On July 30 Lorillard presented report on its second-quarter 2014 results, which reflects earnings increase by 3.7% from the prior-year quarter and sales increase. Reduction of outstanding share count resulted in earnings growth. Due to low e-cigarettes sales, in the report there was no Zacks Consensus Estimate of 88 cents by 4.5%.
The report showed a reduction by 0.3% in net sales to $1.8 billion due to decline in sales of e-cigarettes, balanced by a slight increase in sales of tobacco cigarettes. Company’s profits estimated by Zacks Consensus Estimate are $1.3 billion.
Significant decline in e-cigarettes sales worries the company because this market is new and very young. The report reveals that sales of e-cigarettes dropped by 35% to $37 million. Experts say that this occured due to great competition from Reynolds American and Altria Group Inc, who lauched their own e-cigarettes, which became popular.
Sales of regular cigarettes were increased slightly because of high prices. The maker of Kent cigarettes, faced reduction in cigarette unit volumes. Cigarette volume has been declining since several quarters. Cigarette volume are hurt by high cigarette prices, high cigarette taxes, and increasing health concerns among people. These days more and more people are quitting and this affects sales.
In some countries the tobacco companies are obliged to place large graphic and text health warnings. Also the industry is affected by tobacco control regulations, which makes people refuse from smoking.
However, despite declining volumes and tough regulations, Reynolds American agreed to take control over Lorillard company on July, 2014, for $27.4 billion.