Reynolds American Results Surge, Driven by Newport Brand -- Update
12 February 2016 - 5:16AM
Dow Jones News
By Tripp Mickle
Reynolds American Inc. on Thursday posted a 43% increase in
fourth-quarter sales and forecast a double-digit increase in profit
this year, reflecting the addition of Lorillard, acquired last
year, and the benefits of being an all-U.S. company sheltered from
foreign-currency swings.
The strong sales results were driven primarily by the Newport
cigarette brand the tobacco company acquired in its $25 billion
takeover of Lorillard. Reynolds, the nation's second-largest
tobacco company behind Altria Group Inc., said Newport increased
its market share to 13.6% from 13% in the quarter, helping overall
cigarette volume increase 33.6% from a year earlier.
The volume increases and higher cigarette prices helped deliver
$3.05 billion in sales, up from $2.13 billion a year earlier. The
Winston-Salem, N.C.-based company posted a profit of $279 million,
or 19 cents a share, up from $148 million, or 14 cents a share.
But Reynolds said it expects industry cigarette volumes to
decline in the 2%-to-3% range this year, which signals a return to
historic levels of decline. Last year, volumes dropped just 0.1% as
lower gas prices put more money in consumers' pockets.
Despite that, Reynolds expects earnings this year of $2.25 to
$2.35 per share, a 14% to 19% increase from 2015. The company also
said it had lifted its quarterly dividend by 17%.
Reynolds's expectations and results contrast sharply with
Marlboro-maker Altria Group, which last month missed Wall Street
expectations and announced it would cut 5% of its workforce. The
job cuts were designed to help the company save $300 million as it
looks to meet its target of 7%-to-9% earnings growth in 2016.
During a call with analysts, Reynolds Chief Executive Susan
Cameron credited the company's sales force for lifting Newport.
Reynolds sales force is about 2,300 people, more than double the
1,000 previously working on Newport.
Newport's performance was offset by volume declines for Camel
and Pall Mall of 2% and 3.5%, respectively. Ms. Cameron said Camel
suffered from a Food and Drug Administration order in September
that required it pull Camel Crush Bold from the market, reducing
the brand's overall volume.
Volume of the company's Natural American Spirit brand, which
includes higher-priced organic cigarettes, increased 18% in the
quarter, helping boost the brand's market share to 2% from 1.7% in
the year earlier period.
The company said it would boost its investment in its Vuse
e-cigarette brand. Growing dissatisfaction with e-cigarettes like
Vuse and inventory backlogs caused sales to slow last year, but Ms.
Cameron said Reynolds's consumer data showed consumers continue to
try the devices. The company announced last year it would release a
refillable device and liquid nicotine product to compete with the
products sold at vape shops, which claim about half the more than
$2.5 billion e-cigarette market.
"We've gone a long way to meet what is really the consumer's
dilemma, which is more satisfaction," Ms. Cameron said.
Chelsey Dulaney contributed to this article.
Write to Tripp Mickle at Tripp.Mickle@wsj.com
(END) Dow Jones Newswires
February 11, 2016 13:01 ET (18:01 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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