Newport boost to RAI’s third quarter

Reynolds American Inc (RAI) yesterday reported that R.J. Reynolds’ domestic cigarette volume shipments during the three months to the end of September, at 21.1 billion, were increased by 30.2 percent on those of the three months to the end of September 2014, 16.2 billion. The increase occurred because of RAI’s acquisition on June 12 of Lorillard and its Newport brand, and despite RAI’s having to offload its Winston, KOOL and Salem brands to Imperial Tobacco as a condition of the acquisition.

Reynolds’ growth brands volume, at 19.4 billion, was up by 74.3 percent. Newport added 8.8 billion units to the pot, but Camel volume was down by 3.2 percent to 5.5 billion and Pall Mall volume was down by 6.9 percent to 5.1 billion.

Other cigarette brand volume was down by 67.0 percent to 1.7 billion.

Premium brands volume was up by 56.4 percent to 14.8 billion while value brands volume was down by 6.5 percent to 6.3 billion, giving a premium-to-total volume mix of 70.1 percent, up from 58.3 percent.

Reynolds’ domestic market share during the three months to the end of September, at 32.0 percent, was down by 0.1 of a percentage point on that of the three months to the end of September 2014.

The share held by Newport increased by 0.5 of a percentage point to 13.3 percent; that of Camel was unchanged at 8.3 percent, while that of Pall Mall fell by 0.3 of a percentage point to 7.8 percent, giving Reynolds a growth-brand share of 29.4 percent.

The share held by other brands fell by 0.3 of a percentage point to 2.5 percent.

At Santa Fe, cigarette sales – all of Natural American Spirit – during the three months to the end of September, at 1.3 billion, were up by 19.3 percent on those of the three months to the end of September 2014.

Santa Fe’s share of the domestic market increased by 0.3 of a percentage point to 1.9 percent.

Meanwhile, American Snuff’s moist snuff volume shipments during the three months to the end of September, at 125.3 million cans, were up by 4.4 percent on those of the three months to the end of September 2014.

Grizzly volume was up by 4.6 percent to 113.7 million cans, while the volume of other brands taken together was up by 2.4 percent to 11.6 million cans.

American’s share of the domestic market during the three months to the end of September, at 33.7 percent, was up by 1.3 percentage points on that of the three months to the end of September 2014.

Grizzly’s share rose by 1.4 percentage points to capture 30.9 percent, while the share of other brands fell by 0.1 of a percentage point to 2.8 percent.

RAI’s net sales for the three months to the end of September, at $3,161 million, were up by 41.1 percent on those of the three months to the end of September 2014.

Reported operating income was up by 48.5 percent to $1,206 million, while adjusted operating income was up by 64.9 percent to $1,405 million.

Reported net income was up by 40.7 percent to $657 million, while adjusted net income was up by 54.7 percent to $781 million.

And reported net income per diluted share was up by 4.5 percent to $0.46, while adjusted net income per diluted share was up by 17.0 percent to $0.55.

“Our operating companies delivered excellent key-brand performance in the third quarter, and that helped drive further gains in Reynolds American’s net sales, earnings and margin,” said Susan M. Cameron, president and chief executive officer of RAI.

“In addition to these strong results, I’m pleased to report that the integration of Newport is going smoothly. Even with the route to market restrictions on retail merchandising in place through mid-November, Newport is demonstrating solid marketplace momentum, and R.J. Reynolds’ consumer marketing and sales teams are focused on identifying additional growth opportunities for the brand.”

In announcing the results, RAI said that R.J. Reynolds Vapor Company’s VUSE Digital Vapor Cigarette had performed well in the third quarter and ‘remains the best-selling e-cigarette in the convenience/gas channel’.

It mentioned, too, that it had concluded a definitive agreement to sell the Natural American Spirit business outside the US to the JT Group for $5 billion; that a vapor technology-sharing and licensing term sheet had been signed between RAI and British American Tobacco; and that it had consolidated its VUSE manufacturing at R.J. Reynolds’ Tobaccoville facility.