RICHMOND, Virginia — Lorillard's first-quarter profit jumped 47 percent as higher prices, electronic cigarette sales and lower legal expenses from a longstanding legal settlement offset a decline in traditional cigarette sales.
The nation's third-biggest tobacco company on Wednesday reported earnings of $328 million, or 86 cents per share, for the period ended March 31, up from $223 million, or 57 cents per share, a year ago.
Excluding one-time items, earnings were 66 cents per share, beating Wall Street expectations by 2 cents. That excludes a benefit of 23 cents per share in credits for disputed payments under the 1998 Master Settlement Agreement, in which some cigarette makers are paying states for smoking-related health care costs.
Revenue excluding excises taxes rose 6 percent to $1.12 billion, matching analyst expectations, according to FactSet.
Its shares rose $1.29, or about 3 percent, to $43.07 in morning trading.
In a conference call with investors, CEO Murray Kessler said Lorillard's gains came in the face of continued promotional activity and a challenging economic environment.
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 Greensboro, North Carolina, company said the number of cigarettes it sold fell about 2 percent to 9.22 billion cigarettes, compared with an estimated total industry decline of about 6 percent.
Volumes of Newport, Lorillard's biggest brand, fell nearly 2 percent, but its share of the menthol market grew to 37.6 percent.
As part of the industrywide push to diversify beyond the traditional cigarette business, Lorillard acquired e-cigarette maker Blu Ecigs in April 2012.
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.
Greater marketing and distribution helped Blu Ecigs contribute $57 million to Lorillard's sales. It estimates its share of the U.S. retail market, excluding Internet sales, to be more than 40 percent.
"There is no doubt in my mind that e-cigs have tapped into a real consumer need," Kessler said.
Kessler said he estimates that the category had a negative impact on total industry cigarette volumes of about 600 million cigarettes, or about 1 percent, during the quarter, excluding Internet sales.
The company said it spent $40 million during the quarter to buy back about 1 million shares under a $500 million share repurchase program announced in March.
Lorillard Inc., the oldest continuously operating U.S. tobacco company, was spun off from Loews Corp. in 2008.
Michael Felberbaum can be reached at http://www.twitter.com/MLFelberbaum.