BAT Gives Upbeat Outlook on Earnings Rise

Source from:  Thu Jul 31, 2008 By David Jones LONDON (Reuters) 08/01/2008

British American Tobacco (BATS.L: Quote, Profile, Research), the world's second-biggest cigarette maker, beat forecasts with a 16 percent rise in first-half earnings and gave an upbeat outlook brushing aside fears of a consumer slowdown. The London-based group which makes Kent, Dunhill, Lucky Strike and Pall Mall cigarettes, reported adjusted diluted earnings per share of 62.02 pence in the first six months of 2008 ahead of analysts' forecasts ranging from 60.1 to 61.1p with a consensus of 60.5p in a Reuters poll. BAT said on Thursday its cigarette volumes rose 1 percent in the first half, compared to its 1 to 1-1/2 percent annual growth target, but its top four brands were up 20 percent. "While not immune from the consequences of an economic slowdown, we can certainty look to the future with more confidence than most," said Chairman Jan du Plessis in a first-half results statement. The results were boosted by strong growth in most of BAT's regions, apart from Latin America, and also benefited from currency translation as the pound was weaker against most of the world's major currencies, which helped boost operating profits by 134 million pounds for an overall 16 percent increase. BAT spokesman Michael Prideaux told Reuters the company had not seen any sign of trading down to cheaper products around the world due to slowing economic growth. BAT, like other cigarette groups, has seen some western European markets declining with public place smoking bans and high excise tax, but has big operations in emerging markets such as eastern Europe and Asia where it has seen good growth. BAT shares rose 0.4 percent to 18.73 pounds by 9:10 a.m. after having have outperformed the FTSE 100 .FTSE index by 12 percent so far this year. They trade on 14.5 times forecast 2008 earnings, above UK rival Imperial Tobacco (IMT.L: Quote, Profile, Research) on 13.3 times, but behind the world's largest cigarette player, Philip Morris International (PMI) (PM.N: Quote, Profile, Research), at 15.6. "The Q2 results and management comments imply no obvious signs of any emerging market slowdown, which ties in with previous comments from the management of PMI at their Q2 results," said UBS analyst Jonathan Leinster. Analyst Adam Spielman at brokers Citi added, "The company says it has scoured the world to see if the slowing economies in the developed world or higher commodity and fuel prices are having any impact. The fact there is no significant impact should reassure investors." The half-year dividend rose 19 percent to 22.1p a share. Enditem