British American Tobacco May Say Profit Rose on Prices: Outlook

Source from:  By Thomas Mulier Oct. 29 (Bloomberg) 10/30/2007

British American Tobacco Plc, the world's second-largest publicly traded cigarette maker, may say this week third-quarter profit rose on higher prices for Pall Mall and Lucky Strike cigarettes in Europe. Net income climbed 25 percent to 556 million pounds ($1.1 billion) from 446 million pounds a year earlier, according to the median estimate of nine analysts surveyed by Bloomberg. Sales gained 2 percent to 2.49 billion pounds, the survey shows. Chief Executive Officer Paul Adams said in May higher prices would fuel revenue gains this year as growth in the number of cigarettes sold weakens. Acquisitions such as Japan Tobacco Inc.'s 7.5 billion-pound purchase of Gallaher Group Plc in April have reduced the number of companies in the industry, giving those that remain more leverage to increase prices. ``We see the environment as mostly positive, especially in Europe, with a combination of pricing and an improved competitive environment,'' said Erik Bloomquist, an analyst at JPMorgan Chase & Co. in London with an ``overweight'' recommendation on BAT. A pack of Pall Mall cost 2.20 euros in Spain as of August, 19 percent more than a year earlier. Altria Group Inc. was charging 4 euros a pack for Marlboro cigarettes in Germany, western Europe's largest tobacco market, up 5.3 percent from a year earlier, according to figures compiled by Altadis SA, the Madrid-based maker of Gauloises cigarettes. Plant Closings In last year's third quarter, BAT's profit was hurt by 116 million pounds of costs for closing factories and reducing production capacity in the Netherlands, the U.K. and Canada. Altria, the world's largest publicly traded cigarette maker, said Oct. 17 third-quarter profit rose 19 percent and raised its full-year earnings forecast. Reynolds American Inc., which is 42 percent-owned by BAT, on Oct. 25 reported a 16 percent gain in third-quarter profit and also boosted its full- year earnings forecast. Tobacco consumption in western Europe has been falling about 1 percent to 2 percent a year because of higher taxes, prohibitions on advertising and smoking bans. That has spurred BAT and rivals based in the region to expand elsewhere. The U.K. company is scheduled to release the figures on Nov. 1 at 7 a.m. London time. Following is a table of median analyst estimates. All figures are in pounds except earnings per share, which are in pence. Enditem