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Net income climbed to 599 million pounds ($1.18 billion), or 29.73 pence a share, in the three months ended March 31, from 495 million pounds, or 24.06 pence, a year earlier, London-based BAT said today. That beat the 559 million-pound median estimate of six analysts. Revenue rose 14 percent to 2.54 billion pounds. BAT shares led gains in the benchmark FTSE 100 index after the pound's decline against currencies from the euro to the Brazilian real added 54 million pounds to operating profit. The cigarette maker has also exploited smokers' switch to higher- priced brands such as the ultraslim Kent Nanotek in Russia. A 12- month, $42 billion wave of tobacco mergers reduced competition, enabling companies to raise prices for their costliest brands. ``A lot of their earnings come from outside the U.K. and we're beginning to see the benefit of the pound's decline against the euro and several emerging-market currencies,'' said Jane Coffey, head of equities at Royal London Asset Management, which oversees $63 billion and owns BAT stock. ``These are very good results.'' BAT gained as much as 59 pence, or 3 percent, to 1,997 pence in London trading and was up 43 pence to 1,981 pence as of 11:04 a.m. local time. The stock has tripled in the past five years, and the shares gained 38 percent in 2007. Currency Swings Foreign exchange gains will probably ``moderate'' as the year goes on, Chief Financial Officer Ben Stevens said on a conference call today. All the currencies BAT generates sales in are stronger against the pound than at this time last year, with the exception of the U.S. dollar, South African rand and Venezuelan bolivar, spokesman Michael Prideaux said. In the first quarter, the pound declined about 8 percent against the euro, and 2 percent against the Brazilian real. Shipments of BAT's four main international brands -- Kent, Lucky Strike, Dunhill and Pall Mall -- increased 6 percent in the first quarter. That compares with a 10 percent gain last year. The total volume of cigarettes sold rose 1 percent, and Prideaux said BAT would be ``very happy'' to continue at that pace for the rest of the year. That ``may be tough to do'' because sales are likely to suffer if the cigarette maker succeeds in raising prices. Last year, overall volumes declined 1 percent. Declining Consumption Tobacco consumption in western Europe has been falling 1 percent to 2 percent a year because of higher taxes, prohibitions on advertising and smoking bans. That has spurred BAT to cut production capacity in countries such as the U.K., where the company no longer has any factories. Chief Executive Officer Paul Adams said today the company is experiencing ``good momentum'' in raising prices in Europe, adding that BAT has seen no evidence of a consumer slowdown. Competition from Philip Morris International Inc., the maker of Marlboro, has not intensified since that company was split off from Altria Group Inc. in March, he said on the conference call. BAT agreed to buy most of Skandinavisk Tobakskompagni A/S, the maker of Prince cigarettes, for $4.1 billion in February, to gain about 60 percent of Scandinavia's cigarette market. The U.K. company also agreed that month to buy Turkey's Tekel for $1.7 billion, giving it 36 percent of that country's industry. BAT saved 1 billion pounds in 2007 after reducing the number of plants it operates by a third to 47 in the past five years. The maker of Peter Stuyvesant said in February it aims to cut a further 800 million pounds a year by 2012. Health Warning Adams said BAT wants to keep its 42 percent stake in Reynolds American Inc., which reported a 54 percent gain in first-quarter profit on April 30, led by higher prices for Camel cigarettes. Tobacco use will kill 1 billion people this century, a 10- fold increase over the previous 100 years, unless governments in poor nations raise taxes on consumption and mandate health warnings, the World Health Organization said in February. BAT was started in 1902 to settle a trade war between U.S. and U.K. cigarette makers and once owned companies from American retailer Saks Fifth Avenue to British insurer Eagle Star. Geneva- based Cie. Financiere Richemont SA, the world's largest jewelry maker, and Remgro Ltd. together control about a 30 percent stake and said in November they would mull spinning off the holding. © Copyright 2006 by CigarettesOn.Com |
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