Tobacco company Reynolds American’s 1Q profit soars from period with big charges

Cigarette maker Reynolds American 1Q profit soars

RICHMOND, Va. — No. 2 U.S. tobacco company Reynolds American Inc. said Thursday that higher prices, growth in its smokeless tobacco business and productivity gains helped its first-quarter profit rise 10-fold.

That’s compared with a quarter a year earlier when the company posted big drops in the value of its trademarks.

The maker of Camel, Pall Mall and Natural American Spirit brand cigarettes says it earned $82 million, or 28 cents per share, in the period that ended March 31. That’s up from $8 million, or 3 cents per share, a year earlier.

Adjusted to exclude one-time items, such as a settlement with governments in Canada, Reynolds American earned $1.11 per share. Analysts polled by Thomson Reuters on average expected adjusted profit of $1.07.

The company said its revenue excluding excise taxes rose 3.4 percent to $1.99 billion from $1.92 billion a year ago. Analysts had expected $1.91 billion.

It reaffirmed its forecast that it will earn $4.80 to $5.00 per share this year from continuing operations.

Based in Winston-Salem, N.C., the company said it sold 18.2 billion cigarettes in the period, 2.5 percent fewer than a year earlier, when retailers and wholesalers cut their orders ahead of a one-time federal tax on inventory. Adjusting for those cuts, cigarette volume declined 4.8 percent.

The company estimates that cigarette volume fell 7.3 percent industrywide.

Reynolds American’s market share rose 0.2 points to 27.9 percent as sales of Pall Mall cigarettes rose. The company has been aggressively promoting Pall Mall as a longer-lasting and more affordable cigarette during the recession.

The company said volumes of its Kodiak and Grizzly smokeless tobacco grew 12.2 percent compared with the year-ago period.

Reynolds American and other tobacco companies are focusing on cigarette alternatives — such as snuff and chewing tobacco — for future sales growth as tax increases, smoking bans, health concerns and social stigma make the cigarette business tougher.