British American Tobacco (BAT) Plc, Europe’s largest cigarette-maker, reported a further decline in shipments as smokers cut back and said that the weakness of currencies in many of its markets led to a slide in revenue.
The quantity of products sold fell 1 per cent in the nine months ended 30 September, London-based BAT said. That compared with the median estimate of ten analysts surveyed by Bloomberg News for a 0.9-per-cent drop. Revenue tumbled 9.6 per cent, 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 rouble 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-per-cent 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 email.
BAT shares fell as much as 4.2 per cent 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 per cent, excluding currency shifts, missing the median prediction for 3.2-per-cent growth.
Slow Recovery
“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 that 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 per cent 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-per-cent stake in Reynolds American Inc. after Reynolds completes its acquisition of Lorillard Inc., subject to approval by regulators.
Bloomberg News, edited by ESM
