BAT Posts Stronger 2016 Profit, Helped by Currency Moves - -- Update

By Saabira Chaudhuri

LONDON--British American Tobacco PLC reported stronger profit for the year even as the volume of cigarettes sold edged down as the owner of Dunhill and Lucky Strike pushed through price increases and saw results helped by the weak pound.

London-headquartered BAT reported 2016 profit of GBP4.65 billion ($5.78 billion) compared with GBP4.29 billion a year earlier, on revenue that was 13% higher at GBP14 billion. At constant currency, revenue rose 6.9%.

The maker of Lucky Strike and Dunhill said the volume of cigarettes sold declined 0.8% on an organic basis compared with a decline of 0.5% a year earlier and against an estimated industry decline of 3%.

BAT last month agreed to take full control of Reynolds American Inc. in a $49.4 billion deal. Buying Reynolds will give the London-based tobacco giant direct access to the U.S., 13 years after it merged its U.S. business Brown & Williamson with R.J. Reynolds Tobacco Holdings Inc. to form Reynolds American. BAT has maintained a 42% stake in Reynolds ever since, with a 10-year standstill agreement preventing it from increasing this.

The company reported its operating margin for the year declined by 0.9 percentage point to 37.2%. Stripping out currency and acquisition impacts, the margin would have improved by 1.6 percentage points, according to BAT.

BAT has been pushing hard to compete with rival Philip Morris on next generation products, spending $1 billion over the past five years. The company in December launched a Vype-branded vaping device called Pebble and has also launched a new heat-not-burn product called Glo in Japan. BAT on Thursday said its vaping business is now the world's largest, outside the U.S. where it currently operates only through its stake in Reynolds.

In the Asia-Pacific region, BAT's adjusted profit at constant currency climbed 1.3% as a strong performance in Pakistan, Bangladesh and Vietnam was damped by markets such as New Zealand, Malaysia and Japan. In the Americas, profit on this basis rose 2.8% as weakness in Brazil was overshadowed by a good performance in Canada, Peru and Venezuela. In Western Europe profit rose 7.8% while in Eastern Europe, the Middle East and Africa it was up by 5.3%.

-Write to Saabira Chaudhuri at [e-mail]

(END) Dow Jones Newswires

February 23, 2017 02:55 ET (07:55 GMT)

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