Cigarette maker Reynolds American Inc. (RAI) on Thursday posted a lower profit for the fourth quarter, dragged down by higher pension expenses. However, adjusted earnings topped the Street view. Further, the company issued earnings forecast for the full-year 2010.
The Winston-Salem, North Carolina-based company's fourth-quarter net income was $215 million, down 16.7% from $258 million a year ago. Per share earnings slid 15.9% to $0.74 from $0.88 in the same quarter of last year.
On a non-GAAP basis, net income, excluding restructuring and trademark impairment charges, totaled $321 million or $1.20 per share, a decline of 13%, compared to $370 million or $1.27 per share in the prior-year quarter.
On average, 10 analysts polled by Thomson Reuters expected the company to post earnings of $1.16 per share. Analysts' estimates typically exclude special items.
Quarterly net sales decreased 3.7% to $2.096 billion from the previous year's net sales of $2.177 billion, but breezed past the $2.07 billion revenue consensus estimate of six Street analysts.
Susan Ivey, chairman, president and chief executive officer of Reynolds, said, "I'm very pleased with the solid underlying performance of Reynolds American in 2009, given the especially challenging economic and industry environment."
However, the second-largest tobacco company in the United States said its strong underlying performance was overshadowed by the negative impact of 40 cents per share in increased pension expense, which drove a year-over-year earnings per share decline.
During the latest quarter, reported operating income amounted to $393 million, compared to $510 million last year, a decline of 22.9%. Non-GAAP operating income was $563 million, 13.9% lower than the last year's income of $654 million.
The company's RJR Tobacco segment fetched fourth-quarter net sales of $1.821 billion, down from $1.897 billion in the prior-year quarter. Segment operating income dropped to $317 million from $537 million last year.
R.J. Reynolds' fourth-quarter cigarette share was 28.5%, up 0.2 share points from the prior-year quarter. The company's growth-brands, Camel and Pall Mall, cigarette share also increased in the fourth quarter, by 2.4 share points to 13.4% from last year, and now represents 47% of R.J. Reynolds' total cigarette share.
Higher pricing, during the most recent quarter, offset the impact of lower cigarette volume. However, the company stated that R.J. Reynolds' adjusted operating income was down 9.8% to $487 million from the prior year, largely due to higher pension expense of $45 million.
Conwood segment's quarterly net sales were $161 million, compared to $187 million a year earlier, and operating income was $83 million, compared to a loss of $43 million in the year-ago period. Volume and pricing gains by Grizzly were more than offset by lower margins on Kodiak and increased promotional spending due to new product introductions, excise tax increases and intense competitive activity.
For the full year 2009, the company reported net income of $962 million or $3.30 per share, compared to $1.34 billion or $4.56 per share in 2008. Non-GAAP net income was $1.35 billion or $4.64 per share, compared to $1.41 billion or $4.79 per share reported last year. Analysts expected earnings of $4.69 per share for the fiscal year 2009.
Annual net sales for fiscal 2009 decreased 4.8% to $8.42 billion from $8.85 billion generated in the year ended December 31, 2008. Nine Wall Street analysts had a consensus revenue estimate of $8.39 billion for the full year.
Looking ahead, the company projects fiscal 2010 earnings to range between $4.80 and $5.00 per share, up from 2009 adjusted per share earnings of $4.64. Analysts are looking for earnings of $4.95 per share for fiscal 2010.
"There will be challenges to overcome again this year, but we expect cigarette volume declines to return to more normal levels, continued profitable growth in key brands and additional savings from productivity efforts," Adams said.
Further, the company increased its dividend by 6%, in line with 75% payout policy. Further, the company noted that its 2008 and 2009 restructuring and outsourcing programs would deliver total annual savings of about $60 million in 2010, growing to about $75 million in 2011.
Reynolds shares, which have been trading between $31.55 and $55.15 in the past 52 weeks, closed Wednesday's trading session at $54.11. In the pre-market session, the stock is currently trading at $21.77, up 7 cents or 0.32%.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.