BAT’s volume up 3.6 percent
British American Tobacco’s cigarette volume during the three months to the end of March, at 158 billion, was said by the company to be increased by about 3.6 percent on that of the first quarter of 2015, 152 billion. Organic growth was put at about 2.4 percent – from 152 billion to 156 billion.
‘Excluding the effect of inventory movements in the comparator period, like for like volume was up by 1.1 percent demonstrating the strength of the portfolio,’ BAT said in an interim management statement issued today. ‘Volume increased in a number of markets including Ukraine, Middle East, Bangladesh, Indonesia, Russia, Turkey, Vietnam, Japan, Romania, France, Spain and Mexico. This more than offset lower volume in markets including Pakistan and Malaysia, which were impacted by significant excise led price increases.’
Global Drive Brand volume increased by 10.5 percent. ‘Dunhill increased by 5.5 percent, as growth in Indonesia and South Korea more than offset lower volume in Malaysia, BAT reported. ‘Kent was 9.7 percent higher driven by growth in Chile, Turkey and Japan. Lucky Strike was up by 12.6 percent, due to higher volume in Colombia, France and Italy. Pall Mall was lower by 5.1 percent as growth in a number of markets including Venezuela, Poland and Mexico was more than offset by lower volume in Pakistan, and following the migration to Rothmans in Italy. Rothmans built on an exceptional 2015 with further volume growth of 49.4 percent in the quarter, driven by Ukraine, Russia, Italy, Turkey and Algeria.’
BAT’s market share was said to have been up by 0.2 of a percentage point on a strong performance in 2015, as growth in Ukraine, Indonesia, Turkey, Russia, Bangladesh, Philippines and Japan more than offset lower market share in Brazil, the countries of the Gulf Co-operation Council and South Korea.
Volumes were increased in three of the company’s four regions: from 49 billion to 50 billion in its Asia Pacific region; from 23 billion to 26 billion in its Western Europe region; and from 51 billion to 54 billion in its Eastern Europe, Middle East and Africa region. They were down in its Americas region: from 29 billion to 28 billion.
Meanwhile, the company’s total tobacco volume, including the volume of tobacco products other than cigarettes calculated as cigarette stick equivalents, increased from 158 billion to 163 billion.
The company reported also that it had strengthened its new generation products business with the recently-completed acquisition of Ten Motives in the UK. ‘Vype continues to perform well, growing market share in the UK and delivering ahead of expectations in Germany, France, Poland and Italy,’ it said. ‘The integration of CHIC, our e-cigarette business in Poland, is on track, with Vype volume benefitting from the CHIC distribution network. Test market results of glo iFUSE, our first tobacco heating device, in Romania are exceeding expectations with distribution expanded across Bucharest.’
Group revenue for the three months to the end of March was up by 7.5 percent at constant rates of exchange or 6.1 percent on an organic basis. Price/mix was nearly 4 percent, with the impact of exceptional pricing in high inflation markets being offset by increased adverse geographic mix.
At current rates of exchange, revenue was up by 1.7 percent as movements in the majority of the Group’s key trading currencies relative to the same period last year adversely impacted reported revenue.
Commenting on the interim statement, Joshua Raymond, market analyst at XTB noted that BAT had announced a like for like growth in cigarette volume of 1.1 percent. ‘The firm saw solid growth in volume sales across a number of important territories including Russia, Turkey and Indonesia which helped to offset lower volumes in Pakistan and Malaysia, which was impacted by higher excise led price increases,’ he said.
‘The firm saw revenues grow by 7.5 percent at constant rates of exchange but once current exchange rates are shown, revenues drop to a mere growth of 1.5 percent, showing just how much the company has been effected by negative FX [foreign exchange] moves. The firm also warned that if FX moves continue as they have been, its profits would be impacted to the tune of seven percent given how much it relies on such a broad geographical transactional flow.
‘All in all it seems a fairly solid report sales wise but given how competitive the industry is and its own fairly open ended disclaimer that profit margins would be hit by negative FX moves, there can also be an element of lingering concern here for the firm’s full year results.’