Profits rose by a third to pounds 287m in the third quarter but this was mainly due to the absence of extra provisions for US tobacco settlement, which mopped up pounds 88m at the same stage last year. Profits for the first nine months were down 7 per cent at pounds 963m.
Forecasts had ranged all the way from pounds 925m to pounds 989m, reflecting difficulties in assessing the impact of a whole raft of special factors. Financial services and other trading activities still contributed pounds 34m to third- quarter profits and pounds 94m in the nine months figures.
The strong pound reduced operating profits by pounds 16m and demerger costs absorbed pounds 17m in the third quarter. Over the first nine months provisions for compensation claims in the US rose from pounds 108m to pounds 150m, exchange rates cost pounds 41m and demerger costs took a further pounds 43m but profits to date include a pounds 78m tax windfall from Brazil.
Cigarette sales were 3 per cent up in the third quarter, and the decision to resist discounting in the America-Pacific region paid off.
But the immediate prospects for a business whose fastest growing markets are in Asia, Latin America and Russia are inevitably under a cloud. The effects of the recession were felt for the first time in the latest quarter and in the chairman's own words the outlook there is now "extremely challenging".
Analysts who yesterday edged full year forecasts up to around 49p before exceptionals trimmed next year's figures down to the same figure. After falling 28.5p to 478p yesterday, the shares appear seductively cheap at only eight times forward earnings and on a prospective yield of 7.75 per cent. But all the usual reservations must apply.Reuse content