Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Bloomberg Customers

BAT First-Half Profit Growth Checked by Sterling’s Strength

British American Tobacco Plc, Europe’s largest cigarette maker, said the strength of sterling against currencies such as the Brazilian real checked growth in first-half earnings, sending the shares lower.

The weakness of the euro, Russian ruble and South African rand against the U.K. currency also restricted profit growth, the London-based maker of Lucky Strike said today. Adjusted profit from operations rose 3 percent to 2.84 billion pounds ($4.4 billion), in line with the 2.83 billion-pound median estimate of five analysts surveyed by Bloomberg.

“These results are no disaster,” Eddy Hargreaves, an analyst at Canaccord Genuity, said in a note. “But Southern Europe weakened, and the currency impact is somewhat greater than the market expected.” He recommends holding the shares.

BAT slid as much as 2.2 percent to 3,237 pence in London trading. Currency fluctuations lowered profit by 4 percent in the first half and could shave 5 percent off full-year earnings per share if rates remain at current levels, Oriel Securities analyst Chris Wickham said in a note.

In Brazil, BAT’s largest market by sales, the company raised cigarette prices in April ahead of a tax increase in May, which resulted in “good profit growth” that was largely offset by a weakening real, the company said. The real has fallen 8.5 percent this year against the pound.

Price Increases

“We’ve had a good run over last few years on currency and now some of our bigger ones have moved against us,” BAT spokesman Kingsley Wheaton said in an interview.

The tobacco company has increased prices and pushed into emerging markets such as Pakistan and Vietnam to offset rising government levies and declining tobacco consumption in the Americas. Developing markets account for 75 percent of BAT’s volume and almost 60 percent of its profit.

Cigarette shipments were unchanged in the first half, as rising sales of Lucky Strike and Pall Mall was offset by sluggish conditions in southern Europe and a boost in one-time shipments last year to Japan in the wake of that region’s earthquake and tsunami, which hurt local tobacco producers.

“Substantial” declines in Spain and Italy pushed Western European volume down 4 percent in the first half. Some cash-strapped smokers are moving to fine-cut tobacco, the volume of which rose by 7 percent in the region, Wheaton said.

BAT was down 1.2 percent at 3,267 pence as of 9:47 a.m. in London, paring its gain this year to 6.9 percent. Imperial Tobacco Group Plc fell 0.9 percent to 2,427 pence.

Russian Tax Increase

First-half sales were little changed at 7.45 billion pounds, below analysts’ estimates of 7.57 billion pounds.

Growth in shipments of the company’s so-called global drive brands, which include Dunhill, Kent, Lucky Strike, and Pall Mall, eased to 4 percent in the first half from 6 percent in the first quarter, below what Erik Bloomquist, a Berenberg analyst, had estimated. Those brands now account for about a third of shipments, up from 12 percent in 2002, according to Jefferies International analyst Dirk van Vlaanderen.

In Russia, where BAT’s market share and profit increased in the first half, fueled by higher sales of Kent cigarettes, the government plans to raise excise taxes on tobacco 40 percent annually through 2015, according to its tax plan.

Australia has passed a law, due to take effect on Dec. 1, which would make the country the first to ban logos on cigarette packaging in an effort to combat smoking. BAT, which is challenging the ban, is the country’s biggest tobacco seller with a 47 percent market share, according to Barclays Capital. The U.K. and New Zealand are also considering such legislation.

Last week, Philip Morris International Inc., the world’s largest publicly traded tobacco company, reported second-quarter profit that beat estimates, spurred by demand for cigarettes in eastern Europe. Yesterday, Imperial Tobacco said declines in tobacco shipments eased in its third quarter.

British American Tobacco also said it bought back 553 million pounds of shares in the period, and increased its interim dividend by 11 percent to 42.2 pence.

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.