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Lorillard loses cigarette volume but gains share

| February 12, 2015

Lorillard’s domestic wholesale cigarette shipment volume during the 12 months to the end of December, at 38,535,460,000, was down by 2.0 percent on that of 2013, 39,325,216,000.

Including shipments to Puerto Rico and US Possessions, shipments were down by 2.3 percent to 39,014,140,000.

Shipments of Newport cigarettes fell by 1.4 percent to 32,900,591,000, while shipments of full price brands taken together decreased by 1.5 percent to 33,175,733,000; with shipments of Kent down by 13.1 per cent to 131,670,000 and shipments of True down by 12.8 percent to 143,472,000.

Shipments of price/value brands decreased by 5.3 percent to 5,359,727,000, with shipments of Old Gold down by 9.4 percent to 395, 910,000 and shipments of Maverick down by 4.9 per cent to 4,963,817,000.

Lorillard’s market share during 2014, at 15.1 percent was up by 0.3 of a percentage point on that of 2013, with Newport’s share up by 0.3 of a percentage point to 12.9 per cent.

Menthol cigarettes last year held a 31.7 percent share of the US market, up by 0.3 of a percentage point from that of the previous year, and Lorillard held a 40.3 percent share of the total US menthol segment, up by 0.1 of a percentage point. Newport’s share of the US menthol segment was 37.1 per cent, up by 0.1 of a percentage point.

Meanwhile, during the three months to the end of December, Lorillard’s domestic cigarette shipments, at 9,646,722,000, were down by 1.0 percent on those of the three months to the end of December 2013, 9,748,031,000. Including Puerto Rico and US possessions, shipments were down by 0.9 percent to 9,762,102,000.

Newport’s shipments during the final quarter were down by 0.6 percent to 8,251,008,000, and total full price brand shipments were decreased by 0.7 percent to 8,317,404,000. Total price/value brand shipments were down by 3.4 percent to 1,329,318000.

Lorillard’s net sales during the 12 months to the end of December, at $6,990 million, were up by 0.6 per cent on those of the previous 12 months period.

Reported operating income was up by 2.6 percent to $2,108 million while adjusted operating income was up by 5.3 percent to $2,138 million.

Reported net income was up by 0.6 percent to $1,187 million while adjusted net income was up by 4.1 percent to $1,216 million.

Reported diluted earnings per share were up by 4.1 percent to $3.28 while adjusted diluted earnings per share were up by 7.7 percent to $3.36.

“Lorillard finished the year in impressive fashion, delivering strong fourth quarter financial and operating results, marked by continued robust cigarette pricing realization, the 12th consecutive year of market share gains and tight cost controls – resulting in 13 percent adjusted earnings per share growth in the quarter and almost eight percent in the full year,” said chairman, president and CEO Murray S. Kessler, in announcing the results.

“Once again, Lorillard shareholders were rewarded with another year of double-digit total shareholder returns as measured by EPS growth and the dividend yield. These results in 2014 are even more remarkable in the context of our continued investments in building the blu eCigs brand both domestically and internationally and without the benefit of share repurchases in the second half of 2014, which have been discontinued as a result of our pending acquisition.

“Overall, we are very pleased that the fundamentals of our cigarettes segment continue to lead the industry, owing to the ongoing market share gains from our flagship Newport brand, while at the same time our electronic cigarettes segment continues to be at the forefront of product innovation and consumer acceptance in the burgeoning e-cigarette category.

“It should also be noted that these solid results have been accomplished while we have been working diligently towards completing our previously announced combination with Reynolds American. Assuming the transaction is approved, it would deliver significant and immediate value to Lorillard shareholders, while also providing for meaningful upside opportunity for Lorillard shareholders through their approximate 15 percent ownership of the combined company.”

Imperial volumes down in first quarter

| February 12, 2015

Imperial Tobacco’s tobacco-products volume during the three months to the end of December (Imperial’s Q1), at 71.8 billion, was down by four percent on that of the three months to the end of December 2013, according to an interim management statement issued this morning.

But Growth Brand volume was increased by 11 percent to 35.4 billion

Tobacco products here include cigarettes, and fine-cut tobacco, cigars and snus calculated as cigarette stick equivalents.

Tobacco net revenue, meanwhile, was down by one percent to £1,486 million.

“We’ve continued to make good progress against our strategic agenda in the quarter and confirm our outlook for FY15,” said chief executive Alison Cooper in announcing the results.

“We delivered another strong performance from our Growth Brands with volume and net revenue up 11 percent and 15 percent respectively, supported by the on-going success of our brand migration program.

“We continue to focus on our priorities for success in our Growth and Returns Markets and are well advanced with our US integration plans. The US deal received overwhelming support from our shareholders and will further strengthen our platform for growth.”

Pakistan going for 85 percent graphic warnings

| February 12, 2015

Pakistan’s Minister for National Health Services, Regulations and Co-ordination, Saira Afzal Tarar, said yesterday that all cigarette packs sold in the country would have to carry new graphic warnings covering 85 percent of both the front and back panels, according to a story in the Business Recorder.

Addressing a press conference, the minister said that tobacco companies would start implementing the requirements from March 30 and that efforts would be made to have all cigarette packs carrying the new warnings by May 30.

The minister said, too, that the government had decided to increases taxes on tobacco products, and that, in this regard, a committee, with representation from the World Health Organization and the Federal Board of Revenue, had been set up with the aim of stopping tobacco use.

According to the minister, Pakistan will be the third country after Thailand and India to require graphic health warnings covering 85 percent of pack surfaces.

PMI to webcast conference presentation

| February 12, 2015

Philip Morris International is due to host a live audio webcast at www.pmi.com/webcasts of a presentation by CFO Jacek Olczak at the Consumer Analyst Group of New York (CAGNY) Conference starting about 13.45 Eastern Time on February 18.

The webcast, which will be in listen-only mode, will provide live audio of the entire PMI session.

The audio webcast can be accessed also on iOS or Android devices by downloading PMI’s free Investor Relations Mobile Application at www.pmi.com/irapp.

An archived copy of the webcast will be available at www.pmi.com/webcasts until 17.00 on March 19.

The presentation slides and script will be available at www.pmi.com/presentations.

Ploom names two senior executives

| February 11, 2015

Ploom, a San Francisco, California, USA-based vapor delivery system company, has added two senior executives to its team. Timothy Danaher was named vice president of finance and Scott Dunlap was appointed chief marketing officer. Reporting to founder and CEO James Monsees, Danaher will play a critical role in developing and executing the overall business and financial strategy of Ploom to maximize sales growth and profitability.Dunlap will be responsible for crafting the strategic marketing vision and plan behind all of Ploom’s future products.

“We are excited to welcome Tim and Scott to the Ploom team,” said Ploom CEO James Monsees. “Tim’s broad experience in finance and history of building value in startup ventures will serve us well as we enter the next phase of Ploom’s strategic growth. In addition to success in growing new business platforms, Scott has the unique skills–ncluding expertise in mobile apps, gaming, data mining and social networking–that are needed in an envelope-pushing industry that relies on new and creative tools to build a customer base. Tim and Scott will be key factors as we continue to build our business with innovative products and designs.”

Reynolds’ volumes down but Santa Fe is on the up

| February 11, 2015

R.J Reynolds Tobacco’s US domestic cigarette volume during the year to the end of December, at 61.0 billion, was down by 5.0 percent on that of 2013, 64.2 billion.

Camel volume was unchanged at 20.9 billion but Pall Mall volume fell by 3.2 percent to 20.6 billion; so the company’s total ‘growth brands’ volume was down by 1.6 percent to 41.5 billion.

Volume shipments of RJR’s other brands were down by 11.6 percent to 19.5 billion.

Reynolds American Inc, whose business sectors take in RJR, Santa Fe and American Snuff, announced its full-year and fourth-quarter results yesterday.

RJR’s volume during the fourth quarter to the end of December, at 14.9 billion, was down by 4.9 percent on that of the fourth quarter of 2013, 15.6 billion.

Camel volume fell by 0.7 percent to 5.1 billion and Pall Mall volume fell by 4.9 percent to 5.0 billion; so the company’s total growth brands volume was down by 2.8 percent to 10.1 billion.

The other-brands volume fell by 9.1 percent to 4.8 billion.

RJR’s share of the US cigarette market during the year to the end of December, at 26.5 per cent, was down from 26.6 percent during 2013.

Camel’s share was increased by 0.4 of a percentage point to 10.2 percent while Pall Mall’s share was unchanged at 9.4 percent.

The share held by the company’s other brands fell by 0.5 of a percentage point to 7.0 percent.

Meanwhile, Santa Fe’s cigarette (Natural American Spirit) volume during the year to the end of December, at 3.9 billion, was increased by 10.0 percent on that of 2013, while its volume during the three months to the end of December, at 1.1 billion, was 14.0 percent up on that of the three months to the end of December 2013.

Santa Fe’s share of the retail market during 2014, at 1.6 percent, was up by 0.2 of a percentage point on that of 2013.

American Snuff’s volume during the year to the end of December, at 478.6 million cans, was up by 2.8 percent on that of 2013.

Grizzly volume increased by 3.5 percent to 433.8 million cans, while sales of the company’s other moist snuff products fell by 3.5 percent to 44.9 million cans.

American’s volume during the three months to the end of December, at 120.5 million cans, was down by 1.0 percent from that of the three months to the end of 2013.

Grizzly volume was down by 0.5 percent to 109.2 million cans, while the volume of the company’s other brands fell by 5.3 percent to 11.3 million cans.

American’s share of the moist snuff market during the year to the end of December, at 34.3 percent, was increased by 0.3 of a percentage point on that of 2013.

Grizzly’s share was up by 0.5 of a percentage point to 31.4 percent, while the share of other brands was down by 0.2 of a percentage point to 3.0 percent.

RAI had net sales of $8,471 million during the 12 months to the end of December, 2.9 percent up on those of 2013.

Reported operating income was down by 19.2 percent to $2,531 million, while adjusted operating income was up by 2.8 percent to $3,105 million.

Reported net income was down by 14.4 percent to $1,470 million, while adjusted net income was up by 5.0 percent to $1,831 million.

And reported net income per diluted share was down by 12.4 percent to $2.75, while adjusted net income per diluted share was up by 7.2 per cent to $3.42.

“Reynolds American continued to deliver growth momentum in the fourth quarter, capping a highly successful year for our operating companies’ core operations and key brands,” said president and CEO Susan M. Cameron in announcing the results. “This strong performance contributed to RAI’s excellent total shareholder return of just under 35 percent for 2014.”

In addition, Cameron said, substantial progress was made in RAI’s transforming tobacco strategy. “Our companies’ innovative new products across categories are enhancing prospects for commercial success in an evolving marketplace, while also underscoring our commitment to reducing the harm caused by tobacco,” she said.

Developments were said to have included:

  • The national expansion of R.J. Reynolds Vapor Company’s VUSE Digital Vapor

Cigarette and the addition of four more adult-oriented styles;

  • The start of the national expansion of Niconovum USA’s ZONNIC nicotine replacement therapy gum; and,
  • R.J. Reynolds Tobacco Company’s launch of REVO in Wisconsin, which uses

heat-not-burn technology.

Late last month, RAI and Lorillard shareholders approved RAI’s proposed acquisition of Lorillard and divestiture of select brands and assets to a subsidiary of Imperial Tobacco.

“We have also substantially complied with the Federal Trade Commission’s second request for information, and the process of obtaining the necessary regulatory and other approvals continues to proceed as expected,” Cameron said. “We remain confident that the transaction will close in the first half of this year.”

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