By Melodie Warner
Reynolds American Inc.'s (RAI) second-quarter earnings rose 4.1%
on higher prices and increased demand for smokeless tobacco.
The nation's second-largest tobacco company behind Altria Group
Inc. (MO) has seen its top line challenged by an industry-wide
decline in cigarette volumes and a weak economy that continues to
pressure consumers' disposable income. Reynolds has been shifting
its focus toward a few key cigarette brands while also expanding
into smokeless tobacco. The company is also reducing its U.S.
workforce by about 10% by the end of 2014 in an effort to save on
labor costs.
Reynolds reported a profit of $461 million, or 84 cents a share,
up from $443 million, or 78 cents, a year earlier. Excluding items
such as a gain from nonparticipating manufacturer partial
settlement, litigation charges and other items, adjusted earnings
rose to 84 cents from 79 cents. Revenue edged up 0.1% to $2.18
billion, thanks in part to higher pricing.
Analysts polled by Thomson Reuters had most recently forecast
per-share earnings of 83 cents on revenue of $2.19 billion.
Operating margin improved to 36.6% from 33.7%.
At American Snuff, the smokeless-tobacco unit that makes Grizzly
and Kodiak moist snuff, total volume increased 9.4%.
Total cigarette market share narrowed to 26% from 26.3%.
Meanwhile, growth brands--which include Camel and Pall
Mall--improved their market share to 17.6% from 16.8%.
Shares of Reynolds American, which also backed its full-year
guidance, closed Tuesday at $50.79 and were inactive premarket. The
stock is up 23% so far this year.
Write to Melodie Warner at melodie.warner@dowjones.com
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