BAT sees volumes fall but sales hold up

City A.M. Reporter
BRITISH American Tobacco, the world's No 2 cigarette maker, reported a four per cent fall in underlying first-quarter volumes but said price rises led to good sales growth and it remains on track for 2010.

The London-based group, which makes Kent, Dunhill, Lucky Strike and Pall Mall cigarettes, said that its consumers were finding economic conditions difficult and volumes suffered as a result of the decline in some markets.

Overall volumes dipped one per cent to 168bn cigarettes in the first three months of 2010 hit by declines in key markets such as Japan, Brazil, Russia, Romania and Turkey, but partly offset by the acquisition of Indonesia's PT Bentoel last year.

Despite falling cigarette volumes, Chief Executive Paul Adams said that the company's action to push up cigarette prices had helped compensate and resulted in higher first-quarter sales.
"There was continued pricing momentum and good growth in market share, leading to solid revenue growth. We remain on track for the year," he said in a first-quarter trading update.

All regions saw volume declines after stripping out Bentoel apart for the Americas which saw flat volumes, but all regions saw revenue growth at constant currency rates while growth benefitted further from the weakness of the pound.

The top four "global drive" brands saw volumes up 6 percent, led by Dunhill up 24 per cent helped by growth in Brazil.

BAT's first-quarter underlying volume fall of 4 percent compared to the world's biggest cigarette group and Marlboro-maker Philip Morris International which showed a fall of 2.3 percent and world No 4 Imperial Tobacco with a 1.4 per cent dip.

In February, BAT reported signs that global economies were starting to improve as it posted a 19 percent rise in 2009 earnings, but group underlying cigarette volumes fell 3 percent in 2009 hit by deteriorating economies and it said then they were set to fall a further 1-1/2 to 2 percent in 2010.