Cigarette maker Lorillard 2Q profit falls

Lorillard

Tobacco company Lorillard Inc. reported on July 20 that its net income decreased 2.4 % in the second quarter because higher prices could not compensate a drop in the number of cigarettes sold.

The cigarette maker said that the number of sold cigarettes declined nearly 1 % to 10.63 billion cigarettes. The biggest Lorillard’s brand Newport decreased 2 %, while cheap Maverick cigarettes increased nearly 5 %. The tobacco group values that the industry as a whole sold nearly 2 % fewer cigarettes during the quarter.

High unemployment and increasing cigarette prices and taxes were a motive for many smoking people to smoke less and buy cheaper brands during the recession in a bid to keep money. Lorillard’s Maverick and Reynolds American Inc.’s Pall Mall have been among the beneficiaries.

CEO Murray Kessler said that the company experienced “heightened competitive activity” during the quarter.

Lorillard’s retail market share rose 0.1 points during the quarter to 14.3 % of the U.S. market. Newport’s share of the menthol market decreased 0.3 points to 36.2 %, while its top rivals have activated efforts to grasp some of the growing menthol market.

Most cigarette makers have been increasing prices and cutting costs to save profits up as the recession and decreasing demand cut into cigarette sales. Tax hikes, smoking bans, health concerns as well have made the cigarette business tougher.

Lorillard reported that its net profits decreased to $284 million, or $2.17 per share, for the three-month period ended June 30, down from $291 million, or $2.05 per share, a year ago.

Income excluding excises taxes increased 4% to $1.2 billion as its average net price per cigarette unit increased 4.5 %.

Last quarter Lorillard acquired Blu Ecigs. As well, the company began to cooperate with few other tobacco companies that had similar initiatives to find cigarette alternatives as demand decreases. Lorillard said Blu Ecigs gave $8 million to the company’s total net sales for the quarter, but didn’t have an influence on its profitability.

Electronic cigarette is a plastic and metal device powered by a battery. The device heats a liquid nicotine solution in a disposable cartridge, creating vapor that is inhaled by smokers. Some e-cigarettes look like a real cigarette with a tiny light on the tip that glows like the real thing.

E-cigarettes lovers feature them as a method to get rid of addiction to real cigarettes.

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

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