Reynolds American Reports Income Growth

Camel, Pall Mall, other brands of RAI

On Wednesday Reynolds American announced its second-quarter business results, reporting that net income soared by over 35 percent as price increase and reduced expenses helped the company to recover from disappointing previous year results, which were affected by legal charges.

Camel, Pall Mall, other brands of RAI

However the second-largest tobacco group across the nation also saw a much higher decrease in the number of cigarettes shipped versus the industry as a whole.

The N.C-based corporation declared considerable promotional campaigns by its rivals led to the 7 percent decline in cigarette volumes, which totaled 18.1 billion cigarettes, in comparison with overall industry decrease of 1.7 percent.

Its cigarette making subsidiary, RJ Reynolds Tobacco, shipped 4 percent less Camel cigarettes, and 3.6 less of Pall Mall cigarettes.

Camel’s share of cigarette market was practically stable at 8.3 percent, whereas Pall Mall share was down by 0.2 points, totaling 8.4 percent of the market.

Pall Mall brand saw an unprecedented growth across the nation in the last 3 years, as RJ Reynolds used a wise marketing campaign, advertising the brand as a long-lasting mid-value cigarette with fine taste, which fit perfectly for smokers at a time of economy downturns and high unemployment. Reynolds reported that 50 percent of people who tried the brand, become loyal to it, yet, the company feels the pressure from its major rivals trying to attract more adult smokers from competing brands.

Reynolds American announced net income of $443 million for the second quarter, ending June 30, going up from $327 million, reported last year, when it faced charges associated with litigation which affected income.

Adjusted earnings totaled 79 cents a share, exceeding experts’ forecasts of 76 cents a share. The group’s shares lost 39 cents to equal $45.35 during Tuesday trade session.

The company’s revenue, excluding taxes totaled $2.18 billion, going down by 4 percent from last year’s $2.27 billion. Analysts expected revenue would reach $2.24 billion.

Reynolds as well as other tobacco firms are increasingly focused on alternatives to cigarettes, including chewing tobacco, snuff and snus as sources of future income as tax increases, anti-smoking policies, health worries have a negative impact on cigarette business.

Shipping volume of the company’s smokeless tobacco products, led by Grizzly, Camel Snus and Kodiak went up by about 11 percent in comparison with the same period last year. It’s share of the nationwide retail market added 1.7 percent to reach 32.4 percent.

The tobacconist also announced the start of test marketing of nicotine gum, named Zonnic, intended to assist smokers in quitting smoking. The gum will be selling across the Des Moines, Iowa, from the third quarter of the current year. In 2009, Reynolds American acquired Niconovum AB, a Swedish company which manufactures nicotine sprays, pouches and gums.

In addition, Reynolds American confirmed its adjusted earnings outlook for the full year of $2.91 and $3.01 a share. According to the analysts earnings would account for $2.95 a share.

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