Altria profit drops on special items, settlements

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Altria Group Inc. said Friday that its fourth-quarter net income fell 9 percent in the fourth quarter, mostly because of special items and charges related to health and tobacco settlements.

The tobacco products manufacturer reported net income of $836 million, or 41 cents per diluted share, during the quarter, compared with $919 million, or 44 cents per diluted share, during the same period last year.

The company also announced that Chairman and CEO Michael Syzmanczyk would retire in May. Read Virginia Business’ related story

Special charges incurred during the quarter included restructuring charges related to a cost reduction program announced in October and $121 million in charges associated with tobacco and health judgments and related interest costs. The expense reduction program is designed to reduce the company’s cigarette-related expenditures ahead of expected volume decreases in the company’s cigarette segment. The company incurred $254 million in charges related to restructuring, mostly from employee separation costs. 

Excluding special items, earnings per share were up 13.6 percent. Revenue for the quarter was up 3.4 percent to $6.3 billion, compared with $5.9 billion during the fourth quarter of 2010.
Altria also announced Friday that it has entered into an agreement with Okono A/S to develop non-combustible nicotine-containing products. “Altria continues to focus on developing lower risk products that appeal to adult tobacco consumers,” Symanczyk said in a statement.

The company has been expanding its reach into non-traditional tobacco products as the number of smokers continues to decrease.

For the full year of 2011, Altria’s net revenues declined 2.3 percent to $23.8 billion, mostly because of lower net revenues from financial services in the second quarter related to lease transactions and lower cigarette revenues.

Earnings per share for 2011 fell 12.3 percent to $1.64, but increased 7.9 percent when special items were excluded.

For the full year, Altria’s cigarette revenues fell 1.1 percent mostly due to lower volume, which was partially offset by higher prices. Cigarette volume fell 4 percent. Revenue, however, increased in the company’s cigars, smokeless tobacco and wine segments.

Revenues for the company’s smokeless tobacco segment increased 4.8 percent on higher volumes and higher prices. Cigar revenues grew 1.3 percent, mostly on higher prices. The company’s wine segment revenues grew 12.4 percent after a new focus on premium products. The financial services segment reported a loss for the full year, mostly because of leveraged lease transactions from the second quarter.

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