More smokers turn to BAT

IOL image smoking smoker smoke cigarette in ashtray FREE IMAGES File image: Free Images

London - British American Tobacco, the world's second-biggest tobacco company, reported a lesser-than-expected fall in 2015 revenue, as it gained market share and saw a smaller decline in cigarette volumes even as more smokers stub out the habit.

Dragged down largely by the impact of currency movements on cost of raw materials and leaf, revenue fell 6.2 percent to 13.10 billion pounds. Analysts on average expected 12.95 billion pounds, according to Thomson Reuters I/B/E/S data.

Excluding the impact of currency, the company behind Dunhill and Lucky Strike said revenue rose 5.4 percent, due to price increases.

Cigarette volume fell 0.8 percent organically, excluding the acquisition of TDR in Croatia, against an estimated industry decline of 2.3 percent, BAT said. Volume, which measures the amount of tobacco sold, fell 0.8 percent.

The company said it was well placed to meet the challenges posed by a trading environment that was expected to be difficult, going forward.

This year may be significant for tobacco makers as a new set of regulations comes into effect in the European Union and Britain plans to introduce “plain packaging,” which requires tobacco be sold in plain, drab packages. The industry has challenged both measures in court, and decisions are expected in coming months.

Read also: Tobacco titan faces $2.2bn fine

Besides, the global tobacco industry is under pressure from a growing health-consciousness, weak consumer spending, higher taxes and competition from cheaper black-market smokes and e-cigarettes.

Still, BAT's stock, like those of its consumer packaged- goods peers, has risen over the last year, outperforming the broader FTSE 100 index, as economic volatility and low interest rates led investors into stocks with reliable dividends.

BAT proposed a final dividend for 2015 of 104.6 pence, resulting in a 4 percent increase in full-year dividend.

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