Lorillard Profit Tops Estimates on Demand for Newport

Source from:  Bloomberg 02/11/2009

Feb. 9 (Bloomberg) -- Lorillard Inc., the third-largest U.S. cigarette maker, reported fourth-quarter profit that exceeded the average analyst estimate as demand for Newport cigarettes climbed. Net income increased 21 percent to $258 million, or $1.53 a share, from $213 million, or $1.23, a year earlier, the Greensboro, North Carolina-based company said today in a statement. Sales rose 14 percent to $1.09 billion, helped by higher cigarette prices. Newport, the top-selling U.S. menthol cigarette, increased its share of smokers after Reynolds American Inc. reduced marketing of Kool, a rival brand, according to Judy Hong, a Goldman Sachs Group Inc. analyst in New York. Demand for Newport spurred an 8.2 percent increase in Lorillard shipments to 9.43 billion cigarettes. "Sales and operating growth were very strong," Hong wrote today in a note to clients. Hong, who recommends buying Lorillard shares, had expected per-share profit of $1.38. Lorillard climbed $2.04, or 3.3 percent, to $64.30 at 4 p.m. in New York Stock Exchange composite trading. The shares have advanced 14 percent this year. The company provided no update on the long-range forecast it gave last year. Lorillard told analysts in November it expected annual revenue to grow 3 percent to 4 percent and per-share earnings to advance 5 percent to 7 percent. Higher Prices Lorillard raised prices Feb. 6 for a third time since May. The increase amounted to 10 cents a pack on Newport, Maverick, Kent, True, Max and Old Gold cigarettes, Hannah Sloane, a company spokeswoman, said today. Effective today, Altria Group Inc.'s Philip Morris USA increased prices of top-selling Marlboro and 17 other brands as cigarette makers brace for falling demand from possibly higher federal tobacco excise taxes. Congress may raise taxes by 61 cents a pack in April, according to Hong. Lorillard won't speculate on how higher taxes may affect cigarette shipments or competitors' promotions and prices, Chief Executive Officer Martin Orlowsky told analysts on a conference call today. Estimating shipments by Lorillard and the U.S. industry is a "slippery slope that we want to stay off of," Chief Financial Officer David Taylor said on the call. Fourth-quarter profit rose on the strength of the Newport brand, which accounts for a third of U.S. menthol cigarette sales, Orlowsky said. Newport's U.S. market share increased 0.32 percentage point to 9.86 percent. Shipments of Newport rose 6.4 percent to 8.21 billion units. Excluding tobacco excise taxes, Lorillard's $912 million in sales exceeded the $859 million average of three analysts' estimates compiled by Bloomberg. By revenue, Lorillard trails Altria, which also owns snuff producer UST, and Reynolds, which sells Grizzly and Kodiak snuff as well as cigarettes. Enditem