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RJR smoked by Russia
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October 22, 1998: 3:19 p.m. ET
RJR Nabisco reports sharp decline in operating profits, hurt by Russia
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NEW YORK, (CNNfn) - Food and tobacco giant RJR Nabisco Holdings Corp. reported a sharp decline in third-quarter operating profits Thursday, reflecting weaker tobacco sales overseas.
The maker of Winston cigarettes and Oreo cookies posted an operating profit of $164 million, or 47 cents a share, during the three months ended Sept. 30, down almost 36 percent from the $255 million, or 75 cents a share, for the year-ago period. Revenue fell 2 percent to $4.33 billion.
The operating profits were in line with Wall Street's estimates of 47 cents a share.
Including one-time items, RJR earned $158 million or 45 cents a share in the third quarter, up from $132 million or 34 cents a share a year ago when RJR took a $133 million charge for litigation settlements assessed as a result of anti-smoking laws.
"Our international tobacco business was severely affected by deteriorating economies in Russia and other markets in the Commonwealth of Independent States," said Steven Goldstone, RJR Nabisco's chairman and chief executive officer.
"Upheavals in the (Commonwealth of Independent States) along with adverse effects from foreign currency translation, were the primary reasons behind the substantial profit decline at Reynolds International. Those problems caused, in turn, an increase in RJR Nabisco's corporate tax rate for the remainder of the year, which added to our profit decline."
For the nine months ended in September, RJR Nabisco (RN) reported an operating profit of $529 million, or $1.52 a share, down from $711 million, or $2.09 a share, a year ago. Revenue rose 1 percent to $12.57 billion.
Including one-time items, RJR earned $8 million in the latest nine-month period, or a loss of 8 cents a share after preferred dividends, compared with a profit of $578 million, or $1.67 a share a year ago.
RJR's international tobacco business was severely hurt by deteriorating economic conditions in Russia and its neighboring states.
The company warned that short-term profits are expected to flounder as consumers buy cheaper brands. However, despite the economic instability in the area, the company said it will regain profits and sales growth in the long term, as recent increases at the end of the quarter prove.
International tobacco sales for the quarter were $735 million, down almost 24 percent from $911 million for the same period last year. Third-quarter domestic tobacco sales were $1.5 billion versus $1.3 billion, which were in line with company expectations.
The company's food subsidiary, Nabisco Holdings Corp. reported a 1 percent rise in sales to $926 million. Nabisco's international sales were down 4 percent in the quarter to $631 million, from $656 million.
RJR shares were off 1/8 to 24-3/8 in Thursday afternoon trade.
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