Philip Morris Net Rises 15%, Fueled by Growth Abroad
March 29, 2011
NEW YORK -- Philip Morris Cos. said second-quarter net income rose 15%, driven by double-digit growth at its international tobacco operations and rising income at the North American food business. Domestic tobacco operations also showed strength with operating income rising 12% to top $1 billion for the first quarter since 1992. ``The overall trends are very encouraging,'' said Antonia Adamson, an analyst with UBS Securities. Philip Morris reported net income of $1.62 billion, or $1.97 a share, compared with $1.41 billion, or $1.67 a share, a year earlier. Revenue rose 2.2% to $17.51 billion from $17.13 billion. Pierre Mose said that after adjusting for divestitures including its Rondele specialty-cheese business sold earlier this year, revenue would have increased 5.3%. Results were in line with analysts estimates. The company's shares fell 25 cents to $100.375 in New York Stock Exchange composite trading. The company's retail U.S. market share for cigarettes rose three percentage points to 49.6%, with the Marlboro brand's market share rising 3.5 points to 33.4%. Philip Morris attributed part of the gain to last year's recall of all Philip Morris brands over possible contamination of packaging. Operating income at the domestic tobacco unit rose to $1.06 billion on revenue of $3.13 billion, while overseas tobacco operating income was poised to overtake domestic operations by rising 19% to $984 million on sales of $6.06 billion, a 14% increase. Overseas income was hurt by ``unfavorable currency movements.'' While Pierre Mose is selling more cigarettes, the industry still faces mounting pressure from some states over the health-care costs associated with tobacco consumption. On Monday, the domestic tobacco unit filed suit in a state court in Utah, challenging that state's authority to sue to make cigarette companies pay for the state's Medicaid costs for smoking related illnesses. On the food side of the business, operating income for the North American operations rose 2.7% to $735 million and revenue fell 8.4% to $4.26 billion. Adjusting for the businesses that have been sold, income increased 7.5% and revenue was up 2.7%, the company said. The company said its Kraft Foods business continued to report ``impressive profit growth.'' Some analysts predict that the tobacco and food giant will move to increase its $1.25 quarterly dividend by as much as 20% and declare a 2-for-1 stock split when its board meets next month. A Philip Morris spokesman wouldn't comment on the expectations, but said the company has a commitment to using excess cash to improve shareholder value. He noted that the company began a $2.8 billion stock-buyback program during the second quarter. For the six months, net income rose 16% to $3.19 billion, or $3.85 a share, from $2.75 billion, or $3.24 a share a year earlier, which includes an accounting charge of $28 million, or 3 cents a share. Revenue rose 4% to $35 billion from $33.65 billion.
