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    Marlboro MST Test Gets the Can; Snus Revamped

    Parent company's fiscal 2008 results benefit from strong operating income in its U.S. businesses.

    RICHMOND, Va. -- In its fourth quarter and year-end results, Altria Group Inc. revealed it would discontinue Philip Morris USA's Marlboro moist smokeless tobacco test market in Atlanta area.

    In the statement, the company maintained the Marlboro brand has "an important role to play in the smokeless tobacco category," adding the company is evaluating potential strategies and options for the Marlboro brand following Altria’s acquisition of UST's smokeless tobacco business last year.

    Meanwhile, the company's test of Marlboro Snus, a spitless, smokeless tobacco pouch, will be expanded into a new test market in Arizona during the first quarter of 2009. In addition, the Snus product was revamped based on consumer-driven insights and learnings from test markets in Dallas and Indianapolis, the company stated. The new Snus contains new packaging, product enhancements and pricing, according to the company.

    Altria benefited from strong performance from its domestic tobacco businesses during fiscal 2008, including cigarette maker Philip Morris USA (PM USA) and cigar manufacturer John Middleton Co., as their operating income -- along with lower general corporate expenses -- partially offset higher asset impairment, a higher income tax rate and other costs, the company stated.

    For the full year 2008, Altria’s operating income increased 11.6 percent to $4.9 billion, while net revenues increased 3.7 percent to $19.4 billion.

    "Altria delivered strong 2008 business results in a year of significant change for the company," Michael E. Szymanczyk, chairman and CEO, said in a statement. "In 2008, Altria successfully completed both the spin-off of PMI and a significant corporate restructuring, which included relocating our headquarters to Richmond, Va."

    PM USA’s 2008 adjusted operating income rose 2.5 percent over fiscal 2007 to $5 billion. Net revenues for fiscal 2008 increased 1.5 percent to $18.8 billion. For the full year 2008, PM USA’s retail cigarette share grew 0.1 share points to 50.7 percent, driven by Marlboro’s strong share gains, which totaled 0.6 share points to 41.6 percent.

    PM USA’s 2008 domestic cigarette shipment volume totaled 169.4 billion units, 3.2 percent lower than the prior-year period, the company stated. When adjusted for changes in trade inventories and calendar differences, volume was estimated to be down approximately 4 percent.

    John Middleton reported 2008 operating income of $164 million, including charges of $18 million for integration costs. Net revenues totaled $387 million for full year 2008, and cigar shipment volume for 2008 grew 6.2 percent to 1.3 billion units vs. the prior-year period.

    Meanwhile, Altria's fourth quarter earnings from continued operations were down 17.2 percent to $679 million, impacted by charges related to a restructuring of certain functions, and financing fees and interest expenses related to the acquisition of UST Inc., and other factors. Net earnings, which included the now spun-off PMI and Kraft Foods Inc. as discontinued operations, decreased 49.6 percent to $4.9 billion due to the spin-offs. For the fourth quarter of 2008, Altria’s net revenues increased 2.8 percent to $4.7 billion. Operating income decreased 0.7 percent to $1.0 billion, attributed to charges from corporate functions, restructuring and other costs.

    However, these factors were partially offset by positive operating income from PM USA and Middleton, as well as lower general corporate expenses, the company stated.

    PM USA’s 2008 fourth-quarter adjusted operating income increased 4.8 percent vs. the fourth quarter of 2007, according to Altria. PM USA's fourth-quarter net revenues increased 1.1 percent to $4.5 billion, the company stated.

    For the fourth quarter 2008, PM USA’s domestic cigarette shipment volume was 40.8 billion units, and 2.1 percent lower than the prior-year period.

    For Altria's John Middleton, fourth quarter operating income totaled $36 million, including charges of $6 million for integration costs. For the quarter, Middleton’s cigar shipment volume increased 3.4 percent to 311 million units vs. the prior-year period.

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