You've got to hand it to Altria
Between splitting off its global growth engine Philip Morris International
For the quarter, Altria delivered EPS growth of 8.9%, with the help of tight cost control. Cost of sales actually declined by 1.4% on the quarter, even as selling, general, and administrative expenses increased by 19.4% with the integration of UST. Altria is forecasting that it will deliver a total of $1.5 billion in cost reduction by 2011 (vs. 2006), including savings achieved by moving its headquarters from pricey New York to Richmond, Virginia.
Altria's not out of the woods here by any stretch of the imagination: Following its purchase of UST, Altria's long-term debt expanded from $101 million in the 2008 third quarter to more than $11 billion as of today.
Overall, cigarette volume dropped by 6.8% for the quarter, with Altria suffering a 1.5% decline in market share in the segment. Volume for the flagship brand, Marlboro, decreased by 5.7%, with a 0.6% loss in share points. These slides were prompted primarily by promotional activity in April and May that increased prices relative to discount competitors. That pricing gap, says Altria, declined as the quarter progressed, and Marlboro gained share throughout June.
Net revenue increased by 32.9% -- which sounds hot -- but this figure includes a 143% increase in excise tax, from $875 million to $2.13 billion. Excluding the excise-tax revenue, actual product revenue increased by just 9.9%. Operating income increased by 25%, albeit with the addition of UST's business.
While competitors Reynolds American
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