Reynolds American, the nation's second-biggest tobacco company, said Tuesday that its fourth-quarter profit fell 54 percent on pension and trademark-related charges and other costs.
But maker of Camel, Pall Mall and Natural American Spirit cigarettes said its earnings excluding those items rose about 6 percent as higher prices, productivity gains and selling more of its smokeless tobacco brands that include Grizzly and Kodiak offset cigarette volume declines and increased promotional spending.
Reynolds American Inc., based in Winston-Salem, N.C., said its net income fell to $139 million, or 25 cents per share, for the three-month period ended Dec. 31, down from $304 million, or 52 cents per share, a year ago. Adjusted earnings were 76 cents per share, beating Wall Street expectations by three cents.
Revenue excluding excise taxes fell slightly to $2.08 billion. Analysts polled by FactSet expected $2.06 billion.
The number of cigarettes sold by its R.J. Reynolds Tobacco Co. subsidiary fell about 3 percent during the quarter to 17.1 billion cigarettes, compared with its estimate of a total industry decline of less than 1 percent. It sold 5.5 percent more of its Pall Mall brand and volumes of Camel fell slightly. The brands account for more than 60 percent of its total cigarette volume.
Camel's market share remained stable at 8.6 percent of the U.S. market, while Pall Mall's market share grew 0.3 percentage points to 8.9 percent.
The company has promoted Pall Mall as a longer-lasting and more affordable cigarette as smokers weather the weak economy and high unemployment, and has said half the people who try the brand continue using it.
The number of Santa Fe Natural Tobacco Co.'s Natural American Spirit cigarettes it sold grew more than 20 percent to about 800 million cigarettes.
Reynolds American and other tobacco companies are also focusing on cigarette alternatives such as snuff and chewing tobacco for future sales growth as tax hikes, smoking bans, health concerns and social stigma make the cigarette business tougher.
Volume for its smokeless tobacco brands that include Grizzly and Kodiak rose 7 percent compared with a year ago. The brands had a 32.6 percent share of the U.S. retail market, which is tiny compared with cigarettes.
Reynolds American also said it expects full-year adjusted earnings in the range of $3.15 to $3.30 per share. Analysts expect earnings of $3.12 per share.
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