DOW JONES NEWSWIRES
Reynolds American Inc.'s (RAI) first-quarter net income skidded
98% amid one-time items and lower volume as inventories were
reduced ahead of an excise tax hike.
Cigarette sales volumes have been declining in the U.S. due to
increased health-consciousness and smoking bans. Producers have
been entering the smokeless tobacco arena, partly to offset the
weakening numbers. A recent excise tax increase is expected to cut
volume further as consumers watch their budgets in the
recession.
The second largest U.S. tobacco company behind Altria Group Inc.
(MO) reported net income of $8 million, or 3 cents a share, down
from $505 million, or $1.71 a share, a year earlier. Excluding
trademark write-downs in the latest quarter and a prior-year gain
from terminating the Gallaher venture, earnings were flat at
$1.
Revenue decreased 6.6% to $1.92 billion despite higher
pricing.
Analysts polled by Thomson Reuters most recently were looking
for earnings of 95 cents on revenue of $1.97 billion.
Gross margin rose to 48% from 43.4% on the price hikes.
The R.J. Reynolds Tobacco division's volume fell 11% as earnings
rose 7.7% on higher prices and streamlining efforts. Market share
fell 0.7 percentage point to 27% while Camel rose 0.1 point to
7.6%.
At the Conwood unit, which makes smokeless-tobacco brands Kodiak
and Grizzly, earnings excluding the write-down rose 3% on a 1%
volume increase while market share for moist snuff shipments rose
two points to 28.8%.
Meanwhile, Reynolds projected 2009 earnings of $4.15 to $4.45 a
share, which includes a 40-cent impact from higher pension costs.
Analysts were looking for $4.38.
Shares closed at $40.64 on Tuesday and didn't trade
premarket.
-By Tess Stynes, Dow Jones Newswires; 201-938-2473;
tess.stynes@dowjones.com