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(July 19, 2001) -- Despite a 13% decline in second-quarter operating income for its Miller Brewing Co. beer business, Philip Morris Cos. reported a 5.4% rise in total net earnings, to $2.3 billion on $23.2 billion in revenue, thanks to growth of its Philip Morris USA tobacco and majority-owned Kraft Foods units.

Tobacco, the company's highest income-generating sector that accounts for 60% of total operating income, performed better domestically than abroad.

The company's domestic tobacco business outperformed its international sales, due to unfavorable foreign currency, explained Philip Morris Chief Financial Officer Louis Camilleri in a call to investors after close of market Wednesday.

Domestic tobacco operating income grew 8.6% to $1.38 billion in the second quarter, while international tobacco operating income was up 2.9% to $1.34 billion.

Mr. Camilleri attributed domestic performance to share growth in the premium retail segment for its four key cigarette brands: Marlboro, Parliament, Virginia Slims and Basic.

Earlier Wednesday, Kraft Foods, which acquired Nabisco in December, reported a 13.5% increase in earnings for the quarter to $581 million, on a pro forma basis.

Philip Morris' stock closed at $45.48 Wednesday, in the middle of its 52-week range of $23.25 to $53.88. -- Cara Beardi

Copyright July 2001, Crain Communications Inc.

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