BAT Weighed Down by Currency Weakness as Smokers Cut BackTom Beardsworth
British American Tobacco Plc, Europe’s largest maker of cigarettes, reported a further decline in shipments as smokers cut back and said the weakness of currencies in many of its markets led to a slide in revenue.
The quantity of products sold fell 1 percent in the nine months ended Sept. 30, London-based BAT said today. That compared with the median estimate of 10 analysts surveyed by Bloomberg News for a 0.9 percent drop. Revenue tumbled 9.6 percent, and rose less than predicted excluding currency shifts.
A long-term decline in cigarette consumption and the weakness of currencies such as the Brazilian real and Russian ruble against the pound are weighing on BAT. That’s being only partly offset by price increases and increased market share for brands such as Lucky Strike and Pall Mall.
“A 12 percent currency headwind is sobering for companies which can’t grow in mature markets,” Chris Wickham, an analyst at Oriel Securities in London, said in an e-mail.
BAT shares fell as much as 4.2 percent to 3,320 pence in early London trading, the most since June 2013.
Volume declined in Brazil, Vietnam, Russia, Poland and Canada, the maker of the Dunhill brand said, offsetting growth in markets such as the Middle East and Pakistan. Price increases meant sales rose 2.4 percent, excluding currency shifts, missing the median prediction for 3.2 percent growth.
“The trading environment remains challenging due to continuing pressure on consumer disposable income worldwide and the slow economic recovery in western Europe,” BAT said. “Industry volume has declined at a lower rate than last year, but is being impacted by large excise-driven price increases.”
Against such a backdrop, Chief Executive Officer Nicandro Durante said the company is “on track to deliver another year of good earnings growth at constant rates of exchange.”
BAT’s four global “drive brands” -- Dunhill, Kent, Lucky Strike and Pall Mall -- increased volume by 6.2 percent after taking an increased share of their main markets.
BAT said in July that it plans to invest an additional $4.7 billion to maintain its 42 percent stake in Reynolds American Inc. after Reynolds completes its acquisition of Lorillard Inc., subject to approval by regulators.