LONDON—British American Tobacco PLC on Wednesday reported higher
first-half profit as the cigarette-maker was buoyed by investments
that helped offset currency losses.
The maker of Dunhill and Lucky Strike posted a net profit of £
2.65 billion ($4.13 billion) in the six months to June 30, compared
with £ 1.75 billion a year earlier, helped by higher finance income
and profit from associates and joint ventures.
Revenue fell 5.9% to £ 6.4 billion but was 2.4% higher at
constant exchange rates.
BAT said its results were pressured by volatile currencies and
falling cigarette volume as the company was hit by excise increases
in Australia, Russia and South Korea, but Chairman Richard Burrows
said the company "is on course to deliver an improved second
half."
BAT's cigarette volume fell 2.9% to 322 billion sticks, a
deterioration from the 0.4% decline last year. The tobacco industry
has faced decades-long volume declines.
Still, BAT was helped by income from joint ventures and
associates in the first half, which more than doubled to £ 799
million. BAT maintains a 42% stake in Reynolds American Inc.
following its acquisition of Lorillard and the American company now
accounts for roughly 20% of BAT's net profit, according to Credit
Suisse. Reynolds earlier this week reported its domestic cigarette
volume increased 5.6% for the quarter ended June 30, outpacing an
industrywide gain of 1.9%.
BAT's profit has been pressured in recent quarters by volatile
currencies, with Citigroup analysts noting that foreign exchange
knocked 13% off per-share earnings last year, warning that "2015
may be as bad."
The company reported its operating profit fell 4.6% at current
exchange rates to £ 2.35 billion.
BAT has secured approval from the British government's health
care authority to launch Voke, a cigarette-shaped nicotine inhaler
that doesn't heat liquid, use a battery or create vapor. BAT said
Wednesday that it expects to launch Voke in the U.K. by the end of
the year.
Developing cigarettes that heat but don't burn tobacco is one of
the areas that BAT has said it is focused on, although the company
hasn't yet released a product. It said Wednesday it plans to test
market one such platform this year.
The area has showed mixed success for tobacco firms. Reynolds on
Tuesday said it would stop marketing Revo, its heat-not-burn
cigarette, less than six months after introducing it, because
consumer-adoption rates failed to meet expectations. But earlier
this month Philip Morris said it plans to start offering its
heat-not-burn iQOS product--already available in Italy and Japan—in
Switzerland.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
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