BAT Cigarette Shipments Fall on Americas Consumption Decline
The quantity of cigarettes sold dropped to 523 billion from 526 billion a year earlier, the London-based company said today in a statement. That beat the 521 billion median estimate of six analysts surveyed by Bloomberg News.
Organic revenue increased 7 percent during the first nine months of the year. The company may “be facing a headwind” from currency swings during the second half, though the overall impact for the year will be “close to neutral,” spokesman Michael Prideaux said by phone.
Shipments in the Americas fell 4.5 percent, while volume in western Europe was little changed. The maker of Lucky Strike and Pall Mall cigarettes has increased prices to offset declining tobacco consumption. BAT said there are signs the economy’s impact on shipments is moderating after a “challenging” climate in the first nine months.
Sales picked up in markets including Pakistan, Malaysia and Venezuela, while the company had a “tremendous performance in Russia,” Prideaux said. BAT is also “doing pretty well” in Western Europe, he said.
BAT rose 1.5 percent to 2,896 pence at the close of London trading.
Volume excluding acquisitions and divestments fell 0.4 percent, compared to expectations of a 1.1 percent decline. The global cigarette market excluding China, which is largely closed to foreign tobacco companies, will probably shrink by 1.5 percent to 2 percent in volume this year, Prideaux said.
The shipments “were pretty good,” and better than expected, while “Western Europe was a bit of a positive surprise,” Erik Bloomquist, an analyst at Berenberg Bank, said by phone.
BAT also benefited from higher shipments to Japan after rivals were affected by the March 11 earthquake and tsunami, though the impact is “starting to unwind,” Prideaux said.
BAT this month completed its $452 million acquisition of Productora Tabacalera de Colombia S.A.S, which owns Mustang, Columbia’s second-biggest cigarette brand.
The company has said it expects to reach its profitability goal a year earlier than forecast and aims to expand margins by 0.5 percentage point to 1 percentage point each year. BAT still expects its operating margin to exceed 35 percent in 2011, according to Prideaux. The margin was 33.5 percent last year.
BAT said in February it plans to buy back 750 million pounds of shares in 2011. The company spent 622 million pounds on repurchases in the first nine months.
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