Reynolds American 3Q net income rises 9 percent

AP News
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Posted: Oct 22, 2013 8:04 AM

RICHMOND, Va. (AP) — Reynolds American's third-quarter profit rose about 9 percent as higher prices and lower expenses from a legal settlement offset a decline in cigarette sales.

The nation's second-biggest tobacco company earned $457 million, or 84 cents per share, for the quarter ended September 30, up from $420 million, or 74 cents per share, a year ago.

Adjusted earnings were 86 cents per share, matching Wall Street expectations, according to FactSet.

The Winston-Salem, N.C., maker of Camel, Pall Mall and Natural American Spirit cigarettes said revenue, excluding excise taxes, increased about 1 percent to $2.14 billion, also matching expectations.

CEO Dan Delen said the company continued to make progress in a highly competitive marketplace and a tough economic environment.

The number of cigarettes sold by its R.J. Reynolds Tobacco subsidiary fell about 4 percent during the quarter to 16.7 billion. When adjusting for trade inventory changes, the company estimates that industry cigarette volumes fell 3.5 percent.

Volumes for Camel rose 4 percent and volumes for Pall Mall fell more than 2 percent. The brands account for more than 60 percent of the company's total cigarette volume. Shipments of its other brands, which include Winston, Kool, Doral and Salem, fell about 13 percent.

Camel's market share increased 0.4 percentage points to 8.9 percent of the U.S. market, while Pall Mall's market share grew 0.3 percentage points to 8.9 percent.

The company has promoted Pall Mall as a longer-lasting and more affordable cigarette as smokers weather the weak economy and high unemployment.

The number of Natural American Spirit cigarettes it sold grew nearlty22 percent to about 1 billion cigarettes.

Reynolds American Inc. and other tobacco companies are also focusing on cigarette alternatives such as snuff, chewing tobacco and electronic cigarettes as tax hikes, smoking bans, health concerns and social stigma make the cigarette business tougher.

Volume for its smokeless tobacco brands that include Grizzly and Kodiak rose 7 percent compared with a year ago. The brands had a 33.4 percent share of the U.S. retail market, which is tiny compared with cigarettes.

The company launched a revamped version of its Vuse-brand electronic cigarette in Colorado in July, with its sights set on expanding nationally. It's also moving ahead with its nicotine gum under the Zonnic brand, which is meant to help people stop smoking. In 2009, Reynolds bought the Swedish company Niconovum AB, which makes nicotine gum, pouches and spray products.

Reynolds on Tuesday narrowed its adjusted profit outlook for the year to between $3.17 and $3.27 per share.

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Michael Felberbaum can be reached at http://www.twitter.com/MLFelberbaum .