British American Tobacco Hit by Emerging Market Turmoil

Source from:  Reuters & The Telegraph 10/29/2015

British American Tobacco, the world's No. 2 cigarette company, reported a 6.5 percent decline in revenue for the first nine months of the year, hurt by currency fluctuations and declines in smoking rates.

Many of the currencies in key emerging market countries in which BAT operates, such as Brazil, Russia and South Africa, have been battered by the collapse in commodity prices and depreciated strongly against sterling.

That translated into lower reported sales for the tobacco group in the nine-month period.

However, when exchange movements are stripped out, revenues actually increased by 4.2pc, despite a 1.8pc drop in the number of cigarettes sold to 487 billion sticks, thanks to higher prices.

Sales volumes of the company's fast-growing "global drive brands", which include Kent, Lucky Strike, Pall Mall and Dunhill, increased by 7.2pc. Dunhill volumes increased by 4.7 per cent, Kent by 2.4 per cent, Lucky Strike by 3.4 per cent, and Rothmans by 43.2 per cent. Volume increases helped to offset decreases in Russia, South Korea, Spain, Malaysia.

Growth in markets such as Turkey, Bangladesh, Iran, Kazakhstan, Denmark and Mexico, more than offset lower volumes in Brazil, Russia, Egypt, Vietnam, and Italy.

"Our excellent market share growth was driven by the exceptional performance of our global drive brands, while the increase in revenue, at constant rates of exchange, was due to strong pricing in the majority of our markets," said chief executive Nicandro Durante.

"There will be increased marketing investment and geographic expansion of next generation products in the fourth quarter, however I remain confident that we are on track to deliver another year of good earnings growth at constant rates of exchange."

However, Mr Durante warned that trading was likely to "moderate" in the final quarter, mainly on the back of deteriorating exchange rates. Enditem