British American tobacco reports strong sales

British American Tobacco, maker of Lucky Strike and Kent cigarettes, said yesterday that sales strengthened in the first nine months of the year thanks to a string of acquisitions.

Sales volumes climbed two per cent to 533 billion cigarettes in the nine months to September, compared with the same period of 2008, BAT said in a trading update.

BAT became the market leader in Denmark and Norway after buying Skandinavisk Tobakskompagni’s cigarette businesses for £2.06 billion in 2008. That was followed by the acquisition of Turkish group Tekel.

“Group revenue for the nine months grew strongly, driven by the continued good pricing momentum and volume growth from the acquisitions made in the middle of last year,” BAT said in a statement.

It added that sales were also boosted by the more recent acquisition of an 85 per cent stake in Indonesian group Bentoel in June.

The group has shrugged off the impact of the economic downturn but admitted that sales weakened in a number of regions.

“This strong performance was achieved against deteriorating trading conditions, with industry volumes lower in a number of markets including Japan, Russia, Brazil, Italy and South Africa, as well as a decline in the premium segment in the third quarter,” BAT added.

“In some markets, particularly in Central and Eastern Europe, there was down-trading to illicit trade as a result of excise increases, affecting the low price segment.”

BAT earlier this week announced plans to close a factory in Denmark in 2011 with the loss of 466 jobs, citing falling demand and high costs.

The company’s Danish subsidiary, BAT Denmark, said it would shut the site in Soeborg, northern Denmark – which produces 12 billion cigarettes a year – and shift its production to other sites in Europe.

It cited a fall in tobacco consumption in Europe and high costs at the Danish site, which it bought from a Danish-based tobacco company in July 2008.

BAT said yesterday that “the group continued to address its cost base and, among other initiatives, started the consultation process with a view to closing the Soeborg factory in Denmark”.