BAT Second-Quarter Profit Rises 9.1% on Africa, Asian Markets
British American Tobacco Plc, the world's second-biggest publicly traded cigarette maker, said second-quarter earnings advanced 9.1 percent as it cut costs and increased sales to Africa and Asia.
Net income rose to 549 million pounds ($1 billion) from 503 million pounds a year earlier, the London-based company said today in a Regulatory News Service statement. The median estimate of seven analysts surveyed by Bloomberg was 506 million pounds.
Tobacco consumption in western Europe has been falling 1 percent to 2 percent a year because of higher taxes, prohibitions on advertising and smoking bans, leading cigarette makers to seek new markets such as Russia, where demand is rising. BAT Chief Executive Officer Paul Adams is also closing unprofitable plants to trim costs and bolster profit.
Second-quarter revenue increased 9.6 percent to 2.51 billion pounds, BAT said in the statement. Operating profit climbed 5.7 percent to 709 million pounds. The median estimate from analysts was 744 million pounds.
British American Tobacco shares have gained 33 percent in the past year, while the five-member Bloomberg Europe Tobacco Index has increased 26 percent.
Stock Price
The stock is the 10th-best performer in the FTSE 100 Index over the past five years, having more than doubled during that period. Per-share earnings rose 17 percent last year, more than the company's target, spurring a 45 percent gain in the stock.
In February, BAT raised its target for cost savings from plant closures and reorganization to 400 million pounds a year by 2007. The company has shut at least eight plants since 2004, cutting more than 4,500 jobs. It expects additional cost savings from improving its distribution networks.
BAT has forecast that it will sell about 1.5 percent more cigarettes this year. Volumes were 678 billion in 2005. The company's four main international brands should maintain a pace of ``high-single digit'' volume growth, Adams said on Feb. 28. Sales excluding currency fluctuations should rise 3 percent to 3.5 percent in coming years, the company has forecast.
Altria Group Inc., the maker of Marlboro cigarettes, is the world's largest traded cigarette maker. Both Altria and BAT are dwarfed by China National Tobacco Corp., which produces more cigarettes than the two of them combined.
Altria said July 25 second-quarter profit rose 1.6 percent on higher Marlboro prices in the U.S.
Twelve analysts have ``buy'' ratings on British American Tobacco's stock, while three rate the shares ``hold'' and one has a ``sell,'' according to data compiled by Bloomberg.
