The Greensboro, N.C.-based Lorillard Inc. said that its third-quarter net revenue increased 6%, as higher prices helped balance out a decrease in the number of cigarettes sold.
The third-biggest cigarette maker in the USA reported that strong promotional activity forced the amount of cigarettes the company sold to drop around 2% during the quarter to around 10.1 billion cigarettes. Newport, Lorillard’s famous cigarette brand, dropped at about the same rate, but the company’s share of the U.S. market increased to 0.2 percentage points to 14.4%. The company considers that the industry as a whole sold 2.7% fewer cigarettes during the quarter.
The tobacco company said that its net revenue increased to $283 million, or $2.16 per share, for the three-month period ended September 30, up from $267 million, or $1.94 per share, in 2011.
Revenue was $2.17 per share, coming short of Wall Street expectations of $2.23 per share.
Earnings, not including excises taxes, went up 4.5 % to $1.16 billion. Its shares dropped $5.24, or nearly 4.5 %, to $110.54.
Lorillard CEO Murray Kessler said even there is serious competitive discounting of menthol cigarettes, he always was amazed by the strength of the Newport franchise. Nevertheless Kessler said that the cigarette maker anticipates the market to continue to be “challenged” in the short term.
In spite of Lorillard’s main competitors’ carried on efforts to get some of the growing menthol market, Newport’s share of the menthol market increased 0.3 points to 36.4%.
Most cigarette groups have been increasing prices and cutting costs to maintain profits up as the financial crisis and declining demand cut into cigarette sales. Tax raises, smoking bans likewise have made the cigarette business tougher.
But high unemployment and increased cigarette prices and taxation as well was the cause of many smokers to smoke less and switch to cheaper cigarette brands during the recession to spend less. Lorillard’s Maverick and Reynolds American Inc.’s Pall Mall have been among the beneficiaries.
The second-largest tobacco company Reynolds American reported that its third-quarter revenue increased about 7% as higher prices and smokeless tobacco gains helped balance out a nearly 7% drop in the number of sold cigarettes.
Lorillard, the oldest constantly operating U.S. cigarette maker, spun off from Loews Corp. in 2008.
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