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    Altria Starts to See Shift in Cigarette Volumes

    The numbers are moving back to historical trends.

    By Melissa Kress, Convenience Store News

    RICHMOND, Va. — Coming off a strong 2015, Altria Group Inc. turned in a solid performance for the first half of 2016, even as cigarette volumes began to shift back to historical trends.

    Altria delivered strong 2016 second-quarter and first-half results overall, growing adjusted diluted earnings per share by 9.5 percent in the second quarter and by nearly 11 percent for the first half, Marty Barrington, chairman, president and CEO, reported during the company's second-quarter earnings call Wednesday morning.

    "Our core tobacco businesses continue to produce very strong results, with yet another quarter of income and share performance. Marlboro matched the record retail share it set in the first half of last year, and Copenhagen and Skoal produced excellent share on a combined basis," he explained. "We continue to reward shareholders, paying out more than $2.2 billion in dividends to shareholders so far this year."

    Looking at Altria's smokeable products segment alone, it grew adjusted operating companies income (OCI) by 4.5 percent in the second quarter and by nearly 7 percent for the first half. In the same period in 2015, the segment grew adjusted OCI by nearly 16 percent in the second quarter and by more than 14 percent for the first half. The 2015 growth benefited from higher reported volumes at Philip Morris USA (PM USA), which was driven by stable industry volume and a trade inventory build influenced by upcoming state excise tax increases, Barrington explained.

    In the second quarter of 2016, the trade depleted inventory levels. When adjusted for these inventory movements, PM USA estimates its second-quarter cigarette volume declined 3 percent, in line with PM USA's estimate for the total industry decline rate. For the first half of this year, PM USA estimates its adjusted cigarette volume declined 1.5 percent, also in line with the industry. 

    "We are extremely pleased with the smokeable segment's performance in both the second quarter and first half of 2016," Barrington said.

    Meanwhile, Altria's smokeless products segment continued to deliver "excellent income performance, robust volumes and strong share growth" on Copenhagen and Skoal combined. Altria operating company, U.S. Smokeless Tobacco Co. (USSTC), grew adjusted OCI by nearly 14 percent in the second quarter and by more than 15 percent for the first half, according to the chief executive. 

    After adjusting for trade inventory movement and other factors, USSTC estimates its volume grew approximately 5 percent in the second quarter and 4 percent for the first half, while estimated smokeless industry volume grew approximately 3 percent for the past six months.

    Finally, as for the company's innovative products segment, Altria operating company Nu Mark LLC continues to invest — with discipline — in a portfolio of products to meet the evolving preferences of adult tobacco consumers.

    Market results for MarkTen XL "remain encouraging as Nu Mark has now distributed the brand to stores representing approximately 50 percent of e-vapor category volume in mainstream industry channels, including c-stores," said Barrington. 

    Richmond-based Altria Group is the parent company for Philip Morris USA, John Middleton, U.S. Smokeless Tobacco Co., Nu Mark and Ste. Michele Wine Estates. Altria also holds a continuing economic and voting interest in SABMiller. The brand portfolios of Altria's tobacco operating companies include Marlboro, Black & Mild, Copenhagen, Skoal, MarkTen and Green Smoke.

    By Melissa Kress, Convenience Store News
    • About Melissa Kress Melissa Kress joined Stagnito Business Information's Convenience Store News and Convenience Store News for the Single Store Owner in November 2010. Her primary beats include alcoholic beverages and tobacco. Kress has been a professional journalist since 1995. A graduate of West Virginia University, she began her career in community journalism before moving to business-to-business publishing in 2000, covering commercial real estate.

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