Archived Issues

Altria on track for breakup

During Altria’s annual shareholders’ meeting, CEO Louis Camilleri confirmed that the company is in the process of splitting into two or three separate businesses. Camilleri said the exact timing is still uncertain and depends on the litigation environment.

“We believe it is very likely that Altria will break up into three separate businesses. We envision these businesses to be broken into Kraft Foods, Philip Morris International and Altria Group (which we believe will consist of PM USA, a 36-percent stake in SABMiller and Capital Corp.),” wrote Smith Barney analyst Bonnie Herzog.

“We think once the company gets the ‘green light’ from the board (after enough favorable resolution from outstanding litigation), the spinoff of Kraft could happen in two months, and the spinoff of PMI could happen four months after that, which is probably faster than most were expecting.”

She adds, “We still think the breakup will happen by the end of 2005 or beginning of 2006.”

Altria Group’s first-quarter profit increased 18 percent as a result of higher cigarette prices and improvements in its Kraft Foods operation.

Net income increased to us$2.60 billion, or $1.25 per share, up from $2.19 billion, or $1.07 per share, in the same period last year. Sales for the quarter increased 9 percent to $23.62 billion.

U.S. tobacco sales increased 3.5 percent to $4.15 billion, while the division’s operating income increased 7 percent to $1.04 billion. Marlboro’s domestic retail market share surged to 39.8 percent, up from 39 percent in the same period last year.

International tobacco revenue increased 13 percent to $11.35 billion, and operating income rose 13 percent to $2.08 billion. The company attributes part of the increase to favorable currency and an inventory sale to a new Italian distributor. The company also continues to make a strong recovery in France, as well as gain in central Europe, eastern Europe and Asia. Lower shipments to Germany continue.