British American Tobacco today said it had enjoyed a strong start to 2006, but currency swings meant it would be tough to sustain such a positive performance.
The world’s second largest cigarette maker said first-quarter profits rose from £626m (€912m) to £668m (€973m) as falling cigarette volumes in Europe were offset by increases in the Asia-Pacific region and Latin America.
However shares in the firm, whose flagship brands include Kent, Dunhill and Lucky Strike, lost more than 1% after it warned that gains made from favourable exchange rates were unlikely to continue.
BAT, which last year announced the closure of its remaining UK plant in Southampton with the loss of 530 jobs, said like-for-like revenues grew 12% to £2.3bn (€3.3bn) in the three months to March 31 while underlying profits climbed 17% to £652m (€950m).
The company, which has been critical of the proposed public smoking ban in England and Wales, said the market in Italy was recovering after the introduction of a virtual ban on indoor public smoking as higher prices offset lower volumes.
Total cigarette volumes for the quarter increased 1% to 161 billion as European sales dipped from 56.7 billion in 2005 to 55.4 billion in 2006.
Chairman Jan Du Plessis said: “BAT has made a good start to 2006 with the first quarter’s results maintaining the momentum of 2005.
“Although exchange gains are unlikely to continue at the recent level as the year progresses, there in no doubt that the group is performing well.”
BAT also highlighted a recent acquisition of Conwood by its US business Reynolds American- the second largest manufacturer of smokeless tobacco products across the Atlantic – for $3.5bn (€2.8bn).
It described the deal as a “major strategic move” into a fast growing and profitable sector of chewing tobacco.