RICHMOND, Va. - Reynolds American Inc.'s fourth-quarter profit more than doubled as higher prices and lower legal expenses offset a decline in cigarette sales, and it benefited from an easy comparison with last year.
The results from the nation's second-biggest tobacco company Tuesday missed Wall Street expectations, however, and its shares dipped in morning trading.
The maker of Camel and Pall Mall cigarettes said the number of cigarettes sold by its R.J. Reynolds Tobacco subsidiary fell about 9 per cent during the quarter to 15.6 billion.
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.
When adjusting for trade inventory changes, the Winston-Salem, N.C.-based company said its cigarette volumes fell 7 per cent, compared with its estimated industry decline of 4 per cent.
Volumes for Pall Mall fell more than 6 per cent and volumes for Camel fell 3.5 per cent. The brands account for more than 60 per cent of the company's total cigarette volume. Shipments of its other brands, which include Winston, Kool, Doral and Salem, fell about 15 per cent.
Camel's market share increased 0.4 percentage points to 9 per cent of the U.S. market, while Pall Mall's market share grew 0.2 percentage points to 9.1 per cent.
The company has promoted Pall Mall as a longer-lasting and more affordable cigarette as smokers weather the weak economy and high unemployment.
Volume for its smokeless tobacco brands including Grizzly and Kodiak rose about 8 per cent compared with a year ago. The brands had a 33.3 per cent share of the U.S. retail market, though that market is tiny compared with cigarettes.
Reynolds American also said it plans to significantly expand its Vuse-brand electronic cigarette outside of Colorado and Utah by the middle of 2014.
The number of Natural American Spirit cigarettes it sold grew nearly 10 per cent to about 1 billion cigarettes.
Reynolds American earned $292 million, or 54 cents per share, for the quarter ended Dec. 31, up from $139 million, or 25 cents per share, in the year-ago period that included pension and trademark-related charges.
Adjusted earnings were 77 cents per share, missing Wall Street expectations by 4 cents.
Revenue excluding excise taxes fell about 2 per cent to $2.04 billion. Analysts polled by FactSet expected revenue of $2.07 billion.
For the full year, the company said its profit rose 35 per cent 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 fell $1.20, or 2.5 per cent, to $47.61 in morning trading.
Michael Felberbaum can be reached at http://www.twitter.com/MLFelberbaum .