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Oct 21, 9:45 AM EDT

Reynolds' net rises on higher cigarette prices


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RICHMOND, Va. (AP) -- Camel cigarette maker Reynolds American Inc.'s net income rose 2.2 percent in the third quarter as higher prices helped offset a continued decline in cigarettes sold.

The Winston-Salem, North Carolina-based company said its profit rose to $467 million, or 88 cents per share, for the quarter which ended Sept. 30, up from $457 million, or 84 cents per share, in the same quarter last year.

Reynolds' adjusted earnings of 95 cents per share beat expectations for 91 cents per share, according to Zacks Investment Research.

The nation's second-biggest tobacco company said revenue, excluding excise taxes, rose 4.9 percent to $2.24 billion. Analysts expected $2.18 billion, according to Zacks.

Its shares rose 67 cents to $59.80 in morning trading Tuesday.

Reynolds announced plans in July to buy Newport cigarette maker Lorillard Inc. for $25 billion. The tie-up would create a formidable No. 2 tobacco company in the U.S. behind Richmond, Virginia-based Altria Group Inc. Reynolds said Tuesday it still expects that deal, which is currently undergoing antitrust review, to close by the middle of next year.

The maker of Camel and Pall Mall cigarettes said its R.J. Reynolds Tobacco subsidiary shipped nearly 3 percent less cigarettes, compared with an estimated decline of 2.3 percent for the industry as a whole.

Volumes for Camel grew 3 percent and its U.S. retail market share rose 0.4 percentage points to 10.4 percent. Volumes for Pall Mall decreased 1.5 percent and its market share fell 0.1 percentage points to 9.3 percent.

The number of Natural American Spirit cigarettes sold by its Santa Fe Natural Tobacco subsidiary grew nearly 8 percent.

Tobacco companies are also focusing on cigarette alternatives such as snuff, chewing tobacco and electronic cigarettes as tax hikes, smoking bans, health concerns and social stigma make the cigarette business tougher.

Shipments of its Grizzly and Kodiak smokeless tobacco brands grew nearly 3 percent. The brands had a 34 percent share of the U.S. retail market, though that market is tiny compared with cigarettes.

The company said the national rollout of its Vuse-brand electronic cigarette is progressing and will be available almost 70,000 stores early next week with an additional wave of expansion early next year. Vuse will be Reynolds' will be its sole e-cigarette brand once it sells Lorillard's Blu e-cig brand to U.K.'s Imperial Tobacco as part of the takeover.

The company on Tuesday also reiterated that it expects full-year earnings between $3.35 and $3.45 per share.

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

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