British American Tobacco expects volumes ahead of industry

British American Tobacco posted a pre-close trading update for its first half on Wednesday, with the board saying the business continued to perform “very well”, in line with expectations.

The FTSE 100 firm said first half revenue was expected to benefit from “good pricing”, with first half volumes lapping a strong prior year comparator and impacted by the phasing of shipments in a number of key markets, including Pakistan.

Full year volume was expected to outperform the industry, which BAT’s board anticipated would be down around 4%.

“We expect our market share to continue to grow, driven by the ‘global drive brands’ (GDBs),” British American Tobacco’s statement read.

“Trading in our key markets continues to reflect the trends discussed at the preliminary results in February with Canada, Romania, Bangladesh and Ukraine performing well and conditions remaining challenging in Brazil, South Africa, Malaysia, France and the UK.”

The performance of BAT’s ‘heat not burn’ tobacco vaporiser product ‘glo’ in Sendai, Japan continued to exceed board expectations, and the company was on track for further Japanese and international rollout in the second half.

In vapour, BAT’s share growth in Western Europe continued, and the board said it was making “encouraging progress” with the rollout of Vype Pebble.

A city test of the Vype e-Pen III remained on track for Q4.

“As previously stated, profit growth is expected to be weighted to the second half of the year, mainly due to the timing of volume shipments, as well as the phasing of NGP investments and marketing spend.

“If exchange rates stayed the same for the remainder of the year, there would be an adverse transactional impact on operating profit of 2% for both the first half and the full year.

“For translation, this would be a tailwind on operating profit of approximately 13% for the half year and 7% for the full year.”

First half earnings per share were expected to benefit from a “significant” translational foreign exchange tailwind of around 14%.