Nicotine products on the up but Camel and Grizzly do the heavy lifting at RAI

Reynolds American Inc (RAI) yesterday reported that R.J. Reynolds’ domestic cigarette volume shipments during the three months to the end of September, at 16.2 billion, were down by 2.9 percent on those of the three months to the end of September 2013.

Reynolds’ growth brands volume, at 11.1 billion, was up by 0.7 percent, with Camel volume up by 3.0 percent to 5.7 billion but Pall Mall volume down by 1.5 percent to 5.5 billion.

Other cigarette brand volume was down by 10.1 percent to 5.0 billion.

Premium brands volume was down by 1.9 percent to 9.5 billion and value brands volume was down by 4.4 percent to 6.7 billion, giving a premium-to-total volume mix of 58.6 percent, up from 57.9 percent.

Reynolds’ market share during the three months to the end of September, at 26.6 percent, was down by 0.1 of a percentage point on that of the three months to the end of September 2013.

The share held by Camel increased by 0.4 of a percentage point to 10.4 percent and that held by Pall Mall increased by 0.1 of a percentage point to 9.3 percent, giving Reynolds a growth-brand share of 19.7 percent, up 0.3 of a percentage point.

The share held by other brands fell by 0.4 of a percentage point to 6.9 percent.

At Santa Fe, cigarette sales – all of Natural American Spirit – during the three months to the end of September, at 1.1 billion, were up by 7.9 percent on those of the three months to the end of September 2013.

Santa Fe’s share of the retail market increased by 0.2 of a percentage point to 1.7 percent.

Meanwhile, American Snuff’s moist snuff volume shipments during the three months to the end of September, at 120.1 million cans, were up by 2.9 percent on those of the three months to the end of September 2013.

Grizzly volume was up by 3.6 percent to 108.7 million cans, while the volume of other brands taken together was down by 3.3 percent to 11.3 million cans.

American’s share of the domestic market during the three months to the end of September, at 34.0 percent, was down by 0.2 of a percentage point on that of the three months to the end of September 2013.

Grizzly’s share rose by 0.1 of a percentage point to capture 31.1 percent, while the share of other brands fell by 0.2 of a percentage point to 2.9 percent.

RAI’s net sales for the three months to the end of September, at $2,240 million, were up by 4.9 percent on those of the three months to the end of September 2013.

Reported operating income was up by 2.7 percent to $812 million, while adjusted operating income was up by 5.4 percent to $852 million.

Reported net income was up by 2.2 percent to $467 million, while adjusted net income was up by 7.9 percent to $505 million.

And reported net income per diluted share was up by 4.8 percent to $0.88, while adjusted net income per diluted share was up by 10.5 percent to $0.95.

“I’m very pleased to report another strong performance by our operating companies, which drove Reynolds American’s earnings and margin higher in the third quarter,” said president and CEO, Susan M. Cameron. “All of our reportable business segments increased both profit and margin during the quarter, while they continued to enhance their powerful key brands…

“The expansion of R.J. Reynolds Vapor Company’s VUSE Digital Vapor Cigarette is going very well. “VUSE will be available in almost 70,000 selected retail outlets by early next week, and that will be followed by another wave of expansion early next year.”

In reference to Niconovum USA having begun national distribution of its ZONNIC gum, a nicotine-replacement therapy product, in September, Cameron said results were positive with strong interest from retailers and smokers.

“ZONNIC is expected to be in about 8,000 selected outlets by the end of this month, and its retail availability will continue to grow through the rest of the year.”

Cameron said that RAI was continuing to work diligently to obtain the necessary regulatory, shareholder and other approvals for the company’s proposed acquisition of Lorillard and the divestiture of select brands and assets to a subsidiary of Imperial Tobacco Group.

“RAI is currently responding to a second request for additional information from the US Federal Trade Commission, and the company recently filed its preliminary joint proxy statement/prospectus with the US Securities and Exchange Commission,” she said. “This process is proceeding smoothly, and we remain confident that the transaction will be completed by mid-2015.”