LONDON — British American Tobacco Plc, the world's second-biggest cigarette maker, posted a bumper 17 per cent rise in first-quarter earnings on Wednesday as 2008 got off to a great start which helped to boost its shares.
The London-based group which makes Lucky Strike, Kent, Dunhill and Pall Mall cigarettes, said it saw profits growth in all its regions and benefited from currency translation as the pound was weaker against most of the world's major currencies.
Chairman Jan du Plessis said 2008 had clearly got off to a great start and the group was well placed for the rest of the year helped by its wide spread of businesses in both developed and developing markets across the world.
The cigarette giant reported adjusted diluted earnings per share of 28.44 pence ($0.56 U.S.), during in the first three months of 2008, largely in line with earnings forecasts ranging from 26.4p to 29.9p with a consensus of 28.2p in a Reuters poll.
BAT shares rose 2.8 per cent to £19.92 by 0837 GMT to be the top gainer in a firmer FTSE 100 index.
“Maybe there is a consumer slowdown in Europe, but we have not seen it yet. The spread of our businesses should help protect us for the worst,” BAT spokesman Michael Prideaux told Reuters after the results.
BAT said its cigarette volumes rose 1 per cent in the first quarter, within its 1 to 1-1/2 per cent annual growth target, but its more expensive cigarettes grew faster with its premium brands up 6 per cent and its top four brands 23 per cent ahead.
“Once again, BAT has shown that it can drive price mix to offset the inherently pedestrian volumes of a tobacco business. We like the exposure to emerging markets and the best in class marketing and cost savings program,” said Citi analyst Adam Spielman.
BAT, like other cigarette groups, is seeing many western European markets declining with public place smoking bans and high excise tax, but it is seeing good growth from emerging markets such as eastern Europe, Asia and Latin America.
“We view these results as confirming the positive outlook for other international tobacco stocks as well,” said Erik Bloomquist at JP Morgan, referring to Imperial Tobacco, Japan Tobacco and Philip Morris International.
BAT gained from the weaker pound with the UK currency down against most major currencies except the dollar and rand, with the euro 11 per cent firmer over the last twelve months.
The currency effect helped boost BAT earnings by 7 percentage points out of the total 17 per cent growth which is ahead of its medium-term “high single-digit” percentage target.
Group operating profits rose 18 per cent to £807-million boosted by strong results around the world from countries such as Russia, Pakistan and Turkey, with the only poor areas being Germany hit by illicit trade from eastern Europe and the Czech Republic from higher excise taxes.
BAT shares have outperformed the FTSE 100 index by almost 30 per cent over the last 12 months and trade on 15.7 times forecast 2008 earnings, just below rival Imperial Tobacco on 16.2 times.
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