Report from Reynolds American's CEO Susan Cameron

Published on June 12th, 2015 00:00

Reynolds American's most recent meeting call some clues at a happier future for U.S. cigarette manufacturers. Even though a lot of challenges keep on being, the company is set up for a significantly better year ahead as it counters cigarette volume diminishes and expands its e-cigarette business. Here is what Reynolds American's administration team would like you to know about its advancement.

Considerably better volume and increased pricing merged for strong revenue growth in the Q3. Adjusted earnings per share for Q3 was $0.95, higher by 10.5% from the similar period in 2014. Management moved its emphasis to Camel and Pall Mall, the two key cigarette brands that it will preserve after its prepared merger with Lorillard resulting in bigger market share for both cigarette brands. The company lately modified Pall Mall's packaging, offering it an improved look and feel to point out its premium quality.

Reynolds American's snuff brands are also doing well, with its popular Grizzly brand growing its market share to about 31.1% in the Q3, up 0.1 percentage point from the previous year. These brands' solid performance led to 10.5% earnings per share increase. The stock has boosted by over 10% since the quarter's results were revealed.  Cameron also presented positive news on cigarette volume: "The drop in cigarette volumes moderated during the Q3."

The moderation in the cigarette volume rate of decrease is terrific announcement for all U.S. cigarette manufacturers. Reynolds American's volume dropped 2.9% in the quarter and industry volume dropped only 2.7%. The company's key cigarette brands as Camel and Pall Mall carried out much better: Pall Mall volume dropped 1.5% and Camel volume improved 3%. Management is expecting industry volume to drop 3.5% for the year, a considerable improvement from last year's 4.6% fall.

Not simply is tobacco volume moderating, but it is doing so while prices are increasing: "Larger pricing was a substantial factor in solid revenue outcomes."
Reynolds American lately released its second price rise this year, $0.07 per package, as outlined by the Winston-Salem Journal. Flattening volume regardless of increased prices might be a signal that nearly all of the price-sensitive cigarette users have already left the brands. If that is the case, then Reynolds American could be ready to increase prices even quicker than usual in the quarters ahead. "As a result of this triumphant performance, I am happy to say that we are on the way to fulfill our revenue guidance for the entire year," stated Cameron.