Lower cigarette volumes at Reynolds but strong moist snuff sales at American

Reynolds American Inc. (RAI) yesterday reported that R.J. Reynolds’ domestic cigarette volume shipments during the three months to the end of September, at 16.7 billion, were down by 4.3 percent on those of the three months to the end of September 2012.

Reynolds’ growth brands volume, at 11.1 billion, was up by 0.7 percent, with Camel volume up by 4 percent to 5.5 billion but Pall Mall volume down by 2.4 percent to 5.6 billion.

Other cigarette brand volume was down by 12.7 percent to 5.6 billion.

Premium brands volume was down by 3 percent to 9.7 billion and value brands volume was down by 5.9 percent to 7.0 billion, giving a premium-to-total volume mix of 57.9 percent, up from 57.2 percent.

Reynolds’ market share during the three months to the end of September, at 26 percent, was down by 0.5 of a percentage point on that of the three months to the end of September 2012.

The share held by Camel increased by 0.4 of a percentage point to 8.9 percent, and that held by Pall Mall increased by 0.3 of a percentage point also to 8.6 percent, giving Reynolds a growth brand share of 17.8 percent, up 0.7 of a percentage point.

The share held by other brands fell by 1.1 percentage points to 8.1 percent.

At Santa Fe, cigarette sales—all of Natural American Spirit—during the three months to the end of September, at 1.0 billion, were up by 21.7 percent on those of the three months to the end of September 2012.

Santa Fe’s share of the retail market increased by 0.3 of a percentage point to 1.5 percent.

Meanwhile, American Snuff’s moist snuff volume shipments during the three months to the end of September, at 116.7 million cans, were up by 7.1 percent on those of the three months to the end of September 2012.

Grizzly volume was up by 8.1 percent to 105.0 million cans, while the volume of other brands taken together was down by 2.4 percent to 11.7 million cans.

American’s share of the domestic market during the three months to the end of September, at 33.4 percent, was up by 1.2 percentage points on that of the three months to the end of September 2012.

Grizzly’s share rose by 1.6 percentage points to capture 30.4 percent, while the share of other brands fell by 0.4 of a percentage point to 3 percent.

RAI’s net sales for the three months to the end of September, at $2,135 million, were up by 0.9 percent on those of the three months to the end of September 2012.

Reported operating income was up by 10 percent to $791 million, while adjusted operating income was up by 5.8 percent to $808 million.

Reported net income was up by 8.8 percent to $457 million, while adjusted net income was up by 4.5 percent to $468 million.

And reported net income per diluted share was up by 13.5 percent to $0.84, while adjusted net income per diluted share was up by 8.9 percent to $0.86.

“Strong performance by Reynolds American’s reportable business segments in the third quarter once again drove gains in both margins and earnings,” said Daniel M. Delen, president and CEO. “Our companies continued to make significant investments in equity-building initiatives on their key brands and in the expansion of Vuse digital vapor cigarettes for long-term sustainable growth.”

Delen said he was especially pleased to report that RJR Tobacco, American Snuff and Santa Fe continued to make progress in the highly competitive marketplace, delivering market share increases on all key brands.

And he said that a highlight of the quarter had been R.J. Reynolds Vapor Company’s expansion of Vuse digital vapor cigarettes to Colorado in July. “We are excited by the enthusiastic response to Vuse from consumers and retailers in Colorado,” Delen said. “Vuse has already captured market leadership in the state, which bodes well for the brand’s national expansion plans.

“Vuse is a highly differentiated product, and we believe that the brand will carve out a strong position in the rapidly growing e-cigarette market as adult smokers migrate to smoke-free alternatives.

“Vuse is a great example of the type of successful innovation that is driving our strategy to transform the tobacco industry over the long term.”