Reynolds a boost to BAT
Group paid $54.5bn for total ownership
BRITISH American Tobacco (BAT) acquisition of Reynolds had boosted its next generation products (NGPs) and this boded well for the future, the tobacco company said yesterday.
Earlier this week BAT announced that it had completed the purchase of the 57.8 percent of Reynolds it did not already own.
The group said it paid $54.5 billion (R709.27bn) for total ownership and Reynolds’ stock was expected to be delisted from the New York Stock Exchange and S&P indices at the close of trading on Tuesday.
Reynolds is estimated to have between 2 000 and 2 200 local employees, the majority of whom work at its plant in Tobaccoville.
BAT chairperson Richard Burrows said these were exciting times for the group. “In the first six months of 2017, the combustible business continued to perform well, against the backdrop of a strong volume comparator. The performance of Glo continues to exceed expectations, with new market launches showing encouraging early signs,” Burrows said. Glo is a heated tobacco product.
BAT now is the largest vapour company in the world and the successful completion of the Reynolds acquisition bolsters its leading position in both NGPs and combustibles.
“We remain confident of delivering another year of good earnings growth at constant rates of exchange,” Burrows added.
In South Africa, the group said volume and profit fell due to down-trading and the growth in illicit trade. Benson & Hedges and Dunhill continued to grow market share, although this was more than offset by Peter Stuyvesant, with its total market share down.
In the Eastern Europe, Middle East and Africa region, profit from operations at the current rates of exchange grew by 18.8 percent, partly due to the weakness of the pound.
In the six months to end June, the group’s revenue rose 16 percent to £7.72bn (R131.13bn), helped by sterling’s weakness, while revenue at constant currency, adjusted for excise on goods purchased from third parties, was up 2.5 percent.
Decline Profit from operations, at current rates of exchange, was 16.3 percent higher at £2.57bn. However, group cigarette volume was 314 billion, a decline of 5.6 percent on the same period last year.
Chief executive Nicandro Durante said the performance of the group during the period was in line with expectations and demonstrated the good organic progress the group was making.
“The relative weakness of sterling led to a significant tailwind on our reported results, with revenue 15.7 percent higher and profit from operations up 16.3 percent at current rates of exchange.
“Excluding the translational tailwind and the adjusting items, adjusted revenue and adjusted profit from operations were both up, 2.5 percent and 3.2 percent, respectively, at constant rates of exchange,” said Durante.
The board had declared an interim dividend of 56.5 pence, being one third of the total 2016 dividend, a 10 percent increase on last year.
The owner of Dunhill, Lucky Strike and Pall Mall brand cigarettes said last month it expected to increase profits in the second half of the year. BAT shares dipped 0.35 percent on the JSE yesterday to close at R905.62.