Exchange rates stub out sales at tobacco giant
PEOPLE quitting smoking, currency swings and higher taxes hit half-year sales at the world’s second-largest cigarette firm.
The weaker Russian rouble and Brazilian real and the strong pound hampered British American Tobacco’s sales which fell 5.9pc to £6.4bn in the six months to June 30.
But results at the Dunhill and Lucky Strike cigarette-maker were better than City forecasts.
It grew market share for some of its big brands and its rate of sales decline was not as bad as at many of its competitors, analysts said. The volume of the tobacco it sold fell 2.9pc at the group but this was better than industry wide volumes.
Excluding the impact of currency moves, sales rose 2.4pc, compared with a rise of 1.7pc in the first quarter.
Pre-tax profit rose 34pc to £3.5bn. The group has cut costs in the face of continuing falls in demand for tobacco globally.
Chairman Richard Burrows said that, as anticipated, first-half figures were hit by unfavourable foreign exchange movements.
He added: ‘The underlying performance of the business remains strong and we are confident that we are on course to deliver an improved second half.’
The group was also helped by its new joint venture with American giant Reynolds American Inc. Thanks to that deal it owns US group Lorillard which, according to analysts, accounts for 20pc of its net profit.
It has also signed an agreement to buy TDR, the leading independent cigarette manufacturer in central Europe, for £389m.
It said it will continue to make acquisitions and is also investing in new technology.
It said it is developing a range of products known as ‘heat-not-burn’ cigarettes. With these, smokers take in less of the harmful fumes because the tobacco is not actually burned.
These are being developed along with e-cigarettes that give users a nicotine hit without the smoke. BAT said it would raise its interim dividend to 49.4p, a 4pc increase on last year. It also said it may start a share buyback after next year. Shares sparked up 3.6pc or 129p to 3680.5p.