Newport supercharges RAI results
Reynolds American Inc’s cigarette volume during the first quarter to the end of March, at 20.1 billion was increased by 34.2 percent on that of the first quarter of last year, 14.9 billion. The increase was said to have been ‘largely driven’ by the acquisition of Lorillard in June 2015, offset slightly by the brand divestitures required under the terms of the acquisition.
RJR Tobacco’s cigarette volume was increased by 35.1 percent from 13.9 billion to 18.8 billion, with drive brand volume up by 80.2 percent from 9.7 billion to 17.4 billion and ‘other’ brand volume down by 66.4 percent from 4.3 billion to 1.4 billion.
Drive-brand volume included 8.1 billion of sales of Newport, which was the main focus of the Lorillard acquisition and which did not appear in 2015 first-quarter figures. Otherwise, Camel volume was down by 2.8 percent from 4.9 billion to 4.8 billion and Pall Mall volume was down by 4.8 percent from 4.8 billion to 4.5 billion.
Santa Fe’s volume, comprising sales of Natural American Spirit, were increased by 22.1 percent from 1.0 billion to 1.2 billion. Natural American Spirit’s business outside the US was sold in January.
The cigarette market share of RAI’s operating companies during the quarter to the end of March, at 34.6 percent, was up by 0.3 of a percentage point on that of the first quarter of 2015.
Newport’s share of the market was increased by 0.6 of a percentage point from 13.4 percent to 14.0 percent. Camel dropped 0.2 of a percentage point to 8.2 percent and Pall Mall dropped 0.3 of a percentage point to 7.8 percent. Natural American Spirit’s share increased by 0.3 of a percentage point to 2.0 percent.
RAI announced also results for American Snuff. Total moist snuff volume during the three months to the end of March, at 121.4 million cans, was increased by 3.3 percent on those of the first three months of last year, 117.5 million.
Sales of Grizzly were increased by 3.9 percent from 107.1 million to 111.3 million, while sales of other brands were down by 3.7 percent from 10.4 million to 10.0 million.
American Snuff’s share of the retail market was up by 0.2 of a percentage point to 33.4 percent, with Grizzly’s share up by 0.4 of a percentage point to 30.8 percent and ‘other’ brands’ share down by 0.2 of a percentage point to 2.6 percent.
RAI’s reported operating income during the first quarter of 2016, at $6,142 million, was increased by 786.3 percent on that of the first quarter of last year, $693 million. Adjusted operating income was increased by 72.4 percent to $1,319 million.
Reported net income was up by 816.5 percent to $3,565 million, and adjusted net income was up by 57.8 percent to $721 million.
Reported net income per diluted share was increased by 591.7 percent to $2.49, while adjusted net income per diluted share was increased by 16.3 percent to $0.50.
“Reynolds American’s operating companies began the year with strong momentum out of the gate, driving additional growth in RAI’s profitability,” said Susan M. Cameron, president and CEO of RAI, in presenting the results. “All of our operating companies demonstrated excellent performance, benefiting from increased volumes and higher pricing on both cigarettes and moist snuff.
“I’m very pleased to report that Newport’s manufacturing integration is progressing smoothly and is now expected to be completed by the middle of this year, well ahead of the initial projection for the end of 2016. Newport has delivered impressive market-share gains during this successful transition, and the brand has been a driving force behind our accelerated business performance over the past three quarters.
“The addition of Newport has given our businesses new energy in a competitive and dynamic environment. As a result, RAI remains on track for earnings growth of 13.6 percent to 18.7 percent for the full year, and we are committed to finding new opportunities for returning value to our shareholders.”
Cameron said also that she has agreed to remain with RAI “to see through the full integration of the Newport brand into R.J. Reynolds Tobacco Company later this year, and complete the succession planning process that we have underway”. Cameron’s original agreement to return to RAI as president and CEO in 2014 was scheduled to end on April 30, but included the ability for this to be extended.
