BAT striking it lucky with price rises paying off

SALES of Lucky Strike cigarettes grew by 11 per cent last year, helping British American Tobacco (BAT) to a 14.5 per cent rise in profits.

The company, which also makes Dunhill, Kent and Pall Mall, saw volume sales fall 1.6 per cent, but hikes to prices meant revenues held steady and profits rose.

BAT has seen strong sales of its top four brands improve by three per cent. They now make up a third of the world’s second-largest cigarette manufacturers total sales.

The fall in sales was mainly down to western Europe, particularly difficult trading conditions in Spain and Italy. The Asia-Pacific region, BAT’s biggest driver of sales, held relatively steady despite falls in Japan and the introduction of plain packaging in Australia, which is set to be followed by New Zealand.

Sales were also affected by growth in black market trade, driven by excise taxes on cigarettes, particularly in Brazil and Mexico, and instability in Egypt.

The company’s revenues were £15.2bn, with a profit of £4.9bn.

BAT said that if it were not for adverse currency effects, revenues would be up four per cent.

BAT also said it would buy back £1.5bn of shares in 2013, following a £1.25bn buyback last year.

Analysts at Jefferies said the margins were a big surprise, well ahead of targets and consensus estimates. The buyback was also positive, they added.“We believe this (buyback) will be well received by the market and suggests a certain level of confidence behind the business looking into 2013,” the brokers said.

Shares, which have risen nine per cent in the last year, rose 0.5 per cent.