MICHAEL FELBERBAUMRICHMOND, Va. (AP) â¿¿ Lorillard Inc., the nation's third-biggest cigarette maker, said Monday that lower volumes and higher promotional costs drove its net income down 8 percent in the second quarter as it raised its prices. The maker of Newport, Maverick and True cigarettes said its cigarette volume fell less than a percent to 9.78 billion cigarettes compared with a year earlier when retailers and wholesalers restocked following cuts they made to prepare for a one-time federal tax on inventory. The company estimates that total industry volumes fell about 7 percent during the quarter. The weak economy and high unemployment have caused many smokers to trade down to cheaper brands during the recession in a bid to save money. Lorillard's Maverick discount brand and Reynolds American Inc.'s Pall Mall cigarettes have been among the beneficiaries. Volumes for Maverick increased 26.5 percent in the latest quarter. But shipments of its Newport brand, which holds about 35 percent of the U.S. menthol market share, fell 3.4 percent. Most tobacco companies have been raising prices to keep profits up as the recession and declining demand cut into cigarette volumes. Tax increases, smoking bans, health concerns and social stigma also have made the cigarette business tougher. Lorillard outperformed the industry and achieved record 12.8 percent of the U.S. retail market despite the continued pressures, CEO Martin Orlowsky said in a conference call with investors. Lorillard, based in Greensboro, N.C., said it earned $263 million, or $1.73 per share, for the April-June period, compared with $286 million, or $1.71 per share, a year ago. The cigarette maker said revenue excluding excises taxes edged up slightly to $1.04 billion from $1.03 billion in the year-ago period. Net sales were relatively flat at $1.52 billion. Analysts polled by Thomson Financial expected Lorillard to earn $1.60 per share on sales of $1.01 billion, excluding excise taxes.
Its shares rose 95 cents, or about 1.3 percent, to close at $77.25 Monday.Lorillard is the last of the country's top tobacco companies to report its second-quarter results. Last week, Altria Group Inc., owner of the nation's biggest cigarette maker â¿¿ Philip Morris USA â¿¿ said its net income grew 3.2 percent on lower costs and higher prices. Its volumes declined 10.2 percent. Meanwhile, No. 2 Reynolds American said the cost of closing factories and changing its sales force helped send its net income down 9.5 percent. The number of cigarettes it sold fell 9.5 percent.