TORONTO (Reuters) - Rothmans Inc , Canada's No 2 cigarette maker, said on Friday fourth-quarter profit rose 16.7 percent on the back of lower-price products, but shipments were down as contraband sales continued to chip away at the company's market share.

Rothmans, known for its Craven A, Rothmans and Benson & Hedges brands, earned C$21.0 million ($21 million), or 31 Canadian cents per share, in the period ended March 31, up from C$18.0 million, or 26 Canadian cents per share, in the same period last year.

The profit rise was due to strength in "price category" cigarette sales, despite weakness in premium sales. Rothmans was also able to grab a bigger share of total domestic cigarettes sold by retailers in the fiscal 2008 period.

Three analysts polled by Reuters Estimates expected a profit of 30 Canadian cents a share before exceptions in the quarter.

Revenue increased 4.8 percent to C$145.7 million.

Rothmans Benson & Hedges Inc., which is a 60-percent co-owned unit, shipped 2.3 billion cigarettes into the domestic market in the three-month period, down 2.6 percent from last year.

In fiscal 2008, shipments were only slightly higher, which is "indicative of continued overall domestic, tax-paid cigarette volume erosion during the year," Rothmans said.

Contraband cigarettes continued to hurt the bottom line, the company said. The industry has lobbied the Canadian government for tougher enforcement and lower taxes to offset the draw of illegal cigarettes.

Toronto-based Rothmans, Canada's only publicly traded cigarette maker, competes with industry leader Imperial Tobacco Canada, owned by British American Tobacco .

($1=$1.00 Canadian)

(Reporting by Jonathan Spicer; Editing by Renato Andrade)

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