The nation's second-biggest tobacco company owns the Camel and Pall Mall brands. Reynolds American Inc. and other tobacco companies are also focusing on cigarette alternatives such as snuff, chewing tobacco and electronic cigarettes as tax hikes, smoking bans, health concerns and social stigma make the cigarette business tougher.
CEO Dan Delen said the company made progress in a highly competitive marketplace and a tough economic environment.
Its financial results matched Wall Street estimates. But its shares slipped 91 cents, or 1.8 per cent, to $49.90 in midday trading.
Reynolds earned $457 million, or 84 cents per share, for the quarter ended September 30, up from $420 million, or 74 cents per share, a year ago. Adjusted earnings were 86 cents per share, matching Wall Street expectations, according to FactSet. That excludes a benefit from credits for disputed payments under the 1998 Master Settlement Agreement in which some cigarette makers are paying states for smoking-related health care costs.
Its revenue, excluding excise taxes, increased about 1 per cent to $2.14 billion, also matching expectations.
The number of cigarettes sold by its R.J. Reynolds Tobacco subsidiary fell about 4 per cent during the quarter to 16.7 billion. When adjusting for trade inventory changes, the company estimates that industry cigarette volumes fell 3.5 per cent.
Volumes for Camel rose 4 per cent and volumes for Pall Mall fell more than 2 per cent. The brands now account for almost 70 per cent of the company's total cigarette volume. Shipments of its other brands, which include Winston, Kool, Doral and Salem, fell about 13 per cent.
Camel's market share increased 0.4 percentage points to 8.9 per cent of the U.S. market, while Pall Mall's market share grew 0.3 percentage points to 8.9 per cent. The company has promoted Pall Mall as a longer-lasting and more affordable cigarette as smokers weather the weak economy and high unemployment.
The number of Natural American Spirit cigarettes it sold grew nearly 22 per cent to about 1 billion cigarettes.
Volume for its smokeless tobacco brands that include Grizzly and Kodiak rose 7 per cent compared with a year ago. The brands had a 33.4 per cent share of the U.S. retail market, which is tiny compared with cigarettes.
The company launched a revamped version of its Vuse-brand electronic cigarette in Colorado in July, with its sights set on expanding nationally. In a conference call with investors, Delen said early results of the test market are "significantly exceeding expectations," with the brand taking market-leading position in the state and seeing high levels of repeat purchase.
It's also moving ahead with its nicotine gum under the Zonnic brand, which is meant to help people stop smoking. In 2009, Reynolds bought the Swedish company Niconovum AB, which makes nicotine gum, pouches and spray products.
Reynolds on Tuesday narrowed its adjusted profit outlook for the year to between $3.17 and $3.27 per share. Analysts expect $3.24 per share.
Michael Felberbaum can be reached at http://www.twitter.com/MLFelberbaum .