RAI Reynolds American (delisted)

By Tripp Mickle and Anne Steele 

Reynolds American Inc. on Tuesday reported a 42% increase in first-quarter sales, driven by last year's $25 billion acquisition of Lorillard Inc. and its Newport cigarette brand.

The tobacco company increased cigarette volume 34% during the quarter as Newport, the U.S.'s leading menthol brand, benefited from better placement in gas stations and tobacco stores. Newport's market share increased to 14% during the quarter from 13.4% a year ago.

Chief Executive Susan Cameron said Newport's manufacturing integration is progressing smoothly and is now expected to be completed by the middle of this year, well ahead of the initial projection for the end of 2016. The company also said it remains on track to achieve $800 million in cost savings from last year's Lorillard acquisition.

"Newport has delivered impressive market-share gains during this successful transition, and the brand has been a driving force behind our accelerated business performance over the past three quarters," she said.

Ms. Cameron also said she has agreed to remain with Reynolds to see through the full integration of the companies later this year. Her original agreement to return as chief executive in 2014 was scheduled to end April 30, but included the ability to be extended

Reynolds, the nation's No. 2 tobacco company behind Altria Inc. by sales, reported a first-quarter profit of $3.57 billion, or $2.49 a share, up from $389 million, or 36 cents a share, a year earlier. The increase reflected the company's $5 billion sale to Japan Tobacco Inc. of non-U. S. rights to the Natural American Spirit cigarette brand.

Excluding a gain tied to that sale, and charges for debt and financing costs, among other things, per-share earnings rose to 50 cents a share, matching Wall Street's estimate, from 43 cents.

Overall sales climbed 42% to $2.92 billion. In addition to strong sales of Newport, the company said its Natural American Spirit brand increased volume 22% to 1.2 billion cigarettes from 1 billion cigarettes. The higher-priced cigarette brand, which doesn't use additives such as glycerol, increased its market share to 2% during the period from 1.7% a year earlier.

Reynolds's total market share increased to 34.6% in the quarter from 34.3% a year earlier on a pro forma basis.

Write to Tripp Mickle at Tripp.Mickle@wsj.com and Anne Steele at Anne.Steele@wsj.com

(END) Dow Jones Newswires

April 26, 2016 12:07 ET (16:07 GMT)

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