Cigarette, smokeless and cigar volumes down

Philip Morris USA’s domestic volume cigarette sales last year, at 148.7 billion, were 12.2 per cent down on those of the previous year, 169.4 billion.

Sales of Marlboro cigarettes were down by 10.6 per cent to 126.5 billion, while sales of Parliament, Virginia Slims and Basic were down respectively by 26.9 per cent, 17.4 per cent and 23.9 per cent to 4.0 billion, 5.2 billion and 9.2 billion. Sales of ‘other’ brands were down by 6.8 per cent to 3.8 billion.

During the fourth quarter to the end of December, sales of Marlboro, Parliament, Virginia Slims and Basic were down respectively 9.3 per cent, 31.2 per cent, 21.9 per cent and 28.8 per cent to 30.9 billion, 1.0 billion, 1.2 billion and 2.0 billion. But sales of ‘other’ brands were up by 8.8 per cent to 1.1 billion. Overall, fourth-quarter sales were down by 11.4 per cent to 36.2 billion.

The volume falls during the fourth quarter and full year were caused mainly by a big federal tax (FET) increase on April 1 last year, but also by a decline in trade inventories and changes to PM’s pricing and promotional strategies.

For the full year, PM’s sales were estimated to be down about 10.5 per cent when adjusted for changes in trade inventories and calendar differences, while total cigarette industry sales were down an estimated eight per cent when adjusted in the same way. PM said that the difference in its sales decline rate and that of the total cigarette industry was due primarily to sales lost during the period of FET-related price gap dislocation, share losses on its portfolio brands, and higher trade inventory declines on its brands.

PM’s retail cigarette share during the full year was down by one percentage point to 49.9 per cent. Marlboro’s share dropped by 0.1 of a percentage point to 41.8 per cent.

Net cigarette revenues for the full year and fourth quarter were increased respectively by 11.6 per cent to $20.919 million and 18.9 per cent to $5,373 million because of higher prices caused by the increase in the FET in April.

Revenues net of excise taxes fell by 6.2 per cent during the full year to $14,454 million and by 4.7 per cent during the fourth quarter to $3,539 million.

PM’s performance was reported yesterday as part of Altria’s results.

Altria acquired UST and its smokeless tobacco business, USSTC, on January 6 last year, and, for the full year, USSTC’s and PM’s domestic sales volume of smokeless products, at 645.6 million cans and packs, was down by 2.4 per cent on that of the previous year due primarily to changes in trade inventories.

USSTC believes that the smokeless category’s volume grew by about seven per cent last year.

Meanwhile, cigar sales for the full year, at 1,259 million, were down by 3.6 per cent.

In the fourth quarter, Altria’s net revenues increased by 29.2 per cent to $6.0 billion, reflecting higher pricing related primarily to the FET increase on tobacco products and the acquisition of UST.

Operating income increased by 20.2 per cent to $1.2 billion due primarily to higher OCI (operating companies’ income) from cigarettes, cigars and financial services, the OCI contribution from the UST acquisition, and lower corporate asset impairment and exit costs, partially offset by higher general corporate expenses, due primarily to the timing of expenditures.

Net earnings attributable to Altria increased by 6.8 per cent to $725 million, due primarily to higher operating income, and higher earnings from Altria’s equity investment in SABMiller, partially offset by higher interest expense related to the debt issued in connection with the UST acquisition, and higher income taxes.

For the full year of 2009, Altria’s net revenues increased by 21.7 per cent to $23.6 billion, reflecting higher pricing related primarily to the FET increase on tobacco products, and the acquisition of UST.

Operating income increased by 11.9 per cent to $5.5 billion, due primarily to higher OCI from cigarettes, cigars and financial services, as well as the OCI contribution from the UST acquisition, lower corporate asset impairment and exit costs, and lower general corporate expenses, partially offset by the gain in 2008 on the sale of the corporate headquarters building, UST acquisition related transaction costs, and a reduction of a Kraft Foods Inc. receivable.

Earnings from continuing operations increased by 3.8 per cent to $3.2 billion, due primarily to higher operating income, a loss in 2008 on the early extinguishment of debt in connection with the PMI spin-off, higher earnings from Altria’s equity investment in SABMiller, and lower income taxes, partially offset by higher interest expense related to the debt issued in connection with the UST acquisition.

Net earnings attributable to Altria, which includes PMI as a discontinued operation in 2008, decreased by 35.0 per cent to $3.2 billion.

source: tobaccoreporter.com

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