British American Tobacco H1 Profit Declines; Sees Earnings Growth Ahead

(RTTNews) - British American Tobacco Plc (BTI, BATS.L) reported Wednesday lower profit in its first half as revenues were hurt by reduced cigarette volumes and negative currency impacts, despite the continued growth of the Global Drive Brands. Looking ahead, the tobacco company said it remains on track for another good performance, and that it is confident of high single-digit earnings growth at constant rates of exchange.

Profit before taxation for the six months was 2.614 billion pounds, lower than last year's 2.991 billion pounds. The profit attributable to owners of the parent declined to 1.747 billion pounds from the previous year's 2.040 billion pounds, with earnings per share decreasing to 93.1 pence from 106.1 pence last year.

Adjusted earnings per share was 101.8 pence, down from 109.1 pence in the previous year.

Profit from operations was 12 percent lower at 2.458 billion pounds, and adjusted Group profit from operations decreased 9 percent.

Tight control of costs resulted in a 30 basis points improvement in operating margin to 39.2 percent, despite absorbing transactional exchange losses.

Revenue for the period declined 10 percent to 6.798 billion pounds from 7.572 billion pounds last year as good pricing and improving volume were more than offset by adverse exchange rate movements. On a constant currency basis, revenues increased 3 percent.

Group cigarette volume was 331 billion, a decline of 0.4 percent. The company said its cigarette market share continued to increase in its key markets, led by good market share growth of the Global Drive Brands, which grew volume by 5.7 percent.

Total tobacco volume, including cigarettes, edged down 0.5 percent to 344 billion equivalent sticks. Fine Cut volume dropped 1.3 percent, driven by market declines in Western Europe.

The company noted that strong growth in emerging markets impacted its price-mix. The underlying business performance, measured at constant rates of exchange, was good, despite the impact of transactional gains and losses in operations, it said.

Further, British American said its Board has declared an interim dividend of 47.5 pence, a 6 percent increase on last year, to be paid on September 30.

Looking ahead, Chief Executive Nicandro Durante said, "We are on course to achieve another good set of results in 2014. We are consistently growing our market share and we continue to improve our volume performance, driven by our Global Drive Brands… Pricing remains on track, with the timing of price increases, compared with 2013, more weighted towards the second half of the year. .. I remain confident that with our strong regional performances, proven strategy and powerful brands, we are set to deliver another year of good growth." In London, British American shares are currently trading at 3,545.50 pence, down 22 pence or 0.62 percent.