Reynolds American 2nd Quarter Net Rises 35% on Strong Snuff Sales

Date : 07/24/2012 @ 9:17AM
Source : Dow Jones News
Stock : Altria Grp., Inc. (MO)
Quote : 73.42  -0.17 (-0.23%) @ 3:59PM

Reynolds American 2nd Quarter Net Rises 35% on Strong Snuff Sales

Reynolds (NYSE:RAI)
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   By Melodie Warner 
 

Reynolds American Inc.'s (RAI) second-quarter earnings rose 35% as moist-snuff volume gains helped to offset the tobacco company's cigarette sales decline.

Like its rivals, the nation's second-largest tobacco company behind Altria Group Inc. (MO), is seeing its top line challenged by an industry-wide decline in cigarette volumes and a weak economy that continues to pressure consumer disposable income. The issues have also contributed to an aggressive promotional environment, which is also hitting Reynolds American's bottom-line results. The company has been shifting its focus toward a few key cigarette brands while also expanding into smokeless tobacco. Reynolds is also reducing its U.S. work force by about 10% by the end of 2014 in an effort to save on labor costs.

Reynolds American reported a profit of $443 million, or 78 cents a share, up from $327 million, or 56 cents, a year earlier. Excluding items such as lawsuits and restructuring charges, earnings rose to 79 cents from 71 cents. Sales dropped 4% to $2.18 billion.

Analysts polled by Thomson Reuters had most recently forecast earnings of 76 cents on revenue of $2.24 billion.

Operating margin rose to 33.7% from 25.6%.

R.J. Reynolds Tobacco, the company's cigarette unit, saw its revenue drop 6.4% to $1.83 billion as volume declined 6.7% amid competitive promotional activity. Total cigarette market share fell to 26.2% from 27.6%. Meanwhile, growth brands--which include Camel and Pall Mall--lost 0.2 percentage points of market share to hold 16.7% of the market.

At American Snuff, the smokeless tobacco unit that makes Grizzly and Kodiak moist snuff, total volume increased 11% and revenue grew 12%.

The company also backed its full-year adjusted earnings estimate.

Shares closed Monday at $45.74 and were inactive premarket. The stock has risen 26% over the past year.

Write to Melodie Warner at melodie.warner@dowjones.com

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