British American Tobacco PLC (LON:BATS) shares rose this morning as the weakness of sterling helped it report higher first-half sales and profits, even though cigarette volumes continued to decline as people smoke less.
The FTSE 100-listed firm saw its revenue rise by 15.7% to £7.7bn in the six months to 30 June, up from £6.9bn a year earlier, helping adjusted profit to increase by 15.8% to £2.8bn.
Excluding the gains from a weaker pound, the maker of brands Dunhill and Lucky Strike said sales rose by 3.5%, although group cigarette volume fell 5.6% to 314 bn against a strong prior year performance.
READ: British American Tobacco benefits from weaker pound but volumes hit by shipment delays
The firm highlighted continued excellent performance in Next Generation Products, with its Tobacco Heating Product, glo, reaching an estimated 8% market share in Sendai, Japan.
In early morning trade, BAT shares were up 1.9%, or 109p at 5,425p.
In an initial note to clients, analysts at UBS said: “BAT delivered a solid organic performance in H1 despite volumes declining -5.8% organically (vs consensus expecting -4.9% and UBS -6.2%) as this was more than offset by strong price/mix +8.3% (UBSe +6.4%).”
UBS reiterated a ‘buy’ rating and 5,670p price target on BAT shares.
“Exciting times” for the tobacco group
BAT also reiterated that it expected its full-year profit growth to be weighted to the second half of the year.
The firm said it completed the takeover of Reynolds on July 25 2017, for a total consideration estimated at £41.7bn for the remaining 57.8% of the US tobacco firm not already owned by the UK-listed group.
Richard Burrows, BAT’s chairman said: “These are exciting times for the Group. In the first six months of 2017, the combustible business continued to perform well, against the backdrop of a strong volume comparator.
“The performance of glo continues to exceed expectations, with new market launches showing encouraging early signs. “
He added: “We remain confident of delivering another year of good earnings growth at constant rates of exchange."
The firm hiked its interim dividend by 10.1% to 56.5p per share, up from 51.3p a year earlier.
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