British American Tobacco posts revenue and volume growth in first quarter trading updates but warns profits are likely to come in second half of the year

Francesca Washtell
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British American Tobacco has said its profits are likely to be weighted towards the second half (Source: Getty)

British American Tobacco posted healthy revenue and volume growth in the first quarter of 2016, but has warned its profits could be weighted to the second half of the year due to the impact of currency headwinds.

The figures

Revenue at the world's second largest cigarette company increased by 1.7 per cent at current rates of exchange, or by 6.1 per cent on an organic, constant rate basis, excluding the impact of currency fluctuations and acquisitions.

BAT's cigarette volume from subsidiaries grew by 3.6 per cent to 158bn, at 2.4 per cent on an organic basis. Like-for-like volume was up 1.1 per cent, BAT said in an interim management statement for the three months to 31 March 2016.

The cigarette volumes of the company's global drive brands, which include Dunhill, Kent, Lucky Strike and Pall, grew by 10.5 per cent.

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Why it's interesting

BAT reported volume increases in a number of markets, including Ukraine, Bangladesh, Russia, Turkey, Vietnam, the UK and France.

This offset lower volumes in markets such as Pakistan and Malaysia, which were hit by significant excise-led price increases. However, there was a slight decline in the firm's performance in the Americas.

The firm's "Next Generation Products" business also continued to grow in the first quarter. BAT reported "good progress" in its expansion of e-cigarette Vype in multiple markets and launched glo iFUSE, the company's first tobacco heating device, in Romania.

However, the company has also said profit growth would be weighted toward later quarters of 2016 due to the impact of foreign exchange moves and how much the company relies on such a broad geographical flow.

BAT and Philip Morris launched a case against the EU Tobacco Products Directive at the beginning of April, in a bid to alter legislation that could increase the price of the cheapest pack of cigarettes by 70p.

What BAT said

Chief executive Nicandro Durante said:

Our momentum has continued with market share in our Key Markets increasing by a further 20 bps. Cigarette volume was up 3.6%, with our GDBs growing by 10.5%. This excellent volume performance reflects the strength of the business combined with the uplift from recent acquisitions and some benefit from inventory movements in the comparator period.

While profit growth will be weighted to the second half of the year, partly due to the impact of foreign exchange on our cost base, I remain confident that we will deliver another year of good earnings growth at constant rates of exchange.

What others have said

"All in all it seems a fairly solid report sales wise but given how competitive the industry is and its own fairly open ended disclaimer that profit margins would be hit by negative FX moves, there can also be an element of lingering concern here for the firms full year results," Joshua Raymond, market analyst at, said.

In short

BAT volumes and revenues grew in the first quarter but suffered from foreign exchange fluctuations, which could impact it heavily over the rest of the year.

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