BAT Sees Opportunities Ahead

Source from:  Tobacco Reporter 02/25/2011

British American Tobacco was in upbeat mood earlier today when it presented its preliminary results for 2010. Journalists at a press briefing were told that the company was emerging from the recession in a stronger position than it had enjoyed when it went into it. And while it acknowledged that total cigarette volumes worldwide, excluding China, would fall this year by about two and half per cent, it said that BAT would outperform the market. Chief Executive designate, Nicandro Durante, said that while it was very difficult to predict volumes beyond 2011, he expected the current rate of decline (it was thought to be about three per cent during 2010) to fall. And he insisted that opportunities existed, particularly on those markets where prices were still relatively low. Some markets, including the Russian market, were starting to see a return to up-trading. BAT, Durante added, had a strong pipeline of innovation that last year had seen 25 successful launches, all in respect of cigarettes. The company seems not to be overly concerned with some of the regulations that often excite industry observers. In answer to a question, CEO, Paul Adams, made the point that no country had yet introduced a plain packaging bill. And while insisting that the company would fight any such proposal on the grounds of brand ownership, he was confident that BAT would not lose market share in the event of the imposition of a plain packaging requirement in Australia, the country that has come closest to introducing such a bill. And while making the point that there was no health-advantage evidence to support the introduction of bans on ingredients in cigarettes, Adams said that, in any case, a large proportion of BAT's business had to do with Virginia cigarettes, which did not use the threatened ingredients. Meanwhile, in answer to another question, Adams said that BAT was still in discussions with China and that he was hopeful that these would end positively in the not too distant future. The one major area of concern seemed to be the illicit trade, which BAT put at about 330 billion cigarettes a year. But even here the company was trying to look on the bright side. It was pointed out that Canada, where such trade had been spiraling out of control, had perhaps turned the corner by reducing the level of its illicit trade from 30 per cent to 20 per cent. British American Tobacco's global volume during the year to the end of December, at 708 billion, was down by two per cent on that to the year to the end of December 2009, 724 billion. Excluding the effects of acquisitions, volume was down by three per cent. Volume was up by two per cent to 188 billion in the company's Asia Pacific region; but down by eight per cent to 119 billion in Western Europe, by three per cent to 128 billion in Eastern Europe, by two per cent to 124 billion in Africa and the Middle East, and by one per cent to 149 billion in the Americas. The company's global drive brands (GDB) increased their combined volume by seven per cent to 208 billion, with Dunhill up by 18 per cent to 48 billion, Pall Mall up by eight per cent to 73 billion, Lucky Strike up by two per cent to 26 billion, and Kent down by one per cent to 61 billion. Across the company's top 40 markets, Dunhill's share was up by 0.4 of a percentage point, Pall Mall's share was up by 0.3 of a percentage point, Kent's share was up by 0.1 of a percentage point and Lucky Strike's share was stable. BAT's revenue during the 12 months to the end of December, at £14,883 million, was increased by five per cent on that of the 12 months to the end of December 2009, £14,208 million. Profit from operations was up by five per cent from £4,101 million to £4,318 million, and adjusted profit from operations was up by 12 per cent from £4,461 million to £4,984 million. Basic earnings per share were up by six per cent from 137.0p to 145.2p, and adjusted diluted earnings per share were up by 15 per cent from 153.0p to 175.7p. Dividends per share were up by 15 per cent from 99.5p to 114.2p. Enditem