BAT expects profits to ease

British American Tobacco says its profits growth is likely to slow

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Thursday, 01, Nov 2007 10:50

British American Tobacco (BAT) has reported a nine per cent rise in earnings for the first nine months of the year.

The company's reported profit from operations also increased by 19 per cent to £2,304 million during the period, but BAT stressed that its profits growth is set to slow in the coming months.

Meanwhile the world's second-biggest publicly traded cigarette maker said the growth in adjusted diluted earnings, which rose to 82p-a-share, was partially offset by the adverse impact of foreign exchange movements.

BAT generates a substantial amount of its profit in US dollars, with analysts saying that the recent weakening of the greenback against the British pound is therefore putting pressure on the maker of cigarette brands such as Dunhill, Lucky Strike and Pall Mall.

However the tobacco firm said the group's "spread of developed and developing markets" had continued to serve its shareholders well, with cigarette makers increasingly looking to expand outside western Europe as consumption of their products continues to fall in the region in the wake of higher taxes and various smoking bans.

BAT said it achieved improvements in both product mix and share in a broad range of key markets in the three months to September 30th.

The tobacco giant stressed that its key "global drive" brands achieved "exceptionally strong" volume growth of 18 per cent in the third quarter.

But warning of slower profits in the coming period, BAT chairman Jan du Plessis said: "Although the momentum of the first six months has been maintained in the third quarter, we do still expect the growth in profit from operations at comparable rates of exchange to slow in the fourth quarter, as a result of generally higher marketing spend and the timing of price increases in Brazil."