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Altria Profit Falls, Mulling Philip Morris International Spinoff

Altria Group, parent of the Philip Morris USA and Philip Morris International, said Thursday first-quarter earnings fell by 21%, hurt by weakness in domestic cigarette sales, but the company raised its full-year earnings forecast.

Separately, Altria Chief Financial Officer Dinyar Devitre confirmed that the company is considering the spinoff of its international tobacco business. That move has been widely anticipated since the company completed its spinoff of Kraft Foods on March 30.

"Over the next several months, we will continue to carefully and diligently examine the benefits of a spinoff of Phillip Morris international and other enhancing options to decide the optimal long strategic course to follow," Devitre said on conference call with analysts.

In first quarter, net income dropped to $2.75 billion, or $1.30 a share, versus $3.48 billion, or $1.65 a share, in the same period last year.

Excluding costs from a spin off of Kraft Foods and other one-time items, Altria said earnings per share were up 5.1% to $1.03. On that basis, analysts polled by Thomson Financial expected Altria to report a profit of $1.05 a share for the quarter.

Revenue for the quarter grew to $17.56 billion, up 8.2% from $16.23 billion a year ago.

Altria also raised its full-year earnings per share guidance to a range of $4.20 to $4.25 from a previous prediction of $4.15 to $4.20 a share, largely because of a better outlook for Philip Morris International including a favorable currency comparison. The Thomson full year estimate was $4.26.

Chief Executive Louis Camilleri said Philip Morris USA had a "relatively weak quarter," while the company's international unit did better, reporting operating income growth of 9.5% to $2.2 billion based on higher pricing and volume growth by buying companies overseas.

"We now are focused on growing our tobacco businesses, while continuing to take measures to further enhance shareholder value," Camilleri said in a statement.

The Philip Morris International unit benefited from price increases in some markets and also from the weaker dollar, which increases the dollar value of sales overseas.

The international unit shipped 213.3 billion cigarettes in the quarter, up 1.5%, as an acquisition and gains in Italy, Argentina and other markets offset declines in Russia and Japan.

International profit rose 9.5% to $2.2 billion.

Altria's Philip Morris USA unit shipments fell 6.2% to 40.6 billion cigarettes, though the company said shipments improved in March.

Market share for the U.S. unit was flat at 50.4% of the nation's retail cigarette market, but the market share of the top-selling Marlboro brand rose to 40.8% from 40.4%.

The company raised prices by 10 cents a pack on Dec. 18, which helped U.S. income rise 1.3%to $1.1 billion.

Since New York-based Altria completed a spin off of a majority 88.9% stake in Kraft, Altria shares, adjusted for the spinoff, have risen about 5.8% since the end of the first quarter. The stock is a component of the Dow Jones Industrial Average.

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