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A first-half pre-close trading update from British American Tobacco (BAT) indicates that its volumes continue to outperform the declining cigarette market.
On Tuesday, BAT predicted that full-year global tobacco industry volume would be down about 3.5%. However, the multinational tobacco company expected its market share to continue to grow strongly, driven by its global brands portfolio that comprises Kent, Pall Mall, Lucky Strike, Rothmans and Dunhill.
BAT said its markets in the US, Pakistan, Bangladesh, Romania, Germany, Canada and Ukraine performed well, but noted conditions remained challenging in the Middle East, Russia, SA, Malaysia and France.
In the US market, where BAT’s presence was bolstered by the takeover of Reynolds America in 2017, lower industry volume in the first quarter was expected to affect revenue in the first half.
BAT said US market share would be stable. The benefit of the US tax reform would help to fund significantly increased investments in next-generation products, it said.
BAT has previously indicated that it wants to double revenue from next-generation products to more than £1bn by the end of the 2018 financial year.
It reported that although the growth of the tobacco-heating products category in Japan had slowed, the glo brand continued to grow and had secured a national share of 4.3%.
With supply constraints of tobacco-heating products having eased, BAT said it was on track for further Japanese and international roll-outs in the second half. It also expected further growth in the vapour category, and its Vype ePen3 was on track for a launch in the UK in the third quarter.
Overall, the tobacco company, which now declares quarterly dividends, indicated that trading was in line with expectations with adjusted revenue and adjusted profit growth weighted to the second half of the financial year. BAT, how-ever, warned that good adjusted constant currency earnings growth would be affected by a “significant currency translation headwind” of about 9% for the first half and 6% for the full year if exchange rates remained unchanged. – BusinessLive
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