MILLER BREWING'S FIRST-QUARTER INCOME UP

Talk of Possible Sale to South African Breweries Still Swirls

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BOSTON (AdAge.com) -- As talk of its potential sale to a South African beer giant continued to swirl, Philip Morris Cos.' Miller Brewing Co. today announced increased income thanks in part to new product launches.

Prospects of selling the country's No. 2 brewer to South African Breweries seemed to dim slightly as Philip Morris' incoming CEO and current chief financial officer, Louis Camilleri, said he was encouraged by the unit's second consecutive quarter of growth.

Market conditions
However, he reiterated that Philip Morris is not oblivious to conditions in the beer industry, which has been consolidating amid increased competition.

First-quarter underlying operating income rose 4.8% to $130 million, up from $124 million a

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year ago. Domestic shipments rose 1.6% to 9.5 million barrels on higher demand for core brands including Miller Lite, Miller High Life and Foster's, as well as its new flavored malt beverage, Skyy Blue.

Ad spending increased
The company said an increase in marketing dollars partially offset the income growth.

Miller represents about 3% of Philip Morris' total income.

The tobacco giant today reported net earnings for the first quarter increased 33% to $2.4 billion, or $1.10 per share, from $1.8 billion, or 81 cents per share, in the year-earlier period. Adjusted for the initial public offering of Kraft and recent accounting-rule changes, underlying net earnings rose 5.9% to $2.5 billion from $2.3 billion. Reported net revenue was up 2.9% to $20.5 billion from $19.9 billion.

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