Reynolds American said a drop in fourth-quarter profit due to lower shipments of cigarettes to wholesalers that stocked up earlier in the year and the timing of promotional expenses.
The maker of Camel cigarettes and Kodiak smokeless tobacco posted profit of $180 million, or 61 cents a share, down from $297 million, or $1.01 a share, a year earlier.
Earnings in the latest period included a noncash charge of $90 million associated with a decrease in the trademark value of some R.J. Reynolds brands that are no longer considered to be part of the company's growth strategy.
Excluding one-time items, earnings were 81 cents a share. Analysts on average forecast 85 cents on revenue of $2.12 billion, according to Thomson Financial.
Sales rose 1.1% to $2.07 billion from $2.05 billion a year ago.
Operating profit fell 18.2% at the R.J. Reynolds cigarette business as the company shipped 25.2 billion cigarettes, down 1.4% from a year earlier.
Earlier in the year, wholesalers had ordered extra cigarettes ahead of the July 4 holiday and the company's change to a new computer system, Reynolds said. That cut into shipments in the third and fourth quarters as wholesalers sold those extra cigarettes to retailers.
But Reynolds still paid promotional discounts later in the year when the cigarettes were shipped to retailers, a company spokesman told Reuters. This created an imbalance between when the company booked sales and when promotional spending was paid.
Wholesale inventories at the end of the year were back in line, the company spokesman said.
Reynolds forecast 2007 earnings of $4.25 to $4.45 a share. Analysts on average were expecting $4.34.
For the next several years, the company said it expected earnings per share to increase at mid-single-digit percentage rates.