Lorillard 3Q profit dips partly on higher expenses

Cigarette maker Lorillard Inc. said Monday that its third-quarter profit dipped 1 percent, pinched by higher expenses and consumers tightening their spending.

The maker of Newport menthol cigarettes earned $235 million, or $1.44 per share, for the three months ended Sept. 30. That's down from $237 million, or $1.38 per share, a year ago.

The per share discrepancy is a result of fewer shares outstanding in the current quarter.

Lorillard, whose other brands include Kent, True and Maverick, said revenue climbed 26 percent to $1.42 billion from $1.13 billion on higher prices, offset by selling fewer cigarettes and spending more on promotions. Excluding excise taxes, revenue grew 2 percent to $953 million from $936 million.

Analysts polled by Thomson Reuters, whose estimates normally exclude one-time items, forecast a profit of $1.52 per share on revenue of $1.32 billion.

Its shares fell $3.86, or about 4.8 percent, to $75.96 in morning trading Monday.

Lorillard's quarterly results were squeezed as selling, general and administrative expenses increased to $96 million from $88 million on legal expenses and pension costs.

The nation's third-largest cigarette maker, based in Greensboro, N.C., also faced declining volumes of full-price brands such as Max and Newport, while those for value brands like Old Gold and Maverick grew. Some smokers have traded down to cheaper cigarette brands during the recession in an effort to cut spending.

Lorillard said domestic cigarette volumes declined 6.1 percent during the period, compared with a total industry decline of 12.6 percent. The company saw a 9.8 percent decline in volumes for its Newport brand, but a 51.9 percent increase in its value-priced Maverick brand. Newport's domestic retail market share rose 0.28 points to 10.29 percent compared with a year earlier, Lorillard said.

Its largest competitors _ Altria Group Inc. and Reynolds American Inc. _ reported third-quarter profits last week.

Domestic cigarette volumes fell across the board, with industry estimates of the decline reaching more than 12 percent.

Shipments fell during the first half of the year before and after a 62-cent-per pack federal tax increase took effect April 1. Investors were closely watching the industry's third-quarter reports for the first clear sense of cigarette volumes following market disruptions from the increase.

Altria Group Inc. _ owner of the nation's biggest cigarette maker, Philip Morris USA, which makes Marlboro _ said cost-cutting and higher cigar sales helped its third-quarter profit rise, even though it sold fewer cigarettes. Altria said its overall cigarette volume fell 12 percent for the quarter, and it estimated a 10 percent drop industrywide.

Reynolds American Inc. _ the second-biggest cigarette seller in the U.S. and maker of Camel and Pall Mall _ recorded 72 percent higher profit than in last year's third quarter, when restructuring costs and the falling value of its trademarks dampened its earnings. It said its estimated 11 percent drop in volume was better than the industry's decline, which it pegged at 12.6 percent.

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