Gallaher reports 7% fall in Irish cigarette sales

Cigarette company, Gallaher, reported a 5

Cigarette company, Gallaher, reported a 5.8 per cent rise in 2004 profits on today as it looked increasingly to eastern Europe for growth in the face of falling sales in Britain and Ireland .

Irish cigarette volumes fell around 6-7 per cent after April's ban on smoking in public places.

The company, whose cigarette brands include Benson & Hedges, Silk Cut and Mayfair in Britain, has expanded into Russia, Kazakhstan and other eastern European countries.

"We are extending our footprint by moving further east and see half a dozen acquisition and start-up opportunities there," Gallaher's chief executive Mr Nigel Northridge told Reuters in an interview.

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He said despite tough trading in Germany, France, Austria and Sweden, the group grew overall volumes, sales and earnings while current trading in 2005 was in line with expectations.

The group posted 2004 underlying pretax profit of £529 million €770 million, just ahead of analysts' forecasts driven largely by eastern European growth and cost-cutting in western Europe.

Gallaher earns two-third of its profits in the declining cigarette market of the UK, Ireland, Austria and Sweden, and has been expanding rapidly in the Czech Republic, Romania, Bosnia and the Balkan region to find new growth areas.

The company makes nearly 10 percent of its profits in Russia, where it owns Liggett-Ducat, Kazakhstan and Ukraine. Volumes in those countries rose 10.3 percent and profits climbed 31.2 percent, with especially strong growth in Russia.

Mr Michael Smith said "Although Russia is growing fast, there are some worries over dividend growth and a smoking ban coming to the UK as the UK accounts for 46 percent of group profits".

Britain plans to ban smoking in most bars and restaurants by 2008.