Marlboro maker Altria Group Inc.’s first-quarter net income increased 15 percent in on lower costs and higher prices, even though it sold fewer cigarettes. The owner of the nation’s biggest cigarette maker, Philip Morris USA, said Wednesday that it earned $937 million, or 45 cents per share, for the period ended March 31.

That’s up from $813 million, or 39 cents per share, last year. Excluding one-time items, earnings were 44 cents per share, matching analyst estimates.

Net revenue excluding excise taxes fell less than 1 percent to $3.94 billion. Analysts polled by FactSet expected $3.9 billion, according to FactSet.

Altria reaffirmed its full-year forecast for earnings between $2 and $2.06 per share, but the company said business is likely to remain challenging, as consumers remain under economic pressure and unemployment remains high.
Its shares rose 12 cents to $26.50 in premarket trading Wednesday.

The company based in Richmond, Va., said cigarettes sold fell 6.4 percent to 31.9 billion compared with last year’s first quarter. Adjusted for seasonal variations, volume declined 5 percent, higher than Altria’s industry estimate of a 4 percent decline.

Altria said its top-selling Marlboro brand lost 0.5 points of market share to end up with 42.2 percent of the U.S. market. Its other brands, including Virginia Slims, Parliament and Basic, also lost ground.

The company introduced several new products the Marlboro brand, often with lower promotional pricing. They include special blends of both menthol and nonmenthol cigarettes to help keep the brand growing and attract its competitor’s smokers.

But it faces competition from other companies’ less-expensive brands such as like Pall Mall from Reynolds American Inc. and Maverick from Lorillard Inc.

Cigarette revenue excluding excise taxes fell less than 1 percent to $3.4 billion during the first quarter, even as it raised prices.

Like other tobacco companies, Altria is focusing on cigarette alternatives — such as cigars, snuff and chewing tobacco — for future sales growth because of expected continuing declines in cigarette smoking. The company also owns a wine business and holds a voting stake in brewer SABMiller.

Altria sold 1.3 percent less of its smokeless tobacco brands such as Copenhagen and Skoal. Excluding excise taxes, revenue from its smokeless tobacco business fell slightly to $353 million.

For the quarter, the company’s smokeless tobacco brands had 54.7 percent of the market, which is tiny compared with cigarettes.

Its Black & Mild cigars saw volumes increase nearly 2 percent during the period, and its revenue excluding excise taxes fell about 24 percent to $66 million because it spent more money promoting the brand. The company’s performance also was boosted by cost savings.

Altria has been reining in expenses as tax increases, smoking bans, health concerns and social stigma make the cigarette business tougher.

Altria said it cut costs about $35 million in the first quarter and expects to save about $110 million more by the end of 2011.