Cigarettes maker Lorillard Inc. (LO) on Monday posted a decline in fourth-quarter profit, as it incurred higher manufacturing, pension and other costs. However, quarterly sales rose from last year on increased federal excise taxes as well as prices.
The Greensboro, North Carolina-based company's fourth-quarter net income was $242 million or $1.52 per share, compared to $258 million or $1.54 per share in the year-ago quarter.
On average, 9 analysts polled by Thomson Reuters expected the company to post earnings of $1.51 per share. Analysts' estimates typically exclude special items.
Quarterly net sales advanced to $1.38 billion from the previous year's sales of $1.09 billion, largely driven by an increase in federal excise taxes on cigarettes. Six Wall Street analysts had a consensus revenue estimate of $1.13 billion for the quarter.
Net sales, excluding excise taxes, in the latest quarter rose 2.2% from the prior year, reflecting higher average prices, partially offset by lower net unit sales volume and higher sales promotion costs accounted for as a reduction of sales.
Martin Orlowsky, Chairman, President and Chief Executive Officer of Lorillard, said, "Given the challenges presented by an unprecedented increase in the federal excise taxes on cigarettes in April 2009, we are pleased to announce our fourth quarter and full year 2009 results were consistent with our long-standing strategic objective of balancing profitability and the improvement of the Newport brand's market share performance."
Gross profit was $481 million in the fourth quarter of 2009, or 51.6% of net sales excluding excise taxes, compared to $493 million, or 54.1% of net sales excluding excise taxes, in the year-earlier quarter, reflecting higher manufacturing costs, higher costs related to the State Settlement Agreements, higher pension expense and the assessment of Food and Drug Administration fees partially offset by higher net sales.
During the most recent quarter, total Lorillard wholesale shipment volume dropped 4.0% to 9.047 billion units. Total domestic industry wholesale shipments decreased an estimated 7.4% for the fourth quarter of 2009 compared to the previous year.
Lorillard's domestic wholesale shipments were down 3.6% that mirrors the impact on demand of the $0.62 growth in the federal excise taxes on cigarettes to $1.01 per pack from $0.39 on April 1, 2009. Newport's domestic wholesale shipments declined 6.5%, while Maverick's domestic wholesale shipments increased 39.7% during the recent quarter.
Selling, general and administrative costs grew 5.1% to $83 million, primarily due to a $2 million rise in pension costs and a $1 million increase in legal expenses due to the continuing defense costs associated with the Engle progeny cases.
For the full-year 2009, Lorillard, the third largest manufacturer of cigarettes in the United States, reported net income of $948 million or $5.76 per share, compared to $887 million or $5.15 per share in 2008. Analysts expected earnings of $5.75 per share for the full year.
Annual net sales for fiscal 2009 were $5.23 billion, up from $4.20 billion reported in the year ended December 31, 2008. Net sales, excluding excise taxes, were $3.686 billion for 2009, an increase of 5.6%, compared to $3.492 billion for 2008. Five Wall Street analysts estimated revenues of $4.60 billion for the year 2009.
Lorillard shares, which have been trading between $55.07 and $81.76 in the past 52 weeks, closed Friday's trading session at $74.50.
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