WASHINGTON (dpa-AFX) - Tobacco holding company Reynolds American Inc. (RAI) on Tuesday reported a 29 percent decline in first-quarter profit, reflecting restructuring charges and lower cigarette volumes. The impact was partially offset by higher pricing and productivity gains. Both earnings per share and top line missed Wall Street estimates.
However, the parent company of RJ Reynolds Tobacco and American Snuff backed its earnings growth forecast for fiscal 2012.
Chief Financial Officer Thomas Adams said, 'Reynolds American delivered solid results in a challenging environment. We remain confident in our companies' key brands and business strategies, and are maintaining RAI's adjusted EPS guidance.'
In the first quarter, net income declined 29.1 percent to $270 million and earnings per share fell 27.7 percent to $0.47.
The results were hurt by restructuring charges of $0.16 per share related to the completion of what the company says 'comprehensive business analysis.'
Adjusted earnings, which excluded one-time items, edged down 1.6 percent to $0.63 per share and missed the consensus estimate of 12 analysts polled by Thomson Reuters by two pennies. Analysts' estimates typically exclude special items.
Net sales declined 2.9 percent to $1.93 billion, missing analysts' estimate of $1.98 billion.
R.J. Reynolds' cigarette shipment volume declined 5.8 percent, negatively impacted by high levels of competitive promotional activities and by lower wholesale inventory levels. The segment's cigarette market share was 26.8 percent, down 1.2 percentage points from last year on losses from the company's non-growth value brands.
However, Reynolds American's first-quarter adjusted operating income edged up 0.2 percent and operating margin grew 1 percentage points from the prior-year quarter to 32.9 percent. This was mainly due to 1.2 percentage point increase in margin in RJR Tobacco due to higher pricing and productivity improvements.
American Snuff's operating margin increased 0.7 percentage points, driven by robust growth in its flagship Grizzly brand in a highly competitive market environment.
Santa Fe Natural Tobacco Co. Inc. delivered modest volume growth in the quarter, as shipment volumes were negatively impacted by its shift to a more efficient integrated supply chain, the company noted. The segment experienced volume and pricing gains in the company's Natural American Spirit brand.
Looking ahead, Reynolds American reaffirmed its fiscal 2012 adjusted earnings per share guidance range of $2.91 to $3.01, which represents an increase of 3.6 to 7.1 percent from last year. Analysts expect the company to earn $2.97 per share.
President and Chief Executive Officer Daniel Delen said, 'RAI and its operating companies demonstrated underlying strength and resilience in a challenging first quarter, and we remain on track to deliver full-year adjusted EPS growth in the mid- to high-single digits.'
Reynolds American shares are currently trading at $40.68, down $1.04 or 2.49 percent.
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