Reynolds American's profit more than doubles

RICHMOND, Va. - Reynolds American Inc. (RAI) said Tuesday that its fourth-quarter profit more than doubled as higher prices and lower legal expenses offset a decline in cigarette sales.

The results from the second-biggest U.S. tobacco company missed Wall Street expectations, however, and its shares dipped in premarket trading.

The maker of Camel, Pall Mall cigarettes and Natural American Spirit cigarettes earned $292 million, or 54 cents per share, for the quarter ended Dec. 31. That's up from $139 million, or 25 cents per share, in the year-ago period that included pension and trademark-related charges.

The Winston-Salem, North Carolina,-based company said adjusted earnings were 77 cents per share, missing Wall Street expectations by 4 cents.

Revenue excluding excise taxes fell about 2 percent to $2.04 billion. Analysts polled by FactSet expected revenue of $2.07 billion.

The number of cigarettes sold by its R.J. Reynolds Tobacco subsidiary fell about 9 percent during the quarter to 15.6 billion. When adjusting for trade inventory changes, the company said its cigarette volumes fell 7 percent, compared with its estimated industry decline of 4 percent.

Volumes for Pall Mall fell more than 6 percent and volumes for Camel fell 3.5 percent. The brands account for more than 60 percent of the company's total cigarette volume. Shipments of its other brands, which include Winston, Kool, Doral and Salem, fell about 15 percent.

Camel's market share increased 0.4 percentage points to 9 percent of the U.S. market, while Pall Mall's market share grew 0.2 percentage points to 9.1 percent.

The company has promoted Pall Mall as a longer-lasting and more affordable cigarette as smokers weather the weak economy and high unemployment.

The number of Natural American Spirit cigarettes it sold grew nearly 10 percent to about 1 billion cigarettes.

Reynolds American and other tobacco companies are also focusing on cigarette alternatives such as snuff, chewing tobacco and electronic cigarettes as tax hikes, smoking bans, health concerns and social stigma make the cigarette business tougher.

Volume for its smokeless tobacco brands including Grizzly and Kodiak rose about 8 percent compared with a year ago. The brands had a 33.3 percent share of the U.S. retail market, which is tiny compared with cigarettes.

For the full year, the company said its profit rose 35 percent to $1.72 billion on revenue of $8.24 billion, excluding excise taxes.

Reynolds American said Tuesday it expects full-year 2014 earnings in the range of $3.30 and $3.45 per share. Analysts expect $3.44 per share.

Its shares slipped 31 cents to $48.50.0 in premarket trading about an hour ahead of the market opening.