BAT insists China plans on track

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The Independent Online
British American Tobacco yesterday insisted plans to crack the Chinese cigarette market via a joint venture with the state-owned Chinese National Tobacco Corporation were on track, despite taking longer than anticipated.</p>Martin Broughton, the chairman, said discussions were continuing "constructively" and he remained "optimistic". BAT, which has long hoped to knock Philip Morris off the world's number one spot, had hoped to finalise an agreement by the middle of this year.</p>BAT said it was still on the hunt for acquisition targets, despite ruling itself out of bidding for complete control of Italy's tobacco monopoly. "Privatising [Ente Tabacchi Italiani] as one whole entity would be less attractive than if it was privatised in parts," Mr Broughton said.</p>BAT gave itself a one-year timeframe to make a major acquisition before it said it would return surplus cash to shareholders. Mr Broughton said the group "remained flexible" about acquisition targets, keeping alive speculation that BAT might one day bid for its UK rival Gallaher. "We'd like to keep a balance between investments in the First World and the developing world."</p>The group, which became the world's second biggest tobacco group when it acquired Rothmans in 1999, sought to allay concern that a weaker US dollar would impact its full-year earnings, insisting that high single-digit growth remained achievable. To signal its confidence, BAT raised its half-year dividend by 10 per cent to 10.7p.</p>While sales in the six months to end-June fell by a heavier-than-expected 5 per cent to 380 billion sticks, BAT said it would recover ground in the second half to meet its expected volume decline of 2 to 3 per cent.</p>The group drove up sales of its four key brands ⓠLucky Strike, Dunhill, Pall Mall and Kent ⓠby 10 per cent. It said its North American subsidiary, Brown &amp; Williamson, had slightly increased its market share. Pre-tax profits for the group rose 11 per cent to £1.04bn while turnover was down slightly at £12.5bn. BAT's shares rose 3 per cent to 708.5p. </p>