US: Cigarette Maker Lorillard 3Q Profit Falls 9 pct  

Source from:  AP - Associated Press  10/29/2013

Cigarette maker Lorillard Inc.'s third-quarter profit fell about 9 percent on legal costs and the acquisition of an overseas electronic cigarette company, but its adjusted results beat Wall Street expectations.

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.

The nation's third-biggest tobacco company said Wednesday it earned $258 million, or 69 cents per share, for the period ended September 30. That's down from $283 million, or 72 cents per share, a year ago.

Excluding one-time items, earnings were 83 cents per share, 2 cents higher than analysts expected.

That excludes 13 cents per share for costs related to a wrongful death suit brought by the family of a Boston woman who said she became a regular smoker after getting free cigarette samples as a child. It also excludes a penny per share for costs related to its recent acquisition of British electronic cigarette maker SKYCIG.

Revenue excluding excises taxes rose nearly 13 percent to $1.31 billion on higher prices on traditional cigarettes and higher electronic cigarette sales. Analysts polled by FactSet expected $1.27 billion.

Its shares rose 25 cents to $49 in morning trading Wednesday.

Lorillard Inc., based in Greensboro, N.C., said its cigarette shipments increased 3.5 percent to 10.42 billion cigarettes. Adjusting for trade inventory changes, Lorillard says its cigarette volumes were up slightly during the quarter, compared with a total industry decline of between 3.5 percent and 4 percent.

Volumes of Newport, Lorillard's biggest brand, increased nearly 5 percent. The brand's U.S. retail market share grew to 12.6 percent. Adjusting for trade inventory changes, Newport volumes were up nearly 2 percent. The brand's overall U.S. retail market share rose to 12.6 percent, and its share of the menthol segment grew 0.8 points to 40.4 percent of the market.

As part of the industrywide push to diversify beyond the traditional cigarette business, Lorillard acquired e-cigarette maker Blu Ecigs in April 2012. Electronic cigarettes are battery-powered devices that heat a liquid nicotine solution, creating vapor that users inhale.

Greater marketing and distribution helped Blu Ecigs contribute $63 million to Lorillard's sales. It estimates its share of the U.S. retail market, excluding Internet sales, to be 49 percent.

CEO Murray Kessler said in a conference call with investors that he still believes the growing category is having about a one percent impact on traditional cigarette volumes.

Lorillard Inc., the oldest continuously operating U.S. tobacco company, was spun off from Loews Corp. in 2008. Enditem