International tobacco to food conglomerate Philip Morris Companies (PMC) has posted underlying diluted earnings per share (EPS) up 11.7% to US$1.24 and underlying net earnings up 8% to US$2.7bn, for its Q2 2002.

"PMC had another strong quarter," said Louis C. Camilleri, president and CEO: "Our domestic tobacco business delivered solid income gains in a highly competitive marketplace. Our international tobacco business delivered strong volume and income gains, with excellent share growth across most of its key markets. Kraft Foods also delivered a very strong quarter, with pro forma diluted earnings per share up 17% behind a solid income gain and increased volume. During the quarter, we announced the merger of Miller Brewing Company with South African Breweries, which was completed on 9 July."

FY EPS lower end of projections

"Looking ahead, we project that our FY 2002 underlying diluted EPS growth will be at the lower end of our previously disclosed range of 9% to 11%. This reflects plans in both our domestic and international tobacco businesses to invest about US$350m in our premium brands and retail presence to enhance future volume and market share. This investment will be partially funded by currency favourability that we expect to realise in the H2," Camilleri added.

During the Q2, PMC repurchased 23.5 million shares of its common stock at a cost of US$1.2bn. The company plans to accelerate its share repurchase programme during the H2, to a total exceeding US$6bn for the FY 2002.

Underlying results

On an underlying basis, Q2 net revenues increased 0.9% to US$21.1bn; operating companies income increased 6% to US$4.9bn; net earnings rose 8% to US$2.7bn; and diluted EPS rose 11.7% to US$1.24. On a constant currency basis, net revenues increased 2.6%; operating companies income increased 7.5%; net earnings rose 9.8%; and diluted EPS rose 13.5%.

Reported results

On a reported basis, Q2 net revenues increased 1.5% to US$21.1bn; operating companies income increased 3.7% to US$4.8bn; net earnings rose 14.1% to US$2.6b; and diluted EPS rose 17.5% to US$1.21.

Review of underlying operating results and volumes

Food

Kraft Foods reported Q2 2002 results including worldwide underlying volume up 2.1%. Underlying operating companies income increased 6.0% to US$1.8bn.

Volume for Kraft Foods North America increased 2% due primarily to strong results in Beverages, Desserts and Cereals and in Biscuits, Snacks and Confectionery, including contributions from new products. Operating companies income improved by 6% to US$1.4bn, driven by volume growth and productivity and synergy savings.

Volume for Kraft Foods International increased 2.4%, benefiting from acquisitions, growth in developing markets and new products. Operating companies income increased 6% to US$316m, resulting from productivity and synergy savings. Excluding an unfavourable currency impact of US$8m, operating companies income would have increased 8.7%.

Beer

Underlying operating companies income for Miller Brewing Co increased 0.6% to US$169m in the Q2, due primarily to higher pricing, partially offset by a significant increase in marketing expenses behind the launch of several new flavoured malt beverages, and lower domestic volume. International volume was up substantially, increasing 15%, driven primarily by gains in Mexico, Russia and the UK.

Tobacco

Underlying operating companies income for Philip Morris Inc (PM US), PMC's domestic tobacco business, increased 5.1% to US$1.5bn, on higher pricing and lower promotional spending, partially offset by lower volume.

At Philip Morris Int (PMI), PMC's international tobacco business, operating companies income rose 5.9% to US$1.4bn, driven by volume gains and higher pricing, partially offset by the impact of unfavourable currency.