Cigarette maker Lorillard 4Q profit falls 5 pct

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News,Business,Smoking

RICHMOND, Va. (AP) — Tobacco company Lorillard Inc.'s fourth-quarter profit fell 5 percent as higher costs offset an increase in revenue from both traditional and electronic cigarettes.

Its adjusted results missed Wall Street expectations and its shares fell about 5 percent in morning trading Wednesday.

Most tobacco companies have been raising prices and cutting costs to keep profits up as the recession and demand for traditional cigarettes declines. Tax increases, smoking bans, health concerns and social stigma also have made the cigarette business tougher. The industry also is diversifying beyond the traditional cigarette business with electronic cigarettes.

The nation's third-biggest tobacco company said its cigarette shipments fell 1.6 percent to 9.85 billion, compared with its estimated total industry decline of more than 6 percent.

Volumes of Newport, Lorillard's biggest brand, increased less than 1 percent during the quarter. The brand's U.S. retail market share grew to 12.7 percent and its share of the menthol segment grew 1.6 percentage points to 36.7 percent of the market.

Lorillard, based in Greensboro, N.C., said acquired e-cigarette maker Blu Ecigs in April 2012. It also bought U.K.-based electronic cigarette maker Skycig in October to expand its global presence in the fast-growing business. Electronic cigarettes are battery-powered devices that heat a liquid nicotine solution, creating vapor that users inhale.

The company said greater marketing and distribution, as well as new, lower-priced rechargeable kits helped sales of Blu, which has an estimated 48 percent share of the U.S. retail market to be. Skycig, which will be rebranded as Blu during 2014, also contributed to its sales.

On a conference call with investors, CEO Murray Kessler said he expects the e-cigarette category will continue to grow but the only caveat is pending regulation by the Food and Drug Administration.

"These regulations have the ability to either help the e-cigarette category grow if the regulations are reasonable or stifle growth if the regulation is draconian and mirrors that of combustible cigarettes," he said. "We hope common sense will prevail with FDA and they will recognize the math of harm reduction's potential that exists with e-cigs."

Lorillard reported earnings of $293 million, or 80 cents per share, for the period ended Dec. 31, down from $309 million, or 80 cents per share, a year ago.

Excluding one-time items, earnings were 82 cents per share, 4 cents lower than analysts expected.

Revenue excluding excises taxes rose 3.6 percent to $1.25 billion. Analysts polled by FactSet expected $1.31 billion.

Its shares fell $2.54, or 5 percent, to $47.41 in morning trading.

For the full year, the company said its profit rose 8.5 percent to $1.19 billion on revenue of $4.97 billion, excluding excise taxes.

Lorillard Inc., the oldest continuously operating U.S. tobacco company, was spun off from Loews Corp. in 2008.

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Michael Felberbaum can be reached at http://www.twitter.com/MLFelberbaum .

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