South Africa: Acquisitions, Better Pricing Help Tobacco Giant BAT Grow Revenue 21 Percent

Source from:  Business Day 03/06/2009

Johannesburg - GLOBAL cigarette giant British American Tobacco (BAT) yesterday reported higher revenue on two new acquisitions, better pricing and an improved product mix. Remgro, an investment holding company, spun off and listed BAT towards the end of last year. Group revenue increased 21% to ?￡12bn, aided by the acquisitions of Tekel and Skandinavisk Tobakskompagni in the middle of the year as well as favourable exchange rate movements, BAT said. Revenue would have increased by 11% at constant rates of exchange. Profit was 23% higher at ?￡3,6bn. Profit from operations, at constant rates of exchange and excluding adjusting items, would have been 14% higher. However, BAT was aware that people might trade down. "Looking ahead, we remain alert to the possibilities of down-trading," said chairman Jan du Plessis. "However, our well-balanced portfolio of brands covers all major price points, while our geographic diversity further mitigates the risks for shareholders." Volumes improved 4%, with the acquisitions adding 3% to this growth. BAT's four key brands grew volumes 16%, with a quarter of this coming from brand migrations. Kent rose 18% and Pall Mall 22%. Each brand sold more than 60-billion cigarettes for the first time. Kent, which is premium priced, is now BAT's biggest brand. Lucky Strike increased 9% and Dunhill 7%. However, volume increases in Poland, Romania, Uzbekistan, Switzerland and Spain "were more than offset" by decreases in Russia, Italy, Germany, Ukraine and the Czech Republic, BAT said. Locally, profit was only slightly improved as the weaker exchange rate took its toll. In rand terms, profit growth was achieved as a result of higher prices and an improved product mix, which was partially offset by the decline in volumes. BAT said both volumes and market share declined after it terminated the Chesterfield trademark licence agreement at the end of 2007. Dunhill and Peter Stuyvesant, however, continued to deliver strong share performances, while Kent performed well after its migration from Benson & Hedges. The rebranded Benson & Hedges brand, Kent, grew volume 18% with "excellent growth in Russia, Romania, Kazakhstan, Ukraine and Chile and from new markets like Kyrgyzstan, Mongolia and Serbia". Kent also benefited from a brand migration in SA. In Japan, volumes came off although market share increased, BAT said. Dunhill improved 7%, with volume growth in South Korea, Taiwan, Australia, SA, Russia, Romania, France, Italy and Saudi Arabia. Volumes were maintained in Malaysia, which led to an increase in market share. Lucky Strike volumes were up 9% as a result of growth in Spain, Italy, France, Chile, Brazil and Argentina, which was partly offset by declines in Japan and Germany as a result of lower industry volumes. Pall Mall increased volumes 22% as it rolled out to more markets such as Pakistan, Malawi, Mexico and Belarus. It continued to grow in Turkey, Romania, Uzbekistan, Hungary, the Netherlands and Malaysia. However, this was partially offset by lower volumes in Poland, Russia, Spain, Greece and Italy. Enditem