British American Tobacco Earnings Report for 9 months of 2010

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British American Tobacco, the second-largest privately-owned tobacco company in the world, reported that cigarette volume shipments totaled 526 billion within the nine months to September 2010, going down by 1.3 percent versus the comparable period last year.

Dunhill cigarette sales

According to British American Tobacco Report, the company distributed 1 percent fewer cigarettes during the first three quarters of the year than during the nine months of 2009, however revenue went up due to positive currency fluctuation and acquisition of Indonesian tobacco company PT Bentoel last year.

Despite the decline in total volume, sales of the company’s major Global brands – Pall Mall, Lucky Strike, Dunhill and Kent went up by 8 percent. Sales of BAT’s four global brands rose by around 8 percent, a growth that flattered by rising consumer sales in Japan on the threshold of a large price increase caused by excise tax hike.

Organic volumes went down by nearly about three per cent in comparison to the same period a year earlier, driven by market dimensions drop and growth of black market sales in several countries. Sale volumes were as well affected by the ruined sales in Pakistan due to the horrible floods across the country. (Organic growth is growth resulting from a company’s current businesses, in contrast to Inorganic growth, which is based on various mergers and acquisitions.)

Sale volumes in Asia-Pacific region reached 141 billion, going up by 5.2 percent; Volumes in Western Europe fell by 8.2 percent to 90 billion cigarettes; volumes in Eastern Europe lost 2.1 per cent going down to 93 billion; sales in Americas went down by 0.9 percent totaling 110 billion; and volumes in Africa and Middle East region fell by 3.1 percent to 92 billion.

British American Tobacco Chief Executive officer, Paul Adams stated that trading conditions have been challenging, as industry volumes declined in a several important markets such as Romania, Pakistan, South Africa, Turkey, and Germany. In several markets, he said, there was reported down-trading tendency driven by contraband products resulting from the pressure on consumers’ available income, aggravated by significant increases in excise taxes. This especially impacted the low cost segment.

Dunhill sales grew by approximately 21 percent, in major part due to brand migrations in some markets, including Brazil and South Africa; Kent and Lucky Strike sales each went up by around two per cent; and Pall Mall’s sales rose by nearly seven per cent.

“The challenging economic environment, product price increases driven by tax rises and growing rate of unemployment have resulted in some declines in our sale volumes,” stated Paul Adams. “The recession’s effect on consumers is still there and demonstrates signs of diminishing. “However we have managed to increase market share in the most important markets, expanded the major Global Brands and reached good revenue growth.”

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