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Reynolds American Inc. Message Board

  • jfrs95 jfrs95 Apr 24, 2012 10:43 AM Flag

    Reynolds American 1Q Profit Falls 29% On Charges

    Reynolds American 1Q Profit Falls 29% On Charges
    04/24/2012 | 09:41am
    --Reynolds and rivals face difficult operating environment as cigarette volumes have been declining for years

    --Major players have responded by enacting price hikes and cutting costs the help boost profitability

    --Latest results aided by growth for smokeless tobacco

    (Updates throughout with additional background, analyst commentary and the latest stock quote.)


    By John Kell
    Of

    Reynolds American Inc.'s (>> Reynolds American, Inc.) first-quarter earnings fell 29% as the tobacco company booked restructuring-related charges and as cigarette sales volume dropped more than the broader industry.

    Reynolds American and rival tobacco firms face a difficult operating environment as cigarette volumes have been declining for years and a weak economy and high unemployment continue to pressure consumer disposable income.

    The major players have responded by enacting price hikes and cutting costs to help bolster profitability. Reynolds American last month said it would cut its U.S. work force by about 10% by the end of 2014, echoing a cost-cutting move by Altria Group Inc. (>> Altria Group, Inc.). Those job cuts were part of a comprehensive review of the company's business, as Reynolds American sought to get operations in line with the current business landscape.

    Cigarette volume for the nation's second-largest tobacco company behind Altria, excluding private-label brands, dropped 5.1% in 2011 from the prior year, compared with an overall industry decline of 3.5%. The company has shifted its focus on key brands and has also diversified into smokeless tobacco and dissolvables in an effort to seek broader appeal.

    In the first quarter, Reynolds American's cigarette volume, excluding private-label brands, slid 5.6%. That was worse than the industrywide 4% decline as the company was hurt by high levels of promotional pricing and lower wholesale inventories.

    On a positive note, total volume at American Snuff, the smokeless tobacco unit that makes Grizzly and Kodiak moist snuff, was up 7.6% and outpaced the industry's increase of about 5%.

    Reynolds American reported a profit of $270 million, or 47 cents a share, down from $381 million, or 65 cents a share, a year earlier. Excluding restructuring-related costs and other items, earnings were down at 63 cents from 64 cents. Revenue decreased 2.9% to $1.93 billion.

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