BAT struggles as cigarette demand falls

BRITISH American Tobacco reported a four per cent fall in underlying first quarter volumes yesterday as fewer customers bought cigarettes.

The London-based group, which makes Kent, Dunhill, Lucky Strike and Pall Mall cigarettes, said 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 Indonesian cigarette maker PT Bentoel last year.

Despite falling cigarette volumes, chief executive Paul Adams said: “There was continued pricing momentum and good growth in market share, leading to solid revenue growth. We remain on track for the year.”

The revenue growth was driven by strong price increases and the impact of favourable exchange rates, the company said.

However, all regions saw volume declines after stripping out Bentoel’s sales, apart from the Americas which saw flat volumes. Its top four brands managed to buck the trend, led by Dunhill which saw volumes up 24 per cent helped by growth in Brazil.

The company’s shares fell 1.5 per cent yesterday closing at 2,107.5p having dropped almost eight per cent since early March.