BAT raises prices to boost earnings

British American Tobacco raised its cigarette prices in the first half of 2011 to offset declining underlying volumes helping the group to beat forecasts on Wednesday with a 10 percent rise in half year earnings.

The London-based maker of Kent, Dunhill, Lucky Strike and Pall Mall cigarettes said the price increases helped offset a 1 percent fall in first half cigarette volumes to push six-month underlying revenue up seven per cent.

BAT, the world's second-biggest cigarette maker and most globally spread of the big tobacco groups, said its ability to raise prices even in low growth markets put it in good shape for growth for 2011.

"With continued pricing momentum, an increase in market share and the rate of volume decline moderating, we are on track for another very good year," said group Chairman Richard Burrows in a results statement.

The group posted half-year adjusted diluted earnings per share of 96.1 pence compared to a company compiled consensus of 95.1 pence. The half-year dividend set at one third of 2010's full year level, rose 15 per cent to 38.1 pence.

BAT has suffered falling volumes as smokers have switched to cheap, and sometimes illicit cigarettes as they have been hit by excise tax rises and high unemployment levels, and had seen volumes down 1.8 per cent in the first-quarter