Altria Group ( MO) reported a modestly higher profit in the second quarter, thanks partly to the weak dollar and a lower tax rate. The New York-based company, best known for its Philip Morris tobacco unit, said net income rose $5.8% to $2.63 billion, or $1.27 a share, vs. $2.44 billion, or $1.20 a share, a year ago. The consensus estimate was for $1.28 a share, according to Thomson First Call. Revenue increased 10.5% from the second quarter 2003 to $23.0 billion. Favorable currency rates contributed $946 million to sales. "Our domestic and international tobacco businesses performed well and continued to implement effective strategies for long-term growth," the company said in a statement. "Our domestic tobacco business continued its momentum, with a particularly strong increase in Marlboro's retail share. Our international tobacco business performed well, but continues to face challenges in France, Germany and Italy." The company also reaffirmed EPS of $4.50 to $4.60 for full-year 2004, which includes additional charges for the Kraft ( KFT ) restructuring and the European tobacco settlement. The consensus forecast is $4.84 a share. Second-quarter results were long on charges and gains. Charges included 13 cents a share for a previously announced food restructuring at Kraft and an agreement that Philip Morris International signed on July 9 with the European Community. Northfield, Ill.-based Kraft, which is 83% owned by Altria earned $698 million, or 41 cents a share, in the three months to June 30, down 26% from earnings of $949 million, or 55 cents a share, a year ago. The most recent quarter included a restructuring charge that cut per-share earnings by 5 cents. Sales rose 4.6% from a year ago to $8.21 billion. The company's year-ago quarterly results included charges of 6 cents a share related to a Philip Morris USA settlement with tobacco growers as well as the initial costs of relocating the unit's headquarters.
Earnings also reflected the positive impact of a lower overall effective tax rate worth 15 cents a share, and favorable currency exchange rates worth 5 cents a share, as well as other items. The company's effective tax rate fell from 35.2% in the year-ago period to 26.6%, "reflecting the reversal of tax provisions that are no longer required due to tax events that occurred during the second quarter of 2004." Operating income decreased 6.6% to $3.9 billion, primarily because of a $250 million payment as part of a massive, long-term tobacco agreement with the European Community on anti-contraband and anti-counterfeit efforts. Philip Morris USA's market share increased to 49.8% from 48.5%, led by a 1.8% gain for its Marlboro brand. Altria shares rose 33 cents, or 0.7%, to $49 in premarket trading.