MO Altria Group Inc

By Tripp Mickle and Chelsey Dulaney 

U.S. tobacco giant Altria Group Inc. on Thursday said it would cut roughly 5% of its workforce in an effort to reduce costs by $300 million annually as industry volumes decline.

The Marlboro maker announced the layoffs on the same day it reported profit and revenue for the fourth quarter that missed Wall Street expectations as cigarette shipments slipped and earnings declined from its stake in SABMiller PLC's beer business.

Altria's earnings rose slightly to $1.25 billion, or 64 cents a share, from $1.24 billion, or 63 cents a share, a year earlier.

The results foreshadowed some of the challenges facing the U.S.'s largest tobacco company, which commits to deliver 7% to 9% annual earnings growth.

Altria reported adjusted earnings growth of 8.9% for 2015 in part because it saved an estimated $300 million in costs because of the expiration of a federal program that required the company pay subsidies for tobacco farmers. The company also benefited from the first increase in cigarette volumes in years as lower gas prices put more money in consumers' pockets.

But the benefits of lower costs from tobacco subsidies ended in the second half of last year, and the company anticipates industry cigarette volumes eventually will return to historic levels of decline in the 3% to 4% range. The company's 27% stake in SABMiller also is expected to affect results as the London-based brewer struggles with volatile currencies in South America and Africa.

"That's what makes this year a tough act to follow," said CLSA analyst Michael Lavery.

Altria said it would eliminate 490 salaried jobs. The Richmond, Va.-based company employs about 9,000 people. It is the second round of cuts in the past five years. In 2011, the company announced it would eliminate 15% of its salaried workforce as part of a $400 million cost-savings plan.

When asked during a call with analysts to explain what triggered this year's cuts, Chief Executive Marty Barrington said, "You always have to be mindful of costs over time. If you have opportunities to improve in your infrastructure or to improve your organization and to invest those savings in your brands or in your products for the future...you should do that."

Mr. Barrington said the company would reinvest some of the cost savings into "reduced harm products" such as electronic cigarettes and in its brands.

In its latest quarter, Altria said higher pricing helped offset a 2.6% decline in cigarette-shipment volume. The company is facing stronger competition from No. 2 player Reynolds American Inc., which in June closed a $25 billion acquisition of rival Lorillard Inc. Despite that, Altria's cigarette market share rose to 51.4% from 50.9% a year earlier.

Net revenue after excise taxes was $4.73 billion, up from $4.61 billion a year earlier. Analysts had been expecting revenue of $4.75 billion.

The company reported earnings from its SABMiller interest declined 17% to $211 million from $253 million. Excluding litigation costs and other special items, per-share earnings were 67 cents, while analysts polled by Thomson Reuters forecast earnings of 68 cents.

For 2016, Altria is expecting earnings of $3 to $3.05 a share, excluding restructuring charges. The guidance doesn't include any impact from the proposed combination of Anheuser-Busch InBev NV and SABMiller, which is expected to close in the second half of the year.

Write to Tripp Mickle at Tripp.Mickle@wsj.com and Chelsey Dulaney at Chelsey.Dulaney@wsj.com

(END) Dow Jones Newswires

January 28, 2016 14:47 ET (19:47 GMT)

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