Reynolds additional Acquisition helps Increase BAT offset fall in Cigarette Sales

British American Tobacco (BAT) managed to offset a decline in cigarette sales in most countries in 2017 by entering the US via its £41.8bn acquisition of Reynolds.

Reynolds added 36-billion cigarettes to take BAT’s global total to 686-billion in 2017, helping
it grow its volumes by 3% from 2016’s 665-billion cigarettes.

Regions where the number of cigarettes sold fell included BAT’s biggest market: Eastern Europe; Middle East; and Africa (EEMEA), which includes South Africa.

BAT said the reason its cigarette sales in the Eastern Europe, Middle East and Africa region fell to 228-billion from 236-billion was not because people were smoking less, but due to "illicit trade".

"Organic volume growth in Bangladesh, Nigeria, the Gulf Co-operation Council (GCC) and Turkey was more than offset by industry volume decline, in particular, in Ukraine, Brazil, SA and Russia, driven by excise increases and illicit trade growth," BAT said in its results statement released on Thursday morning.

The group has switched from paying dividends every six months to every three months in its 2018 financial year.

Its total dividend for 2017 came to 195.2p, a 15.2% increase on the 169.4p in 2016.
The addition of Reynolds saw BAT’s revenue jump 38% to £20.3bn.
Its after-tax profit increased sevenfold to £37.7bn — more than its revenue — from £4.8bn due to the addition of a £24.2bn "share of post-tax results of associates and joint ventures".

"This was driven by the recognition of a gain of £23bn arising on the acquisition of Reynolds, as the group is deemed to have disposed of an associate and acquired a subsidiary," the results statement said.

Regarding its different brands, BAT said the volume of Dunhill cigarettes its sold fell 5.9%, "driven by the economic slowdown impacting consumers’ disposable income in Indonesia and continued down-trading in Malaysia, and GCC, and industry contraction in South Korea."

Lucky Strike, on the other hand, grew its volumes by 12.2%, with growth in Indonesia and Spain more than offsetting reductions in Argentina and Egypt.

Businesslive