Cigarette maker BAT gets a lift from US tax reforms, but runs into currency headwinds
Cigarette maker British American Tobacco (BAT), whose share price has fallen by about a quarter over the past year, managed a small rebound on Tuesday morning after issuing an upbeat trading statement.
BAT’s stock gained as much as 2.8% to R675 after the company said: "The group remains on track for another good year of adjusted constant currency earnings growth, on a representative basis, with the benefit of the US tax reform helping to fund significantly increased investment in next-generation products."
The share price of the group, whose cigarette brands include Dunhill, Rothmans and Lucky Strike, reached a peak of R942 in November before tumbling to R620 in April.
BAT did not provide an earnings forecast for its interim results for the six months to end-June in Tuesday’s trading statement.
The statement indicated that while it was doing well measured in the local currencies of the many countries in which it sells cigarettes, measured in pounds it was not doing that well.
"Good adjusted constant-currency earnings per share (EPS) growth, is expected to be impacted by a significant currency translation headwind of around 9% for the first half and 6% for the full year, assuming exchange rates remain unchanged for the remainder of the year," the trading statement said.
The volume of cigarettes sold by the overall industry is expected to decline by about 3.5% in 2018.
BAT indicated it was doing better than its competitors at fighting the decline in numbers of cigarettes sold, saying "volume continues to outperform the industry".
BAT listed SA along with the Gulf Co-operation Council (GCC), Russia, Malaysia and France as regions where "conditions remain challenging".