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Reynolds American 4Q Profit Falls On Charges

Yet competitors are doing the same and the company is facing pressure from rivals.

The number of Santa Fe Natural Tobacco Co.'s Natural American Spirit cigarettes it sold grew more than 20 percent to about 800 million.

Reynolds American and other tobacco companies are focusing on cigarette alternatives such as snuff and chewing tobacco for growth as tax hikes, smoking bans and social stigma make the cigarette business tougher.

Volume for its smokeless tobacco brands rose 7 percent compared with a year ago. The brands had a 32.6 percent share of the U.S. retail market, which is tiny compared with cigarettes.

The company said it is getting positive feedback from its test market for a nicotine gum under the Zonnic brand, which is meant to help people stop smoking. In 2009, Reynolds bought a Swedish company Niconovum AB, which makes nicotine gum, pouches and spray products. The test market that was initiated in the third quarter is the first of its products to be sold in the U.S.

Delen also said its development of its first electronic cigarette under the Vuse brand is "going very well." The company has begun limited distribution of the battery-powered devices heat a liquid nicotine solution, creating vapor that users inhale.

For the full year, the company said it earned $1.27 billion, or $2.24 per share, compared with a profit of $1.41 billion, or $2.40 per share, a year ago. Revenue, excluding excise taxes, fell 3 percent to $8.3 billion. Cigarette volumes fell more than 5 percent to 68.9 billion cigarettes. Its full-year U.S. retail share fell 1.1 percentage points to 26.5 percent of the market. Smokeless tobacco volumes grew 8 percent and it claimed 32.4 percent of the U.S. retail market.

Reynolds American also said it expects full-year 2013 adjusted earnings in the range of $3.15 to $3.30 per share. Analysts expect earnings of $3.12 per share.

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