The Investment Column: BAT's Canadian deal fails to light up share price

NO ONE could accuse British American Tobacco of sitting on its hands on the dealmaking front. Just a couple of months after completing the Rothmans International takeover, it has smoked out another opportunity in Canada. The tidying up of the stake in Imasco sees BAT jettison its last financial services interests whilst giving it sole control of Imperial Tobacco in Canada. This deal in turn is expected to lead to the disposal of its Rothmans business in Canada, probably to Marlboro maker Philip Morris.

The deal was welcomed by analysts as it allows BAT access to Imasco's pounds 100m cashflow rather than just being able to consolidate the dividend payment. There should be further proceeds when BAT sells the remaining Imasco interests in retailing and property.

The deal aside, BAT's first-half figures would be enough to make any investor reach for a gasper. Operating profits edged up by 2 per cent to pounds 736m but were down by 9 per cent on an underlying basis. Volumes fell by 9 per cent in the first half, which includes a 12 per cent drop in the second quarter. Volumes have been hit by a price hike in the US to fund the Medicaid settlement. Elsewhere volumes have tumbled due to an export tax in Brazil and weak exports in Asia. BAT is expecting year on year improvements in the second half though the 29 per cent slump in volumes in the second half in Asia Pacific looks worrying. The drift in sales towards counterfeit sources is also a trend that could prove a longer term drain on the legitimate cigarette makers. But BAT is banking on a bounce back in Asia, eastern Europe and Latin America.

On the litigation front the record has been mixed with investor sentiment knocked by the class action in the US combined with aggressive noises being made by Al Gore in the presidential election race.

Much of this bad news is already in the share price which after an 18.5p drop to 516.5p yesterday is well off its highs of last year. Assuming profits of pounds 2bn in the year to 2000 the shares trade on a forward p/e of just 10. That may look cheap but BAT will need better news on trading before the shares light up. Hold.

Start your day with The Independent, sign up for daily news emails
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific