British American Tobacco revenue growth slows in third quarter

22nd Oct 2014 07:04

Revenue growth slowed in the third quarter at British American Tobacco as depressed consumer income met large tax-driven price rises, although volumes improved from 'Global Drive Brands' such as Pall Mall and Rothmans.The volume of cigarettes sold also worsened between July and the end of September, with growth in many markets, including the Middle East, more than offset by lower volumes in such markets at Russia, Brazil, Poland and Canada, mainly driven by industry-wide declines.Revenue grew by 2.4% in the nine months to 30 September, down from the 3% growth in the first half of the year, while revenue growth at current forex rates was 9.6%, versus 10.2% in the first half.The company said the trading environment remained "challenging" due to continuing worldwide pressure on consumer disposable income and the slow economic recovery in Western Europe.Chief executive Nicandro Durante explained that revenue growth came from a "slightly better" price mix, despite increased competitive pricing activity in some of BAT's key markets.Pricing is weighted to the second half of the year, the FTSE 100 group explained in its statement, although recent competitive pricing activity in some key markets, notably Australia and Malaysia, and the growth of the low-price segment have resulted in "some moderation of the improvement in price mix".Cigarette volume from subsidiaries decreased by 1.0% to 495bn, having declined by 0.4% in the first half, while the volume from BATS' Global Drive Brand cigarettes grew 6.2%, accelerating from the 5.7% growth in the first half.Of these, Rothmans enjoyed strongest growth of 37.0% with strong performances in Russia, Italy, Ukraine and the UK, slightly offset by decline in Egypt."Our volume performance reflects our broad geographic spread, increased market share and excellent growth of our Global Drive brands," said Durante."Although currency movements impacted our reported results, the group continues to perform well and we are on track to deliver another year of good earnings growth at constant rates of exchange."Volume across the cigarette industry has declined at a lower rate than last year, but is being impacted by large tax excise-driven price increases.The group suspended is share buyback from 30 July after it agreed to invest $4.7bn as part of Reynolds American's proposed acquisition of Lorillard and maintain its 42% equity position in the enlarged Reynolds American business.