Cigarette Industry News

Published on August 26th, 2011 12:08
British American Tobacco

British American Tobacco reported unexpected profits due to Japanese tsunami

The second-largest tobacco company in the world, British American Tobacco (BAT), managed to gain some ground from the devastating Japanese tsunami, reporting £50 million of additional profits and shipping additional 2 billion cigarettes to Japan.

Michael Prideaux, BAT director of regulatory affairs, stated that after the earthquake Japan Tobacco had to put on hold production and BAT ended up with massive benefit from that. The company held 11 percent of Japanese tobacco market at the end of 2010, and after the tsunami this share rose to 20 percent. Prideaux said they understand that JP will regain most of the lost share, but they hope to retain a part of it. The additional profits contributed to the 2-percent growth of BAT revenues in the first six months to July, reaching £7.44 billion, with pre-tax earnings up by 22 percent, reaching £2.79 billion.

Sales volumes decreased 1 percentage point to 344 billion units, but the rate of decrease was slower that during the second quarter compared to 1.8% decline reported in the first quarter. BAT director of regulatory affairs said the decline slowed as the economies have been rising from the recession and the company obtaining market share. He said that with the stable UK economy it is hard to imagine that many countries still cope with economic crisis.

After a price war with Imperial Tobacco in Spain, British American Tobacco admitted earnings in Spain decreased, despite Prideaux stated BAT market share went up by 1% accounting for 12% of the market.

Imperial Tobacco’s performance affected by slow recovery

The weak economy recovery has affected the performance of Imperial Tobacco, as the tobacco giant admitted sales of drive brands fell during the last quarter.

The cigarette maker’s shares fell after the shipments of its major brands – West, Davidoff and Gauloises Blondes lost 2 percent during the nine months to July versus 5 percent in the first half-year. Nevertheless, investors obtained unexpected profit from Imperial Tobacco division in Spain where the group cut predicted profit erosion after a price war. The company stated it forecasted operating profits to lose £70m versus previous expectation of £110m. The revised profit drop resulted from the price increase implemented by Imperial Tobacco and major rival in Spanish market, British American Tobacco.

The company confirmed it is still on track to meet expected profits as revenues grew 2%, or 4% excluding Spanish market. “We boosted sales of our global drive cigarette brands, including Davidoff, West, and Gauloises Blondes with strong performances in developing markets and we as well reached further magnificent growth with JPS,” stated Alison Cooper, Imperial Tobacco’s CEO.

In the United Kingdom, Imperial Tobacco reported growing sales of less expensive brands which had ensured the company’s market share despite “the cigarette market has faced declines after the March tax hike.”

By Kevin Lawson, Staff Writer. Copyright © 2011 All rights reserved.

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