Illicit trade offsets BAT cigarette volumes in SA

The tobacco giant reported a 25% increase in adjusted diluted earnings per share to 77.27 pence for the six months ended June from 62.02 pence a year ago, principally as a result of the strong growth in profit from operations and favourable exchange movements.

Basic earnings per share were up 17% at 73.23 pence.

Group revenue increased by 24% to £6.780 billion as a result of the continued good pricing momentum, volume growth from acquisitions made in the middle of last year - Skandinavisk Tobakskompagni (ST) and Tekel - and the favourable impact of exchange rate movements, the group said.

BAT said profit from the Africa and Middle East region grew by £84 million to £336 million.

At constant rates of exchange, profit would have increased by GBP53 million or 21%, mainly driven by Nigeria, the Gulf states and the benefit of the acquisition of Tekel during 2008.

Volumes were 37% higher at 64 billion, following increases in Turkey, the Gulf states, Nigeria and Egypt, which was partly offset by a decline in South Africa.

However, BAT said it increased its market share in South Africa with the relaunched Peter Stuyvesant showing strong growth and achieving record market share, whilst Kent and Dunhill continued to perform well.

"Profit was broadly in line with last year," BAT said of South Africa.

The group declared an interim dividend of 27.9 pence per share - up 26% from 22.1 pence a year ago.

Dividends are declared and payable in sterling except for shareholders on the branch register in South Africa whose dividends are payable in rand.

A rate of exchange of GBP:ZAR = 12.95460 as at July 28, results in an equivalent interim dividend of 361.43334 SA cents per ordinary share.

This interim dividend amounts to £552 million.

The comparative dividend for the six months to 30 June 2008 of 22.1 pence per ordinary share amounted to £440 million, BAT said.

Following a review of its annual budgets, plans, current forecasts and financing arrangements, as well as the current trading activities, British American Tobacco said it had adequate resources to continue operating for the foreseeable future.

"The group has, at the date of this report, sufficient financing available for its estimated existing requirements for at least the next twelve months.

This, together with the proven ability to generate cash from trading activities, the performance of the Group's Global Drive Brands, its leading market positions in a number of markets and its geographical spread, as well as numerous contracts with established customers and suppliers across different geographical areas and industries, provides the directors with the confidence that the Group is well placed to manage its business risks successfully despite the current financial conditions and uncertain outlook in the general global economy and financial climate," BAT concluded.

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