Two weeks ago Altria Group Inc published its earnings report for the second quarter, which featured strong operating profits and retail share growth for the group’s key premium brands, including flagship Marlboro. The company’s solid pricing power and wide product portfolio are considered to be the main sources of value production. Altria, formerly known as Philip Morris Companies Inc., is the owner of Philip Morris U.S.A, United States Smokeless Tobacco, John Middleton Inc., Chateau Ste. Michelle Wine Estates and Morris Capital Corporation. The corporation is the owner of several best-selling tobacco products, such as Marlboro, Black and Mild, Scoal and Copenhagen. Its cigarette-making division, Philip Morris is the leader of US tobacco market, with Reynolds American and Lorillard being its major rivals.

According to experts’ estimates, Altria is currently valued at $27, which is just a little higher than the market price. Though Altria’s earnings decreased 60% caused by one-time charges, the company’s tobacco business showed a solid performance and delivered retail share growth.

Marlboro, Copenhagen Ensure Growth

Increased prices ensured Altria’s growth in operating profits, partly offset by declined shipping volumes. The cigarette segment, which represents approximately three-fourths of the company’s stock value, maintained its lead with the strong operating growth of 6 percent year-over-year or 3 percent on basis of adjusted earnings. The solid performance was headed by the group’s key brand Marlboro which produced successive increase in its market share thanks to recent launches of new products and boost in its menthol business.

The smokeless tobacco business followed the steps of cigarette division with solid OCI increase of 12 percent year-over-year, contributed by its top-selling premium brands, Copenhagen and Scoal, both of which faced continuous growth in market share. Higher pricing contributed to expansion of OCI margins by nearly 3.8 percentage points. Copenhagen faced shipments growth during the quarter due to recent new product launches and boost of its key natural business.

Cigars Profits Decrease, Premium Wines Still Strong

In the cigars sector, John Middleton maintained its marketing strategy, featuring launches of new products, promotional campaigns and brand building intended to protect Black and Mild’s market share amid considerable competition mainly from imported machine-made cigars which are less expensive. Whereas Black and Mild’s market share added 1%, higher promotional expenses resulted in 16% decrease in OCI.

In the wine sector, Ste. Michelle showed solid performance as it continued to expand its mix with higher margin premium brands. Consequently, net profits increased by 8-9 percent, whereas OCI delivered two-fold increase during the second quarter of 2011.

By Clark Moore, Staff Writer Copyright © 2011 Hot-Cigs.com All rights reserved.