* Sees single-digit core profit growth
* Adjusted EPS up 6 pct in 2013, in line with consensus
* Currency headwinds could impact this year
* Shares down 1.2 pct
By Sarah Young
LONDON, Feb 27 British American Tobacco
, the world's No. 2 cigarette maker, said it expected
single-digit core earnings growth again this year as it
continues to expand its share of a shrinking cigarette market.
BAT's core earnings rose 6 percent in 2013 as it snapped up
a bigger share of its key cigarette markets, boosted by growth
of its global brands Kent, Dunhill, Lucky Strike and Pall Mall.
"We think we'll continue to be able to deliver the high
single digit earnings per share growth," BAT's director of
corporate affairs, Kingsley Wheaton, said in an interview on
Last year, innovations such as "capsules" which can change
the taste of a cigarette to menthol drove sales in Malaysia and
other parts of Asia, while an "additive free" range of Lucky
Strikes proved popular, particularly in Germany, said Wheaton.
BAT's overall cigarette volumes declined by 2.7 percent in
2013, a less steep decline than the wider industry which shrank
by 3 percent, Wheaton said.
Big tobacco companies including BAT's rivals Philip Morris
International and Imperial Tobacco are grappling
with waning demand in a number of markets due to increasing
government regulation and more health-conscious consumers, as
well as economic weakness and smuggling.
But Wheaton said BAT's focus on its global brands, combined
with more product innovation and further tight control of costs,
would underpin earnings growth this year.
The company improved its operating profit margin by 100
basis points last year, partly through a standardisation of its
BAT posted 2013 adjusted diluted earnings per share of
216.6, up from 205.2 pence last year and in line with an analyst
consensus forecast of 216.8 pence.
Adverse currency movements in countries including Brazil,
Australia, Japan and South Africa impacted earnings by about 4
percent, BAT said. On a constant-currency basis, adjusted
earnings per share would have come in 10 percent higher at 224.7
"If the rates remained as they are today for the rest of the
year, we would indeed have another year of some currency
headwinds," Wheaton warned.
Panmure Gordon analysts estimated that currency headwinds
could depress BAT's revenue by around 11 percent this year.
SHARES OUTPERFORM FTSE
Shares in BAT traded down 1.2 percent at 3,134 pence at 1028
GMT. Britain's bluechip FTSE 100 index which was down
"I think there was a growing unease that maybe the
underlying markets would have been getting tougher for BAT so
the fact that they've come in with a robust set of underlying
numbers is quite reassuring," said Societe Generale analyst Chas
The company said it would lift its annual dividend by 6
percent to 142.4 pence per share, and confirmed a further 1.5
billion share buy-back programme for 2014.
To help secure growth in the longer term, BAT, like its
rivals, is investing in electronic cigarettes - battery-powered
metal tubes that turn nicotine-laced liquid into vapour.
These so-called e-cigarettes are gaining popularity in
markets such as Europe and the United States, with people
looking for smoking alternatives.
BAT launched its own version called Vype in Britain last
July, but did not give details of its performance on Thursday.
Earlier this month, the company became the biggest tobacco
company to show a television advert for e-cigarettes in Britain,
using the strap line "pure satisfaction for vapers" on
television, but "pure satisfaction for smokers" online.