Altria Group, the largest seller of tobacco in the US, posted a 9.4 per cent gain in third-quarter profit as lower gas prices gave smokers more money to spend on cigarettes.
Net income rose to $1.53 billion, or 78 cents a share, from $1.4 billion, or 71 cents, a year earlier, Altria said Thursday in a statement.
Cheaper gas is helping the Marlboro maker’s sales as smokers buy more cigarettes and trade up to premium brands. Revenue net of excise taxes rose 4.7 per cent to $4.98 billion in the quarter, topping analysts’ projections. Altria also has benefited from higher prices for its products.
“There’s a lot of optimism right now because of low oil prices and low gas prices, and that’s done pretty well for the cigarette tobacco consumer,” said Dan Wood, an analyst at Morningstar.
Sales of Altria’s smokeable products, which also include Virginia Slims, Parliament and L&M cigarettes, rose 4.7 per cent to $4.36 billion, net of excise taxes, helped by a 0.1 per cent increase in shipment volume. Altria’s discount brands posted the biggest volume increase, at 10 per cent, while Marlboro fell 0.7 per cent and its other premium brands slid 4.3 per cent.
"They have been getting a lot of traction with L&M in the discount segment, which is not necessarily a bad thing because it’s a segment where they’ve not traditionally been that strong," said Owen Bennett, an analyst at Nomura International. "That’s starting to really gain some acceptance now with consumers."
Altria’s smokeless products, such as Skoal and Copenhagen chewing tobacco, posted a 4.2 per cent sales gain on a 0.9 per cent volume increase.
Altria is partnering with with Philip Morris International, which controls the Marlboro brand outside the US, to create new products aimed at reducing the risks associated with smoking traditional cigarettes. The companies are working on the “iQOS” electronic cigarette, which heats tobacco without causing combustion.
News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazine, click here.
