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BAT Confronts Dying E-Cigarette Dilemma With Charge-on-the-Go

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BAT Confronts Dying E-Cigarette Dilemma With Charge-on-the-Go

British American Tobacco Plc plans a version of its Vype e-cigarettes with longer-lasting battery power as the tobacco industry confronts an issue that has plagued mobile-phone makers: keeping devices lit up.

Vype eSticks, which will go on sale in the UK in August, can be continuously charged via the packaging, which users plug in overnight. BAT gave details on the product today as the owner of the Lucky Strike and Dunhill cigarette brands reported a 9 per cent decline in first-half earnings.

“One of the problems with small batteries in small e-cigs is that the battery power disperses over time quite quickly,” Kingsley Wheaton, BAT’s director of regulatory affairs, said in an interview today. “Charging-on-the-go means every puff is like the first puff.”

Tobacco companies are in a race for market share in a growing market for lower-risk nicotine products after dealing with declining tobacco consumption for years. Imperial Tobacco Group Plc got a lead in the category when it snapped up the world’s largest e-cigarette company Blu by agreeing to acquire assets related to Reynolds American Inc.’s takeover of Lorillard Inc. Philip Morris International Inc., which plans a device that heats tobacco rather than burns it, said last month cigarette makers are at the start of a “transformational process.”

Vaping Triples

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The use of e-cigarettes has tripled over the past two years in the UK, a study by anti-smoking lobby ASH found, with about 2.1 million Britons now using the devices. The e-cigarette market is expected to be worth around $6 billion globally by the end of 2014 and $51 billion by 2030, according to Euromonitor data.

BAT’s first-half earnings adjusted profit from operations declined to £2.67 billion, as weakness of currencies against the pound reduced revenue from abroad, the London-based company said in a statement today. That compares with the £2.66 billion estimate of nine analysts surveyed by Bloomberg News. Excluding currency fluctuations, profit rose 4 per cent.

BAT is the latest UK company whose earnings were hurt by the pound’s 12 per cent appreciation against a basket of 10 developed-nation currencies over the past year. That impact will wane in the second half of the year, Berenberg Bank analyst Erik Bloomquist said by phone.

‘Robust’ Figures

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Today’s figures “are robust and even slightly better than expected on volumes,” he said. “With the currency effect moderating, they are well on track and there’s even a potential for the full year to be slightly better than currently anticipated.”

The tobacco industry is consolidating amid a slump in demand for cigarettes after decades of anti-tobacco campaigning and public-health bans. Reynolds American Inc., 42 per cent owned by BAT, this month agreed to buy Lorillard Inc., leaving the US tobacco industry with two main competitors. BAT reiterated it will fund $4.7 billion of the Lorillard acquisition, allowing it to maintain its Reynolds stake and access to the US tobacco industry.

The company gets as much as 8 per cent of profit from Russia, which is facing international pressure regarding its annexation of Crimea. European Union governments agreed yesterday on their most sweeping sanctions against that country to date, with measures affecting industries such as banks and oil. BAT hasn’t yet seen an effect on its business, BAT’s Wheaton said.

“If the sanctions continue to be tightened and become more all-encompassing, then increasingly that would worry us,” he said. “We keep a watchful eye on it and quite frankly, given that we have big businesses in Russia and Ukraine, we’d rather the situation is solved through diplomacy.”

Bloomberg News, edited by ESM

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