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Reynolds American, Inc. has a market cap of $26.36 billion; its shares were traded at around $45.12 with a P/E ratio of 17 and P/S ratio of 3.1. The dividend yield of Reynolds American, Inc. stocks is 5.1%. Reynolds American, Inc. had an annual average earning growth of 3.8% over the past 10 years.
Highlight of Business Operations:RAI’s operating subsidiaries sell contract-manufactured cigarettes and processed strip leaf to BAT affiliates. Pricing for contract manufactured cigarettes is based on negotiated cost, plus 10%, adjusted for contract years 2011 through 2014 with prices increasing or decreasing by a multiple equal to changes in the Producer Price Index, reported by the U.S. Bureau of Labor Statistics. Net sales to BAT affiliates, primarily cigarettes, represented approximately 4.0% of RAI’s total net sales during the six months ended June 30, 2012.
RJR Tobacco recorded deferred sales revenue relating to leaf sold to BAT affiliates that had not been delivered as of the end of the respective quarter, given that RJR Tobacco has a legal right to bill the BAT affiliates. Leaf sales revenue to BAT affiliates is recognized when the product is shipped to the customer.
RJR Tobacco’s net sales for the quarter ended June 30, 2012, decreased compared with the prior-year quarter, due to $133 million attributable to lower cigarette volume and lower related party sales of $52 million, partially offset by higher pricing of $61 million as well as a favorable premium-to-value mix. RJR Tobacco’s net sales for the six months ended June 30, 2012, decreased compared with the prior-year period, due to $228 million attributable to lower cigarette volume and lower related party sales of $78 million, partially offset by higher pricing of $118 million as well as a favorable premium-to-value mix.
Moist snuff has been the key driver to American Snuff’s overall growth and profitability within the U.S. smokeless tobacco market. Moist snuff accounted for approximately 86% of American Snuff’s revenue in each of the second quarter and the first six months of 2012 compared with approximately 82% of American Snuff’s revenue in the second quarter of 2011 and approximately 81% in the first six months of 2011. U.S. moist snuff industry shipment volume grew by approximately 5.0% in the second quarter of 2012 compared with the same period in 2011.
Santa Fe’s net sales for the three- and six-month periods ended June 30, 2012, were favorably impacted by higher pricing and volume. The cigarette shipment volume growth of 9.5% was negatively impacted by Santa Fe’s shift to a more efficient integrated supply chain in the first quarter of 2012. This shift resulted in a one-time reduction of wholesale inventory levels.
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