BAT's headwinds

27 Jul 2004

The UK tobacco group hasn t sorted out all its problems with the RJR merger. Canada looks like a bloodbath. The strong pound and a likely lower than expected share buyback aren t going to help BAT either.

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British American Tobacco said that, in the first half of the year, its pretax profits rose to £941m, below the £1.1bn or so that analysts were expecting. The tobacco group also said that it expects downtrading in Canada to significantly affect its results for the year as a whole, and that the second half of the year may be negatively impacted by the pound's strength against the dollar.

In the second quarter, turnover in the AmericaPacific region , which includes Canada, fell by 15%, while ebita declined by 29%. At the group level, ebita fall by 1%, although on a constant currency basis it would have risen by 5%.

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