Thursday July 26, 05:55 PM
BAT profits climb in second quarter
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LONDON (AFP) - British American Tobacco (LSE: BATS.L - news) , the cigarette maker, posted a modest rise in second-quarter net profits on Thursday but warned of slowing growth later this year.
BAT's net profit advanced by 6.8 percent to 584 million pounds (872 million euros, 1.19 billion dollars) in the three months to June 30, 2007. That compared with 549 million pounds in the same period of 2006.
Sales declined by 0.7 percent in the second quarter of this year to stand at 2.493 billion pounds, BAT added in an interim earnings release.
The cigarette maker said "significant" taxation increases in a number of key markets, combined with a rise in spending, means that the strong first-half profits performance would not be repeated in the second half.
"As a result of global drive brand growth and improved pricing, British American Tobacco has had a strong six months, despite the substantial impact of foreign exchange," added chairman Jan du Plessis in the statement.
"However, there have recently been significant excise increases in a number of key markets, while the level of our investment in expanding distribution and rolling out our global drive brands is set to rise over the next few months."
As a result, du Plessis added he expected profits growth to slow in the second half of the year.
The downbeat outlook sent BAT's share price sliding 0.67 percent to 1,632.00 pence on London's FTSE 100 (news) . The capital's leading shares index fell 1.68 percent to 6,345.80 points.
Total volumes dipped 2.0 percent to 330 billion cigarettes, while the group's for key brands -- Lucky Strike, Dunhill, Pall Mall and Kent -- sold 6.0 percent more in volume terms, according to BAT.
The company reported profit growth in all regions except America-Pacific (002790.KS - news) , mostly as a result of ongoing difficult trading in Canada.
A succession of duty hikes in the country has lead to a surge in illegally sold cigarettes, denting volumes, while smokers are also choosing cheaper, less profitable brands.
BAT's results statement made no mention of moves in Europe to ban smoking in public spaces.
On July 1, 2007, smoking in enclosed public spaces was outlawed in England, covering offices, factories, pubs and bars, but not outdoors or in private homes.
England was the last part of the United Kingdom to go smoke-free: smoking was banned in enclosed public places in Scotland on March 26 last year and was outlawed in Wales on April 2 and Northern Ireland on April 30.
In recent years, other countries which have also banned smoking in enclosed spaces include Ireland, Italy, Malta, Norway, Spain and Sweden.
Aside from Europe, however, BAT also has a strong presence in Africa, the Asia Pacific, Latin America and the Middle East.
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