July 20, 1999 10:37 AM EDT

NEW YORK (Reuters) - Tobacco giant Philip Morris Cos. Inc. Tuesday reported a 2.9 percent increase in second quarter earnings before charges, to $2.05 billion, meeting Wall Street expectations despite declines in both domestic and worldwide tobacco operations.

The company's Kraft foods and Miller beer operations reported improved income, with higher volume and lower commodity costs boosting North American food operations.

Philip Morris said its second quarter earnings before charges were equal to 85 cents per diluted share, on revenues of $19.79 billion. Analysts had expected the company to earn 85 cents a share before extraordinary items, according to First Call Corp., which tracks estimates.

A year earlier the company reported income of $2 billion, or 82 cents per diluted share, on revenues of $18.93 billion.

Second quarter 1999 results exclude $45 million in pre-tax charges for severance costs in the domestic tobacco operations. Second quarter 1998 results exclude $232 million in charges for early retirement and severance costs and $199 million in charges for tobacco lawsuit settlements.

North American tobacco volume, a measure of cigarette consumption, fell 9.6 percent in the second quarter, although the company's top-selling Marlboro brand gained market share. International tobacco consumption fell 6.1 percent on poor economic conditions in Eastern Europe, Philip Morris said.