31st Jul 2020 10:02
(Alliance News) - British American Tobacco PLC on Friday posted higher interim profit as its previous year included a charge relating to a class action lawsuit in Canada, while revenue grew despite travel-related hit to cigarette volumes.
BAT reported a a GBP4.59 billion pretax profit for the six months ended June 30, up 19% from the previous year's GBP3.87 billion profit.
This was driven mostly by "charges in respect of the Quebec class action" in 2019, which amounted to GBP436 million and did not repeat in 2020. BAT was one of three tobacco companies that lost an appeal in Quebec in March 2019 against a CAD15.6 billion, around GBP8.9 billion, judgement against them in class action lawsuits that had been running for some 20 years.
The class action was brought against the wholly-owned subsidiaries of BAT, Philip Morris International Inc, and Japan Tobacco Inc in Canada. Smokers alleged that the firms did not do enough to warn them about the risks of smoking.
Revenue increased by 0.8% to GBP12.27 billion in the first half of 2020 from GP12.17 billion in the first half of 2019.
Total cigarette and tobacco heating products volume declined 6.3% to 315 billion sticks, with cigarette volume down 6.5% but THP volume up 9.1%. BAT said, however, its volume market share improved by 50 basis points in the half.
"Covid-19 led to a sustained impact on our Global Travel Retail business due to international travel restrictions, acting as a negative drag on total cigarette and THP volume of 1.1%," BAT noted.
Excluding Global Travel Retail, cigarette and THP volume declined 5.3% against an estimated industry decline of around 6%.
"While cigarette volume in Developed Markets has been largely unaffected, volume in Emerging Markets has been impacted by government mandated factory closures and sales restrictions including in South Africa, Mexico and Argentina, as well as the severity and duration of lockdowns in a number of other markets, particularly in APME. Volume was also down in Indonesia - driven by local pricing and tax - and Pakistan - as illicit trade grew," BAT added.
BAT will make its next quarterly interim dividend payment of 52.6 pence per share in August, part of its previously announced 210.4p per share for 2020 - maintained from 2019 - which will be paid in four equal instalments.
For the year ahead, BAT still expects to report annual currency adjusted revenue growth of between 1% and 3% and mid-single figure constant currency adjusted diluted earnings per share growth. A global cigarette and tobacco heading product industry volume decline of around 7% is still predicted for 2020.
BAT is also still expecting a positive outcome from its challenge to the South Africa sales ban, which is now schedules for August 2020. This ban is currently dealing an approximately GBP25 million per month blow to BAT's adjusted profit from operations.
BAT said: "The group's response to the global Covid-19 pandemic is rapidly evolving, and we expect the actions we take to develop over time as the needs of our people, our customers and society as a whole change.
"The group remains financially robust, with the directors' reiterating the commitment to the group's dividend policy of 65% adjusted diluted EPS, demonstrating the confidence in the group's ability to continue to navigate Covid-19 with the associated macro and socioeconomic challenges and uncertainty this international crisis brings."
Chief Executive Jack Bowles said: "We expect the coming months to bring continued uncertainty. Nevertheless, we will continue to invest in accelerating our strategy. Building on our excellent momentum, we are confident that we will exit this crisis as a stronger and better business."
Shares in BAT were up 1.5% at 2,697.27 pence in London on Friday morning, and up 2.7% in Johannesburg at ZAR600.85.
By Anna Farley; [email protected]
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