Reynolds American 4Q profit falls almost 17 percent on writedown, restructuring charges

Reynolds American 4Q profit falls almost 17 pct

RICHMOND, Va. — Cigarette maker Reynolds American Inc. said Thursday that its fourth-quarter profit fell almost 17 percent as it accounted for restructuring and a drop in the value of its trademarks.

It also shipped 7.6 percent fewer cigarettes, a drop the maker of Camel and Pall Mall blamed on the economy and a 62-cents-per-pack federal tax increase that began in April.

Its profit fell still faster for the year, 28 percent, as its revenue slipped 4.8 percent.

But it’s anticipating a brighter future.

The nation’s second-biggest cigarette company, Reynolds earned $215 million, or 74 cents per share, for the period that ended Dec. 31. That was 16.7 percent less than a year earlier.

Excluding pretax charges of $170 million for restructuring and a drop in value for one of its trademarks, it earned $1.10 per share. Analysts had expected $1.11 per share. The company said pension costs rising $45 million contributed to the profit drop.

The company, based in Winston-Salem, N.C., says its quarterly revenue dipped about 4 percent to $2.1 billion. Reynolds American’s revenue figures do not include the excise taxes it collects and passes along to the government, which amounted to $1.12 billion for the quarter.

CEO Susan Ivey said in a statement that the company “faced an extraordinary set of challenges in 2009, including unprecedented increases in tobacco excise taxes, heightened competitive activity and the effects of a deep recession.”

Reynolds American’s shares fell 28 cents, or less than 1 percent, to $53.83 in morning trading.

Its annual profit fell to $962 million, or $3.30 per share, compared with $1.34 billion, or $4.56 per share, in the previous year.

The company estimated that its 7.6 percent drop in volume was better than the industry’s overall decline, which it pegged at 7.4 percent. Camel lost 0.4 percentage point of market share in the U.S. and ended the quarter with 7.4 percent, according to data from Information Resources Inc. Pall Mall, which the company has been aggressively promoting, gained 2.8 points to end up with 6.0 percent of the U.S. market.

For the year, Reynolds American’s cigarette volumes fell 8.7 percent, while the company estimates an industry overall decline of 8.6 percent.

Like other tobacco companies, Reynolds is focusing on cigarette alternatives — such as snuff and chewing tobacco — for sales growth. Volumes increased in Reynolds’ smokeless tobacco division, which makes Kodiak and Grizzly brand products, rose 5.7 percent during the quarter.

Reynolds American said it expects 2010 to be challenging, but it expects its profit to rise to $4.80 to $5.00 per share, excluding one-time items.

Reynolds American’s top competitor, No. 1 Altria Group Inc., parent company of Philip Morris USA and maker of top-selling Marlboros, said last week that raising prices on cigarettes and cigars and cutting costs helped its fourth-quarter profit climb 7 percent even as it shipped fewer cigars and cigarettes.