By William Spain
Charges and volume declines dragged down Reynolds American's
first-quarter profit, the cigarette maker said Wednesday.
Before the start of trading, Reynolds (RAI) said that it earned
just $8 million, or 3 cents a share, down from $505 million, or
$1.71 a share, in the year-earlier quarter. Knocking out 97 cents a
share in non-cash trademark impairment charges, the company said it
would have earned $1 a share, flat with adjusted profit levels in
the same quarter of 2008.
Sales fell to $1.92 billion from $2.06 billion, a nearly 7%
drop.
The average estimate of analysts polled by FactSet Research had
been for the company to earn 98 cents a share on revenue of $2.01
billion.
Cigarette shipment volume declined 10.5%, even higher than usual
due to wholesale inventory reductions ahead of a federal tax
increase. Factoring that out, volume would have been off 8.1%.
And the company noted that it is now "seeing trade inventories
returning to more normal levels."
The industry "was marked by significant shifts in the first
quarter," said Susan Ivey, the company's chief executive, in the
earnings report. "However, the fact that both of [our] reportable
operating segments continued to post increases in adjusted
operating income highlights the strength of the total-tobacco
business model we've established over the past several years."
Looking ahead, the company said it expects full-year earnings of
$4.15 to $4.45 a share, which includes an increase in pension
expenses, but excludes any trademark-impairment charges.
Shares of Reynolds were up 2% to close at $41.48.
-William Spain; 415-439-6400; AskNewswires@dowjones.com