British American Tobacco Profit Lifted by Finance Income--Update

By Saabira Chaudhuri 

LONDON-- British American Tobacco PLC on Thursday reported strong profit growth for the year after the tobacco group was helped by strong finance income and improved profits from associates.

BAT reported a profit of GBP4.29 billion ($5.97 billion) for 2015 compared with GBP3.12 billion a year earlier. Revenue fell 6.2% to GBP13.1 billion due to currency fluctuations, but climbed 5.4% on a constant currency basis.

The maker of Lucky Strike and Dunhill cigarettes among others said sales volumes declined 0.5% compared with a fall of 1.4% a year earlier.

BAT's operating margin succumbed to currency headwinds, falling by 60 basis points to 38.1%, disappointing some analysts and sending shares down 1% in morning trading in London.

The company said it has informed the U.K.'s serious fraud office that is has appointed an external law firm to conduct a "full investigation" and into a story published late last year by the British Broadcasting Corporation that alleged that BAT bribed politicians and civil servants in East Africa. At the time, the company said it denies "the suggestion that this is how BAT operates around the world."

The company struck an upbeat tone on the current year, saying that despite a "challenging" trading environment, it believes the business "is well placed."

BAT posted finance income GBP62 million for 2015 compared with costs of GBP417 million in 2014 due to a gain tied to its investment in Reynolds American Inc. In 2014 BAT agreed to pay $4.7 billion to maintain its existing 42% stake in Reynolds after the American company decided to buy Lorillard Inc.

BAT on Thursday said it had logged a gain of $931 million (GBP601 million), reflecting the difference between the fixed price paid to Reynolds and the market value of Reynolds shares on the day of the transaction after the contract was fair valued.

BAT's share of posttax results of associates and joint ventures climbed to GBP1.24 billion from GBP719 million a year earlier.

BAT said it would continue to explore products for the growing e-cigarette market. In November, BAT began tests of a hybrid tobacco based vapor product called iFuse, which combines e-cigarette and tobacco technology. The company on Thursday said its ambition is to "lead the category world-wide."

Write to Saabira Chaudhuri at [e-mail]

(END) Dow Jones Newswires

February 25, 2016 04:21 ET (09:21 GMT)

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