Altria Group Inc. (AP), parent of Richmond-based Philip Morris USA, said Wednesday its first-quarter profit increased 18 percent as it benefited from higher cigarette prices and improvements in its Kraft Foods (KFT) operation.

New York-based Altria said net income increased to $2.60 billion, or $1.25 per share, from $2.19 billion, or $1.07 per share, in the year-earlier period. Earnings from continuing operations were $1.24 per share — beating by one penny the $1.23-per-share estimate of analysts surveyed by Thomson Financial.

Altria's sales rose 9 percent to $23.62 billion in the quarter from $21.72 billion in the year-ago period.

Domestic tobacco sales rose 3.5 percent to $4.15 billion, while the unit's operating income increased 7 percent to $1.04 billion. The star was Marlboro, which had 39.8 percent of the domestic retail market in the quarter, up from 39 percent in the year-earlier period.

"Our people obviously have their foot on the accelerator, and that is obviously resulting in good market-share growth," Dinyar Devitre, Altria's chief financial officer, said during a morning conference call.

The gains came despite stagnant shipment volumes. Philip Morris (search) reduced the wholesale promotional allowance on four key brands by $1 per carton in December 2004 and, a month later, increased the price of other brands by the same amount.

International tobacco revenue was up 13 percent to $11.35 billion, and operating income was up 13 percent to $2.08 billion.

That income gain was aided by favorable currency and an inventory sale to a new Italian distributor, Louis C. Camilleri (search), Altria's chief executive officer, said.

Sales at Altria's North American food segment rose 5 percent to $5.55 billion, while operating income grew 9 percent to $910 million. International food sales increased 10 percent to $2.51 billion, and operating income was up 56 percent to $293 million.

Commodity costs continued to impact Kraft's earnings, but Camilleri said he was pleased with the division's revenue increases and strong market share growth in "numerous key categories and markets."

Altria reaffirmed its projection for full-year earnings from continuing operations of $4.95 per share to $5.05 per share, including a charge of 12 cents per share associated with Kraft's restructuring. The food company has been selling off businesses, including its Altoids brand, to focus on core products such as cookies, coffee, biscuits and dairy items.

The 2005 estimate does not include possible benefits from the prior year's accrual for contributions to the National Tobacco Grower Settlement Trust or from the repatriation of funds from international businesses under the American Jobs Creation Act.

Also not reflected in the annual forecast: the impact of the impending purchase of PT Hanjaya Mandala Sampoerna, Indonesia's third-largest cigarette manufacturer. The $5.2 billion acquisition is expected to close in May.

Altria Group shares rose 66 cents, or 1 percent, to $64.78 on the New York Stock Exchange (search). The stock has traded in a 52-week range of $44.50 to $68.50.