Altria Profit Lifted on Anheuser-Busch InBev Stake -- Update
February 01 2017 - 12:09PM
Dow Jones News
By Anne Steele and Jennifer Maloney
Altria Group Inc.'s stake in beer behemoth Anheuser-Busch InBev
NV proved a boon in the final quarter of the year as cigarette
volumes continued to wane and market share in the company's lead
segment remained flat.
Cigarette-shipment volume fell 4.8% amid an overall industry
decline and one fewer shipping day. For the year, the company's
cigarette shipments fell 2.5%, in step with the industry, Altria
executives estimated.
On a conference call Wednesday, Chief Executive Marty Barrington
said cigarette volumes declined faster in the second half of 2016
than earlier in the year. He expects that to continue this year,
but the company plans to offset the declines with price increases,
which have averaged 4% to 5% in recent years.
One development that may weigh on results this year is
California voters' approval in November of a new cigarette tax,
which will raise taxes by $2 to $2.87 a pack starting in April. Mr.
Barrington called California a high-volume state and noted "there
are already proposals in several states to raise excise taxes
further."
Altria, the U.S.'s largest tobacco company, faces strong
competition from No. 2 player Reynolds American Inc. In the latest
quarter, Altria's cigarette market share remained flat from a year
ago at 51.4%, as Marlboro remained flat while a 0.1% increase in
discount brands retail share was offset by and a 0.1% decrease in
other premium cigarette sales. For cigars, Altria's market share
slipped to 26.6% from 27.4%.
But during the quarter, Altria received a share of the newly
enlarged Anheuser-Busch InBev following the Belgian brewer's
just-completed roughly $100 billion takeover of rival SABMiller
PLC.
The U.S. tobacco company received $5.3 billion in cash and a
9.6% share of AB InBev in exchange for its 27% stake in SABMiller.
Altria said it would have two seats on AB InBev's board of
directors, allowing it to continue using equity accounting
practices to report its share of the brewer's profit as
earnings.
Mr. Barrington declined to offer details on Altria's plans to
introduce Philip Morris International's heat-not-burn device, iQOS,
to the U.S. market. Philip Morris plans to submit an application
this quarter to the Food and Drug Administration for approval to
sell the device in the U.S.
Unlike e-cigarettes, which contain nicotine-laced liquid,
heat-not-burn devices heat tobacco to a high temperature,
vaporizing it. As of December, the device had been introduced in 20
overseas markets. Mr. Barrington said Altria was studying those
markets in anticipation of a U.S. rollout.
"What we're going to try to do, of course, is to introduce adult
smokers to the product, try to explain what it is and its
attributes, and then give them an opportunity to see if it is for
them," he said.
In all for the December period, Altria's earnings rose to $10.28
billion, or $5.27 a share, from $1.25 billion, or 64 cents a share,
a year prior. Earnings were lifted largely by the AB
InBev/SABMiller transaction gain. Excluding items, per-share
earnings rose to 68 cents. Analysts polled by Thomson Reuters had
forecast earnings of 67 cents.
Net revenue after excise taxes grew 0.1% to $4.7 billion, just
short of analyst estimates for $4.8 billion.
Altria forecast 2017 adjusted earnings in a range of $3.26 to
$3.32 a share. That is just below the $3.33 a share analysts have
predicted.
Write to Anne Steele at Anne.Steele@wsj.com and Jennifer Maloney
at jennifer.maloney@wsj.com
(END) Dow Jones Newswires
February 01, 2017 11:54 ET (16:54 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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