Friday, October 24, 2014

British American Tobacco cigarette sales falling

British American Tobacco
 British American Tobacco reported an accelerated decline in the number of cigarettes sold, citing economic pressures on smokers around the world to rein in spending.

British American Tobacco’s shares fell after it joined other consumer goods makers that have been hit by cutbacks from cash-strapped consumers such as Reckitt Benckiser, Coca-Cola, Heineken and Nestle.

The maker of Pall Mall and Dunhill cigarettes said it sold 495 billion cigarettes in the nine months ended. Sept 30, a 1% fall from the year earlier, citing weakness in Russia, Vietnam, Brazil, Poland and Canada.

RBC Capital Markets said that the figure implied a worse-than-expected 2.2% drop for the third quarter, an acceleration from the 0.4% dip British American Tobacco reported for the first half.

The global cigarette market is expected to shrink this year as more people quit smoking or switch to e-cigarettes and as a weak global economy curbs their ability to spend.

“The trading environment remains challenging due to continuing pressure on consumer disposable income worldwide and the slow economic recovery in western Europe,” British American Tobacco said in a statement.

It added, however, that it was “on track to deliver another year of good earnings growth at constant rates of exchange”, as price increases on some brands offset competitive discounting and growth in the lower-priced segment in certain markets.

In the nine months ended Sept 30, revenue fell 9.6%, hurt by the weakening of various currencies relative to the British pound. Excluding the currency impact, however, revenue rose by 2.4%.

The company said volume sales were also being hurt by large excise-driven price increases, because many countries have been raising taxes on cigarettes in order to discourage smoking.

The World Health Organisation this month approved guidelines urging countries to increase tobacco taxes.

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