American brands lifted by UK sales: Surging cigarette sales inflate increase in group's profit

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The Independent Online
THE TIMING of the British Budget distorted the results of American Brands, the US conglomerate whose products include Benson & Hedges cigarettes, Titleist golf balls and Whyte & Mackay whisky. It yesterday reported profits of dollars 164m ( pounds 110m), up from dollars 151m in the same quarter last year.

The profits were ahead of market expectations, with international tobacco, distilled spirits and the golf businesses all making record operating profits, but surging volumes of cigarette sales in the UK, as a result of changes between last year and this in the timing of the Budget, distorted the figures.

Volume sales of cigarettes by the UK subsidiary, Gallaher, were up by 44 per cent in the second quarter compared with the same quarter in 1993.

Gallaher is Britain's biggest tobacco company, with a 40 per cent share of total cigarette sales. 'Although Gallaher continues to contend with intense competition, we are encouraged by its recent performance, in spite of distortions related to the change in timing of the UK government Budget,' American Brands said. It added that shipments of Benson & Hedges cigarettes to the former Soviet Union rose strongly during the quarter.

In the US, cigarette market share increased from 6.9 per cent to 7.2 per cent during the first half for brands owned by the American Tobacco Company subsidiary. Profits were down 23 per cent for the second quarter, however, compared with the same period the year before when price wars broke out as premium brands, led by the rival Marlboro, battled to regain market share that had been lost to cheap discount brands. In April, American Brands agreed to sell American Tobacco to BAT Industries for dollars 1bn but, while awaiting regulatory clearance, the division's earnings are still being consolidated into the parent figures.

The sale of American Tobacco is the biggest single deal in a continuing restructuring of American Brands that has seen several disposals and acquisitions during the past few years.

In June 1993, American Brands acquired the Benson & Hedges European trademark from BAT. Last year Whyte & Mackay, a subsidiary of Gallaher, completed the acquisition of Invergordon Distillers Group and last month Gallaher announced the sale of Dolland & Aitchison spectacles group for dollars 146m.

American Brands is the second- largest spirits company in the US and one of the top three Scotch whisky companies in the world.