RICHMOND, Va. (AP) -- Cigarette maker Lorillard Inc. said Wednesday its third-quarter net income rose 6 percent, as higher prices helped offset a decline in the number of cigarettes sold.
The nation's third-biggest tobacco company said intense promotional activity drove the number of cigarettes it sold down about 2 percent during the quarter to about 10.1 billion cigarettes. Newport, its biggest brand, fell at about the same rate, but the Greensboro, N.C.-based company's share of the U.S. market grew to 0.2 percentage points to 14.4 percent. The company estimates that the industry as a whole sold 2.7 percent fewer cigarettes during the quarter.
Lorillard said its net income grew to $283 million, or $2.16 per share, for the three-month period ended Sept. 30, up from $267 million, or $1.94 per share, a year ago.
On an adjusted basis, earnings were $2.17 per share, missing Wall Street expectations of $2.23 per share.
Revenue excluding excises taxes rose 4.5 percent to $1.16 billion. Analysts polled by FactSet expected revenue of $1.2 billion.
Its shares fell $5.24, or about 4.5 percent, to $110.54 in morning trading Wednesday.
In a conference call with investors, Lorillard CEO Murray Kessler said even in the face of heavy competitive discounting of menthol cigarettes, "I never cease to be amazed by the strength of the Newport franchise." Still Kessler said the company anticipates the market to remain "challenged" in the short term.
Despite Lorillard's top competitors' continued efforts to grab some of the growing menthol market, Newport's share of the menthol market rose 0.3 points to 36.4 percent.
Most tobacco companies have been raising prices and cutting costs to keep profits up as the recession and declining demand cut into cigarette sales. Tax increases, smoking bans, health concerns and social stigma also have made the cigarette business tougher.
But high unemployment and rising cigarette prices and taxes also have caused many smokers to smoke less and trade down to cheaper brands during the recession to save money. Lorillard's Maverick and Reynolds American Inc.'s Pall Mall have been among the beneficiaries.
During the third quarter, Maverick saw its volume increase about 1 percent after several quarters of solid growth.
The brand has held up "beautifully well," even though in the current marketplace, a smoker could buy a premium-priced menthol cigarette from one of its competitors at the same price as a discount brand like Maverick, Kessler said.
No. 2 cigarette maker Reynolds American said Tuesday its third-quarter profit grew nearly 7 percent as higher prices and smokeless tobacco gains helped offset a nearly 7 percent decline in the number of cigarettes it sold. No. 1 Altria Group Inc. reports on Thursday.
Lorillard, the oldest continuously operating U.S. tobacco company, spun off from Loews Corp. in 2008.
Michael Felberbaum can be reached at http://www.twitter.com/MLFelberbaum.
- Investment & Company Information