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BAT Profit Increases Less Than Analysts’ Estimates

July 28 (Bloomberg) -- British American Tobacco Plc, Europe’s largest cigarette maker, reported first-half profit growth that missed analysts’ estimates as tax increases weighed on sales volume.

Net income rose to 1.53 billion pounds ($2.4 billion), or 76.5 pence a share, from 1.45 billion pounds, or 72.8 pence, a year earlier, London-based BAT said today in a statement. The average estimate of six analysts surveyed by Bloomberg was 1.7 billion pounds. Sales gained 7.6 percent to 7.3 billion pounds.

Turkey increased taxes on cigarettes by 29 percent at the end of 2009 as part of a package of measures to reduce the government budget deficit. Australia raised its tax by 25 percent on April 30 under a program to discourage smoking that will also include an eventual ban on cigarette brand names.

“There remains plenty to be concerned by on a market-by-market basis,” Rob Mann, an analyst at Collins Stewart in London, said today in a note. He has a “buy” recommendation on the stock.

First-half cigarette volume fell 3 percent, excluding the effects of takeovers or disposals, on lower shipments to Romania, Turkey, Japan and Pakistan, BAT said. That was an improvement on the first quarter’s 4 percent decline. Second-quarter cigarette volume fell 1.9 percent. The economic slowdown and rising unemployment have led smokers to buy fewer premium cigarettes, the company said in April.


BAT fell as much as 1.6 percent in London trading and was down 6.5 pence, or 0.3 percent, to 2,253 pence as of 11:31 a.m. The shares have gained 12 percent this year, outperforming Bristol, England-based Imperial Tobacco Group Plc, which has declined 7.6 percent, and Philip Morris International Inc., the largest publicly traded tobacco company, which has increased 6.5 percent in New York Stock Exchange composite trading.

Excluding currency moves and acquisitions, second-half cigarette volume should decline less than 2 percent, Chief Executive Officer Paul Adams said on a conference call. BAT should see volume growth of about 0.5 percent once the recession ends, Adams said.

“While the comparisons with 2009 will become tougher in the second half, shareholders should see another year of good growth in both earnings and dividends,” BAT Chairman Richard Burrows said in the statement.

Total Volume

Total volume in the first half was in line with last year at 348 billion, boosted by the takeover of Indonesian clove-cigarette maker PT Bentoel Internasional Investama. First-half volume gained 21 percent at Dunhill, 1 percent at Lucky Strike and 7 percent at Pall Mall, the cigarette maker said. Volume declined 4 percent at Kent.

The sale of the Lyfra wholesale business should widen BAT’s operating margin by about 0.5 percent this year, Finance Director Ben Stevens said on the conference call. BAT is making “good progress” towards its operating margin goal of 34 percent by 2012, Stevens said.

BAT plans to raise the first-half dividend by 19 percent to 33.2 pence a share, the company said in the statement.

To contact the reporter on this story: Tom Mulier in Geneva at

To contact the editor responsible for this story: Celeste Perri at

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