Cigarette Maker Altria's Share Declines in Shrinking Market
July 26 2018 - 9:00AM
Dow Jones News
By Austen Hufford
Altria Group Inc.'s revenue declined in the latest quarter as
the company lost share in a shrinking U.S. smoking market.
The company, which sells Marlboro cigarettes and other tobacco
products in the U.S., saw its cigarettes U.S. retail market share
decline to 50.2% in the second quarter from 50.9% in the same
quarter a year before.
Revenue after excise taxes fell 3.7% and was below analyst
expectations. In premarket trading, Altria shares fell 2.9%.
Big Tobacco has long been under threat from the steady decline
of smoking, particularly in the developed world. But in recent
years, the industry has been able to push through price increases
to make up for falling volumes -- boosting profits and stock
prices. That has enabled big investments aimed at developing
smoking alternatives, like e-cigarette devices and other gadgets
that promise to deliver nicotine but not the more harmful effects
that come with lighting up.
In recent months, though, investor concerns about how consumers
abroad have responded to cigarette alternatives have weighed on
share prices. Philip Morris International Inc. and Altria are
working on a device called IQOS, which is billed as a "heat not
burn" product. While Philip Morris has rolled the product out in a
number of international markets, Altria said Thursday that it is
ready to deploy it in the U.S. if the Food and Drug Administration
gives its approval.
The FDA said earlier this year that the science on the device's
relative safety wasn't yet conclusive. The FDA has also been
pushing a separate initiative to cut the nicotine content in
traditional cigarettes to nonaddictive levels.
Altria said volumes in the U.S. cigarette industry declined 3.5%
as the company's adjusted volume fell 5%.
Price increases weren't enough to offset the decline, leading to
a total revenue decrease of 5.4% to $6.32 billion.
Profit came in at $1.88 billion, or 99 cents a share, compared
with $1.99 billion, or $1.03 a share, in the same period a year
before. Earnings per share adjusted for certain items came in at
$1.01, a cent above what analysts polled by FactSet were
expecting.
Shares of British American Tobacco PLC rose 5.1% in London
trading on Thursday as the company said its cigarettes and
tobacco-heating product portfolio had outperformed the
industry.
Write to Austen Hufford at austen.hufford@wsj.com
Write to Austen Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
July 26, 2018 08:45 ET (12:45 GMT)
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