Lorillard 4th-qtr earnings rise 21 percent on higher prices, lower costs; shares up too
Monday February 9, 2009, 5:06 pm EST
GREENSBORO, N.C. (AP) -- Lorillard Inc., which makes Newport cigarettes, said Monday that its fourth-quarter profit rose 21 percent on higher prices and lower costs.
Its shares rose $2.04, or 3.3 percent, to end at $64.30.
Profit rose to $258 million, or $1.53 per share, beating the average estimate from analysts polled by Thomson Reuters. That compares with $213 million, or $1.23 per share, a year earlier.
Analysts, who typically exclude one-time items, expected a profit of $1.37 per share and revenue of $934.7 million.
Sales rose 14 percent to $1.09 billion from $957 million a year ago on higher prices and volume.
Selling, general and administrative costs declined in the fourth quarter, as results a year earlier were hurt by a $66 million litigation charge.
For all of 2008, profit slipped to $887 million, or $5.15 per share, from $898 million, or $5.16 per share, in 2007.
Sales rose 6 percent to $4.2 billion from $3.97 billion last year.
"We are pleased with our results for the fourth quarter and full year 2008, which can be attributed to our strong operating performance and strides made growing our market share," said Chief Executive Martin Orlowsky.
Lorillard reported that it now holds roughly 9.86 percent of the U.S. cigarette market.
As sales volumes continue to fall, cigarette makers have raised prices to keep revenue growing, though a federal tax hike set April 1 -- from 39 cents to $1 per pack -- could further dampen sales.
On Jan. 29, Altria Group Inc. reported a 2.1 percent drop in the number of cigarettes sold in the U.S., while total revenue rose 3 percent. Altria owns Philip Morris USA, which sells Marlboros and is the nation's biggest cigarette maker.
Tobacco makers bigger than Lorillard have entered the smokeless market with acquisitions or partnerships to boost promotions and marketing as smoking bans and health concerns drag down the number of cigarettes sold.
Altria closed on its acquisition of UST Inc., maker of Copenhagen and Skoal, last month. Reynolds American Inc., the nation's No. 2 cigarette maker, bought Conwood Co. in 2006. And Philip Morris International announced a joint venture with Swedish Match to sell smokeless products outside the U.S. and Sweden.
Also on the horizon is the possible reintroduction of a bill to give the U.S. Food and Drug Administration the authority to regulate the industry.
Reynolds American executives said in September that their strategy was to focus on Camel and Pall Mall, and that they planned to make Kool menthol cigarettes a "support brand."
Standard & Poor's analyst Esther Kwon raised her rating on Lorillard shares to buy from hold.
"We see Lorillard benefiting from (a) competitor's recent de-emphasis of its menthol brand and view prospects for the segment to remain healthy despite a federal excise tax hike and likely boosts in state excise taxes," Kwon wrote.