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    Reynolds Profit Hurt by Charges

    Tobacco company's profit down $126 million from same quarter last year.

    CHICAGO -- While its takeover of Brown & Williamson helped Reynolds American push its third-quarter revenue sharply higher, the tobacco company's organic volume was in decline -- and its earnings took a big dive on assorted charges, reported Market Watch.

    Before the start of trading Wednesday, Reynolds said that it earned $213 million, or $1.44 a share, down from $339 million, or $2.66 a share in the same period a year ago. The latest-quarter figures include some $127 million in charges related to tobacco grower buyout programs.

    Revenue came in at $2.15 billion, up 15.2 percent, primarily reflecting the addition of the B&W brands, along with higher cigarette prices.

    The average estimates of analysts polled by Thomson First Call had been for earnings of $2.02 a share on revenue of $2.07 billion; backing out various charges, Reynolds would have earned $2.13 a share.

    Total domestic volume rose 8.2 percent to 28.8 billion smokes. However, on a pro forma basis -- as if the merger had been complete as of January 2004 -- domestic volume slumped 3 percent, setting a 5.7 percent decline thus far this year. And the company said it now expects a full-year 2005 volume decline in line with that year-to-date performance.

    On the same basis, the company's third-quarter share of U.S. retail cigarette business slumped more than 1 point to 29.66 percent. Reynolds said it had focused its resources largely on "investment brands Camel and Kool [and] these brands' growth partially offset declines on the company's selective support and non-support brands."

    Meanwhile, the company revised its 2005 earnings forecast to $6.35 to $6.55 a share, while analysts are projecting earnings of $7.14 a share.

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