LONDON -British American Tobacco PLC (BATS.LN) Wednesday posted an accelerating decline in cigarette volumes for the first quarter as lower consumer spending in the global economic downturn hit sales of its cigarette brands.
“Our consumers are clearly finding economic conditions difficult, and volumes suffered as a result of market size declines,” said Chief Executive Paul Adams in a statement.
The London-based tobacco company said in a trading update that its revenue growth in the three months to March 31 was “solid”, despite a 1% drop in cigarette volumes. Stripping out acquisitions, volumes were 4% lower, compared with a 2.4% drop in the previous quarter.
The revenue growth was driven instead by strong price rises and the acquisition of PT Bentoel in Indonesia in June last year. Revenue has benefited further from the impact of exchange rates, the company said.
“There was continued pricing momentum and good growth in market shares, leading to solid revenue growth,” added Adams. “We remain on track for the year.”
The volume figures were a little softer than expected, said Nomura analyst David Hayes. He had expected a volume drop of about 3.2%, given difficulties in Turkey, Brazil and Japan. He is still confident however that volumes will improve as the year progresses.
The company’s shares remained flat at 2140 pence at 0715 GMT having dropped almost 8% since early March on fears of stagnating volumes. The company said in February that the worst of the recession had passed as it posted a 10% rise in full-year profit.
The company said Wednesday it had achieved a good performance despite lower industry volumes in a number of important markets, such as Japan, Brazil, Russia, Romania and Turkey.
It said rising levels of unemployment, together with increases in excise had hit the premium segment, particularly in Central and Eastern Europe, while down-trading to illicit cigarettes had hit the low-price segment.
The company said that despite these difficulties, it had grown its market share compared with the previous quarter, while volumes of its four key brands-Dunhill, cigs4us.biz/lucky-strike-cigarette, cigs4us.biz/kent-cigarette and cigs4us.biz/pall-mall-cigarette-grew 6%.
By Michael Carolan
Of DOW JONES NEWSWIRES, APRIL 28, 2010