Beer, Baloney Boost Philip Morris

Philip Morris, producer of Marlboro cigarettes, Oscar Mayer baloney and Miller beer, said first-quarter profits from operations rose 1.4 percent, held back by sluggish tobacco sales.

The world's largest maker of tobacco products said it earned $1.96 billion, or 80 cents a share, up from $1.93 billion, or 79 cents, a year earlier, excluding special items. That matched estimates of analyst surveyed by First Call Corp.

Revenue climbed 6.1 percent to $19.5 billion. Shares of Philip Morris, a component of the Dow Jones Industrial Average, rose 1 to 34 1/8 in midday trading Tuesday.

As expected, Philip Morris saw choppy results in both its domestic and overseas tobacco segments, though market share did inch higher.

U.S. operating income, hampered by a recent 45-cent price increase and higher marketing expenses aimed at fending off cheaper rivals, fell 7.3 percent to $1 billion. Distributors had stocked up before the price increase and were still working those supplies.

Operating income from foreign sales, meanwhile, rose a meager 0.9 percent to $1.4 billion. International sales have been hurt by economic woes in Asia and Latin America.

Weakness in the tobacco business was partly offset by moderate gains in the company's food and beverage segments.

Operating income in the North American food business rose 5 percent to $842 million, bolstered by efforts to improve productivity and by cheaper prices of raw materials. The international food business posted a 5.1 percent gain in profits from operations to $246 million.

Operating income in the beer business grew 6.3 percent to $136 million, as the company managed to cut costs and brew more beer for other beer sellers. Still, the results fell short of company expectations. Earlier this month, Philip Morris removed three key executives after a big marketing campaign failed to stimulate lagging sales.

Profits from operations, or "underlying profits," exclude the impact of more than $1 billion in charges stemming from employee layoffs and a settlement of a suit filed by U.S. states seeking reimbursement for federally paid medical costs related to tobacco illnesses.

Written By Jeffry Bartash, CBS MarketWatch
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