Reynolds American Net Income Up On Higher Prices

MICHAEL FELBERBAUM

RICHMOND, Va. (AP) â¿¿ Cigarette maker Reynolds American's net income climbed more than 35 percent in the second quarter as higher prices and cost-cutting helped it recover from year-ago results that had been dragged down by legal charges.

But the nation's second-biggest tobacco company also saw a much steeper decline in the number of cigarettes it sold than the rest of the industry.

The Winston-Salem, N.C., company said heavy promotional activity by its competitors drove its cigarette volumes down nearly 7 percent to 18.1 billion cigarettes, compared with an estimated total industry volume decline of 1.7 percent.

Its R.J. Reynolds Tobacco subsidiary sold 4 percent less of its Camel brand and volumes of Pall Mall fell 3.6 percent.

Camel's market share fell slightly to 8.3 percent of the U.S. market, while Pall Mall's market share fell 0.2 percentage points to 8.4 percent.

The company has promoted Pall Mall as a longer-lasting and more affordable cigarette as smokers weather the weak economy and high unemployment, and has said half the people who try the brand continue using it. Still Reynolds has faced pressure from its competitors looking to attract more smokers looking to save money.

"There's a lot of price competition in the marketplace, there's a lot of promotions out there," CEO Daniel M. Delen said in a conference call with investors. "Because there are so many low-priced offers, particularly from other premium brands in the marketplace, what we're actually seeing currently is the amount of new trialists out there for the (Pall Mall) brand has gone down significantly over time."

Reynolds reported net income of $443 million, or 78 cents per share, for the three-month period ended June 30. That's up from $327 million, or 56 cents per share, a year ago when the company recorded charges related to a legal case that hurt its results.

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