Lorillard Profit Beats Estimates, Shares Up

02/10/2009

CHICAGO (Reuters) - U.S. cigarette maker Lorillard Inc posted better-than-expected quarterly profit Monday, helped by higher prices and market-share gains by its Newport brand. Lorillard has been gaining market share in the United States on the strength of Newport, shipping more cigarettes while the U.S. cigarette market as a whole shrinks. Lower-priced offerings such as Maverick are also attracting cash-strapped smokers. Newport, a menthol cigarette, may have benefited from the decision of Lorillard's rival Reynolds American Inc to cut marketing support for Kool cigarettes, another menthol brand. "We think that Newport is going to be the main beneficiary of that move," Morningstar analyst Phil Gorham said. Lorillard's fourth-quarter profit rose to $258 million, or $1.53 a share, compared with $213 million, or $1.23 a share, a year earlier. Analysts expected $1.37 a share. Newport market share rose to 9.86 percent in the quarter from 9.54 percent a year earlier. Total market share for Lorillard rose to 11.06 percent from 10.48 a year earlier. Sales rose 5.9 percent to $4.2 billion. The company shipped 9.43 billion cigarettes, up 8.2 percent from a year earlier. Newport shipment volume rose 6.4 percent and Maverick volume jumped 58 percent to 684.7 million cigarettes. But Morningstar's Gorham also cautioned that Lorillard's portfolio is weighted more toward the premium segment of the cigarette market, which could hurt the company if consumers trade down from that segment in the weak economy. Smokers will fell even more price pressure now that a 61-cent increase in the federal tax on a pack of cigarettes has been passed. Lorillard shares were up $2.43 at $64.69 Monday on the New York Stock Exchange. (Reporting by Brad Dorfman, editing by Dave Zimmerman) Enditem