BAT’s nine-months’ volumes up

British American Tobacco’s cigarette volumes during the nine months to the end of September, at 497 billion, were increased by 2.2 percent on those of the nine months to the end of September 2015. Excluding the effect of acquisitions, the increase was 0.9 percent.

According to an interim management statement posted on the company’s website, volumes were increased by 10.1 percent in its Western Europe region, by 5.1 percent in its EEMEA (Eastern Europe, Middle East and Africa) region, and by 0.6 percent in its Asia Pacific region. Volumes were down by 7.4 percent in its Americas region.

Total tobacco volumes, incorporating OTPs calculated as stick-equivalents, were increased by 2.0 percent to 515 billion.

For the three months to the end of September, BAT’s volumes were flat at 165 billion, or down by 1.3 percent on an organic basis. Total tobacco volumes, at 171 billion, were down by 0.2 percent.

BAT said that higher volumes in a number of markets, notably in Ukraine, Bangladesh, Russia, Vietnam and Turkey, had been partly offset by industry declines in Pakistan, Brazil and Venezuela.

Market share was up by 0.4 of a percentage point as growth in Ukraine, Russia, Pakistan, Indonesia, Turkey, Poland, Japan, Romania, Chile and Colombia had more than offset declines in Brazil, Malaysia and the countries of the Gulf Co-operation Council. At the same time, the market share of the company’s Global Drive Brands (GDBs) had grown by 0.9 of a percentage point.

‘In the nine months ended 30 September 2016, the Global Drive Brands grew volume by 9.8 percent,’ BAT said. ‘Dunhill held market share, as good performances in Indonesia and South Korea were offset by industry declines following excise increases in Malaysia and Brazil, with an overall decline in volume of 0.8 percent. Kent’s market share was 10 bps higher, with volume up 2.9 percent driven by growth in Turkey, Russia and Japan.

‘Lucky Strike’s volume grew by 14.0 percent, following the launch in Indonesia and growth in Italy and France, with market share 10 bps higher. Pall Mall’s market share increased by 10 bps with volume up 0.5 percent driven by Venezuela, Poland and Mexico, offsetting lower volume in Pakistan, Russia and Spain. Rothmans’ market share increased by over 60 bps as volume grew by 45.6 percent driven by strong performances in Ukraine, Russia, Italy, Turkey, Nigeria and South Korea.’

Turning to next generation products, BAT said its performance during the first nine months of the year had been ‘very encouraging’.

‘In the UK, vapour market retail share, as per Nielsen, has reached 35 percent through the growth of VypeTM and the acquisition of Ten Motives,’ it said. ‘Geographic expansion continues, with the performance of VypeTM, in the markets where it is present, progressing well. Our vapour products are now present in the UK, France, Germany, Poland, Italy, Colombia, Monaco and Kuwait.

‘We are gearing up for the imminent launch of a new-to-world Vaping platform in Europe, called the Vype PebbleTM. After extensive R&D investment and a substantial programme of consumer insight generation, we believe PebbleTM will enable us to enhance the overall category and scale up consumer penetration.

‘In December of this year we will launch, in a city-test, our innovative electronic tobacco heating system. The system device will be branded GloTM and will be partnered with Kent NeostiksTM. Created by a dedicated R&D team we have extensively researched this offer on a multi-market basis and we believe GloTM offers significant advantages over existing products in the tobacco heating products category.’

Group revenue for the nine months to the end of September at constant rates of exchange, grew by 8.1 percent or 6.2 percent on an organic basis, while reported revenue increased by 10.2 percent, further enhanced by the relative weakness in Sterling against the group’s key trading currencies.

In presenting the interim statement on Friday, chief executive Nicandro Durante said that BAT had made an offer for the 57.8 percent of Reynolds American Inc. not already owned by the group. “This offer values Reynolds at $56.50 per share, a 20 percent premium to the closing share price on 20 October 2016,” he said. “Settlement is proposed to be by a mix of both $24.13 in cash and 0.5502 shares of BAT for each Reynolds share. We are proud of the group’s track record of consistent delivery for shareholders and bringing these two great companies together would further strengthen that delivery in the future.”

Meanwhile, Durante said that BAT had performed well during the first nine months of the year. “Revenue at constant rates of exchange and cigarette volume both increased, driven by organic growth,” he said. “The excellent momentum of our Global Drive Brands continued, driving an increase in group market share. We have made significant progress in our Next Generation Products, both in terms of geographic rollout and product development. The on-going transactional foreign exchange headwinds on our cost base remain a challenge, despite the translational tailwind as a result of recent movements in Sterling. I remain confident that we are on track to deliver another year of good earnings growth at constant rates of exchange.”