Reynolds to Cut Workers by 10% as Cigarette Demand Falls

Reynolds American Inc. (RAI), the second- largest U.S. tobacco company, plans to eliminate 10 percent of its U.S. workforce, or about 540 jobs, in the next three years as demand for cigarettes slumps.

The reductions, including salaried and hourly positions, will result in a pretax restructuring charge of about $110 million in the first-quarter for severance, benefits and related costs, Winston-Salem, North Carolina-based Reynolds said today in a statement. As of Dec. 31, it had about 5,400 workers.

The job cuts will enable Chief Executive Officer Daniel Delen to reduce annual costs by $25 million this year and $70 million a year in 2015. Reynolds’ share of U.S. cigarette sales slipped to 27 percent in the fourth quarter, down 1.1 percentage points from a year earlier, as shipments tumbled 7.4 percent.

Most of the departures of employees are voluntary, Reynolds said.

Four brands gained market share last year, including Camel, Pall Mall, American Natural Spirit cigarettes and Grizzly snuff, the company said last month.

By revenue, Reynolds trails Altria Group Inc. (MO), the maker of top-selling Marlboro cigarettes.

Reynolds slipped 1.3 percent to $41.33 at the close in New York. The shares have declined 0.2 percent this year.

To contact the reporter on this story: Chris Burritt in Greensboro at cburritt@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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