Reynolds' Volume And Share Down in First Quarter

Source from:  Tobacco Reporter 04/26/2012

Reynolds American Inc. (RAI) yesterday reported that R.J. Reynolds' domestic cigarette volume during the three months to the end of March, at 16.3 billion, was down by 5.8 per cent on that of the first quarter of 2011, 17.2 billion. At the same time, industry volume fell by 4.0 per cent to 66.8 billion. Camel volume was increased by 4.4 per cent to 5.1 billion, but Pall Mall volume was down by 5.2 per cent to 4.9 billion; so, taken together, Reynolds' 'growth brands' volume was down by 0.5 per cent to 10.0 billion. At the same time, the volume of the company's other brands, which include Winston, Doral, Kool, Salem, Misty and Capri, was down by 13 per cent to 6.3 billion. Reynolds' market share during the three months to the end of March, at 26.8 per cent, was down 1.2 percentage points from that of the first quarter of 2011. Camel's share was increased by 0.1 of a percentage point to 8.4 per cent, while that of Pall Mall was unchanged at 8.5 per cent. The share held by the company's other brands fell by 1.2 percentage points to 9.9 per cent. RAI reported also that Santa Fe's Natural American Spirit volume rose by 0.4 per cent to 0.6 billion while its market share rose by 0.2 of a percentage point to 1.1 per cent. And it reported that at American Snuff, moist snuff volume during the three months to the end of March, at 104.4 million cans, was increased by 7.6 per cent on that of the first quarter of 2011. Grizzly volume was increased by 9.4 per cent to 93.0 million cans while the volume of other brands fell by 4.9 per cent to 11.5 million cans. American Snuff's share of the market increased by 1.9 percentage points to 32.2 per cent, with Grizzly's share up by 2.2 percentage points to 28.7 per cent and the share of the company's other brands down by 0.3 of a percentage point to 3.5 per cent. RAI's net sales during the three months to the end of March, at $1,933 million, were down by 2.9 per cent on those of the first quarter of 2011. Reported operating income was down by 22.0 per cent to $486 million while adjusted operating income was increased by 0.2 per cent to $636 million. Reported net income was down by 29.1 per cent to $270 million and adjusted net income was down by 2.2 per cent to ￡364 million. Reported net income per diluted share was down by 27.7 per cent to $0.47 and adjusted net income per diluted share was down by 1.6 per cent to $0.63. Commenting on the results, president and chief executive officer, Daniel M. Delen, said RAI and its operating companies had demonstrated underlying strength and resilience in what he described as a challenging first quarter. The group remained on track to deliver full-year adjusted earnings-per-share growth in the mid- to high-single digits. "Our operating companies continue to focus on balancing market share and profitability, and their broad range of tobacco products at different price points offers a distinct advantage in this highly competitive environment," he said. The first quarter 2012 highlights were said to have included improved premium mix and adjusted operating margin at RJR Tobacco; higher moist-snuff volume and share at American Snuff; and earnings and share growth at Santa Fe. According to the results announcement; during the first quarter, RAI conducted a comprehensive review of key programs and activities at RAI, RAI Services Co and most departments within R.J. Reynolds. This analysis was said to have resulted in the identification of where cost savings could be made and where a reallocation of resources could be made to areas of the businesses that offered the best potential for growth. Last month, RAI said that it planned to shed a 10th of its workforce by the end of 2014 in order to cut costs. In making the announcement, the company said that the job losses were expected to save about $25 million by the end of this year and that job-loss savings would increase to about $70 million annually in 2015. "We are committed to a long-term, highly successful future for RAI and its operating companies," Delen said in announcing the job losses last month. "Our industry is in transition and in order for us to maintain our momentum, we must have the flexibility to move quickly when marketplace opportunities present themselves." In announcing the first quarter results, Delen returned to this theme. "Our industry is transforming and we intend to maintain our growth momentum," he said. "Despite the intense competitive environment in the first quarter, we have the financial resources and employees aligned behind the right programs and processes. This gives our operating companies the flexibility to move quickly to take advantage of marketplace opportunities as they present themselves, while allowing them to further develop product innovations and strong brands as platforms for long-term growth." Enditem