British American Tobacco upbeat despite facing headwinds

JOHANNESBURG – British American Tobacco (BAT) has said that its businesses continued to perform in line with expectations despite challenges in some of its key markets of South Africa, Japan and Malaysia.

The tobacco giant yesterday said in a trading update for the six months to end-June that the growth of the Tobacco Heating Products slowed in Japan.

It said glo, however, continued to grow and has a national share of 4.3percent.

“With device supply constraints now lifted, we are on track for further Japanese and international roll-outs in the second half. In vapour, our business continues to grow and Vype ePen3 is on track for a launch in the third quarter in the UK,” the group said.

It said its market share grew in other markets, driven by the Global Drive Brands (GDBs).

“We expect our market share to continue to grow strongly, driven by the GDBs.

“Trading in our key markets continues to reflect the trends discussed at the preliminary results in February, with the US, Pakistan, Bangladesh, Romania, Germany, Canada and Ukraine performing well and conditions remaining challenging in the Gulf Co-operation Council (GCC), Russia, South Africa, Malaysia and France,” the group said.

However, the group said adjusted revenue and profit growth was expected to be skewed to the second half.

It said strong volume growth in Pakistan following excise changes in the first half of 2017 and down trading in the GCC was expected to drive a greater first-half geographic mix dilution.

This was expected to unwind in the second half.

The maker of Lucky Strike, Pall Mall, Kent and Dunhill cigarettes said good adjusted constant currency earnings per share growth was expected to be impacted by a significant currency translation effect of about 9percent for the first half and 6percent for the full year, at current spot rates.

The group did not report earnings forecast for its half-year results but it said its volume continued to outperform the industry. BAT added that it expected full-year global industry volume to be down about 3.5percent.

In the US lower industry volume, primarily in the first quarter, was expected to impact revenue in the first half. “Share in the first half is expected to be stable following strong growth at the end of last year,” the group said.

In July last year, BAT acquired the remaining 57.8percent stake of Reynolds for $54.5 billion (R720bn) to boost its next generation products.

The group is the largest vapour company in the world and the successful completion of the Reynolds acquisition bolsters its leading position in both next generation products and combustibles.

BAT shares declined 0.41 percent on the JSE yesterday to close at R653.73.

– BUSINESS REPORT