RICHMOND, Va. (AP) — Cigarette maker Lorillard Inc. said Wednesday its fourth-quarter profit fell slightly despite selling more cigarettes at higher prices.
Results topped Wall Street expectations and Lorillard, the nation's third-biggest tobacco company, is also raising its dividend 6.5 percent. Shares rose nearly 6 percent in morning trading.
In a highly competitive market, Lorillard said the number of cigarettes it sold rose by less than 1 percent to 10.1 billion cigarettes. That's more than the total industry estimate of a 1 percent decline.
Volumes of Newport, Lorillard's biggest brand, rose about 1 percent, but the cigarette's share of the menthol market slipped 0.5 percentage points to 35.1 percent.
As its competitors shipped the "most specially discounted" cigarette packs of the year and launched several menthol products, Lorillard also discounted more to protect its core business, CEO Murray Kessler said in a conference call with investors. That helped the Greensboro, N.C.-based company's share of the U.S. market grow 0.2 percentage points to 14.2 percent.
For the three-month period ended Dec. 31, Lorillard said it earned $309 million, or 80 cents per share, compared with $310 million, or 77 cents per share, a year ago. Excluding one-time items, earnings were 79 cents per share. Analysts polled by FactSet expected 75 cents per share.
Revenue excluding excises taxes rose 7 percent to $1.21 billion. Analysts expected $1.16 billion.
Most tobacco companies have been raising prices and cutting costs to keep profits up as the recession and declining demand cut into cigarette sales. Tax increases, smoking bans, health concerns and social stigma also have made the cigarette business tougher.
The higher taxes and cigarette prices have caused many smokers to smoke less and trade down to cheaper brands during the recession to save money. Lorillard's Maverick brand and Reynolds American Inc.'s Pall Mall have been among the beneficiaries.
However, during the fourth quarter, Maverick volumes fell, by less than 1 percent, after several quarters of solid growth.
As part of the industrywide push to diversify beyond the traditional cigarette business, Lorillard acquired e-cigarette maker Blu Ecigs in April.
Electronic cigarettes are battery-powered devices that heat a liquid nicotine solution in a disposable cartridge, creating vapor that users inhale. Some e-cigarettes are made to look like a real cigarette with a tiny light on the tip that glows like the real thing. Devotees tout them as a way to break addiction to real cigarettes. They insist the devices address both the nicotine addiction and the behavioral aspects of smoking without the more than 4,000 chemicals found in cigarettes.
The company said more marketing and distribution helped Blu Ecigs contribute $39 million to Lorillard's sales for the quarter. It estimates its share of the U.S. retail market, excluding Internet sales, to be about 30 percent.
The results for its e-cigarette segment were "pretty good for something we still consider in the developmental phase," Kessler said.
The company also Wednesday said its board approved a 6.5 percent increase in its quarterly dividend, to 55 cents per share. It's the fifth increase since Lorillard, the oldest continuously operating U.S. tobacco company, was spun off from Loews Corp. 9n 2008.
The dividend will be paid March 11 to shareholders of record as of March 1.
Shares rose $2.33, or 5.9 percent, to $42.05 in late morning trading Wednesday.
Michael Felberbaum can be reached at http://www.twitter.com/MLFelberbaum.