Reynolds' net income in 3Q up 8.8 percent [Winston-Salem Journal, N.C.]
(Winston-Salem Journal (NC) Via Acquire Media NewsEdge) Oct. 23--More market-share gains among Reynolds American Inc.'s four primary tobacco brands contributed to an 8.8 percent gain in third-quarter net income to $457 million.
The net income excludes legal fees and lawsuit payments related primarily to the Engle progeny cases in Florida.
For shareholders, Reynolds adjusted its fiscal 2013 earnings forecast to a range of $3.17 to $3.27. The previous forecast was a range of $3.15 to $3.30. Reynolds has built a reputation for being one of the largest and consistent dividend payers.
Daniel Delen, the company's chief executive and president, said R.J. Reynolds Vapor Co.'s entrance into the electronic-cigarette category with Vuse has "significantly exceeded expectations with consumers and retailers" since debuting statewide in Colorado in July.
Delen said Vuse already has taken the top e-cig market share in Colorado, "which bodes well for the brand's national expansion plans." He said the most encouraging part of the Vuse test market to date is consumer demand for replacement cartridges, signifying increasing repeat business.
There has been concern among some analysts that Reynolds was coming into the e-cig marketplace late.
"That they've tried some of these competitive products at one stage or another over time has actually helped us," Delen told analysts during a conference call.
"Because then, we come in over the top with a significantly superior product, both from a quality point of view, from a consumer experience point of view. And a product that offers a consumer benefit that's closer to the existing smoking expectation the existing smokers have. I think that actually makes our jobs easier in aggregate."
Overall sales were up 0.1 percent to $2.13 billion. The Grizzly moist snuff brand of Reynolds' American Snuff Co. subsidiary posted the largest year-over-year market-share gain of the four top brands at 1.6 percentage points to an industry leading 30.4 percent.
Camel moved back into a tie with Pall Mall for third place in industry market share for cigarettes at 8.9 percent, trailing Marlboro and Newport. Camel's market share rose 0.4 percentage points, while Pall Mall's market share was up 0.3 percentage points despite its volume decreasing 2.4 percent to 5.6 billion cigarette sticks.
Natural American Spirit's market share rose 0.3 percentage points to 1.5 percent.
Reynolds' overall share of the cigarette market was down 0.5 percentage points to 26 percent compared with a year ago. It has made a strategic decision to emphasize the four key brands in terms of marketing over its remaining cigarette brands.
Bonnie Herzog, an analyst with Wells Fargo Securities, said Reynolds continues to show "strong momentum" with Grizzly and Santa Fe's Natural American Spirit brands.
"Reynolds' growth brand cigarette volume appears to be on solid footing with share growth in the third quarter," Herzog said. She said she was concerned about Pall Mall's shipment volume decrease since the brand has benefited from its discount pricing in recent years.
"We remain very bullish on the e-cig category, and are even further encouraged by the category's vast potential given Vuse's positive trends."
Stephen Pope, chief global market strategist with Cantor Fitzgerald Europe, said the overall solid quarter "reinforces" his view that Reynolds, under Delen's leadership, "has established the right product mix in terms of variety, premium versus budget brands and has the marketing and pricing really tightly nailed down."
"Going forward those are key ingredients to future revenue growth in an environment that is beyond tough and trying.
Addressing the Engle legal cases, Delen repeated Reynolds' strategy of being willing to fight each case individually rather than pursuing another potential landmark settlement.
On Oct. 7, the U.S. Supreme Court declined for the third time in the past two years to hear the appeal of tobacco manufacturers, including R.J. Reynolds Tobacco Co., of a multimillion-dollar Engle jury award.
In each case, the companies had no further legal recourse and were required to pay the award.
Delen said Tuesday the company "will continue to fight for our constitutional rights" with the Engle cases.
The sheer number of Engle plaintiffs -- estimated at more than 8,000 -- could compel the manufacturers to agree to a Master Settlement Agreement-type arrangement as more jury awards reach the payment stage, said Mark Gottlieb, president of the Tobacco Products Liability Project at Northeastern University School of Law.
(c)2013 Winston-Salem Journal (Winston Salem, N.C.)
Visit Winston-Salem Journal (Winston Salem, N.C.) at www2.journalnow.com
Distributed by MCT Information Services
[ Back To Technology News's Homepage ]