Reynolds American 1Q Profit Soars But Volumes Continue To Fall

Reynolds American Inc.'s (RAI) first-quarter earnings more than quadrupled from a year-ago period weighed by a settlement with the Canadian government, and higher product pricing and operational cost cuts continued to offset cigarette volume declines.

Revenue missed analyst expectations, but earnings came in ahead.

Reynolds, whose brands include Camel cigarettes and Grizzly moist snuff, has shifted its focus in the face of changing demand for cigarettes. The company has diversified into smokeless tobacco, cut production costs by shutting plants and put its energy into a few key brands. Last month, the company sold its Lane Ltd. roll-your-own and pipe tobacco unit to Denmark's Scandinavian Tobacco Group AS for $205 million.

Reynolds, the second-largest U.S. tobacco company behind Altria Group Inc. ( MO), said it will continue to "refine" its cigarette portfolio this year.

The company reported a profit of $353 million, or 60 cents a share, up from $ 82 million, or 14 cents a share, in the same period a year earlier. Excluding items such as plant closing costs and settlements with the Canadian government, per-share earnings rose to 59 cents from 56 cents.

Revenue edged up 0.3% to $1.99 billion.

Analysts polled by Thomson Reuters most recently forecast per-share earnings of 58 cents on revenue of $2.04 billion.

Earnings at the R.J. Reynolds Tobacco Co., the company's largest unit, slid 1% as higher prices failed to offset a 5.2% volume decline. Total domestic market share was flat at 27.9%, though share increased for core brands Camel and Pall Mall.

At the American Snuff unit, which makes Grizzly- and Kodiak-branded moist snuff, earnings edged up $1 million to $85 million. Total moist snuff volume rose 13.2% and the company gained 1.3 share points to grab 31.1% of the market.

Reynolds American backed its full-year forecast for adjusted per-share earnings of $2.60 to $2.70.

source: www.nasdaq.com