Reynolds American Inc. said Tuesday that its first-quarter net income jumped 88 percent as higher prices and lower the cost of long-standing legal settlement offset declining cigarette sales.
The second-largest tobacco company is the nation earned $ 508 million, or 92 cents a share, for the quarter ended March 31, compared with $ 270 million, or 47 cents a share, a year ago.
Adjusted earnings were 72 cents a share, beating Wall Street expectations by three cents. That excludes the benefit of 21 cents per share in the credits for the disputed payments to 1998 Master Settlement Agreement, in which some cigarette makers are paying states of smoking-related health care costs. Winston-Salem, NC-company also adjusted for non-recurring costs of implementation.
The maker of Camel, Pall Mall and Natural American Spirit cigarettes said revenue excluding excise taxes fell nearly 3 percent to $ 1.88 billion. Analysts surveyed by FactSet expected $ 1.91 billion.
Its shares fell 39 cents to close at $ 45.43 on Tuesday. This stock is trading at a 52-week range of $ 39.45 to $ 46.93.
Reynolds American said higher prices for gas and payroll taxes have reduced the disposable income of consumers during the quarter. These factors, along with two minimal numbers of days of delivery, reduce the number of cigarettes sold its RJ Reynolds Tobacco auxiliary about 9 percent per quarter to 14.9 billion cigarettes, as compared to its overall evaluation by industry reduction of 6 percent.
It sold 5.5 percent less than their brand Camel and Pall Mall volumes fell by 2 percent. Brands account for more than 60 percent of the total cigarette Reynolds American.
Camel’s market share increased by 0.1 percentage points to 8.5 percent of the U.S. market, while Pall Mall’s market share rose 0.5 percentage points to 9 percent.
The company promoted Pall Mall as a longer lasting and more affordable cigarette as smokers withstand a weak economy and high unemployment, and said half the people who try the brand continue using it.
Number of Natural American Spirit cigarettes it sold rose by almost 15 percent to 700 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.
The volume of its smokeless tobacco brands that include Grizzly and Kodiak rose about 1 percent from a year ago. Brands were 33 percent share of the U.S. retail market, which is tiny compared with cigarettes.
The company is making “significant progress” in the development of its first electronic cigarette brand Vuse, CEO Daniel Delen said in a conference call with investors. It began limited distribution of battery-powered heat a liquid nicotine solution, creating a vapor that users inhale.
Additionally, the company said it is moving forward with its nicotine gum under the Zonnic brand, which is meant to help people quit smoking. In 2009, Reynolds bought a Swedish company AB Niconovum, which makes nicotine gum, bags and spray products. Market test, which was started in Des Moines, Iowa, in September last year, the first of its products to be sold in the U.S.
Reynolds American has kept its earnings forecast for the year of $ 3.15 to $ 3.30 per share.
The company also said it spent $ 300 million to buy back 6.8 million shares during the quarter as part of $ 2.5 billion share repurchase program.