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British American Tobacco Reveals Growth in Sales Volume

Published on July 25th, 2014 00:00

British American Tobacco (BAT), Europe’s largest cigarette manufacturer, revealed Q1 sales increase that overlooked estimates as the company postponed price boosts right up until the second half of the year. Profits at persistent exchange rates have increased by 2 % within the three months, the London-based company stated these days in a report. That corresponds to 4 % median growth estimation of 11 industry experts.

A drop in the volume of cigarettes sold improved in the quarter, even though gains from larger prices were substantially less distinct than in prior time periods. BAT, which for years has been depending upon price boosts to compensate decreasing cigarette consumption, explained that the advantage this year will be weighted toward the second half. The company didn’t offer a reason.  “We consider the less strong pricing performance in the quarter should not be a big surprise given the challenging evaluation of 8.7 % in the Q1 of 2013,” Damian McNeela, an expert at Panmure Gordon, stated in a notice.

BAT stock has fallen up to 2.4 % in London and also declined 2.3 %. The shares have progressed 5.1 % this year. The volume of cigarette sold by affiliated companies has decreased by 1 % in the quarter, BAT stated, defeating the common estimate for a 2.3 % fall. Overall tobacco volume decreased 1.1 %. Foreign exchange “continues to be an issue” for claimed results, Chief Executive Officer Nicandro Durante explained in the report. Earnings decreased by 12 % in the quarter at latest rate of exchange, affected by sterling’s toughness against foreign currencies like the Brazilian real and South African rand.

BAT is also fighting tougher government guidelines on cigarette use. The U.K. intends to demand plain tobacco packaging in the coming year, while European lawmakers have amplified the size of graphic health warnings on cigarette packages and prohibited flavored tobacco.

BAT is the owner of 42 % of Reynolds American, the Camel cigarette manufacturer that traders estimate may bid for Lorillard, whose tobacco products include Newport, Kent, and others. BAT could support finance this kind of purchase, experts at Exane BNP Paribas have stated. Durante refused to comment on whether he would assist an offer by Reynolds for Lorillard.