BAT sales take tumble in twelve countries

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The Independent Online

British American Tobacco yesterday reported declining cigarette sales in at least 12 of the countries it operates in, with the largest fall coming in France after sales were affected by an increase in tax rates.

British American Tobacco yesterday reported declining cigarette sales in at least 12 of the countries it operates in, with the largest fall coming in France after sales were affected by an increase in tax rates.

Reporting results for six months to the end of June, BAT said that although global volumes were up 3 per cent, cigarette consumption shrank in a number of its countries, including the US, Canada, Japan, Germany, France, the Netherlands, Brazil, Mexico and Indonesia. Volumes sold of BAT's key brands - Lucky Strike, Pall Mall, Dunhill, and Kent - fell 1 per cent over the half year.

With so many markets declining, BAT is looking for new customers. Yesterday the group vowed to press ahead with capturing the Chinese market despite regulatory confusion over its plans. China is the world's biggest market for cigarettes, with annual sales of 1,800 billion cigarettes.

BAT announced last week that it had approval to build its first factory in China. But since then, two Chinese state authorities have said they have not given clearance for any foreign investments. Paul Adams, the chief executive, said yesterday: "We have not said we have a deal. We have only said we have approval for a deal. There are some sizeable hurdles to overcome, including the location of the factory and our sales strategy. The negotiations continue." He added that BAT had permission to invest from the Chinese state government.

BAT's factory plans to make 100 billion cigarettes a year.

The company has suffered specific problems in Canada, where it has had to slash prices to offset tax rises and competition from cheaper brands. Profits fell 21 per cent in the first half of the year. It also warned of a potential legal blow in Canada, where the British Columbia government is trying to recover healthcare costs allegedly associated with tobacco from BAT.

While the company blamed most of the declines in volumes on tax rises, it also admitted health concerns were hitting sales. "Consumers are more aware of the health risks. But the global adult population is growing," Mr Adams said.

The effect of currency exchange also knocked profits by about £82m in the first half and will continue to damage the group's profits. Pre-tax profits rose 25 per cent to £941m, but this was helped by restructuring costs taken the previous year.

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