MO Altria Group Inc

By Lisa Beilfuss 

Reynolds American Inc. said sales climbed 33% in its latest quarter as the tobacco company continues to benefit from last year's acquisition of rival Lorillard Inc., though results fell short of expectations.

Last year, the second- and third-biggest U.S. cigarette makers agreed to a $25 billion tie up that would make it better able to compete with industry leader and Marlboro owner Altria Group Inc. Through the deal, Reynolds, maker of Camel and Pall Mall brands, has folded in top-selling menthol cigarette Newport.

Chief Executive Susan Cameron said Reynolds finished the integration during its June period, six months ahead of schedule and as Newport gained a half-point of market share, to 13.9%. The performance, driven by a sixfold increase in sales volume to 8.8 billion, helped boost Reynolds's overall market share to 34.5% from 34% a year earlier.

Total cigarette volume rose 57% to 18.9 billion as the Newport brand offset a 2.8% decline in Camel and a 5.4% fall in Pall Mall volume.

In all for the three months ended June 30, the company reported a profit of $796 million, or 56 cents a share, down from $1.93 billion, or $1.69 a share, a year earlier. The decline was largely due to a gain in the year-ago period on divestitures that the company had to make to seal the Lorillard deal. Excluding that and other items, earnings per share rose to 58 cents from 51 cents.

Revenue increased to $3.2 billion from $2.4 billion. Analysts had projected 61 cents in per-share profit and $3.26 billion in sales, according to Thomson Reuters.

Shares in the company, up 13% this year, were inactive during premarket trading.

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com

(END) Dow Jones Newswires

July 26, 2016 07:55 ET (11:55 GMT)

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