Reynolds American Inc. (RAI), the nation's second-largest tobacco company, said its first-quarter profit for 2007 fell 5 percent, as strength in smoke

April 25, 2007 - Reynolds American Inc. (RAI), the nation's second-largest tobacco company, said its first-quarter profit for 2007 fell 5 percent, as strength in smokeless tobacco helped offset a soft cigarette market. RMI lost market share in the overall cigarette industry, saying its cigarette shipments fell 4 percent from the prior year. But the Winston-Salem-based company benefited from higher prices and improved its operating costs, officials said. During a conference, Chief Financial Officer Dianne M. Neal praised the company's new smokeless tobacco division, Conwood Co., for strong growth. Conwood saw its volume increase 14 percent and now owns more than one-quarter of the moist-snuff market. Reynolds acquired Conwood last year. "It positioned Reynolds American as the nation's only total tobacco company, with operations that compete in every major tobacco category," said Neal. Citigroup analyst Bonnie Herzog said investors should be concerned that Reynolds may not be able to accelerate its earnings, and she warned increased competition could hinder Conwood's growth. The company's net income dropped to $328 million, or 1.11 cents per share, from $345 million, or $1.17 per share, in the year ago period. Revenue rose 10 percent to $2.15 billion from $1.96 billion in the previous year. Reynolds American faces its largest challenges in the competitive and difficult cigarette market, which faces possible smoking bans, higher industry taxes and additional regulations by the Food and Drug Administration. Reynolds also expects industry consumption of cigarettes to drop 3 percent for the year.Though Reynolds lost market share in its cigarette business, the company gained in its so-called "growth brands" _ Camel, Kool and Pall Mall. Aggressive marketing, including the new "light and luscious" Camel No. 9 brand targeted at women, helped drive market shares and provided additional opportunity for growth, according to the company. (Reynolds American 1Q profit falls 5 pct on lower volume, Assoc. Press, FayObsever.com)