor Snus - David Beran, Executive Vice President Chief Financial Officer Altria Group, Inc. - Marlboro Snus was launched nationally in the second quarter. We have a plan to get trial and awareness throughout the year.
Cigars, manufactured by John Middleton Co.
Black & Mild's second quarter retail share of the machine-made large cigar category declined by 2.4 share points, versus the prior year period to 27.9%. Black & Mild continued to meet evolving adult cigar consumer's preferences for variety by introducing Black & Mild Royale in both plastic and wood tip variants. Middleton intends to strengthen the brand's position in the marketplace through additional brand-building activities.
Altria Reports 2010 Second-Quarter and First-Half Results, Press Release, SOURCE: Altria Group, Inc., 7/21/2010.
Altria Group Inc. Q2 2010 Earnings Call Transcript provided by Seeking Alpha, 7/22/2010.
Q&A - Altria Group Inc. Q2 2010 Earnings Call Transcript provide by Seeking Alpha, 7/22/2010.