British American Tobacco sales down as smokers get frugal

Revenue falls almost 10% with slowdown in sales accelerating in third quarter

British American Tobacco reported an accelerated decline in the number of cigarettes sold, citing economic pressures on smokers around the world to rein in spending.

BAT’s shares fell after it joined other consumer goods makers that have been hit by cutbacks from cash-strapped consumers, such as Reckitt Benckiser, Coca-Cola, Heineken and Nestlé.

The maker of Pall Mall and Dunhill cigarettes said it sold 495 billion cigarettes in the nine months to September 30th, a 1 per cent fall from the year earlier, citing weakness in Russia, Vietnam, Brazil, Poland and Canada.

RBC Capital Markets said that the figure implied a worse-than-expected 2.2 per cent drop for the third quarter, an acceleration from the 0.4 per cent dip BAT reported for the first half.

In the nine months, revenue fell 9.6 per cent, hurt by the weakening of various currencies relative to sterling. Excluding the currency impact, however, revenue rose by 2.4 per cent.

“The trading environment remains challenging due to continuing pressure on consumer disposable income worldwide and the slow economic recovery in western Europe,” BAT said in a statement.

It added, however, that it was “on track to deliver another year of good earnings growth at constant rates of exchange”, as price increases on some brands offset competitive discounting and growth in the lower-priced segment in certain markets.

The company said volume sales were also being hurt by large excise-driven price increases, because many countries have been raising taxes on cigarettes in order to discourage smoking.

The World Health Organisation this month approved guidelines urging countries to increase tobacco taxes. – Reuters