BAT volumes dip 3 percent
LONDON (Reuters) - British American Tobacco (BATS.L), the world's second-biggest cigarette maker, posted a 3 percent dip in underlying nine-month sales volumes on Wednesday but said price rises led to "strong revenue growth."
The maker of Kent, Dunhill, Lucky Strike and Pall Mall cigarettes said third-quarter volumes fell 4 percent, similar to larger rival Philip Morris (PM.N), slightly worse than analysts had forecast, as global unemployment headed higher and as it shed low-margin cheaper cigarette business.
London-based BAT said trading conditions had deteriorated especially in Japan, Russia, Brazil, Italy and South Africa.
"Our consumers are clearly finding the current economic conditions difficult, as unemployment continues to rise," said Chief Executive Paul Adams in a third-quarter statement.
"This has led to a softening of our volumes, although I am encouraged by the growth in our global drive brands and the strong growth in revenue," said Adams, adding volumes of its top four brands grew 4 percent in the nine-month period.
BAT shares drifted down 1.3 percent to 19.65 pounds by 8:30 a.m. in a lower London market, but analysts said there would be no major changes to earnings estimates.
"We are not overly concerned with such softening volumes in Q3 as pricing remains good," said analyst Rogerio Fujimori at Credit Suisse, but added BAT's premium-priced cigarette volumes were clearly under pressure due to rising unemployment.
Spokesman Michael Prideaux said the group expected underlying volumes to be down this year and next, but was cautiously optimistic on revenue growth, which had risen as much as 14 percent in the first-half at constant exchange rates.
The company did not give a figure for nine-month revenue.
"We are confident that good pricing momentum will continue, but we will have to be careful," he said.
The fall in underlying volumes of 3 percent came after a first-half decline of 2 percent, while some analysts had looked for a 2 percent fall for the nine-month period.
BAT's Brazilian and South African performance suffered from increased illicit trade after sharp rises in excise tax, while recession hit smokers hard in Japan, Russia and Italy.
Analysts on average expect BAT 2009 earnings to rise 17.1 percent to 150.8 pence a share, according to Thomson Reuters I/B/E/S.
Overall BAT volumes rose 2 percent to 533 billion cigarettes in the January-September period, but the rise was mainly due to the acquisition of Turkey's Tekel and Denmark-based ST, in the middle of 2008, after a first-half rise of 5 percent.
(Reporting by David Jones, editing by Will Waterman)
