BAT trading in line but expects currency hit

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Sharecast News | 12 Jun, 2018

British American Tobacco said it was trading in line with expectations but that profit would be affected by significant currency fluctuations.

Earnings are showing good growth but if exchange rates remain unchanged there will be an 8% hit to operating profit in the first half and 6% for the full year, BAT said in a trading update.

The cigarette maker also said revenue and profit growth would be skewed towards the second half of the year as the impact of significant events unwinds, including strong volume growth in Pakistan that led to greater geographic mix dilution.

In the US, lower industry sales will affect revenue in the first half and in Japan growth in sales of tobacco heating products has slowed. Constraints on the supply of devices in Japan have lifted, paving the way for product rollouts in the second half.

BAT said its volume sales were outperforming the industry, which is heading for a 3.5% drop in volume for the year. The company’s share of the cigarette market is growing, driven by “global drive brands” including Dunhill and Lucky Strike. BAT is increasing investment in e-cigarettes and other “next generation” products for smokers after buying Reynolds in the US for £42bn in 2017 partly to pool resources for those products.

“The business continues to perform well and trading is in line with our expectations,” BAT said. “If exchange rates stayed unchanged for the remainder of the year, there would be an adverse translational impact on operating profit, on a representative basis of 8% for the first half and 6% for the full year.”

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