Altria confirms PMI's separation, commitment to OTP tests in U.S.
NEW YORK -- As long expected, Altria Group Inc. formally announced the spinoff of Philip Morris International Inc. (PMI) yesterday while discussing its yearend financials. At the same time, Altria officials reaffirmed their satisfaction with domestic testing of both its smokeless, Marlboro-branded "snus" and moist-smokeless tobacco (MST) products.
During an investors' call yesterday, Louis Camilleri, chairman and CEO for Altria, New York, said retailers can expect changes in the look and feel of the tobacco rack, as well as potential changes in pricing.
"We're looking at various [image-nocss] parts of the mix…and testing ways of marketing product to the consumer," Camilleri said in response to a question about Richmond, Va.-based Philip Morris USA (PM USA) and its pilot testing of other tobacco products (OTP) in Atlanta and Dallas. "That's why it's a test market."
He described consumer response to be "terrific" and that share momentum has been both "satisfactory and encouraging."
Earlier this week, CSP Daily News reported on an analyst's report noting a less-than-stellar showing for the Marlboro MST product in Atlanta. Officials with PM USA disagreed, telling CSP Daily News that the response has been strong and warranted expansion of the test. (To read the article, click here.)
With regards to PMI's future relationship to PM USA, Camilleri said the entities will be separate, with the only concern prior to yesterday's announcement being intellectual property rights. Anything developed prior to the split belongs to both entities, he said.
In conjunction with the PMI spinoff, the company announced new Altria and PMI boards, dividend policies, initial dividend rates and share repurchase programs for each company. Officials also provided separate forecasts for 2008 earnings per share from continuing operations for Altria and PMI.
"Two-thousand-and-seven was a watershed year, with strong underlying earnings growth and a number of strategic actions that further strengthen our tobacco businesses for long-term growth," Camilleri said in a statement released prior to the web call. "While we are by all means not immune to the current economic uncertainties, we enter 2008 with solid momentum, and I am confident that both Altria and PMI are well positioned to not only weather these uncertainties but to deliver strong results this year and beyond."
In that release, the company announced forecasts for 2008 earnings-per-share growth rates:
Altria 2008 full-year diluted earnings per share from continuing operations are projected to grow approximately 9% to 11% from a 2007 adjusted base of $1.50, excluding PMI, which will be accounted for as a discontinued operation for the full-year 2008. PMI 2008 full-year diluted earnings per share from continuing operations are projected to grow approximately 12% to 14% at current exchange rates, from a 2007 pro-forma adjusted base of $2.78.
"Today's announcement underscores our long-term commitment to build shareholder value," Camilleri said. "The PMI spinoff and related actions position our international and domestic tobacco businesses for future success as standalone companies with unique and formidable strengths, including leading brands, strong cash flow, experienced leadership and solid growth prospects."