Reynolds American Q4 Profit Surges, But Results Miss View; Hikes Dividend
WASHINGTON (dpa-AFX) - Tobacco company Reynolds American, Inc. (RAI) on Tuesday reported a profit for the fourth quarter that more than doubled from last year, reflecting higher cigarette and moist-snuff pricing as well as improved operating margins that helped offset lower cigarette volumes.
However, both revenue and adjusted earnings per share missed analysts' expectations. Looking ahead, the company forecast earnings mostly below Street estimates and raised its quarterly dividend by 6.3 percent.
Daniel Delen, CEO of Reynolds American, said, 'Reynolds American delivered growth in fourth-quarter earnings and margin despite lower-than-expected wholesale inventory levels.'
The Winston-Salem, North Carolina-based maker of Camel cigarettes and Grizzly smokeless tobacco reported net income for the fourth quarter of $292 million or $0.54 per share, up from $139 million or $0.25 per share in the prior-year quarter.
The latest quarter's results include loss on debt extinguishment of $0.15 per share, trademark and other intangible asset impairment charges of $0.04 per share, implementation costs of $0.01 per share and other tobacco-related litigation charges of $0.03 per share.
Excluding these items, adjusted net income for the latest quarter was $416 million or $0.77 per share, compared to $425 million or $0.76 per share in the year-ago quarter.
On average, twelve analysts polled by Thomson Reuters expected the company to report earnings of $0.81 per share for the quarter. Analysts' estimates typically exclude special items.
The company noted that adjusted earnings for the quarter benefited from higher cigarette and moist-snuff pricing as well as lower MSA expenses that offset lower cigarette volume.
Net sales for the quarter declined 2 percent to $2.04 billion from $2.08 billion in the year-ago period and missed analysts' consensus revenue estimate of $2.07 billion.
Adjusted operating margin for the quarter rose 0.8 percentage points from the prior-year quarter to 35.4 percent.
The company's R.J. Reynolds Tobacco segment generated sales of $1.64 billion in the quarter, down from $1.72 billion in the same period last year. Shipments declined 8.6 percent, and cigarette market share decreased 0.3 percentage points to 26.1 percent.
Among its brands, Camel market share was up 0.4 percentage points at 9.0 percent, and Pall Mall market share rose 0.2 percentage points to 9.1 percent.
American Snuff sales grew to $199 million from $177 million last year. Moist-snuff volume increased 8.2 percent, and moist-snuff market share increased 0.7 percentage points to 33.3 percent. Grizzly shipment volume grew 9.6 percent, while market share increased 1.0 percentage point to 30.3 percent.
Santa Fe sales increased to $149 million from $132 million in the year-ago quarter. Natural American Spirit super-premium brand volume grew 9.6 percent, and market share edged up 0.2 percentage points to 1.5 percent.
For fiscal 2013, Reynolds American's net income was $1.72 billion or $3.14 per share, up from $1.27 billion or $2.24 per share last year. Adjusted earnings for the year were $1.74 billion or $3.19 per share, compared to $1.69 billion or $2.97 per share in the previous year.
Net sales for the year edged down 0.8 percent to $8.24 billion from $8.30 billion last year.
The company's board approved an increase in the quarterly cash dividend on the company's common stock from $0.63 to $0.67, bringing it to an annualized $2.68. The dividend will be payable on April 1, 2014, to shareholders on record March 10, 2014.
Looking ahead to fiscal 2014, Reynolds American forecast earnings per share in a range of $3.30 to $3.45, up 3.5 percent to 8.2 percent from 2013's adjusted earnings per share of $3.19. Analysts expect the company to earn $3.44 per share for the year.
RAI closed Monday's trading at $48.81, up $0.05 or 0.10 percent on a volume of 2.12 million shares.
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