WASHINGTON (dpa-AFX) - Cigarette maker Reynolds American Inc. (RAI) said Wednesday that it will cut its U.S. workforce by about 10 percent by the end of 2014, as part of a restructuring at its operating units. The company also said it will incur a pre-tax restructuring charge of $110 million in the first quarter.
The second-largest U.S. tobacco company said in a regulatory filing that several of its operating companies, including R. J. Reynolds Tobacco and RAI Services Co., have completed a three-month business analysis designed to identify resources to reinvest in the businesses to sustain growth momentum.
However, Reynolds American noted that the job cuts, a majority of which are voluntary, will be partially offset by hiring of new workers as and when required.
Daniel Delen, Reynolds American's president and CEO said, 'Our businesses' four key brands are all on a growth trajectory. In order to sustain that growth, we need to ensure we have the financial resources and employees aligned behind the right programs and processes.'
Reynolds American said that as a result of the restructuring and workforce reduction, it will incur a pre-tax charge of about $110 million in the first quarter. The company expects cost savings related to the restructuring to be about $25 million during 2012, which will increase to about $70 million annually in 2015.
In early February, Reynolds American reported a 16 percent increase in profit for the fourth quarter as improved margins at R.J. Reynolds Tobacco Co. offset a drop in cigarette volume. American Snuff results were weak, while Sante Fe reported improved results.
The company's cigarette volume in the quarter dropped 7.4 percent, due to heavily promoted competitive line extensions, the timing of the company's promotional activity, and the decision to move away from the company's private label brands.
Total cigarette market share, excluding private label brands, fell to 27.0 percent from 28.1 percent in the year-ago period.
RAI closed Wednesday's trading at $41.33, down $0.53 or 1.27 percent on a volume of 2.23 million shares.
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