Tobacco giant BAT’s revenue hit by exchange rates

revenue dropped
revenue dropped

Against the backdrop of increased challenges in the trading environment for cigarettes in Western Europe and indeed in most developed countries, where increased health concerns and the tightening of government regulation have caused people to smoke less,  the second largest cigarette maker British American Tobacco has announced its quarterly trading update, which shows an improved sales volume for the first quarter of 2014, although the actual revenue of the company was severely affected by foreign exchange rates.

The cigarette maker said revenue in the first quarter of 2014, excluding the impact of currency exchange rates, rose by 2 per cent, helped both by price increases and gains in market share primarily in emerging markets. Yet, when expressed at current currency rates, revenue actually fell by 12 per cent. It is clear that falling exchange rates in emerging markets have taken their toll on the performance of this important player in the tobacco industry. However, the company’s CEO remains confident that the company will achieve a “consistent earnings growth” for the whole of 2014.

BAT, which is the maker of popular brands such as Lucky Strike, Dunhill, Pall Mall and Kent cigarettes, announced that in the first quarter of 2014, which ended on 31 March, its total volume of sales, which is the measure of the amount of tobacco sold, fell by 1 percent, which however is an improvement from the 2.7 percent decline that the company had reported for 2013.

In actual numbers, Cigarette volumes dropped to 158 billion sticks in the period from 1 January to 31 March, compared to the 160 billion that they were in the corresponding period in 2013. BAT saw volumes actually increase in its biggest region, the Asia-Pacific, although the increase was slight. Indeed, according to the figures released, gains in Asian countries such as Pakistan and Indonesia were more than offset by declines in European markets such as Russia and Poland.